Lobbying for the enemy

For some telecom lobbyists, it’s tough these days to know what signal to send Capitol Hill. Longtime rivals are now talking about merging, just as lawmakers are talking about tackling telecommunications reform. Houston-based SBC, one of the four so-called Baby Bells that provide local telephone service, wants to purchase Bedminster, N.J.-based AT&T for $16 billion. As a long-distance provider, AT&T has been SBC’s blood enemy in the telecom fight.

For some telecom lobbyists, it’s tough these days to know what signal to send Capitol Hill.

Longtime rivals are now talking about merging, just as lawmakers are talking about tackling telecommunications reform.

Houston-based SBC, one of the four so-called Baby Bells that provide local telephone service, wants to purchase Bedminster, N.J.-based AT&T for $16 billion. As a long-distance provider, AT&T has been SBC’s blood enemy in the telecom fight.

Another Baby Bell, Denver-based Qwest, is rumored to be eyeing MCI, another long-distance provider.

For lobbyists, the merger talk sets up a difficult question at a critical time: exactly what to advocate for as lawmakers such as House Energy and Commerce Telecommunications Subcommittee Chairman Fred Upton (R-Mich.) and others plan to push telecom reform.

An AT&T spokeswoman said the company would lobby as if the merger weren’t taking place.

“Our lobbying shop will continue to work for our shareholders until the merger is finalized,” AT&T’s Claudia Jones said.

But disagreements, including a more than $300 million fight between AT&T and the Baby Bells over calling-card fees, inevitably place lobbyists for the companies being bought in awkward positions, observers said.

“What do they fight for? The company that exists today or what it is going to look like a year and a half from now?” one telecom lobbyist said.

“It’s got to be a challenge, seeing how some of the things they want to lobby against, the people who might be their employers likely want,” said Bill McCloskey, a spokesman for BellSouth, another Bell company.

Already, the AT&T-SBC merger has created rumblings among some members of CompTel/Ascent, a group of so-called competitive local exchange providers, sources said. The group’s member companies compete for local phone service business with the Bells.

Some members “don’t trust” AT&T in light of the merger and want it off the group’s governing board, said one telecom lobbyist.

No decision as to whether the company would continue in that capacity has been made, the association says. AT&T could pull out voluntarily. Membership fees — which for AT&T approach $50,000 — aren’t due until next week.

If the merger creates some distrust within CompTel/Ascent, it would also end one of the nastier fights in American commerce.

“There is no doubt in my mind that one of the biggest benefits [for SBC] is eliminating … AT&T as a lobbying force,” said George Reed-Dellinger of Washington Analysis, a group that tracks legislative and regulatory changes that could affect the stock market.

AT&T is thought to have been the financial backer for the group Voices for Choices, which mounted an expensive advertising campaign against SBC and other Baby Bells over access to local markets. SBC spent millions more countering the ad campaign.

Each side also spends millions a year lobbying at the federal and state level. AT&T spent more than $4 million lobbying in Washington in the first half of last year. SBC, meanwhile, spent nearly $5.7 million, according to Senate lobbying disclosure forms.

Despite the bitterness of the rivalry, however, there were indications that each side was tiring of the fight even before the merger talks surfaced.
“The whole ground has shifted so that the old battles are moot,” said Allison Remsen, a spokeswoman for the United States Telecom Association (USTA), which represents incumbent local providers like the Bells. AT&T retains one of the most recognized brand names, although it is a shell of its former self.

One big shift was AT&T’s recent decision no longer to pursue the residential local market, opting instead to concentrate on its business, or enterprise, customers. That took off the table one of the main points of contention: How much access it would get to local Bell networks, and how much that access would cost.

Bells and long-distance companies also agree on some issues. SBC and AT&T both support, for example, the continuation of a tax moratorium on sales over the Internet. Jones, of AT&T, said the two companies also are members of a coalition that supports reform of interconnection fees, which are the prices charged when a call originates on one network but ends on another.

Still, lingering, nasty fights remain, including whether AT&T should pay taxes on prepaid-calling-card phone calls. AT&T claims that because the phone calls contain information such as advertising, they are exempt from the fee requirement. BellSouth’s McCloskey said AT&T owes local telephone companies $340 million.

And while AT&T is not pursuing local residential customers, it still faces access-fee issues over its business operations with the Bells, several lobbyists said.

Gail Lawyer, a spokeswoman for CompTel/Ascent, said her group’s lobbying message hasn’t changed, despite the merger talk.
“We want to promote competition,” Lawyer said. That puts it at odds, she added, with USTA, which is planning a multimillion-dollar push for telecom reform, and the Bells.

But other sources said the mergers effectively clear the field, leaving the Bells to concentrate on a new rival: the cable industry. The emerging wireless industry is another key player.

One major fight centers on how local phone companies, which can now send more content through fiber-optic lines, can access markets traditionally roped off for cable companies and how cable companies, through advances such as voice over Internet protocol, can compete for phone service.

“That’s where the new battle is going to be,” said the telecom lobbyist.