National Cable and Telecommunications president Michael Powell seemed relaxed. Or rather, as relaxed as one can be two weeks shy of a major convention revamp—The Cable Show, renamed The Internet and Television Expo (INTX), begins May 5 in Chicago.
Powell also looked Mad Men dapper in a sport jacket and open collar, as he sat comfortably in his office, talking about cable life, the broadband universe and everything. Powell believes FCC chairman Tom Wheeler has gotten Title II very wrong, and is happy to make his case for why cable is the gateway to, not the gatekeeper of, a bright, broad future, and should be treated by the broadband-centric government as a partner, not a pariah. The onetime occupant of Wheeler’s chair discussed a number of topics with B&C Washington bureau chief John Eggerton. An edited transcript follows.
Back when Kyle McSlarrow had your NCTA job, and then-FCC chairman Kevin Martin was pushing a la carte, there was the issue of the 70% threshold for reregulation the FCC was suggesting had been met. McSlarrow told me at the time that he thought Martin had a vendetta against cable. Given recent decisions and rhetoric out of the commission, does chairman Tom Wheeler have a vendetta against Internet service providers?
I don’t know if I would go that far. That is a strong thing to say; however, I think unfortunately we hear too much language that seems to adopt the kind of negative, superficial language of advocacy groups. We’re not behemoth gatekeepers or villains, which I hear a government agency using to describe an industry that they regulate. I don’t have a high degree of respect for having the industry described in those terms.
I do think there isn’t a full and often fair enough recognition that an enormous part of the [broadband] miracle they want to celebrate has been brought to them by private industry in the private markets using private capital, and that that is consistent with the public interest as well.
You know, if the government were building the Internet and trying to deliver on the promise of that platform and wanted to build the infrastructure that allows Google and Facebook and Amazon and Etsy today at the price of their IPOs, they would be awful far from their goal if it weren’t for the actions of private Internet companies who have been delivering on that promise aggressively and forcefully for 15 years. I don’t know how much more you can ask of the private sector than what it has delivered over the last decade, with private capital and without governmental subsidy or support.
I frankly believe they deserve to be described and treated as a partner in the country’s broadband ambitions and not somehow an obstacle. Just in the time that this administration has been in office, we have seen dramatic increases in speeds and services, deployment and adoption, in new applications and services deployed by the software community.
I just don’t get it, is what I should say. And [President Obama] uses the rhetoric as well. I don’t get the need to treat private industry like they’re the enemy as opposed to your partner in trying to serve the public interest.
I don’t see any conceivable way that the ambitions [the FCC] lays out in the National Broadband Plan and the aspirations for every child and every citizen—I don’t see how those aspirations are ever achieved without the ISP industry being a partner and being on board with those objectives.
So, it’s a curious approach, it seems to me. I don’t know if it’s a vendetta, but it’s certainly not particularly constructive.
What would you say is the industry’s biggest challenge?
That is a hard question because there are different constituencies in Washington. I think, obviously, it continues to be working through net neutrality. So, No. 1, working through what is a strong litigation position and preparing to fight the order in court is consuming an enormous amount of time. We’re also working on the Hill with regards to net neutrality.
I think we have been very successful over the course of the last year. We started working on STELA—which was soon to become STELAR. Everybody said there was no possible way you can get this done—“Oh, this Congress doesn’t work, you can’t get it legislated.” I think it really was a terrific victory that they were able to secure that legislation in a way that included critical components that we were after.
I think we are well-regarded still. I think we are effective. I think the bigger challenges are in the market than they are in Washington.
Well, you got two out of three in STELA, as in no coordinated retrans and getting rid of the set-top integration ban. Are you still pushing to get out from under must-buy and for the Local Choice?
Let’s be clear, we were never behind Local Choice or pushing it. We certainly, with guidance from the board, supported changes to must-carry through the STELAR process and our position is probably the same. You know, we’re waiting to see what Congress’ agenda is on telecom reform and/or video reform.
I don’t know that I expect to see a whole lot this year on those fronts because I think net neutrality, for one, has really sucked the air out of what could be a much more constructive agenda.
I think we are going to get into the presidential election cycle pretty darn fast here and, once we get through the budget process in Congress, it’s hard to see what more substantively will actually get done once we kick off in the fall. But, you know, that is something we’re always thinking about.
National Association of Broadcasters president Gordon Smith said in his speech at the NAB convention that they have to work with policymakers to show their “immense value” to their communities. What is cable’s “immense value” to theirs?
