August 13, 1999
Fight For Internet Access
Creates Unusual Alliances
Former Foes Find Profits in AT&T Cable Lines
By STEPHEN LABATON
ASHINGTON -- Unimaginable as it might have seemed
a year ago, President Clinton's top
private lawyer and the former senior
aide to Kenneth W. Starr in the impeachment battle recently joined to
argue on the same side of one of the
biggest legal fights in years.
|
Associated Press
|
David Kendall, once President Clinton's
private lawyer, finds himself on the same legal side as an old adversary.
|
The two men, David E. Kendall
and Brett M. Kavanaugh, are but one
example of the unusual alliances being forged in the dispute over which
companies will end up dominating
high-speed Internet service delivered through cable systems.
Kendall, representing America Online, and Kavanaugh,
whose firm represents G.T.E., are
among a legion of advisers who are
quickly finding business in the dispute, which has turned into the latest
full employment act for lawyers and
lobbyists here and in many cities
around the nation.
Their common adversary in the
fight is AT&T, which is rapidly acquiring cable systems and offers
high-speed Internet access over
those lines exclusively through a
company, Excite@Home, in which it
owns a major stake. Led by America
Online and G.T.E., a coalition of Internet service providers and other
telephone companies have mounted
a nationwide campaign to force
AT&T to let cable customers use
Internet providers other than Excite@Home without additional fees.
The AT&T opponents have several
business interests with billions of
dollars in future revenues at stake.
G.T.E. is developing a rival high-speed Internet service, and many
smaller providers believe that if
AT&T's system proves popular, they
will be doomed if they are shut out.
Some of the other telephone companies in the fray are either competitors of AT&T or are using the issue to
press for greater deregulation and
the ability to compete with the company's long-distance service.
AT&T contends it would have little
incentive to upgrade its cable systems to provide high-speed Internet
service if it must serve as a carrier
for all providers, and that in any
case, comparable telephone- and satellite-based services will insure competition.
While a precise figure on spending
on the lawyers and lobbyists and for
campaign contributions is not available, executives and lawyers involved in the case estimate that it is
already in the tens of millions of
dollars.
"In a field where exaggeration is
common, it is fair to say that this
issue is regarded as the most important public policy question in telecommunications for the decade,"
said Andrew Jay Schwartzman,
president of Media Access Project,
which promotes consumer rights and
diversity on the airwaves and has
taken sides against AT&T.
"In the near term," Schwartzman said, "there's billions of dollars
in revenue at stake. Over the longer
term, the outcome of this fight will
play a large role in determining who
will be the dominant telecommunications and Internet players for the
next decade. As a consequence, the
bedfellows are stranger than
strange."
When Kendall and Kavanaugh found themselves on the same
side recently, for instance, "their
eyes were like saucers," recalled
William P. Barr, the general counsel
at G.T.E. and former United States
Attorney General, who was in the
same room with them.
For their part, consumer groups
have joined the anti-AT&T side but
acknowledge that they are in an awkward position, allied with telephone
companies that they have sharply
criticized in the past. The consumer
advocates have also criticized William E. Kennard, the chairman of the
Federal Communications Commission, after lobbying fiercely to get
him appointed two years ago.
Kennard has in essence sided with
AT&T by formulating a policy that
only the Federal Government, and
not local authorities, has jurisdiction,
but ruling out intervention for now.
There have been high-stakes
struggles over telecommunications
policy in the past, but perhaps never
one fought on so many fronts, including a number of localities where approval is needed -- and conditions on
the Internet issue can be attached --
if AT&T is to assume the franchises
of the cable companies it is acquiring.
One reason cable has become a
focus of the Internet battle is that it
is expected to be a dominant source
of high-speed service, at least in the
near term. Today fewer than 1 million homes have such connections,
offering speeds 10 to 80 times those
of conventional phone lines. But by
2002 the number of high-speed customers is expected to reach 10 million to 16 million, industry analysts
say, with 60 percent to 85 percent
using cable connections.
The current dispute is also notable
because it involves a convergence of
technology that has far outpaced
laws, court opinions and regulatory
decisions, all of which treat cable
and telephones differently and, for
better or worse, have said little explicitly about the Internet.
| |
|
A convergence of
technology that
has outpaced laws
and regulations.
| |
| |
On one front where AT&T's opponents have scored their biggest
gains, the issue is heading to a Federal appeals court. It will hear oral
arguments in October over a decision by local authorities in Portland,
Ore., to require AT&T to open its
cable lines there to any Internet
company on the same terms as Excite@Home.
