WPCYB 2 BJ Z|xArial (TT)Times New Roman (TT)Symbol (TT)Arial (TT)CourierTimes New Roman (TT)TimesHelveticaCourier New (TT)Wingdings (TT)Arial Narrow (TT)Arial Rounded MT Bold (Bold) (TT)Book Antiqua (TT)Bookman Old Style (Light) (TT)Century Gothic (TT)Century Schoolbook (TT)Monotype Sorts (TT)Haettenschweiler (Medium) (TT)Algerian (TT)Braggadocio (TT)Britannic Bold (Bold) (TT)Brush Script MT (Italic) (TT)Colonna MT (TT)Desdemona (TT)Footlight MT Light (Light) (TT)Garamond (TT)Impact (TT)Kino MT (TT)Wide Latin (TT)Matura MT Script Capitals (DemiBold) (TT)Playbill (TT)MS LineDrawAlbertus Medium (TT)Albertus Extra Bold (Bold) (TT)Antique Olive (TT)CG Omega (TT)CG Times (Scalable)Clarendon Condensed (Bold) (TT)Coronet (Italic) (TT)Letter Gothic (TT)Marigold (TT)Univers (Scalable)Univers Condensed (TT)Lucida Calligraphy (Italic) (TT)Line Printer 16.67cpiModernPalatinoJ2PQP C\  P6QP"a\  P[AP/J2PQP;d6X@C@CC\  P6QPYC\  PUP_`2PkCPid6X@DQ@{r P?pQP<xzP"@QPAopL1 QJz PQPB  0*Q0Q^P-0QP M P:+QP"}'' PV/QP7)!PQPWHUP73QPfXM6PhQPx^4pQ^+ @xćQX8. 0Q^0=fP7bQP7O 0Q0}Vi P1QP7KtPF QP-E 9PX6QPnJx PQP09x @P%Qp[!uP:QPjSL7 @Q@v9>PjQPAptQFP{2QP1%YkP2QPc P7P5  p$Q@xQXC9 @^Q@0!S @P8(4QP?ixP7PR%5P6QPjY*6j HxgUwQXHHH H@;@Ct0n U0bX  Pg9CP2;?R39phoenix#XX2PQXP# Petition to Deny -- Final Version JLinderWiley, Rein & Fielding 2.m(..heading 1heading 1X` hp x (# (#  (#X` hp x (#heading 2heading 2X` hp x (#` (#` (#X` hp x (#heading 3heading 3X` hp x (#` (# ` (#X` hp x (#heading 4,h4heading 4,h4X` hp x (#  (#   (#X` hp x (#2#.Q. "3#heading 5heading 5X` hp x (#h (# h (#X` hp x (#heading 6heading 6X` hp x (#h (# h (#X` hp x (#heading 7heading 7 heading 8heading 8 2' # l$ v'% %heading 9heading 9 A7#B2PQP#  #XX2PQXP#Default Paragraph FoDefault Paragraph Font Body TextBody Text  headerheader X` hp x (#(#(#X` hp x (#2i+ v'c(v*r*footnote textfootnote text  footerfooterX` hp x (#(#(#X` hp x (#Body LeftBody Left endnote referenceendnote reference 2e-v+r,l,v,endnote textendnote text footnote referencefootnote reference page numberpage number Quote IndentQuote Indent 26-./14toc 7toc 7X` hp x (#` (#`` (#`X` hp x (#toc 1toc 1  X` hp x (#(#`(#`X` hp x (#toc 2toc 2X` hp x (#4` (#`4` (#`X` hp x (#toc 3toc 3X` hp x (#4` (#`4` (#`X` hp x (#2>Q6o8:<toc 4toc 4X` hp x (#4 (#`4 (#`X` hp x (#toc 5toc 5X` hp x (#4h(#`4h(#`X` hp x (#toc 6toc 6X` hp x (#4h(#`4h(#`X` hp x (#toc 8toc 8X` hp x (#( (#`( (#`X` hp x (#2>|AAtoc 9toc 9X` hp x (# (#` (#`X` hp x (#TitleTitle  body text,btbody text,bt;1#XXX  Pg9C.XP##XX2PQXP# X u1!2x` xdd footerX` hp x (#(#page number"page number"X` hp x (#(# footer(#` hp x (#umfooterX` hp x (#(# Normalfooter(#` hp x (#m Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 In the Matter of ) ) Applications of WorldCom, Inc. and ) MCI Communications Corporation)CC Docket No. 97211 for Transfer of Control of) MCI Communications Corporation to) WorldCom, Inc.) To: The Commission  PETITION TO DENY OF GTE SERVICE CORPORATION AND ITS AFFILIATED TELECOMMUNICATIONS COMPANIES  William P. Barr, Executive Vice President &Richard E. Wiley General CounselR. Michael Senkowski Ward W. Wueste, Vice President Jeffrey S. Linder Deputy General Counsel Peter D. Shields GTE SERVICE CORPORATIONWILEY, REIN & FIELDING One Stamford Forum1776 K Street, N.W. Stamford, CT 06904Washington, D.C. 20006 (202) 4297000 Dated: January 5, 1998   u1!2x` xdd footerX` hp x (#(#page number"page number"X` hp x (#(# footer(#` hp x (#u TABLE OF CONTENTS  Page    toc 1  X` hp x (#(#`  US??I. WORLDCOM AND MCIs APPLICATIONS IGNORE THE FCCS BELL ATLANTIC/NYNEX STANDARD AND TREAT THE ACQUISITION OF THE NATIONS SECOND LARGEST INTEREXCHANGE CARRIER AS A GARDENVARIETY TRANSFER.4 toc 1toc 2X` hp x (#4` (#`  A. WorldComs Basic Competitive and Public Interest Showing Does Not Satisfy Its Burden of Proof or the FCCs Merger Review Standards.p6 B. WorldComs Showing Concerning AntiCompetitive Effects Fails to Meet the Bell Atlantic/NYNEX Requirements.p8 C. WorldComs Public Interest Showing Fails to Meet the Bell Atlantic/NYNEX Requirements.p9 toc 2toc 1  X` hp x (#(#`II. THE WORLDCOM/MCI MERGER WOULD DIMINISH COMPETITION IN THE DOMESTIC RETAIL AND WHOLESALE LONG DISTANCE MARKETS.10 toc 1toc 2X` hp x (#4` (#`  A. The Merger Would Exacerbate Coordinated Interaction in the Retail Long Distance Market.p11 toc 2toc 3X` hp x (#4` (#`1. WorldCom and MCI Are Two of Only Four Most Significant Participants in the Domestic Retail Long Distance Market.p11 2. The Merger Would Reinforce Conditions that Promote Cooperative Pricing of Long Distance Services and Would Eliminate the Lone Maverick Supplier.p15 toc 3toc 4X` hp x (#4 (#`a) The Domestic Long Distance Market Already Exhibits Coordinated Pricing.p16 b) The Merger Would Reverse WorldComs Incentives to Disrupt the Oligopoly and Would Exacerbate Coordinated Interaction Among the Remaining IXCs.p19 toc 4toc 2X` hp x (#4` (#`B. The Merger Would Compromise the Supply of Bulk Capacity and Advanced Features in the Resale Input Market.p25 toc 2toc 1  X` hp x (#(#`III. THE WORLDCOM/MCI MERGER WOULD CREATE MARKET POWER IN INTERNATIONAL TELECOMMUNICATIONS MARKETS.29 toc 1toc 2X` hp x (#4` (#`  A. The WorldCom/MCI Merger Would Result In Increased Market Concentration In International EndUser Product Markets.p30 toc 2toc 3X` hp x (#4` (#`1. The WorldCom/MCI Merger Would Result in Increased Market Concentration in the International Private Line Services Market.p30 2. The WorldCom/MCI Merger Would Threaten Competition in the International Message Telephone Service Market.p33 toc 3toc 2X` hp x (#4` (#`B. The Merged Entity Would Control an Essential Input for Retail Service Providers, Thereby Creating Barriers to Entry for Competitors in the U.S. International Telecommunications Marketplace.p35 toc 2toc 1  X` hp x (#(#`IV. WORLDCOM HAS FAILED TO ADDRESS THE COMPETITIVE EFFECTS OF THE MERGER ON LOCAL EXCHANGE AND EXCHANGE ACCESS SERVICES.42 V. WORLDCOM AND MCI HAVE FAILED TO ADDRESS THE SUBSTANTIAL ANTICOMPETITIVE IMPACT OF THE PROPOSED MERGER ON THE INTERNET MARKET.46 VI. THE WORLDCOM/MCI MERGER WOULD DIMINISH COMPETITION IN THE NASCENT MARKET FOR BUNDLED TELECOMMUNICATIONS SERVICES.47 VII. CONCLUSION49 ??US  toc 1  (#`` hp x (# Appendix 1:Declaration of Debra R. Corey Appendix 2:International Private Line HHI Analysis Appendix 3:IMTS HHI Analysis  ÑSUMMARY  WorldCom and MCI are direct competitors in virtually every aspect of their U.S. telecommunications ventures. Their proposed merger would create massive competitive overlaps permeating the interexchange, international, local exchange, and bundled services markets. Consequently, the combination of WorldCom and MCI would diminish competition and increase concentration in markets that are already heavily concentrated. Considering the circumstances, one might have expected the applicants to acknowledge the mergers anticompetitive effects and enlighten the agency about any offsetting benefits. The transfer applications, however, make no attempt to define product and geographic markets, identify most significant market participants, or discuss the competitive effects of the merger on any service market. Nor is there a single factual showing to confirm any purported efficiency gains or public interest benefits. Instead, WorldCom and MCI have submitted applications that are devoid of facts and uncorroborated by documentation. The absence of any competitive assessment seems rooted in the applicants astonishing assertion that [m]ost of the activities of WorldCom and MCI are complementary rather than directly competitive. (WorldCom App., at p. 27) This claim should certainly come as a big surprise to anyone even remotely familiar with the telecommunications marketplace. In fact, one is hardpressed to identify any of their respective services where WorldCom and MCI are not direct competitors. Because WorldCom and MCI avoid any discussion of the mergers competitive and consumer effects, their applications are fatally deficient under the Commissions standards for reviewing such transfer applications. This omission is even more glaring given the following anticompetitive consequences, which are obvious from even a cursory examination of the FCCs market data and other publicly available information. Interexchange Services. The combination of the nations second largest and fourth largest interexchange service providers would significantly exacerbate market concentration, enhance the likelihood of coordinated conduct by the surviving three major companies (AT&T, Sprint and WorldCom/MCI) in the retail market, and encourage unilateral anticompetitive behavior by WorldCom in the supply of wholesale capacity. In particular, the merger would impose a competitive triple whammy by: (1) eliminating the only significant competitor that is a pricing maverick (WorldCom); (2) reducing the number of most significant market participants to just three (AT&T, Sprint and WorldCom/MCI); and, (3) encouraging and enabling WorldCom to raise the price for wholesale capacity provided to long distance resellers that compete with MCI, AT&T, and Sprint. International Services. With respect to international services, the merger would create market or monopoly power in three basic respects: ` hp x (#4` hp x (#1For 73 of the countries served by WorldComs and MCIs competing private line services, the merger would be presumed likely to create or enhance market power; and, in nine of those markets, the merger would result in pure monopoly conditions. 4` hp x (#` hp x (# ` hp x (#4` hp x (#1For 24 of the countries served by WorldComs and MCIs competing International Message Telephone Services ( IMTS), the merger would be presumed likely to create or enhance market power. 4` hp x (#` hp x (# ` hp x (#4` hp x (#1The merger would increase concentration in the control of international undersea cables and cable landing access facilities, which are essential inputs for new entrants seeking to compete in international services markets. 