2009-10-22

Facing a major regulatory issue that could be worth a fortune in future business, AT&T has unleashed the kind of lobbying blitz that makes it one of the grand corporate players of the great Washington game.

And yet, for all the money AT&T and other old-line telecom and cable companies have spent pushing their cause, they are poised to lose a key vote to a bunch of younger technology companies that never had anything to do with Washington until recently.

If the Federal Communications Commission votes Thursday in favor of crafting rules to let the government oversee access to the Internet, it could be a sign of a fundamental shift of power under the Obama administration that may make K Street rethink its ways.

"This is totally new in Washington, that opposed to only the old Goliaths like AT&T, or traditional public utilities commissions or large insurance companies at the table, they are now joined by others like tech growth companies," said Mark Heesen, president of the National Venture Capital Association, a trade group that represents the investors of Web giants such as Google, Facebook and Amazon.

The vote is on a proposal that would begin a months-long process to formulate rules on how Internet service providers manage traffic on their networks while not blocking or unfairly slowing some content. The proposal, favored by Chairman Julius Genachowski, is expected to pass with three votes out of five.

AT&T and other wireless and cable providers say the proposal amounts to giving the government control over the Internet, and that companies will lose the ability to reduce congestion on their networks. Web service providers such as Google and Skype counter that they need unfettered access to all Internet users because the carriers could decide to block services that compete with their own.

A flood of calls, e-mails

In recent weeks, large telecommunications and cable firms have been flooding the offices of Congress, blasting e-mails and calling aides to try to get them to sign onto letters sent to Genachowski in protest of his push for new "net neutrality" rules.

Staffers on Capitol Hill and at the FCC say the most active lobbyists have been from AT&T -- a company that is historically the largest donor to the political campaigns of members of Congress It has spent more than $8 million in lobbying this year on a wide range of issues, including net neutrality, according to the Center for Responsive Politics.

Last week, 72 Democratic members of Congress wrote the FCC in opposition to the net-neutrality proposals. Many of them, staffers said, had been encouraged to write by AT&T. And 52 of them received a total of $180,000 in campaign contributions from AT&T this year, according to the Center.

Over the weekend, AT&T's chief lobbyist, Jim Cicconi, reached inside the company for lobbying support, asking its 300,000 employees to write the FCC that net neutrality would severely hurt their business.

AT&T spokeswoman Claudia Jones declined to comment on the company's lobbying on the issue, saying, "Honestly, if you look at letters against net neutrality, they were sent because [lawmakers] had conviction and felt very strongly about it."

Google, by contrast, hired its first Washington staffer in 2005 and opened its first permanent office here last year, with a staff of 20. It has spent $1.8 million in lobbying this year, compared with $6.8 million by Verizon and $6 million by Comcast. Dozens of venture capitalists and high-tech giants, including Amazon, eBay and Facebook, jumped into the debate this week, throwing their support behind Genachowski's proposal, which would benefit their firms.

Burning bridges?

Not all broadband network operators agree with AT&T's approach, saying such an aggressive approach on the first major item introduced by Genachowski may hurt the company down the road.

"Why burn every bridge before this comes out?" said one industry source who spoke on the condition of anonymity because the proposal hasn't been made public.

Marvin Ammori, general counsel at public interest group Free Press, said that if the FCC compromises on its proposal, that would be an indication that AT&T's tactics are effective. "This would send a clear signal that if you run as hard as you can and pay a bunch of lobbyists and sow confusion in the press, Julius Genachowski will buckle," Ammori said.

Genachowski, a former FCC counsel, has roots in the Internet start-up world. He was an executive at IAC/Interactive, which owns a variety of Internet companies, such as Evite and Urbanspoon.

Some staffers at the FCC and on the Hill say the voice of AT&T and other telecom companies is diminishing, and that Thursday's vote is likely to be a sign to those companies that the rules are changing. "They are playing the same game but they may not get the same outcomes that they are used to," said a staffer on the House Energy and Commerce Committee, which oversees telecommunications policy, who spoke on the condition of anonymity because the person was not authorized to speak publicly. "The issues and people have changed, from the Obama administration to new members down to new staff, who see things differently."

Rep. Edward J. Markey (D-Mass.), a key member of the Energy Committee, said AT&T "wants to frame it as big companies against each other, but in fact millions of people online see net neutrality as the ability for great ideas by the next Steve Jobs, Bill Gates or Sergey Brin to get out without having to ask permission from companies like AT&T."

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