IP: GTE's $3.3 billion wireless purchase an unusual venture

[Dave Farber <farber@cis.upenn.edu>]

>Date: Sun, 18 Apr 1999 23:41:34 -0400
>From: Declan McCullagh <declan@well.com>
>
>
>[From an electronic newsletter published by UCLA law prof Eugene Volokh.
>Subscription info (if you are so inclined) is at the end. --Declan]
>
>======================================================
>
>                   "Minority Stakes"
>
>by James Surowiecki, from Slate, http://www.slate.com
>Copyright 1999 Microsoft Corp.; all rights reserved.
>
>
>
>     Ordinarily, last week's announcement that Ameritech
>would be selling half of its wireless telephone
>operations to GTE for $3.3 billion would have occasioned
>little notice.  Ameritech is being acquired by SBC
>Communications, and in order for that deal to pass muster
>with the FCC, Ameritech had to sell its wireless
>operations in Chicago and St. Louis, where SBC also
>offers service.  So the sale was a foregone conclusion.
>
>     What wasn't quite as expected was that the deal
>would, as the New York Times put it, end up being "the
>first major telecommunications acquisition to be
>described as a 'step forward' for racial diversity." 
>That's because GTE offered Georgetown Partners, a private
>investment firm whose managing director is black, 7
>percent of the equity in the wireless business in
>exchange for $60 million in cash.
>
>     Georgetown Partners has no previous experience in
>the telecommunications business, and even if it did have
>any experience it's hard to see what influence the owner
>of a 7 percent minority stake of one division of a
>company the size of GTE could possibly have.  Of course,
>GTE wasn't looking for a noisy partner.  Actually, all
>indications are that it wasn't looking for a silent
>partner, either.  But SBC was looking for a way to look
>good in front of FCC chairman William Kennard, who has
>said that he wants to increase minority participation in
>the telecom industry.  So GTE decided that owning the
>wireless operations with Georgetown was better than not
>owning them at all.
>
>     This is, in other words, exactly the kind of thing
>that gives affirmative action a bad name.  In the Times
>yesterday, Davenport happily admitted that he was the
>recipient of preferential treatment, arguing that if he
>had been white he would already have "100 times more
>money than I have."
>
>     But even if that were in fact the case, William
>Kennard -- and Jesse Jackson, whose Wall Street
>initiative seems to have played some role in this deal --
>has better things to do than help someone worth $100
>million become worth $10 billion.  Affirmative action,
>whatever its flaws, had the noble goal of giving a chance
>at real success to those who wouldn't otherwise have had
>that shot.  We're all ill-served when it's turned into a
>mere spoils system, and when it consists of giving
>someone who's already really successful the chance to be
>really really successful.
>
>     That's especially true in this case, where
>Georgetown is literally bringing nothing important to the
>table: no telecom experience, no managerial experience,
>and no real marketing experience.  Even the money is
>essentially irrelevant, since GTE hardly needed a partner
>to come up with that extra $60 million.  All this is is
>an unearned gift.
>
>     Now, Wall Street is hardly the home of pure economic
>rationality, where nepotism and connections play no role
>at all.  The Street still in many ways relies on an
>old-boy network, and insofar as that locks out black
>financiers and entrepreneurs, we're all hurt (both
>morally and economically).
>
>     But there's a difference between something like
>AT&T's recent bond offering, in which the black-owned
>Blaylock & Partners was named a co-manager, and the
>GTE-Ameritech deal.  In the former case, Blaylock &
>Partners was competing against its peers for business
>that it was qualified to do.  If race played any part in
>AT&T's decision to say yes, it was only to ensure that
>race didn't play a part in a decision to say no.  If
>Georgetown hadn't been included in the GTE deal, no other
>investment firm would have been.  I don't know what you
>call it, but it's certainly not equal opportunity.
>
>     The really astonishing thing about all this is the
>nakedness of SBC's ploy.  In a statement it released on
>the day the deal was announced, SBC actually said that
>creating diversity was an important goal "for a number of
>parties, not the least of which is the FCC," then
>described the deal as allowing the company to do "good by
>achieving the goal of expanding diversity within the
>ranks of industry ownership."
