TechKnowledge No. 95

The Regulator Who Loved Markets

By Adam D. Thierer
January 21, 2005

The free market lost a friend Friday and, believe it or not, it’s a regulator. Federal Communications Commission (FCC) Chairman Michael Powell announced that he is stepping down in March after a turbulent, controversial tenure in office. He will be sorely missed because he is the rarest of species-a rational regulator who genuinely believes in the superiority of markets over mandates and capitalism over central planning.

After all, how many bureaucrats make a habit out of quoting the works of Friedrich Hayek, Joseph Schumpeter, Ronald Coase, and Adam Smith? But Powell did more than simply give these thinkers lip service; he integrated their teachings on markets, incentives, and human liberty into almost everything he said or did during his tenure at the FCC. “The market is the best vehicle designed by mankind for innovation, for technology change and evolution. I would caution we review fully the lessons of economic history to deepen our appreciation of that fact,” he noted in an October 2001 speech.

In a speech a few months earlier before members of the Federal Communications Bar Association-some of the Beltway’s biggest proponents of “public interest” regulatory intervention-Powell declared, “Contrary to the classic bugaboo that markets are just things that favor big business and big money, market policies have a winning record of delivering benefits to consumers that dwarfs the consumer record of government central economic planning. Thus, if you are truly committed to serving the public interest, bet on a winner and bet on market policy.”

More impressively, this is a man who once stood before a hostile group of telecom industry service resellers who were clamoring for more government-mandated infrastructure-sharing and told them, “There is no upside, in the long run, being dependent on your primary competitor for your key assets, or in relying on the government to protect or subsidize your service. Wherever and whenever possible build facilities. Only by controlling your own essential facilities do I believe you can differentiate your service. And, the more you possess your own assets, the less you need to look to the government for salvation.” Needless to say, they didn’t appreciate that. But that’s the way Powell worked: no pulling punches; no need to capitulate to appease an audience; no need to sell out freedom for short-term political gain.

In fact, when asked at his very first press conference after becoming Chairman about the existence of a supposed “digital divide” in America he famously said, “I think there’s a Mercedes divide-I’d like to have one; I can’t afford one.” The self-anointed “consumer advocates” went after him with a vengeance for that one. But he has never recanted those remarks; rather, he has repeatedly stressed in his subsequent speeches the amazing and unabated diffusion of computer and communications technologies and services throughout our society.

Rhetoric aside, Powell worked hard to translate his market principles into action, occasionally meeting with some success, but more often being greeted by overt hostility from special interests and other status quo-oriented policymakers. One area where Powell’s vision yielded tangible results was spectrum policy where his leadership helped give rise to a veritable public policy revolution at the FCC. Powell formed a Spectrum Policy Task Force that issued an amazing report containing a sweeping indictment of the agency’s past record. As a result, remarkable changes are underway at the agency that will unleash the wireless sector from the shackles of the command-and-control central planning techniques that have hindered it for over seven decades.

When it came to telecom and broadband policy, Powell’s vision has been equally clear: “I believe strongly that broadband should exist in a minimally regulated space.” He attempted to push through numerous reforms to achieve that vision but was directly thwarted on one important deregulatory initiative by fellow Republican Commissioner Kevin Martin, who cast his vote with the Commission’s Democrats in favor of expanded regulatory oversight by state regulators. Of course, it doesn’t help that Powell’s superiors in the Bush Administration have never lent any serious support to the reforms he has proposed. The Bush team was content to talk a big game when it came to broadband deployment and telecom deregulation but then let Powell take all the heat when it came to the controversial steps needed to get us there.

Finally, despite the hysteria generated by the opponents of efforts to relax archaic media ownership regulations, Powell pushed through some limited relaxation of existing rules. Warning of the dangers of government overreach on the this front, Powell noted, “[W]hile we are right to concern ourselves with Citizen Kane, we should not use that concern to justify the resurrection of King George. Our founding fathers said little about commercial owners of news and print, but they reserved the top spot on the bill of rights to condemn the government from foisting its values, preferences, viewpoints or tastes on a free people.”

Will history judge Mr. Powell kindly? It depends who writes that history, of course. But for those who cherish liberty and limited government, he should be remembered as a man who fought to reverse the widespread presumption held by his fellow regulators that market failure is everywhere and that only incessant intervention by benevolent bureaucrats can protect the amorphous “public interest.” Michael Powell’s legacy is that the regulation is not synonymous will consumer welfare; government failure is the bigger concern. Let’s hope his successors heed that lesson.

Adam Thierer (athierer [at] cato [dot] org) is the director of Telecommunications Studies at the Cato Institute in Washington, D.C. (www.cato.org/tech). To subscribe, or see a list of all previous TechKnowledge articles, visit www.cato.org/tech/tk-index.html.