In re Application of WorldCom, Inc.
| Decision Date | 14 September 1998 |
| Docket Number | CC 97-211 |
| Parties | In the Matter of Application of WorldCom, Inc. and MCI Communications Corporation for Transfer of Control of MCI Communications Corporation to WorldCom, Inc. |
| Court | Federal Communications Commission Decisions |
Adopted: September 14, 1998
By the Commission: Commissioner Furchtgott-Roth concurring and issuing a statement; Commissioner Powell issuing a statement and Commissioner Tristani approving in part, dissenting in part, and issuing a statement.
Paragraph I. INTRODUCTION ....................................................... 1
II. BACKGROUND ........................................................ 2
III. PUBLIC INTEREST FRAMEWORK ....................................... 8
IV. ANALYSIS OF POTENTIAL PUBLIC INTEREST HARMS .................... 23
1. Relevant Market ......................................... 24
2. Market Participants ....................................... 32
3. Analysis of Competitive Effects ............................. 36
1. Input Markets ........................................... 82
2. End User Markets ....................................... 119
3. GTE's Argument Regarding IMTS and Private Line Services ...... 133
4. Analysis of Transfer of Control of MCI's DBS License .......... 140
1. Background ........................................... 143
2. Analysis of Competitive Effects ........................... 147
3. MCI's Divestiture ....................................... 151
4. International Internet Issues ............................... 157
1. Relevant Markets ....................................... 164
2. Market Participants ...................................... 169
3. Analysis of Competitive Effects ............................ 183
V. POTENTIAL PUBLIC INTEREST BENEFITS ............................... 194
VI. OTHER ISSUES ...................................................... 200
VII. CONCLUSION ...................................................... 224
VIII. ORDERING CLAUSES ............................................... 225
APPENDIX List of Commenters
1. In this Order, the Commission considers the applications filed by WorldCom, Inc. (WorldCom) and MCI Communications Corporation (MCI) pursuant to sections 214(a) and 310(d) of the Communications Act of 1934, as amended (Communications Act), [1] for approval to transfer control of certain licenses and authorizations from MCI to WorldCom in connection with their proposed merger. In accordance with the terms of sections 214(a) and 310(d), WorldCom and MCI (collectively, Applicants) must persuade us that their proposed transaction will serve the public interest, convenience, and necessity before we can grant their applications.[2] For the reasons set forth below, we conclude that WorldCom and MCI have demonstrated that the transfer of the subject licenses and authorizations will serve the public interest, convenience, and necessity. Accordingly, we grant their applications for transfer of control. In so doing, however, we condition our approval on MCI's divesture of its Internet assets to Cable & Wireless plc (C&W) prior to the close of its merger with WorldCom. Further, although this Order permits the transfer to WorldCom of MCI's direct broadcast satellite (DBS) license, such transfer is subject to whatever action the Commission may take pursuant to the pending application for review of the initial license grant to MCI.
2. MCI is one of the largest telecommunications companies in the United States (U.S.), with 1997 revenues of $19.6 billion.[3] MCI is the second largest U.S. provider of long distance and international telecommunications services.[4] It also provides local exchange service in 62 U.S. cities through its MCImetro subsidiary.[5] At the time the instant merger application was filed, MCI was a major provider of Internet backbone and access services, which it provided over its national fiber network.[6]
3. WorldCom is also among the largest U.S. telecommunications companies, with 1997 revenues of $7.35 billion.[7] It is the fourth largest U.S. provider of long distance and international telecommunications services[8] and provides local exchange service in 111 U.S. cities through its subsidiaries Brooks Fiber Properties (Brooks Fiber) and Metropolitan Fiber Systems (MFS).[9] WorldCom is also a major provider of Internet backbone and access services, which it provides over its national fiber network.
4. The Applicants request the Commission's consent to the transfer of control of MCI's numerous Title II authorizations and cable landing licenses and Title III radio licenses to WorldCom.[10] WorldCom's first application was filed on October 1, 1997, in conjunction with its initial tender offer for MCI.[11] Following WorldCom and MCI's November 9, 1997 merger agreement, the companies jointly filed an amended application for transfer of control of MCI's licenses and authorizations to WorldCom on November 21, 1997.[12] On July 31, 1998, Applicants filed a minor amendment listing additional private land mobile radio licenses held by MCI, but not included in the initial application.[13]
5. Under the terms of the merger agreement, MCI will become a wholly-owned subsidiary of WorldCom[14] and the combined company will be renamed MCI WorldCom.[15]Holders of MCI Common Stock will receive shares of WorldCom Common Stock according to an agreed upon exchange ratio.[16] Following the merger, current holders of MCI Common Stock will own approximately 45 percent of the combined company.[17]
6. The proposed merger was reviewed by European and U.S. Federal antitrust authorities. On July 8, 1998, the European Commission (EC) cleared the merger subject to the condition that MCI sell its entire Internet business.[18] The proposed merger was reviewed by the U.S. Department of Justice pursuant to the Hart-Scott-Rodino amendment to the Clayton Act.[19]On July 15, 1998, the U.S. Department of Justice (DOJ) issued a press release concluding that the merger of WorldCom and MCI may proceed after MCI sells its Internet business.[20] The instant Order represents the Commission's independent review of the merger based on its public interest standard.
7. Numerous parties filed timely comments opposing the application or petitions to deny the application. These parties assert that the transfer of control of MCI's licenses and authorizations to WorldCom is not in the public interest.[21] In addition, parties filed numerous procedural and related motions.[22]
8. Pursuant to sections 214(a) and 310(d) of the Communications Act, the Commission must determine whether Applicants have demonstrated that granting a transfer of control of licenses and authorizations from MCI to WorldCom would serve the "public interest."[23] More specifically, under section 214(a) of the Communications Act, the Commission must find that the "present or future public convenience and necessity require or will require" WorldCom to operate the acquired telecommunications lines, and that "neither the present nor future public convenience and necessity will be adversely affected" by the discontinue of service from MCI.[24] Under section 310(d) the Commission must determine that the proposed transfer of wireless licenses "serves the public interest, convenience, and necessity" before it can approve the transaction.[25]
9. The public interest standard of sections 214(a) and 310(d) is a flexible one that encompasses the "broad aims of the Communications Act."[26] These broad aims include, among other things, the implementation of Congress' "pro-competitive, de-regulatory national policy framework designed to . . . open[] all telecommunications markets to competition, "[27]"preserving and advancing" universal service, [28] and "accelerat[ing] rapidly private sector deployment of advanced telecommunications and information technologies and services."[29] The public interest analysis may also include an assessment of whether the merger will affect the quality of telecommunications services provided to consumers or will result in the provision of new or additional services to consumers.[30] In evaluating whether the proposed transaction furthers the aims of the Communications Act, the Commission may consider the trends within, and needs of, the telecommunications industry, the factors that influenced Congress to enact specific provisions of the Communications Act, and the nature, complexity, and rapidity of change in the telecommunications industry.[31] Of course, we note that this list of considerations is not exhaustive, and an assessment of other factors may be appropriate in the future.
10. The statutory standards that the Commission must apply in this case necessarily involve a balancing process that weighs the potential public interest harms against...
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