Telecom's Info-Bandits

There's a Latin phrase that people use -- cui bono -- which translates as "for whose good?" It means that you can figure out who is responsible for a situation by looking at who benefits from it. Sometimes, though, it's easier to figure out who benefits by looking at who is responsible.This rule greatly simplifies the task of comprehending the sweeping Telecommunications Act recently passed by Congress and signed into law by President Bill Clinton. Supporters widely praised the bill as beneficial to the public at large. It would lower prices and improve service, they claimed, by allowing the giant conglomerates of the telecommunications industry to compete with one another. Vice President Al Gore went so far as to call it an "early Christmas present for the consumer."But the law was not created with consumers in mind. In effect, the bill was bought and paid for by the very telecommunications conglomerates it is supposed to bring under the discipline of the market. Far from mandating competition among telecommunications companies, the act encourages already-mammoth corporations to pursue further mergers and allows businesses to form alliances with their supposed rivals in other sectors, greatly reducing the risk that new technologies will provide consumers with meaningful choice."This was conceived as: How do you get all the industries on board? You give everyone what they want legislatively," says Anthony Wright of the Center for Media Education, an advocacy group that tried to blunt the bill's worst excesses. "You just give as many carrots as you can. Unfortunately, the consumers weren't invited to that feast."This kind of special-interest lawmaking has often been the norm in Washington, but the congressional class of 1994 seems to have scaled new heights in eliminating the awkwardness of public discussion from the legislative process."A lot of the public-interest sector felt totally shut out," says Kevin Taglang, who monitored the process for the Benton Foundation, which promotes public-interest media. "No one saw the final draft of the bill before it was passed. The industry found a Congress it could work with; a Congress that doesn't allow the public into the debate was a perfect setting for getting the bill through.""The telecom bill was to the 104th Congress what health care was to the 103rd, in terms of attracting a lot of big money contributors," says Nancy Watzman of the Center for Responsive Politics (CRP) in Washington. "It flowed in from all different sectors." The center, one of the prime sources of information about money and politics, documented political action committee (PAC) contributions from the telecommunications industry to members of Congress in the first half of 1995. The numbers are striking: Altogether, the industry contributed more than $2 million in that six-month period, nearly three-quarters of which went to the newly ascendant Republicans. A full $640,000 went to the 45 representatives and senators on the joint conference committee that hammered out the final version of the bill in the late fall of 1995. By contrast, Watzman points out, "Consumer groups contributed little, if anything."It should be noted that these figures do not include individual contributions given by telecommunications industry executives or investors, which may amount to as much or more than the institutional PAC money. And powerful legislators sent clear messages that their votes were for sale. David Samuels of Harper's magazine captured the spirit in which this money changed hands in an excerpt from a speech in which Sen. Robert Dole (R-KS) shook down Republican contributors in Massachusetts. Dole cut to the chase with admirable tact: "I want to thank Senator Pressler for coming in. I want to say just one word about Senator Pressler. He's running for re-election in '96 -- he takes money. He takes checks. It's legal in South Dakota to take money out of Massachusetts. Well, let me tell you something about Senator Pressler. There are probably a lot of people here interested in the Telecommunications Bill -- it's the best thing that we've done all year as far as the future's concerned in technology and jobs. And the chairman of that committee, and the one leading the effort right now on a day-to-day basis, has been Senator Larry Pressler from South Dakota. Larry, thank you very much."Dole's pitch apparently paid off. Pressler, chair of the Senate Commerce, Science and Transportation Committee, took in more than $103,000 in telecom PAC contributions alone in the first half of 1995. Rep. Jack Fields (R-TX), chair of the House Telecommunications and Finance Subcommittee, followed close behind with almost $98,000. Rep. Thomas Bliley (R-VA), who chairs the committee that oversees Fields' subcommittee, received $31,000. Members were rewarded in proportion to their power over the bill, and to their enthusiasm for advancing industry goals. "It was an investment," says the Center for Media Education's Wright. "For most of the companies, it paid off quite well."In addition to the money that went directly into legislators' campaign chests, industry coffers paid for expensive lobbying campaigns. "Every trade association and every corporation in every industry had representatives in Washington," Wright says. These lobbyists-for-hire were selected for their connections: Ex-members of Congress and former staffers of key officials were in high demand.As is often the case in contemporary Washington, the lobbyists' involvement went beyond persuading, cajoling or even doling out money to members. To a great extent, the lobbyists took over the act of writing legislation itself. "If you want to be a serious player, you're asked to submit language," said Jamie Love of the Center for Study