Belying his rhetoric, McCain worked for megamerger sought by campaign patron AT&T

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WASHINGTON, December 7, 1999 — Republican Senator John McCain, outspoken advocate of campaign-finance reform, has built his presidential candidacy on the argument that special interests play too big a role in politics.

When asked Sunday on NBC-TV’s Meet the Press whether he is influenced by companies that contribute to his campaign, the Arizonan replied, “Of course not. Of course not.”

But when it comes to AT&T Corp.—and a megamerger it sought —the facts suggest a different scenario.

This spring, McCain went to the mat to help AT&T win federal approval for a merger that would enable it to become the biggest cable company in the nation. McCain, chairman of the Senate Commerce, Science and Transportation Committee that oversees the telecommunications industry, introduced a bill that would clear the hurdles for the company’s proposed acquisition of MediaOne Group, Inc.

His efforts did not go unrewarded. Two weeks after he introduced his bill, AT&T employees and their spouses contributed $10,000 to his presidential campaign. That’s in addition to $3,000 they gave him three days after AT&T announced its merger plans.

McCain and AT&T have quietly kept close ties even as the senator has publicly railed against the company’s growing dominance in the cable industry. As recently as Nov. 8, he warned at a hearing on megamergers in the telecommunications industry that AT&T was turning into “Ma Cable.”

But his outward suspicion of the telecom giant apparently hasn’t hurt AT&T’s feelings —or McCain’s campaign coffers. AT&T is McCain’s No. 3 career patron, with its political action committees, employees and the employees’ spouses giving him more than $75,000 since 1982. In addition, lobbyists for AT&T have given McCain at least $12,500 since 1998.

And the relationship goes deeper than direct company donations. John W. Timmons, McCain’s former legislative director, is now a top lobbyist for the telecom behemoth. Moreover, several AT&T lobbyists have played a major role in raising money from corporate America for his presidential bid.

Last spring, Timmons, along with super-lobbyists Vin Weber and Kenneth Duberstein, co-hosted a fund-raiser that brought McCain more than $120,000. Weber is a registered lobbyist for AT&T and a key adviser to McCain’s presidential campaign. Additionally, Timmons’ wife, Paula Pleas-Timmons, a former aide on the Senate Commerce Committee, is an in-house lobbyist for AT&T Wireless Service.

It’s no wonder that AT&T has pulled out all stops to get its MediaOne merger approved. The acquisition would help AT&T dominate the growing market for broadband technology, which provides much faster telecommunications connections and allows users to employ their phones, fax machines, and Internet connections at the same time.

Last year, AT&T bought the No. 2 cable company, Tele-Communications, Inc., and the MediaOne purchase would enable the giant to reach 60 percent of American cable consumers.

To protect its nascent cable business, AT&T has flooded both the Republican and Democratic parties with soft-money contributions since January, making it the top soft-money donor this year . (The Reform Party doesn’t accept soft money). AT&T has given more than $520,000 to the Republicans and more than $220,000 to the Democrats.

That’s almost as much as it gave during the entire 1998 election cycle, even though the 2000 elections are nearly a year away.

But it’s AT&T’s relationship with McCain that’s borne the most fruit so far in its attempt to control the cable industry. Soon after the company announced on April 26 that it intended to purchase MediaOne for about $60 billion, Federal Communications Commission Chairman William Kennard said his agency would give the deal “very careful scrutiny.” On the same day, May 7, McCain also questioned the merits of the proposed merger, and announced a June 17 hearing on consolidation in the telecommunications industry.

But by May 26, McCain had softened his position. He introduced a bill that would eliminate FCC authority over telecom mergers. That day, at a Commerce oversight hearing on the FCC, McCain blasted the agency for dragging its feet on industry mergers. “To the extent the committee finds that the commission is unable to lead or unwilling to follow, it’s our responsibility to make sure it gets out of the way,” he warned. Kennard objected to any attempt to restrict the FCC’s role in nixing mergers. “It is not the time for the FCC to be hamstrung or prohibited from reviewing industry mergers . . . as companies are consolidating,” he wrote in an op-ed piece for the Chicago Tribune on June 24.

Currently, the FCC reviews all telecom mergers to determine whether they will harm consumers, with the Justice Department and the Federal Trade Commission reviewing them to ensure that they don’t violate antitrust laws. Under McCain’s proposal, the FCC would be able only to comment on a proposed merger, with Justice and the FTC making the approval decision. Company lobbyists told the Center that the bill, if passed, would remove a key obstacle from AT&T’s merger plans.

Between April 26 and June 9, AT&T employees and their spouses contributed $13,000 to McCain’s presidential campaign. The donations started on April 29, three days after the merger announcement. The lion’s share came soon after the senator introduced his bill. The total is four times more than any other telecom company gave McCain during the same six-week period.

On Oct. 6, the FCC announced plans to streamline the FCC’s merger review process. Two days later, the FCC said it was relaxing its rules on how much market share a cable company could control. The new rules would allow AT&T to buy MediaOne without breaking federal regulations.

FCC spokesman Michael Balmoris told the Center that McCain’s bill had no impact on the agency’s actions, but commission insiders have said the agency can’t afford to ignore its Capitol Hill overseers. As for the hearing McCain promised for June 17, it didn’t happen until Nov. 8, by which time industry experts were calling FCC approval of the merger a done deal.

The McCain campaign did not return telephone calls from the Center seeking comment. On Meet the Press, McCain noted that he had received more than 100,000 contributions to his campaign. “Literally every business in America falls under the Commerce Committee,” he said. “I oversee literally every company in America, whether it be trains, planes, buses, telecommunications, whatever it is.”

“But you have said that all politicians, including yourself, are influenced by big donors,” host Tim Russert said.

“Oh, absolutely. Absolutely. Absolutely,” McCain replied. “All of us are tainted by this problem, and that’s what shames me so much, because I believe public service is honorable.”

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