Money talks

The ILECs have more money, more lobbyists and, thus, more clout than their local competitors.

Money is a formidable force. It causes otherwise rational people to become estranged from their families. It makes companies bicker over semantics and, in some cases, teeter over ethical lines. And as a general rule, the entities that have more money also have more power than those that don't.

In telecom, the incumbent local exchange carriers are considered the richest — at least in the local loop space. They own the golden (well, copper) link to the end customer and they aren't readily willing to give it up — even though the Telecom Act of 1996 says they should play more fairly. The ILECs have more money, more lobbyists and, thus, more clout than their local competitors.

FCC Chairman Michael Powell is hoping to balance the game. Last week, Powell sent a letter to Congress asking for a substantial increase in the fine levied on ILECs that fail to comply with the Telecom Act's provisions for open competition. The current fine of $1.2 million per incident is “insufficient to punish and deter violations in many instances,” he wrote.

Powell's suggestion is to raise the fine to “at least $10 million” per incident. That, he argues, would hit the ILECs where it hurts: the bottom line. In addition, Powell suggests that Congress allow the FCC to “award punitive damages, attorneys' fees and costs in formal complaint cases” to CLECs.

These are grand suggestions and they hold to the intent of the act: Local competition isn't negotiable. It must occur. Congress passed the act, but ILECs are getting off easy, CLECs say. Even Powell has said his conversations with CLECs indicate “enforcement is the key area for increased regulatory effort.”

Despite his best intentions, however, I doubt Congress will take to Powell's suggestion. Even if Powell's argument is sensible and logical, it's a long shot. Look at who he's asking for change: legislators who base their positions and campaigns on funding from people and companies with a lot to give.

If the 2000 presidential election is any indication of influence, look at the contributions. According to federal political action committee (PAC) reports compiled by the Center for Responsive Politics and reflecting 1999 campaign contributions through Sept. 30, 1999, Sen. John McCain, R-Ariz., pulled in $122,738 from telecom industry PACs and employees. McCain, who heads the Senate Commerce Committee, which oversees telecom legislation, also received $5000 each from Ameritech, Bell Atlantic, BellSouth, SBC and U S West, plus $2000 from MCI.

George W. Bush at the time raised only $12,000 from telecom PAC donations. Overall, however, Bush got $153,000 from telecom companies, and Al Gore pulled in a whopping $219,300.

At the time, other legislators received cash from telecom firms and their leaders, including Bell Atlantic Chairman and CEO Ivan Seidenberg, Ameritech Chairman and CEO Richard C. Notebaert and Charles R. Lee, chairman and CEO of GTE. All these leaders were involved in major mergers during the past year. Coincidence?

Legislators are under pressure to please their constituents — and the most powerful constituents are those with the most money. Will any politician seeking re-election be likely to pass a bill that would result in more than an eight-fold fine for incumbents — the same incumbents that helped that politician get into office?

I say no. Perhaps my cynicism is shining through, but I suspect Congress will reject Powell's idea even if legislators intellectually buy into it. The idea that ILECs should be punished for failing to comply with the Telecom Act and stymieing competition is right on, just like people who steal food or clothing should be punished.

But do I think it will happen? No. Because money talks on both sides of the issue.

Contact Susan Biagi at sbiagi@intertec.com