COMPETITIVE TELECOM COMPANIES QUESTION USTA LOBBYING PLAN

USTA reacted strongly to the question of antitrust violations, calling the allegations “baseless and slanderous.” The dinner meeting involved a campaign to eliminate excessive regulations and the competitors who wrote the letter were beneficiaries of those regulations, USTA Pres. Walter McCormick said in the statement. USTA Senior Vp Thomas Amontree said the meeting of telecom executives was “identical to our opponents’ getting together and writing this letter that was sent to Congress.” Amontree said McCormick emphasized at the beginning of the meeting that only public policy would be discussed and that the session “would be conducted in strict accordance with antitrust law.”

However, in the letter sent Fri. to the House and Senate Judiciary Committees, the competitors said that “secret campaign appears to raise fundamental issues relating to antitrust law and, specifically, whether it is merely a ruse to engage in conduct forbidden by antitrust law.” Among questionable actions, the letter said: (1) The invitation to suppliers to join the campaign “has the patina of intimidation” because the Bells have “enormous economic power” over suppliers: “At a minimum, such an effort to leverage the economic power of these suppliers to support anticompetitive policies suggests the possibility of a cartel-like implied threat of a group boycott should a supplier wish to remain neutral, as we believe many do.” (2) “If such secret meetings are used by the Bell companies in any way to enter into spoken or unspoken agreements to, among other things, not compete against one another, then such collusion would clearly be illegal” under the Sherman Act.

The letter said the Noerr-Pennington antitrust doctrine allowed competitors to work cooperatively on public policy matters but it didn’t allow companies “to use public policy advocacy as a cloak for engaging in illegal behavior.” The Bells are “plotting to undo the overwhelmingly bipartisan competition laws adopted by Congress,” the competitors said: “This is not what the American free marketplace represents. Over 20 million American consumers have taken advantage of competition laws by switching to competitive telecommunications providers.”

A House source said that issue may come up in a hearing the House Judiciary Committee plans to hold on a broad range of telecom antitrust issues, such as the Trinko court case (see item elsewhere in this issue).

The campaign became public last week after the L.A. Times and Roll Call obtained an Oct. 17 memo McCormick sent to Bell officials that outlined plans for the meeting. In the memo, McCormick said the CEOs of 10 top suppliers had agreed to attend, including such luminaries as Intel CEO Craig Barrett, Lucent CEO Patricia Russo, Motorola CEO Christopher Galvin. Among carrier representatives, McCormick listed BellSouth CEO Duane Ackerman, SBC CEO Edward Whitacre, Verizon CEO Ivan Seidenberg.

McCormick said USTA planned to ask the CEOs “to make a 3-year financial commitment to this campaign” that amounted to “3/100ths of a cent on each dollar of revenue,” which he said meant for larger companies “a funding level of approximately $500,000 per year for 3 years.” Among “talking points” to convince suppliers to jump on board was the argument that “substituting market-based competition for government-managed competition will spur investment, job creation and economic growth.”

The memo outlined: (1) A 3-year plan to obtain “comprehensive federal legislation to substitute market-based competition for government-managed competition.” (2) “Immediate, short-term objectives in furtherance of this broader goal in current proceedings before the FCC on UNE-P, TELRIC pricing, broadband and USF.” McCormick said USTA would “inform the manufacturers that we want to work with them to establish a new business environment that is conducive to investment, innovation and economic.”

USTA’s “action plan for the FCC” included a variety of issues: (1) “Fix the broadband portion of the UNE Triennial Review Order” because the new rules “fell short of the substantial broadband relief announced by the FCC in February.” The areas of the TRO that needed “fixed” are the treatment of Sec. 271 unbundling obligations and the current requirements to unbundle fiber deployment to apartments and residential/small business customers. (2) Gain “functionally equivalent” regulation of broadband services offered by local phone companies and cable. “The FCC has been reviewing this issue since December 2001 and should bring it to a conclusion by Thanksgiving,” McCormick wrote. (3) Convince the FCC to stay a part of the TRO that would change rules for competitive use of enhanced extended links. “The new rules will result in below-cost pricing for special access services, thus destroying a thriving competitive market and reducing incumbents’ revenues by billions of dollars annually.” (4) Encourage the FCC to revise TELRIC pricing rules that now “severely devalue the networks of local phone companies.” As “an immediate partial fix,” the Commission should grant pending forbearance petitions submitted by local phone companies on whether TELRIC pricing should apply to UNE-P. (5) Gain an FCC ruling “that local phone companies, and not UNE-Platform carriers, are entitled to receive access charges,” a move advocated in forbearance petitions filed by Bell companies.

On universal service, the action plan targets 2 outcomes sought from the FCC in pending dockets: (1) “Rule that all broadband providers must contribute to funding universal service.” (2) “Issue rules ensuring that states rigorously apply [a] public interest test when designating new ETCs [eligible telecom carriers].”

The memo indicated the preferred route for gaining FCC action would be “the Administration, through NTIA” calling on the Commission to take actions. McCormick said USTA would “ask that the Administration advance this policy through participation by [NTIA] in key FCC regulatory proceedings and in legislative proceedings on Capitol Hill.”

Analysts at Legg Mason said in a report that the USTA meeting could be the start of “a major initiative in Congress” similar to the Bells’ efforts to push the Tauzin- Dingell bill several years ago. Although the bill never passed, “most of what the proponents wanted was achieved through the FCC’s recent UNE order,” the report said. Thus, “there could be new tactical advantages to having legislation that provides a platform for a debate that can again reverberate at the FCC,” it said.