DEREGULATORY AGENDA LIKELY FROM COMMERCE COMMITTEE UNDER MCCAIN

Senate will hold leadership meetings Nov. 13 to determine who will be given committee chmn. positions. McCain, who was Commerce Committee chmn. for 4 years at end of Clinton Administration, is widely seen as retaking position he lost when Sen. Jeffords (I-Vt.) left Republican party in 2001 and gave Democrats control of Senate. McCain spokeswoman said he would pursue position, and Sen. Stevens (R-Alaska), most senior Republican on committee, will take position as Appropriations Committee Chmn., Stevens spokeswoman said. Under Republican party rules, committee chmn. positions are term-limited to 6 years, meaning McCain would have to relinquish position in 2004, same year his Senate term expires, his spokeswoman told us. He hasn’t announced whether he will seek another term.

Many industry observers said McCain was difficult to “pigeonhole,” but consensus was that he was likely to pursue deregulatory agenda. He is generally opposed to open access requirements and media ownership restrictions, we're told. He was one of few senators to vote against 1996 Telecom Act. But he also is concerned about cable rates and recently asked General Accounting Office (GAO) to conduct study of their rise. He has been supportive of charging broadcasters for spectrum they use. McCain proposed legislation on free air time this session (S-3124) that would impose up to 1% fee on broadcast license holders’ gross annual revenue, which would fund nearly $650 million in vouchers for federal election air time for candidates.

While free time might be high on McCain’s wish list, broadcast industry source said issue was likely to develop political friction. Incumbent elected officials such as current Senate Commerce Committee Chmn. Hollings (D-S.C.), who probably will become committee’s ranking minority member, have nothing to gain from free time bill, broadcast source said. “Why would Hollings, who has 95% name recognition, want to give air time to an opponent who has 5% name recognition,” source said. Many candidates turn down free time when offered in forms they don’t like, broadcast industry source said. For example, NBC’s Tim Russert offered to moderate debates in 11 most competitive Senate races, but only 2 accepted. While there are some questions about McCain, broadcast industry is thrilled with likelihood that Sen. Burns (R-Mont.), former broadcaster, would become Communications Subcommittee chmn., source said.

McCain would be in position to use other issues to apply pressure for free time legislation, said Adam Thierer, Cato Institute dir.-telecom studies. Example is McCain’s sympathy for relaxation of media ownership rules, which cuts 2 ways: While networks support relaxation of rules preventing broadcasters from owning newspapers in same market, stations are opposed to relaxing cap on network’s ownership of affiliates.

Veteran broadcast lobbyist sees little change as result of Republicans’ retaking Senate. “Our issues are not and never have been political [so] I don’t see it as a major sea- change difference,” he said. With McCain taking over Commerce Committee, it’s too early to predict what telecom and broadcast issues will rise to forefront, he told us: “We're waiting on him [McCain] for that.” As for Hatch’s resuming Judiciary Committee chair, lobbyist said “we've always had a very close relationship with him.”

Industry observers don’t expect Commerce Committee to rush into telecom issues. Several key FCC proceedings are open, including media ownership, broadband issues and unbundled network elements, and it’s unlikely there will be strong action from committee until FCC establishes its direction. However, Powell is likely to feel “emboldened” to pursue deregulatory agenda because McCain sponsored Powell’s appointment to FCC and has been vocal supporter of Commission chmn., staffer of Democratic member of Senate Commerce Committee told us. “The FCC will drive the agenda,” staffer said. “It depends on what they do.” Senate will begin its session focused on issues such as homeland security, which could distract debate in early going, sources said.

McCain may not be quite the maverick on telecom issues he was in mid-1990s, Thierer said. He isn’t likely to push for major changes in Telecom Act, he said, instead opting for “changes at the margins.” “He’s resigned to the fact that he lost the Telecom Act,” Thierer said. “He’s likely to be more pragmatic. I don’t think he sees anything to gain from carrying water for the Bells. He’s become more politically savvy since then.” And while some senators have expressed interest in spectrum reform, it’s unlikely there will be wholesale changes, Thierer said, because issue is complicated and “politicians love to micromanage the spectrum.”

