By Jim Schutze
By Rachel Watts
By Lauren Drewes Daniels
By Anna Merlan
By Lee Escobedo
By Eric Nicholson
It started with a lady in the clouds issuing you a challenge in a 30-second TV commercial.
"As you look at your next phone bill," she said as dark billows moved rapidly across the sky behind her, "try and make sense out of the fact that it's more expensive to call within Texas than it is to call another state."
The lady spoke indignantly as you lay supine on your sofa. "That's right," she said. "It costs more to call from Marfa to Midland than it does from Marfa to Honolulu."
How can that be? you thought.
"Southwestern Bell, GTE, and other local monopolies have no effective competition," she explained, "allowing them to set long-distance access rates that are among the highest in the country."
You didn't know an access rate from a prime rate, but you were galled at Southwestern Bell.
And she was glad.
The lady in the clouds' on-screen debut during the fall of 1996 launched a high-stakes scuffle over telephone service that is working toward its denouement at the Texas Legislature. In a legislative session devoid of any crisis, AT&T helped create one with its barrage of TV ads that spawned an equally aggressive ad campaign by Bell.
Legislators, keenly aware of the storm clouds swirling over access rates, feel pressured to act. Somehow. Some way. "In the absence of the ads, it's questionable whether the Legislature would even be inclined to do anything on these issues," says Rep. Sylvester Turner of Houston.
Yet telecommunications is a subject that even the most learned of legislators has trouble understanding. Seemingly innocuous bill language can cost consumers millions of dollars. In the haste to pass a telecommunications bill before the Legislature shuts down on May 31, legislators are poised to make a decision without really grasping the implications.
As one legislator puts it, the telecommunications freight train has left the station. And just in case legislators forget that there is no turning back, AT&T has the lady back on your TV, still seated in front of a backdrop of storm clouds but sporting a different hairdo and issuing a call to arms. "Demand low phone bills," she says as she slams her fist on her khaki-covered knee.
You are under her spell. You either call the toll-free number or call up the Web site that appears on the screen. From there, a group called Texas Partnership for Competition encourages you to contact your state legislator and, darn it, you're mad, so you do just that.
Congratulations. What you have just done is help fan flames that almost certainly are going to come back to singe your behind and those of other residential phone customers.
The lady, you see, is a tramp for AT&T. And she has drafted you into AT&T's war of greed with Southwestern Bell.
AT&T sees Bell as a future competitor in long-distance, local phone, and other telecommunications services. Since February, AT&T has spent about $5 million on political ads, according to filings with the Texas Ethics Commission. Bell spokesman Glenn Smith says Bell has matched AT&T dollar for dollar on defense ads that slam AT&T. The strategy behind the AT&T ads is to seize profits from Bell by pressuring the Legislature to reduce long-distance access fees.
An access fee is the surcharge Bell imposes on long-distance companies, including AT&T, to tap into Bell lines within the state. The fee, currently 11.63 cents a minute, gets passed down to you, the customer, every time you place a long-distance call within the state. That's why long-distance companies like AT&T charge you more to call from Marfa to Midland than from Marfa to Honolulu. It's not their fault. It's Southwestern Bell's.
But before you become an AT&T soldier and contemplate how sexy you look in camouflage, understand that as you fight for AT&T, you are actually helping Southwestern Bell. Whenever Bell gives a little at the Legislature, it expects to take a lot in return. The company almost assuredly will walk away from this fight with a trove of new rights, including an ability to raise prices essentially at will on most of its services.
That's because no company is as plugged-in at the Legislature as Southwestern Bell. With more than 100 lobbyists trolling the Capitol halls on its behalf, with a well-earned reputation as a company committed to community philanthropy, and with 25,000 laborers across Texas wearing a union label, Bell enjoys advantages like no other special interest that asks the Legislature for favors.
The more candid of legislators admit they have a hard time saying no to Bell.
"Bell is aggressive, and it's just a matter of an individual legislator being able to accept that aggressiveness," says Rep. Robert Puente, a San Antonio Democrat and one of the few legislators tough enough to stand up to Bell. "If you can accept it and hear their point of view and still stand your ground, well then I think that's what the voters want of you. And if you can't stand up to them, well then I think the voters need to know that too."
