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It’s a new day for telecom lobbyists. Decisions by the AT&T Corp. and WorldCom Inc. to split into corporate pieces — and put some distance between their traditional long-distance services and fast-growing wireless ventures — were intended to send an upbeat message to Wall Street. But they have sent just as loud a signal to telecom lawyers and lobbyists: The dynamics of the public policy debate over access to long-distance markets and high-speed cable networks is changing fast. AT&T, long a player in Washington, will see its regulatory priorities thrown in the air, and competitors and critics are predicting that the company’s influence in Washington will diminish. The two corporate moves, read as a full-scale retreat from the residential long-distance market, are also giving the four regional Bell operating companies, or Baby Bells — SBC Communications Inc., Verizon Communications Inc., Qwest Communications International Inc., and BellSouth Corp. — leverage to argue for a fresh look at rules governing long-distance services. Last week, the Baby Bells-backed United States Telecom Association sent a letter to Federal Communications Commission Chairman William Kennard and four commissioners asking that the agency “expedite” the Baby Bells’ entry into the long-distance market, given AT&T’s “lessening interest in providing long-distance service to customers when service to those customers deprives it of the financial return it believes it merits.” The landmark Telecommunications Act of 1996 compels the Baby Bells to prove to federal and state regulators that they have opened local telephone lines and equipment to competitors before they can gain approval from the FCC to provide long-distance service. “The major players in essence [are] saying what, quite frankly, they have been saying for a long time — that there is no money in residential long-distance,” says Martin Machowsky, executive director of iAdvance, a coalition backed by the Baby Bells. “It might lay the groundwork for re-examination of the rules under which the Bells get into long-distance.” But Andrew Schwartzman, president of Media Access Project, a public-interest firm, doubts that lawmakers and regulators will be eager to reopen the Telecom Act. “The one thing the administration, Congress — with the exception of Sen. John McCain, who opposed the act — and the FCC have in common is the need to have the 1996 act appear to be successful,” says Schwartzman. He adds that the noise the Baby Bells are making in hopes of using the AT&T and WorldCom restructuring plans to push for their long-distance agenda is no more than a “lobbyist merchandising function.” In addition, an FCC official says that the local phone companies’ newfound optimism may be misplaced. “There is nothing we are going to do to lessen the standards of Section 271,” which requires opening of the local market to competitors, says the official, who asked not to be named. TAKING IT TO THE STATES In only two states have the Baby Bells gained approval to offer long-distance service — SBC in Texas and Verizon in New York. Verizon’s application to provide long-distance service in Massachusetts is currently pending before the FCC. The two other Baby Bells — Qwest and BellSouth — have not gained access to long distance. Still, outside lobbyists for SBC and Verizon are anticipating that the AT&T and WorldCom breakups are likely to work in their favor, and feel that now, more than ever before, they are in a position to take on the almighty long-distance carriers. “The day of the monopoly is gone. Just look at the landscape,” says David Bolger, a spokesman for the United States Telecom Association. “People are going to look at AT&T and say, ‘What are they doing?’ “ The expectation is that as AT&T restructures and spins out its broadband and wireless businesses, policy fissures and divided financial resources will hamper the corporation’s ability to push its agenda in Congress. “Now [AT&T's] voice will be split and splintered and less effective,” says one veteran of the telecom industry. In the current election cycle, AT&T has contributed more than $4.3 million to federal candidates, according to the Center for Responsive Politics. Public documents show that, in the past four years, AT&T has spent approximately $23 million on lobbying expenses — including $8 million in the past year alone — making it the 10th-highest spender on Washington lobbying. With the company splitting into four separate entities, most telecom lobbyists are skeptical that AT&T will be able to continue doling out campaign dollars and courting policy-makers on such a mass scale. “[AT&T] must, under the definition of a breakup, operate independently to some degree, [which] could have the effect of watering down its lobbying on the Hill,” says David Butler, spokesman for the Washington office of Consumers Union. But Peter Jacoby, vice president of congressional relations for AT&T, says that the company isn’t planning to make any major changes in the structure or functions of its D.C. office, nor does it intend to concede on any issues in the near future. “A lot of this is a little longer-term than it is being made out to be,” says Jacoby, adding that it will be at least 18 months before AT&T spins off its broadband cable division. Besides, says one former FCC official, the Baby Bells shouldn’t expect diminished power of AT&T’s lobbying arm to improve their chances of gaining approval to enter long-distance markets. “AT&T wasn’t even that effective when it was big,” says the former official. “They were arrogant, assumed the commission people were stupid, and as a result are not highly regarded at the commission.” A former lobbyist for AT&T also criticizes the company’s government affairs department for spending too much time in internal arguments over policy and not enough time executing strategy. One person close to AT&T acknowledges that the company has gotten “bogged down” at times by its consensus-management style, but says it may be wise to move slowly. “AT&T is such a high-profile company — it’s better to err on the side of caution,” he says. While four separate AT&T companies may be able to pursue more effectively their own interests on Capitol Hill without having to compromise, they won’t have the same clout as a unified AT&T. Inside AT&T, there is concern over the restructuring. The “company is clearly trying to find a new direction,” says a lobbyist familiar with AT&T’s strategy. “People are kind of anxious.” In the rapidly converging telecommunications playing field, cautious approaches and nervousness can leave a company out of the game. CLOSED OFF In the area of broadband — or high-speed cable networks — AT&T has been one of the biggest opponents to federally mandated open access. In the past few years, AT&T has pursued a plan to offer customers so-called bundled packages of voice, Internet, and cable services, investing more than $100 million to buy and upgrade cable companies Tele-Communications Inc. and MediaOne. Although AT&T has now effectively abandoned its plan to offer bundled services, it still intends to provide interactive cable over its cable networks — hopefully without prompting government scrutiny over opening those lines to competitors. Mark Cooper of the Consumer Federation of America says AT&T’s restructuring signals that the company no longer intends to fulfill the promises to increase local telephone and Internet competition that it made when it sought approval for its cable acquisitions. “[AT&T] will change its story and turn on a dime if it’s in its economic interest,” says Cooper, who adds that his group may advocate new legislation that would bolster the Telecom Act by requiring cable companies to open their networks to Internet service providers and startup telecommunications companies. “What this tells us is we have two bottleneck facilities — video wire and telephone-data wire — and we need competition in both,” says Cooper. The prospect of a more competitive cable landscape could come sooner than the next session of Congress. If the Federal Trade Commission succeeds in pressing America Online Inc. to commit to opening its network to competitors as a condition of approving the company’s merger with Time Warner Inc., then open-access advocates will have gained a powerful ally — one powerful enough to tip the debate in their favor. This year, telecom lobbyists say that AT&T has focused most of its efforts on lifting restrictions on cable ownership rules to avoid selling any of its holdings — a condition the company agreed to when seeking FCC approval of its MediaOne acquisition, the Baby Bells and consumer advocates point out. Senate Appropriations Committee Chairman Ted Stevens, R-Alaska, a longtime AT&T booster, has been pushing a rider, which has yet to appear in any of the appropriations bills, to effectively loosen the federal rules limiting cable ownership. The rider’s future — as well as AT&T’s — remains uncertain. In the meantime, AT&T is doing the same thing the rest of America is doing: waiting to see what happens in the upcoming elections. Says AT&T’s Jacoby: “We’ll sit down and talk about what’s likely to happen then.”

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