Put The Blame On Peggy, Boys

Byline: ALICIA MUNDY

Susan Eid was fed up. The legal adviser to the chairman of the Federal Communications Commission had blown yet another weekend in May wrestling with the proposed media ownership changes, mandated by the infamous biennial review provision in the 1996 Telecom Act. She called her good friend Peggy Binzel, and left a message. "Okay, missy: I'm up to my ears, thanks to 202h, and I'm thinking of you. Not fondly."

In Atlanta, Binzel smiled and returned the call: "I'm really sorry about that." Binzel, a former Congressional lobbyist for News Corp., and her boss at the time, Preston Padden, were the masterminds of the now-infamous Section 202h, the bane of the FCC's existence and the reason all of Congress and the media are lathered up about the new FCC deregulation rules. On June 26, Sen. John McCain (R-Ariz.), chairman of the Commerce Committee, introduced a new FCC reauthorization act. One provision that he and all five commissioners agreed on was that the mandatory biennial review of every ownership rule had to be destroyed; it's been pushed back to once every four years.

There's a great story behind the way that biennial provision slipped ever so gently into the Telecom Act, a veritable road map to legislation.

However, it's not just a story about smart strategic thinking by corporate lobbyists. It's also about Congressional hypocrisy and the apotheosis of politicking. Several veteran Republicans and Democrats who signed on to that original bill are now busy denouncing its consequences, acting as though provision 202h had been dropped on their doorstep by some wayward stork.

Although these senators would like to distance themselves from 202h, it is actually their very own love child. Perhaps it's time someone called for DNA tests.

It was late spring 1995 when then-Sen. Bob Dole (R-Kan.) called for the Commerce Committee to move the nascent Telecom Act forward. The chairman at that time was Larry Pressler (R-S.D.), not the brightest bulb in the Senate, but a staunch deregulator. The battles over media ownership were only part of the mix - telephone and cable companies wanted their piece of the pie, too. The GOP wanted deregulation of ownership, as did the NAB and the major networks.

But there was little compromise. The network cap at the time was at 25%; the House wanted it to go to 50%, GOP senators wanted it eliminated. Most Dems wanted stasis.

That's when Binzel and Padden and others devised a plan to keep the cap issue in play after the bill, in whatever form, passed. "You have to think long term," Binzel says. "You have to convince a corporation that, when dealing with Congress, the front door may be locked, but there's always a window open somewhere."

The cap was raised after much finagling to 35%, but it wasn't codified. That's where the biennial review framework came in, Binzel explains. If the networks and deregulators in the Senate, such as McCain, couldn't get legislation to remove the cap, they could punt it to the FCC. It meant that the FCC would have to eliminate or justify the cap, and this presented companies an opportunity to use the FCC's innate lethargy - enhanced under a Democratic president - against itself.

"Peggy really ran the show," says Padden. "She had a terrific plan." His role, he says, largely involved keeping News Corp. executives from pressuring for a resolution they could not achieve, and keeping everyone else, including other networks, out of her way. "We had to think long term on this," he adds.

Carefully crafted language in the bill mandated that the FCC "shall repeal or modify any regulation it determines to be no longer in the public interest" every two years. Padden, Binzel and numerous GOP senators, some now sitting on the Commerce Committee, guessed that the FCC wouldn't do the full justification exercise. And that would be the launching pad for a court challenge. The little time bomb became part of the total package and quietly began ticking.

The provision was approved after numerous conferences as a compromise between conservative and liberal pols. McCain didn't like it, says one person involved, because 202h was a "wussy" compromise, and he wanted total deregulation. On Christmas Eve 1995, at a meeting in Trent Lott's office, Pressler, Sen. Fritz Hollings (D-S.C.) and John Dingell (D-Mich.) all signed off on the language including 202h. As they were going back to their offices, the GOP leaders were furious to learn that Vice President Al Gore was on CBS excitedly telling Dan Rather that Bill Clinton would soon sign the most comprehensive deregulation of the telecom industry, almost giving the Democrats credit for it.

Incoming FCC Chairman Bill Kennard argued that 202h mandated only a review of any rules which his agency thought needed change. It took him two years to complete the first biennial review, which was due in 1998. It was released on June 20, 2000, without changes in the cap or cross-ownership. By this time, Binzel had taken a post at the National Cable & Telecommunications Association. But a current News Corp. lobbyist notes that before she left Rupert Murdoch's company, Binzel had already lined up an appellate lawyer for the inevitable day of reckoning - Ed Warren of Kirkland and Ellis.

As the FCC was releasing the report touting the results of its limited biennial review on June 20, 2000, News Corp. reps were already at the D.C. Court of Appeals filing their challenge on the cap. Commissioner Michael Powell made the biennial review his first major dissent at the agency, and in a lengthy statement he predicted the court would trounce the FCC and open the dereg floodgates. He was right. Though Binzel is now head of Corenet Global in Atlanta, and Padden's moved on to Disney, they are probably owed a belated bonus from Murdoch.

So the big question is: Are the Republicans on Commerce who are now pushing to undo the FCC's recent rulings rewriting history? (It should be noted that McCain introduced a bill himself in 1999 to raise the cap to 50%.) Or, are they brilliantly maneuvering to punt again, this time to the House and Billy Tauzin?

Hit hard in the press by everyone from the National Rifle Association to leftist liberals, and savaged by William Safire, GOP senators seem to be retreating rapidly. So much so that some telecom insiders wonder why the Senate Commerce Committee didn't simply step in last year and undo the biennial review provision, thereby saving Powell, the FCC and others millions in time and money refighting these rules.

However, the new "kitchen sink" bill rolling back the FCC rules that McCain helped push through the Commerce Committee recently may just be a political tactic. Several current staffers think the GOP is shipping it to Tauzin (R-La.), certain that he will kill it without a second thought. Tauzin can take the hit. He's a party-changer, owes no one and has a safe seat. Safire's howitzer won't make a dent in the Billy-mobile.

However, Tauzin's thinking of moving on himself, which could open up passage for McCain's Bill 1046.

If the bill dies, the Senate Commerce folks will pat themselves on the back publicly for trying to control media consolidation, and cluck sadly about those runaway deregulators in the House. After all, some of their own staff have said they think this bill was cleverly designed to fail. But if it lives, will these senators wonder if they were too clever by half?

THE NEXT QUESTION:

* Will the White House signal its views on McCain's bill? Will Ed Markey (D-Mass.) convert Tauzin to his church of regulation religion?

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