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Analysis and Commentary for the Independent Telecommunications Industry Published By Independent Telecom Associates

Monday, September 29, 2008

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Many voices claim to represent the telecommunications industry offering their views before the FCC and the U.S. Congress on the critical policy issues affecting the industry. Welcome to The Back Page, a special newsletter featuring commentary and viewpoints of interest primarily to the independent telecommunications industry. The views and opinions expressed in The Back Page are the views of the author. The Back Page is our attempt to give voice to the policy objectives and goals of the independent telecommunications industry. The Back Page includes commentary on legislative and regulatory issues specifically affecting the independent telecommunications industry. Readers are encouraged to submit letters or other commentary for publication. Letters and commentary for publication can be sent to: The Back Page, Independent Telecom Associates, 4601 Tilden Street N.W., Washington, D.C. 20016 or by e-mail to: [email protected]. The Back Page may be duplicated and distributed with the written permission of Independent Telecom Associates. Copyright, Independent Telecom Associates, 2008

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THE CAPITOL CORNER

THE 2008 PRESIDENTIAL ELECTION: WILL IT MATTER FOR RURAL TELECOM? (Part I) By Tom Smith

Can you imagine a world without candidates’ political commercials, presidential debates, and campaign rhetoric? It may seem only like a wish, dream, or the fantasy of a Disney movie, but we’re actually not too far away from that world. In less than six weeks, the long presidential election campaign will be over. The 2008 presidential election seemed to start the day after President George Bush made his second Inaugural address on a sunny winter day on the steps of the U.S. Capitol on January 20, 2005. American voters have been subjected to the longest, most costly, and perhaps, the most caustic campaign in modern political history. As the candidates now ready for a series of presidential debates over the next few weeks, polls indicate the race between Senator Barack Obama (D-IL) and Senator John McCain (R-AZ) is very close. So far, at least, it seems that neither candidate has sealed the deal with the voters. Like four years ago, only a few voters in one state could make the difference again this year. But, will this election make a difference for the rural and independent telecommunications industry and businesses? Does it really matter who wins? What makes the presidential election important for the rural and independent telecommunications industry is that the next President will choose a new FCC Chairman and probably two

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new FCC Commissioners in the first few months of the new administration. There are also indications recently that Obama may be anticipating making fundamental changes in how telecommunications policy is set. In fact, it seems that the Obama campaign and his transition team (which is operating on the basis of an Obama victory) may be giving more thought to telecommunications issues these days than McCain. In part, this could be attributed to the fact that Obama has no previous record on telecommunications policy. Although he has spoken on the record generally about broadband, Obama has never spoken publicly about telecommunications policies specifically affecting rural America. On the other hand, McCain once chaired the Senate Commerce Committee, which has oversight over telecommunications policy. McCain has an extensive history of debating and voting on telecommunications policy issues. As Senate Commerce Committee Chairman, he was a thorn in the side of many industry lobbyists along with many FCC Commissioners. McCain and then-FCC Chairman Michael Powell often clashed. McCain is probably better versed in telecommunications policy because of his long tenure on the Commerce Committee. Beyond his strong support for a nationwide public safety communications network, telecommunications policy is not an issue that is front and center in McCain’s grassroots campaign. He is giving more attention to energy and national security issues. There is significant speculation in Congress and within the telecommunications industry about who Obama might appoint to the FCC. Most of the talk is that current FCC Commissioner Jonathan Adelstein has the inside track to be named the new FCC Chairman if Obama wins the presidency. Former Senator Thomas Daschle (D-SD) has been named the head of Obama’s transition operation. Adelstein once worked for Daschle and owes his current job to Daschle who fought vigorously with President Bush to get Adelstein appointed to one of the two Democratic seats on the FCC. Moreover, recently, Adelstein has publicly embraced plans being formulated by the Obama campaign that could radically restructure the role of the FCC in the federal government. According to numerous reports, Former FCC Chairman Bill Kennard, one of Obama’s key economic advisers, is working on a plan to reorganize the FCC and how telecommunications policy is managed within the federal government. The outlines of the plan were included in the platform of the Democratic Party approved at the Democratic National Convention last month. Kennard is thought to have a great deal of influence on Obama’s thinking on telecommunications policy issues. Former FCC Chairman Reed Hundt is also a key adviser to Obama on telecommunications policy issues. Kennard’s plan calls for Obama to create a new agency and appoint a cabinet-level national technology and telecommunications “czar” with broad government-wide authority to make telecommunications policy. The FCC would be expected to follow the direction of this new “czar.” The technology and telecommunications “czar” would work across all other government agencies and report directly to the president. Early reports indicate the technology and telecommunications “czar” would have three major responsibilities: oversight of spectrum policy; development of a national broadband policy; and boosting minority ownership of media properties.

