article

Election 2000

Posted: 10/2000

Election 2000
What’s in It for the Telecom
Industry?
By Kim Sunderland

In May, FCC (www.fcc.gov)
Commissioner Michael Powell blasted Chairman William E. Kennard and his
democratic colleagues over their support of a "new" White House
initiative aimed at providing affordable phone service to American Indians
living on reservations.

Saying he was “sincerely troubled” over the “unabashed politicization of commission business,” Powell acknowledged he was disturbed with the White House’s claim the initiative was “Mr. Clinton’s proposal.”

Powell said the FCC had been working on the plan for a year.

Powell also objected to the “chairman carefully orchestrating commission business to play on the political stage in support of White House activities.”

“Such action puts at risk the independence and integrity of the FCC and its career staff by purposely joining our authority and agenda with that of the administration,” Powell stated. “I sincerely hope that this matter is not just the first in a series of activities designed to build a legacy and promote political outcomes in this election year.”

Alas, that’s exactly what it is.

It
should come as no surprise that President Bill Clinton got semi-involved in
telecom issues this election year. Vice President Al Gore actually takes credit
for practically inventing the Internet; many of Gore’s closest chums work at the
FCC and the National Telecommunications and Information Administration (www.ntia.doc.gov);
and Gore repeatedly is referred to as "Mr. Information Superhighway."

Powell’s comments illustrate the entrenched political yarns that make up a tightly woven fabric of campaign loyalties. They reach into all facets of the telecom industry, including the federal commission that oversees it.

Make no mistake, while telecom issues have not been making the political headlines during this election year, the communications industry is involved heavily. Telecom companies support Gore and Republican candidate George W. Bush with substantial financial contributions in hopes their respective issues will find support in the new White House.

Because of this, the Gore or Bush plan for presidency does include telecommunications more than most people outside Washington, D.C. realize.

Gore’s
Telecom Agenda

On the opening day of the Democratic Convention in Los Angeles, Clinton urged Americans to put their trust in his vice president, because he said Gore comprehends what lies ahead.

“More than anybody else I’ve ever known in public life, Al Gore understands the future and how sweeping changes can affect Americans’ daily lives,” Clinton said during his speech.

In respect to the Internet and technology, Gore has advocated investment in information technologies. From early in his congressional career, Gore staffers say that he has focused on the potential of the information technology age, and worked to connect every classroom in the United States to the Internet.

Gore also promotes online privacy, advocates faster Internet connections and is a prime supporter of the development of the Next Generation Internet, which will move at speeds 1,000 times faster than today, according to campaign staffers.

As vice president, Gore helped lead the fight for the Telecommunications Act of 1996, which competitive carriers say has revolutionized the telecom industry in the United States.

And Gore has emphasized technological innovation and preparing today’s workers for tomorrow’s economy as a way to keep the prosperity of the last eight years growing.

“We must harness the powerful new forces of technology, and use them to strengthen our oldest values–to promote freedom, to educate our children, and to lift our families and our nations up,” Gore says.

According to Gore’s campaign information, Gore would take these steps to keep U.S. high-tech industries growing:

  • Build a strong economy–which he says is a key precondition to high-tech
    growth. He would make the federal tax code an agent for innovation through
    targeted tax credits aimed at spurring investment in research and
    development;
  • Open global markets in cyberspace for U.S. companies;
  • Boost investment in information technology and biotechnology;
  • Educate and train the workforce of tomorrow by creating the best public
    education system;
  • Make higher education more affordable and expand training programs;
  • Close the Digital Divide and finish connecting every classroom and library
    in America to the Internet;
  • Launch a crusade to make Internet access as universal as telephone access
    in every U.S. household. Continue support for the deployment of broadband
    Internet access and development of the Next Generation Internet to help end
    the "world-wide wait";
  • Build on competition and innovation by making the telecom industry a
    leader in America’s economic growth, while sustaining a commitment to a
    competitive telecom industry;
  • Call for an Electronic Bill of Rights to protect personal online privacy
    to secure personal information that can be intercepted and abused by others.
    Gore also has worked with 25 of the largest Internet companies to develop a
    parents’ protection page to protect children from material they think is
    inappropriate.
  • Create an e-government where citizens are online, not in line, resulting
    in a government that is always open by putting virtually every federal
    government service online by 2003; and
  • Fight efforts to undermine the benefits competition has brought.

Clinton began pushing Gore’s telecom agenda when he unveiled earlier this year a computer subsidy program during his State of the Union address. The president promised to attack the Digital Divide with a multibillion-dollar initiative that would subsidize computers and Internet access to qualified homes.

The White House says the program would include $2 billion in tax incentives and $380 million in private-sector grants to drive computer ownership and high-speed connections to the underserved.