4` hp x (#` hp x (#Б Competitive Local Exchange Carrier ( CLEC) Services. The applicants also have failed to provide even rudimentary information concerning their competing CLEC operations. Yet, the most basic review of information made public by WorldCom and MCI on their respective Internet web sites reveals that competitive overlaps of existing or planned CLEC operations would occur in at least 26 of the largest markets in the country. Without access to the companies HartScottRodino submissions, it is impossible to ascertain the full scope of the proposed mergers effects upon planned entry by the two companies into competition with each other. Internet Services. After the merger, WorldCom/MCI would be by far the largest provider of Internet backbone capacity and would control other significant Internetrelated assets. The parties nonetheless have supplied no information that would permit the Commission to determine whether the merger would adversely affect competition in the market for Internetrelated services. Although the Commission has no jurisdiction to regulate the Internet, it should take cognizance of the merger's anticompetitive effects on the Internet marketplace as part of its public interest analysis. Here, of course, the risks of such harm are both evident and severe enough to preclude a finding that the proposed merger would serve the public interest. At a minimum, the applicants must submit the information mandated by the Bell Atlantic/NYNEX requirements and the Commission must afford interested parties full opportunity to review, analyze, and respond to that submission. Bundled Telecommunications Services. There is little doubt that the merger of WorldCom and MCI would, in some large measure, adversely affect the growth of the stillemerging bundled services market. The applicants are two of very few companies that can offer facilitiesbased interexchange and local service. Moreover, the fact that the transaction reduces competition in the supply of interexchange, CLEC, and international inputs inevitably will constrain competition in the provision of bundled services. By substituting vague promises for hard fact, however, the applicants make a full assessment impossible. Public Interest Benefits Showing. Notwithstanding the obvious anticompetitive effects of the proposed merger, the applicants have failed to demonstrate any offsetting public interest benefits. Indeed, there are no facts, figures or analysis offered to show that the merger will have any beneficial effects for the public. Nothing more than hollow claims of efficiencies, synergies and common pioneer ancestry can be found in the applications ! and, upon scrutiny, it becomes clear that any efficiencies and synergies simply represent the removal of a competitor. In short, the applicants have presented precisely the type of uncorroborated, wishful incantation that the Commission has rejected as insufficient to support public interest claims.  * * * * * In sum, the Commission has established specific standards for reviewing the competitive and public interest effects of telecommunications mergers. The applicants, however, have ignored these requirements notwithstanding powerful prima facie evidence of anticompetitive effects. Accordingly, the WorldCom and MCI applications must be summarily denied.    XXX 1!2x` xdd footerX` hp x (#(#page number"page number"` hp x (#(# footer(#` hp x (#Ѓ- headerX` hp x (#(#  header(#` hp x (#-footerX` hp x (#(#footerpage number "page number" footer(#` hp x (# Before the  FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 In the Matter of ) ) Applications of WorldCom, Inc. and ) MCI Communications Corporation)CC Docket No. 97211 for Transfer of Control of) MCI Communications Corporation to) WorldCom, Inc.) To: The Commission  PETITION TO DENY  GTE Service Corporation and its affiliated telecommunications companies#footnote reference#X0X01ÍÍ footnote text#footnote reference#)footnote reference)GTE Alaska, Incorporated, GTE Arkansas Incorporated, GTE California Incorporated, GTE Florida Incorporated, GTE Hawaiian Telephone Company Incorporated, The Micronesian Telecommunications Corporation, GTE Midwest Incorporated, GTE North Incorporated, GTE Northwest Incorporated, GTE South Incorporated, GTE Southwest Incorporated, Contel of Minnesota, Inc., Contel of the South, Inc., GTE Communications Corporation, and GTE Hawaiian Tel International Incorporated. (collectively GTE) herewith submit their petition to deny the abovecaptioned applications of WorldCom, Inc. ( WorldCom) for transfer of control of MCI Communications Corporation ( MCI).#footnote reference# footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference) Pursuant to Public Notice, DA 972494, released November 25, 1997, Petitions/Comments on the WorldCom/MCI Application are due on January 5, 1998. Therefore, this Petition to Deny is timely filed. As detailed below, the proposed acquisition of MCI by WorldCom gives rise to an unprecedented array of competitive and public interest concerns created by the extensive and direct overlaps of their interests. Despite the obvious importance of these issues, the applicants have elected to ignore the wellestablished obligations of transferors and transferees to document the effects of their proposed merger on competition and the public interest.#footnote reference# footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference)In light of the applicants egregious failure to comply with the Commissions requirements, GTE is filing contemporaneously a Motion to Dismiss the applications. GTE also is filing a Request to Inspect Protected Information, which seeks access to any HartScottRodino documents that the Commission has received or will receive from WorldCom and MCI in the course of its analysis of the proposed merger. The adverse effects of this proposed merger will stretch from the local loop around the globe. Those repercussions and GTEs position as a customer and competitor of the applicants in a variety of markets#footnote reference# footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference) GTE is a major customer of long services for both resale and internal use, and WorldCom is its predominant supplier. As such, GTE purchases a wide array of services, including: (1) basic long distance for resale; (2) advanced long distance services for resale; (3) long distance as a component of wireless service; (4) long distance for GTE internal use and infrastructure support; and (5) international long distance as a component both of long distance for resale and wireless service, and for internal use. These long distance purchases will total about onehalf billion dollars in 1997, and are expected to increase significantly in 1998.  establish the basis for its standing to make the foregoing objections, pursuant to Section309(d) of the Communications Act.#footnote reference# footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference)See, e.g., AmericaTel Corp., 9 FCC Rcd 3993, 3995 (1994) (finding that a direct competitor need only allege potential economic injury for standing); see also, NAB Petition for Rulemaking, 82 F.C.C. 2d 89 (1980), as modified, Maumee Valley Broadcasting, Inc. 12 FCC Rcd 3487 (1997) (granting standing to viewers (consumers) of broadcast licensees). Section309(d) permits [a]ny party in interest [to] file with the Commission a petition to deny any application, where the objecting party can assert that the applications grant is reasonably likely to result in . . . some injury of a direct, tangible or substantial nature.#footnote reference#} footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference)Time Warner Entertainment Co., 10 FCC Rcd 9300, 9302 (CSB 1995).} As will be shown, the merger of the applicants would create anticompetitive effects that would injure not only GTE and other resellers, but consumers and others in the U.S. and worldwide. For these reasons, GTE undeniably has standing to challenge the applications of WorldCom and MCI. This petition documents that a WorldCom/MCI merger would result in competitive overlaps in several markets: ` hp x (#4` hp x (#1Section II demonstrates that combining the second largest and fourth largest interexchange service providers would greatly increase market concentration, enhance the likelihood of coordinated conduct by the surviving three major companies (AT&T, Sprint and WorldCom/MCI), and create a risk of unilateral anticompetitive conduct by the merged company in the provision of wholesale capacity to resellers that compete in retail markets. 1Section III makes clear that the merger would create market or monopoly power in many international markets. 1Section IV shows that, although WorldCom and MCI have failed to provide even basic information concerning their competing CLEC operations, the companies appear to have competitive overlaps in 26 of the largest markets in the country. 4` hp x (#` hp x (# ` hp x (#4` hp x (#1Section V explains that the combined WorldCom/MCI would be the largest provider of Internet backbone capacity and would control other important Internetrelated assets, raising grave competitive risks that the applicants do not even attempt to address. 1Section VI describes the potential anticompetitive effects the proposed merger would have on the nascent bundled services market. 4` hp x (#` hp x (#In addition, this petition shows that WorldCom and MCI have failed to fulfill their obligation to demonstrat[e] that the proposed transaction is in the public interest  and that any harms to competition are outweighed by benefits that enhance competition, as required by the Commission in the Bell Atlantic/NYNEX Order.#footnote reference#J footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference) Applications of NYNEX Corporation and Bell Atlantic Corporation for Consent to Transfer Control of NYNEX Corporation and Its Subsidiaries, Memorandum Opinion and Order, FCC 97286, File No. NSDL9610 (rel. Aug. 14, 1997) ( Bell Atlantic/NYNEX).J For example, the applicants fail to document any efficiency benefits to be produced by the proposed merger. These omissions offer independent grounds for the denial of their applications. 2  heading 1X` hp x (# (# ۲I.WORLDCOM AND MCIs APPLICATIONS IGNORE THE FCCS BELL ATLANTIC/NYNEX STANDARD AND TREAT THE ACQUISITION OF THE NATIONS SECOND LARGEST INTEREXCHANGE CARRIER AS A GARDENVARIETY TRANSFER.   2   heading 1  (#` hp x (# If brevity is a virtue, WorldCom is more virtuous than Caesars wife. Only a few pages of prose are devoted to describing the applicants telecommunications interests and the purported public interest benefits of the largest telecommunications merger ever. Even more remarkable is that the lions share of this limited attention consists of repetitious and bare contentions. WorldCom hardly mentions the seminal merger case, Bell Atlantic/NYNEX,#footnote reference# )footnote reference)let alone the FCCs rigorous standard for approving mergers such as the instant one.  WorldCom essentially portrays its proposed acquisition of MCI as just the latest addition in its series of interexchange carrier acquisitions. Glossing over the global scope of their proposed transaction, which they have touted as the largest merger in U.S. history, WorldCom and MCI act as though this deal is a gardenvariety acquisition of a minor interexchange carrier. More specifically, WorldCom and MCI ignore the FCCs rigorous standards for reviewing mergers. While the agency has unequivocally and repeatedly signaled that the days of routine merger processing are over, WorldCom and MCI have clearly missed that signal and, in this case, the boat. It is not as though WorldCom and MCI lacked guidance to assemble an application containing all required information. To the contrary, in its recent merger orders ! including proceedings in which MCI was a petitioner ! the Commission has established a detailed analytical framework for evaluating the public interest and competitive effects of a transaction. In Bell Atlantic/NYNEX, the Commission used plain, clear language to establish a process, which was further refined in the subsequent British Telecommunications/MCI and Century Telephone/PacifiCorp decisions.#footnote reference#  footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference) The Commissions criteria were borne of its consideration of three significant mergers in 1997. See Pacific Telesis Group and SBC Communications, Inc., Memorandum Opinion and Order, Rpt. No. LB9632, FCC 9728 (rel. Jan. 31, 1997) (SBC/PacTel Order); Bell Atlantic/NYNEX Order; MCI Communications Corp. and British Telecommunications plc, Memorandum Opinion and Order, GN Docket No.96245, FCC 97302 (rel. Sept. 24, 1997) (BT/MCI II Order).  