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Monday, November 07, 2005

Records Indicate Bells Engaged in 'Astroturf' Lobbying

Records Indicate Bells Engaged in 'Astroturf' Lobbying

Creation of Faux Consumer Groups Designed to Influence Pending Legislation

WASHINGTON, Nov. 7 /PRNewswire/ -- An examination by Larstan Business Reports of publicly available documents indicates that certain "independent groups" claiming to represent consumer interests are actually undercover stalking horses for the special interests of the large phone companies.

The Bell telephone companies are pushing Congress to repeal anti- discrimination rules in the 1984 Cable Act. Those rules prohibit discrimination, within a service territory, by any communications company that provides cable television service. The Bell telephone companies - anxious to get into the television services industry - are asking Congress to repeal these and other rules which empower local governments to protect their communities. Similar bills also are being considered in several states, including California, New Jersey, Michigan, Virginia, and elsewhere.

The Bells have made clear that they intend to deploy new fiber networks capable of delivering video services mostly to wealthy neighborhoods. SBC Communications told Wall Street investors that it intended to roll out the new network almost entirely for their "high value" customers while redlining most of their "low value" customers. Verizon has announced a similar business plan for its new fiber rollouts. Both companies have come under widespread criticism from civil rights leaders, including C. Delores Tucker in a recent op-ed in The Washington Post.

As the political arm-twisting gets underway, the record reveals inconsistent arguments from four highly visible groups in particular: the Internet Innovation Alliance (IIA); Consumers for Cable Choice (CCC); Frontiers of Freedom (FOF); and the Phoenix Center for Advanced Legal and Economic Public Policy Studies.

For years, these four organizations warned that the Bell companies were dangerous monopolies prone to act in a manner that's contrary to the public interest. The rhetoric often was strident: "The Bell companies are building a coffin to bury the competition that has managed to surface in consumer telecom services and they want the FCC and Congress to help them," stated CCC president Robert K. Johnson, in a press release, Oct. 15, 2002.

Now that the Bells have bought the corporate sponsors of these groups, these four one-time nemeses have become the Bells' shills. Here's merely one example of this newly found affection for the public policy positions of the Bells, found on the CCC's web site: "Unlike phone rates, which have been subject to intense consumer competition in the past decade, cable rates have increased steadily since 1996, and service quality complaints persist."

For years, CCC and the others advocated strict regulation of the Bell phone companies because of the lack of competition and rising phone rates. Now these groups are arguing that the Bells should be deregulated while their competitors should not. With a straight face, they argue that tilting the regulatory landscape in the Bells' favor will release their entrepreneurial energy, to the benefit of everyone. The record of these contradictions speaks for itself, by examining the public statements from these groups, before and after the announcement that AT&T and MCI were being acquired by Baby Bells' SBC Communications and Verizon, respectively.

A Long Record of Policy Flip-Flops

In the biggest monopoly bust-up since Standard Oil, federal antitrust regulators in 1984 split up AT&T (the venerated Ma Bell) into the long distance company and seven local monopolies. The 1996 Telecommunications Act set in place rules to encourage competition in the local markets by giving AT&T, MCI and other competitors wholesale access to the monopoly networks of the Bell companies under the theory that the Bell facilities were ratepayer financed and that market entry was otherwise impossible. In 2004, the Bells effectively won the repeal of those rules, and earlier this year SBC acquired AT&T for $16 billion and Verizon acquired MCI for nearly $8.5 billion.

The hypocrisy of the four pressure groups runs long and deep. Below are specific examples of these groups' "about-face" arguments, with explanations of why their statements constitute a reversal:

-- Internet Innovation Alliance (IIA):

Before: "SBC's charging of higher fees to VoIP providers ... is discriminatory in nature and is a dangerous first step toward eradicating the vast array of benefits services like VoIP will provide to consumers. VoIP promises great consumer benefits provided it remains unburdened by regulations and access fees ... SBC apparently missed the memo or chose to ignore it in the face of larger profits." - IIA press release, November 30, 2004.

After: "This increased video competition is very much needed. Since 1996, cable rates have increased 45 percent, or nearly three times the rate of inflation. Internet-delivered video offerings - Internet Protocol Television (IPTV) as it's called - should bring the same downward pressure on these prices as competitive alternatives in voice telephony and broadband access." -- "On telecom, Texas is set to bring on competition," August 31, 2005: http://www.internetinnovation.org/news/083105.shtml.

Explanation: IIA shifts its focus from opposing rules that enrich the Bells at AT&T's and other Bell competitors' expense, to advocating rules that enrich the Bells.

-- Internet Innovation Alliance

According to cable executives, the IIA approached them seeking support for this organization, which cable executives were told was a front group for Bell competitors. They merely wanted the cable companies to join to provide the appearance of "added legitimacy."

Earlier, the IIA publicly derided the Bells for seeking to keep in place "legacy access charges and subsidies" on companies offering competitive phone service. Today, not only is IIA utterly silent about these Bell subsidies, but the group actually advocates Bell entry into video services on terms that favor them over other competitors - terms which call for an end to local oversight and anti-discrimination strictures that other competitors must observe.

In attempting to justify their position as to why telephone companies should now be given favored treatment, IIA sheepishly explained that "[applying the same rules to telephone companies] makes no sense today, particularly for businesses that already pay local taxes and have relationships with the local authorities, such as the phone companies." -- "On telecom, Texas is set to bring on competition" (see link above).

-- Consumers for Cable Choice (CCC):

Before: "Competition left in the hands of a Bell monopoly is not competition at all ... Through anti-competitive tactics, the Bells have succeeded in stifling competition and maintaining their stranglehold on telecom consumers across the country." - Robert K. Johnson, Consumers' Voice press release, March 22, 2001.

