`Everyone Has Taken Lumps In This Lobbying War'

When the Senate was mulling over a bill earlier this year that would allow the Baby Bells to make communications gear, one group of the companies' potential rivals launched an all-out drive to stop the measure. At one strategy session, William M. Rodgers, president of Teleco Inc. in Greenville, S. C., volunteered to pay a visit to his senator, Democrat Ernest F. Hollings. A grass-roots appeal from a communications-equipment distributor, headed by a constituent, seemed shrewd.

Unfortunately for Rodgers, Hollings--the bill's author--was worried that if the Baby Bells stayed on the sidelines, the U. S. would lose its edge in the global telecommunications-equipment market. And when Rodgers admitted during the tete-a-tete that Teleco distributes mostly Toshiba products, the meeting went downhill fast. It was, moans an anti-Bell lobbyist, "a disaster."

So it goes in the latest round of the high-stakes Baby Bells lobbying war. Both sides in the battle over unleashing the Bell regional holding companies are using every tactic they can think of, often to little avail. Not only are lobbyists failing to change minds on Capitol Hill but their use of what lawmakers consider heavy-handed tactics is creating a backlash against Gucci Gulch's denizens. Says Gene Kimmelman, the Consumer Federation of America's legislative director: "Everyone has taken lumps in this lobbying war. Who wins may depend on who comes out with the least damage."

Worse, the free-for-all is turning into one of the most expensive lobbying campaigns in some time. The Baby Bells alone have a $21 million war chest. That's more than twice what the auto industry is spending to fight tougher fuel-economy rules. "You've got a huge amount of influence-buying," says a lawyer for the small telecommunications concerns that oppose the Bells. He and his opponents are spending less than the Bells, but the figure is in the millions.

It's easy to see why the lobbying is so intense. The Baby Bells think the current Congress offers them their best shot yet at winning freedom from the shackles of the 1984 antitrust consent decree that broke up American Telephone & Telegraph Co. The manufacturing bill sailed through the Senate on June 5 by a 71-24 vote. On Oct. 7, the U. S. Court of Appeals in Washington gave the seven Bell regional holding companies the O. K. to enter information-services businesses right away. Both fields had been off-limits under the consent decree, as was long distance. Now, all the Bells need is to win passage of the Senate bill in the House and to hold off opponents who want a law curbing their entry into information services.

The fight in the House will be far tougher, however. The Bells' single-minded focus on manufacturing made Senate passage relatively smooth. But the ruling on information services will energize the phone companies' enemies for the House battle.

INSTANT REPLAY? The Bells contend that U. S. competitiveness hangs in the balance in the debate over their move into the $50 billion equipment market. And they argue that information services such as electronic publishing and home shopping will never get off the ground unless companies with their reach and deep pockets get into the business.

But the Bells' opponents fear that if phone companies are allowed to offer such new services as electronic classified ads, slumping newspaper and television ad revenues will be hit hard. Rival media charge that letting such heavyweights into the information business would recreate the kind of anticompetitive abuses that led to the breakup of AT&T in the first place. In an Oct. 7 speech, Cathleen Black, chief executive of the American Newspaper Publishers Assn., noted that several Baby Bells have been fined for exploiting their monopoly on local phone lines. "If the regional Bell companies have already abused their position before they get into information services," she said, "just imagine what they'll do if they are allowed to provide these services."

Although both sides have assembled high-priced talent to devise their strategies, the execution has been remarkably sloppy. Consider the experience of Representative Michael G. Oxley (R-Ohio). The five-term congressman is skeptical of cable-TV industry concerns about phone company domination and of newspaper publishers' worries about competition for advertising. Nonetheless, Oxley agreed to meet in his Lima office with Allan Block, president of the cable unit of Blade Communications Inc., which also owns the Toledo paper, The Blade.

'DAMNABLE LIE.' Like many of his counterparts, Block made no headway with Oxley. As a last stab, Block allegedly hinted to an Oxley aide that the Blade might not look kindly on the congressman's views in the future, an Oxley staffer contends. Within days, the paper ran a story blasting Oxley for free trips that he had accepted from special interest groups. "This is the way some publishers try and inflict political punishment," Oxley fumes. Block denies any link between his meeting and the story, calling the suggestion "a damnable lie."

Up against those standards, the Bells ought to be able to win this fight without firing a shot. But they're shooting themselves in the foot just as often. The phone companies, says a House aide, "are not known for their sensitivity in their lobbying efforts."

As part of the Bells' advertising blitz, for example, one phone industry trade group, the U. S. Telephone Assn., last spring ran local radio ads suggesting that lawmakers who opposed phone company entry into cable TV might favor higher cable-TV rates. "Members were hot," recalls the House staffer.

To show that there's broad public support for the manufacturing bill, the Bells are trotting out seemingly disinterested groups--Citizens for a Sound Economy, for instance. But the vocal conservative organization gets some funding from the Bells. Then there are the groups representing the disabled, who are well-positioned to win public sympathy for the telecommunications giants. The phone companies say that given freedom, they could offer a vast array of new equipment and services to benefit the handicapped. To get disabled groups on board, the Bells have made generous contributions and sent representatives to their conventions. At one gathering in Dallas, the companies set up a booth with a computer that allowed attendees to type in their names and addresses, then automatically cranked out "personalized" letters to their legislators.

But lawmakers doubt this slugfest among corporate titans has the slightest grass-roots interest. Nor do they believe the Bells are motivated by a desire to help the disabled. Although the courts have approved numerous waivers from the consent decree, Nynex Chairman William C. Ferguson was forced to admit in a letter to Congress in August that the Bells hadn't requested a single one to provide services for the handicapped. "I hate to see unsuspecting people manipulated by powerful corporate interests," says House telecommunications and finance subcommittee member Jim Cooper (D-Tenn.).

Groups representing the handicapped are upset, too. Deborah Kaplan, director of the technology policy unit at the World Institute for Disability in Oakland, Calif., says members of disabled groups may not understand the complexity of the issues they are asked to back. "They ended up feeling like they were being used," she says.

A similar backlash is growing against the big bucks that the Bells are spending. While they pledge to avoid abusing their monopoly status if they're unleashed, some lawmakers believe these lobbying efforts show the Bells still aren't following the rules. Under regulations set by state utility commissions and the Federal Communications Commission, lobbying costs generally must be borne by company shareholders, not customers. But last year, Southwestern Bell Corp. admitted that between 1985 and 1989, it had effectively charged long-distance companies for $19 million in lobbying expenses. Other Bells have since admitted similar actions, and more revelations may be in the offing, FCC officials say.

At the rate the two sides are going, the winner of this battle will be the group that hurts itself the least. The Bells seem to have the edge. They have the court's information-services decision in hand plus the momentum of the Senate vote. Their opponents haven't shown any ability to stop the Bell drive. So the Bells may finally get the freedom they have sought for nearly a decade.