Specifically, the Commission requires the applicants to address the following: ` hp x (#4` hp x (#1Definition of Product Market(s) 1Definition of Geographic Market(s) 1Identification of Significant Actual or Potential Competitors 1Determination of Whether There Are Public Interest Benefits That Enhance Competition and Therefore Outweigh Any AntiCompetitive Effects 4` hp x (#` hp x (# The applicants have utterly failed to discharge these obligations, even though the Commissions standards govern all "mergers that may present horizontal market power concerns."#footnote reference#  footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference)Bell Atlantic/NYNEX Order at 37; see also Pittencrieff Communications, Inc. and Nextel Communications, Inc., Memorandum Opinion and Order, CWD No. 9722, DA 972260 (rel. Oct.24, 1997), at 1017 (Pittencrief/Nextel Order) (applying the Bell Atlantic/NYNEX analysis to a transaction involving CMRS licensees). Furthermore, MCI and WorldCom must recognize that the Commission is obliged to apply its standards in an evenhanded fashion.#footnote reference#  footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference)See, e.g., Melody Music v. FCC, 345 F.2d 730 (D.C. Cir. 1965); Etelson v. Office of Personnel Management, 684 F.2d 918, 92627 (D.C. Cir. 1982); Adams Telecom v. FCC, 38 F.3d 576, 581 (D.C. Cir. 1994). Consequently, there is no excuse for their failure to comply with the Bell Atlantic/NYNEX requirements in the pending applications. 2  heading 2X` hp x (#` (# A.WorldComs Basic Competitive and Public Interest Showing Does Not Satisfy Its Burden of Proof or the FCCs Merger Review Standards.  2   heading 2  Body Text` (#` hp x (# Before approving a proposed transfer of control, the FCC is required by the public interest standard of Sections 214(a) and 310(d) to consider the effects of the transfer on competition.  Body Text #footnote reference#g  footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference) Pittencrieff/Nextel Order at 8.g The Commission elaborated on this standard in the Bell Atlantic/NYNEX merger and has since refined its application, determining that (1) future telecom mergers would be evaluated using this framework, and (2) the applicants bear the burden of demonstrating that the proposed transaction is in the public interest.  Body Text #footnote reference#b  footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference) Bell Atlantic/NYNEX Order at 2.b   For WorldCom and MCI to satisfy their burden meeting this public interest standard, their applications must show that the merger will not substantially . . . lessen competition . . . or . . . create a monopoly  Body Text #footnote reference#  footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference) Bell Atlantic/NYNEX Order at 33 (citing 15 U.S.C. 18, 21(a) (1997)). and also will enhance competition.  Body Text #footnote reference#b footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference) Bell Atlantic/NYNEX Order at 2.b Additionally, WorldCom and MCI are required to document that any harms to competition . . . are outweighed by benefits that enhance competition.  Body Text #footnote reference#b footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference) Bell Atlantic/NYNEX Order at 2.b Consequently, WorldCom and MCI must prove not only the benefits to be derived from their merger, but that these benefits outweigh any resulting harms (e.g., enhancing market power or slowing the decline of market power).  Body Text #footnote reference#b footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference) Bell Atlantic/NYNEX Order at 2.b In other words, the Bell Atlantic decision requires WorldCom and MCI to prove that, on balance, the merger will enhance and promote, rather than eliminate or retard other sources of competition.  Body Text #footnote reference#b footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference) Bell Atlantic/NYNEX Order at 3.b   Body Text  For MCI's part, these criteria should come as no surprise. The Commission applied the same competitive analysis in its review of the public interest effects of the nowdefunct British TelecomMCI merger. Specifically, the Commission in that proceeding sought information as to whether the merger would consolidate or eliminate firms possessing significant assets or capabilities in . . . relevant markets#footnote reference#X footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference) BT/MCI II Order at 9.X and whether the merger [would be] likely to increase the incentive or ability of either [company] . . . to discriminate in favor of its affiliate in another market . . . .#footnote reference#Y footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference) BT/MCI II Order at 16.Y In this case, however, MCI and WorldCom have failed to offer the requisite showing.  2  heading 2X` hp x (#` (# đ WorldComs Showing Concerning AntiCompetitive Effects Fails to Meet the Bell Atlantic/NYNEX Requirements. 2   heading 2 ` (#` hp x (# WorldComs discussion of the mergers potentially adverse effects upon competition is a model of word economy. The entire showing is relegated to just two paragraphs in its applications. An almost verbatim recitation of its submission is as follows:  ` hp x (#4` hp x (#1 [N]either WorldCom nor MCI is a dominant carrier. (38). 4` hp x (#` hp x (# ` hp x (#4` hp x (#1 [T]he revenue shares of WorldCom and MCI are minimal in the sector on which their capital investment and expansion programs primarily focus: local services (both domestic and international). (Id.) 4` hp x (#` hp x (# ` hp x (#4` hp x (#1 [N]either WorldCom nor MCI controls bottleneck facilities. (39). 4` hp x (#` hp x (# ` hp x (#4` hp x (#1 Nor is the proposed Merger likely to have any significant adverse impact on the Commissions ability to enforce regulatory oversight responsibilities, given WorldCom and MCIs lack of market power and foreign affiliation. (3940). 4` hp x (#` hp x (# ` hp x (#4` hp x (#1 The Merger is . . . 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. (40). 4` hp x (#` hp x (# ` hp x (#4` hp x (#1 [N]o precluded competitor who has previously been deterred or prevented by regulatory barriers from entering the market is being removed from the market by the Merger at a time when barriers that previously had precluded its entry are being removed. (4041 (footnote omitted)). 4` hp x (#` hp x (# The foregoing assertions are not accompanied by any data concerning the respective telecommunications interests of the two companies, their market shares, their facilities, or the extent of their competitive overlaps. Nor are any studies, data, or other information offered to substantiate even the minimalist claims outlined above. Instead, WorldCom contends only that there are no specific anticompetitive concerns, such as enhancement of a partys existing market power, to be overcome, and, that [m]ost of the activities of WorldCom and MCI are complementary rather than directly competitive.#footnote reference#\ footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference)WorldCom/MCI app., Vol. I, at 27, 38.\  d  heading 2X` hp x (#` (# C.WorldComs Public Interest Showing Fails to Meet the Bell Atlantic/NYNEX Requirements. d   heading 2 ` (#` hp x (# The applicants purported public interest showing is equally deficient. The table of contents to the application describes the mergers public interest benefits as follows:  ` hp x (#4` hp x (#1 Numerous Synergies, Efficiencies, and Economies Will be Achieved Through the Merger of WorldCom and MCI. (ii). 4` hp x (#` hp x (# ` hp x (#4` hp x (#1 Local Services Competition Will be Particularly Enhanced from the Merger of WorldCom and MCI. (Id.) 4` hp x (#` hp x (# ` hp x (#4` hp x (#1 Substantial Enhancement of International Services Competition Will Likely Result from the Merger of WorldCom and MCI. (Id.) 4` hp x (#` hp x (# The text accompanying these claims, however, is a vacuum, without facts, data or other information to corroborate WorldComs bare assertions. Nonetheless, to give the applicants fair credit for their efforts, an abridged rendition of their arguments is as follows: ` hp x (#4` hp x (#1 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. (iv). 4` hp x (#` hp x (# ` hp x (#4` hp x (#1 The combination of advanced fiberbased local city networks, high capacity transoceanic cable, and stateoftheart global long distance and data networks well position the combined company to become a preeminent provider of advanced onestopshopping telecommunications services. (2). 4` hp x (#` hp x (# ` hp x (#4` hp x (#1 The contribution of WorldComs domestic local networks, 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. (23). 4` hp x (#` hp x (# ` hp x (#4` hp x (#1 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 operational savings. (30). 4` hp x (#` hp x (# ` hp x (#4` hp x (#1 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. (36). 4` hp x (#` hp x (# Notwithstanding these lofty claims, WorldCom and MCI fail to provide any information to document the purported synergies, efficiencies, cost savings and enhanced competitive capabilities.#footnote reference#E footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference)Even assuming facts could be provided to support the applicants claims, it is hardly the point that the lesser of two horizontal competitors may be made stronger. The same can be said of virtually every horizontal merger, no matter how anticompetitive it may be.E Not only is there no meat on their bones, but the bones themselves are missing. 2  heading 1X` hp x (# (# II.THE WORLDCOM/MCI MERGER WOULD DIMINISH COMPETITION IN THE DOMESTIC RETAIL AND WHOLESALE LONG DISTANCE MARKETS.  2   heading 1  Body Text (#` hp x (#In two conclusory paragraphs, WorldCom and MCI cavalierly dismiss any concerns that the combination of the second largest and fourth largest interexchange carriers ( IXCs) could adversely affect domestic long distance competition.  Body Text #footnote reference#Z footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference) Amendment Exhibit 4 at 3940.Z They neither acknowledge nor address the fact that long distance pricing already evidences tacit cooperation, the long distance industry already is highly concentrated, and the merger would substantially increase concentration. Rather, the applicants merely assert that they hold no bottlenecks, that coordinated action is not likely, and that the interexchange market has the fewest entry barriers.  Body Text #footnote reference#A footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference) Id.A In reality, as detailed below, the merger of WorldCom and MCI would substantially diminish competition in the markets for retail long distance service and the supply of transmission capacity to resellers. 2    Body Text heading 2X` hp x (#` (# A.The Merger Would Exacerbate Coordinated Interaction in the Retail Long Distance Market. 2   heading 2 heading 3X` hp x (#` (# 1.WorldCom and MCI Are Two of Only Four Most Significant Participants in the Domestic Retail Long Distance Market.     heading 3  Body Text` (#` hp x (#The Commission has stated that the domestic long distance product market includes all interstate, domestic, interexchange services.  