Telecommunications reform and the politics of 96

Telecommunications reform and the politics of `96

Stephen N. Brown

The November elections will not bring a quick resolution of the telecommunications reform effort, which will stretch out to the 1996 presidential election, because 18 Republican senators will then be vulnerable to a counterattack by the Democrats and will need significant funds to sustain reelection campaigns. Republican strategists, in control of Congress for the first time in 40 years, face a simple choice: Should they quickly resolve the telecommunications issue, or move it slowly through their committees toward ultimate passage in October 1996, all the while raising campaign funds to bring in a bumper crop of new and reelected Republican senators?

Although Americans like to think that public policy and electoral concerns do not have anything to do each other, the tactic is common practice in Washington. The Demo crats held power for 40 years because they skillfully linked reelections, public policy and campaign funding. Republicans may use the same linkage, and the first practitioner appears to be Senator Larry Pressler (South Dakota), the new chairman of the Senate Commerce Committee. He will have significant influence on new legislation, and as chairman, will have the same blocking power that Senator Hollings used last September to kill S1822. However, in a public statement, Pressler said, "We would like to pass a bill early on," and suggested he would be amenable to bipartisan efforts because the Democrats, with 47 seats in Senate, have enough votes to slow or block legislation. But the South Dakotan also wants to move into the Senate Republican leadership and head the National Republican Senatorial Committee, the chief fund-raising organization for Republican senatorial candidates. If Pressler chairs the NRSC and the Commerce Committee, campaign contributions from the various cash-rich players in the telecommunications scene will be an important factor in financing Republican campaigns for the Senate. Those players include local phone companies, long-distance companies, the cable industry, competitive access providers, wireless companies and electric utilities. Because they are often antagonistic to each other, none of them can afford to sit on the sidelines of the influence game. Senator Pressler could be in an ideal position not only to shape telecommunications policy, but also to improve the Republicans` advantage in the Senate. Fifty-three senators are Republican, giving the party only marginal control of the Senate. Increasing that figure to 60 would give the party complete control, an objective perhaps achievable through adroit handling of telecommunications legislation. A related question is whethe

Tying tele communications policy to electoral strategy is easy because the issue does not inspire passion in the electorate. Roy Neel, president and chief executive of the United States Telephone Association, the lobbying group for the regional Bell operating companies, aptly said, "[Telecommunications legislation] never develop[s] the grass roots passion that can propel controversial legislation, such as...a crime bill. ...No one is going to stop a Senator at a Rotary meeting and demand to know why he is blocking telecommunications reform." The tele com munications players cannot look to the public for support; they have to fight it out among themselves. The battle has begun.

Edward D. Young III, Bell Atlantic`s vice president and associate general counsel, recently attacked the cable industry for its efforts to open the local exchange to competition by stating: "No amount of posturing by the cable-TV monopoly will disguise the fact that what cable wants is a market to itself while being allowed to compete freely in other telecommunications businesses. Bell Atlantic`s position has been clear for months: Open all markets, including the local exchange, cable and long distance to full competition at the same time and as soon as possible. If we`re ready to compete, why isn`t cable?" All the RBOCs favor this policy, and they may have found sympathetic ears in Congress. Pressler was quoted in The Wall Street Journal as saying, "We are looking for a very balanced approach" to telecommunications reform. His counterpart in the House, Rep. Jack Fields (Texas), who now presides over telecommunications legislation initiated in that forum, said, "The overall premise is regulatory parity. ...We want to put everyone on the same playing field as close to the same time as possible so we have real competition."

Local competition

Industry watchers believe that Fields may explicitly link the development of local competition with the Bell operating companies` entry to nationwide and interstate long-distance service. Jot Carpenter, director for government relations for the Telecommunications Industry Association explains: "The RBOCs and the long-distance carriers went to battle last year, and we know what the parameters will be now. Local competition is recognized as part of the solution and is regarded as inevitable. Part of the problem involves discussion of how local competition is brought about and how that will make it easier to lift the restriction on interexchange for RBOCs." Carpenter added, "The RBOCs` line of business restrictions will eventually go away and appropriately so."