What Southwestern Bell wants, and probably will get, is freedom to raise rates on nearly all of its services, effectively getting the state's regulator, the Public Utility Commission, out of its business. Taking note of the Legislature's proclivity to lower access rates, Bell is willing to negotiate a reduction even though the company insists the existing rate subsidizes a loss it incurs from keeping the basic rates for local service among the lowest in the nation.
Although the legislation now under consideration in Austin changes almost hourly, Bell appears willing to appease lawmakers by agreeing to freeze that basic residential rate along with the price of its most popular premium service, call waiting, until perhaps 2005. In exchange, the company will be able to set prices for just about everything else without PUC interference.
PUC Commissioner Judy Walsh repeatedly has warned legislators of the dangers of giving Bell too much pricing flexibility too quickly. Although legislators moved to open local phone service to competition with its 1995 telecommunications reform law, Bell remains Texas' local phone monopoly. Bell disagrees, pointing to the 200-plus companies licensed to provide local phone service in Texas. The fact remains, though, that Bell has 97 percent of the customers within the mostly urban markets where it does business.
"A market with a 97 percent market share will not police itself," Walsh told a Senate committee recently.
Walsh, along with smaller phone companies that want to be able to compete in local residential service, figures Bell will engage in predatory pricing. They fear that Bell would chase away competitors by charging cut rates on services, and that once competitors have left Texas, Bell would raise its prices, which it would be able to do without state regulatory interference. The short-term benefit of low prices is outweighed by the long-term consequence of high prices charged by an unregulated monopoly, they argue.
So would consumers benefit at all from the Bell trade-off?
It's possible, perhaps even probable, that long-distance companies will pass on the access-charge reductions to customers, but legislators can't guarantee that--although they might try to convince you they can. Even if the savings are passed on, not all customers would benefit equally. Business customers could experience a bonanza at the expense of residential customers. And customers who rarely place long-distance calls within the state might see annual savings that amount to mere pocket change.
Legislators say they want to pass a telecommunications bill that is good for consumers. But in the frenetic pace of a 140-day legislative session, they have gotten caught up in the lobbying. They are casting this fight as Bell vs. AT&T, when, in fact, it is Bell and AT&T vs. you.
Some legislators admit that when they decide their vote on this most complex of legislation, they will consider factors that have nothing at all to do with the merits of the bill. They will consider that Southwestern Bell is based in Texas while AT&T is based in New Jersey. They will consider Bell's sparkling record of community service. They will consider the job security of Bell's 25,000 union workers. They will consider the trust that they have built over the years with Bell lobbyists. And they will pick their side accordingly.
And Bell, driven by profit and an intense desire to retain its monopoly over local phone service in Texas, will make certain that it is rewarded handsomely for its sacrifice of reducing access charges.
"AT&T was hoist with its own petard," says Janee Briesemeister, senior policy analyst with the southwest regional office of Consumers Union, which advocates more competition in local phone service. "They are the architect of their own doom. They have forced the Legislature to do something, but Bell has the clout to do a quid pro quo and thus do all the other stuff that AT&T and consumers hate."
The lady's head most assuredly was in the clouds.
Officially, it's called House Bill 1701. Some legislators, for simplicity's sake, call it "Bell's bill."
"Around our house," says consumer advocate Sheila Holbrook-White, "we call it the telecommunications wet dream for Southwestern Bell."
If nothing else, the bill is a testament to the confidence and power that Southwestern Bell wields at the Legislature. More than 35 House members fell over themselves to sign on as co-sponsors even though the bill would have lowered access charges a puny 2 cents a minute while giving Bell full control over setting its own prices on a boatload of services, including call forwarding, call return, caller ID, three-way calling, speed dialing, directory assistance, and ISDN lines.
It also would have let Bell launch a new service simply by giving 24 hours' notice to the PUC. Right now, Bell must go through hearings and secure PUC approval before starting a new service. While the bill would have frozen the monthly price for basic residential service at what it has been since 1984--in Dallas, $10.40--it would have let Bell add surcharges and fees at will.
