WPC 2B ZK0  Volume I - Applications and Request for STA Network AdministratorNetwork Administrator  *XXN\  PXP  X0Í ÍX0Í ÍҫXN\  PXP&a0 Z 6Times New Roman RegularX23|x  ЊX   * See Amendment to Application of WorldCom, Inc. For Transfer of Control of MCI Communications Corporation, dated November 21, 1997. ( Before the FEDERAL COMMUNICATIONS COMMISSION "Washington, D.C. 20554 ă In the Matter ofhh#(-pp2) ` `  hh#(-pp2)  * Applications of WorldCom, Inc. and -pp2) Howard A. White, Trustee, for (-pp2)7File No. ________________ Transfers of Control of hh#(-pp2) MCI Communications Corporation and -pp2) Request for Special Temporary Authority -pp2) ` `   To:` ` The Commission APPLICATIONS AND REQUEST FOR SPECIAL TEMPORARY AUTHORITY (VOLUME I ă ` `  hh#(-pp2Andrew D. Lipman Catherine R. Sloanhh#(-pp2Jean L. Kiddoo Robert S. Koppelhh#(-pp2Helen E. Disenhaus ` `  hh#(- WORLDCOM, INC.hhh(-pp2SWIDLER & BERLIN, CHTD. 1120 Connecticut Ave., N.W.(-pp23000 K Street, N.W., Suite 300 Washington, D.C. 20036hh#(-pp2Washington, D.C. 20007 (202) 7761550hh#(-pp2(202) 4247500 Dated:` ` October 1, 1997   @-  -@  ( VOLUME I TABLE OF CONTENTS     ` ` ` SUMMARYp"(#Iiii ` ` ` I.` ` ` INTRODUCTION AND OVERVIEWp"(#J1 ` ` ` ` `   * ` ` ` ` `  A. WorldCom is Initiating an Exchange Offer for All of ` ` ` ` `   MCIs Issued and Outstanding Stockp"(#J1 ă ` ` `   ` ` `  1. The Transaction Achieves a Significant Milestone in ` ` `  the Evolution of Telecommunications Competitionp"(#J1 ` ` `    ` ` `   2. A TwoStep FCC Approval Process is the Appropriate ` ` `   Procedure for the Commission to Address the Offer ` ` `   and Subsequent Merger Transactionp"(#J3 ă ` ` ` hhh ` ` ` hhh a.hhhThe Transaction Contemplates Use of an ` ` ` hhhhh# Interim Voting Trust Arrangement to Complete ` ` ` hhhhh# the Exchange Offer Pending Commission ` ` ` hhhhh# Approval of the Transfer of Control to WorldComp"(#J5 ă ` ` ` hhh ` ` ` hhh b.hhhUse of a Voting Trust Permits Timely ` `  hhhhh# and Orderly Completion of the Exchange ` ` ` hhhhh# Offer in a Manner Fully Consistent with ` ` ` hhhhh# Commission Proceduresp"(#J6 ă ` ` ` ` `  ` ` ` ` `  B. Description of the Consolidated Applicationsp"(#J8 ă ` ` ` II.` ` REQUEST FOR SPECIAL TEMPORARY AUTHORITYp`"(#I10 ă ` ` ` ` `  ` ` ` ` `  A. In Reviewing this Request, the Commission Should ` ` ` ` `   Follow the Procedures Established in the FCC Policy ` ` ` ` `   Statement to Avoid Unnecessary Processing Delays in ` ` ` ` `   the Context of Tender Offers and Proxy Contestsp`"(#I10 ` ` `   ` ` `   1.Use of These TwoStep Procedures Achieves the ` ` `   Policy Statements Objectives of Maintaining FCC ` ` `   Neutrality and Accommodating Other Federal Laws ` ` `   Intended to Protect Shareholder Rightsp`"(#I10 ` ` `  ` `  *` `  ` `    2.The Commission Has Explicitly Held that the ` ` `   Policy Statement and Related Procedures are ` ` `   Applicable to All CommissionRegulated Servicesp`"(#I12 ` ` `   ` ` `   3. These Applications Comply with the Policy ` ` `   Statements Processing Procedures and Requirementsp`"(#I15 ` ` ` ` `  ` ` ` ` `  B. The Trustee is Eminently Qualified to Serve in that Capacityp`"(#I17 ` ` ` ` `  ` ` ` ` `  C. The Terms and Conditions of the Voting Trust Fully ` ` ` ` `   Conform to the Commissions Requirementsp`"(#I19 ` ` ` ` `  ` ` ` ` `  D. Conclusion: The Commission Should Promptly Grant ` ` ` ` `   the Requested STA and Interim Transfer to the Independent ` ` ` ` `   Trusteep`"(#I23 ă ` ` ` III.` ` ` THE PUBLIC INTEREST BENEFITS OF THE ` ` TRANSACTIONS ARE SUBSTANTIAL AND PERSUASIVE.p`"(#I24 ` ` ` ` `  ` ` ` ` ` A. The Merger of MCI and WorldCom Furthers the Public ` ` ` ` `  Interest Because it Will Enhance Competition in Multiple ` ` ` ` `  Sectors of the Telecommunications Industryp`"(#I24 ` ` ` ` `  ` ` ` ` ` B. The Procompetitive Merger of WorldCom and MCI ` ` ` ` `  Will Result in Substantial Enhancement of Local, ` ` ` ` `  Interexchange, and International Competitionp`"(#I28 ` ` `   ` ` `  1.Numerous Synergies, Efficiencies, and Economies ` ` `  Will be Achieved Through the Merger of WorldCom ` ` `  and MCIp`"(#I28 ` ` `   ` ` `  2.Local Services Competition Will be Particularly ` ` `  Enhanced from the Merger of WorldCom and MCIp`"(#I32 ` ` `   ` ` `  3.Substantial Enhancement of International Services ` ` `  Competition Will Likely Result from the Merger of ` ` `  WorldCom and MCIp`"(#I35 ` ` ` ` `  ` ` ` ` ` C. The Merger Will Accelerate Competition Without Raising ` ` ` ` `  Any of the Competitive Concerns Sometimes Raised by ` ` ` ` `  Mergers Involving Carriers with Market Powerp`"(#I38 ` ` `   ` ` `  1.The Merger Will Accelerate the Development ` ` `  of Competition by Creating a Leading and ` ` `  Innovative Provider of Integrated OneStop ` ` `  Shopping For Communications Servicesp`"(#I39 ` ` `   ` ` `  2.MCI and WorldComs Lack of Market Power ` ` `  Avoids AntiCompetitive Concernsp`"(#I40 ` ` ` ` `  ` ` ` ` ` D. Conclusion: The Commission Should Promptly Approve ` ` ` ` `  the Applications Because the Merger of WorldCom and ` ` ` ` `  MCI Will Enhance Competition and Otherwise Further ` ` ` ` `  the Public Interestp`"(#I42  XX * IV.` ` EXHIBITS ` `  A. Voting Trust Agreement ` `  B. Trustees Curriculum Vitae ` `  C. FCC Forms 159 Associated with the Request for ` `   Special Temporary Authority @-  -@  (SUMMARY׃  *` `  WorldCom, Inc. ( WorldCom or Transferee) is commencing an Exchange Offer (the Offer) for all the issued and outstanding stock of MCI Communications Corporation ( MCI). WorldCom respectfully submits that, as has been the case with the series of previous acquisitions by WorldCom in recent years, telecommunications customers, shareholders, and the general public will realize extraordinary benefits from a merger between MCI and WorldCom. WorldCom and MCI share similar histories as pioneers in the introduction of competition to the telecommunications marketplace through innovation, agility, and rapid growth. Indeed, these two companies are the paradigm for the American entrepreneurial spirit they have both forged significant inroads into industry sectors long dominated by mammoth incumbent providers and have been among the first to offer consumers a choice of providers for local, long distance, data, and other services. Combined, the two companies will accelerate competition especially in local markets by creating a company with the capital, marketing abilities, and stateoftheart network to compete against incumbent carriers.  *` `  Because of the pendency of the proposed acquisition by British Telecommunications plc ( BT) of MCI (the BTMCI Acquisition), this Offer is what is colloquially termed a hostile tender offer. WorldCom seeks therefore to prosecute the Offer in a timely and orderly manner, so that MCIs shareholders may consider it simultaneously with their consideration of the revised BT acquisition proposal. Accordingly, consistent with well established Commission procedures, WorldCom hereby requests that the Commission grant it Special Temporary Authority ( STA) for an interim transfer of the stock of MCI and its đ * licensee subsidiaries to an independent Trustee, Professor Howard A. White ( Trustee), of St. Johns University School of Law, pursuant to the terms of the attached Voting Trust Agreement, pending Commission consideration of the applications requesting a transfer of control to WorldCom. ` `  The provisions of the Voting Trust Agreement and the application procedures utilized in this Consolidated Application fully conform to the policies and procedures of the Commissions Policy Statement on Tender Offers and Proxy Contests, which was adopted specifically to address this type of corporate ownership contest. Under the Policy Statement, the Commission will consider on an expedited basis STA requests and related transfer applications proposing an interim transfer to an independent trustee, pending Commission processing under its usual procedures of related applications proposing a transfer of control to the offeror. ` `  This Consolidated Application therefore consists of three parts. Volume I includes  *general information pertaining to the transaction and all the applications, including the STA request; information concerning the voting trust and trustee; and a discussion of the public  *interest benefits of the proposed transaction. Volume II contains the Step I STA Applications pertaining to the proposed transfer of shares from the Shareholders of MCI to the Trustee. Volume III contains the Step II Applications seeking approval of a transfer of control from the Trustee to WorldCom.   ( Before the FEDERAL COMMUNICATIONS COMMISSION "Washington, D.C. 20554ă In the Matter ofhh#(-pp2) ` `  hh#(-pp2)  * Applications of WorldCom, Inc. and (-pp2) Howard A. White, Trustee, for (-pp2)7File No. _______________ Transfers of Control of hh#(-pp2) MCI Communications Corporation and -pp2) Request for Special Temporary Authority -pp2) ` `  hh#(-pp2 To:` ` The Commission yxdddy yxdddy  *ZAPPLICATIONS AND REQUEST FOR SPECIAL TEMPORARY AUTHORITY ă d'VOLUME ONE yxdddy yxdddy I.` ` ` INTRODUCTION AND OVERVIEW  * ` `  A. WorldCom is Initiating an Exchange Offer for All of MCIs Issued and Outstanding Stock. ` `  1. The Transaction Achieves a Significant Milestone in the Evolution of Telecommunications Competition.  *` `    WorldCom, Inc. ( WorldCom or Transferee) is commencing an Exchange Offer (the Offer) for all the issued and outstanding stock of MCI Communications Corporation ( MCI). X0ÍX0Í   Í` `  Related documents filed with the Securities and Exchange Commission ( SEC) may be obtained from, among other sources, the SECs Electronic Data Gathering, Analysis and Retrieval (EDGAR) System which can be accessed through the SECs web site whose Uniform Resource Locator ( URL) is . Č WorldCom respectfully submits that, as has been the case with the series of other acquisitions by WorldCom in recent years, telecommunications customers, shareholders, and the general public will realize substantial benefits from a merger between X8ÍX8Í 8Í 8ÍґMCI and WorldCom.x   Í` ` See Remarks of Commissioner Susan Ness Before the Joint Meeting of the NARUC Communications and International Relations Committees, San Francisco, California (July 23, 1997) at 7, where the Commissioner said: Mergers, as you know, can be procompetitive or anticompetitive. Procompetitive mergers put together companies that can bring an increased level of competition to the marketplace. An example would be the merger of MFS and LDDS. The substantial public interest benefits of the proposed transactions are discussed, infra, in Section III.x This transaction will achieve a significant milestone in the history of the telecommunications industry, by bringing together two pioneering companies in competitive long distance, local, international, and advanced data services. WorldCom and MCI share similar entrepreneurial legacies and experiences in newly competitive markets. They have a common history of innovation, agility, and growth, and they share a mutual vision of the future. Indeed, these two companies are the paradigms for the American entrepreneurial spirit. By complementing the operating and management expertise of WorldCom with the skills and experience of MCI, the merger of MCI and WorldCom will create one of the worlds leading telecommunications carriers (particularly in the fastestgrowing segments of the global telecommunications industry) with the combined expertise to meet the expanding and diverse needs of sophisticated business and residential customers. ` ` The combination of advanced fiberbased local city networks, high capacity transoceanic cables, and stateoftheart global long distance and data networks well position the combined company to become a preeminent provider of advanced onestopshopping telecommunications services. The contribution of WorldComs domestic local networks,   Í` ` See, e.g., New Paradigm Resources Group, Inc. & Connecticut Research, 1997 Annual Report on Local Telecommunications Competition at 43850 ( Paradigm Report). with an established, facilitiesbased presence in over 50 U.S. metropolitan areas, will greatly accelerate MCIs local services entry strategy and result in significant savings, efficiencies, and economies of scale and scope for the combined company. By creating a more effective and multifaceted carrier in the local exchange sector, the proposed merger will significantly enhance competitive choice for U.S. telecommunications customers, and advance, further than perhaps any other initiative, realization of the underlying intent of Congress and the Commission in implementing the Telecommunications Act of 1996.   *` `    2. A TwoStep FCC Approval Process is the Appropriate Procedure for the Commission to Address the Offer and Subsequent Merger Transaction.  ` ` The Offer and proposed subsequent merger (the Merger and, collectively with the Offer, the Transactions) will enable WorldCom to acquire the entire equity interest in MCI. Because MCI directly and indirectly holds numerous cable landing licenses   Í` ` See  An Act Relating to the Landing and Operation of Submarine Cables in the United States, 47 U.S. C.  34 39 (the Cable Landing License Act). and Title II and Title III radio licenses and authorizations issued by the Commission (the MCI Authorizations),!   Í` ` MCI holds authorizations for international wireline facilities, and a variety of wireless facilities, including pointtopoint microwave stations, earth station licenses, private telephone maintenance radio service licenses, private business radio licenses, private aircraft stations licenses, and an 800 MHZ airground radiotelephone license . . . used to provide voice and video services. . . . [as well as] submarine cable landing licenses and a direct broadcast satellite (DBS) license. In the Matter of The Merger of MCI Communications Corporation and British Telecommunications plc, Memorandum Opinion and Order, GN Dkt. No. 96245, FCC 97302 at  21 (rel. Sept. 24, 1997) ( BT/MCI Order)  *` `   While WorldCom has attempted to obtain from the Commissions public records a complete list of these authorizations, see Exhibit IV.C, Transferee is unable at this time to confirm that this listing represents a full compilation of the numerous authorizations and their respective licensees since MCIs Board of Directors has not endorsed the Exchange Offer and MCIs management has not participated in or reviewed the license compilation in Exhibit IV.C. Transferee respectfully requests, therefore, that the Commission deem these Applications to encompass all authorizations held by MCI or its subsidiaries. In the case of several MCI licenses, it should be noted that Transferee has not requested transfers of control for two public coast stations whose applications for transfer of control from MCI to a third party, Globe Wireless, Inc., were granted in May 1997. See Applications of Globe Wireless, Inc. For Public Coast Stations KPH and WCC, Memorandum Opinion and Order, FCC File Nos. 878286 and 878287, 12 FCC Rcd. 6002 (1997). The Applicants presume that these transactions were consummated, given the MCI request for dismissal of the corresponding applications for transfer of the authorizations to BT. ! consummation of the Transactions is subject to, among other things, prior Commission approval of the applications, filed concurrently herewith, for transfer of control  * of MCI to WorldCom. As the Commission is aware, there is currently pending a proposed acquisition by British Telecommunications plc ( BT) of MCI (the BT-MCI Acquisition),y   Í` `  See BT/MCI Order, supra note 5, at 1. y which has been endorsed by the Board of Directors of MCI. The WorldCom Offer is * Pages 5 through 23 of Volume I of the October Applications are deleted in their entirety by this Amendment.         *` `  With respect to the instant situation, WorldCom respectfully submits that the Commissions requirements for grant of the STA and the Step I Applications are satisfied and that their prompt grant would further the public interest. Use of an interim voting trust arrangement to permit the Offer to proceed without unnecessary delay that could prejudice its success is consistent with Commission policies and procedures codified in the Policy Statement and compatible with other federal laws. The terms of the Voting Trust Agreement conform to Commission requirements intended to ensure the independence of a voting trustee during the pendency of applications for transfer of control to WorldCom. The Trustee selected by WorldCom is fully qualified to hold that position and fulfill his responsibilities under the Trust Agreement. ` `  Therefore, the Commission should expeditiously grant the STA Request and approve the Step I Applications requesting grant of authority for an interim transfer of control of MCI to the Trustee. III.` ` ` THE PUBLIC INTEREST BENEFITS OF THE TRANSACTIONS ARE SUBSTANTIAL AND PERSUASIVE. ` ` A. The Merger of MCI and WorldCom Furthers the Public Interest Because it Will Enhance Competition in Multiple Sectors of the Telecommunications Industry. ` `  Pursuant to Sections 214(a) and 310(d) of the Communications Act, the Commission must review the FCC Applications to determine that transfers of the subject licenses and 'authorizations would promote the public interest, convenience, and necessity.n(   Í` ` BT/MCI Order, supra note 5, at  2.n It is well   understood that this standard is to be so construed as to secure for the public the broad aims of the Communications Act.)   Í` ` Western Union Division, Commercial Telegraphers Union, A.F. of L. v. United States, 87 F. Supp. 324, 335 (D.D.C.), affd, 338 U.S. 864 (1949). See also FCC v. RCA Communications, Inc., 346 U.S. 86, 9395 (1953). ` `  In analyzing the merits of a transfer of control application, the Commission must review the proposed transaction on its individual merits , without consideration of alternative transactions or applications. See, e.g., Application of Continental Tel. Corp., Memorandum Opinion and Order, 41 F.C.C. 2d 957, 958 (1973); Viacom, 8 FCC Rcd. 8439 and QVC, 8 FCC Rcd. 8485 (approving simultaneously the STA requests of competing offerors); Eugene McCarthy, 60 Rad. Reg. 2d (P&F) 1207, and Macfadden Acquisition Corp., 60 Rad. Reg. 2d (P & F) 872 (approving STA requests of competing offerors). ` ` In its recent decision approving the merger of Bell Atlantic and NYNEX, the Commission refined the standards to be used under this expansive public interest test in evaluating proposed mergers between telecommunications carriers.