An interesting ethical dilemma confronts FCC Commissioner Robert M. McDowell, who could decide the fate of the AT&T/BellSouth merger.
It may not entirely be McDowell’s fault that the merger is languishing at the FCC despite the fact the Antitrust Division of the Department of Justice has already concluded it poses no significant threat to competition. After all, as McDowell pointed out in a recent statement, his four colleagues managed to approve the recent SBC/AT&T merger without him. But the analogy isn’t useful. Back then, many in Washington thought telecommunications legislation appeared to be moving through Congress and all sides had high hopes for their agendas. Everyone realizes the legislation is now dead, and this merger is the only opportunity on the horizon to enact a net neutrality nondiscrimination principle and prop up the unsustainable CLEC business model. Indications are McDowell doesn’t want to participate; the question is, should he anway?
During McDowell’s confirmation hearing, McDowell promised to rely on the FCC’s office of general counsel if confronted with potential conflict of interest scenarios.
STEVENS: You’ve had a substantial relationship with some of the communications interests and I note in your statement that you indicate that you do intend to very jealously apply the conflict of interest concepts and will disqualify yourself in any matter that you’ve had connection with before or any entity you’ve had before.
Can you elaborate on that a little bit?
MCDOWELL: Well, I will certainly rely on the opinion of the Office of the General Counsel of the FCC and they do have a system in place and rules in place.
Well, the FCC’s general counsel, Sam Feder, has concluded that it’s in the government’s (and, by extension, the public’s) interest that McDowell should participate in this proceeding:
… the Government’s interest in your participation here is at least as strong as, if not stronger than, the Government’s interest in Chairman Kennard’s participation in the proceeding on the repeal of the personal attack and political editorial rules …. there is currently no way to move forward here absent your participation because a three-member majority is necessary for the Commission to take any action whatsoever on the merger.
The problem for McDowell is if he participates he will be under pressure to support his chairman, Kevin Martin, at least to some extent. If he doesn’t participate, the entire merger could fail unless AT&T and BellSouth give the FCC’s two Democratic commissioners everything they want. Under this scenario, McDowell gets to appear completely innocent while his former associates get everything they want. Thus, McDowell can inflict the maximum damage on the rivals of his former associates, with the least collateral damage, by adopting the role of spectator. This may or may not be what he desires or intends, but it’s clearly how the whole thing might look in retrospect.
The word on the street is that McDowell has told at least one member of Congress he won’t agree to vote on the merger until June. Sources report McDowell has reached out to several members of Congress in the last few days and that he is seeking “cover.”
Bruce Fein, a former FCC general counsel, writes that, “FCC precedents speak volumes in favor of McDowell’s participation.”
Earlier in 2006, a forbearance petition was filed by a CompTel member with the agency. McDowell initially recused himself. It was reported that the FCC deadlocked 2-2 and that the FCC’s general counsel then determined that McDowell’s participation was in the public interest (the petition was withdrawn before a vote). McDowell also participated and voted in a universal services proceeding in which CompTel participated. Neither CompTel nor any other party raised any objection to his participation in that proceeding.
In 2000, the FCC had continually deadlocked over the FCC’s Personal Attack and Political Editorial Rule Proceeding because Chairman Willian Kennard had recused himself. His non-participation stemmed from prior employment with the National Association of Broadcasters (a party to the rulemaking). After the prolonged stalemate on an issue of public importance, the FCC’s general counsel advised the Chairman that “the difficulty of reassigning the matter is now of controlling importance.” Chairman Kennard thus reversed course and participated.
Of course, one of the key factors Kennard cited in support of his decision to participate was the fact that the parties opposing his former associates, who would be the parties most likely to question his impartiality, made it clear they believed he should participate. The same “plus factor” is present here. AT&T and BellSouth, the parties whom the conflict of interest guidelines are intended to protect in this instance, are asking McDowell to participate.
Former Chairman Reed E. Hundt also faced an argument from Commercial Realty St. Pete that he should have recused himself from a proceeding that included a rival spectrum bidder whom Hundt represented in private practice. The FCC explained that the “speculative allegations do not rise to the level of specific statements ‘clearly showing prejudgment’ required by the applicable law of recusal.”
Fein points to what could happen if commissioners don’t follow the conflict of interest guidlines, including the provision authorizing participation in spite of a potential appearance of conflict:
Agencies like the F.C.C. are entrusted with authority over industries that are keys to the nation’s economic development and competitiveness. It would be extremely damaging to the public interest if these agencies were repeatedly deadlocked–like the FEC–in executing their public interest responsibilities. Governing ethics rules are designed to avoid that harm by giving proper weight to both the need to decide and the need to avoid direct financial conflicts of interest. They recognize that recruitment from regulated industries will be frequent, but that fact, in isolation, should not lead to recurring recusals and agency immobility.
Or, as a federal judge once noted in Center for Auto Safety v. FTC, “it might be difficult for the government to employ policymakers who had the requisite knowledge of the particular subject matter.”
Fein is of the opinion that, once authorized, McDowell is obligated to participate since he cannot delegate his vote on the merger to another. But setting this aside, even if McDowell doesn’t have to participate, he clearly should. Not only will this merger promote investment in broadband in the BellSouth region, but there are other urgent priorities before the FCC (like Universal Service) which could suffer from continued deadlock on this matter.
I’ve recently posted some additional commentary on the AT&T/BelLSouth merger proceeding, beginning here, here, here and here.
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