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A Maverick Voice on Phone Rules

Times Staff Writer

Susan P. Kennedy seethes when people call her “anti-consumer.”

She is, after all, a Democrat, a former top aide to Sen. Dianne Feinstein and former Gov. Gray Davis, who put her on the California Public Utilities Commission in January 2003.

As the state’s highest-ranking openly gay public official, she embraces the party’s ideals of civil rights and individual freedoms. “I’m a Democrat to the core,” she said.

So why do Republicans love her so much, while many Democrats distrust her?

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On the commission, Kennedy is orchestrating -- at breakneck speed -- a wholesale revision of state regulation, mostly to the liking of giant regional phone companies SBC Communications Inc. and Verizon Communications Inc.

She would eliminate many economic regulations, including the state’s power to set wholesale and retail phone rates. In the process, she is dismantling actions she considers excessively pro-consumer, such as a telecom consumers “bill of rights” pushed by former Commissioners Loretta M. Lynch and Carl W. Wood.

“She’s the most Republican Democrat I’ve ever seen,” said Joe Gillan, an economist who has worked for AT&T; Corp. and other rivals of SBC and Verizon.

It all comes as the traditional telephone industry is consolidating, with SBC and Verizon gobbling up their two biggest long-distance rivals.

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Consumer advocates contend that now is not the time to set the phone carriers free from regulation. But Kennedy insists her agenda ultimately will help California residents and small-business owners.

“I’m pro-business and I’m pro-consumer, and I reject the notion that those are mutually exclusive,” Kennedy said. “I’m pro-growth. I’m pro-jobs. I don’t see how you can be pro-growth and pro-jobs and be considered anti-consumer.”

PUC matters aren’t usually viewed as partisan. However, she acknowledges that her telecom views aren’t typical for a California Democrat. “I can’t believe how conservative, even right-wing, I’ve become on these issues,” she said in an interview last fall.

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The daughter of an RCA Corp. employee and a church secretary, Kennedy grew up in the tough environs of Rumson, a New Jersey shore town. As a 12-year-old in 1972, she was inspired by actress Jane Fonda’s support of American Indian and free-speech causes and opposition to the Vietnam War.

Five years later, a partial meltdown of a nuclear power plant at Three Mile Island near her new home in Lancaster, Pa., raised her political hackles as the government tried to keep a lid on what happened.

Her then-private sexual orientation also shaped her views of equality and her political affinity for Democrats. “You can’t grow up gay in this country without experiencing some real pain,” she said. She always has viewed herself as a public official who happens to be gay, not as a gay public official. Her 1999 marriage to partner Vicki Marti drew top politicians to the ceremony in Hawaii.

After dropping out of Millersville State College in Pennsylvania because she was partying too much -- “My father made me pay him back” -- Kennedy headed to Los Angeles and, at nearly 20, joined the Campaign for Economic Democracy run by Fonda’s then-husband, Tom Hayden.

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It was a breeding ground for political training: campaigning, fundraising and field organizing. She quickly became a behind-the-scenes organizer and fundraiser taking on ever-increasing responsibilities in a series of jobs to become one of the state Democratic Party’s top field organizers.

In one of the biggest get-out-the-vote campaigns, which Kennedy helped lead, the state Democrats in 1992 put Feinstein in the Senate and helped put Bill Clinton in the presidency. Clinton’s “solution-oriented mind-set,” she said, is one she emulates and one that too many California Democrats don’t appreciate.

“We rightfully get tagged with the baggage that all we want to do is tax, spend, regulate,” said Kennedy, now 44. “We measure progress by how many regulations and dollars we throw at problems. I’m tired of having my party being labeled as anti-business.”

To her own dismay, Kennedy has spent 13 years studying part time to reach her senior year in college. She insists she will finish. She promised her father.

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Kennedy is pushing her telecom agenda with passion, quick wit, a sharp tongue and a short fuse.

She is impatient with bureaucratic and legal process, which, she acknowledges, may make her ill-suited for a seat on the commission, a full-time job that pays $114,191.

A sprite of a woman at 5 feet 2 with sky-blue eyes, Kennedy also can be confrontational. After agreeing in January to delay a vote she sought, she said in an e-mail she didn’t want to leave any impression “that I have no appetite for an ugly fight.”

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Kennedy typically is backed by PUC President Michael R. Peevey, also a Democrat, and is expected to get support from new appointee John Bohn, a Republican. Geoffrey F. Brown and Dian M. Greuneich, appointed in January, are moderate Democrats.

In the last four months -- with Republican Gov. Arnold Schwarzenegger’s blessing and aided by the departure of Commissioners Wood and Lynch -- Kennedy has spearheaded such major changes as:

* Shelving the nation’s first telecom consumers bill of rights eight months after it was passed and recently proposing a much less restrictive replacement.

* Dropping the commission’s court challenge to a Federal Communications Commission order that blocks states from regulating Internet telephony.

* Recommending that state lawmakers remove municipal barriers hindering telecoms from offering new high-speed and video services, leaving most broadband regulation to the FCC.

* Proposing a new way to regulate the industry, leaving it with little state oversight.