-*   Í` ` In Re Application of NYNEX Corp., Transferor, and Bell Atlantic Corp., Transferee, for Consent to Transfer Control of NYNEX Corporation and its subsidiaries, Memorandum Opinion and Order, File No. NSDL9610, FCC 97286 (rel. Aug. 14, 1997) ( BA/NYNEX Order) at  37 42. This analytical framework was also applied in the Commissions recent decision approving the proposed acquisition of MCI by BT. BT/MCI Order, supra note 5, at  3342.- As explained by Chairman Hundt in recent Congressional testimony, the Commission must independently determine whether the proposed merger will enhance competition, or whether it will slow the arrival of competitive markets and deregulation. P+   Í` ` Reed E. Hundt, Testimony on the 1996 Telecommunications Act: An Antitrust Perspective, Before the Subcommittee on Antitrust, Business Rights and Competition of the Committee on the Judiciary of the U.S. Senate, Sept. 17, 1997 ( Hundt Testimony) at 2.P This evaluation generally involves a balancing of the potential competitive benefits in one or more market segments against the potential competitive detriments in one or more other market sectors.*,   Í` ` In addition to its jurisdiction pursuant to Titles II and III of the Communications Act to review transfers of control of licenses and authorizations to determine whether the transfer serves the public convenience and necessity, the Commission also has jurisdiction under Sections 7 and 11 of the Clayton Act to review the competitive impact of such transfers. As the Commission has previously held, however, this authority is largely duplicative, since the Commissions public interest authority under the Communications Act to consider the impact of the proposed transfer on competition is sufficient to address the competitive issues raised by . . . proposed merger[s]. BT/MCI Order, supra note 5, at  28 and nn.4344.* Significantly, however, as Chairman Hundt explained, ` ` ` Mergers and other consolidations can be a potent competitive force. The synergies that result from combining assets may create from two small less efficient firms a large, more efficient one. The effect can be actually to deconcentrate the market, as the newly created and newly enabled merged firm wins market share from incumbent market leaders.m-   Í` ` Hundt Testimony, supra note 43, at 6.m ` ` The proposed merger between WorldCom and MCI is intended to capture just such synergies, efficiencies, and economies. By combining the intellectual energy, capital, management skills, and expertise of WorldCom and MCI, two pioneering and entrepreneurial telecommunications companies, the merger will promote achievement of what the Commission has identified as the overriding goal of the Telecommunications Act of 1996: to open all telecommunications markets to competition..   Í` ` BT/MCI Order, supra note 5, at  6; see also Telecommunications Act of 1996, Pub. L. No. 104104, 110 Stat. 56; Implementation of the Local Competition Provisions in the Telecommunications Act of 1996, First Report and Order, FCC Docket No. 9698, FCC 96325, at  4 (Aug. 8, 1996) ( Local Competition Order) (noting the importance of local competition not only in providing economical and innovative services to customers, but also in preventing incumbents from impeding competition through bottleneck control of facilities). See also Remarks of FCC Commissioner Rachelle B. Chong [Before the Conference on] Bridging Digital Technologies and Regulatory Paradigms, Interesting Times at the FCC, Berkeley, California (June 27, 1997) at 5, voicing the opinion that the Act allows for communications players to seek out new business opportunities and develop synergies with others in order to better compete.  ` ` Evaluated under the applicable Commission review standards, the competitive benefits of the proposed Merger, particularly for local, interexchange, and international services, are substantial, while there are no adverse effects. Most of the activities of WorldCom and MCI are complementary rather than directly competitive. In addition, significantly, neither WorldCom nor MCI controls any bottleneck facilities or incumbent carrier network, or has market power in any telecommunications service.:/   Í` ` Cf. BT/MCI Order, supra note 5, at  188 (finding BT to have near monopoly control over local access services in the U.K. which it had leveraged to maintain high market shares of the intercity and international services sectors).: The industry segment in which their combined market shares will be largest - long distance services - is the sector that is the most competitive and has virtually no barriers to entry. Further, the Commissions own statistics demonstrate that the proposed combined companys market share will be less than half that of AT&T.d0   Í` ` See, e.g., J. Bender, Industry Analysis Div., Com. Car. Bur., FCC, Long Distance Market Shares, 1997 ( IXC Shares Report) at 4, 16, 24; AT&Ts share of presubscribed lines is 63%, as compared to a total of 18% for a combined MCI WorldCom. Id. at 4.d Rather than being a case in which there is a significant likelihood that a combination would eliminate or retard competition, this is clearly a case in which the results will be only procompetitive.{1   Í` ` Cf. BA/NYNEX Order, supra note 5, at  48.{ Review of the overall impact of the merger on competition, therefore, demonstrates that approval of the Transfer Applications would further the public interest and should be granted expeditiously.2   Í` ` Significantly, the Commission has already approved the proposed acquisition by BT of MCI, a transaction resulting in a combination larger in scope than that proposed here, and one involving a dominant carrier in one of the worlds largest telecommunications markets. See BT/MCI Order, supra note 5, at  1920. Grant of the transaction proposed here will avoid the anticompetitive consequences of the BTMCI Acquisition identified by the Commission. See, e.g., id. at  202. Moreover, it generates additional procompetitive benefits resulting from the WorldComMCI merger itself, particularly in the market segments U.S. local, interexchange, and international seamless services in which the Commission anticipated benefits from the proposed BTMCI acquisition that would counterbalance the competitive harm anticipated to result from that acquisition. Id. at  132.   ` ` B. The Procompetitive Merger of WorldCom and MCI Will Result in Substantial Enhancement of Local, Interexchange, and International Competition. ` `  1.Numerous Synergies, Efficiencies, and Economies Will be Achieved Through the Merger of WorldCom and MCI. F ` `  WorldCom has initiated its tender Offer to bring substantial benefits to the public, telecommunications customers, and its shareholders from the combination of MCI and WorldCom to create a preeminent provider of onestopshopping advanced communications services. The combination of MCI and WorldCom will produce an efficient and well positioned competitor in the fastest growing segments of the global market, such as local services and advanced data services, with the combined expertise and capital to meet the expanding and increasingly diversified needs of sophisticated business and residential customers. In many ways, the merger will advance the broad aims of the Communications Act, which include, among other things, the implementation of Congress procompetitive, deregulatory national policy framework for telecommunications, preserving and advancing universal service, and accelerat[ing] . . . private sector deployment of advanced telecommunications and information technologies and services.3   Í` ` BT/MCI Order, supra note 5, at 3, citing BA/NYNEX Order, supra note 42, at  2, citing H.R. Rep. No. 104458 at 1 (1996), and 47 U.S.C.  254 (1997) (interior quotation marks omitted). While both MCI and WorldCom each have a larger presence in the domestic interexchange market than BT, their combined market shares are less than half that of AT&T alone. See supra note 48. This market segment, which was opened to competition long before intrastate and overseas markets, is already highly competitive, with more than 800 alternative providers and few entry barriers of any kind, and, in addition, it is the focus for U.S. market entry by the incumbent local exchange carriers and overseas carriers. The proposed business combination will not only increase competition in the interexchange market, it will promote competition in the far more concentrated local facilities and overseas markets. Cf. BT/MCI Order, supra note 5, at  152; see also IXC Shares Report at 4; Frost & Sullivan, U.S. LongDistance Service and Reseller Markets Domestic, Network Status, and International Markets at 1, 2 (Oct. 1996). Approval of the proposed Transactions will enhance competitionq4   Í` ` BA/NYNEX Order, supra note 42, at  2.q by increasing the resources, facilities, and personnel available to the combined company and allowing it to take optimal advantage of operational synergies, cost savings,5   Í` ` Substantial synergies are expected to be realized by combining the long distance and local operations of MCI and WorldCom to achieve better utilization of the combined network and other operational savings. Significantly, development of local facilitiesbased services is particularly capitalintensive, and the proposed merger will allow both parties to optimize their networks. and complementary service offerings. ` ` In combination, WorldCom and MCI can create a newgeneration telecommunications provider that can grow and thrive in the increasingly competitive domestic and international telecommunications marketplace. MCI has built a welldeserved reputation as a vigorous competitor in domestic interexchange services.6   Í` ` MCI is the second largest U.S. long distance carrier providing domestic voice and data services primarily by fiber and terrestrial digital microwave facilities and international services primarily by submarine cable systems, satellites, and leased international facilities. BT/MCI Order, supra note 5, at  19. WorldCom, which has successfully grown from a regional reseller of long distance services into a facilitiesbased carrier with an expanding international presence, similarly is a long distance innovator and has had a special focus on developing stateoftheart business services, such as new broadband and advanced data services. The two carriers have had similar innovative and entrepreneurial approaches to telecommunications services, with MCI having been the first competitor to penetrate successfully the domestic long distance market and WorldCom having been the leading carrier in opening local services and advanced data services to competition. ` `  With the remaining legal and regulatory barriers to entry being dismantled, both the U.S. and overseas telecommunications markets have the potential to become more competitive. In the United States, both domestic and foreignaffiliated firms, large and small, are entering all industry segments, including both resold and facilitiesbased local services, at a pace that is accelerating daily. The number of authorized interstate carriers is in the hundreds.x7   Í` `  Frost & Sullivan, supra note 51, at 1.pp2x GTE and other local exchange carriers are successfully entering the long distance market. The former Bell Operating Companies, which can now offer long distance services out of region]8   Í` ` 47 U.S.C.  271 (b) (2).] and certain prescribed long distance services in region,9   Í` ` 47 U.S.C.  271(b)(3); 271(g) (permitting RBOC provision of inregion incidental interLATA services such as audio and video programming and commercial mobile radio services). expect soon to offer long distance services more broadly in their service territories. Further, implementation of the World Trade Organizations Agreement on Basic Telecommunications Services ( WTO Agreement) will afford the worlds largest international carriers increased access to the entire U.S. telecommunications market in a matter of months.:   Í` ` See International Settlement Rates, Report and Order, IB Docket No. 96261, FCC 97280 at  912 (Aug. 18, 1997) ( Benchmarks Order). In this dynamic and competitive marketplace, WorldCom believes that the proposed Merger will enhance competition and continue the longstanding record of success and innovation that have been hallmarks of both MCI and WorldCom. As the Commission has recognized, even with the passage of the procompetitive 1996 Telecommunications Act and the WTO, significant barriers to entry into domestic and international telecommunications services remain, and ` ` ` [e]ntrants must still attract capital, and amass and retain the technical, operational, financial and marketing skills necessary to operate as a telecommunications provider. For mass market services, entrants will have to invest in establishing brand name recognition and, even more important, a mass market reputation for providing high quality telecommunications services.q;   Í` ` BA/NYNEX Order, supra note 42, at  6.q Combining their complementary resources will better enable WorldCom and MCI to build a wellpositioned, fullservices carrier that will be a worldwide, not just domestic, leader in the provision of advanced telecommunications services. ` `   2.Local Services Competition Will be Particularly Enhanced from the Merger of WorldCom and MCI. ` `  Of particular importance, by consolidating WorldComs management skills and experience with MCIs sales and marketing expertise, the proposed Merger will significantly enhance the combined companys ability to compete in the least competitive segment of the domestic telecommunications industry: local exchange services. The Merger will result in a combined company that is far better positioned to compete against the powerful and monopolistic incumbents and promote deconcentration of the local services sector.q<   Í` ` Cf. Hundt Testimony, supra note 43, at 6.q This critical industry segment is still overwhelmingly dominated by the incumbent local exchange carriers, whose ratepayerfinanced ubiquitous networks give them substantial market power and a tremendous cost advantage over their new entrant competitors in serving new customers.s=   Í` ` Ameritech Michigan, Memorandum Opinion and Order, CC Docket No. 97137 at  12 (Aug. 19, 1997) ( Ameritech Section 271 Order) (denying Ameritechs Section 271" market entry petition). Incumbent local exchange carriers already control about ten times as many fiber miles as the exchange carriers. J. Kraushaar, Industry Analysis Div., Com. Car. Bur., FCC, Fiber Deployment Update End of Year 1996 at 26, 39 ( Fiber Report) (ILEC fiber miles in excess of 12.3 million; CLEC fiber miles approximately 1.3 million).s As Chairman Hundt recently reported to Congress, local competition is particularly important now because our local networks need to evolve to adapt to the countrys growing data needs.m>   Í` ` Hundt Testimony, supra note 43, at 4.m The greater resources available to the combined company as a result of the merger will allow it to pursue local competition and interconnection opportunities even more aggressively. In combination, WorldCom and MCI will thus expand consumer choice and accelerate the introduction of new broadband and advanced data communications services and products. ` ` The public can particularly benefit from the combined companys enhancement of real competition in the local services sector, both in the U.S. and abroad. WorldCom has already become a prominent and highlyregarded carrier in this segment,v?   Í` ` See Paradigm Study, supra note 3, at 435 52.v but even the combined local market share of MCI and WorldCom is still dwarfed by the respective shares of the incumbent local exchange carriers, who have ubiquitous networks reaching virtually every U.S. home and business, giving them still near, if not absolute, monopolies. WorldComs established presence as a local facilitiesbased provider in more than 50 domestic markets, however, should help jumpstart MCIs local services entry strategy and will result in significant savings for the combined company.@   Í` ` Cf. "BT likely to keep MCI deal terms, Financial Times, at 1, August 19, 1997 (citing MCIs report of losses of $800 million in local services expansion costs). By linking WorldComs local facilities to MCIs long distance customer base, the combined company will substantially enhance its effectiveness in competing with the incumbent local exchange carriers.A   Í` ` Cf. BT/MCI Order, supra note 5, at  88 89. As the Commission recognized in the Interconnection Order, eliminating the incumbents market power inherent in control of local bottleneck facilities is essential to ensuring full competition in all segments of the telecommunications industry: ` ` ` [T]he opening of one of the last monopoly bottleneck strongholds in telecommunications the local exchange and exchange access markets to competition is intended to pave the way for enhanced competition in all telecommunications markets, by allowing all providers to enter all markets.yB   Í` ` Local Competition Order, supra note 46 at  4.y Creating a more effective competitor for local services will also accelerate the introduction of new broadband and other advanced data services and products, enhancing choices for U.S. customers and helping to realize the statutory goals of the Telecommunications Act of 1996. WorldCom expects that the marketplace will respond favorably to the combined entity and its expanded range of services, enabling it to attract and, through reduced churn, retain significant numbers of new customers.` `   3.Substantial Enhancement of International Services Competition Will Likely Result from the Merger of WorldCom and MCI. ` ` The WorldComMCI Merger will also enhance the ability of these U.S.based carriers to penetrate formerly closed overseas markets and take advantage of the opportunities abroad that the U.S. government so strongly advocated in achieving the WTO Agreement. Combining WorldComs panEuropean Ulysses fiber network and city networks in key European cities with MCIs international operations will create a leading alternative provider of telecommunications services in deregulating European and Asian markets. As pioneers in the industry, WorldCom and MCI have complementary skills in competing in such markets, and combining their expertise will permit them to develop effective solutions to meet the increasingly diverse and complex telecommunications needs of multinationals, governments, other business entities, and customers. ` ` Moreover, as the Commission has recognized, [a]n important purpose of the WTO Basic Telecom[munications] Agreement is to enable carriers to provide international service on an endtoend basis.C   Í` ` BT/MCI Order, supra note 5, at  4 (citation omitted). WorldCom has already