When the bill was filed earlier this year, Southwestern Bell was not listed as its chief author. That's against the rules. Instead, the bill carried the name of Rep. Leticia Van de Putte, a San Antonio Democrat who later this year is expected to launch a campaign for an open state senate seat. One of her opponents is likely to be Puente, her House colleague with a reputation for standing up to Bell.
Van de Putte says that although she filed HB 1701, she would not have supported the original version--the "wet dream" version. "It looks very much like Southwestern Bell and GTE [the company that monopolizes local phone service in rural Texas] would be enhanced by that bill. And I filed it just like that, knowing that during the legislative process, it would change. But you never start from your weakest point. I needed things in that bill that I knew I could give up."
For her troubles, Van de Putte, a 44-year-old pharmacist and mother of six, is being characterized rather crudely.
"I think it's a very wrong portrayal for anybody to tell me, 'Leticia, you're the ho for Southwestern Bell,' and yet that's what the other side would have you believe." Van de Putte says AT&T is threatening to assassinate her character during the upcoming election by using--what else?--ads. AT&T officials deny making any such threats.
Before this session, Van de Putte was known among legislators as a cheerful colleague since 1991 who had yet to become a major player. As she took on the biggest bill of her political career, she sought the assistance--and perhaps the cover--of Rep. Toby Goodman, an Arlington Republican who sits next to her on the House floor. The cigar-chewing lawyer with the thick, graying mustache is widely regarded around the Capitol as one of the good guys.
He shepherded the rewriting of the state's juvenile justice laws in 1995. He played watchdog over former Attorney General Dan Morales' bumbling child-support enforcement division. His name is mentioned by Capitol insiders as someone who, by all rights, should be the next House speaker except that everyone knows the lobby would never stand for it because of his independent ways.
Together, Goodman and Van de Putte thought they could marshal through the Legislature a telecommunications bill this session that would be good for consumers and make Southwestern Bell happy at the same time. They are finding out that they are in over their heads.
"These are two legislators who are experienced legislators, but not in telecommunications," says Edwin Rutan, AT&T's southwest regional vice president of law and government affairs and general counsel. "This is an incredibly complicated area. I do this 365 days a year, and I can't look at all those provisions without having to think about some of them for a long time to think through the implications."
As the pair's House bill languished in committee without a hearing, the sponsor of the Senate's telecommunications bill, who hadn't seemed interested in moving his bill first, suddenly decided to move it along. Sources say Sen. David Sibley of Waco was pressured into doing so by Lt. Gov. Rick Perry, who presides over the Senate. Sibley called Bell and AT&T to the table to negotiate a compromise. The two companies agreed on a bill in mid-April that consumer groups and smaller phone companies opposed. The deal was struck even as the TV ad war was being waged on full throttle.
The bill passed unanimously on the Senate floor with no amendments and almost no discussion--something unusual for a bill of such magnitude. Perry reportedly had put out word that he wanted nothing introduced that could derail the so-called compromise.
Sen. Chris Harris of Arlington took to the microphone on the Senate floor as the bill zipped through the chamber and asked Perry jokingly, "Why the freight train?"
He didn't get an answer.
The Senate bill became the vehicle from which the House would debate telecommunications. But when it arrived at the House State Affairs Committee to be heard, it had been significantly rewritten. The new bill more closely resembled House Bill 1701--the original Bell wet-dream version--than the bill that had passed the Senate.
Van de Putte says she and Goodman oversaw the revisions in the Senate bill and insists Bell didn't call the shots. Yet during the committee hearing, Van de Putte and Goodman had to admit that some of the language in their bill conflicted with their intent. On the same night, the two offered 20 amendments to steer the bill closer to the form it was in when it passed the Senate. A few days later, they brought 38 more.
It all begged the question, Whose bill was this that stood before the House State Affairs Committee? It certainly wasn't the Senate's. And it did not appear to be Goodman and Van de Putte's.
Clearly, it was Bell's.
As Goodman stood before 15 peers who make up the committee, he was quickly losing face because he and Van de Putte had lost control of their own legislation.
"I was not invited to any of the negotiations on the Senate bill," Goodman told the committee sheepishly, with Van de Putte shaking her head that she hadn't either. "I don't know what was agreed to, because I wasn't there."
