FCC chief’s painstaking approach earns mixed reviews in turbulent times for telecom industry
By Cecilia Kang,
When he isn’t chairing the Federal Communications Commission, Julius Genachowski enjoys a seat at a poker table.
And as it turns out, he approaches cards much like he regulates: with great caution.
Quiet, brainy and restrained, the nation’s top telecom cop carefully evaluates each hand. He typically shies away from high-stakes, high-risk rounds. Instead, he’ll play the river in Texas Hold ’Em long enough to size up rivals, but not long enough to test his luck — even with a decent hand, according to people who have played with him in the homes of Beltway government officials, journalists and sports pros.
But in a town full of aggressive lobbyists paid to bend the FCC’s positions in their favor, that measured approach can draw attack. Genachowski has sometimes been called a regulatory “Hamlet,” deliberating over details as powerful companies push impatiently for action.
The approach has turned some early supporters into detractors.
Regulators aren’t supposed to play the role of negotiator between companies, said Derek Turner, head of policy analysis at public interest group Free Press. “He’s squandered an opportunity to give consumers the competitive communications market they deserve,” Turner said. “If someone like him upholds compromise, it quickly leads to capitulation, which is what he’s done. He folds, folds, folds to the pressure of big companies.”
Those high-stakes battles have reached a fever pitch during Genachowski’s four-year term, with the agency at the center of the massive technological transition from phone lines and TV broadcasts to the Internet. Consumers are dumping home phones for smartphones and trading cable subscriptions for streaming videos. And the industry has been upended by multibillion-dollar mergers as companies scramble to adapt.
Genachowski points to a string of achievements, including outlining a plan for auctions of airwaves that could raise billions of dollars for the government and a landmark effort to expand access to broadband Internet in rural America, a priority of President Obama.
And the 50-year-old says he’s intentionally held his cards close to the vest, negotiating agreements on controversial issues behind the scenes.
“One thing I learned from my predecessors is that people don’t remember the day-to-day battles, but they remember you got it done,” Genachowski said in an interview.
His term ends next summer, and while Genachowski, a law school friend of the president, hasn’t announced plans for departure, he is widely expected to leave as soon as the administration can arrange for a successor.
After two successive Republican chairmen who had generally been restrained in exercising regulatory authority, Genachowski entered the job intent on staking out the government’s claim over the fast-growing Internet industry.
He wound up presiding over a crucial period in which the powerful companies of Silicon Valley turned into Washington power players. Lobbying the FCC has become a major economic franchise. Each day, hundreds of dark-suited lawyers crowd the antiseptic, midcentury-modern agency building.
They are jockeying for the attention of its five commissioners on merger reviews, local media ownership rules and licenses to use satellites. Often those lobbyists are former FCC staff or congressional aides, hired by companies to influence former government colleagues. Comcast spent $13 million in 2010 to lobby for its takeover of NBC Universal, and AT&T spent $20 million last year to plead for its failed bid for T-Mobile.
Critics say Genachowski initially seemed unprepared. “His term looked in the beginning like it was going to be a disaster because he was in over his head,” said Harold Feld, a senior vice president at the public interest group Public Knowledge.
But Obama’s pick was equipped with a rare blend of government and private-sector experience. The Harvard Law School graduate counseled former FCC Chairman Reed Hundt and clerked for Supreme Court justices William J. Brennan and David Souter. And he was an Internet executive at Barry Diller’s IAC/Interactive.
At the FCC, Genachowski promised to be “data-driven” in his role, a sort of compromiser in chief. He often assigns staff to pose as “devil’s advocates” on policy issues to make sure he covers all perspectives.
His Socratic tendencies have sometimes irritated the business leaders in industries he oversees.
Billionaire Philip Falcone blames Genachowski for waffling over his $14 billion satellite venture LightSquared, a project the chairman once touted but eventually put on ice because it was said to interfere with military technology.
After the agency rejected AT&T’s merger with T-Mobile last January, AT&T chief Randall Stephenson complained that Genachowski’s staff was slow. “Even the smallest and most routine spectrum deals are receiving intense scrutiny from this FCC, oftentimes taking up to a year and sometimes longer for these to be approved,” he said to investors.
