Kennard's FCC legacy: Creative compromise

Summary:Friday is FCC Chairman William Kennard's last day of an extremely eventful stint marked by booming expansion of the broadcast industry.

With the departure of Chairman William Kennard from the Federal Communications Commission on Friday, a controversial era in telecommunications and Internet regulation is drawing to a close.

Kennard, who has headed the FCC since late 1997, has served as a lightning rod for criticism from Congress and big business, as he has presided over radical changes in the telecom and Net industries. He leaves behind a record of creative compromise, allowing much of the consolidation in the sector to take place, but with conditions that sharply limit the merged companies' actions.

It's this middle-of-the-road stance that often angered Kennard's critics. An affable, universally gracious leader by most accounts, he nevertheless drew ire from both sides of the political spectrum throughout his term.

"He tried to initiate policy instead of implementing policy from Congress," said Ken Johnson, spokesman for Republican Rep. Billy Tauzin, who chairs the House Commerce Committee, and who has been one of Kennard's most vocal critics. "He lost sight of his mission."

Competition above all
Kennard himself, in his resignation letter to President Bill Clinton last week, cited two themes for which he wished to be remembered.

"The first challenge is to fight for a competitive marketplace in which monopoly is ended, innovation and entrepreneurship are cherished, and consumers have competitive choice," he wrote. "The second is to make sure that the benefits of the Information Age reach all Americans."

It was in his vision of competition, and in how to implement the landmark 1996 telecommunications deregulation law, for which Kennard drew the most criticism.

From the first moments of controversy over high-speed Net policy, Kennard spoke of maintaining a "hands off" policy toward the Net. The burgeoning sector was too young for regulation one way or the other, he said, echoing the longtime rhetoric of Silicon Valley entrepreneurs.

But in the context of the battle over access to the cable TV lines that companies like Excite@Home and Road Runner used to provide high-speed Net access, this decision proved controversial--and ultimately impossible to maintain. Consumer groups and rivals to the cable companies lobbied hard for action breaking open the cable lines, while shifting alliances and business plans in the cable world broke down the opposition.

Ultimately, so-called open access--giving rival ISPs access to the cable lines--was required of Time Warner as a condition of its merger with America Online. AT&T agreed to open its wires to rivals on its own, though the details were vague. In late September of last year, the FCC finally agreed to open hearings on the issue.

Throughout the debate, Kennard was criticized by the local phone companies, which noted that they were required to open their high-speed Net services to rivals and complained about separate-and-unequal regulatory systems.

"I think he could have been known as the Internet chairman, but he took a passive approach," said David Bolger, communications vice president of the United States Telecom Association, a trade group representing local phone companies. "Instead, he left us in a limbo situation."

That said, statistics tell their own story of Kennard's administration. When he entered office, 18 percent of households had Net access. By his tenure's close, 56 percent were tapping into the Net. Few people subscribed to the high-speed Net in 1997; 4.3 million people had fast Net connections by the end of 2000.

The chairman also drew criticism for the way he interpreted the 1996 Telecommunications Act, which was intended to break up local phone companies' monopolies and then let these companies into the long-distance market.

Although a considerable number of companies did begin offering local phone service, the local phone companies were never able to prove to Kennard's satisfaction that they had opened their monopolies enough to break free of much of the regulation still facing them. Only two companies, in two states, won the right to enter the long-distance market, a fact that has left executives bitter.

Kennard also struck hard bargains with the phone companies as they sought mergers of unprecedented size and scope. Although he never blocked any of the largest deals--the failed Sprint-MCI WorldCom marriage died before the FCC finished its review--he did help impose strict and often controversial conditions on mergers that were geared toward boosting competition as much as possible.

Access for all?
A large part of Kennard's time and rhetoric was dedicated to the proposition that Net and telephone access need to be as universal as possible, reaching minorities and low-income areas.

Few faulted him for this vision, and he won accolades across the industry for his work with minority groups and on Indian reservations.

But his implementation of the so-called E-rate--a congressional program designed to bring Net access to schools and libraries--did win considerable criticism. This was a policy passed before he came to office, adding a small surcharge on consumer phone bills to pay for the connections.

The Republican Congress dubbed it the "Gore Tax," alluding to Vice President Al Gore's strong support, and castigated Kennard for the way his agency structured the program and pushed through implementation.

By 1999, the last year for which figures are available, the FCC said 63 percent of K-12 classrooms were on the Net. That program along with others is likely to be cut or changed dramatically under the new Bush administration, however.

Whatever the criticisms from partisan corners and interest groups, Kennard does leave behind a record of presiding over one of the biggest booms in telecommunications history.

"I think he deserves substantial credit for the huge boom in the information sector," said Reed Hundt, Kennard's predecessor as chairman. "Everything went up that was supposed to go up, and everything went down that was supposed to go down."

Topics: Networking, AT&T

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