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ALEC, Tech and the Telecom Wars: Killing America's Telecom Utilities

Posted: 07/24/2012 1:49 pm

Written with David Rosen

All eyes are on Salt Lake City Utah this week (July 23 to 28, 2012) as a group called ALEC, the American Legislative Exchange Council is having its 39th annual meeting. This year ALEC will be greeted by other ALEC enthusiasts, such as the Alliance for a Better Utah. As they put it, ALEC's legislative proposals "...would tilt the tax code in favor of wealthy corporations, privatize Medicare and Social Security, lower wages, eliminate employee rights, ship American jobs overseas, and remove protections for American consumers."

TechAmerica is having its own event with ALEC to "celebrate southern hospitality, enjoy fine cuisine, and honor our legislators from around the country ... and will offer an opportunity to learn more about developing policy issues and to network with legislators from around the country in a social setting." Made up of the phone and cable companies, as well as many of leading tech firms, this meeting is to make sure that the large corporations get to wine and dine politicians, many of whom are also ALEC members and to make sure that they understand the value of campaign contributions and other financial perks.

One of most insidious, but least reported, campaigns that ALEC has undertaken is to further deregulate and privatize America's telecom system controlled by AT&T, Verizon and Centurylink. It has done this through a series of coordinated programs intended to end state regulatory oversight over the telecom industry, prohibit public broadband services and kill-off the telecom infrastructure, the Public Switched Telephone Network (PSTN).

Worse, as we will discuss in upcoming articles, the plan to close the PSTN is also being played out at on the national level, where the phone companies have convinced the FCC's Technical Advisory Council to 'sunset' the PSTN into oblivion.

ALEC, working closely with AT&T and Verizon, creates model telecom laws that various elected officials, "water carriers," aggressively promote in state legislatures across the country. To accomplish this it teams up with a host of non-profit influence peddlers such as TechAmerica, one of the leading high-tech lobbying groups, or the Von Coaltion.

These efforts, combined with the policies and programs promoted through the FCC, determine the nation's telecommunications system. No wonder why the U.S. ranks 17th in broadband. Short-term gains have long-term goals. Today, regulatory capture is business as usual.

* * *

ALEC was founded in 1973 and long remained a relatively invisible force influencing legislatures in Washington and state capitals throughout the country. With the Tea Party victories of 2010, it came out of the proverbial closet, gaining national prominence in drawn out battles in Wisconsin and Indiana over the union rights of state employees.

In the wake of the Sanford, Fla., killing of Treyvon Martin in February, ALEC's role (along with the National Rifle Association) in fashioning and promoting Florida's "Stand Your Ground" gun law became front-page news. As a consequence, a growing number of corporate underwriters have quit the group, including Coca-Cola, Pepsi Cola, Kraft, Mars, Procter & Gamble and Wal-Mart.

ALEC promotes itself as a "nonpartisan individual membership organization of state legislators that favors federalism and conservative public policy solutions." It claims to "advance the Jeffersonian principles of free markets, limited government, federalism, and individual liberty ...." Whether its claims are making Jefferson spin in his grave is an open question; nevertheless, ALEC's campaign is clear.

Fortune reported that during the 2009 legislative session, ALEC developed 826 state bills and 115 of them were made into law. According to Edwin Bender, executive director, National Institute on Money in State Politics, "Corporations can implement their agendas very effectively using ALEC."

ALEC'S telecom policy is managed through its Telecommunications & Information Technology Task Force. It has a long and special relationship with AT&T.

As of October 2010, this committee consisted of 172 members drawn from the following entitites:

  • Private sector -- including AOL, AT&T, Charter Communications, Comcast, DirecTV, Ebay, HP, Intuit, Qwest, Reed Elsevie, SAP, Sprint, Symantec, T-Mobile, Time Warner Cable and Verizon.
  • Nonprofit groups, "think tanks" and trade associations -- incluing Americans for Tax Reform Foundation, Association for Competitive Technology, Cato Institute, CTIA -- (the wireless association), Entertainment Software Association, Heartland Institute, Institute for Policy Innovation, NCTA (the cable association), Progress & Freedom Foundation, Reason Foundation, Satellite Broadcasting and Communications Association, State Policy Network and the Washington Policy Center.

Many of these groups are funded by AT&T, Verizon and/or the cable companies.

  • Legislators -- representing Arizonia, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Michigan, Montana, Missouri, Mississippi, Nebraska, New Hampshire, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virgina, Washington, Wisconsin and Wyoming.
Many of these legislators have major campaign contributions from Verizon or AT&T as well receive other perks, such as receiving foundation monies for projects in their districts.

ALEC has an annual budget of approximately $7 million. Its income is generated through membership fees contributed by such major telecom and tech companies as AT&T, Microsoft,Sprint and Verizon. They get what they pay for.

