Kennard Departs FCC, Changes on the Way

William Kennard has resigned as chairman of the Federal Communications Commission, effective January 19, the final day of the Clinton administration. According to Washington insiders, his position may be filled by Commissioner Michael Powell, son of former general Colin Powell, President George W. Bush's newly-appointed Secretary of State.

Kennard's departure leaves only four commissioners at the FCC. A fifth will be appointed by Bush, giving the Republican Party control over FCC policies. Kennard, who will become a senior fellow at the nonprofit Aspen Institute, was the first black chairman of the FCC and a strong booster of community radio and diversity in hiring in the broadcast industry.

Many Kennard-backed policies are likely to change with the new administration, including what many in the communications industry regard as his emphasis on regulation. Michael Powell reportedly favors minimal governmental interference in the workings of business. Powell has stated that he is opposed to regulating the Internet, a subject of much discussion in the recent approval of the merger between America Online and Time Warner. Powell worked briefly as chief of staff in the federal antitrust division before being appointed FCC commissioner by President Clinton in 1997. Powell believes that the FCC should be reorganized to be more responsive to issues and petitions brought before it. "We just flat out are too slow," he said, echoing Bush's sentiments that government should be run "like a business."

Perhaps presaging changes to come at the FCC, a US Court of Appeals in Washington struck down FCC rules designed to encourage broadcasters to hire more women and minorities. The ruling came just a few days before Kennard's resignation. "Official pressure upon broadcasters to recruit minority candidates . . . creating a race-based classification that is not narrowly tailored to support a compelling governmental interest . . . is unconstitutional," declared the three-judge panel. The ruling coincided with the release of a National Telecommunications Information Administration report showing the number of minority-owned radio stations had increased to 426 since 1998. Commercial television stations owned by minorities have dropped to 23, the lowest number since 1990, the year in which the agency began keeping such records.

The challenge to the minority-hiring mandate was brought by 50 state broadcaster associations, which claimed that it put pressure on them to hire minorities—in their view, a violation of the Constitution because it set up "race-based" classifications. The appeals court agreed. Kennard decried the decision as "a defeat for diversity." In his last days in office, he encouraged his agency and the television industry to promote hiring programs that would "better reflect the rich diversity of the American people."

On January 19, the FCC gave digital television a ceremonial boost by issuing proposed rules that may require new television sets to be capable of receiving digital signals. The inclusion of digital tuners in television sets has been resisted by the Consumer Federation of America, who objected that the result would be an increase of $200-$300 per set at the retail level. Broadcasters welcomed the ruling, because a greater number of digital receivers would mean an increased market for digital programming. The FCC also reiterated its support for the transmission standard known as "8-VSB," a technique that has been opposed as technically flawed by a broadcasters coalition led by the Sinclair Broadcast Group Inc. Both the National Association of Broadcasters and the Electronics Industry Association applauded the intent of the decision, saying it would help the rollout of digital TV. The FCC would like to see an unspecified percentage of big screen sets—32 inches or larger—be made with integrated digital tuners. The EIA is opposed to manufacturing quotas, according to spokesman Jeff Joseph.

On the same day, in a separate action, the FCC ruled that cable provider Comcast Corporation must carry a new Florida digital television station even though the station has no analog channels. Cable companies are required to carry analog stations' signals, but the rules have not been altered to include digital. The Florida case was the first instance in which the issue has been officially addressed, but it doesn't resolve the ongoing controversy about whether cable should be forced to carry DTV signals. "Must carry," as the issue is known, is a sticking point for television broadcasters, who say that cable's participation is essential for the success of DTV.

In the wake of the approval of the AOL-TW merger, the FCC has also made a move toward a decision on interactive television. On Thursday, January 18, the agency began a formal inquiry into whether an integrated company like the new AOL-TW conglomerate might unfairly favor its partners. Time Warner, in addition to being a major player in the print industry, is also a prominent cable TV supplier. The commission had avoided the issue in previous discussions of the merger. Although some members of the commission believe that the market for merged media is too new to need regulation, outgoing chairman Kennard said he wanted his agency to "get ahead of the curve" on interactive TV, a nascent format that, in his view, "has the potential to bring huge benefits to the American consumer, not to mention substantial revenues to service providers." Commissioner Harold Furchtgott-Roth, a Republican, said it is "too early" in the development of interactive TV to establish any rules; Democratic commissioner Gloria Tristani stated that the FCC should not initiate an inquiry, but should instead move toward making some rules. The inquiry process will delay the development of regulations for the interactive TV industry by at least a year, Tristani commented.