Fuzzy Connection in the Journal

A good telecom yarn misses the larger point by an Iowa mile

The headline is catchy: “How 2 Guys’ Iowa Connection Took Big Telecoms for a Ride.” This article appeared October 4 in The Wall Street Journal. And it is a good read. We learn how two entrepreneurs, Ron Laudner and David Erickson, took advantage of government rules to put the screws to big telecom companies.

An outdated federal rule allowed the two men to make hundreds of thousands of dollars by routing Web-based conference calls through a tiny local phone company. That company, because it was rural and thus benefited from a degree of government protection, could submit hefty bills to big long-distance carriers for its services.

The story reports that the FCC has proposed closing this loophole, which makes sense. Even Laudner expressed surprise at the money that came pouring in: “I’m not going to argue I didn’t think it was amazing,” he told the Journal.

So while the plight of large telecom carriers is not exactly our first priority here at the Columbia Journalism Review, we enjoyed the story. It has a David-and-Goliath drama to it, with the little guys figuring out how to profit at the expense of the giants. And enough little guys have set up this kind of system that companies like Qwest and AT&T are fighting it in court and through the Federal Communications Commission.

The rising friction between rural phone companies and the big carriers has largely been relegated to the trade press, so The Wall Street Journal did readers a service by printing such an engaging piece on the front page.

But equally interesting is what the Journal did not publish, and it is hard for readers to understand Riceville without knowing more—a lot more—about the telecom sector.

The Journal frames the story as little guys taking advantage of outdated rules:

The deal between Messrs. Laudner and Erickson illustrates how tumult in the telecom industry has given rise to opportunities—and headaches—as entrepreneurs exploit outdated regulation.

That’s true, but it’s also like saying Hamlet is the story of what happens when a troubled prince gets an unexpected visit from two college chums.

The point of telling the Riceville story should not be to demonstrate the exploitation of the successor to American Telephone and Telegraph Co. The fact is, and the Journal should know this, the “tumult” has given rise to disputes all over the telecom industry, including allegations that AT&T itself is price gouging. What’s more, the big players, like AT&T, may have an unfair advantage in how these disputes are resolved.

The very same day that the FCC opened a rulemaking proceeding on AT&T’s complaints about Riceville and other rural carriers, Sprint was accusing AT&T of exploiting its own monopoly-like control of high-speed, fiber-optic networks to gouge other companies—like Sprint. That dispute was described in an October 3 Washington Post piece by Kim Hart, headlined “Sprint Attacks Phone Giants on Access.”

And the Journal story came out the same day the Government Accountability Office issued a report critical of FCC information leaks. The report, which focused on four cases from 2002 to 2006, criticized the commission for giving unfair advantages to certain corporations and trade groups by leaking important information to them in advance of FCC proceedings. The GAO didn’t identify exactly which corporations benefited from the FCC leaks, but it did say it wasn’t consumer groups—or, we’re guessing, tiny rural phone companies.

The AP, the Los Angeles Times and The Washington Post all covered the GAO report, while Dow Jones Newswires carried the AP story, by John Dunbar.

But the Journal didn’t cover it at all. That’s fine, though one could argue that, in substance, the fact that the FCC’s rulemaking process is tainted is more important than AT&T’s problem with rural carriers.

Weirdly, the Journal did include a paragraph summary of the GAO story in its Morning Brief e-mail, which it describes as “a look at the day’s biggest news.” (The New York Times, by the way, didn’t cover the report at all.)

Furthermore, the telecom “tumult” is even more far-reaching than readers of the Journal piece would ever know. The GAO report, as well as the rural phone dispute the Journal addressed, comes in the context of a partisan war over the FCC itself. As reported in Technology Daily PM, a trade publication, the Republican-controlled FCC is hurrying through regulatory measures—including, apparently, the one pushed by AT&T against the rural companies—before the new Democratic majority in Congress has a chance to set its own agenda.

We like a good yarn, including one that correctly identifies AT&T as a victim. But it shouldn’t be framed exactly as AT&T’s PR consultant would have framed it, rather than the more accurate context of a telecom free-for-all. What’s so hard about that?

And another thing: The Journal story was interesting, but not new. An April 12 article in BusinessWeek online, headlined “AT&T vs. the Farm Team,” covered the action big telecommunications companies were taking against the small, rural carriers. Lorraine Woellert began her article with Laudner and Farmers Telephone Company of Riceville. The following month Bruce Meyerson of the AP, wrote a pair of stories describing the situation in Iowa and covering Sprint’s lawsuit against Iowa phone companies for the pricing policy outlined in the Journal.

We don’t want to play the gotcha game. In fact, we’re against the idea that because one outlet did a story, no one else can. The Journal story gives us more detail on Laudner and Erickson’s venture, and it tells the tale well. That’s a good thing and a net contribution to readers’ understanding.

And as far as connecting the dots goes, the Journal is not the only news outlet to have published fragmentary coverage. Generally speaking, the press didn’t make enough connections among various telecom issues making news this past week.

But the Journal, given its place in American financial journalism, will always have the highest bar to surmount as far we’re concerned, especially when it is late to a story. So framing the Riceville story as one of “opportunities—and headaches—as entrepreneurs exploit outdated regulation” seems strange to us, especially at this point. It is impossible for us to imagine John Keller, a great former Journal reporter who happened to cover AT&T, making that mistake.
But Keller doesn’t work there any more.

The most recent development: The FCC yesterday granted AT&T partial relief from its Iowa tormentors. Audit Readers can rest easy. The vote was 3-2, Republicans in favor, Democrats opposed.

Has America ever needed a media watchdog more than now? Help us by joining CJR today.

Elinore Longobardi is a Fellow and staff writer of The Audit, the business-press section of Columbia Journalism Review.