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LAS VEGAS -- It's a myth that the Internet is not regulated, says the head of the Federal Communications Commission. But the government has focused--appropriately--on infrastructure, and should keep its hands off content, Michael Powell, FCC chair, told the National Association of Broadcasters meeting here this week.

"The telephone you use to dial in is regulated, the terms of negotiation between the ISP and the carrier is regulated, and the backbone is regulated," he said in a keynote address. "What isn't regulated is content, and I think that's the thing that should always remain unregulated."

However, as Internet use grows, "it's going to be a place where pornography is rampant and people's money is stolen," Powell noted. And as people grow more dependent on it, they will cry out when they're unhappy with its development, Powell said.

And what of such items as the Web site NakedNews.com, on which newscasters undress while reading the news, asked ABC journalist Sam Donaldson, event host.

The Internet operates under a "different First Amendment," Powell replied. "If I wanted to do something about [NakedNews.com] on traditional broadcasting, the First Amendment groups might let me. On cable television it would be a close call. But if you tried to stop it on the Internet, you would lose," he said.

Digital TV on Schedule

Powell also talked about digital television, which he says is being adopted on schedule. The FCC says all broadcasters must offer both digital and analog signals by 2002. Congress has ordered stations to switch to all-digital broadcasts by 2006 if 85 percent of customers have adopted digital service by then. However, Powell hinted the FCC may be flexible with that deadline.

"You don't have to worry that we'll be unreasonable" when the deadline hits, Powell said. "But I'm not going to propose now that we'll have to waive the deadline." The transition depends on hundreds of variables, such as broadcasters, consumers, hardware manufacturers, Congress, and regulatory models, and any of them can disrupt the transition, he said.

"Ultimately, [small stations] and everyone else will have to find the business model to make it possible," he added.

3G Nets: Learning From Europe

Finally, Powell said that the upcoming 3G auctions in the United States will be different than those in Europe.

"Auctions have nothing to do with money for the government," he said. "They are an efficient way to get licenses out to the people who really want them."

The much-hyped European 3G auctions resulted in amazingly high fees for a service that doesn't exist, from many companies that entered huge debt to purchase licenses. Powell pointed out that the United States should learn from Europe's experience.

"Europe is going to crush itself over what it paid for the 3G spectrum," he said. "It paid too much and the government wanted the money."

For example, British Telecommunications now has $35 billion in debts, with no 3G services or customers yet.

"For the same amount of money as BT paid, you could have wired every home in England with fiber-optic cable," Powell said.

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