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A Game of Soft-Money Hardball

Donations: Reacting to deregulation and a booming Internet, the telecom industry is throwing cash at political parties like never before.


Congress retooled the telecommunications industry in 1996 to give consumers cheaper access to telephone and cable service.

But deregulation has boosted access costs in at least one area: politics.

No established industry has increased political donations more this election cycle than telecommunications, where the spending rate has more than doubled that of the 1996 presidential election cycle.

"Our position is, we've got to be in every possible venue we can be to be heard," said David A. Bolger, a spokesman for the U.S. Telecom Assn., which represents regional phone companies. "If the ticket costs $50 or $500 or $500,000 to get in the door, we have got to do that if we're going to play seriously in the process."

In 1996, when Congress passed the most significant piece of legislation in the industry's history, telecommunication businesses ponied up a little more than $7 million in donations to party organizations.

Now that law has the industry embroiled in an array of regulatory and legislative battles. And through June of this year, companies had kicked in about $17.8 million in such "soft money" contributions, according to Common Cause, which tracks these unlimited, unregulated donations.

(The top five givers from the telecommunications industry were AT&T at $2.9 million, SBC Communications at $1.2 million, Verizon at $1.1 million, BellSouth at $827,696 and Cablevision Systems at $815,000.)

Only the computer industry boosted its spending at a faster clip, Common Cause found. And only the financial sector gave more money overall.

Bolger has a one-word explanation for the telecommunication spending boom: Internet.

The landmark 1996 Telecommunications Act left giants such as AT&T Corp., Time-Warner Inc. and AOL competing for customers on each other's turf, and no prize was bigger than the burgeoning market for Internet services.

Cable companies battled with Internet providers over using cable lines to send Internet information. Local and long-distance phone companies fought over who pays whom to complete customer calls to the Internet. And cellular phone companies have begun fighting each other to capture enough space on the radio spectra for various wireless Internet services.

On one thing, the diverse players in the telecommunication industry agreed: They would not be "Microsofted," a reference to the computer giant's once-lackluster political contribution record and its related inability to find a powerful congressional champion to help fend off a Justice Department antitrust suit.

"They learned they need to play the big-money game," said Meredith McGehee, senior vice president of Common Cause.

The game's big winners are members of Congress.

Rep. W. J. "Billy" Tauzin (R-La.), chairman of the House Commerce subcommittee on telecommunications, has received $137,859 this year from the telecommunication and computer industries, up from $97,671 during the entire 1996 cycle, according to the Center for Responsive Politics.

In the Senate, Republican Conrad Burns of Montana, who faces a tough reelection fight, heads the subcommittee that oversees most telecommunication bills. Since he was reelected in 1994, he has received more than $1.9 million from telecommunication and computer companies, his biggest source of contributions, according to the Center for Responsive Politics. That's six times more than what he received from 1989 to 1995.

"There's been just an avalanche of activity in and around these industries," said Gene Kimmelman, the Washington co-director of Consumers Union, which publishes Consumer Reports. "It's no surprise they'd be currying favor with legislators."

One of the biggest remaining fights before this Congress is about a complex provision of the 1996 act that governs how phone companies compensate one another for using networks other than their own.

Under the law, competing local phone companies pay each other when they transfer voice or data calls from one local network to another.

The problem is that competing local phone companies were formed after the telecommunications act passed, and they swept up Internet providers. Lots of calls are made to Internet providers, but few calls go in the other direction, creating a vastly uneven flow of money between phone carriers.

The Baby Bells say that that costs them $2 billion a year in payments to competitors. The Internet companies say their rates would go up 35% if the phone companies they use stopped receiving the payouts from the Baby Bells.

As the fight has heated up, some of the Baby Bells have more than tripled their donations to lawmakers. AT&T remains at the top of nearly every political money list: lobbying expenditures and soft-money and hard-money donations. And the newly flush Internet companies have donated hundreds of thousands to both parties' political conventions, for instance.

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