demonstrated its ability to make significant contributions to emerging European competition, both by providing endtoend services to multinational businesses, and by developing innovative telecommunications infrastructure projects, such as the Gemini Submarine Cable System across the North Atlantic and the Ulysses panEuropean fiber optic system. These projects offer both U.S.based and overseas endusers the high quality, costeffective services they require and have come to depend on from WorldCom in the U.S. The Merger of WorldCom and MCI will lead to expanded offerings of such seamless international services, thereby enhancing the emerging competition in a service in which consumers currently have few options.D   Í` ` Cf. BT/MCI Order, supra note 5, at  130 (finding the only providers of such services to be the Concert, WorldPartners, and Global One alliances). ` ` By providing the innovative services and high capacity facilities that endusers are increasingly demanding, WorldCom has already established itself as an industry leader in advocating and demonstrating the benefits of competition abroad even in countries where competitive opportunities have been extremely restricted. The proposed WorldComMCI Merger will provide WorldCom with additional facilities and resources to accelerate its expansion into international markets now that international opportunities are increasing and WorldCom is beginning to compete with the large incumbent carriers to capture those opportunities. As the Commission has recognized, U.S. consumers benefit from fully competitive world markets in the form of new and better services at lower prices, and promoting the success of U.S.based carriers in entering markets abroad will have measurable and substantial benefits for consumers in the U.S.E   Í` ` Market Entry and Regulation of ForeignAffiliated Entities, Report and Order, 11 FCC Rcd. 3873, 3877 (1995) ( Market Entry Order), recon. pending ( establishing an effectively competitive global communications market could result in reduced rates, increased quality, and new innovative services for U.S. consumers, including the availability of global communications services.). The Commission clarified that the Commissions regulatory focus is on routes between the U.S. and foreign countries, including the U.S. end of global, seamless network services, Id. at 387778. The Commission has recognized that competition in such services requires significant resources, which must extend throughout the world. BT/MCI Order, supra note 5, at 130. See also Benchmarks Order, supra note 58, at  3, 7; Rules and Policies on Foreign Participation in the U.S. Telecommunications Market, IB Docket 97142, Order and Notice of Proposed Rulemaking, FCC 97195 (rel. June 4, 1997) ( Foreign Participation Notice) .֌` ` WorldCom has long supported the U.S. governments successful efforts to achieve the WTO Agreement because of the favorable marketopening opportunities it creates in formerlyclosed international markets. Yet, WorldCom, which is longaccustomed to battling the incumbent local exchange carriers in the U.S., does not underestimate the substantial resources and facilities required to be successful in overseas markets where competition is still little more than embryonic . By combining with MCI, WorldCom believes that it will be able to be a more aggressive and successful competitor and can ensure that the public can receive the substantial benefits of effective competition in both U.S. local and international markets that have for too long been closed.F   Í` ` See BT/MCI Order, supra note 5, at  127 (strengthening the position of a competitor to the local exchange carriers likely to enhance competition in this relevant market). Approval of the Merger will therefore advance the Commissions objective of benefitting U.S. telecommunications consumers by promoting competition worldwide.G   Í` ` See, e.g., BT/MCI Order, supra note 5, at  209; Local Competition Order, supra note 46; Market Entry Order, 11 FCC Rcd. 3873. ` ` C. The Merger Will Accelerate Competition Without Raising Any of the Competitive Concerns Sometimes Raised by Mergers Involving Carriers with Market Power.  ` ` In discussing the Commissions recent approval of the Bell Atlantic/NYNEX merger, which involved two of the largest telecommunications providers in the New York metropolitan area, Chairman Hundt noted that although the combination of two of a small number of the most significant participants in any relevant market raises concerns under [the Commissions] public interest analysis, . . . the public interest standard requires the Commission to balance this anticompetitive effect against other procompetitive effects that the transaction might entail in other market.mH   Í` ` Hundt Testimony, supra note 43, at 8.m In that decision, competitive benefits throughout the merged companies service territories, resulting from numerous commitments agreed to by the parties as a condition to approval, were found to outweigh potential anticompetitive effects in the New York local market.sI   Í` ` BA/NYNEX Order, supra note 42, at  178.s The case for approval of the instant business combination is significantly stronger, for there are no specific anticompetitive concerns, such as enhancement of a partys existing market power, to be overcome.  ` `  1.The Merger Will Accelerate the Development of Competition by Creating a Leading and Innovative Provider of Integrated OneStop Shopping For Communications Services. ` `  In the instant context, neither WorldCom nor MCI is a dominant carrier in any telecommunications market. Moreover, the revenue shares of both WorldCom and MCI are minimal in the sector on which their capital investment and expansion programs primarily focus: local services (both domestic and international). It is beyond dispute that these markets are populated by incumbents of longstanding with substantial capital resources, ubiquitous infrastructure, and control of bottleneck facilities. The Commission has repeatedly recognized the public interest benefits of improved access to capital that can fuel investment in stateoftheart infrastructure that leads to economic growth and job formation in the U.S. economy and facilitates competition among U.S. carriers both at home and abroad.J   Í` ` Sprint Corporation, Declaratory Ruling and Order, DA 961560, File No. ISP96003 at  12 (Chief Intl Bur. Sept. 18, 1996) (permitting increased foreign ownership of Sprint). With respect to enhancing the level of competition in this market segment in particular, WorldComs experience in local competition initiatives makes a WorldComMCI Merger considerably more likely than the previouslyapproved acquisition of MCI by BT to enhance the level of competition in this highly concentrated sector. {K   Í` ` See BT/MCI Order, supra note 5, at  20911.