HILL ACTION ON LATA RELIEF, FCC REFORM SAID NOT TO BE SLAM DUNKS

Debating success or failure of Telecom Act (see separate story, this issue) is no academic matter in Congress, where several proposals would make significant changes. Most prominent include 2 heavily pushed by House Commerce Committee Chmn. Tauzin (R-La.): Loosening restrictions on Bell companies’ offering data services across long distance LATA lines and adding restrictions on FCC’s handling of merger reviews. While both have received great deal of support in theory, we're told both still face considerable difficulty winning passage this year.

New version of “data-LATA” bill is being drafted by Tauzin and his co-sponsor on last year’s HR-2420, ranking Democrat Dingell (Mich.). Although parties are anticipating some changes, we're told it’s more likely Tauzin and Dingell initially will drop something similar, but stay open to significant alterations in markup. “It’s easier politically to put in the same thing,” said Dingell aide, especially when last year’s bill won co-sponsorship by more than majority of House. With committee still sorting itself out, “we're weeks away from making those decisions,” said Tauzin spokesman Ken Johnson. He said Tauzin has had “general discussions with Mr. Dingell, but our staffs haven’t met yet.”

However, several new wrinkles have been rumored to be in works to help win wider industry support, particularly if Bells succeed in their efforts to hold out olive branch to their long- time legislative foe, AT&T. “The obvious political plan is for an unholy alliance of the cable industry with the baby Bells,” said aide to House Telecom Subcommittee ranking Democrat Markey (Mass.). “That would be great for the incumbent owners of both wires. The only people disadvantaged by that would be consumers and competitors.” Bell companies, most notably Verizon, have proposed resurrecting “Title 7” that was dropped from Telecom Act, to regulate equally (and lightly) cable and telephone broadband services. But that would do more for phone companies, which currently face more regulation. Hill sources told us they expected AT&T to offer Tauzin and Dingell proposal that would work for all parties, possibly to remove statutory caps on cable ownership that restrict AT&T’s ability to build nationwide cable modem and telephony service.

AT&T’s support could smooth bill’s passage in Senate, where ranking Commerce Committee Democrat Hollings (S.C.) and others blocked consideration last year. House Judiciary Committee also is seen likely to become involved, perhaps even moving competing version. If AT&T is on board, that leaves only CLECs as major obstacles, Hill source said, and “nobody’s going to block it for the CLECs.” On other hand, consumer groups could be expected to turn up heat on what then would be painted as blatant favoritism for incumbents, ALTS Pres. John Windhausen said: “I doubt they could stop it, but they could make it pretty painful.” He said ALTS, CompTel and other competitive groups could be expected to rely on strategy that succeeded in fighting reciprocal compensation reform bill last year -- get congressional allies to offer “poison pill” amendments that would diminish Bells’ interest in passing resulting bill. “It’s going to encounter quite a number of amendments,” Windhausen promised. One Senate source said Tauzin and Dingell shouldn’t get any ideas about passing bill that clearly was “just leveraging 2 monopolies.”

Of course, all those scenarios are contingent on AT&T’s reaching deal with Bells. “I don’t know whether you're going to see any unity there,” Windhausen said. “Traditionally, they've not been that friendly to each other.” “I don’t know if [agreement] will emerge,” said Markey aide. Spokesman for USTA said, “To my knowledge, we're not working with them [AT&T] at all.” But he added, “there are ways we can work together. We're willing to listen.” AT&T has publicly denied being in talks with Bells. It didn’t make representative available for comment by our deadline.

Momentum Slowing On FCC Reform Bill?

FCC has come under increasing attack in Congress in last few sessions, and last year saw several bills receive serious consideration that would have at least curtailed agency’s discretion in reviewing mergers. Tauzin and others have criticized Commission for taking too long to complete reviews and for forcing companies to “voluntarily” accept conditions that otherwise would be of questionable legality. They have talked about stripping FCC of its ability to apply broad “public interest” standard in merger review.

But move to reform Commission has lost “a lot of the push,” according to one Hill source, for 2 reasons. First, agency now is under Republican control, and headed by new Chmn. Powell, who agrees with Tauzin on many issues and has pledged to reform agency internally. If Powell “takes reform seriously, that may take the wind out of the sails of any legislative action,” ALTS’s Windhausen said. Senate Communications Subcommittee Chmn. Burns (R-Mont.) said “I think you've got to give [Powell] time to assess” Commission before acting.

Meanwhile, we're told AOL takeover of Time Warner last year caused many members to have 2nd thoughts about removing public interest oversight from FCC. That unprecedented merger of leading ISP and one of leading media companies raised several issues FCC couldn’t have anticipated and couldn’t have resolved any other way but through using public interest standard, sources said. One Hill source who didn’t want to be named said AOL-Time Warner deal was main reason FCC reform didn’t get traction last year, with staffers unable to craft compromise that would allow some public interest standard to be used while still scaling back Commission’s authority.

“Everyone wants the FCC to work on their merger as expeditiously as possible,” said aide to Markey. But he said there would be “certain mergers that come up from time to time that present precedent-setting policy-setting issues for the Commission.” AOL-Time Warner “helped to illustrate why the public interest is alive and well,” aide said. Unlike FCC’s widely criticized handling of Bell company mergers and other large transactions, he said, its treatment of AOL-Time Warner received generally good reviews on the Hill: “People said, ‘Sometimes they do a good job.'”

Reps. Pickering (R-Miss.) and Burr (R-N.C.) sponsored last year’s legislation and are expected to bring something back this year. “It’s their bill. I don’t know how they're going to refine it,” Johnson said. Pickering’s office didn’t return call.

But Johnson rejected idea that FCC reform no longer was needed. Powell’s words so far have been “music to our ears,” he said, but “we recognize that politics in this town can change every 4 years… We've got one chance to fix [the FCC], and we're going to do it.”