Bush’s Telecom Agenda

Bush’s national role in telecom is limited currently to his announcement in July 1999 of the formation of his Information Technology Advisory Council for his presidential campaign.

The
group advises Bush on high-technology issues and helps to recruit industry
leaders. The council has amassed a serious group of knowledgeable industry
veterans, including Michael Dell, CEO of Dell Computer Corp. (www.dell.com),
who is chairman.

Co-chairmen include: James Barksdale, managing partner at The
Barksdale Group (www.barksdalegroup.com);
Carol Bartz, CEO and chairman of Autodesk Inc. (www3.autodesk.com/adsk);
John Chambers, president and CEO of Cisco Systems Inc. (www.cisco.com);
Richard Egan, founder and chairman of EMC Corp. (www.emc.com);
Tom Engibous, chairman, president and CEO of Texas Instruments Inc. (www.ti.com);
Robert Herbold, executive vice president and COO for Microsoft Corp. (www.microsoft.com);
Ray Lane, president of Oracle Corp. (www.oracle.com);
and Steve Papermaster, chairman and CEO of Agillion (www.agillion.com).

If elected president, Bush has three main goals for the high-technology area:

  • Lift barriers to innovation and fight efforts in the United States and
    overseas to impose new obstacles;
  • Develop and maintain a workforce prepared to seize the opportunities of
    the high-tech economy; and
  • Establish a stable environment that encourages research and innovation
    without attempting to direct them.

As governor of Texas, Bush has taken a leading role in addressing the needs
of that state’s high-tech community, according to his staff.

He signed Y2K
legislation considered the most comprehensive in the nation by the Information
Technology Association of America (www.itaa.org). The state law provided
liability protection to sellers and manufacturers who made good-faith efforts to
notify consumers of potential Y2K problems and offered low-cost solutions before
harm occurred.

Bush also signed a state law that cut Texas’ Internet access and data processing taxes.

But
Bush’s real strength in telecom has been his ability to choose the right people
to deal with the issues, says Rosemary McMahill, senior manager at CHR Solutions
Inc. (www.chrsolutions.com). The
governor appoints the people who sit on the Public Utility Commission of Texas (www.puc.state.tx.us),
which oversees telecom regulation.

"The governor has chosen real
regulatory leaders," McMahill says. "They are practical, moderate and
consensus building in what is a very tough job."

Chairman Pat Wood III, a
Republican, is the PUC chairman. He also sits on the Universal Service Joint
Board, a federal-state effort. And Bush appointed Brett A. Perlman as a
commissioner, who sits on the Section 706 Joint Task Force on advanced services,
another federal-state cooperative endeavor.

"These commissioners are on
the cutting edge of the issues," McMahill says.

The Money Machine–Cha-Ching!

The communications industry has poured large sums of money into the presidential candidates’ coffers.

The
Federal Election Commission (FEC, www.fec.gov)
reports that as of Aug. 3, the Democratic Party had received nearly $16 million
in contributions from the TV, motion pictures, recording, computer equipment and
services, telephone utilities, and telecom services and equipment industries.
The figure is based on contributions from political action committees (PACs),
soft money donors and individuals giving $200 or more, the FEC says.

The
Republican Party had received nearly $11.5 million from the telephone utilities,
computer equipment and services, and TV, motion pictures and recording
industries, the FEC reports.

Of the parties’ top 20 contributors (see
related charts
), the Democratic Party list includes the most
communications-related contributors with seven. This includes two
communications-related unions.


Chart: Top 20 Contributors for the Two Largest Political Parties

The GOP listed four communications contributors among its top 20.

Among
the largest contributors to the Democratic Party is AT&T Corp. (www.att.com),
listed as the fourth-largest donor with $992,815. For the GOP, AT&T is
listed as the No. 1 contributor at $1.47 million.

The long-distance giant has several pending telecom issues, including mergers, Bell companies entering into its business and the cable open access issue.

SBC
Communications Inc. (www.sbc.com) is another
top 20 contributor listed for the Democratic Party at $726,600. SBC, which
gained in-region long-distance approval in Texas from the FCC this summer, is in
the midst of deploying a massive broadband project. It also is seeking Section
271 approvals in other states within its region.

Verizon Communications (www.verizon.com)
and Microsoft are listed as top 20 contributors for both political parties.
Verizon–formerly Bell Atlantic Corp. and GTE Corp.–also is seeking Section 271
approvals in other areas of the country.

Microsoft, which the federal courts has found to be a monopoly, is battling the federal government against a court order to split the company.

Some
sources say the communications industry’s dynamics are changing. IXCs fight the
ILECs and hold off the CLECs. Cable companies scuffle with ISPs and
broadcasters. Hollywood entertainment giants get into it with all of them.

