Telecommunications Industry Is More Politically Active Than Ever
Washington Post Staff Writer
Sunday, December 6, 1998; Page H1 A confidential memo from the public relations firm Burson-Marsteller spelled it out for Sprint Corp. executives: For $1.5 million, the agency could launch a nationwide "grass-roots" lobbying campaign that would convey the impression of strong citizen opposition to rival SBC Communications Corp.'s pending acquisition of Bell phone company cousin Ameritech Inc.
Consumer groups, low-income and minority activists and other allies "can easily be contacted and mobilized" in several states, said the October memo, a copy of which was obtained by The Washington Post. Those groups would demand regulatory hearings on the merger, which "will result in a delay in the approval process and will require the merger companies to defend their proposal in many unanticipated venues."
Sprint already was helping to finance grass-roots "coalitions" against the merger in Indiana, Illinois, Ohio and Wisconsin. But company officials said they rejected the PR agency's pitch to broaden that approach, and now focus on lobbying regulators directly. "What we decided to go forward with is different from what they suggested," said spokeswoman Eileen Doherty.
Sprint's campaign against big Bell mergers is only the latest example of how the telecommunications industry remains more politically active than ever, nearly three years after Congress enacted the biggest overhaul of telecommunications laws in six decades.
The nation's local, long-distance and wireless phone companies have spent $166 million on legislative and regulatory lobbying since 1996 more than the tobacco, aerospace and gambling lobbies combined according to an analysis conducted for The Post by the Campaign Study Group, a Springfield-based independent research firm.
The study examined the first two years of filings required under the Lobbying Disclosure Act of 1995, which requires companies to disclose how much they spend exercising their right to influence legislators and regulators at the federal level.
Even if Sprint had embraced Burson-Marsteller's plan, it wouldn't have been required to disclose such spending. In late 1994, House Speaker Newt Gingrich (R-Ga.) led a successful effort to exempt state and grass-roots lobbying efforts from requirements of the law, though some companies including Sprint have voluntarily included such data in past filings.
Sprint's efforts to quash the SBC-Ameritch deal aside, the biggest spenders on lobbying have been companies seeking regulatory approval for mergers, led by Bell Atlantic Corp., SBC and MCI Communications Corp.
The study also confirms the telecommunications industry's renown as one of the top sources of congressional and presidential campaign funds. Telecom companies spent $13.5 million on contributions to candidates, political parties and political action committees (PACs) in the 1997-98 election cycle as of Oct. 14 a 52 percent jump from the $8.9 million spent during the last nonpresidential election cycle of 1993-94.
Those companies also nearly doubled their spending during the last presidential election period, increasing it to $16.6 million in 1995-96 from the $9.1 million spent during the 1991-92 presidential campaign season.
The increase reflects what was among the most expensive and contentious lobbying wars ever waged on Capitol Hill. During one period, from Oct. 25, 1995, to Feb. 2, 1996, as House and Senate lawmakers were huddled in a conference committee to work out the the final details of an overhaul of telecommunication law, the industry sprinkled $2.7 million in contributions over lawmakers and parties three times more than it gave during comparable periods in each of the previous two election cycles.
Lobbying spending and campaign-giving levels only rose higher after the Telecommunications Act became law on Feb. 8, 1996. In addition to influencing the merger approval process, the cash has been aimed at educating legislators and regulators on the fine points of carrying out the law. Billions of dollars in revenue are in play among the telecom giants, as the Federal Communications Commission remains paralyzed over such tangled issues as revising the archaic telephone subsidy system for a newly competitive market, deciding whether Bell companies should be allowed into the long-distance business and opening local phone monopolies to competition.
Those issues, little known or understood by consumers, also will determine how much people pay for phone and Internet services and how many competitors will vie for their business.
The Law on Lobbying
The 1995 Lobbying Disclosure Act requires professional firms and organizations that hire lobbyists to disclose what issues they are seeking to influence and how much they are spending to influence federal executive and legislative-branch officials. The law covers lobbying on legislation, executive-branch enforcement and regulatory decisions as well as contract awards.