I think it is twofold. One, they are builders of the platform that takes you to the world’s information. That is enormous value. I don’t know if there is any higher value in this world of communications you can deliver to the American consumer, provided at a relatively low cost given the value you derive from it, and the ability to access the entire record of human knowledge. The ability to work from home. The ability to entertain yourself. The ability to publish and write. The ability to create. That’s what we provide. If I went to your computer and unplugged the wire in your house and you went to Google you’d get a big thing saying “no network connection found.”
Nothing happens unless that happens first. I think that is a pretty darn big contribution to the community.
Americans are in love with television. Sometimes embarrassingly so. The idea that we as a people watch 310 hours of television a month is astounding. The vast majority of that television is being brought to you over a highly engineered infrastructure designed to provide consistent, reliable and high-quality viewing, [beginning with] critical news events, which the vast majority of people turn to cable for when they break. Lots of people in this town were watching as some guy landed a helicopter on Capitol Hill. Where do you go? You turned on CNN or Fox News. These are really critical news outlets for the country. They become critical political platforms for presidential candidates.
So, I think the video mission continues to be a pretty important part of what we deliver to communities. And I think it is of pretty high value.
Your website calls INTX the “reimagining of The Cable Show.” How are you reimagining the association to meet this new online, interactive reality?
The cable industry has been undergoing a pretty fundamental transformation over the last decade and if you really are building an organization that has its eye on the future and not just sort of celebratorily looking to the past, you can see that the future lies in a dramatically different set of infrastructure and assets and services that are much more broad and much more dynamic than we are accustomed to thinking of when we use the term cable today.
It is clear that, among the operators, the most critical product they are providing today really is the fastest broadband speeds in the United States, and it will continue to be a critical part of their businesses, and many companies have actually crossed over and have more broadband customers than video customers. That is an important part of their character and their future that isn’t really captured in the way that people traditionally think of cable.
And I also think there really is a revolution in video and television content as well. That’s not only with the really significant changes in the type of media consumers consume with long-form drama and other things, but the fact that that Internet platform also provides a whole suite of new kinds of video entertainment that aren’t being properly captured by traditional approaches. So in my view, the association and the show and the whole industry needs to embrace fully a cultural change and an operational change to be more focused on those things.
And NCTA is leading that revolution?
I really do think we are probably the preeminent association dealing with Internet services and infrastructure and I think that should be a bigger part of our story and certainly is a bigger part of our work.
So, it is not just a name change. It is intended to sort of put a flag in the ground and say, ‘It’s time to sort of put to bed the more dated ways that we have looked at this industry and begin to reemerge both to the external world and internally as a really critical player at the table’s discussion of the Internet future of video.’
The show’s idea is that it is not just cable television. It should be all things Internet and all things television, and every time they go together and in whatever form, we should be willing to showcase that, even when some of the people doing interesting things in our space are not specifically members of our association.
For example?
We’ll have on the floor this time Sling TV, we’ll have all kinds of interesting exhibits and panels and presentations that will include a much broader range of players. I think we shouldn’t be afraid of that, and we are excited to embrace that.
So, this is not the “umpteenth” cable show, just a rebranded one. You look at this as the first of a new kind of show?
I do. But I wouldn’t profess that the show in Chicago is the beginning and the end. To our mind, it is part, probably, of a three-year transformation. We’ve changed the branding.
We’ve done some new and radical things on the floor. We’ve changed the general session formats. We have focused on a new set of constituencies. But I think it will take two or three steps to get to where we really want to be, and envision to be, which is America’s premiere trade show covering Internet and television and things that go along with that ecosystem.
We noticed that in February, the “NCTA renewed its trademark on NCTA: The Internet And Television Association” for another six months. By the end of that three-year transition, are you changing the name?
I don’t know. Although I make no secret that I think that should absolutely be on the table. But I don’t want it to be about what the name is. I want it to be about what the mission is. And if the current name doesn’t fit that mission then we ought to have a new name.
I have been here four years and we haven’t run off and changed the name. But I think we want to change how we are perceived and we want to change how we present ourselves, and I think our brands have a lot to do with that over time.
So, no, we’re not on the cusp of doing it. But I would be less than candid if I didn’t say it is certainly a topic and I think that the rebranding of the show is meant to be an exploration into different kinds of nomenclature and brand. I think we are looking for the way to emphasize Internet and television and explore the cable moniker less and less and less.
