New FCC chairman had big telephone player as a major client

Introduction

As the new chairman of the Federal Communications Commission, Michael K. Powell can draw on his experience as an FCC commissioner in trying to navigate the arcane world of telecommunications policy and the closely knit group of high-powered, multibillion dollar companies that dominate the industry.

Powell has had the opportunity to witness and regulate some of the biggest mergers in the history of American industry, as well as to develop regulatory guidelines for cutting-edge technologies, such as broadband Internet access and a new high-speed wireless Internet bandwidth.

But Powell has another experience from which to draw: On-the-job training with one of the biggest players in the game.

According to Powell’s personal financial disclosure reports and a company spokesman, one of Powell’s major clients at his old law firm of O’Melveny & Myers was GTE Corp., an “incumbent local exchange carrier” that held a monopoly on local phone service in various communities across the country. GTE merged with Bell Atlantic to form Verizon Communications, now the nation’s largest local phone company. FCC spokesman David Fiske told The Public i that, as an FCC commissioner, Powell never recused himself from matters relating to GTE or Verizon, including the merger that was completed in 2000.

The Code of Federal Regulations requires executive branch employees to consider whether their impartiality would be compromised through past affiliation and employment, and mandates such consideration in situations where the employee has contact with any person “for whom the employee has, within the last year, served as officer, director, trustee, general partner, agent, attorney, consultant, contractor, or employee.” Powell became FCC commissioner 11 months after having worked as an attorney for GTE, according to information provided by Verizon spokesman Bob Bishop.

Under circumstances requiring an examination of the potential for a conflict of interest, federal regulations require the employee to seek guidance from an agency ethics officer. FCC spokesman Fiske said Powell did not seek an ethics advisory or waiver, explaining that there was no matter that came before Powell relating to GTE during the one-year “cooling off” period after his work for GTE.

Before becoming an FCC commissioner in November 1997, Powell was chief of staff at the Department of Justice’s Antitrust Division, headed at the time by Joel Klein. Powell submitted a personal financial disclosure form to the U.S. Office of Government Ethics in August 1997 in preparation for his move to the FCC. In that disclosure, Powell indicated that he had received more than $5,000 in income from a number of corporate clients at the law firm, including GTE. On the disclosure form, Powell describes his work for GTE as “Legal Services in connection with telephone service.”

Verizon spokesman Bishop told The Public i that Powell’s work for GTE consisted of his participation on a team from O’Melveny & Myers that worked on arbitration relating to “interconnection issues” faced by GTE. Bishop said that according to company officials familiar with Powell’s work for GTE, Powell was on the O’Melveny team from August 1996 until the end of that year, when he left to join the Justice Department.

In the wake of the Telecommunications Act of 1996, local phone companies were forced to open their local networks to competing local exchange carriers (i.e., to allow “interconnection”) in exchange for the opportunity to offer their local customers long-distance service. Prior to the 1996 act, the local and long-distance phone markets had been kept separate by the FCC and existing federal statute. The 1996 act required incumbent local exchange carriers to pass a 14-point with test from the FCC that ensured that their networks were open to competitors before being able to enter the long-distance market.

Such interconnection requirements continue to be a major irritant to local carriers as well as the FCC. Only two local carriers have passed the test for entry into the long-distance market: Verizon in New York and SBC Communications in Texas, Kansas and Oklahoma.

Like all major telecommunication companies, Verizon has myriad regulatory issues before the FCC, ranging from broadband Internet access (such as DSL) to standards regulating wireless phone service. As an FCC commissioner, Powell has been an outspoken critic of what he viewed as the overly burdensome interconnection and market-opening requirements forced on local carriers such as GTE. He opposed the market-opening conditions imposed on the GTE-Verizon merger as well as the open-access Internet conditions applied to the recently approved America Online –Time Warner merger.

O’Melveny & Myers declined to comment on Powell’s work at the firm.