NCTA pres/CEO Michael Powell had a big presence at this month’s Adaptive Spirit event in Vail to raise money for the U.S. Paralympic Ski Team. Cablefax Publisher Michael Grebb caught up with Powell for an in-depth conversation about the challenges facing the industry at the FCC, competitive pressures with Silicon Valley and, of course, this year’s crazy election cycle.
The FCC just proposed new privacy rules for the cable and wireless industries. What are the stakes for the industry?
It’s funny because we’ve always thought of our role as the protector of customer privacy as a benefit of our industry and something we’re proud of. And our only significant concern is the continuing erosion of coherence. You’re not serious about creating a meaningful privacy regime for the American consumer if you continue to create separate privacy regimes… [with] the FCC creating a privacy regime whose contours are radically different than the ones applied by the Federal Trade Commission for other institutions. It just further splinters the coherence of privacy law. You know, we read every day about Apple and encryption and fighting and enshrining the idea that your privacy is so sacrosanct that you need to be able to protect everything you do with encryption, but at the same time it’s okay if a third-party box manufacturer—maybe even from China or North Korea—can take all of that data and collect all of that data and not protect the privacy of it. Or that for regular collection of data some communities have a lighter standard than ISPs do. Anybody who’s being intellectually honest knows that those guys make dramatically greater use of your personal information than we do. One of the reasons we don’t is that we’re in a subscription relationship with you, you pay us money. Part of the way we profit from you is that you pay us directly. For them, they don’t get paid directly, they make all their money selling your profile and monetizing your profile. But somehow we hear politicians talking about, “Well, that’s not a problem.”
Why does Silicon Valley seem to get treated differently than cable on a host of issues, and how do you change hearts and minds on that?
I don’t know. I think you just have to keep talking about it. You have to keep pointing out the inconsistencies and the incoherence. I mean, I want to be clear. I don’t accuse the Commission of sitting down in a room and saying “Hey, let’s help Google today.” I don’t think that’s the right way to think about what’s happening. But I do think it employs a vision and an approach to the public policy framework that’s highly tilted toward seeing the Internet as those companies playing the most significant role and that the harms that befall consumers from their particular corporate commercial activities are of little interest, while treating the other half of the Internet system as somehow not really part of it, just a gatekeeper, just a dumb pipe that ought to be regulated and onerously protected from abusing its gateway position. That’s language we hear.
Yet all of that rhetoric is equally true in respect to these other services, yet the government somehow doesn’t harmonize that. I think that’s unfortunate. I think it’s wrong. I think it’s unfair. I also think over time it’s going to confuse consumers and not lead to a better understanding… I listen to the Commission and others say that “Well, infrastructure is different because you can’t change your ISP for another ISP. That’s why it’s different than Facebook. You can always change Facebook.” That’s comical because what they’re really saying is that you can remove your profile from all of the Internet players. Yeah, I can leave Facebook and go use Google+ Circles, but I’m still walking into an unprotected privacy environment. I can leave Google+ Circles and only use Snapchat or Periscope, but then I’m going to get other data collected on me. So I think people can’t swallow this sort of cursory distinction.
Let’s segue to the FCC’s set-top proposal to open up the market to third-party providers. Some worry Google and others could overlay ads or supplant other traditional cable functions? What are your biggest concerns?
We have a lot of concerns about it, but on the advertising thing, let’s be clear. There’s a difference between the FCC telling them they can—which they haven’t, and the Commission will be quick to say “We didn’t say they could do that.” Well, I’m not saying they said they could do that. But they also didn’t prohibit it. So you’re not creating any kind of meaningful enforcement mechanism should they do the things that we’re suggesting. The order is quite dismissive. It says “well, these problems have never happened before, so for some reason we should assume they’ll never happen in the future.” Even Wall Street tells you that past performance is no indication of future behavior. Secondly, they have done it before. We’ve shown the Commission examples of TiVo overlaying ads on existing content. And anyway, are you just naïve? Google is not a consumer electronics manufacturer. They’re in the advertising and data collection business—pure and simple. So I don’t understand how you can, with a straight face, say that’s never going to happen because it’s never happened before. They do it all the time. And we have legions of examples of Google self-certifying that they won’t collect data only to find later they were. In the Google education environment, for example, they’ve been accused of collecting all of this data on students without their permission, even though they signed pledges saying they wouldn’t collect them for those purposes. But that’s just what they do. I think it’s naïve of the government to pretend to not know what these guys do for a living. So I think this sort of “Can you advertise, yes.”
