Monday, February 7, 2005

State Sen. Troy Fraser is bracing for what's expected to be one of the most intense lobbying campaigns of this legislative session. Hundreds of millions of dollars are up for grabs in the first rewrite of the state's telecommunications laws in a decade, an undertaking that affects a raft of big corporations that employ some of the most powerful lobbyists.

Lobbyists lining up for phone deregulation fight

By Claudia Grisales, Austin American-Statesman
Monday, February 07, 2005

State Sen. Troy Fraser is bracing for what's expected to be one of the most intense lobbying campaigns of this legislative session.

Hundreds of millions of dollars are up for grabs in the first rewrite of the state's telecommunications laws in a decade, an undertaking that affects a raft of big corporations that employ some of the most powerful lobbyists.

Fraser, R-Horseshoe Bay, introduced a bill that would end regulation of local phone rates in Texas within two years, one of two major telecommunications bills up for debate. To avoid being swarmed by lobbyists, he has declared that he'll deal with only one representative from each company.

"I don't know that I've ever seen an issue with this number of lobbyists hired," said Fraser, who filed the bill last week. "The number of lobbyists is proportionate to the amount of money involved in the transaction."

His decision could be challenging for lobbyists accustomed to free access to legislators. SBC Communications Inc., for example, has dozens of registered lobbyists, including Mike Toomey, former chief of staff to Gov. Rick Perry, and Bill Messer, a former state representative who is close to House Speaker Tom Craddick, R-Midland.

For now, however, Fraser is dealing only with Jan Newton, president of SBC Texas.

AT&T has signed up former lawmakers Neal "Buddy" Jones of Hillco Partners and David Sibley, Fraser's predecessor as head of the Senate Business and Commerce Committee, according to recent filings at the Texas Ethics Commission.

Messer referred calls to a spokesman for SBC; Jones referred calls to a spokesman for AT&T, and the others didn't return phone calls last week.

Fraser aside, industry lobbyists won't lack for legislators to tackle, including the eight other members of Fraser's committee and the Regulated Industries Committee in the House, where Rep. Phil King, R-Weatherford, has introduced his own bill.

Both bills would end regulation of rates for local phone service by 2007, on the premise that more competition would benefit consumers. Fraser's bill would have the Public Utility Commission determine whether there's sufficient competition in a particular area of the state to end regulation. King would leave it up to the existing phone companies in a region to decide whether they want to open their area to competition, in a system similar to the method used in deregulating the Texas electric market.

High stakes

In exchange for allowing companies to set their own rates, both bills would require SBC and other local phone companies to significantly reduce the access fees they charge long-distance competitors for in-state toll calls.

Under King's bill, companies that opt for competition also would have to give up the money they receive from the Texas Universal Service Fund, which subsidizes phone service in rural areas. King would restructure the fund, which paid providers $583 million in 2003. The two biggest beneficiaries were SBC, which received $195 million, and Verizon, which received $110 million.

The stakes are high; Texans spent $2.8 billion on basic phone service in 2003. And the deregulation debate involves numerous companies with divergent interests, which will add to the lobby activity.

SBC, the state's dominant phone company, wants an unregulated market but says it isn't ready to give up Universal Service Fund subsidies or access fees.

Verizon, which provides service in many high-cost rural areas, also says it can't afford to give up service fund revenue, which prevents the company from choosing deregulation in those areas.

"We simply wouldn't be able to take advantage of the new law," said Steve Banta, Verizon's Southwest regional president.

Millions at stake

Consumer groups worry about what SBC might do if it gets out from under state control.

Cable companies, now getting into Internet phone service even as phone companies are starting to offer video service, want equalization of the fees that telecom providers pay to cities so that cable and phone companies are treated the same.

In the last regular legislative session, the telecommunications industry, including phone companies, cable operators and Internet service providers, spent up to $13.7 million on lobbyists, and the amount is expected to be higher this session, according to Texans for Public Justice, an Austin group that tracks money in politics.

SBC alone reported lobby contracts worth up to $7.2 million in that session; companies are allowed to report spending ranges instead of exact amounts. By comparison, the Texas Cable & Telecommunications Association had lobby contracts worth up to $625,000.

The early figures "understate the reality," said Andrew Wheat, research director for Texans for Public Justice. "Generally, what we find is that lobby registrations climb all year long and especially in the legislative frenzy period, especially in a case such as telecom. It's a good time to be a telecom lobbyist."

Newton says the lobby figures for SBC may be misleading because "we do ask, in the spirit of caution, anyone that might even be remotely involved to register" as a lobbyist.

But SBC doesn't deny it intends to fight to protect its interests.

"We're a large Texas-based telecommunications company and we have over 30,000 employees," she said. "Telecom policy is a really criticalarea of economic growth, and we certainly want to be active in the process."

Rival companies are worried about SBC's clout.

"SBC's lobby prowess is legendary, and they are unmatched in spending," said Kathy Grant, vice president of government relations for the Texas Telecommunications & Cable Association, which represents the cable industry. "There is no company that spends more to lobby their interests in the state capital. We'd have to be crazy not be concerned about that."

Cities worried

The Texas Municipal League is concerned about how the bills might affect the right-of-way and franchise fees telecom providers pay cities. Overall, fees from phone, cable and gas utilities account for 9 percent of the average city budget, and telecom is "a substantial chunk" of that, said Executive Director Frank Sturzl.

"We want to make sure whatever happens there keeps us whole," he said.

Some Capitol watchers are concerned that consumers won't be well-represented on the telecommunications issue. One key advocacy group, Consumers Union, has significantly scaled back its day-to-day presence at the Capitol.

"We are probably outnumbered 400 to 1 in terms of total lobby power," said Tom "Smitty" Smith, Texas executive director of Public Citizen. Without Consumers Union in the trenches, "it's going to be worse than ever."

Tim Morstad, policy analyst for Consumers Union, says the group hopes to get consumers involved, with e-mail campaigns and other efforts asking them to contact their legislators or attend committee hearings on the legislation.

"Our strategy this session is to really do all we can to amplify the voice of consumers in this debate," Morstad said. "We are hoping to generate a small movement to provide avenues for people to voice concerns . . . and have a strong impact this time around."