Then, in a burst of honest emotion that showed that Goodman is one of the good guys but also that he is overwhelmed, he confessed, "This may not be the greatest bill that this Legislature ever heard, but I'm going nuts with this damn thing...They [the Senate] decide they don't want to pass a bill. Then they decide they do want to pass a bill. Then they decide they don't want any amendments on the floor. And then people bring me stacks of amendments...And it's like, 'Well, Senator Sibley agreed to put this on, but they had a brokered deal over there, and he didn't put it on.' Well, I don't know! And if I sound frustrated, I am.
"I get questions from reporters: How much money did Bell give you? And how much money did AT&T give you? And I have [first-year legislators] threatened by one side or the other. I have people coming over and saying, 'Well, hell, we signed on to your bill. It's a great bill.' And they haven't read the bill!"
Both Van de Putte and Goodman know that if legislators actually read their bill, they wouldn't be able to understand it. Telecommunications policy is muddy at best, and the ever-changing language of the bill makes it next to impossible to decipher, especially for legislators having to deal with hundreds of other issues coming to a head in the waning days of the session.
"I find most of the House members are just scratching their heads, not knowing really what to do," says Rep. Kevin Bailey of Houston, who has an advantage over most because he sits on the State Affairs Committee. "This issue is so complex, most of the House--and I was in this category before I was on State Affairs--really doesn't know the issues and what to do on the issues.
"I'm going to try to get the best deal in terms of rates that I can, if I can figure out who's offering the best deal. But I'm not even sure on that."
It appears nothing can stop the Legislature from ramming through a telecommunications bill this session, certainly not the legislators' own sense of self-control. A few weeks ago, House members called Bell, AT&T, and other interested parties together for a private summit to try to hammer out yet another compromise. Inside the meeting room, the parties were greeted by a large drawing pad.
On the first page was a picture, drawn in black marker, of a choo-choo train engine pulling a freight car with "SB 560" written on the side--SB 560 as in Senate Bill 560, the telecommunications bill under consideration in the House. The train was leaving the station.
On the second page of the pad was a drawing of tickets alongside a hangman's noose. The message was clear: Hop on board or pay the consequences.
The third picture depicted smiling passengers inside a rail car effortlessly gliding along the tracks on a beautiful, sunny day. Those who hop on board this moving train experience bliss.
The final drawing was of a damsel in distress, tied to the train tracks, moments away from meeting her demise. See what happens to those who don't get on board?
They get run over.
The artist was Rep. Kim Brimer of Arlington, a member of the House State Affairs Committee. He says he was trying to add levity to the situation as well as make a point to the negotiating parties.
They surely noticed that Brimer's art exhibit did not include a sketch of a brakeman.
David Cole, Southwestern Bell's Texas president, has put aside an hour to have lunch with his wife, Sandy, and his two tow-headed toddlers, David and Brett. It's a rare treat for Cole, who directs Bell's government affairs and community relations from an office six blocks from the Capitol. One of the boys pointed to the building recently and said, "That's where Daddy lives."
During the legislative session, that's about right. Cole is the commander of an operation that spends about $12 million a year to influence the Legislature, according to reports the company files with the Public Utility Commission.
This legislative session, Bell enlisted 95 lobbyists. Another four represent Bell's parent company, SBC Communications Inc., and nine more lobby for the Texas Telephone Association, of which Bell is a key member.
The volume of lobbyists is obscene. But Cole says in his strong Texas accent that the number is deceiving. Most of those folks don't really lobby legislators, he says, but Bell wants to abide by state ethics laws, so it registers them in case a contact should occur.
It is true that much of a legislator's contact with Bell occurs outside of Austin, in the home district. Of Bell's 95 lobbyists, about 70 are employed by either Bell or SBC. Of those, about 60 are external-affairs managers, who are company emissaries fanned out across the state.
They are Bell's goodwill ambassadors; some serve on school boards, and all are active in chambers of commerce. They take part in community economic development and education projects. They are the faces behind Bell's investment in community involvement. The company spent $6.4 million from 1995 to 1997 in dues and membership fees, according to the reports it files with the PUC. In 1997, the dues included $74,750 to the Greater Dallas Chamber of Commerce, $72,500 to the Fort Worth Chamber of Commerce, and $21,300 to the Central Dallas Association.
