House targets FCC "threats"

But while early versions of the committee's report paint the FCC's actions as politically motivated threats, other players close to the debate say the House's effort is itself little more than a political weapon. The sharply negative report is likely to be used in next year's Congressional debates on reforming the FCC, observers say.

For the last 11 months, the U.S. House Commerce subcommittee on Oversight and Investigations has been investigating the FCC's conduct in charging phone companies for universal service, the federal program that helps subsidize telephone service for low-income and rural customers.

After Congress and the FCC jointly expanded the program in 1996, AT&T and MCI threatened to raise their phone rates, and identify the rate hike as a universal service fee. The moves prompted consumer groups to protest the subsidy programs. Commission officials opposed the actions both publicly and in private communications with company executives.

FCC threatened reprisals?
According to subcommittee documents, the Commission linked its opposition to other issues important to the telephone companies, such as approval of the MCI/WorldCom merger and the baby Bells' entry into long distance markets.

In a letter dated last July, Commerce committee chairman Tom Bliley, (R-Virginia), cited a November 1997 internal FCC memo that contained "talking points" for chairman William Kennard. "Proceeding along this course will intensify pressure on the [long distance approval] process, and on the WorldCom/MCI merger, in ways that may change outcomes," the FCC memo said.

"I am concerned that the FCC apparently strong-armed long distance providers to hide the costs of its costly program from consumers," Bliley wrote in the July letter to MCI chairman Bert Roberts. "I also am very troubled by information gathered during this review that the FCC may have sought to link its decision on unrelated matters, such as [long distance approval], and specifically on the MCI WorldCom merger, in order to extract concessions from the long distance carriers."

According to a draft memo obtained by the Communications Daily newsletter, the subcommittee is now close to wrapping up its investigation, reiterating many of the concerns expressed by Bliley last summer. The commission "pressured and threatened long distance carriers in an inappropriate manner," allegedly to further White House goals of connecting classrooms to the Internet, the memo says.

The findings "shatter the Committee's confidence that the FCC is an expert independent agency, and suggest that significant reform of the agency may be necessary," the publication quotes the draft report as saying.

House report is political document
Some outside observers said the report appeared to be exaggerating what are common--if often unspoken--practices between regulatory agencies and regulated companies.

"It is not that common for [the FCC] specifically to state political motivations for things. But that doesn't mean politics doesn't affect the outcome," said Chris Savage, a Washington telecommunications lawyer. "It is widely understood that they operate in a highly politicized environment."

"The FCC was probably a little heavy-handed on this issue," Savage said. But the early reports coming out of the subcommittee's investigations appeared to put the Commission's actions "somewhere between business as usual and benign," he added.

Another observer close to the issue speculated that the House subcommittee report likely was being prepared in part as fodder for a GOP campaign to reform the FCC next year. Rep. Billy Tauzin, (R-Louisiana), who chairs the Commerce Telecommunications subcommittee, has said he will introduce legislation aimed at reining in FCC powers next year.

A spokesman said today that the report would be useful in the congressman's campaign. "It's part and parcel of the whole problem with the FCC," said Tauzin spokesman Ken Johnson.

"In recent years, the FCC has become an arm of the White House instead of an independent agency," he added. "What we want to do is bring that under control."

Spokesmen from AT&T and MCI declined to comment on the subcommittee's investigation, saying they had finished talking with the FCC about universal service charges months ago.