WPC 2a BKf Z CG Times3|wWXw PE37XP",tB^ f ^;C]ddCCCdCCCCddddddddddCCY~~vCN~sk~CCCddCYdYdYCdd88d8ddddJN8ddddYYdYddddddCddddddddd8YYYYYY~Y~Y~Y~YC8C8C8C8ddddddddddYdddddsdXdXXXddx|X~d~d|XdddddddC8ddddoddd|8|H~d|8|8dtddddHHdlLlLlLkd|H|8~dddddddXXXd~ddkd~ddxCddCCCWxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxNdddCYQQddddddFddddFCChhd44ddxxdddvooChdF"dhddCCxCddoddCdYds]xUvdYYCCCCx~oxoY~NYdYC8YooYdYxsdxdd~YYxoxxx~CdxYxxxxCCdddddddxCsdYC\   pxtll\tll@\@\`LHP LaserJet 5LHPLAS5L.PRS5XN\  P\\y"]eXP2 Z 3 0 CG TimesCG Times BoldЊ#Xw PE37WXP#Lisa's PrinterHPPCL5MSXN\  PXPX01Í ÍX0Í ÍҫXN\  PXP(hH  Z 6Times New Roman RegularX2/ f X/3|x",tB^ f ^;C]ddCCCdCCCCddddddddddCCdxN`xoCCCddCdoYoYFdo8Co8odooYNCodddYdddddddddCddddddddo8dddddYYYYYN8N8N8N8oddddooooddpddddxodddXXddXddXdddddooL8doddpddo8PdN8ppoddXXdpLoNpLodPDdopoopdXYXodoodddCddCCCWxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxNdddCdUUddddddFddddFCCssd44ddxxddd~ooCsdF"dsddCCxCddoddCdYds`xUvdddCCCCxoxoYNYYYN8YooYdYxxdxddYYxoxxxNdxYxxxxCCdddddddxCxdYC\   pxtll\tll@\@\`L8wC;,WXw PE37XP.7zC;, *Xz_ pi7X2 X-   (JBefore the  Federal Communications Commission Washington, D.C. 20554  X-In the Matter of  hh,V) ` `  hh,V)  X_-Application of WorldCom, Inc. And V)  XH-MCI Communications Corporation forV)ppCC Docket No. 97211  X1-Transfer of Control of MCI Communications)  X -Corporation to WorldCom, Inc.hh,V)  Y -  X -  X -To: The Commission  X - "COMMENTS OF THE \ INDEPENDENT PAYPHONE SERVICE PROVIDERS FOR CONSUMER CHOICE ( IPSPCC) bPON THE JOINT REPLY OF WORLDCOM, INC. AND @ MCI COMMUNICATIONS CORPORATION TO m PETITIONS TO DENY AND COMMENTS  Y- " Y- ." These comments are submitted on behalf of the Independent Payphone Service Providers   for Consumer Choice ( IPSPCC), a nonprofit association formed in 1997 to advance and   protect the rights of payphone location providers to choose their primary interexchange carriers   to service their premises payphones and the right of independent payphone service providers   ( IPSPs) to compete in the marketplace for payphone services after the entry of the Regional   Bell Operating Companies ( RBOCs) as authorized by Section 276 of the Communications Act   of 1934, as amended, 47 U.S.C.  276 (1996) (the Act). The IPSPCC membership is composed of consumers (location providers), IPSPs and their agents.  X#- 3INTRODUCTION ă  LBy Order in this Docket, released February 27, 1998, the Common Carrier Bureau found   that an additional pleading cycle is warranted to ensure that interested parties have a meaningful   opportunity to comment on [the] significant amount of information presented . . . in the Joint"(0*0*0*0*"   Reply of WorldCom, Inc. ( WorldCom) and MCI Communications Corporation ( MCI)   <(collectively, the Applicants), DA 980384 at 2. The IPSPCCs comments are submitted in response to the Orders request for additional comments and provide facts deemed relevant to specific information provided in the Joint Reply of the Applicants.  STATEMENT OF INTEREST ă The Joint Reply addresses concerns raised by petitions to deny and comments filed on the applications submitted to the Commission in support of the proposed merger of WorldCom and MCI. The information and arguments of the Applicants contained in the Joint Reply, which the IPSPCCs comments address, include the following: ` ` ` The assertion that the combined company after the merger will be in a better position to compete with incumbent local exchange monopolies than MCI or WorldCom could separately and that the merger of two competitors in the local exchange markets not served by dominant incumbent carriers raises no antitrust concerns. Jt. Rpl.  II. A. at 8 and II. B. at 13. ` ` ` The assertion that the merger will not reduce competition in the long distance market and that significant entry into the segment of the market will continue with or without the merger. Further, that the merger will not increase the likelihood of collusion. Jt. Rpl.  III. B. at 31, 33 and III. C. at 40. ` ` ` The assertion that the merger will not provide the merged entity with market power through operation of network access points for access to the Internet. Jt. Rpl.  V.B. at 86. ` ` ` The assertion that there is no legal or policy basis for linking the merger to BOC interLATA entry. Jt. Rpl.  VI. B. at 93.   STATEMENT OF FACTS AND ISSUES ă MCI is currently under contract to Bell Atlantic Corporation ( Bell Atlantic) to serve as the exclusive provider of long distance services to Bell Atlantic payphones in the 13state service area now served by Bell Atlantic after its merger with NYNEX. Ѝ The IPSPCC is currently seeking injunctive relief and damages against Bell Atlantic before the United States District Court for the District of Columbia Circuit in Independent Payphone Service Providers for Consumer Choice, et al. v. Bell Atlantic Corporation, et al., Case No. 98CV0127 ( DC Litigation). The existence of the contract with MCI was disclosed in Bell Atlantics Motion for Summary Judgment, Civil Action No. 1:98CV00127, at 11 (February 17, 1998).  At one point in 1997, WorldCom was under contract to Ameritech to serve as its exclusive provider of long distance services to Ameritech payphones in the fivestate area served by Ameritech. Whether or not that relationship still exists, but through another entity, is unknown at this time.