Bell's external-affairs employees are in the business of making friends with the movers and shakers in their communities, including legislators. Typically, they don't talk to legislators about the nitty-gritty details of legislation, Cole says.
"If there's an opportunity that they can talk directly to their legislator, we give them that opportunity," he says. "These folks are not involved in any strategic thinking as to where we are trying to take our company. But these people play a key role in their communities. I guarantee you, we don't have them out there as a focal point for our legislative agenda."
The contacts may be benign, but they are obviously intended to help advance Bell's objectives by building friendly relationships with those who control legislation. Raul "Rudy" Martinez, a Bell external-affairs employee and chairman of the Arlington Convention and Visitors Bureau, gave Rep. Toby Goodman a ticket to join him at Sun Devil Stadium in Tempe, Arizona, in 1996 to watch the Dallas Cowboys win Super Bowl XXX. Goodman says he has known Martinez for about eight years and mentions that their children attended the same high school.
"The only thing I got was a ducat in the end zone at Sun Devil Stadium where they oversold, and the guy in the seat next to me weighed 300 pounds," Goodman says. "If anyone thinks giving me a Super Bowl ticket influenced me on this bill, they just don't know me."
Bell external-affairs employees also play social director. Lisa Hughes, an area vice president based in Austin, spent $2,819 wining, dining, and entertaining legislators, their staffs, and their families during the first three months of this year, according to reports at the ethics commission.
The filings also indicate that Brad Parrott, an external-affairs vice president in San Antonio, routinely treats legislators to rounds of golf, such as when he carted Rep. Joe Driver of Garland around Austin's Barton Creek Country Club in February.
Bell is far from the only company with lobbyists who treat legislators to dinners, drinks, and golf games. But it may be the only company that uses its own employees, usually based in the legislator's hometown, to do it.
"Southwestern Bell is unique in that there is no other corporation or institution with operations that are so pervasive that they literally have a physical presence and employees in virtually every single legislator's district," says Rutan of AT&T.
Bell, which operates in five states and has its headquarters in San Antonio, does its business out of more than 2,800 buildings across the state. It has more than 37,000 employees in Texas, including about 7,000 employees each in Dallas and Houston.
AT&T, with its corporate offices in New Jersey, has 9,000 employees in Texas, many of whom work in a regional service center in Dallas.
About 25,000 Bell employees in Texas are members of the Communications Workers of America (CWA). During hearings on the telecommunications bill, Bell's union workers have packed the back of the committee room, wearing round, white stickers that say, "For Jobs. HB 1701."
Taking money from Bell by reducing long-distance access charges hurts the company and therefore threatens jobs, says Joe Gunn, president of the Texas AFL-CIO, for which CWA is the largest affiliate. Gunn, a former Bell employee and CWA union boss, says the federation takes the general position that what is good for Bell is good for the union. And CWA members, at Bell's behest, aren't shy about reminding some legislators, mostly Democrats, that the union has been good to them in the past by helping in their election campaigns.
"We help the legislators in some districts get their jobs; now we're asking them to help us keep ours," Gunn says boldly.
AT&T has CWA employees too, but only about 4,000 of them.
AT&T also cannot match Bell's totals in campaign contributions. Bell's political action committee donated about $450,000 to legislators and statewide elected officials in 1998, compared with the $150,000 given by AT&T's PAC, according to ethics commission filings. Those totals do not include donations given directly by company executives or lobbyists.
The disclosures at the PUC indicate that Bell gave $31.6 million in charitable and other contributions from 1995 to 1997, most of it funneled through its parent company's foundation. Bell estimates that its charitable contributions are $14.1 million annually, with $1.5 million going to Dallas-area charities. Contributions are both big and small.
"We know if we need help, Southwestern Bell will be there to assist in some projects that we may have," says Puente, the San Antonio legislator. "For example, I had a high school mariachi group in my district that didn't have any uniforms, and I mentioned it to Bell. Sure enough, they sponsored their uniforms."
In gearing up for the legislative session, Bell sent correspondence to lawmakers reminding them of the company's financial investment and philanthropy in Texas, going as far as to break out the numbers by legislative district. In a January newsletter that Bell called its "Report to Legislators," the company heaped praise on itself for a $461 million investment, even though almost all of it was required under the 1995 telecommunications reform law.
