PLAUSIBLE DENIABILITY

BY ALICIA MUNDY

The White House is into duck-and-cover mode in the wake of the Feb. 20 decision by a split Federal Communications Commission to leave regulation of the networks of the Baby Bell companies to the states.

The debacle that will not die resulted in large part from the failure of the White House to signal its position on the matter, say several sources with close ties to the Bush administration, Congress and the FCC. The tanking of some $15 billion in Baby Bell stock value that very afternoon stunned the White House, these sources say, and the vote has thrown the deregulatory agenda of FCC Chairman Michael Powell into question. Whether the lack of policy involvement at the White House was due to its well-known disconnect on telecommunications matters or to a political calculation is now the subject of increasingly harsh debate behind the scenes in Washington. Some GOP congressmen suspect foul play at 1600 Pennsylvania Avenue. Others wonder how it will be reflected in upcoming issues, such as media ownership; the White House is trying to run away from the whole matter.

The vote, in which Republican Commissioner Kevin Martin sided with the two Democrats on the commission, Michael Copps and Jonathan Adelstein, was the most serious split yet in the increasingly tempestuous relationship between Martin and Powell. The White House had hoped to avoid being pulled into the tussle. But it seems to have stumbled into the quagmire anyway. Several high-ranking Republican members of the House now ?believe that the White House maneuvered with Martin at the expense of Chairman Powell,? according to a staffer at the House Commerce Committee who would not speak for attribution. This staffer's assertion is echoed by several others who work with the committee. Commerce Chairman Billy Tauzin (R-La.) said through his spokesman, ?Kevin Martin will have to drag a $15 billion ball and chain around for a long time.?

The White House was issuing contradictory statements last week regarding its role in the Powell and Martin relationship, indicating to one lobbyist who is close to the president that the administration is ?desperate? for this to go away. Meanwhile, Washington power brokers are trying to determine if the vote represents a triumph of the political fraternity over the policy makers at the White House, a clever calculation by Bush political adviser Karl Rove, a miscalculation by same or simply the result of the White House's benign neglect of telecom. ?Do we say that Powell couldn't count to three [votes]?? asked a telecom expert, ?or that Rove and Martin couldn't count to 15 [billion]??

The Wall Street Journal reported Feb. 18 that the White House contacted Martin when it became clear he was going to vote with Copps and Adelstein, leaving Powell in the minority.

In response to questions about this last week, White House press spokeswoman Claire Buchan at first said, ?There were no calls? to Martin. But pressed further, Buchan said, ?The White House expressed no policy preference.? Asked about calls from Rove, or from chief of staff Andy Card or his deputy Josh Bolten, Buchan said neither Rove nor Card called Martin. But pressed again, she added, ?on this issue.? And she did not answer the question about Bolten.

The semantics are very important to the White House, which was loathe to be seen as trying to influence Martin's decision. This was especially sensitive so close to the sunshine period of seven days prior to the vote itself, according to six separate sources who, like others interviewed, would speak only on the condition of anonymity. These six sources said they had been told ? four of them by people inside the White House ? that Rove himself spoke with Martin at least once. They specifically noted that they'd been told Rove wanted only to encourage Martin to ?play nice? with Powell. Shortly after that alleged discussion, around Feb. 11, Martin did indeed leave his roost and visit Powell's office to discuss their differences. Martin's pilgrimage to Powell set off the gossip meter among staffers at the Portals.

Rep. Billy Tauzin and other Republicans said, according to several staffers at the Commerce Committee, that they'd been assured by the White House that it had spoken with Martin ? not necessarily on the substantive issue, but on the appearance of a permanent and paralyzing split between Powell and Martin.

Martin's legal adviser, Catherine Bohigian, said that Rove ?never called Commissioner Martin.? But she did not say whether Martin had spoken with Rove or his deputy about the political perception of the division with Powell. Martin is said to be on friendly terms with many people at the White House, where his wife Catherine is Vice President Dick Cheney's advisor.

Powell himself had contacted the White House late last summer to discuss the problems he foresaw in pushing deregulation if he couldn't count on Martin's vote, according to sources with White House ties. Powell declined to comment for this story, saying only that there were other issues coming up.

Powell, according to a lobbyist with ties to Bush, received a call from the office of the chief of staff assuring him of the president's support, shortly before the FCC meeting. And the White House's desire to placate Powell may have killed a move within the Commerce Department to ?give Martin cover? after the vote.

There's been an internal battle at the Commerce Department, say several lobbyists, Hill and FCC staffers, between asst. secretary Nancy J. Victory and others. Victory is said to be a supporter of Powell and Powell's position on the Bells. Months ago, Victory, who declined to comment, was said to have tried to get Commerce to take the Bells' side in the issue, which essentially is against AT&T and other long-distance providers. But, those sources say, her efforts were ?shot down? by the White House on the grounds that it would not take sides on this issue.

However, after the vote Feb. 20, industry sources say a press release was prepared in the office of Commerce Secretary Don Evans that would immunize Martin, suggesting that the 3-2 decision didn't bother the White House. No such press release went out.

First, according to sources, Victory fought it. Then, two Commerce Committee congressmen heard about it and feared Evans himself might speak on the issue, ?giving air cover to Martin,? according to a House staffer. These congressmen let the White House know they would ?strangle the [expletive deleted, referring to Evans and company] if the White House let that happen,? the staffer added.

Instead, a one-paragraph statement was readied and given out to reporters if they asked Commerce for the official White House position. The statement only mentioned the broadband provision voted for by a 3-2 GOP majority Feb. 20, and thanked Powell.

Normally, such Byzantine bizarreness doesn't matter much. But in the next few months, the FCC will tackle the huge and controversial issues of media ownership and cable broadband access. And the capital is seething with speculation over how Martin's strange bedfellowship with the Democrats will play out. For instance, one well-known telecom lawyer bluntly asked a reporter whether there'd be a voting payoff for Martin or for Copps in upcoming decisions regarding nondiscriminatory Internet access or must-carry multicasting. The Wall Street Journal has suggested the White House let Martin go ahead with the vote in order to keep phone prices down prior to the 2004 elections. Several GOP contributors have been reminding reporters of the long-time friendship between Rove and AT&T's lobbyist Jim Cicconi, who worked for the senior Bush.

However, some telecom lobbyists think Rove just wanted to keep the White House from being in the middle of the battle between White House friends. After all, the Bells and AT&T are all big GOP contributors.

But the ongoing backlash in the form of uncertainty in the market for telecom stocks, and questions about Martin's deregulatory position, have not abated. One Bell insider says White House people he has talked with seem surprised by the hit on the economy, but they aren't prepared to say the vote was a mistake.