Hollings held up Breaux-Nickles broadband bill in Senate, but observers don’t see McCain’s ascension to leadership as signal that broadband legislation will pass. Legislation probably won’t have as much momentum because FCC proceedings and gradual approval of Bells’ entry into long distance market reduce priority for bill, sources said. McCain didn’t co-sponsor Breaux-Nickles, instead introducing own bill (S-2863), which would deregulate competitive entry into residential market, but not business market, which has seen competition. Scott Cleland of Precursor Group said CLECs could lose most from McCain committee: “Those telecom competitors who want and need regulatory help could be the most unhappy with McCain.” But CompTel Pres. Russell Frisby said he was taking “wait-and-see” approach. Frisby said CompTel still had concerns about ability to attract customers and was following upcoming FCC decisions closely. “CompTel will not sit by while the Commission makes these decisions,” he said. “We'll continue to walk the halls of Congress to talk to members about the impact of these proceedings.”

House Commerce Committee spokesman Ken Johnson said Committee Chmn. Tauzin (R-La.) had “a great working relationship” with McCain and was “looking forward to getting things done that will benefit consumers as well as the telecom industry.” Johnson said committee priority would be to “jump-start the sagging high-tech sector of our economy.”

“I don’t anticipate any drastic changes” as result of election for satellite industry, Satellite Bcstg. & Communications Assn. Pres. Andrew Wright told us: “We have a compelling case to make no matter who is in the majority.” Wright said having. McCain as chmn. of Commerce Committee was positive development: “He has always been a supporter of satellite technology, but [overall] we didn’t lose any good friends.”

More Musical Chairs

Other likely leadership changes include: Sen. Hatch (R- Utah) would resume his chairmanship of Judiciary Committee, replacing Leahy (D-Vt.). Hatch, too, will be in final 2 years of his tenure atop that committee. Sen. Feinstein (D- Cal.) will hand Judiciary Technology Subcommittee gavel to Sen. Kyl (R-Ariz.), while Sen. Wyden (D-Ore.) will step aside from running Commerce Technology Subcommittee in favor of Sen. Allen (R-Va.). Despite shift in chairmanships, however, everyone we spoke with was in agreement floor action was likely to remain difficult, with Republicans well short of the 60 votes needed to end debates with cloture vote.

Rep. Morella (R-Md.), member of House Science Committee, was defeated Tues., along with Rep. Gekas (R-Pa.), longtime member of House Judiciary Committee and 3rd in GOP seniority there, narrowly lost. But Rep. Shimkus (R-Ill.), member of House Commerce Committee and Telecom Subcommittee, defeated Rep. Phelps (D-Ill.) in race forced by redistricting. In another pairing of incumbents, Rep. Pickering (R-Miss.), also member of House Commerce Committee and Telecom Subcommittee, defeated Rep. Shows (D-Miss.), by nearly 2-1 margin. Pickering was staffer for Lott before being elected to Congress and worked as staffer on drafting of Telecom Act. He also has been big recipient of funding from WorldCom, which has hq in his state.

Rep. Chambliss (R-Ga.) defeated Sen. Cleland (D-Ga.), member of Senate Commerce Committee. In 107th Congress, Chambliss was active on homeland security issues as member of House Select Intelligence Committee. One bill he authored, HR-4598, would provide for sharing of homeland security information by federal intelligence and law enforcement agencies with state and local entities. That bill passed House by 422-2 but never was taken up in Senate. Chambliss defeated Cleland in part by positioning himself as stronger on national security issues. Chambliss also voted in favor of Tauzin-Dingell bill (HR-1542).

Rep. Thune (R-S.D.) was trailing Sen. Johnson (D-S.D.) but was expected to see recount under state law because of narrow margin of race, just over 500 votes. We're told GOP attorneys were investigating possible voter irregularities there in echo of Fla. in 2000. Thune doesn’t have much of track record on telecom and Internet issues, but voted in favor of Tauzin-Dingell. Johnson was co-sponsor of 2 bills, S-88 by Sen. Rockefeller (D-W.Va.) and S-966 by Sen. Dorgan, both of which aimed to provide broadband to rural areas.

Sen. Landrieu (D-La.), meanwhile, found herself in runoff election Dec. 7 because she failed to win 50% of vote Tues. Landrieu is another co-sponsor of S-88, and also co- sponsored S-2430, by Sen. Breaux (D-La.) and Senate Minority Whip Nickles (R-Okla.) that would have mandated that FCC create regulatory parity for broadband providers, in essence deregulate Bells. Landrieu was primary sponsor of S-2922, which would have required FCC to assign licenses in 12.2-12.7 GHz range for fixed terrestrial communications with intent of providing ubiquitous wireless Emergency Alert System coverage. Landrieu also sponsored S-1388, to make Election Day national holiday. That bill went nowhere, and it was unclear whether, had it passed, that would have sufficiently increased voter turnout to allow her to avoid runoff.