Ѝ See Attachment 1, WorldCom correspondence reflecting its relationship with Ameritech; ILD Teleservices, Inc. correspondence to Larry Kay. Bell Atlantic has, and continues to, claim rights, pursuant to Section 276 of the Act, to bar any location provider, IPSP or other entity from selecting a long distance service provider (primary interexchange carrier or PIC) to serve the payphones located in Bell Atlantics inregion territory other than its contracting partner, MCI. In the case of Ameritech, despite the companys claim that that location providers may select the long distance provider of their choosing, Ameritechs practices, as evidenced by location provider complaints, indicate that selections of carriers other WorldCom will not be respected.Ѝ See Attachment 2, location provider correspondence complaining that Ameritech changed its long distance carrier to LDDS (WorldCom) without authorization. Briefly stated, based on the assertion of rights under Section 276, as alleged in the Complaint filed in the DC Litigation, Bell Atlantic has engaged in and continues to engage in the following practices: (1) refusing to maintain the order processing system Bell Atlantic itself devised, a threeway conference call among the IPSP, location provider and Bell Atlantic; (2) switching the PIC of location providers, thus far on 90,000 payphones, without the knowledge or authorization of the location provider; (3) using a negative option marketing technique that purports to create a binding contract between Bell Atlantic and the location providers without regard for any existing contract the location provider has with an IPSP; (4) marketing its payphone service as a bundled package of services, including MCI long distance services, which the consumer has no right to refuse or reject and no right to change to another PIC once Bell Atlantic has switched the location providers PIC to MCI; (5) representing to location providers that Bell Atlantics actions are authorized and required by the Act; (6) refusing to accept any orders submitted by a location provider and IPSP that does not specify MCI as the PIC; (7) maintaining that Bell Atlantic is not subject to the slamming rules; and (8) treating IPSPs differently than Bell Atlantics own payphone arm (Bell Atlantic Public Communications or BAPC) by providing BAPC preferential or discriminatory treatment in favor of BAPC and adverse to IPSPs and their location provider customers. The discriminatory conduct complained of includes the actions described immediately above and, including, without limitation, such discriminatory conduct as: (1) circumventing the PIC change process by effecting a change of carrier without paying any PIC change fees when a location provider is switched to Bell Atlantics MCI long distance payphone services or by failing to submit any verification of the location providers authorization; (2) refusing IPSPs access to 90% of the inregion payphones to provide payphone services; and (3) refusing to process any orders to change a location providers PIC from MCI once Bell Atlantic has switched the payphone to MCI services. The effects of these practices, in which MCI participates, is to place IPSPs at risk of irreparable injury through bankruptcy;Ѝ See ODonnell Certification and Order of the United States District Court for the District of Columbia attached hereto as Attachments 3 and 4, respectively. to foreclose all location provider choice of their PIC to serve their payphones;Ѝ See Attachment 5, Murray Certification,  5; see also Attachment 6, Fenn Certification,  110. to slam location providers to MCI services and then hold them captive without right to switch their PIC from MCI at anytime in the future;Ѝ See Attachment 7, Waldron Certification,  29; see also Attachment 8, Mosner Certification,  9. to eliminate any opportunity for any other competitor of MCI to ever provide long distance service to 80% to 90% of the payphones in Bell Atlantics territories; and to eliminate the opportunity for any other payphone service providers to compete to provide payphone services in Bell Atlantics 13 state territory. The facts disclosed in the DC Litigation, and in correspondence on the similar activities of Ameritech, suggest that the assertions that Applicants will be in a better position to compete with incumbent local exchange monopolies after the merger are suspect, as is the corollary that there are no antitrust issues about which to be concerned.|Ѝ Two of the counts in the complaint allege violations of Sections 1 and 2 of the Sherman Act.| Jt. Rpl.  II. A. at 8 and II. B. at 13. The existence of current contractual relations, which have anticompetitive effect and which are subject to present allegations that Bell Atlantic is using its contract with MCI to eliminate or restrain trade and MCIs apparent acquiescence in Bell Atlantics conduct, suggest that the very ability and willingness of the combined companies to compete is suspect, if not contradicted. Similarly, the assertions that the merger will not reduce competition in the long distance market, that significant entry into the segment of the market will continue with or without the merger, and that the merger will not increase the likelihood of collusion, become equally suspect, if not also contradicted. Jt. Rpl.  III. B. at 31, 33 and III. C. at 40. Two specific circumstances bear on the issue of collusion. First, as is attested to in the affidavit of a member of the IPSPCC, MCI participated in shifting commissions from the IPSP, which MCI had been serving as the PIC, to Bell Atlantic.\Ѝ See Attachment 9, Firkser Certification,  56.