FCC action on AT&T; deal hits roadblock

Times Staff Writer

Robert McDowell’s confirmation in May as the fifth member of the Federal Communications Commission was supposed to end a 2-2 partisan deadlock that had stymied the agency on several issues for more than a year.

But with commission approval all that’s standing in the way of AT&T; Inc.'s purchase of BellSouth Corp., it’s back to stalemate again at the FCC because of the occasional bane of regulatory agencies -- a recusal.

McDowell, a Republican who holds the tiebreaking vote, has removed himself from voting on the $83-billion purchase because he used to lobby for an association of smaller phone companies that opposes the deal.

His decision has given the commission’s two Democrats leverage to hold up approval unless some of their conditions are met, such as preventing the companies from charging for priority delivery of services over their Internet lines -- a controversial issue known as network neutrality.


McDowell’s recusal was expected. During his confirmation hearing in March he agreed to “make sure that there’s not even the appearance of a conflict of interest” after being pressed on the point by two senators.

But it still has roiled a process that AT&T; and BellSouth had hoped would be wrapped up by now after the Justice Department gave the deal its blessing Oct. 11.

AT&T; has proposed some concessions to gain the support of Democratic commissioners Michael J. Copps and Jonathan S. Adelstein, but it opposes stronger conditions such as network neutrality. An AT&T; executive suggested Friday that the company might push for McDowell to be forced to participate -- a procedure allowed under federal law -- if the deadlock lasted more than a few weeks.

“It would not be right for this to drag out for the next two months,” said Robert Quinn, AT&T;'s senior vice president for federal regulatory affairs. “If reasonable people can’t agree, then that’s when I think people are going to start examining other options.”


It all raises the question of whether commissioners should be chosen from the ranks of industries they would regulate. In addition to phone companies, the FCC regulates television and radio stations as well as cable and satellite providers.

“It’s been a tension forever ... you want people with expertise, but where do you get expertise? Often in the industry that’s being regulated,” said G. Calvin MacKenzie, a government professor at Colby College in Waterville, Maine, and author of the 2002 book “Scandal Proof: Do Ethics Laws Make Government Ethical?”

He and other experts said it would be a loss if industry executives were not allowed on regulatory commissions, given their deep knowledge and experience.

“If you say we would never hire anybody who has a recusal problem, you would find yourself disqualifying many, many qualified people,” said Blair Levin, an analyst at brokerage Stifel, Nicolaus & Co. who is a former FCC chief of staff. “The people who’ve represented these companies often have a much deeper understanding of the economics of these companies.”


But it’s an ethical juggling act that can cause problems.

Federal law calls for recusal whenever “a reasonable person” might question impartiality. The law applies to all federal employees.

Among the relationships covered by the law are companies for which a federal employee has worked within the last year. For example, Harvey L. Pitt, a securities lawyer, sat out 34 votes during his first year as chairman of the Securities and Exchange Commission from 2001 to 2002 because the cases involved former clients.

Recusal initially is left up to the individual, who decides whether there would be an appearance of conflict of interest. Those appearances can persist even after the one-year period.


Former FCC Chairman William E. Kennard recused himself for more than two years from a late-1990s case involving a requirement for free airtime to rebut broadcasters’ political editorials. Kennard had worked on the issue in the early 1980s while at the National Assn. of Broadcasters.

His recusal left the issue deadlocked. With federal judges threatening to step in to resolve the stalemate, Kennard decided to participate.

He also could have been forced to participate by the FCC’s general counsel. Federal law gives that power to an agency if officials decide that settling the deadlocked issue outweighs the concerns about a perceived conflict of interest.

Kennard said it would be difficult to force such a decision on a commissioner.


“A recusal is a personal decision. It’s an ethical decision that someone has to make,” he said. “Once you’ve said you’re not comfortable voting on a particular issue, it’s very hard later to reverse yourself.”

McDowell served as senior vice president and assistant general counsel for Comptel, a Washington-based association of small phone companies and suppliers. He was nominated for the FCC seat by President Bush in February after one of the leading candidates, Christine Kurth, deputy staff director for the Senate Commerce Committee, withdrew from consideration because her husband was a telecom consultant. His continued activity would have raised even more conflict-of-interest concerns.

McDowell is the only current commissioner to come directly from the telecom industry. Others came from congressional policy jobs, administration positions or state government commissions -- all of which produce fewer recusal issues.

McDowell said his work with Comptel required him to sit out the AT&T;/BellSouth vote. That has left FCC Chairman Kevin J. Martin in a bind. He is pushing to approve the deal without conditions and is expected to be joined by fellow Republican Deborah Taylor Tate.


With Copps and Adelstein holding out for strong conditions, the commission is deadlocked on the acquisition issue as negotiations continue.

Martin has declined to comment about whether he would press for McDowell’s recusal to be lifted if the stalemate continued.

“This is proving to be rather political. You’ve got two Democrats against it, two Republicans for it,” said James H. Quello, a former FCC chairman who is a government affairs consultant for Washington law firm Wiley Rein & Fielding.

Quello joined the commission in 1974 from a Detroit radio station and said he didn’t recuse himself from decisions affecting the broadcast industry. He said he believed that he could act impartially, and thought McDowell and others from industry could do the same.


“Look at all the facts in the case and make an independent judgment,” he said. “Regardless of what ... you were before, you are now an independent commissioner.”