When it comes to trust-busting, McCain's no Roosevelt

McClatchy NewspapersAugust 20, 2008 

WASHINGTON — John McCain broadcasts his affection for Theodore Roosevelt, but his opposition to regulating the local telephone industry suggests that he may not share the former president's passion for busting huge corporate trusts.

Unlike Roosevelt, who railed against "malefactors of great wealth," McCain's positions frequently have echoed those of the giant regional Bell phone companies, now consolidated as AT&T, Verizon and Qwest, the big survivors of the telecommunications wars of the last quarter-century.

McCain's opposition to the 1996 Telecommunications Competition and Deregulation Act, intended to spur competition by pressuring the Bells to lease their lines and switches to competitors cheaply, offers a window into how he might view regulation of other markets as president.

The Arizona senator characterizes his unsuccessful stand against the measure, and his later attempts to thwart its implementation, as in keeping with his commitment to free markets and his maverick positions on behalf of American consumers. He was the only Republican senator to vote against the legislation.

Critics charge, however, that McCain backed an approach to telecommunications that's limited competition and kept prices high. They note that executives of the big three telecommunications giants and their lobbyists have raised and donated millions of dollars for his political committees.

With McCain on their side, the Bells wound up escaping the stringent sanctions of a 1982 federal court antitrust case that broke up AT&T — then known as "Ma Bell" — and the curbs of the 1996 law. They now dominate local and long-distance phone markets.

McCain and consumer groups speak of the same goals: more competition, better service and lower prices. But consumer groups think that government must intervene to curb monopolies, while McCain contends that deregulation breeds competition.

In two stints as the chairman of the Senate Commerce Committee from 1997 to 2004, he proposed legislation and sent tough letters aimed at hindering the Federal Communications Commission from implementing the 1996 law. He even tried to persuade a nominee for FCC chairman not to appeal a court ruling that would have neutered the law.

McCain's legislation stalled, and the Clinton-era FCC stood its ground in court.

But watchdog groups and former FCC officials say that McCain had an impact, especially in 1997, when the Clinton administration let him pick Michael Powell, the son of former Chairman Colin Powell of the Joint Chiefs of Staff, for a Republican FCC seat.

They charge that later, as President Bush's first FCC chairman, Powell undercut the law, leading to the collapse of hundreds of fledgling companies and ensuring the Bells' and cable giants' dominance over U.S. telephone and Internet markets.

McCain campaign spokesman Tucker Bounds said the senator had stated openly that the 1996 law "was flawed and didn't serve consumers, so it is not surprising that he took actions to block its enactment or impede its implementation."

McCain backed Michael Powell to be commissioner and later chairman "because Powell shared McCain's belief in a free marketplace," Bounds said.

Powell, who's now a McCain campaign adviser, said it wasn't he but three other FCC commissioners who sabotaged the law. During a recent public appearance, he praised McCain for seeking to let free markets act amid "the most fundamental information technological revolution in the history of mankind."

However, Mark Cooper, the research director for the Consumer Federation of America, called McCain "an extreme market deregulator" who's never recognized the need "to let competition grow on the basis of fair access to the monopoly market."

European and Asian nations that mimicked the 1996 U.S. law by requiring dominant carriers to share their networks "have succeeded phenomenally," giving consumers many cheaper phone and Internet choices, Cooper said.

Other watchdog groups charge that McCain, who survived a 1990s ethics scandal to become a leader in overhauling campaign-finance law, has been too cozy with the phone giants.

Executives of the consolidated Bells, the head of their trade group and their present and former lobbyists have raised as much as $4.25 million for McCain's 2008 presidential campaign, data from the nonprofit groups Public Citizen and Campaign Money Watch show. Bell employees, their families, political action committees and lobbying firms have donated more than $400,000, according to the Center for Responsive Politics.

More than 60 present and former telecom lobbyists work for McCain's campaign as staffers and volunteers, some in high-echelon posts while on leave from their firms. Senior strategist Charles Black represented AT&T when it was a long-distance carrier. Campaign manager Rick Davis and Deputy Campaign Manager Christian Ferry lobbied for Bells.

Former Texas Congressman Tom Loeffler recently resigned as a campaign finance chief amid a flap over the hiring of active lobbyists. Loeffler has lobbied for the new AT&T, formerly the Bell SBC Communications. He and his wife, Nancy, have raised more than $1 million for McCain.

