FCC action on
AT&T deal hits roadblock
By Jim Puzzanghera, Staff Writer
Los Angeles Times
Monday, October 24, 2006
WASHINGTON — Robert McDowell's confirmation in May as the fifth
member of the Federal Communications Commission was supposed to end
a 2-2 partisan deadlock that had stymied the agency on several
issues for more than a year.
But with commission approval all that's standing in the way of AT&T
Inc.'s purchase of BellSouth Corp., it's back to stalemate again at
the FCC because of the occasional bane of regulatory agencies — a
McDowell, a Republican who holds the tiebreaking vote, has removed
himself from voting on the $83-billion purchase because he used to
lobby for an association of smaller phone companies that opposes the
His decision has given the commission's two Democrats leverage to
hold up approval unless some of their conditions are met, such as
preventing the companies from charging for priority delivery of
services over their Internet lines — a controversial issue known as
McDowell's recusal was expected. During his confirmation hearing in
March he agreed to "make sure that there's not even the appearance
of a conflict of interest" after being pressed on the point by two
But it still has roiled a process that AT&T and BellSouth had hoped
would be wrapped up by now after the Justice Department gave the
deal its blessing Oct. 11.
AT&T has proposed some concessions to gain the support of Democratic
commissioners Michael J. Copps and Jonathan S. Adelstein, but it
opposes stronger conditions such as network neutrality. An AT&T
executive suggested Friday that the company might push for McDowell
to be forced to participate — a procedure allowed under federal law
— if the deadlock lasted more than a few weeks.
"It would not be right for this to drag out for the next two
months," said Robert Quinn, AT&T's senior vice president for federal
regulatory affairs. "If reasonable people can't agree, then that's
when I think people are going to start examining other options."
It all raises the question of whether commissioners should be chosen
from the ranks of industries they would regulate. In addition to
phone companies, the FCC regulates television and radio stations as
well as cable and satellite providers.
"It's been a tension forever … you want people with expertise, but
where do you get expertise? Often in the industry that's being
regulated," said G. Calvin MacKenzie, a government professor at
Colby College in Waterville, Maine, and author of the 2002 book
"Scandal Proof: Do Ethics Laws Make Government Ethical?"
He and other experts said it would be a loss if industry executives
were not allowed on regulatory commissions, given their deep
knowledge and experience.
"If you say we would never hire anybody who has a recusal problem,
you would find yourself disqualifying many, many qualified people,"
said Blair Levin, an analyst at brokerage Stifel, Nicolaus & Co. who
is a former FCC chief of staff. "The people who've represented
these companies often have a much deeper understanding of the
economics of these companies."
But it's an ethical juggling act that can cause problems.
Federal law calls for recusal whenever "a reasonable person" might
question impartiality. The law applies to all federal employees.
Among the relationships covered by the law are companies for which a
federal employee has worked within the last year. For example,
Harvey L. Pitt, a securities lawyer, sat out 34 votes during his
first year as chairman of the Securities and Exchange Commission
from 2001 to 2002 because the cases involved former clients.
Recusal initially is left up to the individual, who decides whether
there would be an appearance of conflict of interest. Those
appearances can persist even after the one-year period.
Former FCC Chairman William E. Kennard recused himself for more than
two years from a late-1990s case involving a requirement for free
airtime to rebut broadcasters' political editorials. Kennard had
worked on the issue in the early 1980s while at the National Assn.
His recusal left the issue deadlocked. With federal judges
threatening to step in to resolve the stalemate, Kennard decided to
He also could have been forced to participate by the FCC's general
counsel. Federal law gives that power to an agency if officials
decide that settling the deadlocked issue outweighs the concerns
about a perceived conflict of interest.
Kennard said it would be difficult to force such a decision on a