After: "Companies that already have one franchise to operate networks should not be required to obtain a second franchise to offer video services. Telecommunications carriers already have the rights-of-way and franchises to reply and operate networks in each state where they are deploying their advanced networks." - posted on CCC web site.

Explanation: The first statement is a clear endorsement of strict regulation of the Bells; the second one is against Bell regulation.

Ironically, the Bells already had criticized CCC chief Robert K. Johnson, for being the leader of a fake front group. Verizon ousted Johnson as a paid AT&T advocate before the merger.

Here are the words of a Verizon executive, in a newspaper letter to the editor, seeking to expose Johnson as a fraud. "Consumers' Voice . . . should really be named `AT&T's Voice.' At a recent National Conference of State Legislatures meeting, a representative from this group admitted that it is entirely supported by AT&T. Moreover, Consumers' Voice has no state chapters or affiliates. Johnson actually is an AT&T hired gun." - William R. Roberts, president, Verizon Maryland, Inc., Cumberland Times-News, August 22, 2002.

During these years, Mr. Johnson pretended to be a consumer voice, but was really a paid lobbyist on behalf of a corporate sponsor.

In support of federal competition rules adopted by the FCC for the telephone industry (before the Bells later killed them), the organization said: "It's a great victory for consumers. Anything less would have been a catastrophe." - Robert K. Johnson, quoted in the article, "Local Callers Win Big," NY Daily News, May 14, 2002.

Now that the position of its corporate sponsor has shifted, so too has the organization's policy loyalties - although it continues to tell the world that it is a "consumers" organization with a slight name change: "Consumers for Cable Choice." In actuality, it has become a Bell lobbyist, funding conferences, polls and publishing op-eds, supporting the Bell position that calls for special rules and exemptions to benefit only the Bells.

-- Frontiers of Freedom (FoF):

Before: "[T]he Bells themselves are today the ultimate beneficiaries of the old `Soviet-style micromanagement of telecom markets' ... After benefiting from this massive government giveaway, and continuing to benefit today from huge market subsidies financed by their competitors and consumers, it's a remarkable development that the Bells now condemn regulation in communications." - FoF chairman and founder, publicly released statement, February 27, 2004.

After: "This cozy arrangement is threatened by the prospects of phone companies using a new technology to make cable customers a potentially very competitive offer. Not surprisingly, the cable companies show no signs of welcoming IP-based competition from the likes of an SBC or Verizon. In the long tradition of regulated monopolies, the cable companies are looking to regulators to stave off new competition instead of simply making their customers a better offer." - FoF president, statement on group's web site, May 3, 2005.

Explanation: In the first quote, the group characterizes Bell companies as sluggish monopolies that benefit from Socialistic handouts. The second quote characterizes Bell competitors as the anti-competitive monolith, and the Bells as entrepreneurs injecting choice and freedom into the market.

As made clear by the quotes above, FoF's stance toward the Bells has evolved from harsh critic into lapdog. FoF effectively endorses the Bells' cries for regulations that will favor only the Bells and has ceased all earlier criticism of the Bells. By arguing that the Bells are the only telecom entities that should be exempted from anti-discrimination and local oversight, FoF has now accomplished more than a 180-degree change. It is leading the Bells' public policy parade.

Referring to the existing satellite and cable industry - in which, by any objective standard, there is far more competition than in the telephone industry - FoF today says cable's current "cozy arrangement is threatened by the prospects of phone companies using a new technology ... Not surprisingly, the cable companies show no signs of welcoming IP-based competition from the likes of an SBC or Verizon." - "The one-sided race between IP technology and IP regulation," May 3, 2005: http://ff.org/centers/celpr/opeds/50420050225_landrith.html

FoF now even champions the Bells as the new competition mavericks: "[The Bell phone companies] would be the challengers to incumbents." They've even paid for Bell ads on the video franchising matter. Here's an excerpt from a print advertisement that recently ran in support of the Texas legislature's pro-Bell bill: "Texas is pioneering a new generation of TV and Internet connections and, for the first time, consumers will have a choice."

Phoenix Center:

Before: "Increasing and protecting profits is the goal of the Bell Companies, not the altruistic promotion of consumer benefits realized from the rapid introduction of competition into the local exchange market. Policymakers should not ignore this fact." - Phoenix report, September 2002.

After: "Instead of extending anti-redlining and build-out requirements to new entrants, public policy can combat the threat of a 'digital divide' and ensure more widespread deployment of advanced communications networks by allowing entrants the freedom to offer video with a broadband offering." - Phoenix report, September 2005.

Explanation: The first report warns that Bell arguments in favor of deregulation were disingenuous; the second argues on behalf of deregulation that will favor only the Bells, saying that it would yield benefits for consumers. Before the SBC/AT&T and Verizon/MCI mergers, the Phoenix Center had been the Bells' harshest antagonist, ripping into their efforts to kill federal competition rules for the telephone industry.

As lawmakers consider telecommunications legislation that affects millions of consumers, they will hear arguments from pressure groups. It remains unclear how the political wrangling will pan out, but one matter does remain clear: when SBC and Verizon took over their adversaries, some so-called independent groups quickly changed their allegiance.

Contact: Larstan Business Reports (240-396-0007, ext. 904; 301-385-7211).

Source: Larstan Business Reports

CONTACT: Larstan Business Reports, +1-240-396-0007, ext. 904, or
+1-301-385-7211

Web site: http://www.larstan.net/

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