CLECs Ask Congress to Investigate "Bell Cartel"

On Friday, the CEOs of some of the country's largest competitive local exchange carriers (CLECs) and their trade groups in Washington asked Congress to open an investigation into recent lobby strategizing by the Bells, warning that anti-trust laws may hav

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WASHINGTON—Despite waging a fierce and costly lobbying battle in Washington for nearly a decade, the Regional Bell Operating Companies have achieved relatively little success in loosening their regulatory obligations. Now, the Bells are trying to enlist network equipment manufacturers in their campaign, but competing carriers are crying foul.

On Friday, the CEOs of some of the countrys largest competitive local exchange carriers (CLECs) and their trade groups in Washington asked Congress to open an investigation into recent lobby strategizing by the Bells, warning that anti-trust laws may have been broken.

In a letter to the House and Senate judiciary committees, the CLECs said that an Oct. 20 dinner meeting of the chief executives of SBC Communications Inc., Verizon Communications Inc., and BellSouth Corp. with some of their suppliers may have been called to strong-arm the manufacturers into joining a massive lobbying effort. Given the Bells economic power over their suppliers, the invitation to join the lobbying campaign "has an unmistakable patina of intimidation," the CLECs charged.

"The apparent audacity of this effort seems to go beyond even the normal questionable standards of the Bell Cartel," the CLECs wrote. "At a minimum, such an effort to leverage the economic power of these suppliers to support anticompetitive policies suggests the possibility of a cartel-like implied threat of a group boycott should a supplier wish to remain neutral, as we believe many do."

The CLECs also questioned whether the strategy dinner was "merely a ruse" to engage in anti-competitive behavior, such as forging spoken or unspoken agreements not to compete with each other.

The cocktails and dinner meeting at the St. Regis Hotel in Washington was scheduled to brief the manufacturers on the Bells three-year plan to loosen their obligations regarding telephone and broadband services, according to an Oct. 17 memo from the president of the U.S. Telecom Association, the Bells lobbying group in Washington, to some of his employees.

According to the memo, a copy of which was obtained by eWEEK, the Bells planned to ask their suppliers to join them in CEO-level meetings at the White House, on Capitol Hill and at the FCC. They also planned to ask them to incorporate the Bells deregulatory agenda into their own corporate "messaging," and to join in a press conference at the National Press Club in Washington.

"Carriers and manufacturers are independent. If we grow…we buy… and then they grow as well," USTA President and CEO Walter McCormick wrote in a "Message Points" section of the memo. "As carriers, we are united, and committed. We now need our manufacturers to unite with us, and commit, as well."

The price tag for such commitment would come to approximately $1.5 million for large manufacturers, as the Bells planned to ask the suppliers to make a three-year financial pledge to the lobbying campaign.

The memo confirmed attendance at the dinner for 10 manufacturers, including Intel Corp., Lucent Technologies Inc., Motorola Inc. and Nortel Networks Corp. Cisco Systems Inc., Avaya Inc. and Calix Networks Inc. declined the invitation, according to the memo.

The Bells Oct. 20 strategy dinner with the manufacturers was first reported earlier this week by the Los Angeles Times.

Twenty-eight top executives signed the CLEC letter to Capitol Hill, including the CEOs of Covad Communications Co. of San Jose, Calif., Allegiance Telecom of Dallas, Supra Telecom Inc. of Miami, KMC Telecom Inc. of Bedminster, N.J. and Eschelon Telecom Inc. of Minneapolis.

USTAs McCormick said today that the CLECs charges of potential anti-trust violations are "baseless and slanderous."

"The meeting concerned a potential campaign to petition the government to eliminate excessive regulations that are suppressing competition and investment and, ultimately, harming consumers," McCormick said. "The authors of the letter are beneficiaries of those regulations and obviously want to perpetuate them."

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