The dispute also is moving to a
new group of cities that are considering whether to permit AT&T to acquire the cable franchises controlled
by Media One. Among other places,
new skirmishing is expected in the
suburbs of Boston and in other parts
of Massachusetts, where a drive to
get the issue on a statewide ballot in
2000 began this week, as well as
Minneapolis-St. Paul, Richmond and
major parts of Florida.
In Washington and cities around
the nation, both sides have retained
battalions of advocates. This week,
for instance, the anti-AT&T forces
announced that in addition to
Kendall, they had retained Lloyd
Cutler, the former White House counsel, and Bruce Ennis, a leading
Washington lawyer.
For its part, AT&T and the cable
industry have retained many of
Washington's lobbyists, including
Vin Weber, the former Republican
representative from Minnesota, and
the lobbying firm founded by the late
Dan Dutko, a major Democratic
fund-raiser who died in an accident
two weeks ago. More than 50 lobbyists for AT&T and the cable companies showed up at an organizational
meeting last December.
"A lot of people have told me that
they owe me thank-you notes," said
Gregory Simon, a former top aide to
Vice President Gore, who is collaborating with Richard Bond, a former
chairman of the Republican National
Committee, in directing the anti-AT&T coalition. "They were retained
just so I couldn't hire them. In Washington it took weeks to find somebody who was not lobbying for
AT&T. I could not find three firms
that had not been retained on this
issue."
Nonetheless, the regional Bell telephone companies have managed to
retain some well-known Washington
figures for the fight, including Haley
Barbour, a former chairman of the
Republican National Committee;
Michael D. McCurry, the former
White House press secretary; and
Susan Molinari, the former Republican Congresswoman from Staten Island. They say that Congress and
Federal regulators should eliminate
restrictions on their clients to make
it easier to offer high-speed Internet
services to compete against AT&T.
The experience in Florida is illustrative of the magnitude and fervor
of the struggle. Local records show
that AT&T and the cable companies
have retained more than 40 lobbyists
in the state. G.T.E. responded by
persuading officials in Broward
County to adopt an ordinance requiring AT&T to open its cable system to
other Internet service providers --
and by agreeing to pay the county's
legal costs if AT&T sued over the
issue. AT&T lawyers say they are
preparing to challenge G.T.E.'s legal
assistance to the county.
There have also been Potemkin-like attempts at local organizing, a
process that is known by some consumer advocates as Astroturf campaigns, in contrast to grass roots.
Contrived rallies were staged in
front of San Francisco's City Hall,
for instance, and both sides have
made extensive use of telephone
banks to gin up support by asking
loaded questions and making alarmist predictions.
Executives and lobbyists from all
sides are pouring campaign contributions into the coffers of the major
Presidential contenders, although
none of the candidates have stated a
clear preference. (The issues have
transcended party politics, although
some of the major players have been
identified with particular candidates.
For example, James W. Cicconi, general counsel and head of government
relations for AT&T and a former
aide to President George Bush, was
recently co-chairman of a fund-raiser in Washington for George W.
Bush. George Vradenberg, the general counsel for America Online, is a
top adviser and fund-raiser for John
McCain. And Simon has been
raising money for his former boss,
Vice President Gore.)
Lawyers on both sides say the candidates are not likely to take a position that could jeopardize more donations.
While competing legislation over
the issue was introduced in Congress
in recent weeks, both sides acknowledge that there is nothing the lawmakers will likely do any time soon.
As a result, the anti-AT&T forces
have embarked on a strategy of trying to find support in states and
municipalities, hoping the issue may
then begin to resonate with more
force in Washington.
Despite the intensity of the fight,
there is a widespread assumption
that it will be settled either at the
corporate bargaining table or by a
Supreme Court decision, which could
be years away.
"Everybody's got a business motivation here and everybody likes
cloaking their arguments in terms
like open access," Cicconi said,
"but what's really going on here is
AOL has a business plan and wants
the government to put its thumb on
the scale to tip the balance in its
favor." He said the opposition has
been "going in at the local level and
hiring as many people as possible
who have connections with city commissioners and local officials."
But consumer groups and AT&T's
corporate rivals say the battle is as
much over principle as it is over
business.
"I'm in awe of the magnitude and
money involved," said Donna N.
Lampert, who had to leave her law
firm, which represents major cable
companies, to continue her work for
America Online. "But at its core this
is really about an important principle. This involves a lot more than
whose garage the Mercedes will be
parked in, as the saying goes about
big money cases. It involves who will
control the Internet."