Republican telecommunications policy appears similar to a Democrat policy, but posits quicker market entry for all participants and quicker termination of regulatory shackles on the RBOCs. The Republican twist to new legislation may be a firm rejection of the Democrats` view of a telecommunications world divided between the "haves and have-nots," a perception that justifies a policy of government intervention. The policy has been ridiculed by commentator Michael Schrage, who wrote, "The data deprived and the modem-less masses will huddle beneath the information superhighway`s overpasses, shut off from the multimedia mainstream. ...If that were true, it would be far more logical and cost-effective to give people subsidies for newspaper and magazines and keep the public libraries open a little longer. ...While we certainly subsidized the growth of telephone systems, we chose not to subsidize the sale of radios and television sets, or VCRs or telephone answering machines. Has that promoted a two-tier society of communications rich and poor?" Schrage did not answer his own question, but he invoked a typical urban image of poverty (people huddling underneath an overpass) to deflate the social-justice cause of the Democrats. Even if Schrage`s observation is ideologically correct to them, Republican strategists should be cautious of making it a cornerstone of their telecommunications policy.

Rural support

Scoffing at urban have-nots is easy, but scoffing at rural have-nots could cost the Republicans Senate seats in rural states. According to a Syracuse University researcher, 79% of library systems that serve cities of 250,000 or more have an Internet connection, but only 17% of rural libraries do. Federal Communications Commission Chairman Reed Hundt got the sense of the rural-urban disparity when he attended the November meeting of the National Association of Regulatory Utility Commissioners. State commissioners peppered him with questions about universal service and how it would be maintained and paid for, and how it would be extended to low-income and high-cost rural areas. According to The Washington Post, "Rural users voice concern that the next wave of technological improvements--broadband fiber-optic cable--will pass them by because of the cost..." and if government were to subsidize rural access to the Internet, the cost would be $10 billion.

Senator Pressler has already demonstrated his familiarity with this problem. In late February 1993, the Senate Commerce Committee questioned Commerce Secretary Brown about Senate Bill S4, the National Competitiveness Act, a funding effort for the information superhighway. Pressler said: "I represent a small state. ...Our largest city has 100,000 [people] and then we drop off to small cities and small towns. ...What will this legislation do for small cities and rural communities?" Brown replied: "Senator, you might consider using the example...of a school child being able to plug into the Library of Congress. That would...be a pretty good incentive for rural educational apparatus." Pressler asked, "That will happen in rural areas, small cities?" Brown assured him, "It will happen."

Republican presidential candidates cannot attack the information superhighway as one more big-government project unless they want to injure their own chances of electoral success. This will be crystal clear toward the end of 1995, when most would-be presidents will be canvassing Iowa. The state is politically significant because it has the first caucus of the presidential season; whoever wins in Iowa usually captures the party`s nomination for president. But there is certain irony this time. Iowa provides an unusual example of the Republican party supporting government intervention in the telecommunications sector. The state has spent approximately $150 million on a state-owned and operated fiber-optic network aimed at educational and medical uses. The network will have more than 500 access points at colleges, high schools, libraries and medical facilities. The network owes its existence to proactive government in a state where politics are dominated by the Republican party. It controls the governor`s office, the state legislature and most of the Congressional delegation. Despite the network`s appearance as a big-government project, no candidates ran against it in the general election. Thus, Republican presidential candidates will not come to the state and denounce government`s positive role in developing fiber infrastructure. And therein lies an opportunity for Senator Dole and his colleagues to present their party as supporting effective and popular telecommunications infrastructure projects, even when government plays a major role. The Republicans` approach to national telecommunications reform will show whether the party is willing to learn from its Iowa chapter: Be eclectic and shed some ideological armor in favor of practical solutions that meet the public`s need. q

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