Is Title II so bad if it is defined as the chairman says it is—which is a way to legally support rules you have pretty much said you support—or is it only a disaster if it’s the so-called camel’s nose under the tent?
It is a disaster because the Federal Communications Commission is fundamentally, if not violently, rewriting the national policy of the United States without congressional direction.
Congress in 1996 knew what the Internet was when it passed the 1996 Telecom Act. It full well knew it because it defined it in the statute and it defined two different regulatory approaches. And they intended as a national policy that dynamic, information-oriented services like the Internet would not be regulated under a regime that was developed and reserved for a world in which you had a very straightforward telephone system with a single national company being managed by a federal judge as the result of an antitrust divestiture, and needed to be managed to competition in a way that was due to its unique history.
That history is not the history of the Internet. I don’t think there is a single member of Congress who ever contemplated or intended that Internet access would be [like a] telephone service, which is what the commission has fundamentally concluded.
The disaster is that you have shifted the national policy from one in which engineers, entrepreneurs and everyday people govern the Internet from the bottom up without the intervention of a regulator, to a world in which now lawyers and bureaucrats from the top down will spend countless hours and money and time fighting about every way the Internet evolved.
You have already seen in the newspapers companies like Cogen openly talking about going in to file complaints.
The disaster is not axiomatic: ‘They did this and now this bad thing happens.’ What happens now is that every business decision, every new service in a competitive market that your competitor doesn’t like, or somebody thinks you are going to get an advantage or you’d rather see it a different way than Cox decided to do it, now there are all kinds of avenues to bring complaints. You can now—no matter what the chairman says—bring a broadband rate complaint to the FCC, so it is entirely possible that anybody who doesn’t like the next price change or price plan that Comcast comes up with for broadband will take that to the Federal Communications Commission, who will have to initiate a proceeding, which will mean we will have to send lawyers in there to file comments.
If you ever look at the time frame the commission acts on these things, we could easily spend a year every time somebody raises a complaint like that, and all the while you have an overhang of uncertainty about whether you can put the thing in place or not put it in place. You can challenge rates at the commission. You can challenge them in federal court.
Every single transit provider or content company could theoretically now bring an interconnection dispute. And you have to ask yourself: Is there really a regulatory problem or do they just have a business preference and they are just trying to use the government to get it?
Netflix wants a certain outcome that allows it to have zero costs for interconnection. I don’t blame them as a business for wanting that. What I blame is the government lending itself to be a vehicle for guaranteeing that.
While the commission hasn’t done that, they certainly have created a process intended to invite that. So, every time there is a new dispute, off we go to the adversarial forum to have a fight. Maybe we’ll win ten out of ten times, but it will still be a disaster that money, time and effort have to be spent on that, rather than on products and services.
And the process does not work the other way. An ISP can’t file a complaint against Netflix?
The commission said, interestingly enough, that all of them are not subject to these things. Their order also exempts all kinds of classes of players that I don’t understand technologically.
For example?
[Content delivery networks] are not. Transit providers. Why? They do the exact same services. This commission has argued those things don’t count. Why, analytically, I don’t know.
You were talking about a prior chairman. We’re going to blink and it is a different chairman. We’re going to blink and it is a different set of commissioners. The majority of that commission is not going to be here 24 months from now and yet they will put in place a framework that allows any future leader there to more or less reach any conduct they want.
I can’t quite imagine any conduct that if I were the next chairman of the FCC, and something happened that got in the headlines, that I couldn’t find within the framework this commission has created the ability to go after that, whether it is rates, practices, charges, the general conduct standard, interconnection.
So, there is just a dishonest description of what this commission has done. It has created a full-out regulatory platform that can be used by anyone who chooses, whether [or not] they are faithful to their word that they are not going to regulate rates. That’s only by their grace, which I will accept and respect and be grateful for. But it isn’t because they haven’t created the regime to do it. It is only because they have chosen not to do it. That is the reality of what we’re dealing with. And I think that’s going to mean that the Internet, which has really blossomed by innovation without permission, as Silicon Valley likes to talk about it, [now is] going to be innovation by adversarial proceeding.
Because anytime anybody doesn’t like an innovation, they are going to come to the government. And I think the tech companies are going to realize they made a big mistake here because they are engaged in a lot of activities and practices that consumers and activists will also find troubling and now will have a venue, I guarantee you, in which those companies are subject to claims at the FCC as well. And maybe this chairman won’t go after them, but somebody will.
You are not pro regulation, but do you think in fairness the FCC should be looking at the edge providers?
