Livingston’s Big Deal

Northpoint to Give Lobbyist a Franchise If He Succeeds on Hill

Posted October 17, 2003 at 3:41pm

Former Rep. Bob Livingston (R-La.), once the powerful Appropriations chairman and now an influential lobbyist on K Street, spends his time these days pleading with members of his old panel to help an upstart wireless cable firm break into the market.

For lawmakers looking to lower cable prices and expand high-speed Internet service, legislation to aid Northpoint Technology is a “slam dunk,” Livingston tells his former colleagues.

But there is one thing that Livingston does not mention when he stops by their offices: In addition to being a registered lobbyist for Northpoint, he is also a potential owner.

In an extraordinary deal that could be worth millions of dollars, Livingston and two other Northpoint lobbyists have the option of owning a share of one of the company’s 68 local affiliates if the company gets access to the airwaves and a license from the government.

“We don’t have the resources that some others have, so we have to create incentives that are more akin to what some other startups have done,” said Toni Cook Bush, who runs Northpoint’s Washington office.

The contacts, which were inked more than three years ago, provide the latest insights into a clever lobbying campaign that has led little-known Northpoint to the brink of a stunning victory on Capitol Hill against two entrenched players in the satellite-television industry, DirecTV and EchoStar.

In addition to Livingston, Northpoint has offered the same deal to lobbyist Diane Allbaugh, the wife of presidential confidant Joe Allbaugh; and Leo Giacometto, a former top aide to Sen. Conrad Burns (R-Mont.), the chairman of a key Senate subcommittee on telecommunications.

Northpoint’s lobbying firms on retainer — such as Akin Gump Strauss Hauer & Feld LLP — would receive a simple cash bonus if Northpoint succeeds on Capitol Hill.

Livingston and other Northpoint lobbyists say the deal is not unique. “The fact is that virtually every lobbyist gets a success fee at some time or another,” Livingston said in an interview.

Indeed, since the days of the Internet boom, an increasing number of cash-strapped startups have offered their lobbyists stock bonuses for success in Washington.

But it is exceptional for a lobbyist to have the ability to acquire a significant share of a corporate client of one of its affiliates. The deal is roughly equivalent to General Electric giving its lobbyists part ownership over a single local NBC affiliate, such as Washington’s WRC-Channel 4.

To be sure, a Northpoint franchise would be worth a small fraction of a network television affiliate. But if the lobbyists do their job and the company gets off the ground, Livingston and other company lobbyists rake in millions of dollars in addition to their traditional lobbying fees.

MDS America, another wireless cable firm, is worth about $500 million, according to market analysts. If Northpoint has the same value, its local affiliates would be worth an average of $7.5 million.

Meanwhile, the spectrum that Northpoint would like to get its hands on would cost about $100 million at a Federal Communications Commission auction.

“We have to find a way to get folks to help us, and the only thing that we can offer is the prospect of success,” said Sophia Collier, the president of the company and the former head of the Democratic Party in New Hampshire.

According to their contracts, the lobbyists would be eligible for the franchises if they move legislation through Congress to give the company the spectrum it wants without having to bid millions of dollars in an auction.

This summer, Northpoint lobbyists added the measure to the appropriations bill funding the FCC. Though the White House opposes the provision, Northpoint hopes to make it difficult for President Bush to veto it by rolling it into a massive, end-of-year omnibus spending bill.

If they succeed and exercise their options, the lobbyists would be responsible for financing the buildout of the land-based network, a task that could cost more than $10 million for the biggest U.S. markets, according to Northpoint officials.

“All of our affiliates have a financial obligation to assist in the financing” of the company, Northpoint’s Bush said.

Founded less than a decade ago, Northpoint hopes to undercut its well-financed rivals by beaming television signals from an inexpensive, land-based network.

Because its nationwide network would be far cheaper than its rivals, Northpoint will be able to offer its subscribers 96 channels for $20. High-speed Internet service would cost another $20.

But in order to provide service, Northpoint needs access to the same slice of the wireless spectrum now shared by DirecTV and EchoStar.

Though Northpoint’s well-heeled competitors received much of their spectrum for free years ago, they now hope to snub out a potential rival by forcing Northpoint to pay for the spectrum.

Since 2001, the satellite-television industry has spent $7.5 million to lobby Washington, about five times as much as Northpoint.

Unable to match the resources of its larger rivals, Northpoint instead gathers is political support from its local affiliates, a list that includes dozens of celebrities and politically connected individuals, from comedian Lily Tomlin and NFL star Jonathon Ogden to lobbyist Livingston and others on Northpoint’s team.

Bush is a former Democratic aide on the Senate Commerce, Science and Transportation Committee who was once considered by President Bill Clinton to head the FCC. Her stepfather, Vernon Jordan, is a close friend of Clinton’s and a partner with Northpoint lobbying firm Akin Gump.

Northpoint also benefits from the support of its affiliates outside of the Beltway, such as Robert Bennett, the chairman of the Ohio Republican Party.

Two years ago, when Northpoint began ratcheting up its lobbying operation, Bennett flew to Washington to urge members of the Ohio delegation to support the company.

“They would really create competition for the industry and lower prices,” Bennett recalled telling lawmakers.

A few days later, a pair of Ohio Republicans sent a letter to the FCC asking the agency to grant the company a license.

Northpoint would “inject meaningful competition across a number of markets, giving consumers great choice,” wrote Ohio Reps. David Hobson and Ralph Regula.

Like Livingston, Bennett did not tell lawmakers about his financial stake in the company. Bennett said that his conversations with the lawmakers were as an owner, not as chairman of the party.

In all, Livingston, Bennett and other Northpoint affiliates have rounded up more than 200 Members of Congress to sign letters in support of the company.

But Livingston, too, does not disclose his financial stake.

“There is nothing about this contract that is onerous,” Livingston said in an interview. “This is not unusual. I have a success bonus, but it’s not anything more unusual than anyone gets as a lobbyist.”

Northpoint officials say Livingston is not obligated to disclose the details of his lobbying contract.

“If he went around and said that he is a part-owner and didn’t say that he is a lobbyist, wouldn’t that be worse?” asked Cook. “Typically, when you go around [Washington on lobbying pitches], you don’t talk about the terms of your contract.”

A few weeks ago, for example, Livingston made a presentation to a group of nearly 100 conservative groups brought together by Grover Norquist, known as the Wednesday Group.

During his pitch, Livingston urged attendees to support the Northpoint legislation. But he did not mention his ownership stake.

On Friday, a handful of the conservative groups sent a letter to Capitol Hill urging lawmakers to “level the playing field between the major satellite television corporations and innovative new land-based competitors.”

Livingston is also trying to place op-eds in newspapers across the country in support of Northpoint’s bid.

“While a Member of Congress, I’d like to think my colleagues and I fought to protect and inspire America’s entrepreneurial spirit by insuring a level playing field for exciting new competitors,” he wrote before arguing that Northpoint should be granted a license.

In a brief memo to editorial page editors that accompanies the op-ed, Livingston mentions that he was a Member of Congress from Louisiana from 1977 to 1999, but does not disclose his stake in the deal.