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Telecommunications is a highly regulated industry with some of the most Washington-savvy companies in its ranks. It is always one of the most furiously lobbied specialties on Capitol Hill, with millions of dollars and marquee names like AT&T and Verizon in the mix. And now, it’s about to get even hotter. The House and Senate may reopen the 1996 Telecom Act next year — which would put any and all telecommunications issues in play. The move is driven, in part, by conflicts over the regulation of such new technology as Internet voice phone calls, as well as by a potential crisis with the funding of universal telephone services, which make dial tones affordable to people in rural, low-income, or remote areas. All of this means lots of work for lobbyists in the sector. If Congress reopens the law, lobbyists could see a repeat of the effort to pass the 1996 act — which was a multiyear, multimillion-dollar effort. Simply put, “Telecom is going to be busy,” says Edward Merlis, the senior vice president of government and regulatory affairs for the U.S. Telecom Association. Adds Gary Lytle, the top in-house lobbyist for Bell operating company Qwest Communications: “We hope they will get to the rewrite next year.” But based on the 1996 go-round, he says, “I’m not particularly optimistic it will be done in one Congress.” Still, the pressure is on. Merlis, a veteran lobbyist who has worked in-house at the Air Transport Association of America and at the National Cable Television Association, says his sector has reached a plateau where the technology has surpassed existing regulations. “Congress has to be involved in that,” he adds. Gregory Rohde, president of the high-tech- and broadband-focused firm e-Copernicus, says the framework of the 1996 law is sound; it’s the way it has been implemented that’s to blame for problems. He calls it “regulatory negligence and sidestepping of the major issues.” “A lot of the reforms have not taken place at the state level or the federal level,” says Rohde, a former telecom aide to Sen. Byron Dorgan, D-N.D., who advised the senator on telecom issues during the 1996 act. “As a result, these new types of services have far outpaced the existing regulatory structure. The battles that have been occurring at the FCC are now going to move into the political arena on Capitol Hill.” The courts have also been a battleground. Merlis’ group, which represents the Baby Bells, recently scored a huge win on an issue it has been fighting for eight years. On June 9, the Bush administration declined to appeal a ruling by the U.S. Court of Appeals for the D.C. Circuit that threw out the Federal Communication Commission’s rules on how the Bells must share their networks with other companies to promote competition. The Bells have battled such competitors as MCI and the AT&T Corp. at the FCC and in the courts for the past eight years on access to the Bells’ networks and the price of leasing parts of them. The court decision may take a big load off the Bells’ legislative wish list and allow them to concentrate on the Telecom Act. The Bells’ opponents, though, are hardly ceding a permanent victory. And any possible rewrite of the act could be a vehicle for the Bells’ competitors to remedy their June 9 defeat. “It’s certainly not over,” says Robert McDowell, senior vice president at the association CompTel/ASCENT, whose members include AT&T and MCI. “In telecommunications, it’s a long war punctuated by a series of battles. We lost this battle, but we still live to fight another day.” Rohde says the court battle does not put an end to the issue at all. “There are apparent winners and losers,” says Rohde, a National Telecommunications and Information administrator during the Clinton years. “The fact that the rules were thrown out, that’s a win for the Baby Bells. That’s a victory for them and a setback for the competitive companies. But in my own view, I don’t think this is a real victory for anybody because the problem we have is continued uncertainty in the marketplace.” The 1996 Telecom Act was the first major rewrite of the nation’s communications laws since the Communications Act of 1934 and opened up competition in the local markets by allowing the Bells to provide long-distance services. In the latest efforts, legislation dealing with “VoIP” — or telecom-speak for the technology that allows people to make telephone calls using a broadband Internet connection instead of a regular phone line — has already been introduced. So has a measure that would deal with antitrust suits in telecom matters. Lobbyists plan on several rounds of hearings this year and next. If the Senate remains Republican next year, telecom lobbyists will encounter a new Commerce Committee chairman in Sen. Ted