Musical Chairs At The Fcc

Reed E. Hundt's tenure as chairman of the Federal Communications Commission has been nothing if not stormy. Since he took over in late 1993, the FCC has wrestled with the gargantuan task of deregulating the telecommunications industry. Hundt's rules on opening up local phone markets to competition drew howls and lawsuits from the Baby Bells. He took on broadcasters over children's programming and insisted on cut-rate Internet service for schools, prompting gripes that he was using the agency for social engineering.

But the turmoil of the Hundt era may pale in comparison with what's coming. As expected, the chairman announced plans to step down on May 27. That leaves the FCC with virtually an all-new team as it faces crucial rulings on how to carry out provisions of the Telecommunications Act of 1996. Moreover, the revamped commission confronts a massive industry consolidation, including the possible megamerger of AT&T and SBC Communications Inc., that the new law didn't anticipate.

POLICY IN FLUX. With the agency's overhaul--four of five commissioners will be replaced in coming months--policy could be in flux at a critical juncture. The FCC may wind up revisiting some of Hundt & Co.'s contentious decisions. Already, lobbyists for the Baby Bells, who think the FCC went too far in cutting access charges paid by long-distance carriers, are preparing to ask the agency to moderate that decision. "This creates a totally new dynamic," says Scott Cleland, a director with Legg Mason Precursor Group, which tracks Washington policy.

The biggest question: Who will succeed Hundt? Kathleen M.H. Wallman, chief of staff for the National Economic Council, is a leading candidate. A former top FCC staffer, Wallman has close ties to Vice-President Al Gore who hand-picked Hundt four years ago. Also in the running: FCC General Counsel William E. Kennard, nominated for a seat May 23 by the Administration, and Susan Ness, the sole Hundt-era carryover.

Some members of Congress, such as Senator Bob Kerrey (D-Neb.) and Senator Byron L. Dorgan (D-N.D.) may insist on none of the above. They already have said they're concerned that none of the nominees under consideration is a strong advocate for rural states.

They're also concerned about the nomination on May 23 of House Commerce Committee chief economist Harold W. Furchtgott-Roth for an open Republican slot. Furchtgott-Roth's market-oriented deregulatory record has some Congress members fretting that he will try to undercut universal service, the system of subsidies that keeps local phone rates low in rural markets. The other likely Republican nominee, 34-year-old Justice Dept. lawyer Michael Powell--son of Colin B. Powell--has little telecom experience and may have little impact on the commission initially.

Broadcasters, though, may be the biggest losers in the coming shakeup. Retiring Democratic Commissioner James H. Quello has been a longtime champion for the industry, who clashed with Hundt over such issues as how much time to devote to children's programming. Quello's departure comes just when the commission is taking up matters such as whether broadcasters should be allowed to own more than one station in a market. Between the demands of broadcasters and all the players in telecommunications, the post-Hundt FCC will remain at the center of the storm.