Charlie Ergen, chairman of television service Dish Network, said the agency delayed his wireless venture by 20 months. If the agency were more responsive, he said, the nation would have had Dish as a rival 4G wireless provider next year. Now, it will be well after 2015 before Verizon and AT&T see more competition.
“We are serious about entering the wireless business and are ready to invest another $6 billion into it,” Ergen said. “But this FCC has relegated us to the sidelines.”
Genachowski said the criticism is misplaced. Sometimes the threat of new rules can bring companies in line. Other times, actions have rippled through an industry.
When the agency rejected AT&T’s merger with T-Mobile in early 2011, for instance, it triggered a wave of overseas investment in the industry. Japan’s SoftBank teamed with Sprint Nextel, and T-Mobile’s parent, Deutsche Telekom, put money into smaller rival MetroPCS.
Former FCC chairman Hundt, a fellow Democrat and longtime friend, said Genachowski’s mission wasn’t to be a strong-armed policymaker. Unlike his own tenure during the mid-1990s, when Hundt had to pave the way for the creation of the satellite TV industry, Genachowski has a more “evolutionary” mission: extending broadband service to as many Americans as possible.
He had to “expedite the evolution instead of start a revolution,” Hundt said. “And he’s done a superb job of achieving that goal.”
“Unquestionably, his major accomplishment has been to give the commission an intense focus on broadband deployment,” said Andrew Schwartzman, a telecom attorney and longtime public media advocate.
Genachowski concedes that he underestimated the demands of Washington politics. A devotee of strategy games and complex puzzles, Genachowski keeps a Rubik’s cube on the coffee table of his FCC office and a leather backgammon set tucked behind the couch. But the game of politics confounded him.
“I am a results-oriented person, so it’s natural to start thinking in terms of compromise,” Genachowski said. “In today’s Washington, compromise is the wrong frame, like a dirty word.”
That was evident in the political theater that erupted in the fall of 2009, when he set out to create controversial rules ensuring companies have equal access to the Internet, a concept called “Net neutrality.” The policy was intended to prevent Verizon, AT&T and Comcast from charging customers more to use rival services from Skype or Google’s YouTube.
Dozens of lawmakers blasted Genachowski as a heavy-handed regulator who risked killing thousands of telecom jobs just as the country was suffering through a recession. They called for hearings, wrote angry letters to newspapers and protested to the White House.
Verizon chief executive Ivan Seidenberg said in June 2010 that Genachowski’s Net neutrality proposal would “cause uncertainty in the marketplace, create disincentives for investment and make one of the true success stories of the American economy less competitive.”
Senior FCC staff asked Genachowski to proceed anyway, saying they had what card players would think of as a sure bet: They had a majority of votes on the five-member commission. And both chambers of Congress were led by Democrats.
Instead, Genachowski postponed voting on the proposal for many months and asked for more meetings with Web and telecom firms.
In the midst of negotiations, Genachowski faced a surprise court decision in spring 2010 that cast doubt on the agency’s ability to regulate broadband Internet providers at all.
Consumer groups and Web firms asked the FCC chief to reclassify Web companies as telecom carriers, to make it more clear that the agency had jurisdiction over Web services.
But members of Congress attacked the idea as harmful to the multibillion-dollar industry. Wall Street analysts decried the move as a market destroyer. The last thing the chairman wanted was a legacy as a job-killer, senior staff said.
Genachowski’s top legal advisers wrote up the reclassification plan. But after much pondering, he gave in to the pressure and scrapped it, according to former senior staff members.
In December 2010, Genachowski went ahead and issued compromise Net neutrality rules. Verizon and MetroPCS sued the agency to get them overturned. Consumer advocacy groups lamented that the rules meant nothing for wireless users.
And the question raised by the court decision about whether the FCC has jurisdiction over the Internet remains unresolved.
Genachowski “got much better in the second part of his term and got more done,” said Feld, of Public Knowledge. “But he’s left a hell of a lot of work for whoever comes next.”