Like the big carriers, Kennedy wants to end economic regulation of the industry, said Cynthia Marshall, SBC’s senior vice president for regulatory affairs in California. “She has the big picture. She can construct a win for consumers, business and the state.”

Few question the need for regulatory reform, in part because the rapid change in technologies is creating new kinds of phone service not envisioned by Congress when it passed the Telecommunications Act of 1996 to break up the regional monopolies in land-line service.

The law also hasn’t worked out as planned, mainly because large carriers fought rules requiring them to lease their networks to rivals at cheap prices. Congress is looking at amending or rewriting it.

Meanwhile, cellphones and broadband telephony offered by cable firms and independent companies such as Vonage Holdings Corp. broke into the market unfettered by federal rules.

Arguments rage among regulators and lawmakers about how much competition there really is among different modes of communication and which rules on land-line companies should be tossed and which should remain.

Kennedy believes that intermodal competition is strong and that aggressive deregulation is needed, positions espoused by former FCC Chairman Michael K. Powell.

Executives at many smaller companies see less and less competition for phone service and for high-speed Internet access. “I still see a monopoly,” said John Sumpter, a vice president at Pac-West Telecomm Inc. in Stockton, a rival of SBC and Verizon.

Competition is key because the more there is, the less regulation is needed. SBC, Verizon and the nation’s other phone companies control 135 million access lines, and the three biggest serve a majority of the 182 million cellphone users.

Cable and Internet telephony firms, by contrast, serve several million customers and are expected to have as many as 5 million by the end of 2006, according to Forrester Research Inc. Phone companies say that, nevertheless, the competition that exists is putting pressure on them to hold down prices.

Kennedy insists that consumer groups and small companies are measuring competition incorrectly. Regulators, she said, should be looking at how consumers use the various technologies and how prices are affected by that use.

Many people have land lines, but may be using cellphones for most of their calling, she said. Minutes of use, the time spent on calls, have shifted dramatically to cellphones.

“You can’t measure competition by who controls what networks,” Kennedy said. “I have benefited from price competition from my Verizon Wireless cellphone because it has forced SBC to drop the price of my land-line service.”

Kennedy said her views, partly aimed at removing an anti-business stigma pinned on Democrats, had not changed since Davis appointed her. And they’re right in line with the thinking of California’s current governor.

Pat Clarey, Schwarzenegger’s chief of staff, said Kennedy had done “a fabulous job” and the governor was “absolutely content” with her on the commission. “She gets things done,” she said.

Some fellow Democrats support her. State Treasurer Phil Angelides, who hired Kennedy in 1992 to help resuscitate the state Democratic Party, called her “fearless and undaunted and disciplined” in the pursuit of her goals.

But others see a woman bent on doing the bidding of big corporations at the expense of California consumers, whom the PUC is supposed to protect from the power of monopoly utilities.

“She has made no attempt to disguise the fact that she comes in with a firm bias against regulation and a very pro-industry view of how things ought to operate,” said Bob Finkelstein, executive director of the Utility Reform Network, or TURN, a consumer advocacy group in San Francisco.

“The fact is, there is no local competition and limited long-distance competition,” said state Sen. Debra Bowen (D-Marina del Rey), who is critical of Kennedy’s stance.

Cable and Internet telephony require high-speed connections, she said, and typically consumers in metropolitan areas have only two choices at most for such broadband service: telephone or cable lines.

And if other modes of competition don’t materialize soon, said TURN analyst Regina Costa, a deregulated California would not be in a position “to clean up the mess.” That kind of deregulation, she said, “is irresponsible.”

Kennedy’s rush to overhaul the rules is intended to play into the hands of SBC and Verizon, said former Commissioner Wood.

“You could be sure that if big business wanted to slow down, it would happen,” he said. “What is really lacking in Kennedy’s approach is respect for involvement by ordinary people.”

Wood contends that Kennedy has long promoted corporate interests. “She very well may believe in her positions, but that doesn’t make them any less extreme.”

Kennedy’s blood boils at such charges.

“No one I know, not Michael Powell, not me, not anybody, has said, ‘Don’t regulate utilities at all.’ ... But you can’t even have a conversation about getting rid of some of these old rules that actually hurt consumers today without being called a radical deregulatory icon and anti-consumer,” she said.

Kennedy wants to streamline the regulatory process, shifting much of the responsibility for making rules to the federal government and letting states enforce those rules.

What some would call sweeping deregulation, she said, is simply “getting rid of some of the most idiotic, damaging regulations that serve no purpose at all, that are 10 and 15 years old,” she said.

Kennedy argues, for example, that it makes no sense to require SBC and Verizon to file mounds of paperwork before offering a new calling feature that Internet competitors can introduce immediately.

She would still regulate social welfare, safety and industry matters, such as emergency 911 calling, funding for service to the poor and to high-cost rural areas and the way carriers connect to one another’s networks.

Her efforts are by no means radical, she said.

Regulators and legislators in 17 other states already are working on measures that would remove rate regulations and restrictions on bundling services, such as video and broadband. A bill in South Carolina would end state regulation of many other aspects of telecom service.

“This is the year for telecom reform, and California should be a leader,” Kennedy said.


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