Lobbying disclosure forms submitted by telecom companies show that the biggest increases in lobbying spending since 1996 belong to the three companies that have been engaged in the most merger activity: Bell Atlantic, Texas-based SBC and MCI.
Bell Atlantic, which announced it would purchase fellow Bell company Nynex Corp. in April 1996, spent $32.3 million on lobbying from 1996 to 1998. That spending ramped up from $7.7 million in the mid-1996 to mid-1997 period to $19.9 million from July 1997 to July 1998. After a contentious approval process in which opponents said the deal would stifle phone competition on the East Coast, regulators approved the merger in August 1997. Bell Atlantic now awaits approval for its new plan to acquire GTE Corp. for $53 billion.
Nynex's lobbying budget was a significant part of Bell Atlantic's lobbying total: Nynex had spent $2.1 million from July 1996 to July 1997 before the company was folded into Bell Atlantic. Bell Atlantic officials also point out that Nynex had not included state lobbying expenses in its federal disclosures, while Bell Atlantic does.
SBC spent $4.7 million on lobbying in 1996 and $8.1 million in 1997. The 1997 figure absorbs roughly $2 million in lobbying spending by Bell company Pacific Telesis Group Inc., which was purchased by SBC in 1996. SBC also bought Southern New England Telephone Co. in 1997.
MCI's lobbying spending doubled from $1.6 million in 1996 to $3.3 million in 1997, with another $1.5 million spent in the first half of 1998. In November 1996 MCI agreed to a buyout bid from British Telecommunications PLC. One year later, WorldCom Inc. supplanted BT with a rival offer for MCI of $40 billion. The WorldCom merger was approved by regulators this fall. WorldCom spent only $140,000 on lobbying in 1996 and 1997 combined.
Critics of the 1995 lobbying disclosure law say these numbers most likely understate the amount companies spend on influencing Congress and agencies. Nor is the information required on biannual spending disclosure forms as meaningful as it should be, they maintain.
For example, companies are allowed to elect whether to include state and so-called grass-roots lobbying with their federal lobbying expenditures. Some companies do while others do not, making comparisons to similar companies difficult. Also, companies are essentially asked to give their "best-guess" estimates of lobbying spending and there is no mechanism for verifying the amounts they report or ensuring that under-counting does not occur.
"There are big gaps, of which the most important one is the loophole omitting grass-roots lobbying," said Gary Ruskin of the nonprofit Congressional Accountability Project.
The lobbying disclosure forms are "really up to the goodwill of the people filing these reports," said Larry Makinson, executive director of the nonprofit Center for Responsive Politics. "There is absolutely no enforcement, even less than with campaign contributions at the Federal Elections Commission. Plus, it's a new law. And yet, they provide a very valuable insight into where the lobbying money goes."
Other huge telecom companies had only marginal increases in lobbying spending, and many including AT&T Corp., US West Inc. and GTE maintained or decreased their lobbying budgets through the two-year period. US West's lobbying efforts included those of Continental Cablevision Inc. after their merger in November 1996.
AT&T, the nation's largest telecommunications company, ranked second in lobbying spending, dispensing $16.2 million in 1996 and 1997. But within the two-year period, AT&T's spending declined from $4.3 million in early 1996 to $3.7 million at the end of 1997.
AT&T's top outside lobbying firm Akin, Gump, Strauss, Hauer & Feld received the most in billings from the telecommunications industry since January 1996, at $1.3 million, according to lobbying data. Wunder, Knight, Levine, Thelen & Forscey (representing Bell Atlantic and other local carriers); O'Brien & Calio (AT&T); and Arter & Hadden (Bell Atlantic, SBC) also received more than $1 million each from telecom companies.
On the Campaign Trail
In addition to lobbying expenses, campaign contributions by telecommunications firms and industry executives to federal and state candidates and parties also have jumped significantly after the law's enactment.