Bell spent $308 million to upgrade its own facilities and another $153 million to build new telecommunications infrastructure (such as the internal wiring and other equipment needed for high-speed Internet access) for schools, libraries, and nonprofit health-care centers. But Bell didn't make much noise about the fact that the company was obligated to do these things by the Legislature itself.
Legislators required the investment in schools, libraries, and nonprofit hospitals as a counterbalance to the perks it gave Bell in the 1995 reforms, which included the ability to ring up extra profits without being subject to a regulated rate cut. Bell is making the most of it, using the required contributions to further endear itself to legislators.
In separate correspondence, Bell gave legislators a regional breakdown listing the communities in which the company had upgraded its facilities as well as the schools, libraries, and hospitals that had received new facilities and service discounts. Cole makes no apologies for that.
"It's a direct contribution for the benefit of our children here in the state of Texas," he says.
Bell's crowing pierces the ears of AT&T's Rutan, who continues his blood feud with Bell even though the companies agreed to a deal in the Senate and could shake hands in the House before they're through. "I don't think it's an improper factor for a legislator to consider the commitment that a particular company has to the state," he says. "What concerns me is a situation where that winds up being the sole determining factor, where Southwestern Bell's ability to be generous in the state of Texas is in large part created by things like profits from the excessive access charge."
Rutan argues that Bell clears $800 million in profits because of an inflated access rate. He also notes that in November, a PUC study determined Bell was ringing up $288 million a year in profits that, prior to 1995 deregulation, the PUC would have ordered the company to return to consumers. He multiplies that number by four, one for each year since the 1995 reforms were passed.
"Well," he says, "that's $1.2 billion, and they gave back $400-some million. Maybe they should have been a little more generous."
When Rep. Sylvester Turner decides whether to support telecommunications legislation, he considers several factors. The merits of the bill is only one of them.
"Southwestern Bell has taken an aggressive position on wanting to be a community partner, and I put value on that," says the Houston Democrat, whose district is about 50 percent black.
A Harvard Law School graduate serving his 11th year in the House, Turner is one of the Legislature's most effective champions for Texas' disadvantaged. He also is vice chairman of the House State Affairs Committee and the only African-American on the 15-member panel, which has the power to advance or spike telecommunications legislation. After some changes were made to the original bill, Turner came on board as a co-sponsor of HB 1701--a triumph for Southwestern Bell. Turner says he believes the bill provides benefits for consumers by lowering access rates and capping the basic residential phone rate.
He also believes Bell is providing benefits to his district and blacks throughout Texas, a factor that he freely admits has teetered him toward supporting the bill that Bell wants.
"Community partnering is not restricted to Southwestern Bell," he says. "If AT&T wanted to do the same thing and show a greater attachment to the district that I serve and to this state, I am more than willing to evaluate them accordingly and respond to them accordingly. But don't come to the table and ask me to serve you when you are not willing to reach out and become a participant in my district and the state of Texas."
Rutan says AT&T is at a disadvantage by virtue of the fact that it is one-fourth of Bell's size in Texas. "We make major contributions to charitable causes all across the country, but we are present in 50 states."
But in AT&T, Turner sees only a company investing tens of billions of dollars to acquire cable and other phone companies. He sees a company spending millions of dollars on TV ads to influence legislators. "All I see is a company headquartered in New Jersey," he says.
In Southwestern Bell, Turner says he sees a company committed to hiring, promoting, and contracting with African-Americans within his district and across the state. AT&T can talk about a commitment, but Turner sees it in Bell every time a company manager who is black and from Houston pays him a visit to lobby.
"I speak very loudly and clearly: Be sensitive to the needs of my district, and you will always, always get a very receptive ear from this legislator," Turner says.
It seemed to make perfect sense at the time. Texas Citizen Action, a consumer group advocating more competition in local phone service, and Luis Wilmot, who has spent his whole life fighting for the little guy, would enter into a coalition with AT&T and small local and long-distance phone companies to challenge Southwestern Bell's outrageously high long-distance access charges.
