Shaking Down Telecom Merger Applicants

FRAMINGHAM (03/06/2000) - None of the fights and accusations you've seen between George W. Bush and John McCain quite compare to a tussle going on between the chairman of the U.S. Federal Communications Commission and his congressional tormentors.

After all, has either Bush or McCain accused the other of "blackmail," "shakedowns" or "abetting corruption"? Those are just some of the charges in a war between FCC Chairman William Kennard and Billy Tauzin, a Louisiana Republican who heads the House subcommittee that oversees the FCC.

And this is a fight with a big impact on you, because it could help determine whether you will have to continue to contend with consolidation among the leading carriers.

The root of the controversy is that Tauzin and some other congressmen don't care for the way Kennard has been handling telecom mergers. Never mind that the congressional critics come from two opposite camps. Some believe the FCC should butt out of merger reviews and let the Justice Department decide. Others think the FCC should start rejecting these deals as anticompetitive and anticonsumer.

What neither group likes is the FCC's habit of approving mergers with conditions committing the merged company to a broad set of socially aware actions of dubious legal standing. These include promises to put more broadband facilities in underserved areas or take some other action attacking the alleged Digital Divide between (take your pick) rich and poor, black and white, young and old, or urban and rural.

This practice has become so ingrained at the FCC that even non-merger applicants have learned to pay homage to the Digital Divide. Wireless and broadcast players with major license issues before the FCC often seem to come up with big contributions to schools and libraries just as their requests come up to a vote.

Tauzin thinks this is a bogus way to run an agency that's supposed to carry out the laws Congress passed. To get his point across he's been claiming that the FCC demands these concessions as a form of "shakedown" or "blackmail." And that's something no self-respecting FCC chairman can abide.

"The phrases you use have plain, common-sense meanings of unethical and potentially criminal conduct resulting in financial gain or benefit for the perpetrator," Kennard wrote Tauzin last month. "It is unfair, irresponsible and unworthy of a public official for you to cast aspersions on the integrity of the FCC in this manner without citing facts or examples of any such conduct."

Maybe so. But surely Kennard must know that every big local, long-distance, cable and wireless carrier has a big lobbying staff that is capable of at least making it look like the company is attacking the Digital Divide. Is there any doubt that potential approvals of the Bell Atlantic/GTE, MCI WorldCom/Sprint and AOL/Time Warner mergers will come with a set of side letters committing the company to do good things for America?

Of course there isn't. So what happens if the Digital Divide is still standing after three more megamergers? Or is it possible that the best way to get big companies to bring benefits to everyone is to get their focus back on technology and away from mergers - maybe even turn one of these mergers down?

Let me know what you think - no blackmail threats accepted - at

Rohde is a senior editor with Network World. He can be reached at

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