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from: TMC Net

[April 13, 2006]

Swarming Capitol paid off for SBC

(San Antonio Express-News (KRT) Via Thomson Dialog NewsEdge) Apr. 13--During the 2005 Legislature, the halls of the Texas Capitol were thick with SBC Communications Inc. lobbyists touting the benefits of a bill that would deregulate the phone giant and ease its entry into the video business.

So thick, in fact, that Sen. Troy Fraser, R-Horseshoe Bay, had reached his limit.

"They had so many lobbyists, they were literally working against themselves," said Fraser, head of the Senate Business and Commerce Committee, which oversees telecommunications issues. "It became unworkable to my staff day to day because we had so many people calling and dropping in. It was completely disruptive, so I told them, 'You need to pick one person to deal with my office.'"

Ultimately, SBC -- renamed AT&T Inc. in November after buying its former corporate parent -- did just that, and Fraser was among the lawmakers who voted overwhelmingly to pass Senate Bill 5.

But critics and supporters of the telecom giant's capital agenda say Fraser's experience illustrates a lobbying style long favored by the company -- one that sometimes borders on overkill but continues to bring results.

During the 2005 session, AT&T spent more than any other San Antonio-based entity to lobby state lawmakers. It dished out between $3.4 million and $7 million on contracts with 112 lobbyists, according to Texas Ethics Commission records.

There are 31 members of the Texas Senate and 150 of the House of Representatives, meaning lobbyists for AT&T and other SB 5 supporters -- among them, fellow telecom Verizon Communications -- nearly had a one-to-one ratio with legislators.

"There's no doubt that the number of lobbyists they've hired and the caliber of lobbyists they've hired have played a big role in their legislative wins," said Todd Baxter, a lead cable-industry lobbyist who served in the Texas House during the 2005 session.

"They certainly spend a lot, but from their perspective, they stand to gain a lot when they're successful."

By contrast, cable giants Time Warner, Cox Communications and Comcast and the Texas Cable & Telecommunications Association -- which vigorously fought SB5 -- together spent between $1.1 million and $2 million last year to lobby state lawmakers.

While observers debate just how much impact lobbying has on the lawmaking process, there's no doubt the company has scored some massive legislative wins in Texas since it moved here from St. Louis in 1993.

Senate Bill 5 died in the regular session last year but passed by an overwhelming vote in a second special session.

The measure made it easier for AT&T to charge what it wanted for basic phone service. It also allowed the company to negotiate a single statewide franchise as it begins offering cable-like video service in the state. Its cable rivals previously had to go through the lengthy process of reaching separate franchises with cities.

A 1995 bill supported by the company allowed it to expand into new areas of business, while requiring the biggest long-distance companies to invest billions in infrastructure before they could enter the state's local-service market. And in 1999, the former monopoly won the ability to increase prices on add-on services like caller ID.

AT&T officials say its lobbying heft is important as it tries to explain the intricacies of the telecom industry to lawmakers often more focused on issues like taxes or schools. It also helped the company last year counter the millions of dollars in TV advertising its cable rivals ran to oppose SB 5.

But a strong lobbying presence, company officials add, doesn't necessarily guarantee passage of a bill that legislators don't think serves their constituents.

"Lobbying is important, the way we use our resources is important," AT&T Texas President Jim Epperson said. "But when it's all over, legislators will cast their votes for what's in the public's best interest. I wouldn't sell lawmakers short. I wouldn't say they get their agenda from the lobby."

But those on the opposite side from the phone giant in recent debates said the sheer number of lobbyists prowling the capital has a bigger effect than it lets on. While lobbyists for the cable industry and consumer groups fought passage of SB 5, together they had a fraction of AT&T's total number.

"The result is that their message gets repeated over and over again," said Joe Sanchez, associate advocacy director of the AARP, which fought the bill's price deregulation. "If (lawmakers) hear a message often enough, they start to believe that it's true, that it's what people really want and what the public needs."

Sanchez recalls making trips to lawmakers' offices with two other consumer group lobbyists to make their case about SB 5. The trio often found the legislators' appointments before and after theirs were lobbyists from AT&T or an AT&T ally.

"We were just kind of sandwiched in there," he said.

Luke Metzger, lobbyist for the consumer advocate Texas Public Interest Research Group, said he got a sense of the size of SBC's push for SB 5 after the bill finally cleared the House. Once lawmakers moved on to the next debate, nearly the entire gallery vacated.

"There were only a couple of us consumer advocates left," Metzger said. "Everyone in there clearly had a stake in the bill."

TexPIRG fought the bill with fact sheets, op-ed pieces and a news conference, but from Metzger's standpoint, the resulting law was only marginally more consumer-friendly than the version originally introduced.

Experts said AT&T's big spending in Austin has paid off not just in quantity but quality of lobbyists.

