Bells Win Round 1

By Caron Carlson  |  Posted 2002-03-12

Bells Win Round 1

In one of the most aggressive lobbying campaigns in recent Washington memory, the major local telephone companies succeeded late last month in securing a victory in the U.S. House of Representatives with the passage of the Internet Freedom and Deployment Act, known as the Tauzin-Dingell bill.

The RBOCs (Regional Bell Operating Companies)—Verizon Communications Inc., SBC Communications Inc., BellSouth Corp. and Qwest Communications International Inc.—are now escalating the lobbying battle in the Senate, but key senators overseeing telecommunications have denounced the bill in terms ranging from subtle to profane (Commerce Committee Chairman Ernest Hollings, D-S.C., described it last month as "blasphemy"). The opposing camp, made up primarily of long-distance companies, CLECs (Competitive Local Exchange Carriers) and independent broadband providers, is bracing for the next round of lobbying.

Politics aside, the legislation sponsored by Reps. Billy Tauzin, R-La., and John Dingell, D-Mich., would eliminate regulatory barriers that the RBOCs argue discourage them from building out their broadband infrastructures. Federal Communications Commission rules ban the Bells from providing long-distance services in their local markets until they satisfy regulators that their markets are open to competition. In addition, the FCC regulates the rates that Bells charge competitors to lease last-mile connections. The Tauzin-Dingell bill would exempt broadband services from those restrictions.

If the Bells cant overcome the weighty opposition in the Senate, they may gain relief from the FCC. Early last month, the FCC proposed rules that could change the regulatory categorization of broadband services offered by the Bells, treating them not as the traditionally regulated telecom services but as information services, which are subject to far less federal oversight.

Following the House vote Feb. 28, BellSouth Vice President Herschel Abbott said the measure would enable the company to expand its data network. "Having this sort of connectivity will pave the way for the high-tech industry to begin a new burst of innovation and help the nations economic recovery," Abbott said, in Atlanta. The other Bells greeted the news with similar positions.

Not all Bell customers are enthusiastic about the prospect of relieving incumbent carriers from competitive obligations. "This one worries me," said Kevin Baradet, network systems director at Cornell Universitys Graduate School of Management, in Ithaca, N.Y., and an eWeek Corporate Partner. "If they can set co-location [and leased-line] rates for other providers, they can make it so the competitors cant make any money."

Broadband promises

Broadband promises

Others worry that once relieved of competitive obligations, the Bells may not make the expansive broadband investments theyve told lawmakers they plan to make. Although incumbent carriers had DSL (digital subscriber line) technology more than a decade ago, they did not begin deploying it in earnest until after the Telecommunications Act of 1996 spurred a myriad of CLEC DSL providers into business.

"The RBOCs may not elect to deploy the capital to upgrade their networks," said David Schaeffer, CEO of Cogent Communications Inc., in Washington. "Ultimately, [the bill] is somewhat anti-competitive. I think it means fewer choices and higher prices."

The legislation has gained notoriety for the huge sums of money both camps have spent on lobbying—in campaign contributions and in radio, television and newspaper advertising. For some telecom users, the brazen and expensive politicking casts the legislation in an unfavorable light.

"Once the vote goes down, Id like to see next to each of their names how much each has been paid by the [telephone companies]," Baradet said.

Perhaps not surprisingly, the 273-157 House vote corresponds closely to patterns of campaign contributions by both the long-distance carriers and the Bells. According to the Center for Responsive Politics, in Washington, the 273 representatives who voted for the Tauzin-Dingell bill received an average of $14,706 from the Bells and an average $2,265 from the three major long-distance carriers AT&T Corp., WorldCom Inc. and Sprint Corp. The 157 House members who rejected the bill received an average of $5,745 from the long-distance carriers and an average of $5,016 from the Bells.

"While there are many reasons members vote for or against a bill, the pattern would seem to suggest that had the Baby Bells not spread as much largesse around Capitol Hill as they did, the vote might have come out very differently," said CRPs Larry Makinson in his assessment of the vote. House members who received approximately equal amounts from the Bells and the long-distance carriers voted 2-1 against the bill, the center found.

In total, the Bells spent more than $19 million on federal contributions in 1999 and last year, and the long- distance carriers spent more than $12 million in the same period—money that some users said could be put to better use upgrading networks.

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