Since 1991, the year when telecommunications reform legislation began moving in Congress, the industry has contributed $48 million to federal candidates and party committees. Nine industry giants account for $42.1 million, or 88 percent, of that total, with five firms AT&T, Bell Atlantic, SBC, BellSouth Corp. and Ameritech making 63 percent of all contributions.
The $100 billion local phone industry, dominated by companies including the Bells and GTE, contributed $27.7 million of that amount. The $70 billion long-distance industry, led by carriers including AT&T, MCI and Sprint, spent $16.1 million.
Top givers during the 1997-98 season were AT&T ($1.9 million) Bell Atlantic ($1.6 million), BellSouth ($1.6 million), SBC ($1.2 million) and MCI ($964,348).
During the most recent presidential election season, 1995-96, the telecommunications industry donated $16.6 million to campaigns, nearly double the $9.1 million spent in the 1991-92 presidential campaign season and the $8.9 million spent in the 1993-94 season.
South Carolina Sen. Ernest F. Hollings, the ranking Democrat on the Commerce Committee and a sponsor of the 1996 law, was the top recipient of telecom campaign contributions, with $107,446 in individual contributions and $164,763 in PAC donations. Hollings, who survived a difficult reelection battle, raised a total of $4 million for his campaign, according to Makinson.
Sen. John McCain of Arizona, who chairs the Commerce Committee that overseas telecommunications issues, was the leading Republican recipient of phone industry contributions, with $240,850.
Most of the recent overall increase in donations is in the form of so-called "soft-money" contributions, which is money going to party campaign committees. The companies donated $1.1 million to the Democratic party in the 1994 national election cycle, but that number shot up to $3.9 million during the 1996 presidential election cycle and was up to $2.3 million as of Oct. 14 for the 1998 season. Republicans received $902,884 in soft-money contributions in the 1994 cycle and $3.4 million in the 1996 presidential election period. As of Oct. 14, GOP candidates received $3.6 million in soft-money contributions for the 1997-98 season.
Contributions by individuals within the telecom industry to lawmakers or parties also accounted for the increase. Democrats got $406,705 from individual contributors in the 1992 presidential election cycle and $791,490 in the 1996 period. Such donations to Republicans for the same periods jumped from $377,691 to $837,532.
President Clinton was the top recipient of contributions from telecom industry individuals from 1991 to Oct. 14, 1998, with $169,800 received. The Republican presidential candidate, Sen. Robert J. Dole, got $73,402 in individual contributions from people at telecommunications firms.
The top congressional recipient of individual telecom contributions was Rep. Edward J. Markey (D-Mass.), a key player on telecommunications issues, who received $124,800 in individual contributions since 1991.
A political action committee seeking to reelect House Commerce Committee ranking Democrat John D. Dingell of Michigan received the most contributions from telecom companies since 1991, $213,630.
Attention and money also shifted to the state level after enactment of the 1996 law. Telecommunications contributors more than doubled their donations to state-level parties and candidates in 1996 and 1997, spending $1 million in each year, compared with $411,694 in 1995. Figures for the 1998 election cycle are not yet available.
Long-distance companies, led by AT&T, MCI and Sprint, contributed $1.4 million to state races from 1995-97, while the Bells, GTE and other local firms donated $999,648.
The Florida Republican Party was by far the largest recipient of telecommunications donations at the state level, with $350,250 in 1995-97 contributions. Florida Democrats ranked second with $191,399. The Missouri Democratic Party ran a distant third with $88,000 in contributions.
Florida was a bellwether state for the telecom industry after the 1996 law, when lawmakers tried but ultimately failed to pass legislation that would have raised local phone rates while reducing charges that long-distance carriers pay to local carriers for access to local phone networks. The effort was an attempt to follow through on a key goal of the federal law: to overhaul the complex system of telephone subsidies that ensures universal phone service.