* * *

To appreciate ALEC's legislative effectiveness, a handful of recent initiatives reveal its game plan and why the nation's telecommunications system is in crisis.

  • In California, it is working closely with AT&T promoting S.B. 1611 intended to further deregulate the state's telecom industry. The bill's goal is to end state consumer protection laws and permit AT&T and other telecom providers to abandon unprofitable landlines. With the help of TechAmerica, Rep. Alex Padilla (D-20th Senate District) is promoting AT&T's interests are, by the way, is his largest campaign contributor in the 2006 and 2010 election cycles.
  • In Connecticut, ALEC is pushing B 447, a bill that would increase telecom company profits while eroding the quality of service for telephone "ratepayers." Backed by AT&T, the bill allows the telecom provider to literally cut a consumer's phone service with no more than a month's notice. In addition, it would further conceal the now almost-impossible-to-read phone bill, deregulate VoIP (i.e., Internet voice service), allow telecoms to place cell towers in public parks and watersheds without meeting environmental requirements, and end telecom company audits,
  • "Greenlight" is the name of a municipal high-speed broadband Internet service operating in the City of Wilson, NC. ALEC appears go have sought to kill. The proposed system envisioned offering speeds twice as fast and cheaper than local corporate services. North Carolina legislators, having received600,000 in contributions from the telecom industry in the previous election cycle, passed H. 129 that the made it illegal for cities to offer broadband services priced below that charged by private providers.
  • In Lafayette, LA, ALEC led a similar but unsuccessful campaign to kill municipal broadband.
  • Orangeburg County, SC, received, in 2009,18.65 million in stimulus money to build out a high-speed broadband Internet network. Fearing threatened, the major telecoms, AT&T, CenturyLink and Time Warner contributed about146,000 to state legislators to promote an ALEC-backed bill, H*3508, to restrict competition.
  • In New Jersey, an ALEC-backed bill, "Market Competition and Consumer Choice Act" (A3766), passed the state assembly. It would end the Board of Public Utilities oversight of land telephone lines and basic cable service; it would also end rules requiring cable companies to offer credits for service outages of more than four hours, fix billing errors and protect customers from the practice of "slamming," in which a customer's telephone company is switched without permission. Under enormous grassroots pressure from the Communications Workers of America and AARP, the bill was stalled.
  • In New York, ALEC lobbyists authored at least 39 bills during the 2012 state legislative session and claim a 20 percent success rate getting bills passed. It also sought to slip a line-item in the Governor Andrew Cuomo's budget that would have ended telecom regulation; under mounting pressure from the CWA and others, the line item was pulled. (In his run for governor, telecom companies ponied up250,516.)
  • And most recently, according to the National Consumer Law Center, in Massachusetts, the new proposed legislation, "MA H.4216 Would Strip Existing Consumer Protections from Telephone Landline Customers and Prohibit State from Implementing Future Protections for Wireless Consumers"


ALEC has got its fingers in many state legislative efforts to protect the interests of the telecom industry.

* * *

The cookie-cutter bills promoted by ALEC in California, New Jersey and other states are designed to close down the Public Switched Telephone Networks (PSTN), the underlying telecom infrastructure. The rationale for this effort is to replace traditional voice service with "VoIP" (voice over the Internet), thus shifting an analog "communications service" to a digital "information service." With this slight-of-hand, a once regulated utility becomes a deregulated private service -- even though it goes over the same wire that was original a phone line.

This legislation is also intended to end telecom's traditional "utility" requirements. In particular, it removes the requirement to be the "carrier of last resort," that it no longer has to provide phone service to those they deem "unprofitable," especially in rural areas.

Key to ALEC success in promoting its "model legislation" has been its active collaboration with a host of lobbying and advocacy groups. Two of these groups are illustrative.

TechAmerica represents some 1,200 firms in a host of market sectors, everything from aerospace to telecom. In California, for example, it implemented ALEC's model Senate Bill 1161 promoted by Sen. Padilla. Even more revealing, the TechAmerica's representative on ALEC's telecom task force, Bartlett Cleland, a registered lobbyist.

The VON Coalition often joins with TechAmerica to promote ALEC legislative initiatives. VON represents the interests of the VoIP (Voice over Internet Protocol) sector and is backed by AT&T, Google and Microsoft, among others. It has spearheaded efforts in California, Colorado, New Hampshire and Wyoming, among others, to end the PSTN and telecom deregulation and privatization. Its principal efforts have been to write letter of support to legislators, to testify at legislative hearings and meet with state (and FCC) officials.

While ALEC's policies regarding a host of polices have been exposed, it now time to reveal its role in restructuring the nation's telecom infrastructure. This may well turn out to be its gravest consequence.

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