WASHINGTON-The Federal Communications Commission shifted into damage control last week after two officials contradicted each other over whether candidates for the Telecommunications Development Fund board were vetted by the White House.
Catherine Sandoval, director of the FCC Office of Communications Business Opportunities, said nominees for four private-sector slots on the seven-member TDF board were reviewed by the White House.
When asked whose idea it was, Sandoval said the FCC voluntarily sent names recommended for the TDF to the White House. She said there were 100 nominees for the four private sector openings on the board, but did not indicate whether some or all received Clinton administration scrutiny.
“We have been working to identify the right mix of people,” said Sandoval.
William Kennard, general counsel for the FCC, flatly denied any White House vetting of TDF nominees but could not explain Sandoval’s statements.
Kennard, joined by Sandoval in a follow-up telephone interview with RCR, reiterated his position. He acknowledged only that the FCC had conversations with the White House about names put forward by the administration. He declined to reveal them.
Sandoval, when pressed, did not deny making the statements but backed away from their content, saying Kennard spoke for both of them.
Robert Nash, head of White House personnel, did not return phone calls for this story or a previous one in April that dealt with internal strife among Democrats regarding the TDF board.
At that time, Nash was said to be acting as an arbiter-perhaps even an advocate-in a dispute over an industry-congressional campaign to win Thomas Hart, a prominent yet controversial African-American communications lawyer, a seat on the TDF board.
Hart is credited with coming up with the idea for the fund and selling it to Edolphus Towns of New York, a Democratic African-American member of the House Commerce Committee who won support for incorporating TDF in the Telecommunications Act of 1996.
Hundt did not support Hart’s candidacy for the board, but is believed to have reluctantly acquiesced to pressure from Hart backers.
The new telecommunications law that created the fund, officially designed to aid small businesses (wireless and others with $50 million or less in annual revenues) with interest from spectrum auction upfront payments, directs the FCC chairman to fill the board of directors. But the legislation says nothing about advise and consent with the White House.
The fund has just more than $6 million in it today, not a big amount of money in terms of telecom capital. It could grow larger in future auctions. But FCC officials are not looking at TDF solely as a lending bank.
Instead, they want the fund structured to help leverage other financing for telecom projects.
The TDF has been a political hot potato since the start, one that Democrats have tried to keep under wraps because of the personalities involved and, perhaps more importantly, because of the explosive race issue. As for the four private sector board seats, pressure has come from all sides: the White House, the Congressional Black Caucus, the Congressional Hispanic Caucus, industry and from within the FCC itself.
“This is a Reed Hundt special,” said Larry Irving, who advises Clinton on telecommunications policy as head of the National Telecommunications and Information Association.
The rest of the TDF board is comprised of a representative from the FCC, the Treasury Department and the Small Business Administration. The TDF board is expected to be fully in place by the end of the month, following speculation that the remaining board appointments would be delayed until after the November presidential election to avoid any pre-election controversy that could hurt Clinton’s chances against Republican challenger Bob Dole of Kansas.
Hundt, who named himself to the board to edge out Sandoval, chose Solomon Trujillo-president of U S West Inc., with a reputation for forging alliances with small businesses-as interim chairman of TDF in March.
Hundt’s selection of Trujillo, was criticized by some who believed the fund should not be guided-philosophically or otherwise-by a big business manager, irrespective of his small business advocacy. Trujillo indicated he will likely resign after TDF is up and running. Trujillo’s firm withdrew a huge financial commitment from BDPCS Inc. the day before the C-block personal communications services auction closed, forcing the bidder to default on 17 licenses it won.
The question of whether the White House vetted TDF board nominees once again brings up the relationship between the White House and the FCC, an independent federal regulatory agency headed by a Clinton appointee with long-standing personal and professional ties to Vice President Gore dating back to prep school in Washington, D.C., and to a lesser extent, to the president with whom FCC Chairman Reed Hundt attended Yale Law School.
Moreover, the matter tends to reinforce the notion that the FCC, under Hundt, is as highly politically driven as the Clinton administration itself. The relationship between Hundt and key Republican and Democratic lawmakers in the GOP-led Congress could also worsen, given that the FCC by law reports to Congress, not to the executive branch. Lawmakers take umbrage at being bypassed.
The TDF fracas-albeit unintentional-also has raised a politically sensitive issue that both parties wish to avoid in advance of the fall elections: race.
The stated purpose of TDF is “to promote access to capital for small businesses in order to enhance competition in the telecommunications industry; to stimulate new technology development and promote employment and training; and to support universal service and promote delivery of telecommunications service to underserved rural and urban areas.”
Not stated, yet understood, is also the goal of furthering minority and female participation in an ever-expanding telecommunications industry.
With new curbs on affirmative action by the Supreme Court via the 1995 Adarand ruling and hostility to race and gender preferences by Republicans who took control of the House and Senate after the 1994 midterm election, architects of the TDF-Towns and Hart-stayed clear of controversy by promoting the fund as a small business program.
The FCC likewise secured legal and political cover by killing female and minority bidding credits (partially at the request of female and minority telecom aspirants) and structured a small business bidding discount for the C-block PCS auction that some viewed as a big business loophole for many of the same companies that dominated A- and B-block pocket phone auctions.
Hart and Khalil Munir, Towns’ aide, bristle when race is mentioned with TDF, yet both concede the program could help women and minorities.
Yet there can be little doubt that TDF and the market barrier telecom reform provision championed by Bobby Rush (D-Ill.), a civil rights advocate also on House Commerce, at least partially offset the elimination of minority tax certificates and female and minority bidding discounts.
That the FCC reacted so swiftly to the prevailing political winds in the early stages of the Republican Revolution is testament to the sensitivity with which Hundt and the White House itself accorded to affirmative action after Republicans began attacking the policy in 1995.
Then-Senate-majority-leader Dole and John Canady (R-Fla.), chairman of the House Judiciary subcommittee on the Constitution, proposed to go beyond Adarand and ban all race and gender preferences in federal programs.
Clinton himself felt compelled to review affirmative action policy and reportedly considered following the lead of Republicans before settling on a “mend it, don’t end it” posture.
While the Justice Department urged federal agencies to review their affirmative action programs to determine whether they meet the new `strict scrutiny’ test, th
e department did not recommend those programs necessarily end.
Indeed, Robert Johnson, chairman of BET Holdings Inc., believes that to be the case in his Sept. 13 letter to Rep. Donald Payne (D-N.J.), chairman of the Congressional Black Caucus, urging that minority preferences be available in digital TV license auctions.
“The combination of inflated auction prices and lack of access to capital by minority and women owned businesses has greatly limited participation by small and/or minority owned business in past auctions,” said Johnson.
The GOP does not want to wipe out affirmative action without replacing it with something and Republicans are afraid of scaring off middle class black voters from the party.
The FCC itself has contributed to the retreat on affirmative action.
The agency has been slow to conduct or contract out a study to evaluate the history and present state of diversity and discrimination in the telecommunications industry. Such a study could be used by the FCC to justify renewal of preferences and bidding credits, depending on the data.
The FCC’s Sandoval said such a study will be launched soon, more than a year after Adarand and after all broadband PCS licenses will have been sold.
Bidding credits proved successful in regional narrowband PCS auctions.
“You don’t want to go to the Supreme Court with a record you’re not confident you can win with,” Sandoval said.
The FCC also has been reluctant to see how the court(s) would square the 1993 diversity legislation with the Adarand affirmative action limits.
“We need the commission’s words to speak louder than their actions,” said Micheal Walker, president of the National Paging & Personal Communications Association.
