Shift of power to Republicans could spur telecom deregulation

Yesterday’s elections that solidified Republican control of the U.S. House and returned control of the U.S. Senate to the G.O.P. is being viewed by some as a positive development for FCC Chairman Michael Powell’s deregulation agenda and potentially for the myriad deregulations bills currently languishing in the Senate Commerce Committee, notably Tauzin-Dingell and Breaux-Nickles.

“This will strengthen Powell’s hand,” said Scott Cleland, president and CEO of Washington, D.C.-based Precursor Group. “All of the process levers in government are now controlled by deregulators.”

The shift in power is particularly important in the Senate, where Sen. John McCain, R-Ariz., resumes chairmanship of the Commerce Committee from Sen. Ernest “Fritz” Hollings, D-S.C. McCain had been Commerce Committee chair until Vermont Sen. James Jeffords resigned from the Republican Party and became an independent in May 2001.

Hollings is an opponent of telecom deregulation, and has been particularly critical of Tauzin-Dingell, which would allow incumbent carriers to provide data long distance services without first receiving Section 271 approval from the FCC, and Breaux-Nickles, which would require the FCC to create parity amongst all providers of broadband services, but without introducing new regulation.

Hollings has characterized both bills as being thinly veiled attempts to extend the Bell companies’ monopolies in the voice market, where they control about 90% of the nation’s access lines, to the data market.

“Hollings was an obstacle. His views don’t reflect those of the consensus, but he has been in control,” said Cleland. “McCain is a deregulator, and his views are closer to those of Tauzin-Dingell.”

A spokeswoman for the U.S. Telecom Association said the group is pleased with the outcome of the elections and is looking forward to working with McCain to stimulate the telecom economy.

“We saw in this Congress growing support for action that would get things moving again, but things haven’t gotten any better,” she said. “This is something the new Congress and the administration will have to take a serious look at, and bring fair regulation and competition to this marketplace.”

However, a panel organized today by the Competitive Telecommunications Association suggested that telecom deregulation, at least through Congressional action, won’t be coming from the lame duck session and probably won’t come out of the next Congress.

For starters, telecom regulation isn’t likely to be on the radar screen of the Bush administration, which has more pressing issues to think about, such as homeland security, pending military action against Iraq and the 2004 presidential campaign, which will kick off in 13 months. Congress also will be focused on these issues, plus a number of pending judicial and commission nominations that need to come to some sort of resolution.

In addition, telecom deregulation has failed to garner broad bipartisan support, which will make it even tougher for deregulation proponents to get the attention of the administration, said John Timmons, principal with The Cormac Group and a former senior counsel to the Senate Commerce Committee as well as a former McCain aide.

“The Bush administration is very cognizant of broad themes and is wary of ‘food fights,’” Timmons said. “And many people view the battles now being fought in the telecom industry as a food fight.”

While McCain has a different perspective than Hollings, Timmons pointed out that the broadband deregulation bill submitted by McCain in August that would deregulate the retail provisioning of residential broadband services and prevent competitive carriers from accessing new ILEC high-speed data facilities represents a much more balanced approach to deregulation than Tauzin-Dingell.

“The Senate requires a balanced approach to get anything done,” Timmons said. “So, anything that McCain does will take into account everyone’s views in the general direction of deregulation. But McCain is not a knee-jerk deregulator. If a situation calls for a good dose of regulation, he’s not opposed to that.”

However, Nancy Kaplan, vice president of Adventis, countered that McCain’s bill is clear on the premise that broadband shouldn’t be regulated. He will be in a better position as Commerce Committee chair to push his legislation to the Senate floor. In addition, McCain is seen neither as being pro-ILEC nor pro-CLEC, which makes it more likely that he will be able to broker a deal.

“Tauzin and Hollings are both so partisan that the result was a very divided constituency,” Kaplan said. “It was very hard for either of them to build any consensus.”

Should Tauzin-Dingell die in the Senate Commerce Committee, it will be difficult for the bill’s proponents to resurrect it in the next Congress, predicted Julian Epstein, a lobbyist for Law Media Group, who counts amongst his clients Voices for Choices. He is also former minority chief counsel and staff director for the House Judiciary Committee.

“A lot of House members took votes they didn’t want to take, and a lot of members got put in a tough position,” Epstein said. “In the next Congress, members are going to say to their respective leaderships, ‘Don’t make us take a vote on a bill that’s not going to go anywhere.’ It will be a much more cumbersome process in the House, at least on the Democratic side.”

One positive development for the FCC that might come out of the lame duck session is the confirmation of Jonathan Adelstein to fill the vacancy created by the resignation of Commissioner Gloria Tristani in September 2001. According to sources, Adelstein’s nomination has been held up by Senate Republicans as payback for the Democrats’ slow movement on several Republican judicial appointments. While the Democrats aren’t expected to roll over during the session, they are expected to move on enough judicial nominees so that Adelstein’s nomination should be confirmed before the end of the session.