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Baby Bells Call on Tech for Aid

Telecom CEOs want their suppliers to help lobby U.S. officials for regulatory changes.

October 28, 2003|James S. Granelli | Times Staff Writer

Chief executives of powerful Baby Bells are wooing their counterparts at major high-tech companies to help persuade federal officials to slash regulations and let the phone companies raise prices.

In an unusual power dinner in Washington last week, the CEOs of SBC Communications Inc., Verizon Communications Inc., BellSouth Corp. and other local phone service providers outlined a three-year lobbying campaign that would bring together top executives from the telecommunications and tech sectors for high-level talks with the White House, Congress and the Federal Communications Commission.

The phone executives gathered with the heads of several high-tech suppliers, including Intel Corp., Motorola Inc., Lucent Technologies Inc. and Nortel Networks Corp., at the St. Regis Hotel to map out plans for raising a multimillion-dollar war chest to lobby for a change in the way telephone companies are regulated, according to portions of an agenda memo that was obtained by The Times.

The local-phone industry wants "comprehensive federal legislation to substitute market-based competition for government-managed competition," the memo said. The goal is "to end government management of competition where the consumer has a choice of telecommunications service."

The meeting was organized by SBC President William M. Daley and the U.S. Telecom Assn., a trade group for Bell companies and other firms that own local phone networks.

Rival phone companies, trade groups and political analysts derided the meeting as an attempt by the Bells to muscle their deep-pocketed suppliers. The Bells have been lobbying for changes in laws and regulations for years, to little effect.

"This is the Bell companies' continuing efforts to restore their monopoly in local phone service," said Charlie Black, a veteran Republican strategist who is close to President Bush.

"Things didn't go their way before the FCC, and they couldn't get Congress to do it, and they'll never give up as long as they have to compete for local phone service," said Black, who has lobbied on behalf of Bell rivals. "These people are monopolists who don't know how to behave in a competitive world."

The lobbying campaign would represent a "serious power play," said Tim Hugo, executive director of CapNet, a bipartisan Washington group that lobbies on technology issues.

"I almost see this as an implied threat to the [Bush] administration when you get so many powerful telecom and tech executives in one room," said Hugo, whose group includes Bell rivals AT&T Corp. and WorldCom Inc.'s MCI unit. "I know that if the Bells are able to succeed, it will unfairly disadvantage consumers and small businesses across the country and result in higher prices and fewer choices."

The Bell companies declined to comment on the meeting.

Tom Amontree, a USTA senior vice president who was not at the dinner, said the long-struggling telecom industry needed to be revived because it was crucial to the overall economy.

Telecoms are "reaching out to all sectors" to take part in a "united effort to educate Congress, the White House, regulators and anyone else who will listen," Amontree said.

The Bells hope that their suppliers and manufacturers, which provide such telecom gear as chips and switches, will contribute as much as $500,000 a year for three years, according to the memo.

One Bell executive, who asked not to be named, called the regulatory world "out of control" and said many high-tech companies involved in high-speed, or broadband, issues would be boosted by a Bell lobbying victory.

"Maybe some people feel their arms are being twisted," the executive said, "but their interests are aligned with ours."

To spur innovation and investment, Amontree said, the government should eliminate some rules, such as the requirement that the Bells lease their phone networks and gear to competitors at regulated prices. The Bells have long complained that those prices were too low for them to recover their costs.

None of the tech executives who attended the dinner returned phone calls Monday.

Black, the strategist, was surprised that the telecoms would lean on their suppliers and manufacturers, because so many vendors have made a point of not getting involved in past Bell fights at the FCC. He also questioned the Bells' promises to make the kind of investments in their networks that would enrich the high-tech suppliers.

"The Bells for years and years were saying, 'We must have it our way on broadband,' " seeking to set wholesale prices for leasing their high-speed lines, Black said. "The FCC gave that to them. That was supposed to trigger investment. Now they say this [wholesale pricing] is terrible and until it's fixed, they can't invest in anything."

Bruce Fein, a former FCC general counsel, said he couldn't recall any sector putting together such a powerful meeting involving so many "cardinals of the industry."

"This is just a staggering array of mammoth companies," Fein said.

"And their purpose is clearly economic -- to destroy the competitors."

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