Wheeler Recusal Not Expected to Affect AT&T Tariff Investigation

The revelation caught some analysts off guard. Stifel Nicolaus’s Christopher King and David Kaut called it a “mini-bombshell,” writing in a report Thursday that the recusal “complicates FCC action” on “Bell special access review.”

Wheeler isn’t recused from the entire special access proceeding, an FCC spokesman told us. Due to his former position on the EarthLink board, Wheeler has recused himself from the Wireline Bureau decision to suspend and investigate AT&T’s tariff revision, the spokesman said. Wheeler is also recused from nonpublic meetings with EarthLink or its representatives, he said. Stifel released an update Thursday evening walking back its original report.

Wheeler’s recusal is “a non-issue for special access,” said Colleen Boothby of Levine Blaszak, who represents high-volume purchasers of the dedicated lines. Both active matters -- the tariff suspension and the special access rulemaking -- are at the procedural phase where all the action is at the bureau level on delegated authority, she said. It’s likely staying at the bureau “until way beyond the 90-day period,” Boothby said. “The tariff suspension is for five months, and the investigation will probably continue long after the suspension expires.” As for the broader rulemaking -- a broad data collection awaiting Office of Management and Budget approval -- the full commission delegated authority to the bureau in the last order, she said.

The EarthLink board position is one of many potential conflicts, according to a letter Wheeler sent to then-FCC General Counsel Sean Lev in May (http://1.usa.gov/1ebk78n). In that letter, he also listed shares he held in 78 other companies, and stated he would divest those interests within 90 days, and until then he wouldn’t participate “personally and substantially in any particular matter that has a direct and predictable effect on the financial interest of the entity” without a written waiver of regulatory exemption. Wheeler listed stock in AT&T, Verizon and CenturyLink, as well as CLECs like Sprint and Windstream, which both challenged the AT&T tariff filing.

"I'm not sure it matters because it’s only for 90 days, but the commission doesn’t work very well when the chairman’s recused,” said a longtime telecom attorney not participating in the special access proceeding. The Communications Act describes the chairman as the CEO of the commission, and “as a practical matter, the chairman really is the CEO,” the attorney said. When the chairman’s recused, “it’s hard to figure out where to report to. Nobody else is in a position to kind of balance priorities” and tell bureaus what to focus on, he said. “It doesn’t work very well."

"This is not an uncommon problem for commissioners,” said Harold Feld, Public Knowledge senior vice president. Then-Commissioner Robert McDowell was conflicted out when AT&T acquired BellSouth, Feld said. That led to the prospect of a 2-2 deadlock, but it also led to extensive praise from senators and other commissioners (CD Dec 19/06 p1). In the nineties, then-Chairman Bill Kenard recused himself on a vote about the equal-time rule, also leading to a potential 2-2 deadlock until Kenard’s recusal was lifted under consultation with the general counsel, Feld said.

The AT&T tariff issue probably won’t require full commission action, as it’s in the bureau on delegated authority, Feld said. Any bureau decision will take months, he said, although it could bypass the bureau and go to a full commission vote “if they viewed this as an important test case around the IP transition.” It’s not uncommon for commissioners’ offices to want to weigh in when big issues are pending at the bureau level, Feld said. That was one of the complaints people had about Chairman Kevin Martin, Feld said: Some argued he “compromised the independence of the bureau” by “leaning on his bureau chiefs.” Still, Wheeler’s recusal “should not make a practical difference,” Feld said.

Wheeler probably won’t be conflicted out of most FCC proceedings, said Boothby, because even if they could affect the 78 companies Wheeler’s had stock in, they would need to have a “direct and predictable” effect. “Most proceedings are industry-wide, with indirect and unpredictable effects for most companies,” Boothby said. The handful of proceedings that might apply -- such as enforcement actions against a single company -- might not require action during the 90 days, she said.

"The tariff recusal does not make for ideal optics for a chairman so early in his tenure,” said Medley Global Advisors analyst Jeff Silva. “It didn’t help that Wheeler’s recusal came to public light the same week a divided FCC voted to pursue the controversial issue of in-flight cellphone usage.” Both are “recoverable bumps on the road” for Wheeler, Silva said: Special access is a complex, time-consuming issue that will take plenty of time to weigh out. Silva said he doesn’t foresee policy treatment being “compromised one way or another in the longer term.” “It’s still early. Wheeler is trying get his sea legs. It’s been the case for past FCC chairmen."

"He can’t possibly sit out every issue that affects competitive broadband issues going forward,” said another telecom attorney. Wheeler’s past financial holdings are so diversified that any conflicting interests might actually cancel each other out, the attorney said.