\ Second, MCI was contacted directly prior to the filing of the DC Litigation and asked to intervene with Bell Atlantic to stop its practices.h Ѝ See Attachment 10, Letter from Charles H. Helein to Mike Salsbury.h All that was received was a polite response stating that MCI does not condone any questionable tactics, and that the IPSPCC protest letter had been forwarded to Bell Atlantic for handling.h Ѝ See Attachment 11, Letter from Mike Salsbury to Charles H. Helein.h The IPSPCC submits that these instances and others suggest that, whether intentional or not, the opportunity for collusive dealings between MCI and Bell Atlantic is a real potential if, indeed, not a fact. The next assertion which warrants analysis is that the merger will not provide the merged entity with market power through operation of network access points for access to the Internet. Jt. Rpl.  V.B. at 86. Of course, payphone services as they exist today do not generally involve Internet communications or access. But the experience in the payphone market is illustrative of what is likely to occur in the Internet access market when similar market forces are at play. When the Applicants participate in schemes which have the effect of denying access to network access points in the form of payphones, it is relevant evidence on the broader issue of the exercise of market power over any kind of network access points for anticompetitive purposes, including those related to the Internet. If network access points are foreclosed in a much smaller market, such as payphones, where the incentives for dominance are much smaller, the inescapable conclusion must be that in the exploding Internet market the incentives for manipulating access to network control points to effect dominance will be irresistible. The final assertion that needs to be addressed, is that there is no legal or policy basis for linking the merger to BOC interLATA entry. Jt. Rpl.  VI. B. at 93. As argued by the Applicants, the IPSPCC supports the Applicants position. Mergers of two titans in the competitive long distance market does not cure the bottleneck, anticompetitive conduct of monopoly local exchange service providers who have evidenced an unremitting purpose and intent to expand their market dominance in areas foreclosed by the Divestiture and now by the Act. However, here the assertion of the Applicants must be turned around to be properly considered. By participating with Bell Atlantic, and at least for some time with Ameritech, in the efforts to coopt the payphone market by closing down competitive access and consumer choice for long distance services to payphones, the Applicants have linked their merger plans and applications to BOC interLATA entry. Their participation as the chosen PIC, which can never be changed, advances Bell Atlantics interLATA entry by bypassing the requirements of Section 271 altogether. Moreover, the effect on interLATA entry may be further heightened by a related discovery of even further participation by MCI in Bell Atlantics interLATA interests.Attached hereto, as Attachment 12, is a flier promoting MCI long distance services. Along with other fliers for other service offerings by a number of vendors, the flier was inserted in a Bell Atlantic direct mail solicitation package. The suggested inference is that Bell Atlantic and MCI have reached some form of joint marketing arrangements. Such a scenario raises further questions about the scope and nature of the relationships between Applicants and a local exchange carrier monopoly, Bell Atlantic. Do these existing relationships presage an intent to merge yet another time, creating a company with dominance in local, long distance, Internet and payphone services in a major market segment of the country? STATUS OF DC LITIGATION ă On March 3, 1998, the Court denied IPSPCCs request for a preliminary injunction on the basis that the Court had not been convinced of the likelihood of success on the merits. A copy of the Order is attached.9 Ѝ Supra, Attachment 4.9 But the Order cannot reasonably be read as anything less than a recognition that the matters complained of, while perhaps not developed enough factually on the record and due to the esoteric nature of the industry and the newness of Section 276, raised serious concerns that Bell Atlantic has not acted fairly. It is also obvious that the Court awaits submissions of factual data as the case proceeds: the Court will await further factual development regarding, inter alia, the existence of enforceable contracts. And finally, we believe that the appellate court will agree that the trial Court simply got it wrong when it concluded that the FCC has not yet adopted rules to implement Section 276. ! CLOSING STATEMENT ă As a concept, the IPSPCC takes no position on the merits of Applicants pending applications to win approval to merge their entities. But in the context of the facts as presented herein, it is submitted that any grant of authority must not be made until the facts set forth hereinabove are investigated and a record made that will permit any grant to be properly conditioned on appropriate safeguards and the effective elimination of any arrangements and conduct which has, is and will produce anticompetitive behavior and a lessening of competition now and in the future. ` `  hh#(Respectfully submitted, ` `  hh#(The Independent Payphone Service Providers ` `  hh#( For Consumer Choice ` `  hh#(By:_______________________________________ ` `  hh#( Charles H. Helein7 ` `  hh#( Counsel for the Independent Payphone Service ` `  hh#( Providers for Consumer Choice Dated: March 13, 1998