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FCC Commissioner Michael Copps had thought that a Democratic administration would mean he would be promoted to the position of FCC Chairman. But, Copps may be feeling a little left out these days, especially after publicly expressing concerns about Obama’s proposal. Copps is reported to be concerned that the creation of a new government agency and the appointment of a technology and telecommunications “czar” could politicize the work of the FCC. Copps has been highly critical of current FCC Chairman Kevin Martin for what Copps called “politicizing” the agency. In fact, Copps was instrumental in getting key Democratic members of Congress to begin an investigation of Martin’s practices in an attempt to pressure Martin to act more independently of the White House, especially on media and merger-related issues. Copps is a strong advocate of more independence for the FCC. Both FCC Commissioners Robert McDowell and Deborah Taylor Tate also have expressed reservations about Obama’s proposal. Both question whether an additional layer of bureaucracy would be productive. But, Tate’s tenure at the FCC may not last much longer. There are no plans by the Democratic Congress to vote to approve her reappointment before her term concludes at the end of the year. This would give the next President an opportunity to appoint a new Chairman and a replacement for Tate. If one of the current FCC Commissioners is selected to be Chairman, the new President will be able to quickly reconfigure the FCC. Obama is likely to be heavily influenced by congressional leaders in making new appointments to the FCC. The Obama campaign has suggested also making a substantive change in the universal service program. The campaign often has indicated that the program needs to transition from a program that supports telephony to a program that provides support for broadband deployment in unserved or hard-toserve areas. There are no additional details on the proposal. Although he may have tried to obtain a monopoly on being the “change candidate,” Obama will not be the only presidential candidate who, if elected, would change how telecommunications policy is made in Washington, D.C. McCain also is likely to bring about major changes in the FCC. When McCain chaired the Senate Commerce Committee, he was one of the harshest critics of thenFCC Chairman Michael Powell and what McCain thought was Powell’s cozy relationship with large carriers. But, unlike Obama’s campaign, the McCain campaign has been more disciplined in keeping the lid on any specific plans for how he proposes to reorganize regulatory agencies, like the FCC. Yet, McCain has been emphatic in committing to a massive overhaul of all federal regulatory agencies. Unlike the Obama campaign, the McCain campaign is also not floating any names in a highly visible way for a new FCC Chairman or FCC Commissioners. Given McCain’s tenure on the Commerce Committee, it is reasonable to expect that a McCain administration will include more scrutiny of USF, a major review of cable and video programming policies, and a likely overhaul of the FCC. No matter who wins the presidency, they will be relying on advisers who have had a history of working on telecommunications issues. They are likely to be names familiar to the industry. Nevertheless, both candidates are committed to change the FCC – perhaps in ways we cannot even anticipate at this point. The next president, however, will not be the only change agent in the policymaking process. Although Democrats are expected to retain control of the U.S. Congress next year, there are likely to be

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many changes in Congress next year. These changes also are likely to have a significant impact on telecommunications policy and fuel a contentious debate about the future of USF – a debate on USF unlike any the rural and independent telecommunications industry has experienced in the past. Do I have your interest, yet? Stay tuned for Part II – Change Comes To The Congress, Too. WHAT DO YOU THINK? LET US KNOW (Thomas M. Smith, a former association executive, is an independent consultant on telecommunications and health care advocacy, marketing, grantmaking, and communications.)