The remarkable thing is that most folks who follow this in the newspaper don’t understand the theory that the commission is fundamentally advancing to the courts, which is that anything that we can ascribe as attributing to the virtuous cycle of the Internet—if an ISP blocked content or prioritized content—we think that would suppress demand for the Internet, plus the Internet wouldn’t grow as fast. So, under 706 we can go regulate this. Well, that theory is boundless, right?
I can easily say that if Apple didn’t allow the app store to be closed in this manner there would be many more app developers and those additional apps would lead to stimulated demand for wireless broadband, and therefore, we’re going to regulate the app store. Or, if Google didn’t allow search results to do this, this and this, that suppresses competition and demand and leads to slower Internet, so we’re going to regulate that, too.
Now, if [edge providers and/or advocates] were sitting here, they would all say ‘outrageous.’ Why, it’s no more outrageous than the claim they’re making now. Any lawyer worth their salt could come up with a hypothetical that suppresses demand all day long. So that’s just a matter of who owns the magic wand. And I think as these companies become more significant, Google, Facebook, Amazon, Etsy, they will draw the attention of government and advocates.
I remember almost 12 years ago at a conference in Davos [Switzerland] saying the next big antitrust suit was going to be Google—whether they think they did anything bad or not. It’s just a matter of time.
And here we see it coming. And interestingly in the papers I’m reading about an Indian media company that decided to pull out of something because they think it’s a net neutrality violation. I think this action by the United States is going to create ripples all over the world that change the way governments look at regulating, and if the United States is not the one that’s going to get after Google of Facebook, I guarantee you other governments will. Other governments will look to the language, the spirit, the schematic of what this commission did as partial justification of what they’re doing.
You see Netflix now having to change their business policy in Australia because they got accused here of being hypocritical on net neutrality. So everybody around the world now will have to take a litmus test. And I guess someone might think that’s a good thing. I think we’re going to find out it’s not.
We could talk about network neutrality all day.
And we have.
Let’s pivot to municipal broadband. Are operators who support state laws limiting muni broadband just trying to prevent competition, as the chairman has suggested?
I could tell you unequivocally that our view as an association is that we do not seek state legislation to stop municipal broadband projects. We don’t think that we should. We think that if the democratically elected people in a given state jurisdiction want to vote to use their resources that way, it should be their decision to make. However, I would equally say it is their decision to make if they don’t want to take on those obligations. The commission seems to be willing to deny the Democratic process in one direction and not the other. If the duly elected representatives of state government believe that they don’t want to put its citizens on the hook for the debt, the bond, the pricing, having to manage a dynamic, expensive network over an infinite amount of time and decide they don’t want their money spent that way, I don’t really understand why they should be told they can’t.
So, not that I think that we should be the ones out there doing that, but I think there are very serious issues for state governments that revolve around this. I think a lot of these municipal broadband projects are well intended. I think a whole lot of them collapse. I think a whole lot of them stick taxpayers with debt obligations they wouldn’t otherwise have. And when there is a vibrant, private alternative, I’m not sure that’s the wisest use of public funds.
But that’s not my decision to make; that’s the citizens of that community’s decision to make. The other thing I would say, and it is fair for ISPs to complain about it, is that it is one thing to have a competitor, it’s another to have a competitor that gets to play by dramatically different rules than you are expected to play by. And government municipalities often grant to themselves special privileges not available to private companies. So that is not competition. That’s biased competition. I think there are serious questions about whether that is a fair and sound system. Municipal governments often own local cooperatives—electric utilities—and they often control the poles that everybody has to use to be competitive. They often set the rates for what those poles will be. Well, if the state is competing with a cable company and they set the rates the cable company has to pay for the poles, particularly under the new FCC-interpreted definition, that can be really hostile to private enterprise. I personally think that’s wrong.
But look, I don’t think anybody should be afraid of competition. What I tell my companies is, go in there and compete. If you’re better, beat ‘em. If you can sell cheaper, sell cheaper. If you can be more innovative, be more innovative. That’s what competition is.
A lot of times I don’t believe these munis can survive unless they are made, in essence, semi-monopolies, the very thing the governments say they don’t condone. Seems like sometimes they are willing to condone them if they are the owner.
It is tough to make the argument when the chairman [who has headed both NCTA and CTIA] can say, “I’ve been there and I know what you guys are really up to.”