Body Text #footnote reference# footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference) Motion of AT&T To Be Reclassified as a NonDominant Carrier, 11 FCC Rcd3271, 3286 (1995) ( AT&T NonDominance Order); Competitive Carrier Fourth Report and Order, 95 F.C.C. 2d 554, 563 (1983). Each pointtopoint market constitutes a separate geographic market, but these markets may be grouped where customers face the same competitive conditions.  Body Text #footnote reference#c footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference) Bell Atlantic/NYNEX Order at  54.c WorldCom and MCI have provided no information to determine whether the relevant geographic market for purposes of assessing the competitive effects of the merger should be the national market, or whether their combined strength in particular locations or regions creates a risk of unilateral market power and thus requires a more refined analysis. Nor have they provided information to assess whether their combined strength varies among long distance customer groups. Such information must be provided to permit an accurate competitive impact determination.   Today, the domestic long distance market is classified as highly concentrated under the Justice Departments Merger Guidelines.  Body Text #footnote reference# footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference) See United States Dept. of Justice Federal Trade Commn, 1992 Horizontal Merger Guidelines, 57 Fed. Reg. 41552 (1992) ( 1992 Horizontal Merger Guidelines); 1997 Revisions to the Horizontal Merger Guidelines Issued by the U.S. Department of Justice and the Federal Trade Commission, April 8, 1997. The FCC typically uses the Merger Guidelines as a significant component of its public interest analysis. See Regulatory Treatment of LEC Provision of Interexchange Services Originating in the LECs Local Exchange Area and Policy and Rules Concerning the Interstate Interexchange Marketplace, Second Report and Order in CC Doc. No. 96149 and Third Report and Order in CC Docket No. 9661, FCC 97142 (Apr. 18, 1997); Rulemaking to Amend Parts 1, 2, 21, and 25 of the Commissions Rules to Redesignate the 27.529.5 GHz Frequency Band, To Reallocate the 29.530.0 GHz Frequency Band, To Establish Rules and Polices for Local Multipoint Distribution Service and for Fixed Satellite Services, Second Report and Order, Order on Reconsideration, and Fifth Notice of Proposed Rulemaking, CC Docket No. 92297, FCC 9782 (Mar. 13, 1997); Pacific Telesis Group, 12 FCC Rcd 2624 (Jan. 31, 1997); AT&T NonDominance Order; Sprint Corporation, 11 FCC Rcd 1850 (1996); Motion of AT&T Corp. To Be Reclassified as a NonDominant Carrier, Order, 11 FCC Rcd 3271 (1995); BAMSNYNEX Mobile, 10 FCC Rcd. 13368 (1995); Market Entry and Regulation of Foreign Affiliated Entities, IB Docket No. 9522, Report and Order, 11 FCC Rcd 3873 (1995); Craig O. McCaw & American Tel. & Tel. Co., 9 FCC Rcd 5836 (1994), recon. denied, 10 FCC Rcd 11786 (1995), affd sub nom. SBC Communications v. FCC, 56 F.3d 1484 (D.C. Cir. 1995); Request of MCI Communications Corp. British Telecommunications PLC, File No. ISP91013, 9 FCC Rcd 3960 (1994). The market is effectively dominated by four facilitiesbased, nationwide carriers, which together account for more than 80 percent of total revenues and almost 90 percent of presubscribed lines:  Body Text #footnote reference# footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference) The source for the table in the text is the Commissions Report on Long Distance Market Shares (October 1997).   Body Text Б  Body Text  Table 1: Interexchange Carrier Market Shares ^ VZZV@@@@ VZZV@@@@^  A A A I @ @ @ HCarrier  Share of IXC Revenues  Share of Presubscribed Lines  Share of Residential Lines      AT&T47.963.369.9     MCI20.014.513.7     Sprint 9.7 7.4 5.0     WorldCom 5.5 2.7Not available     Others17.012.111.4 (including WorldCom)         HHI282342795099   Body TextIn these circumstances, AT&T, MCI, Sprint, and WorldCom are clearly the most significant market participants.  Body Text #footnote reference#o footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference) The Commission has defined the most significant market participants as the market participants that have, or are likely to speedily gain, the greatest capabilities and incentives to compete most effectively and soonest in the relevant market. Bell Atlantic/NYNEX Order at 62.o The hundreds of other IXCs are predominantly resellers, and the few other facilitiesbased carriers do not operate nationwide and have little brand recognition or other market presence. Dividing the retail market into customer segments as identified by the Commission  Body Text #footnote reference#b footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference) Bell Atlantic/NYNEX Order at 53b reveals even greater cause for concern. Market share data by class of customer are not readily available (and certainly were not provided by the applicants). However, WorldCom and MCI clearly have significantly higher market shares among medium and large businesses than the overall figures contained in the Report on Long Distance Market Shares. Indeed, when combined, MCI's and WorldCom's market shares for this customer segment may well exceed that of AT&T and may give the merged company market power.  Body Text #footnote reference# footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference)The merger would also adversely affect mass market customers. WorldCom competes in this market segment both directly and, as discussed in section II.B, below, indirectly through a host of namebrand resellers, including GTE. Currently, WorldCom is the lowest cost provider of wholesale capacity and the only provider of advanced services and capabilities for resale. After the merger, MCI/WorldCom undoubtedly would raise wholesale rates and discontinue the provision of advanced services and capabilities to resellers, effectively depriving retail consumers of a lowcost alternative to the remaining Big 3 IXCs. Once again, the applicants must provide more data for the Commission to make an accurate assessment of the effects of the merger.   Body Text Looking to the future, additional competition may come from several entities. None of these, however, is likely to offer the ubiquitous network and advanced features that are necessary to enable them to be a fullfledged competitor to the Big 4 IXCs. Nor is any of these possible entrants likely to be able to offer wholesale services that would meet the needs of GTE and other resellers for a ubiquitous national supplier of basic and advanced capabilities.#footnote reference#  footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference) See Declaration of Debra R. Covey (Appendix 1 hereto). In fact, contrary to the applicants claim, there are considerable barriers to entry in the long distance market. While it is easy to enter as a reseller, resale competition alone cannot drive overall price levels down to cost. In addition, as discussed in SectionII.B below, the merger will diminish competition in the supply of wholesale capacity to resellers, impeding their ability to offer service at reduced rates. Only facilitiesbased competition can discipline overall rate levels, and constructing a nationwide network with full interoperability and intelligence is an extremely costly and timeconsuming process. Other barriers to entry include Section 271, which restricts the BOCs provision of interLATA service, and the Commissions Docket 96149 rules, which do not directly bar entry but prevent incumbent LECs from taking advantage of proconsumer integration efficiencies.  For example, if the BOCs begin providing long distance service within the next year, they could bring competitive discipline to portions of the domestic long distance market. Nonetheless, the BOCs will operate primarily as resellers outside of (and possibly within) their regions, and they probably will not be strong competitors for all customer segments. Although the Big 4 IXCs have national brand recognition and market presence, each BOC is known primarily in its own region and, possibly, in contiguous territories served by neighboring BOCs. The BOCs thus may be hampered in competing to serve customers with nationwide telecommunications needs ! the very customer segments where WorldCom and MCI appear to be strongest.#footnote reference#  footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference) As the Commission found in the Bell Atlantic/NYNEX Order (at 73), Bell Atlantic would have been most likely to target mass market, not large business, customers.  Body TextAccordingly, for today and the foreseeable future, there are and likely will be only four most significant participants in the domestic long distance market. As discussed below, structural conditions in the market contribute to coordinated pricing, and the three largest companies currently enjoy exceptionally high pricecost margins that are more consistent with tacit collusion than with vigorous competition. By dramatically increasing concentration in the industry and altering the incentives of the only most significant participant that acts as a maverick (WorldCom), the merger of MCI and WorldCom would be directly antithetical to the interests of all retail consumers of long distance services.   Body Text heading 3X` hp x (#` (# 2.The Merger Would Reinforce Conditions that Promote Cooperative Pricing of Long Distance Services and Would Eliminate the Lone Maverick Supplier.     heading 3  Body Text` (#` hp x (#In the Bell Atlantic/NYNEX Order, the Commission cautioned that [m]arket performance can 8 be adversely affected if a merger increases the potential for coordinated interaction by firms remaining in the postmerger market. 8 [A]s the number of most significant market participants decreases, all other things being equal, the remaining firms are increasingly able to arrive at mutually beneficial market equilibria, to the detriment of consumers.  Body Text #footnote reference#i! footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference) Bell Atlantic/NYNEX Order at 121.i The horizontal combination of MCI and WorldCom in the domestic long distance market raises such concerns to a far greater extent than any merger previously reviewed by the Commission.   The long distance market already is highly concentrated, with a premerger HHI of 2823 based on revenues.  Body Text #footnote reference#c" footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference) Long Distance Market Shares, Table 6.c Combining WorldComs and MCIs revenues would give the merged company a 25.5 percent market share in the overall market, and, almost certainly, a much greater share among mediumsized and large business customers. The overall postmerger HHI would be 3038, an increase of 215. Under the Department of Justices merger guidelines, such a high initial HHI level combined with an increase of this magnitude would be presumed to create or facilitate the exercise of market power.   Body Text heading 4,h4X` hp x (#  (#  1 1 1 1 1 1 1 1 1The Domestic Long Distance Market Already Exhibits Coordinated Pricing.   #heading 4,h4# Body Text۲  (#` hp x (# The long distance market already is beset by cooperative rather than competitive pricing. The Commission acknowledged more than two years ago that AT&T, MCI, and Sprint may have been engaging in tacit price collusion,  Body Text #footnote reference#s# footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference) AT&T NonDominance Order, 11 FCC Rcd at 331415.s and economic theory confirms that the long distance market is characterized by conditions supporting coordinated interaction.     For example, Robert Crandall and Leonard Waverman have concluded that [t]he evidence presented establishes the existence of conditions under which firms, even in the absence of a single firm with market power, or overt collusion, and even in the absence of any conscious desire to coordinate prices, may discover that they are able to maintain prices above the competitive level.  Body Text #footnote reference#;$ footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#X` hp x (# (#)footnote reference) Affidavit of Robert Crandall and Leonard Waverman in Support of Ameritechs Section 271 Application for Michigan, (filed May 21, 1997), at 85. Crandall is a Senior Fellow in Economic Studies at the Brookings Institution, and Waverman is a Professor of Economics at the University of Toronto.; As Crandall and Waverman explain, supracompetitive prices can be maintained in a market without any single firm having market power as long as each firm believes that a reduction in price will lead to a reduction of its profits. Maintaining this belief requires four conditions, each of which is present in the long distance market: high market concentration due to a limited number of suppliers, prices that are common knowledge, the existence of credible capacity of rivals to meet any price reduction or retaliate with a greater reduction, and similarity of costs across suppliers.  Body Text #footnote reference#Z% footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference)Id. at 1011, 6077.Z  Empirical analyses confirm that the three largest long distance carriers are not pricing competitively in any market segment. Following a painstaking examination of those carriers pricing of MTS, inbound WATS, outbound WATS, and contract services, Professor Paul MacAvoy of Yale University has concluded that [t]he dynamic behavior of [pricecost] margins in the early 1990s provides evidence that the three major carriers were able to establish coordinated strategies over that period in place of competition  Body Text #footnote reference#=& footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference) P. MacAvoy, THE FAILURE OF ANTITRUST 172. MacAvoy is the Williams Brothers Professor of Management Studies (and past Dean) of the Yale School of Organization and Management. His analysis is presented in depth in Chapters 4 and 5 (pages 83174) of his book.= and that [t]heir coordination takes levels of pricecost margins toward higher levels than would result from independent price setting.  Body Text #footnote reference#I' footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference) Id. at 156.I As he explained:  For findings of increased competitiveness, margins should have decreased when concentration declined, or when concentration reached and then stabilized at levels below those associated with the presence of second or third equalsized sources of service. But that did not take place in the ten years since industry restructuring. To the contrary, margins have increased, particularly during and after concentration stabilized at those lower levels. Reduced competitiveness has been the result.  Body Text #footnote reference#L( footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference) Id. at 17374.L  Notably, this reversal of the structureperformance relationship ! that is, the finding that pricecost margins increased rather than decreased as concentration declined ! took place in message toll and all the business service markets nationally.  Body Text #footnote reference#I) footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference) Id. at 171.I  Further confirmation of this point comes from Professor Jerry Hausman, who has found that AT&T, MCI, and Sprint have engaged in lock step price increases in long distance while the largest cost component, long distance access, has decreased significantly over the same time period.  Body Text #footnote reference#* footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference) Declaration of Professor Jerry A. Hausman in Support of BellSouths Section 271 Application for South Carolina, filed Sept. 30, 1997, at 30. Hausman is the MacDonald Professor of Economics at MIT. Professor Hausman noted that:  đ[T]wo major cost components of long distance service ! access and transport ! have both decreased significantly over the past few years, yet residential long distance prices have not reflected those price decreases. This outcome is another indication of noncompetitive behavior.  Body Text #footnote reference#A+ footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference) Id.A   Notably, the conclusion reached by these economists is shared by Wall Street. In a recent analysis of AT&T, Merrill Lynch explained that AT&T had not passed through the full extent of the July 1997 access charge reductions:  We estimate AT&T received a total annualized access cut of $800M, on July 1. About $400M was passed through to business customers in rate cuts beginning last December (in anticipation of the July 1 order). AT&T had assured the FCC that the remaining $400M would be passed through to consumers in the form of basic rate reductions. However, we estimate that only $65M (annualized to $250M) was passed on to consumers in 3Q. The result was higher consumer prices and AT&T profits, which we expect will continue into both 4Q and '98.  Body Text #footnote reference#, footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference)Merrill Lynch, AT&T Corp. 3d Quarter Review (Oct. 21, 1997), at 2 (emphasis added).    Clearly, if the market truly were competitive, no carrier would be able to keep these savings as profits rather than passing them to consumers in the form of lower prices.   Body Text heading 4,h4X` hp x (#  (# 1The Merger Would Reverse WorldComs Incentives to Disrupt the Oligopoly and Would Exacerbate Coordinated Interaction Among the Remaining IXCs.   #heading 4,h4# Body Text۲  (#` hp x (# The merger of WorldCom and MCI would diminish long distance competition for four reasons: (1) it would reverse WorldComs incentive to act as a maverick, because continued aggressive pricing by WorldCom would undercut profit margins from its newly acquired customer base; (2) it would reduce the number of significant competitors from four to three and otherwise aggravate the tendency toward coordinated interaction; (3) it would place the vast majority of long distance capacity under the control of a small group of players, so that the threat of mutually assured destruction would deter real price competition; and (4) it would appreciably reduce the market share gap between the top two competitors, which would further discourage competitive pricing.    The merger would eliminate the only significant maverick competitor. WorldCom traditionally has undercut the AT&T/MCI/Sprint coordinated price. Indeed, GTEs own experience as a consumer of long distance services is that WorldCom has been far more pricecompetitive than its larger rivals.  Body Text #footnote reference#`- footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference) See Declaration of Debra R. Covey.` This experience apparently has been shared by many customers: Over the years, the longdistance companies say WorldComs aggressive tactics have forced them to cut prices ! especially with business customers, an MCI niche. But the merger knocks WorldCom out as a competitor.  Body Text #footnote reference#. footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference) Glassman,  Dial M for Megamerger, The MCIWorldCom Deal May Not Be So Good For Consumers, U.S. News and World Report, Nov. 24, 1997, at 68 ( Glassman article).  After the merger, WorldComs incentives, and therefore its market behavior, will shift by 180 degrees. Currently, as a firm with low retail market share, WorldCom does not lose much profit from its existing customers when it lowers prices because it has relatively few customers. Thus, it gains more by attracting new customers through reduced prices (even at reduced margins) than it loses from current customers. After the merger, in contrast, WorldCom will no longer be the brash upstart hungry for market share. Rather, it will be anxious to preserve and protect the value of its acquisition. At a minimum, continued aggressive pricing would cannibalize the combined companys own customer base (by enabling existing MCI customers to take service at lower rates), without earning sufficient revenues from new customers to offset these losses. It would be irrational for WorldCom to invite, and for the Commission to expect, such a scenario.  The risk of significant price increases by the combined MCI/WorldCom is particularly great because the two companies are strong in the same market segments, suggesting that many customers view them as their first and second choices. As Carl Shapiro (past Deputy Assistant Attorney General for Economics in the Antitrust Division) explains:  If a significant proportion of consumers considers the merging firms products to be their first and second choices (at premerger prices), then the merged entity will have an incentive to impose a nontrivial price increase following the merger.  Body Text #footnote reference#/ footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference)Shapiro, Mergers with Differentiated Products, Antitrust (Spring 1996) at 24.  The amount of this increase is likely to be greater where there are high Gross Margins and high Diversion Ratios.  Body Text #footnote reference#G0 footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference)Id. at 26.G As Crandall, Waverman, MacAvoy, and Hausman have shown, the long distance market certainly is characterized by high gross margins. And, while MCI and WorldCom provide no data on the diversion ratio ! that is, the proportion of customers who would leave one carrier for the other in response to a price increase by the first ! the fact that these suppliers are particularly strong in the same market segments implies that this ratio is high.  Finally, Shapiro cautions that accommodating responses by rivals to a postmerger price increase are likely to result in even higher overall prices in the market:  đGametheoretic analyses of pricing competition with differentiated products indicate that rivals will typically find it optimal to raise their prices in response to higher prices set by the merging firms. Accounting for these accommodating responses tends to increase, not decrease, the predicted postmerger price increase.  Body Text #footnote reference#G1 footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference)Id. at 27.G  That is, AT&T and Sprint are likely to accommodate price increases by raising their own rates, rather than aggressively responding. Consequently, there is every reason to expect that the WorldCom/MCI merger would restrain rather than promote competition in the domestic retail long distance market.  