{ ` ` The combination of WorldCom and MCI can bring to local services the critical mass of resources necessary to become, in Chairman Hundts terminology, the potent competitive force required to deconcentrate the market.xL   Í` ` See Hundt Testimony, supra note 43, at 6. x Thus, in several significant ways the proposed Merger will generate substantial additional competitive pressure on the local telecommunications market. ` `   2.MCI and WorldComs Lack of Market Power Avoids AntiCompetitive Concerns.  ` ` Significantly, unlike the participants to the mergers involving the Bell Operating Companies and the acquisition of MCI by BT recently approved by the Commission, neither WorldCom nor MCI controls bottleneck facilities. This eliminates a key concern that the Commission weighs heavily, and negatively, in its costbenefit merger analysis.M   Í` ` See BA/NYNEX Order, supra note 42, at  37 ( [W]e evaluate the effects of the merger on competition in the relevant market, such as whether the merger is likely to result in either unilateral or coordinated effects that enhance or maintain the market power of the merging parties.). See also id. at  2; BT/MCI Order, supra note 5, at  3 n.8. Nor is the proposed Merger likely to have any significant adverse impact on the Commissions ability to enforce its regulatory oversight responsibilities, given WorldCom and MCIs lack of market power and foreign affiliation. The Merger is similarly unlikely to increase the likelihood of coordinated action among other industry players because the long distance industry, rather than being highly concentrated, epitomizes the competitive marketplace.uN   Í` ` See BA/NYNEX Order, supra note 5, at  45.u ` ` Further, in contrast to the local services market, where there is scarcely any competition,]O   Í` ` Remarks of Reed E. Hundt Before the American Enterprise Institute, The Light at the End of the Tunnel vs. The Fog: Deregulation vs. The Legal Culture, Washington, D.C., August 14, 1997 (, AEI Speech) at 1.] and new entrants have collective traffic shares of between one and two percent,QP   Í` ` Id. at 3.Q the long distance sector, in which WorldCom and MCI have had the longest operating experience, is the most open of all to competition, and the segment with the fewest entry barriers.Q   Í` ` See, e.g., Ameritech Section 271 Order, supra note 60, at  16, where the Commission recognized that there is a substantially competitive market for interstate interexchange services; and at  17, finding that BOC entry into the long distance market is likely to be much easier than entry by potential competitors into the local market[.] The former Bell Operating Companies and large foreignaffiliated carriers are expected soon to enter this sector and to become vigorous competitors as a result of the opportunities available as a result of deregulation under the Telecommunications Act of 1996 and the WTO Agreement. Further, no precluded competitor who has previously been deterred or prevented by regulatory barriers from entering the marketR   Í` ` See BT/MCI Order, supra note 5, at  36 n.65 (citing the BA/NYNEX Order, supra note 42, at  60 and explaining that precluded competitors are the firms most likely to have entered the relevant markets, but, until recently had been prevented or deterred from market participation by barriers that the 1996 Act seek[s] to lower). is being removed from the market by the Merger at a time when barriers that previously had precluded its entry are being removed. Thus, the expected procompetitive public interest benefits of the proposed Transactions far outweigh any conceivable potential detriments. ` `  D. Conclusion: The Commission Should Promptly Approve the Applications Because the Merger of WorldCom and MCI Will Enhance Competition and Otherwise Further the Public Interest. ` ` By strengthening the ability of MCI and WorldCom to compete in all sectors of the U.S. and international markets, the proposed merger will enhance competition in both the U.S. and world markets. This is especially the case for the local exchanges currently controlled by incumbent monopoly carriers. The strategic partnership of WorldCom and MCI will advance the public interest by providing the capital, facilities, and human resources essential to the continued provision to the public of stateoftheart telecommunications services at competitive prices. ` ` The procompetitive benefits to be achieved from a WorldComMCI Merger are substantial, and they not only equal, but greatly exceed, those expected to be derived from the acquisition by BT of MCI previously approved by the Commission. At the same time, no lessening of competition in telecommunications services can be expected to result from consummation of the Transactions.S   Í` ` Cf. BT/MCI Order, supra note 5, at  17677 (finding the proposed BTMCI merger likely to increase BTs ability and incentives to use its market power in an anticompetitive manner).  *` ` For all of the foregoing reasons, the Commission should promptly grant the STA Application to permit WorldCom to complete the Offer and, upon conclusion of the appropriate public notice period, approve the Applications to transfer of control of MCI to WorldCom. ` `  hh#(-pp2Respectfully submitted, ` `  hh#(-pp2 /s/ ` `  hh#(-pp2Andrew D. Lipman Catherine R. Sloanhh#(-pp2Jean L. Kiddoo Robert S. Koppel  hh#(-pp2Helen E. Disenhaus WORLDCOM, INC.hhhpp2SWIDLER & BERLIN, CHTD. 1120 Connecticut Ave., N.W.(-pp23000 K Street, N.W., Suite 300 Washington, D.C. 20036hh#(-pp2Washington, D.C. 20007 (202) 7761550hh#(-pp2(202) 4247500 ` `  hh#(-pp2 Dated:` ` October 1 , 1997