Look, I hate to break it to the world, but lobbying is not some secret, dark art that you get granted the tools, and he knows them and nobody else does. All we do is make public arguments as to what we think the public interest should be and what the law should be. They are always filed publicly and transparently. You know, we don’t run around hidden from view in making these arguments. We make them the same way that Free Press and Public Knowledge does.
And the chairman can’t have it both ways. He is looking to distance himself from the industry by saying he did it at a time when the industry was totally different and it was a startup. Well, then he shouldn’t be as familiar with what it is today, which isn’t a startup.
That’s just language. I don’t think it is particularly meaningful. Unfortunately, I think sometimes it is meant to be a way of just being disparaging so that you don’t have to deal with the argument on the merits. ‘Oh, there you go again,’ is a classic political line when you don’t want to actually deal with the substance of what is presented. Just saying ‘that’s a lobbyist being a lobbyist.’ Well, of course it is, but what about the merit of what they are saying?
Do you think the chairman is trying to regulate the market more broadly as he wishes it to be in a lot of different areas?
I don’t know if I would be prepared to say that. Look, I’ll just take the issues one by one. Because, on other things, I am very supportive.
But they owe the country honest assessments that are accurate and factually based and I think that they do that most of the time. But when they are not, I don’t think they should be above being called on it. It’s a simple matter. Does 75% of the country really only have one broadband choice? No, not by any layman’s definition. But the game being played is, ‘As I define it, picking a number I picked arbitrarily for this rhetorical purpose.’ At least tell people that’s what you are doing.
Make the case for usage-based pricing?
It’s fair. It should be the only issue. Look, the reality is that when the Internet first started off, there was kind of one thing to do—surfing. People used their Web browsers in the same way to get to sort of the same thing. The Internet has gotten much more sophisticated and increased its dynamic range of uses.
I have relatives who sit on their Internet connections and Facebook all day long. I don’t do that. I know people who watch Netflix movies hours a day. My mother doesn’t do that. My mother does email. My mother posts things on low-intensity bandwidth uses. Why should she pay the same thing as a power user? Why should she pay the same as someone who is running a server in their home?
She shouldn’t. Usage-based pricing is nothing but price differentiation, which economics strongly sanctions and, in fact, is a hallmark of efficient markets. [Powell is a former top antitrust advisor at the Justice Dept.—ed]. It is creating differentiated pricing so that you can get what you need and nothing more.
So, I don’t understand those who want to go apoplectic. You can go to a giant food store and you can buy brand name cheese that costs $3.25 and you can buy the store band that costs $1.52 and if you don’t like that, you can go to Costco. We differentiate prices in every facet of the U.S. economy.
And by the way, so does every software company in this debate. Go to Amazon and pay $99 a year and be a Prime member and you get your stuff sent to you within two days for free. Or you can be a different kind of user.
I just think we all have to calm down and stop acting like the communications space is Alice in Wonderland and all the rules don’t work the same place they work everywhere else.
Why is it OK for the United States Post Office to charge me one rate to send something overnight and charge me another rate to get there by the end of the week? And we think that’s good. You know why it’s good? Because I forgot to pay my son’s tuition and I just realized it and they are going to kick him out of the University of Texas if that check isn’t there by tomorrow. Am I willing to pay $5.50 instead of 45 cents for a stamp so that that check arrives? Sure, that is very pro-consumer.
Let’s circle back to network neutrality. Is there a way for it to end well?
I think it could very easily end well by Congress taking control.
You think this Congress can do that?
I personally believe they can because I think that the most substantive part of the law [a Republican-backed bill that would prevent blocking, degrading or paid prioritization, but without Title II] has almost universal agreement. The ISP industry is not fighting net neutrality rules. They will accept them. The Republicans, I think, in a remarkable show of concession, are willing to give them to you. I think there is a real opportunity for Democrats and proponents to take a deal while they’ve got it and create net neutrality rules that are permanent, that are not subject to litigation. End the litigation fight. Save money, save resources. If I were on the other side, I don’t know why you wouldn’t take this deal while you can get it.
Because?
Because if any part of this order is overturned—it doesn’t have to be the whole thing. Let’s say the wireless part gets knocked off [for the first time, the FCC is applying all the rules to wireless broadband]. Or the interconnection part gets knocked out. There will be no more deals to be had on the Hill.
The Republicans on the Hill will not do a deal if they get this thing beaten in court. And the Obama Administration is not going to be here in 24 months. So, very high likelihood that whatever happens in court gets remanded to a different government. And then what happens? So, I think it could end well for every single person involved for Congress to adopt this as a law.