The merger would facilitate coordination by substantially increasing concentration in the market. By increasing consolidation in the already highly concentrated long distance market, the merger would reinforce the structural conditions that underlie existing noncompetitive pricing. Cooperation would be significantly easier with only three, rather than four, most significant market participants. Moreover, the remaining competitors would be far better able to police noncooperative pricing. Today, WorldCom essentially serves the mass market by distributing its services through many resellers, each of which makes its own pricing decisions. After the merger, as discussed in Section II.B below, WorldCom will have an incentive to increase its wholesale rates and leave resellers even less margin to undercut the prices set by the Big 3.   Body Text  The merger would deter competitive pricing by giving three companies control of the vast majority of long distance capacity. Because the three remaining major competitors would control so much capacity, the merger would further entrench the conditions giving rise to noncompetitive pricing. In the past, the Commission has concluded that excess capacity can be used to discipline uneconomically high prices, and it relied on this analysis in reclassifying AT&T as a nondominant carrier.#footnote reference#2 footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference)AT&T NonDominance Order, 11 FCC Rcd at 330305. The applicants have provided no information regarding capacity in the long distance market, and GTE believes that there may be areas of the country where capacity may be limited. In such areas, the deterrence effect from regions where excess capacity is in place may still prevent both more competitive pricing and additional investment in facilities. Excess capacity is a twoedged sword, however. Where, as in todays long distance market, a few competitors enjoy both substantial amounts of reserve capacity and relatively even market shares, it can cut against competitive pricing. Indeed, economists have long recognized that continued excess capacity can serve as a deterrent to new entry or pricecutting by signalling that retaliation will be a lowcost, rational, and credible strategy.#footnote reference#3 footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference)J. Tirole, THE THEORY OF INDUSTRIAL ORGANIZATION, Chapter 8 (MIT Press 1989). See also P. MacAvoy, THE FAILURE OF ANTITRUST 102 (excess capacity among the largest IXCs provided each carrier with more incentive to choose price levels that limit incursions in the revenue shares of each of the carriers in each of the key markets.); Crandall and Waverman Affidavit at 6163. That is, each incumbent holds a club over the others and over prospective new competitors ! in essence, mutually assured destruction ! that keeps both entry and a price war at bay. The merger would give the remaining AT&T, WorldCom/MCI, and Sprint even bigger clubs; since virtually all of the nationwide capacity would be controlled by the cartel, the prospect of truly competitive pricing would be even more remote.  Body Text đThe merger would deter competitive pricing by reducing the market share gap between AT&T and WorldCom/MCI. Economic theory shows that, as market shares in an oligopoly become more nearly equal, cooperative rather than competitive pricing is more likely to prevail. As explained in the leading text on market performance:  [W]hen cost functions and/or market shares vary from firm to firm within an oligopolistic industry, conflicts arise that, unless resolved through formal collusive agreements, interfere with the maximization of collective monopoly profits. And if left unresolved, these conflicts may trigger myopic, aggressive behavior that drives the industry away from the joint profitmaximizing solution of its priceoutput problem.  Body Text #footnote reference#r4 footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference)F. Scherer, INDUSTRIAL MARKET STRUCTURE AND ECONOMIC PERFORMANCE 160 (Houghton Mifflin, 2d ed. 1980). The same point is made by Professor MacAvoy in THE FAILURE OF ANTITRUST (at 100101):  X` hp x (#4` hp x (#When shares of the second and third largest firms increase to levels more comparable to if not the same as that of the largest firm, and regulation eliminates price floors for the largest firm, the second and third firms would not clearly be advantaged from further individual initiatives to increase their shares. With two to three equalsized firms, any one can credibly threaten its rivals with large price reductions if those rivals seek to have shares further redistributed. 8 It is more credible to expect that each firm sets out its own tariff, with the preconception that all firms will do the same, to maintain previous shares.r    The merger of MCI and WorldCom would informally resolve the market share "conflicts" by equalizing market shares. Consequently, the combination of these companies would further deter the "myopic, aggressive behavior" that most benefits consumers. As Professor MacAvoy has concluded, the more alike in size the companies get, the less they compete for market share, and consequently, the WorldCom/MCI merger is very likely to facilitate collusion.  Body Text #footnote reference#e5 footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference) Glassman article, supra note 45, at 68.e 2    Body Text heading 2X` hp x (#` (# đ  Body Text  The Merger Would Compromise the Supply of Bulk Capacity and Advanced Features in the Resale Input Market. 2   heading 2  Body Text` (#` hp x (# Product and geographic markets. As the Commission recognized in the Bell Atlantic/NYNEX Order, the competitive effects of a proposed merger must be assessed in both wholesale (input) and retail markets.  Body Text #footnote reference#q6 footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference) Bell Atlantic/NYNEX Order at 115120.q The wholesale long distance market consists of the supply of bulk capacity (either minutes of use or leased facilities) and advanced features (such as enhanced 800 service, frame relay, and Advanced Intelligent Network capabilities) to resellers. Like the retail market, the wholesale long distance market is composed of pointtopoint geographic markets that may be aggregated where the same competitive conditions prevail, and of various customer groups. The applicants, once again, have failed to provide any information regarding market conditions either on particular routes or nationwide, and have failed to discuss the impact of the merger on specific reseller customer groups.   Most significant participants. The most significant market participants in the supply of wholesale capacity to long distance resellers are the same as in the domestic retail market ! AT&T, MCI, Sprint, and WorldCom. While the applicants have provided no wholesale market share data, GTE believes that WorldCom has a far greater share of the wholesale market than of the retail market, and may even be the largest or second largest provider of such capacity. Whatever its share, WorldCom has aggressively pursued wholesale supply arrangements as a means of indirectly serving residential and small business customers. That is, recognizing that its own brand name is largely unrecognized in the retail mass market, WorldCom has followed a strategy of distributing its services through resellers with known brands, such as GTE, Ameritech, and Excel.  In contrast, the other large IXCs have brands with more appeal in the mass market, and they generate large profit margins by directly serving residential and small business customers. Their profit margins from wholesale services are far lower, making the wholesale market a much less attractive distribution mechanism for them than for WorldCom. Put another way, AT&T, MCI, and Sprint incur an opportunity cost when they sell wholesale service or capacity to a reseller.  Body Text #footnote reference#>7 footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference)For example, if AT&T has half the retail market, then supplying a minute of wholesale service to a reseller would, on average, cost it roughly half the profit it would have earned from supplying a minute of retail service to the final consumer of the reseller.> If resellers aggregate traffic from residential and small business customers, from whom retail toll margins are significant, then the opportunity cost associated with resale is quite large. Consequently, existing competition by the Big 3 long distance carriers in the wholesale market, limited though it may be, almost certainly is due to the presence of a competitor (WorldCom) that does not directly serve mass market customers. Absent WorldCom, the Big 3 IXCs rationally would pursue an even less vigorous wholesale marketing strategy.  The belief that WorldCom is the leading supplier of wholesale long distance capacity and advanced features to resellers is bolstered by GTEs own experience. As detailed in the attached Declaration of Debra R. Covey, WorldCom has been more willing than the other large facilitiesbased IXCs to offer attractive rates and terms to resellers. In addition, although WorldCom traditionally was a plain vanilla provider of wholesale capacity, it has also committed to provide advanced features and capabilities to its wholesale customers ! features that the three largest IXCs have been reluctant to provide to resellers. WorldCom has also agreed to develop additional features for resellers in the future.  These advanced capabilities are essential elements of the services that GTE and other carriers resell to business and residential customers. Without access to them on a nationwide basis, GTE would be seriously hampered in its resale efforts. Because of WorldComs competitive pricing and responsiveness on nonprice terms, GTE entered an agreement in 1996 under which WorldCom supplies a significant portion of GTEs domestic voice resale needs.  In contrast to WorldCom, the three largest facilitiesbased IXCs are far less accommodating of resellers. In GTEs experience, AT&T pursues a highprice strategy in the wholesale market that renders it a less competitive choice as a supplier. MCI and Sprint are somewhat more pricecompetitive than AT&T,  Body Text #footnote reference#|8 footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference)MCI was the second choice for GTE in the competition won by WorldCom.| but none of these three carriers provides GTE the full range of advanced capabilities offered to their retail customers.  No other feasible sources of supply exist. Only the Big 4 IXCs can effectively compete to provide nationwide wholesale long distance capacity for resale. The remaining providers of wholesale capacity are generally regional suppliers that lack features desired by resellers, such as redundant or diverse routing and advanced network capabilities. Moreover, these smaller carriers have higher cost structures than the largest IXCs because they interconnect at relatively few local tandems and at few or no end offices. Any reseller using their networks must therefore obtain additional longhaul transport and (directly or indirectly) pay higher access charges.  