While Gore’s party may have received most of the money donated by the communications industry and its workers, alliances will shift easily depending on the issue–especially as firms continue to merge, industry observers say.

What
Could Change

Regardless of which candidate gets into the White House, the telecom industry likely will experience some changes.

For instance, on Capitol Hill, the telecom merger issue could be impacted substantially if the Republicans win the election, according to sources.

"The
differences would be rhetorical rather than actual in mergers," says Robert
Rosenberg, president of The Insight Research Corp. (www.insight-corp.com).
"The Democrats have taken no concrete steps to stop them; they’ve done very
little. The Republicans’ cardinal faith, on the other hand, is to let the
marketplace decide.

“If [Republicans] win the election, we would probably see more mergers being approved at a faster pace,” Rosenberg predicts.

Telecom
attorney Mitchell F. Brecher of Greenberg Traurig LLP (www.gtlaw.com)
says, "If Al Gore wins, both houses could change hands to the Democrats and
then all bets are off on pending legislation" that could harm competition.

Several
broadband-related bills, largely supported by Republicans, are pending in
Congress. A Gore administration that likely would not give the BOCs competitive
breaks in the local market could squash such proposals.

But if the Republicans
have control of the House and Senate, a "better chance that pending
broadband legislation would be enacted, and that’s a horrible thought" for
competitors, Brecher says.

On the content side of telecom issues, Gore’s
running mate Sen. Joseph I. Lieberman (D-Conn.) wants limits, which go against
Gore’s views. Brecher says this could create problems for heavy donors seeking
rewards for their earlier campaign support.

Another contentious issue is that
"on the international side, Republicans want free trade and an open
market," Brecher adds. "The Democrats have their labor constituency to
consider."

Calling the Courts

At the U.S. Department of Justice
(DOJ, www.usdoj.gov), the presidential
election eventually will bring new faces to key antitrust enforcement positions,
but policy changes aren’t expected to occur.

That means that if Bush becomes president, for example, he’s not going to end the government’s case against Microsoft, and telecom mergers would receive about the same amount of scrutiny they do now, sources say.

However, the U.S. Supreme Court will be a hot topic on the Hill following the November elections. It is expected the next president could be in a position to appoint three or four justices to the high court.

Speculation in the nation’s capital is that some of the associate justices currently sitting on the nine-member Court may retire because of age or health reasons. The current associate justices range in age from 51 years old to 79 years old.

It
would be difficult to predict what a shift in a balance of judicial power might
mean for the telecom industry. But given the amount of time the industry spends
in court, who is appointed to the federal bench–including at the federal
district and federal appeals levels–could become crucial in the future.

What
would be great for telecom if Gore wins is that "this would be the first
time we would have a president who was seriously interested in
telecommunications. This is one of his pet issues along with the
environment," Brecher says.

Lights, Camera, Action!

No matter who wins the White House, new characters will be cast at the FCC.

Current
Chairman William Kennard’s term expires in 2001. Two to three new commissioners
and a Common Carrier Bureau (www.fcc.gov/ccb)
chief could be appointed by the new president, according to Lawrence J. Spiwak,
president of the Phoenix Center for Advanced Legal & Economic Public Policy
Studies (www.phoenix-center.org).

As
a former FCC staffer, Spiwak says, "If Gore wins, we’ll see more of the
same shenanigans that we’ve seen over the last eight years with the Clinton/Gore
team, whereby nothing gets done for competition."

Spiwak believes that
while the current FCC commissioners are largely Gore people, the career
bureaucrats working in the trenches still are the ones that handle the important
orders. Most of these people came in with the Republicans, he says.

"All
of them were appointed under the Republicans but they’ve become more entrenched
under the Democrats," Spiwak says. "The Democrats came in with Gore,
but these Republicans had to stay on at the FCC to show them what to do and
they’ve never left. They control the keys to the kingdom."

This has led
to an entrenchment of current policies, he adds. And that is what has allowed
mergers and consolidations that hurt competitors–not to speak of BOC
long-distance entry, he adds.

But Spiwak says he is not sure a Republican
administration would be any better for the FCC.

"Neither party has it
right," Spiwak says. "Remember that old [The] Who song, ‘Meet the new
boss, same as the old boss?’ That’s what we’re talking about here."

Overall,
says Scott Cleland, CEO of the Precursor Group (www.precursorgroup.com),
if Gore wins, it "would not represent a large shift" for the telecom
industry, while if Bush becomes president there "would be a significant
shift, and we would see a whole different FCC."

"But really, it’s
crystal ball gazing," Cleland adds.


Chart:Soft Money Contributed by Communications Industry

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