AT&T Merger: FCC Comm. Won’t Vote

In a short but impassioned public statement this afternoon, the likes of which has rarely been seen in Washington for decades, FCC Commissioner Robert M. McDowell boldly reiterated his refusal to vote in the current debate over the AT&T/BellSouth merger, citing his former involvement with a legal advocacy group opposed to the merger, and at times quoting the pillars of American ethical jurisprudence.

“While I expected the legal equivalent of body armor,” McDowell pronounced emphatically, referring to a memorandum from the Federal Communications Commission’s general counsel, Sam Feder, authorizing him to vote despite possible conflict of interest, “I was handed Swiss cheese.”

The entire speech was that riveting. As McDowell explained in detail, he had been nominated by President Bush last February to fill a vacancy on the FCC, left when Kevin Martin ascended to the chairman’s position following Michael Powell’s departure. Prior to that time, McDowell served as general counsel to the CompTel trade organization, which not only represents smaller telecom companies, but which has been solidly opposed to AT&T/BellSouth. That merger had already been announced at the time of McDowell’s nomination, so the subject of his stance on the merger became a prime topic during his confirmation hearings before the Senate.

Having consulted with the FCC’s Office of General Counsel at the time, he was advised in writing that he should immediately resign his position with CompTel, and for a period of one year disqualify himself from all proceedings in which CompTel, or anyone represented by CompTel, was a party.

“In effect, from the beginning, I have had a ‘red light’ prohibiting me from participating in particular matters involving specific parties – in this case, a merger proceeding involving two parties, AT&T and BellSouth – where CompTel is a party,” stated McDowell. “In light of this bar, I therefore have not participated in its substantive consideration.”

“Against this backdrop, on December 1, 2006,” he continued, “citing my four colleagues’ ‘inability to reach consensus on this matter,’ Chairman Martin announced his decision to exercise his prerogative to direct the FCC’s General Counsel to ‘consider whether the Government’s interest would be served by’ permitting me to participate.”

Last December 8, Feder produced his memorandum, which cited US Code in stating that an FCC employee may be directed to participate, despite the appearance of conflict of interest, “the interest of the Government in the employee’s participation outweighs the concern that a reasonable person may question the integrity of the agency’s programs and operations.”

But Feder’s language in commenting on that portion of US Code showed a certain reticence.

“Balancing these competing concerns here was difficult,” Feder wrote, “and reasonable people looking at these facts could disagree about the appropriate result. However, on balance…I find that you should not be barred from participating in this proceeding if you choose to do so.”

The “if’s” in Feder’s language left considerable holes in the legal argument, which McDowell – an accomplished attorney, obviously -drove a truck straight through.

“In all candor…I had expected a memorandum making a strong and clear case for my participation,” he enunciated. “Instead, the Authorization Memo is hesitant, does not acknowledge crucial facts and analyses, and concludes by framing this matter as an ethical coin-toss frozen in mid-air. The document does not provide me with confidence or comfort. Nor does the December 11, 2006, letter responding to the questions posed by Representatives Dingell and Markey [of the House Energy and Commerce Committee].”

Feder’s memo, McDowell pointed out, didn’t even raise the issue of his earlier commitment to disqualify himself from certain proceedings for one year – a commitment which, he made clear, became a promise to the US Senate in exchange for its blessing upon his nomination.

“Senators relied on these representations when they confirmed me unanimously on May 26,” he said. “Yet, the Authorization Memo offers no discussion of, let alone justification for, why or how the Ethics Agreement may be breached.”

Late last week and over the weekend, McDowell sought legal advice from a number of reputable sources, including the Virginia State Bar. None could sway his decision, nor his stance – in fact, they probably reinforced it.

In a statement that sounded ominously like it could have been a resignation, McDowell went on: “Throughout my brief tenure here at the FCC, I have tried to be as thoughtful, transparent and direct as possible in my decision making. With each decision I make, I endeavor to keep in mind why the FCC exists and what the mission of each commissioner should be; and that, of course, is to promote and protect the public interest. We must never lose sight of the fact that the ultimate shareholders in every endeavor we embark upon are the American people. In this vein, it is incumbent upon every public servant to do all that he or she can to earn the public’s trust in the integrity and impartiality of their government.”

“In light of these factors,” he continued, “I find that I have no choice but to abide by the terms of my Ethics Agreement, heed the independent advice of OGE and my personal ethics counsel, and, ultimately to follow my own personal sense of ethics. Accordingly, I disqualify myself from this matter.”

Tossing the ball into the court of the four remaining FCC commissioners – if not kicking it there as though it were the fourth quarter with two seconds left from the 50-yard line, and with a two-point deficit – McDowell slowly and distinctly urged them to come to a reasonable compromise.

“Because I am an incurable optimist,” he pronounced, citing the spirit of the holiday season, “I am confident that this merger can be resolved with the same speed and unanimity as the SBC/AT&T and Verizon/MCI mergers of last year.

“Now, my four colleagues have exclusive and unambiguous ownership of this important merger. Having only four Commissioners participate really should not be an impediment to progress. There have been many stretches of time in recent history when only four Commissioners sat on the FCC. In fact, since 1990, the Commission has had fewer than five Commissioners for a combined period of over five years. During these periods, contentious and difficult mergers were successfully considered. And, the two Bell mergers reviewed just last year were approved unanimously by a four-member Commission. This transaction should be no different. I urge all of them to resolve their differences as soon as possible.”

At a period of time when Democrats in Washington are stealing the spotlight, one Republican today may have caught the attention of John McCain and Rudy Guiliani.

Immediately afterward, McDowell’s former employer, CompTel CEO Earl Comstock, issued a statement: “Now that this matter has been resolved, COMPTEL hopes that AT&T will finally engage in forthright negotiations on conditions to address the serious competitive harms raised by this merger,” Comstock wrote. “It is time to make a decision on this transaction. Whether it is approved or is denied is now largely a function of AT&T’s willingness to address the legitimate public interest concerns raised by the largest telecom merger in history. We should know soon whether AT&T is serious about this merger or not.”

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