>
>     Even if you set aside the use of the words achieving
>and ownership to describe a 7 percent stake by a company
>with no telecom background, this statement is painful
>precisely because SBC makes no bones about the fact that
>the only reason it's including Georgetown is because
>Kennard wanted it to.  SBC might just as well have said: 
>"OK, Bill.  Are you happy now?"  The only question that
>remains is whether the parties to this deal are
>self-deluded about the supposed virtue of their action or
>else deeply cynical.  Actually, I think we know the
>answer.
>
>
>                         * * *
>
>
>     James Surowiecki is contributing editor at Fortune,
>staff writer at Talk, and the author of Slate's Moneybox. 
>Check out the Web version of this article on Slate -- one
>of your editor's favorite publications -- at
>
>     http://www.slate.com/Code/Moneybox/Moneybox.asp
>
>(It's the entry for 4/13.)  While you're there, check out the
>various links provided at the end of the article.
>
>
>======================================================
>
>
>              "Guns and the Constitution"
>
>    by Eugene Volokh, from the Wall Street Journal
>
>
>     A federal judge in Texas has just done something no
>federal court had done in more than 60 years:  He held
>that the Second Amendment protects people's right to keep
>and bear arms.  If this decision is affirmed by the Fifth
>Circuit Court of Appeals, the case has a very good chance
>of going to the Supreme Court, which hasn't yet resolved
>this issue.  And behind the narrow Second Amendment
>matter lies a deeper question about the utility of a
>written Constitution.
>
>     As in many constitutional cases, the defendant --
>Timothy Emerson, a San Angelo doctor -- isn't the best of
>fellows.  During Dr. Emerson's divorce proceedings, his
>wife claimed he had threatened to kill her lover.  The
>state divorce court apparently made no findings on this,
>but entered a boilerplate order barring Dr. Emerson from
>threatening his wife.
>
>     Though this state order said nothing about firearms,
>a little-known federal law bars gun possession by people
>who are under such orders.  Dr. Emerson not only failed
>to dispose of his guns, as the law required, but
>eventually brandished one in front of his wife and
>daughter.  He was then prosecuted under the federal law,
>though for gun possession rather than gun misuse.
>
>     The instinctive reaction here is that Dr. Emerson is
>the very sort we'd like to disarm, trouble waiting to
>happen.  But when the divorce court issued its order, Dr.
>Emerson hadn't been found guilty of anything.  Had he
>been convicted of a felony, all agree he would have lost
>his right to keep and bear arms as well as his right to
>remain at liberty.  Here, though, there was no trial, no
>conviction, no finding of misconduct or future
>dangerousness.  So when the federal law barred Dr.
>Emerson from possessing guns, he was a citizen with a
>clean record, just like you and me.  Hence his Second
>Amendment defense.
>
>     The hot constitutional question is whether the
>Second Amendment protects only states' rights to arm
>their own military forces, or whether it protects an
>individual right.  If the states-rights view is correct,
>Dr. Emerson could have been disarmed with no
>constitutional worries -- and so could anyone else.  But
>the Second Amendment's text and original meaning pretty
>clearly show that it protects individuals.  The text, "A
>well-regulated Militia, being necessary to the security
>of a free State, the right of the people to keep and bear
>Arms, shall not be infringed," says the right belongs to
>people, not states.  And in the Bill of Rights "the right
>of the people" refers to individuals, as we see in the
>First and Fourth Amendments.
>
>     Moreover, the Second Amendment is based on the
>British 1688 Bill of Rights and is related to right-to-
>bear-arms provisions in Framing-era state constitutions. 
>The British right must have been individual; there were
>no states in England.  Same for the state constitutional
>rights; a right mentioned in a state Bill of Rights,
>which protects citizens against the state government,
>can't belong to the state itself.  So in the Framing era,
>the "right to bear arms" meant an individual right.