Adverse competitive effects of the merger. The merger with MCI inevitably will alter WorldComs incentives and practices in the wholesale market. Currently, WorldComs comparative willingness to offer resellers favorable rates and advanced features can be ascribed to its small retail market share. In the premerger market, WorldCom often acts as a carriers carrier, deriving a substantial percentage of its long distance revenues from the wholesale supply of bulk transport than from retail services. After the merger, in contrast, rather than welcoming resellers as a distribution channel, WorldCom will realize that increased sales through resellers would diminish its profit margins by cannibalizing MCIs lucrative retail customer base. That is, the opportunity costs of resale for WorldCom will increase to the point where resale is no longer a favored distribution strategy. GTE therefore expects that WorldCom will increase its wholesale rates, limit the range of advanced capabilities that it offers to resellers, and discontinue commitments to develop additional wholesale capabilities.  In short, the result of the merger, as in the retail market, will be the elimination of the maverick supplier and the promotion of cooperative rather than competitive pricing. Residential and small business customers will suffer because resellers will pay higher prices for wholesale capacity (an anticompetitive unilateral effect of the merger), which they will be forced to pass on through higher end user rates. Customers also will be hurt because resellers will be denied access to the advanced capabilities they need to compete. The merger thus will injure consumers both directly (by restraining retail competition) and indirectly (by hindering resale). 2    Body Text heading 1X` hp x (# (#  đ  Body Text THE WORLDCOM/MCI MERGER WOULD CREATE MARKET POWER IN INTERNATIONAL TELECOMMUNICATIONS MARKETS. 2   heading 1  Body Text (#` hp x (# WorldCom and MCI assert that the 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.  Body Text #footnote reference#c9 footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference)WorldCom/MCI Application at 36, Vol. I.c The companies additionally conclude that the merger will trigger an avalanche of competitive benefits for international services without a single countervailing adverse effect.  Body Text #footnote reference#h: footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference)See WorldCom/MCI Application at 27, Vol. I.h Yet again, however, these assertions not only are unsupported by any facts, figures or analyses, but fail to explain why strengthening WorldCom at the expense of eliminating MCI as an independent competitor would not harm consumers.   WorldCom and MCIs failure to identify a single anticompetitive effect of their merger on the international markets is, at best, willful ignorance. Even the slightest attempt at such an analysis reveals significant potential harms to consumers and competition in international markets. When publicly available data are applied to rational market divisions ! as GTE does below ! the smoke screen clears and it is evident that the merger of WorldCom and MCI would undermine the Commission's procompetitive international policies and substantially restrain international telecommunications competition.  Body Text #footnote reference#; footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference)The Commission repeatedly has stated that the lack of competition in the U.S. international telecommunications marketplace has resulted in supracompetitive prices and restricted carrier entry.$ footnote text$#footnote reference##X>0 181`111X1# )footnote reference)See Rules and Policies on Foreign Participation in the U.S. Telecommunications Market, Report and Order, IB Docket No. 97142, FCC 97195 (rel. June 4, 1997); Market Entry and Regulation of ForeignAffiliated Entities, 11 FCC Rcd 3873 (1995); International Settlement Rates, Report and Order, IB Docket No. 96261, FCC 97280 (rel. Aug. 18, 1997). To counteract this imbalance, the Commission has attempted to jumpstart competition, for example, by opening the U.S. market to additional foreign participation. See Rules and Policies on Foreign Participation in the U.S. Telecommunications Market, Report and Order, IB Docket No. 97142, FCC 97398 (rel. Nov. 26 1997), and by streamlining regulatory oversight of U.S. carriers. See Streamlining the International Section 214 Authorization Process and Tariff Requirements, Report and Order, 11 FCC Rcd 12884 (1996); AT&T NonDominance Order, 11 FCC Rcd 3271 (1995). 2    Body Text heading 2X` hp x (#` (# đ  Body Text  The WorldCom/MCI Merger Would Result In Increased Market Concentration In International EndUser Product Markets. 2   heading 2  Body Text` (#` hp x (# The Commission has long held that there are two relevant international retail markets: international message telephone service ( IMTS) and nonIMTS (primarily private line) services.  Body Text #footnote reference#< footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference)See International Competitive Carriers Policies, 102 F.C.C. 2d 812, 821823 (1985), recon. denied, 60 R.R. 2d 1435 (1986). This definitional split was borne of the FCCs conclusion that IMTS and private line services are not substitutable products.  Body Text #footnote reference#_= footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference)See id., 102 F.C.C. 2d at 824826._ As detailed below, the merger would stifle competition in both of these markets.    Body Text heading 3X` hp x (#` (# 1.The WorldCom/MCI Merger Would Result in Increased Market Concentration in the International Private Line Services Market.    heading 3  Body Text` (#` hp x (#A merger of WorldCom and MCI would create the worlds largest carrier in the international private line market, possessing dramatically enhanced market power in an already oligopolistic market. Publicly available data from 1996 demonstrate that the overall international private line services market is already highly concentrated, with an HHI of 2,757 (see Table 2).  Body Text #footnote reference#> footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference) Federal Communication Commission, 1995 Section 43.61 International Telecommunications Data (Oct. 31, 1996).  In terms of revenues, MCI is ranked second and WorldCom is third; combining their revenues in this market will give the newly merged entity a 44.8 percent market share. This would leapfrog the merged company past the 39.8 percent share held by the current market leader, AT&T. As a result, the merger would increase the HHI by 921 points to 3,678 (see Table3). Under federal merger guidelines, such an increase would lead the DOJ to presume the merger likely to create or enhance market power.     Body Text  | 6J@@@@@@@ 6J@@@@@@@| **#I2PQP# Table 2 PreMerger International ` h Table 3 PostMerger International **` h Private Line Market ` h Private Line Market *** @ @ H @ @ H @ @ H @ @ H* Market ShareMarket Share*AAIAAI@@H@@H*CarrierRevenuePercentageCarrierRevenuePercentage *    *AT&T$261,473,06739.8%MCI/WorldCom$294,208,50344.8%**MCI$189,554,14828.9%AT&T$261,473,06739.8%**WorldCom$104,654,35515.9%Sprint$59,632,7559.1%**Sprint$59,632,7559.1%All Others$41,096,3826.3%**All Others$41,096,3826.3%*    *World$656,410,707*     *World$656,410,707*  *` PostMerger HHI3,678 *    *` PreMerger HHI2,757 Increase in HHI921 Body Text` hp x (##XX2PQXP# This HHI analysis demonstrates that the merger poses a serious competitive concern, which WorldCom and MCI simply ignore. Mere disregard for the facts, however, can not make them disappear: By combining the second and thirdranked carriers in the private line market, the transaction will significantly increase concentration and hurt the public, including government entities that are consumers of these facilities, by eliminating competitors from the market. The adverse effects of the merger are even more striking when examined on a routespecific basis, as is the Commissions longstanding practice in defining relevant geographic markets for international services.  Body Text #footnote reference#? footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference)International Competitive Carrier Policies, 102 F.C.C. 2d 812, 828 (1985).  An analysis of the 1995 data from these markets shows that a WorldCom/MCI merger would create private line service overlaps in 76 U.S. foreign markets worldwide. As the charts in Appendix 1 make clear, these markets span the globe and affect virtually every vital commercial center. The merger would be likely to create or enhance market power under the DOJs merger guidelines in 71 of these 76 overlap markets.  Body Text #footnote reference#@ footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference)FCC 1995 Section 43.61 International Telecommunications Data (Feb. 1997). Indeed, in 9 of these markets, the postmerger HHI would be 10,000, indicating pure monopoly conditions. It is absurd to argue that the creation of anticompetitive and monopolistic conditions in private line markets around the world does not create public interest concerns. Quite clearly, the merger would deprive customers of a competitive markets greater variety of services and lower prices. While MCI and WorldCom might benefit from their combination, consumers most assuredly would not.  Body Text #footnote reference#A footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference)The anticompetitive effects of the proposed combination are not vitiated by the theoretical possibility that other carriers could route traffic for countries served primarily or exclusively by WorldCom/MCI via third countries. Carriers from many countries ! particularly those that retain substantial state ownership or monopolies ! are reluctant to substitute "transit" arrangements for international longhaul agreements because of reduced revenues. Even where a particular nation was willing to accept transitrouted U.S. traffic, it might be some time before other U.S. carriers could negotiate new foreign operating agreements.   Body Text heading 3X` hp x (#` (# ב  Body Text The WorldCom/MCI Merger Would Threaten Competition in the International Message Telephone Service Market.     heading 3  Body Text` (#` hp x (# As with the international private line services market, a WorldCom/MCI merger would have a profoundly anticompetitive effect on the IMTS (U.S. originating or terminating) market. The proposed merger would result in the consolidation of the second largest (MCI) and fourth largest (WorldCom) competitors in this market. Even absent the merger, todays IMTS market is effectively an oligopoly of four carriers, which together account for over 98.3 percent of IMTS revenues (see Table 4). Were the Commission to approve the proposed merger, the market instantly would be dominated by just three players, to the detriment of consumers and new carrier entrants. Indeed, the overall effect of permitting the proposed merger would be an increase the HHI in the IMTS market from 4,450 to 4,954 (see Table 5). This 504point increase is considered likely to create or enhance market power under the DOJ Merger Guidelines.       