Funds flow on telecom legislation:

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State’s star lobbyists and PR firms take sides on cable franchise bill

Sacramento Bee

Many of the Capitol’s most powerful political players are waging a multimillion-dollar war over legislation to let telephone companies provide cable television service.

Assemblyman Lloyd Levine and Assembly Speaker Fabian Nunez, who proposed
Assembly Bill 2987, can’t help but smell the greenbacks.

“Fabian and I were joking, saying, ‘Everybody’s getting rich on this but us,’ ” quipped Levine, D-Van Nuys. “We’re just trying to do the right thing.”

Lawmakers may not be getting personally wealthy, but both sides are showering them with campaign contributions, and Nunez himself has been promoted in huge Verizon newspaper ads thanking him for moving the bill.

A Capitol all-star team of lobbyists, consultants and public relations experts, meanwhile, is swarming nearly nonstop over AB 2987.

Hired guns include former Senate President Pro Tem John Burton and former Senate Appropriations Committee Chairwoman Deirdre Alpert on one side, for example, and former campaign chiefs to Gov. Arnold Schwarzenegger and ex-Gov. Gray Davis on the other.

“I think that everyone recognizes how much money is at stake,” said Assemblyman Joe Canciamilla, D-Pittsburg. “It’s a huge amount.”

AT&T and Verizon are pushing for the right to acquire statewide franchises that could bring them billions in future revenue.

Hammered by competition in the phone industry, AT&T and Verizon want to branch out into household entertainment, offering a “triple play” of cable TV, Internet and phone services to millions of Californians for one monthly fee.

AB 2987 would eliminate the need to negotiate separately with each city and county, allowing phone companies to acquire blanket rights to install broadband
throughout a state of 36 million people, tops in the nation.

Passed without a dissenting vote in the Assembly, the measure is pending in the Senate.

AT&T has barred no expense in hiring big names to press its case, including:

— Bob White, former chief of staff to ex-Gov. Pete Wilson and a leader in the campaign to elect Schwarzenegger and in shaping his administration.

— Steve Smith, director of Davis’ campaign to evade gubernatorial recall in 2003.

— Former Senate Republican leader Jim Brulte of Rancho Cucamonga.

— Former Senate Majority Leader Richard Polanco, D-Los Angeles.

— Darius Anderson, a lobbyist, fundraising expert and Davis’ former finance chairman during his 1998 and 2002 elections.

— Jason Kinney, former communications adviser to Davis and a political adviser to Senate President Pro Tem Don Perata, D-Oakland, whose chamber now controls the bill’s fate.

“I haven’t seen this level of lobbying in the Capitol since fallout from the electricity crisis,” said Jamie Court, president of the Foundation for Taxpayer and Consumer Rights, which opposes AB 2987.

AT&T and Verizon are not required by state law to disclose how much they’ve
spent pushing AB 2987 — and spokesmen declined to do so voluntarily.

Waging separate campaigns, AT&T and Verizon have a combined 10 powerhouse lobbying firms — including Platinum Advisors, Read & Associates, and Manatt, Phelps & Phillips — manning their front lines to push the measure, records show.

The two phone companies also have spent vast sums for public relations experts and advertising campaigns, with Verizon focusing largely on print ads, including in The Bee, and AT&T spending on TV airtime to promote the notion of cable choice and competition.

“It seems pretty vivid to us that they’re willing to spend whatever it takes,” said Anthony Thomas, a lobbyist for the League of California Cities.

Dennis Mangers, head of the California Cable and Telecommunications Association, which is leading the charge against AB 2987, said his media buyers have estimated the telecom advertising at more than $30 million as of April 30, including ads to publicize company mergers.

H. Gordon Diamond, an AT&T spokesman, characterized Mangers’ cost estimates as “grossly exaggerated.”

AB 2987 clearly is important to AT&T, but also to consumers, he said.

“We believe the video market should be open to competition, and we want to let Californians know that they’ve been spending up to a billion dollars too much every year on video service,” Diamond said.

All sides view broadband franchises as a potential gold mine, a lightning-quick data highway to link household devices in ways that could fundamentally change lifestyles.

Levine envisions a time when Californians can open their refrigerators, discover they’re out of milk, enter that information instantly into an electronic “shopping list,” and reorder simply by pushing a button to zip the information to a supermarket.

Soon, Californians will be able to order whatever TV show they want and watch it whenever they want, he predicts.

Levine talks of a future in which every room of the house is wired for high-speed Internet, so that someone baking a souffle can call up the recipe on a personal computer in the kitchen.

Cable experts say the market will dictate specifics, but it’s possible to offer a system that allows viewers to split TV screens to watch up to four shows at a time, or let viewers choose among various camera angles during a sports event, or broadcast a school play to parents at home.

“I think broadband infrastructure is as important as highways and airports and any other type of infrastructure the state needs, now and for the future,” said Timothy J. McCallion, Verizon regional president.

Experts say the changes are coming regardless of whether phone companies participate, but Levine argues that competition would hasten deployment.

Nunez and AT&T, long before AB 2987, have enjoyed a warm relationship. For many years, the telecom firm has sponsored the speaker’s Pebble Beach golf
tournament, last year contributing $100,000.

Mangers, a former assemblyman, concedes there is little chance of killing Nunez’s bill.

Mangers is focusing on amending the measure, pushing to ensure that phone companies do not receive favorable franchising terms or “cherry pick” a customer base by slighting low-income communities.

“We need to be careful that we get it right, and that no entity, irrespective of power or size or anything else, carries the day for reasons that are not related to good, sound policy,” he said.

Cable firms have a natural ally in the League of California Cities, which fears a potential loss of control or franchise fees from AB 2987.

For campaign strategy, Mangers has turned to Burton and Alpert, two Capitol heavyweights with close ties to lawmakers.

Burton downplays his role, saying he doesn’t plan to meet with senators and that any money he makes will go to his foundation for homeless children.

“I’m just giving them advice on what I think they should do,” said Burton, Senate leader from 1998 to 2004. “Whether they’ll listen or not, I don’t know.”

The cable association is spending less money than the telecoms, perhaps, but
waging a formidable campaign nonetheless.

Mangers estimates spending about $1.5 million on TV ads, about $100,000 for newspaper ads, and roughly $350,000 for public relations and political consulting to oppose AB 2987.

Mangers said his group benefits from the expertise of various lobbyists for cable TV companies — including Cliff Berg, Fred Taugher, and the firms of Norwood & Associates and Nielsen, Merksamer, Parrinello, Mueller & Naylor.

Both sides are major campaign contributors — AT&T or its political action committee have donated to 74 of 80 Assembly members during the past two years, for example, while the cable group’s saturation rate is even higher, 76 of 80.

Nunez — who before the vote on AB 2987 urged his caucus behind closed doors to support it — said its fate ultimately will be decided by public benefit, not private largesse.

“Consumers need a better product and more competition,” he said. “That’s what
drives the decision and that’s why people, I think, have been supportive.”

Consumer Watchdog
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