>
>     What about the militia?  The Second Amendment
>secures a "right of the people," not of the militia; but
>in any event, as the Supreme Court held in 1939, the
>Framers used "militia" to refer to all adult able-bodied
>males under age 45.  Even today, under the 1956 Militia
>Act, all male citizens between 18 and 45 are part of the
>militia.  (Women are probably also included, given the
>Supreme Court's sex-equality precedents.) "Well-regulated
>militia" in late 1700s parlance meant the same thing --
>"the body of the People capable of bearing Arms," which
>is how an early propsoal for the amendment defined it. 
>And the individual-rights view is the nearly unanimous
>judgment of all the leading 1700s and 1800s commentators
>and cases.
>
>     Based on this evidence, federal Judge Sam Cummings
>concluded Dr. Emerson's gun possession (though not his
>gun misuse) was constitutionally protected.  If the
>Second Amendment is to be taken seriously, then Judge
>Cummings was right, and the other lower court cases
>holding the contrary were wrong.
>
>     If, that is, the Second Amendment is to be taken
>seriously.  The notion of a written, binding Constitution
>tells us it should be, but cases like this lead some to
>wonder.  Why, they ask, should today's decisions be bound
>by the dead hand of the past?  If we have a "living
>Constitution" onto which courts may graft new rights, why
>can't they prune away obsolete ones?
>
>     These are genuinely tough questions, which go far
>beyond just the Second Amendment, and which have been
>raised in past controversies by conservatives as well as
>liberals.  Let me give a few responses.
>
>     First, government entirely by the sometimes
>hyperactive hand of the present also has flaws.  The
>benefits of liberties, however real, are often less
>visible than the costs.  When we see Dr. Emerson before
>the court, accused of making violent threats, it's
>tempting to treat the right to possess guns as a
>nuisance.  But we don't as easily see the hundreds of
>thousands of people who use guns each year in self-
>defense, including separating spouses who defend
>themselves against would-be abusers.
>
>     Second, modern innovations that restrict traditional
>liberties are often oversold.  Realistically, people
>willing to violate laws against violent crime will rarely
>be deterred by laws against gun possession.  Conversely,
>if Dr. Emerson is the poster child for why some shouldn't
>have guns, he is equally an example of how the law could
>effectively punish people for misusing guns (by
>brandishing them in a threatening way) rather than just
>for having them.  Maybe ignoring the Constitution is
>neither so valuable nor so necessary.
>
>     Third, while some think gun rights are "obsolete,"
>others disagree.  Since 1970, 15 states have enacted new
>state constitutional rights to bear arms or strengthened
>old ones; 44 constitutions now have such provisions.  In
>the mid-1980s, nine states let pretty much all law-
>abiding adults get a license to carry concealed weapons;
>now the number is 31.  A conclusion that the right is
>obsolete thus doesn't rest on any unambiguous consensus;
>it can rest only on the judge's personal policy
>preferences.  Do we trust judges that much?
>
>     And finally, do we trust judges to determine when
>other provisions -- the Establishment Clause, the
>privilege against self-incrimination, the jury trial, the
>freedom of speech -- become obsolete, too?
>
>
>                         * * *
>
>
>     Eugene Volokh is your loyal editor; you can find
>links to his Second Amendment-related articles at
>http://www.law.ucla.edu/faculty/volokh/index.htm#GUNCONTROL
>
>     He has collected a large set of original sources
>on the Second Amendment, available at
>http://www.law.ucla.edu/faculty/volokh/2amteach/sources.htm
>
>     For the opposite view of the Second Amendment, see
>http://www.handguncontrol.org/ (Handgun Control, Inc.'s
>Web site), especially
>http://www.handguncontrol.org/legalaction/C2/c2rtarms.htm
>
>
>
>======================================================
>
>
>      CENTER-RIGHT is edited by Eugene Volokh, who
>teaches constitutional law and copyright law at UCLA
>Law School (http://www.law.ucla.edu/faculty/volokh),
>and organized with the help of Terry Wynn and the
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>
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