Look, they’re taking away a customer. If you’re Alfred Liggins, and you’re in the business of selling TV One for money. You take that money, and you make great content, and you pay employees, and you pay writers and directors. And by the way, at this company, they happen to be black writers and directors, which creates a whole ecosystem for them to survive. He sells that to Comcast. He also sells that to DirecTV. He sells it to Verizon. He sells to mobile product. He sells the same thing multiple times to different people. All of the companies that want the set-top box thing are potential customers, right? TV One would probably love to also sell to Google or YouTube. But so far those guys have shown very little interest in wanting to buy that product from them. And so now they’ve gotten the government to sort of essentially confiscate the product and give it to you for free. So now, what should be a customer of yours is now able to have and enjoy your product without any payment or negotiations. So they’re taking away a customer.
The second thing is that they’re letting that customer monetize the product. But more importantly, let’s just admit that they can create viewing data, which is far more valuable. Will they share any of that with TV One? Nope. Will they give them any cut of the advertising? Nope. Whose product is it that’s generating the value, but that person isn’t allowed to share in the profits being made by the third party. That’s not right.
And then the third thing to remember is that TV One doesn’t just sell to distributors. It sells to McDonalds, Target and Walmart for advertising, and what they do is say “Look I have this great show for blacks or Hispanics, this audience you’re trying to reach. Buy time on my network, and you’ll reach them.” They say, “Great, I’ll pay five bucks.” Then all of a sudden, your content is showing up on another platform that you don’t control, and McDonalds says “Wait a minute, I can pay Google to get the same data. And by the way, since they don’t have privacy protections, they’re probably getting better data than you have on the viewing habits. Maybe I’ll take five of my dollars, give you two and give them three. Or maybe I’ll give you none and give them five.”
You are killing the advertising because no longer does Alfred have a special product that he’s able to control the use of. Somebody else does. And now Google has probably a better data set because it’s going to cross reference it with all of its other data about you. And they go out and sell to people trying to reach minorities. They go sell to Macy’s and Target. “You want to reach minorities? We have all this data.” Who loses that sale? The content industries that are built around those minority interests are losing those sales because these guys are using data to basically sell the same thing. So you’ve created an advertising rival. That’s all fine if it’s happening in the market, and it is happening in the market. But why should the government pick sides to facilitate them?
And yet despite this tension between cable and Silicon Valley, you continue to integrate more Silicon Valley perspective into INTX. What’s the right balance?
Sometimes these things about Silicon Valley versus whatever makes for great theater. It’s of course always more complicated than that. Everybody is a friend and an enemy in a converged world. And they’re in the world to stay, and by the way, we don’t think that’s all bad. They bring lots of things to our space and we bring lots of things to their space. So I don’t buy the whole “us versus them” dynamic.
But my complaint is that it’s not Google’s job to not care about Google’s interests. It’s the government’s job to be fair and unbiased in a way that administers clear policy, and I think there’s some criticism to be had over whether they’re fairly refereeing those distinctions or not.
So look, they’re not our enemies, and yet they are contributing really interesting and insightful things to the ecosystem and that we want to look at, share and learn from at our cable show. A cable show’s not a lobbying forum; it’s a forum to put on display all the interesting things that are happening in a space you care about. And if you’re in the traditional cable industry, you care about the Internet enormously because you’re selling it. If you’re in the business, you care about all of the developments in video, whether they be streaming, apps or traditional provisioning.
We’ve tried to expand our show to be more inclusive of all the interesting entrepreneurial activity going on in that space that goes beyond just traditional cable. We don’t want a show where we just talk to ourselves. We want a show where we hear controversial ideas, brilliant ideas and dumb ideas. But I want to know more about what YouTube thinks about the nature of video. I’d love to sit down and talk with Snapchat about the ways they see using video for mobile experiences.