And thus, the Partnership for a Competitive Texas was born in the summer of 1996. The lady in the clouds became a TV fixture shortly after that.
Coalition members had different interests but a common enemy in Bell. But when AT&T unilaterally entered into a compromise with Bell by signing off on the Senate's telecommunications bill, the question had to be asked: Were the coalition's consumer representatives nothing more than pawns in AT&T's chess game with Bell?
"The partnership came together because every member saw local phone competition as important," says Holbrook-White, Texas Citizen Action's executive director. She inherited the coalition when she took the job last summer. "In retrospect, the partnership backed itself into a corner by making its only public issue access rates."
MCI WorldCom and Sprint already had proved that an interest in lowering access rates wasn't enough to jump on the side of consumers. Those two long-distance companies opted to side with Bell in this fight when it became certain that access-rate reductions would be the centerpiece of any telecommunications bill. MCI and Sprint focus primarily on business customers and therefore are harmed far less by the potential dangers of granting Bell broad pricing flexibility in local phone service.
AT&T, which just invested billions of dollars to buy TCI Cable, envisions itself as a consumer's sole provider of telecommunications services, including local phone, long distance, high-speed Internet, and cable TV. It needs to be able to compete in local phone service because that is the likely entry point into a home where the company can push its other services.
More than AT&T, it's the small and midsize phone companies, aggressive upstarts like Dallas-based Allegiance Telecom and the deep-pocketed Time Warner Telecom, that are most interested in making sure Bell does not succeed in taking the PUC out of the picture. They are concerned about predatory pricing and therefore have had the difficult task of having to make the conceptual argument to legislators that rate regulation is necessary to keep consumer prices high, at least until the market is truly competitive. They, too, were part of the coalition with AT&T and consumers. And they, like the consumer representatives, opposed the Senate compromise.
"I'm not sure consumers are a whole lot better off with two competitors than they are with a monopoly," says Charlie Land, executive director of TEXALTEL, an association that represents some of the small and midsize phone companies.
Wilmot came to the coalition as executive director after spending three years as a regional counsel for the Mexican American Legal Defense and Educational Fund (MALDEF) in San Antonio. Before that, he was Gov. Ann Richards' appointee as the state's advocate for utility consumers.
Now, he is faced with reconciling consumer interests with those of AT&T and having to make excuses when those interests collide--like when AT&T agreed to the Senate bill against the wishes of its consumer partners. Wilmot says the partnership's multimillion-dollar ad campaign, funded almost exclusively by AT&T, succeeded in that it exposed Bell's inflated access charges. But when asked whether it failed by helping ensure that Bell walks away from the 1999 legislative session with dangerous deregulation advantages, he is less assured.
As Wilmot sees it, consumers owe gratitude to AT&T for at least having the guts to take on Bell over access charges. Bell undoubtedly would have gone to the Legislature this year asking for pricing flexibility and for the PUC to be cut out of the process. At least now, Wilmot says, access reductions are part of the deal.
The real question for consumers is whether the harm caused by deregulated pricing is made up for by the benefit of the Legislature's mandating lower access rates. Consumer advocates, by virtue of their opposition to the Senate compromise bill, are saying it is not.
The first issue is whether the access reductions will be passed on to consumers equitably or even at all. AT&T officials have pledged to the PUC that it will flow through access-charge reductions to consumers, but some legislators are not convinced the PUC will be able to determine whether that's even happening. Bell lobbyists are fond of asking, Why is AT&T pushing so hard for access reductions if all that money is going back to consumers?
Altruism certainly is not AT&T's motive, but the company likes the idea of taking profits away from Bell, which stands to lose about $100 million annually per penny of access reduction. The Senate compromise phases in a reduction, starting at 1 cent and graduating to 3.5 cents, which means Bell stands to lose as much as $350 million a year.
Wilmot says he is convinced AT&T will pass on the savings to consumers. Of course, he also considers AT&T a partner, albeit one with the upper hand.
"A number of times we have gone cross-eyed with AT&T and had yelling matches," he says. "And if one of us doesn't like it, there's the door. Of course, it wouldn't be the door for them. It would be the door for me."
That scenario doesn't make it sound as if consumers and AT&T make very good partners, no matter what the lady in the clouds says.