After Michael Powell
January 21, 2005; Page A8

The bad news is that we are told that Michael Powell, one of Washington's better bureaucrats, is calling it quits today after four years at the helm of the Federal Communications Commission. You read it here first. The good news is that his exit affords the Bush Administration an opportunity to re-evaluate its stepchild treatment of telecom policy.

Given the media coverage, you might think Mr. Powell's tenure has been about little more than Janet Jackson's wardrobe malfunctions and Howard Stern's potty mouth. In fact, Mr. Powell has spent the past four years focused on much more substantive matters regarding the government's role in overseeing a telecommunications sector that has never been more dynamic.

This is Mr. Powell's proper legacy, and if he failed to reach all of his goals, some of the blame rests with a White House that never fully grasped telecom's potential to drive economic growth. Between 1989 and 2001, labor productivity in telecom grew annually by an average of more than 3%, versus a 1.6% pace in the overall nonfarm economy. Information technology alone was responsible for nearly two-thirds of the rise in labor productivity in the late 1990s.

After the tech bubble burst and mild recession, however, billions of capital investment dollars retreated to the sidelines. Only during the final months of the Presidential campaign did Mr. Bush begin making noises about clearing away "the regulatory underbrush" that was holding back the venture capitalists and faster broadband deployment, among other things. Mr. Powell's deregulatory instincts led him to make broadband development and deployment a priority. By declaring cable modem an "information service" in 2002, the FCC was able to block efforts to apply the entire telephone regulation boondoggle to new broadband technologies. Last November, the FCC accomplished a similar goal with respect to VOIP, which enables consumers to make phone calls over the Internet.

The White House ultimately abandoned Mr. Powell when he tried to update media ownership rules in response to a federal court decision that found the current regulations "arbitrary and capricious and contrary to law." The Administration agreed with the Chairman in principle but went soft after Democrats and liberal interest groups complained that revisions might allow Rupert Murdoch to own a couple more TV stations.

Mr. Powell's battle royale, however, surrounded his efforts to address the make-believe "competition" spawned by the 1996 Telecom Act, which forced the Baby Bells to unbundle their local phone networks and lease them to rivals at discount rates. The requirements, supported by AT&T and others that subsequently built business models around this subsidy, have depressed investment and limited consumer choice.

The FCC unbundling decision last month split the baby; it phases out some of these rules by 2006 but not all of them, so more litigation is a possibility. And the ruling itself came at least 18 months too late, thanks in part to opposition from Mr. Powell's fellow Republican Commissioner Kevin Martin.

This brings us to the matter of potential replacements for the Chairman at the five-member agency, and whether President Bush will squander an opportunity to start taking telecom more seriously. The White House decision last month to renominate Democratic Commissioner and Tom Daschle-protege Jonathan Adelstein was not a good start, to say the least, since he and fellow Democratic Commissioner Michael Copps are reliable opponents of genuine competition.

Mr. Martin is gunning for Chairmanship, but his decision in the unbundling fight to put personal ambition above good policy split the Commission and helped extend the telecom depression. The last thing Mr. Bush should want is to repeat the mistake of putting Republicans in a de facto minority position at the agency. The next Chairman not only needs Mr. Powell's instincts and vision but also a Commission that will follow his lead.

Other names mentioned for the post include Becky Klein, a former head of the Texas Public Utility Commission; Michael Gallagher of the National Telecommunications and Information Administration; and Janice Obuchowski, a telecom consultant who served in the Commerce Department under Mr. Bush's father. Someone like former Interstate Commerce Commission Chairman Darius Gaskins or former Federal Trade Commission Chairman Jim Miller also would be an excellent choice to keep the FCC on a deregulatory path.

Mr. Powell spent four years as an FCC Commissioner before taking over the agency in 2001. So it's easy to believe that after eight years he's ready for some new challenges, probably in the private sector. We hope the Administration hasn't taken him for granted and is up to the challenge of a worthy replacement.

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