Shows should be like new universities: You should walk away smarter than you came. It’s not just a cheerleading forum. Now we do plenty of cheerleading, and we should. We have plenty to cheer about. But I think it’s a poor use of money if it’s also not rich and educational and exciting, and that’s what we’re trying to do.
I can’t let you go without asking about this crazy election year. Any thoughts?
You can talk about this Presidential election about a million different ways. I think the thing that I always focus the most on is the developments and the mood of the country and the perspective of American citizens toward institutions and what that means for the country. And I think it’s a very worrisome thing. The government is probably sitting at an all-time low in terms of its reputation with the American public. It’s not good to have your government thought of so poorly.
We’ve somehow managed to damage the brand of government so badly that it’s worth revolting against. But yet it has to function. So I worry about when all the fire and brimstone is over, there’s still going to be a Congress and a White House and an executive branch and a judiciary that has to go to work. For those of us who—when the elections are over—have to work in that environment every day, I worry that we’re not going to make a better functioning government: we’re going to make a worse functioning government. It’s going to be filled with emotion rather than substance, and that bothers me.
The second thing is that I think the underlying economic negatives in terms of fundamentals and the sense that so many of my fellow citizens have that they’re being left out of the American dream, that they can’t see paths to upward mobility, that there’s a degree of income inequality… has also led to a position of distrusting institutions and private business and corporate America. I think politicians are somewhat shameless in taking advantage of that sentiment to beat up business, beat up corporate models—some of it deserved to be perfectly candid, but some of it overheated.
But at the end of the day, if you going to live in a free-market, capitalist democracy, you need those institutions to function and function well to be successful. You’re not going to hire more workers by putting GE out of business. You might feel good blocking every merger someone tries. You might feel good cutting into the profits of some company that’s going to go overseas. But do you think the CEOs of those companies are the ones who are going to get hurt? Cut their salaries in half. They’re still rich people. But when they lay off a thousand people or don’t build a new plant because it’s uneconomical, it’s not the one percent of the wealth class that’s suffering that loss. It’s going to be people.
And so you’ve got to get corporations to be more responsible and to be more fair, but without vilifying them to the point that they really stop being part of the solution, and they’re no longer admired. I see that in Bernie Sanders and Donald Trump. I see that frankly in all of them at this point, it’s become such a popular thing to do. That should worry us and every other established and corporate interest that’s got to function.
I also think there’s a lot of social disorientation. I for one am someone who is proud of the developments in my country around gay marriage, around other things that have freed us, but we’ve also seen with Ferguson and other things that the deep seeds of racism are still there, and still there in a brutal way. The country is becoming brown very rapidly. In a world in which in very few short decades the color of Americans is going to be one persuasion or the other, I think that creates disorientation among the white middle class. I think that creates disorientation for people who held certain values about marriage, or certain values about a conservative way of life that they’ve enjoyed. I think history will show that this happens a lot.
When you have a really tectonic shift in the social order, there will be a group that doesn’t see itself in it any more. If they feel condemned for who they are, they rise up. I think a lot of Trump supporters feel that way. They feel that no one is speaking for them. They feel cut out of the equation. They get vilified if they have a different view, so that’s why you hear that political correctness diatribe. But those are real problems. And that’s a real migration. And a responsible leader has got to help the country make that transition because you can’t stop it.
In 2040, my son is going to live in a world that socio-geographically looks radically different. Nothing’s going to change that. You can deport every Mexican worker if you want to, but the country needs immigration to survive and in order to roll the labor pool as it ages. And they’re going to be part of our fabric one way or another. It’s just not responsible to act like you can create a vision where they’re gone. Number one, they’re great people. They shouldn’t be gone. And secondly, it’s naïve to think they will be. America is a melting pot. It has to incorporate things, not expel things.
It sounds like NCTA would love to endorse a candidate right now.
NCTA never endorses as President, and we sure as heck aren’t going to this time.