of Responsive Law, a Naderite consumer group.Looking at industry's campaign contributions, lobbying efforts and bill-writing is the only way to explain much of the Telecommunications Act. The law is filled with provisions that make no sense from a public-interest point of view but make perfect sense for the industries involved. Consider the deregulation of broadcasting. In the name of "competition," limits on TV station ownership are being raised so much that networks like ABC and NBC will be able to buy twice as many stations. (CBS, whose new owner, Westinghouse, already had stations of its own, needed the limit raised just to avoid having to sell off stations.)In radio, all national limits on station ownership are eliminated under the bill; on the local level, one company may own as many as eight stations in a large market. In smaller markets, two companies will be allowed to own all the stations between them. The bill also guarantees that when the Federal Communications Commission (FCC) assigns new space on the broadcast spectrum for digital television, the only entities that will get a chance to be assigned such space will be those that already have TV stations.Furthermore, because of a new technology known as data compression, the new broadcast frequencies being given for digital TV will be much wider than needed to duplicate traditional analog TV programming. Under a provision of the bill known as "spectrum flexibility," broadcasters will be able to use this technology to put out four or five different channels in the space formerly occupied by one. Or they can use the excess spectrum to sell something completely different -- cellular phone service, say, or paging systems. They can use it for whatever they want: It's "flexible."For decades, the FCC has regulated ownership of stations, saying that it was necessary to prevent concentrated ownership from monopolizing scarce spectrum space. One might expect regulators to regard new technologies like data compression as an opportunity to bring new voices into the broadcast discussion that have previously been shut out. But the Telecommunications Act looks at the spectrum not as a public resource to be shared, but as a private preserve whose investment value must be protected. Granting multitudes of new licenses would deplete the value of those already on the market.The merits of the broadcasters' case no doubt became clearer to legislators thanks to the PAC money the National Association of Broadcasters showered on Congress ($142,000 in the first half of 1995). On top of that came big money from other companies with interests in broadcasting, such as General Electric, Time Warner and Viacom. The network point of view also got a boost from lobbyists like Fox's Peggy Binzel, who was formerly legislative director for Rep. Fields of the Telecommunications Subcommittee. On the Democratic side, the networks enlisted the help of Martin Franks, a senior vice president at CBS and the former head of the Democratic Congressional Campaign Committee.With this kind of money and talent, the networks were able to roll over Dole when at the last minute he objected to the spectrum flexibility plan as "corporate welfare." Some observers believe Dole demurred out of loyalty to other telecommunications companies that had paid good money to the FCC for rights to use spectrum space for cell phone services and the like; they didn't want to be competing with networks that had gotten such space for free. Others suggest that Dole just hasn't liked broadcasters lately. "The networks had been giving him lousy reporting on the shutdown of the government," one analyst noted.Whatever his motives, Dole was unable to delay a bill that offered goodies not only to the broadcasters but to the entire range of telecommunications sectors. In the end, Dole had to settle for an assurance that the FCC would not go ahead with the spectrum giveaway before Congress had a chance to re-examine the issue. But few expect Dole to make any legislative headway before the networks are happily camped out on their new spectrum.If the broadcast provisions of the Telecommunications Act aim to preserve and expand the dominant positions of TV and radio networks, the sections of the bill that deal with cable have an even more perverse purpose: They allow cable companies to take full advantage of their local monopolies, and encourage them to make financial alliances with potential competitors from other telecommunications sectors. Local and regional telephone companies will now be allowed to compete with cable companies to provide video service; cable companies, in turn, are authorized to provide phone service. But cable companies and regional phone companies are both local monopolies -- and make the kind of profits that only monopolies can. There is little incentive for either to lay out the massive investment necessary to go into the business of the other, only to reap the greatly reduced profits available in a competitive environment. It would be like a newspaper chain trying to launch a new daily in a city where another chain already had a local monopoly. It just doesn't happen.Instead of competing, these industries are likely to collude, and the Telecommunications Act does much to encourage them to do so. In areas with fewer than 35,000 people, for example, the local phone company can completely buy out the local cable company (or vice versa, though telephone companies generally have more cash to play with). Elsewhere, telephone and cable companies may buy a 10 percent stake in each other -- which is enough to ensure that the two industries see no economic sense in going after each other.The chimera of cable-telephone competition was used to justify granting the cable industry its heart's desire: