Federal Communications Commission Chairman Michael K. Powell is increasing the pressure on regional telephone giants and their rivals to reach new network leasing agreements in hopes of avoiding sudden price increases for millions of people.
Powell called representatives of the nation's largest regional and long-distance companies late Thursday night, summoning them to meetings at the agency's headquarters yesterday, according to sources at several companies involved in the talks.
Powell and Commissioner Kevin J. Martin presided over the day-long meeting, sources said. The talks included high-level executives from long-distance giants AT&T Corp. and MCI Inc., and also from regional phone companies Verizon Communications Inc., BellSouth Corp. and SBC Communications Inc. The executives are set to continue negotiating through the weekend, sources said.
Verizon confirmed yesterday that the company is complying with the FCC's request for face-to-face negotiations at the agency. The nation's largest phone company also said that it is holding individual talks with dozens of other firms.
"Our participation in the FCC initiative in no way deters us from continuing our efforts with all wholesale customers who wish to work with us to reach agreements," said Larry Plumb, a Verizon spokesman.
The phone companies have been at an impasse since March, when a federal appeals court in Washington threw out FCC regulations that effectively guaranteed rivals discounted rates for access to the regional phone companies' telephone networks and equipment. Companies such as AT&T and MCI have relied on those regulations in recent years to launch their own brands of local telephone service to more than 20 million customers.
Powell prodded the parties to the negotiating table just as the Justice Department faces a decision on whether to appeal the D.C. court's decision to the Supreme Court. That decision, which could come as early as next week, forces the White House to decide between two powerful interests: the long-distance companies that support an appeal and the regional telephone companies that oppose one. A negotiated agreement would effectively eliminate the need for an appeal.
"We believe that commercial agreements are preferable to litigation, and we encourage the parties to work together to resolve their differences," said Claire Buchan, a White House spokeswoman. Buchan declined to comment on the potential for an appeal. "I am not going to speculate beyond that," Buchan said.
AT&T, MCI and other rivals of the regional phone giants say that without a viable agreement that provides reasonable leasing terms or a Supreme Court appeal, they will likely be forced out of the local phone business. Such a move would inevitably lead to higher rates for consumers and more layoffs in an already troubled industry, they said.
Some competitors are even threatening to elevate the debate to a presidential campaign issue with a series of television advertisements aimed at battleground states.
The stakes are also high for Powell. Last year, he suffered a political setback when three of the FCC's five commissioners voted against his proposal to take the regulations off the books. The opposition was led by Martin, who has since been viewed as Powell's rival at the agency.
If the current talks succeed, it could vindicate Powell's view that agreements can be reached without government regulation.
Powell returned from a trip to South Dakota and Martin from Alaska to attend the weekend talks.
Among the issues on the table yesterday was a proposal to do away with so-called non-disclosure agreements in deals, according to sources familiar with the discussions. The regional phone companies want to keep the details of their agreements private while the long-distance companies and other competitors want the deals to be public to ensure companies are treated equitably.
The parties also considered whether the talks should focus on a global agreement that would include all companies, or whether the FCC would facilitate agreements between individual companies.
The FCC-initiated negotiations have been criticized by industry trade groups that include CompTel/Ascent, a coalition of approximately 300 telephone companies that lease network capacity from local phone giants.
CompTel/Ascent chief executive H. Russell Frisby Jr. said yesterday that his group has been excluded from the meeting and that it was considering a possible lawsuit against the FCC. Another group, the Association for Local Telecommunications Services, also said it had been barred from the meetings.
"There may be a secret deal between the larger companies that will lead to dramatic price hikes for a majority of Americans," Frisby said.
FCC officials declined to comment on the trade groups' complaints, saying only that the agency supports the current negotiations.
Frisby's coalition includes AT&T and MCI, which has led to internal tensions within the organization.
Earlier this week, an advertising agency completed a series of television spots aimed at putting pressure on the Bush administration to appeal the D.C. court's decision to the Supreme Court. Sources say the ads are being targeted for states where President Bush is in a tight contest with Sen. John F. Kerry (D-Mass.), the presumptive Democratic nominee.
"The message is that this decision needs to go to the Supreme Court, and it's a decision that this administration needs to make, or else prices go up," Frisby said.
AT&T wants to hold off airing the ads, fearing that the commercials may alienate the White House just as it decides on a potential appeal.
But Frisby said other members of his trade group feel that they have run out of time.
"A number of the CEOs of smaller companies feel like their backs are against the wall," Frisby said.
Frisby insisted his members are not motivated by partisan politics in pushing the ad campaign. "A number of the CEOs are staunch Republicans, but their feeling is that the Republican White House is leaving them in the lurch."