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Monday, November 10, 2003 - Page updated at 12:00 A.M.
At the heart of the spectrum: Powell is the man to watch on wireless
By Sarah Lai Stirland
WASHINGTON Nothing has stirred as much uproar at the Federal Communications Commission under Michael Powell as removing restraints from media companies in their pursuit to acquire other media companies.
But there is an even more dramatic shift in agency policymaking that has received scant attention, and the impact of those changes on the future of the Internet could become one of the FCC chairman's most enduring legacies one perhaps more significant than the issue of media consolidation.
The changes are in the allocation of the commercially exploitable airwaves, or spectrum, the resource behind every wireless gadget, from garage-door openers to cellphones, from Wi-Fi equipment to satellites.
When the commission convenes for its monthly open meeting later this week, it is expected to issue a progress report on its effort to overhaul the way it manages those airwaves.
The moves are part of a larger effort that's under way at the commission to shift from its traditional role of licensing pieces of the spectrum and toward one where it allows free markets to reign.
"Wireless spectrum has the potential to solve so many problems that have been so persistent in the 100 years of the phone system," Powell says as he discusses issues in a recent interview in his office on the eighth floor of the FCC building.
As commission chairman, Powell and his views stand out because his strong convictions on the merits of his own arguments sometimes sound dismissive, even contemptuous, of the other side. During the interview, he vigorously dismisses the image that some have tried to confer on him: of being in the pockets of "Big Companies."
He clearly believes in letting "market forces" rule, but more in an economic, rather than political, sense. And he believes that he can move forward quickly and push the boundaries of existing law to do that instead of fighting political battles in Congress that end in stalemate and result in few changes.
What Powell thinks and how he approaches issues will influence the outcome of the spectrum issue. In turn, the proposed changes themselves could be significant, leading experts say, because of their potential to transform the economy and to create an abundance, rather than scarcity, of spectrum.
"The FCC's new spectrum allocation and secondary market rules really make this a decade of opportunity for wireless applications, whereas the 1990s were a decade of fiber and wired networks," write Greg Staple and Kevin Werbach in "The Coming Spectrum Explosion," a paper that contains a survey of changes in spectrum policy. "This decade's spectrum explosion, like the 1990s' fiber-optic boom, will trigger major changes in the way services are priced and marketed, leading to the demise of old business models and the rise of new ones."
One result of this abundance will be a further decline in the value of spectrum licenses. Companies, mostly cellular carriers like AT&T Wireless and the other giants, spent about $24.5 billion to acquire them in the past decade, Staple and Werbach estimate.
But the pressing question for businesses watching spectrum reform is: What does Powell believe the free market really looks like in the wireless world? And does he have the political will and stamina to overcome the interests that have fought changes for decades?
Reading between the lines
Observers are divided on the issue. Advocates of the unlicensed world see hopeful signs in Powell's speech at the University of Colorado in October 2002 in which he acknowledges the value of the "commons," or an area of the spectrum to which no one has exclusive rights. In this vision, all comers have equal or tiered rights, and must coordinate among themselves to avoid harmful interference.
This view assumes there will be standards to prevent companies currently holding exclusive spectrum rights from using the ambiguous term of "harmful interference" as a rhetorical tool to prevent sharing.
"This would have been inconceivable five years ago a chairman of the FCC treating open wireless-network approaches and spectrum property rights as equally attractive alternatives," says Yochai Benkler, a professor of law at Yale Law School. "This is not a small, but a huge conceptual step forward."
But this is where the vision of the market bifurcates and where Powell's leanings get fuzzy. The Colorado speech and a report from the FCC spectrum-policy task force that followed it gave equal deference to the "property" approach.
In this version, rather than letting other users freely tiptoe across their "property," the occupants with exclusive access would have the right to sublet the spectrum they're not using. That would allow another kind of free-market setup in which entrepreneurs pay spectrum license holders a subleasing fee.
Both versions of the free market are designed to make the spectrum more accessible and used efficiently by businesses. The question is which method is more efficient. Holders of spectrum leases favor the property approach and say they can't share spectrum because of harmful interference.
Faith in innovation
But Powell's belief in technology may provide a hint as to which direction he's headed.
"I'm a passionate believer in technology in its potential, and I'm a passionate believer in creating as many competitive and useful communications platforms for the future as we can," he says. "[Entrepreneurs] will come up with stuff, and they'll come up with innovative ways to do it without interfering with others. And that will limit our role to making sure that where there's a problem, we can address that."
Powell takes the same approach when dealing with one specific issue of spectrum reform: the sharing of the broadcast bands. Data-networking companies are watching closely because these bands, unlike the spectrum used by Wi-Fi technology, can be used over longer distances and through walls.
"If somebody has something interesting and can demonstrate that they can operate in those bands without interfering, we would be receptive to that," Powell says..
As part of its review process, the commission has asked for public comment on whether to allow broadcast-band sharing, and Microsoft is among supporters of the idea.
Despite the sense that, through its task-force report, the FCC may be open to a lot of ideas that would make more spectrum available, skeptics abound.
"It's politically crippled," says Dewayne Hendricks, chief executive of The Dandin Group, a wireless Internet service provider in Fremont, Calif., and a longtime advocate of spectrum reform. "It will ultimately fail because it's crippled," he says of the report, which he charges doesn't go far enough.
He points to another proposal to revamp spectrum in the 1980s that existing license holders smothered. He predicts the same fate for current efforts, noting that the report's recommendations were already watered down from their original form. (Hendricks is on the FCC's Technological Advisory Group.)
But there are signs things may be different under Powell's tenure. The commission has a staff of engineers and economists installed under one of his initiatives and has held a number of workshops examining some of the tougher issues discussed in the report.
The commission has also taken what many consider a bold step: the adoption of the secondary-markets proposal in May, which allows most land mobile and other radio licensees with exclusive spectrum rights to lease excess capacity. Some groups have charged that this new rule is questionable legally, while others say it illegally privatized the airwaves.
Though many industry watchers don't agree with Powell's policies, they respect his intellect and his understanding of the business and societal implications of emerging technologies. (In a trade-magazine editorial earlier this year, Larry Lessig, a law professor at the center of many debates over new technology policies, called Powell a brilliant "counter-revolutionary.")
"You know when you can tell when some people are just clueless and the questions they ask are just peripheral? Not a hint of that. He understands what's going on," says David Isenberg, an independent telecommunications analyst who was in a meeting with Powell last week.
But Isenberg notes some change over time in Powell's discussions. In the past, Isenberg says, Powell used to talk more freely about creative disruption and disruptive technology, common concepts among technologists and popularized by the economist Joseph Schumpeter and Clayton Christensen, the Harvard business professor who wrote "The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail."
"He doesn't do that anymore," Isenberg says. "He's toned that rhetoric down I think that's because he's chairman for the old guys as well as the new guys. So he's got to play both sides."
However much of an advocate for free markets and technology he is, Powell faces some pretty steep political obstacles.
In their survey, Werbach and Staple note that it took the FCC four years to authorize ultra-wideband, an innovative technology that allows people to transmit information across other people's spectrum without any harmful interference.
In addition to broadcasters and the cellular industry, powerful opponents include the military and the aviation industry.
The authors also predict that the innovative legal reasoning used to create the secondary markets rule will also lead to litigation.
That doesn't daunt Powell.
"Would you rather have the opportunity with litigation risk, or no opportunity whatsoever and have nothing to litigate about?" he asks. "Our job is to write rules that are as ironclad and defensible as possible. But we live in a society that if you don't like it, you can sue."
Sarah Lai Stirland, a freelancer in Washington, D.C., writes frequently about technology-policy issues.
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