In re Applications of Ameritech Corp., CC 98-141

• Decision Date: 08 October 1999
• Docket Number: CC 98-141
• Court: Federal Communications Commission Decisions
• Parties: In re Applications of AMERITECH CORP., Transferor, AND SBC COMMUNICATIONS INC., Transferee, For Consent to Transfer Control of Corporations Holding Commission Licenses and Lines Pursuant to Sections 214 and 310(d) of the Communications Act and Parts 5, 22, 24, 25, 63, 90, 95 and 101 of the Commission's Rules

In re Applications of AMERITECH CORP., Transferor, AND SBC COMMUNICATIONS INC., Transferee, For Consent to Transfer Control of Corporations Holding Commission Licenses and Lines Pursuant to Sections 214 and 310(d) of the Communications Act and Parts 5, 22, 24, 25, 63, 90, 95 and 101 of the Commission's Rules

CC No. 98-141

Federal Communications Commission

October 8, 1999

Adopted: October 6, 1999

MEMORANDUM OPINION AND ORDER

By the Commission: Commissioner Ness issuing a statement Commissioners Furchtgott-Roth and Powell concurring in part dissenting in part, and issuing separate statements Commissioner Tristani issuing a statement.

TABLE OF CONTENTS

Page

I. INTRODUCTION ............................................................................................................... 5

II. EXECUTIVE SUMMARY ................................................................................................. 6

III. BACKGROUND ................................................................................................................. 8

A. The Applicants ......................................................................................................... 8

1. A Changing Industry .................................................................................. 11

2. State of Local Competition in SBC and Ameritech Regions ..................... 12

B. The Merger Transaction and Review Process ....................................................... 18

1. Department of Justice Review ................................................................... 19

2. State and International Review .................................................................. 20

3. Commission Review .................................................................................. 22

IV. PUBLIC INTEREST FRAMEWORK .............................................................................. 25

V. ANALYSIS OF POTENTIAL PUBLIC INTEREST HARMS ........................................ 30

A. Overview ................................................................................................................ 30

B. Analysis of Competitive Effects ............................................................................ 32

1. Competition Between SBC and Ameritech ............................................... 32

2. Local Exchange and Exchange Access Services ....................................... 34

C. Comparative Practices Analysis ............................................................................ 49

1. Need for Comparative Practices Analyses ................................................. 51

2. Effect of Reduction in Number of Benchmarks ........................................ 55

3. The Value of Comparative Practices Analyses .......................................... 59

4. Adverse Effects of SBC/Ameritech Merger .............................................. 69

5. Continued Need for Major Incumbent LEC Benchmarks ......................... 75

6. Conclusion ................................................................................................. 83

D. Increased Discrimination ....................................................................................... 84

1. Overview .................................................................................................... 84

2. Analysis ...................................................................................................... 88

VI. ANALYSIS OF POTENTIAL PUBLIC INTEREST BENEFITS .................................. 114

A. National-Local Strategy ....................................................................................... 115

1. The Benefits are Not Merger-Specific ..................................................... 119

2. Magnitude of the Claimed Benefits ......................................................... 131

B. Efficiencies .......................................................................................................... 135

1. Cost Savings ............................................................................................. 137

2. Revenue Enhancements ........................................................................... 139

3. Long Distance .......................................................................................... 141

C. Other Product Markets ......................................................................................... 141

VII. CONDITIONS ................................................................................................................. 143

A. Open Process ........................................................................................................ 144

B. Adopted Conditions ............................................................................................. 145

1. Promoting Equitable and Efficient Advanced Services Deployment ...... 148

2. Ensuring Open Local Markets ................................................................. 156

3. Fostering Out-of-Territory Competition .................................................. 166

4. Improving Residential Phone Service ...................................................... 167

5. Ensuring Compliance with and Enforcement of these Conditions .......... 170

C. Benefits of Conditions ......................................................................................... 175

1. Mitigating Harm from Loss of Potential Competition ............................. 176

2. Mitigating Harm from Loss of Benchmarks ............................................ 177

3. Mitigating Harm from Potential Increased Discrimination ..................... 178

4. Additional Benefits from Conditions ....................................................... 180

D. Other Requested Conditions or Modifications to Proffered Conditions .............. 181

1. Separate Affiliate for Advanced Services ................................................ 182

2. Requests Regarding Other Conditions ..................................................... 198

VIII. OTHER ISSUES .............................................................................................................. 214

A. Wireless Services ................................................................................................. 214

1. Wireless Service Offerings ...................................................................... 214

2. Relevant Markets ..................................................................................... 215

3. Mobile Voice Telephone Services ........................................................... 215

4. Two-way Wireless Data Services ............................................................ 217

5. Paging Services ........................................................................................ 217

6. Other Competitive Issues ......................................................................... 217

B. International Issues .............................................................................................. 218

1. SBC Foreign Carrier Affiliations ............................................................. 218

2. Ameritech Foreign Carrier Affiliations ................................................... 221

C. Alarm Monitoring ................................................................................................ 223

1. Overview .................................................................................................. 223

2. Analysis .................................................................................................... 225

3. AICC Motion on Smith Alarm ................................................................ 231

D. Cable Overbuild Issues ........................................................................................ 232

E. Service Quality Issues .......................................................................................... 234

F. Public Interest Issues Involving SBC's Acquisition of the Ameritech

Licenses and Lines ............................................................................................... 236

G. Requests for Evidentiary Hearing ........................................................................ 239

IX. ORDERING CLAUSES .................................................................................................. 243

APPENDIX A: Public Record Filings

A. List of Commenters and Filings

B. List of Participants in Public Forum on Merger Conditions

APPENDIX B: Summary of Confidential Information and Conclusions [TEXT NOT AVAILABLE IN PUBLICLY RELEASED VERSION]

A. Each Applicant's Plans to Compete Outside Its Home Region

1. Ameritech's Out-of-Region Plans

2. SBC's Out-of-Region Plans

3. Conclusion

B. Additional Information Pertaining to the Analysis of Potential Public Benefits

APPENDIX C: Conditions

I. INTRODUCTION

1. In this Order, we consider the joint applications filed by SBC Communications Inc. (SBC) and Ameritech Corporation (Ameritech) 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 licenses and lines from Ameritech to SBC in connection with their proposed merger.^[2]Before we can grant their applications, SBC and Ameritech (collectively, Applicants) must demonstrate that their proposed transaction will serve the public interest, convenience, and necessity.^[3] After lengthy discussions with Commission staff and consideration of public comments in this proceeding, SBC and Ameritech supplemented their initial application by attaching to it proposed conditions representing a set of voluntary commitments.

2. We conclude that approval of the applications to...