During the past session, its ranks included Neal "Buddy" Jones -- often considered one of the most successful lobbyists in the state's history -- and when Fraser forced AT&T to choose a single lobbyist to deal with his office, the company sent well-connected Senior Vice President John Montford, a former state senator and Texas Tech chancellor.

What's more, observers point out, AT&T's powerful lobbying help also includes people not on its payroll.

Chambers of commerce and other business organizations have stumped for the company's legislative agenda during their lobbying rounds. And the Communications Workers of America union, which represents tens of thousands of AT&T's rank-and-file workers, has done the same.

In past sessions, red-shirted CWA members have filled the House and Senate galleries during bill deliberations, sending lawmakers the signal that it's not just the suits in the corporate offices that back the measure.

"Historically, those two business interests tend not to be aligned, so when you see the union lobbying for the same thing, it gets your attention," Baxter said. "I think it can make for a more persuasive argument, if nothing else because it's such an unusual thing to see."

AT&T's political influence in Austin also extends to campaign contributions.

Since 2000, the company has donated $149,000 to members of committees that oversee telecom legislation, according to San Antonio Express-News research. It gave $48,000 of that total last year.

Rep. Phil King, R-Weatherford, whose enthusiastic backing of SB 5 helped keep it alive through the special sessions, was a large recipient of AT&T contributions since 2000, taking in more than $14,000 in campaign contributions from the company. He didn't return calls for comment.

Fraser, who's received more than $10,000 from AT&T since 2000, dismissed suggestions that the money paved the way for the bill's passage. The measure succeeded, he said, because it offered increased competition.

"The bill would have passed as it passed if they had spent zero," Fraser said. "All their money had zero impact. And here's the reason: Nothing moves through my committee unless I agree with it."

Frank Sturzl, executive director of the Texas Municipal League, which lobbies on behalf of cities, said he sat down with Fraser to go over local governments' complaints about SB 5 soon after it died in the regular session.

By the second special session, most of the Municipal League concerns had been allayed by changes to the bill that would mean more revenues for cities even as they lost franchise authority over new video providers like AT&T.

"This got as good as it was going to get," Sturzl said. "We were completely out-gunned -- there's no doubt about that."

Sturzl said the telecom company likely registered as lobbyists any lawyer or company executive who might talk to legislators about the bill to avoid violating state rules. Plus, it retained some lobbyists not necessarily for their services but to keep them off the payroll of potential opponents, a time-honored tactic in Austin.

"They registered (112) lobbyists, but I certainly didn't see (112) lobbyists," he said.

But AT&T officials said big spending and powerful lobbyists don't necessarily translate into legislative wins.

Even though the company has long been a big spender in the statehouse, lawmakers handed the company legislative defeats in the '80s and early '90s as it tried to fight off growing competition in its industry, Epperson said. AT&T found itself on the winning end only once it began supporting measures designed to open rather than close the phone markets.

SB 5 resonated with lawmakers because it would make it easier for the company to offer video and give consumers fed up with rising cable bills another for-pay TV service, Epperson said.

"We spent an awful lot of years fighting competition," he added. "It didn't work."

AT&T's big spending in recent years has dovetailed with some significant legislative wins, but have those victories been worth the company's considerable lobbying expense?

Observers think so.

Telecom battles fought out in the Texas Legislature often play out later in other states -- or even in Congress -- and that heightens the importance of winning them, experts said. When federal lawmakers passed the monumental Telecommunications Act of 1996, some cited portions of Texas' 1995 deregulation law as a model.

Additionally, video franchise bills similar to Texas' have since passed in Arizona, Indiana and Virginia, and federal lawmakers also are mulling changes in franchise law. King, the Texas representative who vigorously pushed for SB 5, recently met with New Jersey lawmakers to tout the bill as that state considers a similar one.

With Texas accounting for a substantial portion of AT&T's $43.8 billion in annual revenue, experts add, there's a lot at stake when it makes its case before lawmakers. The company has said it will spend $800 million in Texas alone as part of its video rollout, and the more quickly and easily it can negotiate franchises that let it deliver TV programming over its lines, the sooner it can begin recouping that investment.

Even though AT&T has yet to offer video across the state -- it's currently just testing the service in some San Antonio households -- it will see another benefit from SB 5 in a matter of weeks.

In March, the company said that 1.4 million Texans' monthly phone bills could rise an average of $2 as a result of the bill's price deregulation. The company is boosting basic rates in many markets for the first time in 22 years to nudge more customers into buying a package of services.

By its own count, AT&T stands to collect some $2.8 million a month in additional revenues.

"They spent millions during the session," the AARP's Sanchez said. "But they've already started recouping it."

Staff Writers Greg Jefferson and Lisa Sandberg and Database Editor Kelly Guckian contributed to this report.