total deregulation of cable prices, starting in 1999. (Smaller systems, as well as those where the phone company is providing virtually anything that can be labeled competition, will be deregulated immediately.) As the Center for Media Education's Wright points out, "A deregulated monopoly is the worst of both worlds." Consumer Reports estimated last year that deregulation of cable rates (under a less sweeping proposal) would result in a 50 percent hike in the average monthly cable bill. Not a bad return on the cable lobbyists' investment -- $264,000 in the first six months of 1995 alone. TCI, the largest cable company, by itself gave $200,000 in soft money to the Republican Party days before the '94 election.The bill's most contentious dispute -- and the most expensive, in terms of influence-peddling -- pitted regional Bell telephone companies against long-distance carriers. The Baby Bells -- cash-rich companies such as Nynex, Ameritech and BellSouth -- wanted access to the long-distance market. The long-distance companies -- mainly AT&T, MCI and Sprint, though there are many others -- wanted to keep the Baby Bells out of their business, unless the Baby Bells gave up a significant share of the local market.The long-distance companies have good reason to fear competition with the regional Bells. Though both AT&T, still the leading long-distance provider, and the Baby Bells sprang from the break-up of the old Bell Telephone monopoly, they've since evolved into quite different businesses. While AT&T has been dogged by genuine competition with the other long-distance companies, as their constant struggle to snatch customers from each other demonstrates, the Baby Bells have grown quite rich from their local monopolies. Owning the phone wires leading to individual homes has given local phone companies a great deal of power over consumers. Up to now, they've switched customers from one long-distance service to another with a minimum of bother. But once they've entered the long-distance market themselves, they may not act so obligingly when customers seek to switch to their competitors. "There are all sorts of things cable and phone companies can do to prevent competition," says the Center for Media Education's Wright.With untold billions at stake in this battle, both sides brought out the big guns. The long-distance companies' lobbyists were particularly impressive: AT&T hired political heavyweights such as Republicans Charles Black and Vin Weber as well as Democrat Robert Strauss, not to mention the law firm of Reagan Chief of Staff Howard Baker. MCI, for its part, retained the ubiquitous lawyer-lobbyist Tommy Boggs.The long-distance companies had more famous names, but the Baby Bells outspent them: The local and regional telephone companies gave more than $847,000 in PAC money to Congress in the first half of 1995 -- heavily targeted at Republicans and members of the key committees -- while long-distance companies gave $371,000.And the Baby Bells' lobbyists, while less recognizable to the average C-Span junkie, were more strategically connected: BellSouth's Daniel Mattoon, for example, is not only a former Republican House staffer, but, as Legal Times' T.R. Goldman pointed out, "also chairs the National Republican Congressional Committee's PAC Advisory Committee, the influential group that hands out money to candidates around the country." That's not a person Republican lawmakers want to be on the bad side of.BellSouth's vice president for government affairs, Ward White, who hails from Robert Dole's hometown of Russell, Kan., spent two years working on the senator's staff. The BellSouth team was so well-connected, in fact, that BellSouth's R.L. "Mickey" McGuire was said to have written much of the law's language. "Mickey's fingerprints are all over this bill," one observer told Legal Times.Not surprisingly, the final draft of the act favored the Baby Bells over long-distance carriers. AT&T and its allies were hoping to make regional companies' entry into the long-distance market contingent on certification by the Justice Department. Instead, the Justice Department will merely play an advisory role as the FCC unleashes the Baby Bells.If the public-interest point of view was lost in the debate over the Telecommunications Act, it was because the bill's primary beneficiaries included media corporations -- the same institutions that, in theory, are supposed to inform the public about what its elected representatives are up to."The broadcasters made no effort whatsoever to cover the huge giveaways they were getting under the legislation," notes Andy Schwartzman of the Media Access Project, which advocates for public-interest communications reform. According to the Tyndall Report, a newsletter that tracks the amount of time nightly network newscasts devote to various issues, neither the passage nor the signing of the most sweeping telecommunications legislation in 60 years made the top 10 stories in their respective weeks.What coverage there was focused on the probably unconstitutional restrictions on Internet indecency and on the V-chip. Rhetorical attacks on "immoral" speech, a routine many Republicans can probably now perform in their sleep, served to distract attention from the bill's pro-corporate economic agenda.Print media covered the story little better -- in large part because nearly every major newspaper group owns a stake in broadcast media, cable or both. When The New York Times editorialized that "after four years of legislative struggle, there was one clear winner -- the consumer," it overlooked another clear winner: the New York Times Co., whose five TV stations and two radio stations will vastly appreciate as a result of deregulation.


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