Stevens, R-Alaska. And a longtime champion of the Bells’ competitors — Sen. Ernest Hollings, D-S.C. — will be retired. And not only are many of the technologies new, but also some of the industry players are different, or are on different footing, than in 1996. “The technology is changing,” says James Halpert, a partner in the government affairs practice at Piper Rudnick. “But consolidation and market conditions can also change the landscape.” The companies at the forefront of these issues are obviously the four Bells, which last year reported spending a total of more than $22 million on federal lobbying: BellSouth, Qwest, SBC, and Verizon; the long-distance companies; businesses that provide high-speed Internet access (or broadband); and cable, satellite, and other high-tech concerns. In addition to the USTA and CompTel, other trade associations likely to get into the mix include such telecom-focused groups as the Association for Local Telecommunications Services. “These are sophisticated companies that already have a real presence in Washington,” says Halpert, whose clients include BellSouth, eBay Inc., and the Internet Commerce Coalition. The Baby Bells as well as their competitors such as AT&T funnel large sums to lobbying firms, and the shops they have on retainer read like a who’s who of K Street in Washington, D.C. Verizon retains the scrappy GOP shop the Federalist Group and, among several others, the bipartisan Quinn Gillespie & Associates and Washington Council Ernst & Young, both of which last year received $320,000 from the company. The Federalist Group also works for BellSouth, as does Mercury Strategies, Venn Strategies and Quinn Gillespie, among others. SBC retains Johnson, Madigan, Peck, Boland, Dover & Stewart and Loeffler Jonas & Tuggey, among others. Qwest, meanwhile, sends outside work to firms including Walker, Martin & Hatch and the Twenty-First Century Group. All four Bells have impressive in-house rosters as well. AT&T, which reported spending $6.7 million on lobbying last year, sends work to such firms as Akin Gump Strauss Hauer & Feld, which earned just under $1 million from the company in 2003; BKSH & Associates; the all Democratic Ricchetti Inc.; and David Rudd of the Palmetto Group. AT&T’s in-house team is led by former Akin Gump lobbyist James Cicconi, who served as deputy chief of staff to President George H.W. Bush. Telecom lobbyists will have to take their clients’ pitches to several congressional fronts, as members take aim at everything from the FCC’s regulatory power over new technology to concerns about antitrust. A bill sponsored by Sen. John Sununu, R-N.H., and a similar measure sponsored by Rep. Chip Pickering, R-Miss., in the House would set limits on the ability of the FCC and states to regulate voice over the Internet services. Pickering is a former telecom aide to Sen. Trent Lott, R-Miss. The House Judiciary Committee is also staking its claim. Chairman F. James Sensenbrenner Jr., R-Wis., and ranking member John Conyers Jr., D-Mich., have introduced a bill aimed at what a Sensenbrenner spokesman says would “reiterate and strengthen the application of antitrust laws in telecom matters.” The Bell companies, however, say the legislation is unnecessary. The measure, which so far hasn’t moved, came after a Supreme Court decision this year in Verizon v. Trinko, which Sensenbrenner says limited Bell companies’ exposure to antitrust laws. AT&T supports the bill. The 1996 act required all telecom carriers that provide interstate services to contribute to universal phone services. The Pickering bill, for example, calls for the FCC to address problems such as funding for universal service. One proposal, the Universal Services Fairness Act, would restructure the formula that determines how phone providers pay into the fund that pays for service to rural, poor, and remote areas. Rohde and other telecom experts explain that services like calling over the Internet can be a cheaper way of voice communications, right now, because some companies that sell voice over the Internet are not subject to the same access charges that other telephone services must pay. On both sides of the aisle, Rohde says, members of Congress on the relevant committees, including Sen. Stevens of Alaska, come from rural or remote areas with constituencies that want to preserve universal service. Voice over the Internet “is really forcing these issues to the forefront,” he says. “What do you do about universal service and 911? That’s a good thing that these issues are being dealt with�I think one thing is safe to say: next year will be a very busy year for communications legislation.” Editor’s note: For more information about the lobbying business, visit www.influence.biz.

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