With his wire-rimmed spectacles, rounded cheeks and affable grin, AT&T Corp. lobbyist Tim McKone doesn’t look particularly frightening. But this month he’s been the cable industry’s worst nightmare on Capitol Hill.
Mr. McKone has helped lead the phone companies’ charge in the House, winning support for proposed legislation that would make it easier for them to get into the pay TV business.
The phone company’s offensive prompted a counterattack by cable TV lobbyists intent on removing some of the sting from a bill that Rep. Joe Barton, R-Texas, may release early this week. But Rep. Barton’s proposed legislation-and his plan for a quick hearing and committee vote on the measure-are victories for the phone companies in a high-stakes battle that has shaken the cable TV industry and put it on the defensive.
As phone companies introduce TV and fast Internet services to counter incursions into their telephone businesses by cable companies, Mr. McKone and his counterparts are also trying to tilt the playing field to their advantage. The phone companies are banking on the lobbyist’s experience on Capitol Hill and his Republican connections to gain an edge.
“His acute knowledge of the telecommunications industry and inner workings of Capitol Hill has earned him enormous respect from his peers, and rightfully so,” said former House Energy and Commerce Committee Chairman Rep. Billy Tauzin, R-La., who is now president and CEO of Pharmaceutical Research and Manufacturers of America.
Mr. McKone, part of an AT&T team led by Senior Executive VP Jim Cicconi, threw the cable industry into a defensive crouch this month by winning the support of Rep. Barton, chairman of the House Energy and Commerce Committee, for a measure that would let the phone companies seek permission to set up franchises on a national basis. That would give them a leg up on cable TV operators, who are currently bound by local regulations.
As Rep. Barton’s plan was originally floated weeks ago, cable providers wouldn’t have been able to escape their local franchising commitments until a phone company secured 15 percent of the TV subscribers in a cable operator’s market. His original proposal would have also prevented cable operators from raising prices in areas without phone company competition to make up for price-cuts in neighborhoods in which cable operators and phone companies compete.
Those measures spurred the cable industry’s man in Washington, Kyle McSlarrow, to take the unusual step March 9 of blasting legislation that was still in the drafting stages. Mr. McSlarrow, the CEO of the National Cable & Telecommunications Association, portrayed the Barton proposal as a “sweetheart deal” for phone company giants.
As of late last week, the counterattack may have persuaded Rep. Barton to reconsider those provisions.
The cable industry, however, faces an uphill battle arguing against a measure that would bring more competition, and perhaps lower prices, to the pay TV market.
“Big government price controls and allowing the government to pick winners and losers in the marketplace is exactly the wrong direction to go,” Mr. McSlarrow said.
In response to Mr. McSlarrow’s public outcry, a coalition of six House Democrats led by Rep. Bart Stupak, D-Mich., wrote Rep. Barton to urge him to hold formal hearings on the legislation before a committee vote.
“All members of the [House Energy and Commerce] Committee deserve a fair and reasonable opportunity to participate in the legislative process and understand the ramifications of such an important bill,” the Democrats said in a March 14 letter.
Leading conservative groups such as Americans for Tax Reform also slammed the proposal.
Wall Street analysts’ takes on the proposed legislation signal how much the cable industry has to fear from Mr. McKone’s efforts.
“It would tilt the playing field decidedly in favor of the telcos,” Bernstein Research analyst Craig Moffett said in an interview. “It would be a very clear indication of just how badly overmatched the cable operators are in the legislative arena and would be a sign to Wall Street that things are likely to get worse before they get better” for cable stocks.
For Mr. McKone, who declined to comment, the franchising fight is an extension of a career spent nurturing Republican contacts. High on his political resume are stints on the presidential campaign of former Sen. Bob Dole,
R-Kan., and as a fund-raiser for Sen. John McCain, R-Ariz.
“Everybody knows he’s a Republican,” added Ed Gillespie, former Republican National Committee chairman, whose lobbying firm Quinn Gillespie & Associates now represents AT&T. “But he’s straight-up when it comes to information. He’s an honest broker.”
Mr. McKone’s boss, Mr. Cicconi, bolsters the AT&T team’s GOP connections, having served as deputy chief of staff to President George H.W. Bush and earlier as a special assistant to President Reagan.
Before joining AT&T Corp. predecessor SBC Communications in 1999, Mr. McKone, who is married and has three children, honed his advocacy skills with the Alexandria, Va.-based lobbying firm Davis, Manafort & Freedman. Among his clients at the time was SBC, which called on Mr. McKone to help sell the company’s $61 billion acquisition of Ameritech on Capitol Hill in 1998.
Mr. McKone, 41, also shepherded SBC’s $16 billion acquisition of AT&T through Capitol Hill last year, helping form the country’s largest telephone company.
Mr. McKone’s success in the surprise legislative attack on the cable companies is partly attributable to his style, said Peggy Binzel, a former top executive for the National Cable & Telecommunications Association and a veteran media industry lobbyist.
“He is one of the smartest behind-the-scenes operators I’ve ever seen,” she said.
The offensive by Mr. McKone, a graduate of the University of Arizona, may benefit from shifts in his industry and some cable customers’ resentment over what they perceive to be high prices.
“There’s no question that the phone companies benefited from the attacks on cable as monopolies,” said Jeff Chester, executive director of the watchdog Center for Digital Democracy.
Consolidation in the telephone industry is also playing into Mr. McKone’s hand as phone companies spend less time fighting among themselves on Capitol Hill.
The draft of Barton’s bill is expected to try to mollify local constituencies by requiring phone companies to pay 6 percent of revenues to the local authorities, an increase from the 5 percent that cable operators can be forced to pay under a local franchising agreement.
“We’ve always wanted to make the local franchising authorities whole on the revenue question,” AT&T spokesman Mike Balmoris said.
AT&T is the nation’s third-largest contributor to federal campaigns during the current election cycle, donating more than $1.2 million into campaign war chests as of Jan. 23, according to the watchdog Center for Responsive Politics.
Industry analysts said it is difficult to predict which provisions will survive in Rep. Barton’s bill. It may be two years before substantive change to TV franchising laws become final, said Chris Stern, an analyst for Medley Global Advisors.
The whole time, cable companies are likely to keep running up against Mr. McKone.
“He’s so affable that sometimes people underestimate him,” added Nick Calio, a former top White House lobbyist for President George W. Bush who is now Citigroup’s senior VP for global government affairs. “But what they miss is he’s extremely well organized and tenacious.”
Donations to Key House Members
Phone company donations to key House Energy and Commerce Committee leaders for the 2006 campaigns:
AT&T: $11,000 to Chairman Joe Barton, R-Texas; $17,000 to Vice Chairman Chip Pickering Jr., R-Miss.; $12,000 to Rep. John Dingell, D-Mich.
sociation: $3,000 to Rep. Barton; $4,000 to Rep. Dingell
BellSouth: $2,000 to Rep. Barton; $4,000 to Rep. Pickering; $3,000 to Rep. Dingell
Cable TV company donations to key House Energy and Commerce Committee leaders for the 2006 campaigns:
Comcast Corp.: $25,000 to Rep. Barton; $9,000 to Rep. Pickering; $2,500 to Rep. Dingell
American Cable Association: $1,500 to Rep. Barton
National Cable and Telecommunications Association: $10,000 to Rep. Barton; $10,000 to Rep. Pickering
Time Warner: $1,000 to Rep. Barton; $4,500 to Rep. Pickering; $1,000 to Rep. Dingell
Viacom: $1,000 to Rep. Barton; $2,000 to Rep. Pickering
Source: Center for Responsive Politics. Figures are as of Jan. 23, 2006.