"It's no wonder that the phone companies and their lobbyists have raised and contributed millions to Senator McCain," said David Donnelly, the director of Campaign Money Watch. "He has gotten too close to the lobbyists for industries over which he has had regulatory power. Trust-buster Teddy Roosevelt — whom McCain calls a hero — would be rolling in his grave."

Spokesman Bounds said that McCain "has never taken legislative action on behalf of any special interest," including the Bells.

In passing the 1996 law over McCain's objections, a bipartisan Congress took over where a federal court had begun 14 years earlier in breaking "Ma Bell" into long-distance carrier AT&T and seven regional Bells that provided local service.

Like the court consent decree, the new law barred the Bells from entering the $70 billion long-distance market until they opened their lines and switches to competitors.

In July 1997, however, the Bells persuaded a federal appeals court that the FCC lacked the authority to issue pricing rules under the new law. That October, McCain urged agency General Counsel William Kennard, President Clinton's nominee to succeed departing Commission Chairman Reed Hundt, not to appeal.

Kennard backed a Supreme Court appeal, and the agency won on most grounds.

In 1998, McCain proposed a bill that would let the Bells enter long-distance markets within one year, regardless of whether they'd followed the law's 14-point checklist for ensuring local competition.

McCain was no fan of the checklist. Russell Frisby, who headed the trade group CompTel, representing hundreds of startup phone companies, said he'd mentioned it to the senator at a 1998 fundraiser, and McCain had "a little blowup" before quickly apologizing.

In 1999, McCain co-authored a bill that would strip the FCC of its authority to veto telecom mergers that weren't "in the public interest," arguing that parallel Justice Department and Federal Trade Commission merger reviews were sufficient.

That made senior FCC officials uneasy about challenging mergers for fear that the agency would lose jurisdiction, former commission employees said, speaking only on the condition of anonymity because the matter is sensitive.

Bounds said that was "hard to believe" given that the FCC imposed "voluminous conditions" on several telecom mergers in 1999 and 2000.

Not long after Powell became the FCC chairman in 2001, he spearheaded a commission decision that the phone giants need not share their new fiber-optic cables with rivals, freezing many competitors out of growing markets.

Powell also dissented from a crucial 3-2 commission vote requiring the Bells to lease local switches at wholesale rates, a decision that an appellate court overturned in 2002. With Powell on the sidelines, the agency didn't seek an appeal, despite frenzied lobbying by smaller firms and long-distance carriers AT&T and MCI, which were making headway in local markets using Bell switches.

In an e-mail exchange, Powell said that the three-member FCC majority "pulled the rug out of the Telecom Act" by not seeking an appeal.

Jim Speta, a Northwestern University law professor who followed the case, said that if U.S. Solicitor General Theodore Olson had appealed, "I think the FCC would have had a good chance of getting the D.C. circuit reversed."

The Supreme Court refused to take the challengers' appeal. AT&T and MCI soon dropped out of local phone markets, and hundreds of smaller companies, which had invested more than $50 billion, collapsed or surrendered to mergers.

After Powell departed in 2005, the FCC approved SBC's acquisition of AT&T and Verizon's purchase of MCI, mergers that former Chairman Hundt once had called "unthinkable."

Today, the three remaining Bells dominate U.S. phone markets and are gaining momentum in Internet markets.

BELLS CHIP IN FOR McCAIN:

Executives of the three remaining Bell telephone companies and their lobbyists have bundled as much as $4.25 million in donations for John McCain:

  • AT&T: Executive Vice President Timothy McKone and at least eight AT&T lobbyists raised $2.3 to $2.44 million for McCain.
  • Verizon: Chief Executive Officer Ivan Seidenberg, Vice President Robert Fisher and at least nine outside lobbyists raised $1.05 million to $1.54 million for McCain.
  • Qwest: CEO Richard Notebaert, Qwest Oregon President Judith Peppler and a lobbyist raised $100,000 to $208,000 for McCain.
  • U.S. Telecom Association (trade group for the Bells): President Walter McCormich raised $50,000 to $100,000 for McCain.

Note: Where lobbyists represented more than one Bell, the money raised was apportioned equally among them.

Sources: federal lobbying reports; McCain's 2008 presidential campaign.

McClatchy Newspapers 2008

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