Body Text  | ~JIJ@@@@@@@ ~JIJ@@@@@@@| ** #I2PQP##XX2PQXP# #I2PQP##XX2PQXP# #I2PQP##XX2PQXP# #I2PQP##XX2PQXP# #I2PQP##XX2PQXP# #I2PQP##XX2PQXP# #I2PQP#**#XX2PQXP# #I2PQP#Table 4 PreMerger International#XX2PQXP# #I2PQP##XX2PQXP# #I2PQP##XX2PQXP# #I2PQP#` h#XX2PQXP# #I2PQP#Table 5 PostMerger International#XX2PQXP# #I2PQP##XX2PQXP# #I2PQP#**` h#XX2PQXP# #I2PQP#Message Toll Service#XX2PQXP# #I2PQP##XX2PQXP# #I2PQP##XX2PQXP# #I2PQP#` h#XX2PQXP# #I2PQP#Message Toll Service#XX2PQXP# #I2PQP##XX2PQXP# #I2PQP#**#XX2PQXP# #I2PQP#` #XX2PQXP# #I2PQP##XX2PQXP# #I2PQP##XX2PQXP# #I2PQP##XX2PQXP# #I2PQP##XX2PQXP# #I2PQP##XX2PQXP# #I2PQP#* @ @ H @ @ H @ @ H @ @ H*#XX2PQXP# #I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP#Market Share#XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP#Market Share*AAIAAI@@H@@H*#XX2PQXP##I2PQP#Carrier#XX2PQXP##I2PQP#Revenue#XX2PQXP##I2PQP#Percentage#XX2PQXP##I2PQP##XX2PQXP##I2PQP#Carrier#XX2PQXP##I2PQP#Revenue#XX2PQXP##I2PQP#Percentage*    *#XX2PQXP# #I2PQP#AT&T#XX2PQXP# #I2PQP#$8,537,707,177#XX2PQXP# #I2PQP#61.5%#XX2PQXP# #I2PQP##XX2PQXP# #I2PQP#AT&T#XX2PQXP# #I2PQP#$8,537,707,177#XX2PQXP# #I2PQP#61.5%**#XX2PQXP# #I2PQP#MCI#XX2PQXP# #I2PQP#$3,252,416,447#XX2PQXP# #I2PQP#23.4%#XX2PQXP# #I2PQP##XX2PQXP# #I2PQP#MCI/WorldCom#XX2PQXP# #I2PQP#$4,745,832,848#XX2PQXP# #I2PQP#34.2%**#XX2PQXP# #I2PQP#WorldCom#XX2PQXP# #I2PQP#$1,493,416,401#XX2PQXP# #I2PQP#10.8%#XX2PQXP# #I2PQP##XX2PQXP# #I2PQP#Sprint#XX2PQXP# #I2PQP#$363,726,482#XX2PQXP# #I2PQP#2.6%**#XX2PQXP# #I2PQP#Sprint#XX2PQXP# #I2PQP#$363,726,482#XX2PQXP# #I2PQP#2.6%#XX2PQXP# #I2PQP##XX2PQXP# #I2PQP#All Others#XX2PQXP# #I2PQP#$240,251,620#XX2PQXP# #I2PQP#1.7%**#XX2PQXP# #I2PQP#All Others#XX2PQXP# #I2PQP#$240,251,620#XX2PQXP# #I2PQP#1.7%#XX2PQXP# #I2PQP##XX2PQXP# #I2PQP##XX2PQXP# #I2PQP##XX2PQXP# #I2PQP#*    *#XX2PQXP# #I2PQP##XX2PQXP# #I2PQP##XX2PQXP# #I2PQP##XX2PQXP# #I2PQP##XX2PQXP# #I2PQP#World#XX2PQXP# #I2PQP#$13,887,518,127#XX2PQXP# #I2PQP#*     *#XX2PQXP# #I2PQP#World#XX2PQXP# #I2PQP#$13,887,518,127#XX2PQXP# #I2PQP##XX2PQXP# #I2PQP##XX2PQXP# #I2PQP##XX2PQXP# #I2PQP##XX2PQXP# #I2PQP#*  *#XX2PQXP# #I2PQP##XX2PQXP# #I2PQP##XX2PQXP# #I2PQP##XX2PQXP# #I2PQP#` ` #XX2PQXP# #I2PQP#PostMerger HHI#XX2PQXP# #I2PQP##XX2PQXP# #I2PQP#4,954*    *` #XX2PQXP# #I2PQP#PreMerger HHI#XX2PQXP# #I2PQP##XX2PQXP# #I2PQP#4,450 #XX2PQXP# #I2PQP##XX2PQXP# #I2PQP#Increase in HHI` #XX2PQXP# #I2PQP##XX2PQXP# #I2PQP#504 Body Text` ` hp x (##XX2PQXP#   An analysis of specific geographic markets for IMTS paints an even more striking picture. Again, based on the Commissions policy of considering each international route to be a separate geographic market, GTEs analysis shows that the proposed merger would result in significant market overlap. Based on 1995 data, in at least 30 markets where WorldComs and MCIs IMTS services currently overlap, the merger would be likely to create or enhance market power. See Appendix 3 hereto. These markets include:  1 1 1 1 1 1 1 1 ` hp x (#4` hp x (#111 countries in Western Europe 14 countries in Asia 14 countries in the Caribbean and South America 13 countries in the Middle East 13 countries in Eastern Europe 13 countries in Africa 12 countries in the South Pacific 4` hp x (#` hp x (#Further, in 12 other markets, a merger between WorldCom and MCI would raise significant competitive concerns under the Merger Guidelines.  Body Text #footnote reference#B footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference)As in the international private line market, the possibility that carriers could offer service via "transit" arrangements will not alleviate WorldCom/MCI's market power on particular U.S.foreign routes. In short, the merged entity would have the power and incentive to engage in anticompetitive conduct that would detrimentally affect consumers in the IMTS market.  2    Body Text heading 2X` hp x (#` (#ב  Body Text  The Merged Entity Would Control an Essential Input for Retail Service Providers, Thereby Creating Barriers to Entry for Competitors in the U.S. International Telecommunications Marketplace. 2   heading 2 ` (#` hp x (#    Product market. As the Commission recognized in the BT/MCI II Order, the competitive effects of a proposed merger must be assessed for international input (primarily transport) markets as well as for retail markets. The analysis of effects in input markets is important because ultimate consumers may be injured to the extent that producers of final goods pass on higher input costs by raising enduser prices,#footnote reference#C footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference)BT/MCI II Order at 5860; see also Bell Atlantic/NYNEX Order at 115120. and because control of scarce facilities will create barriers to entry in the retail market, further entrenching the oligopoly. The international transport market is an essential input for the provision of international voice data and Internet transmission services on a retail basis.#footnote reference#PD#footnote reference#)footnote reference)Private line services also constitute an input market under certain circumstances (as well as being a separate retail market, as discussed above). Large, sophisticated businesses and government users must maintain secure and reliable communications and thus cannot use the public switched telephone network ( PSTN) or virtual private networks ( VPN), which involve some other entity performing network management functions. Examples of such purchasers are the large closed user groups, such as SWIFT (banking) and ARINC and SITA (airlines). Instead, these users must construct or obtain private networks composed of leased private lines. The proposed merger could severely restrict competition in this input market. (Although the FCC has not specifically examined the issue, European antitrust regulators consider the provision of private lines and bare capacity to sophisticated network providers to be a separate input market.) Specifically, the merged entity could raise the price of private lines, which, in turn, would drive up the costs of banking, aviation, and other services, to the detriment of the public. P As discussed more fully below, WorldCom and MCI are significant participants in the international transport input market ! and a merger of the two companies would create market power and increase barriers to entry for competitive U.S. carriers. Geographic market. International transport normally is accomplished through underseas cables located in the Atlantic, Pacific and Caribbean Ocean Regions.#footnote reference#E footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#Satellite capacity )footnote reference)also is $ footnote text$#footnote reference##X>0 181`111X1#used forIVC international transport)footnote reference). However, due to its relatively high cost and quality constraints$ footnote text$#footnote reference##X>0 181`111X1#, )footnote reference)satellite service is typically not a providers first choice for pointtopoint transport. See$ footnote text$#footnote reference##X>0 181`111X1# BT/MCI II)footnote reference) Order at$ footnote text$#footnote reference##X>0 181`111X1# 80.)footnote reference)ۇ The most heavily subscribed region is the North Atlantic, which includes routes between the United States and Europe. Accordingly, the initial analysis presented below focuses on the Atlantic region.#footnote reference#F footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference) The Commission should compel the applicants to provide information regarding their ownership shares in all common carrier and private cables in all major oceanic regions. The Atlantic Region is served by a number of underseas cables owned by consortia of international telecommunications carriers. The existing cables include TAT8, 9, 10, 11, and 12/13.#footnote reference#G footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference) These routes also are served by two private cables (PTAT and CANTAT3). FCC 1996 Circuit Status for U.S. FacilityBased International Carriers, Table 7 (Dec. 2, 1997). In addition, two new cables ! Gemini (a private cable) and Atlantic Crossing ! will soon become available.#footnote reference#6H footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference) The Commission has authorized construction and operation of several new cable systems, but only Gemini and Atlantic Crossing will be operational in the North Atlantic within the next year. See BT/MCI II Order at 101, 141. 6  Most significant participants. Once again, WorldCom and MCI have supplied no information regarding their respective ownership interests in the Atlantic Region cables or the extent to which spare capacity is available. Nonetheless, the Commission has recognized that, with respect to existing facilities, TAT12/13 is a reasonable proxy for concentration in the entire Atlantic Region because it is the most costeffective, reliable, and largest (with as much capacity as all of the other currently operating cables combined).#footnote reference#I footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference) See BT/MCI II Order at 98, 134, 135; TeleGeography 1996/1997, Global Telecommunications Traffic Statistics & Commentary at 61 (Gregory C. Staple ed. 1996/1997).  The data regarding TAT12/13, as depicted below, reveal substantial cause for concern regarding the potential for anticompetitive conduct in this market. Moreover, these concerns are significantly exacerbated when information regarding the new cables is added into the mix.  With respect to capacity allocation in international cables, analysis of the U.S. side of the cable is the most relevant.#footnote reference#J footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference) Traditionally, international capacity has been divided into halfcircuits owned by entities on each end of a cable. These circuits are then paired to complete a transmission. Were any single carrier, or group of carriers, to control the U.S. side of halfcircuit capacity, such entity or entities would be able to exert market power over other carriers. Although the halfcircuit model may some day be replaced by whole circuits, the market for U.S.side halfcircuit capacity remains the most critical input for new carrier entry. In any case, existing whole circuits likely would be covered by halfcircuit data. As Table 6 shows, allocation of existing U.S.end international transport capacity (using TAT12/13 as a proxy) already is concentrated; the premerger HHI for capacity allocation on the U.S.end of the TAT12/13 is 1907. This figure falls within the highly concentrated range of the Department of Justice merger guidelines#footnote reference#K footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference) See 1992 Horizontal Merger Guidelines, 57 Fed. Reg. at 41558  1.5.:  đ Table 6 Premerger TAT12/13 U.S.end MIUS Assignments#footnote reference#X01ÍÍX01 Í  Í QL footnote text#footnote reference#)footnote reference) The source for the table is the $ footnote text$#footnote reference#June 1997 TAT12/13 Schedules)footnote reference). MIUS is a measure of the minimum amount of cable capacity available to a carrier that is an initial purchaser of a cable.Q  T  ZZ  F@@@  ZZ  F@@@T  A A I @ @ H Carrier  U.S.end MIUS Assigned  Percentage Allocated      AT&T 1298 32     MCI 1131 28     Sprint 275 7     WorldCom 247 6     Others 1081 27       Premerger HHI  1907  Body Text A merger of WorldCom and MCI would further concentrate an already concentrated market.  Body Text #footnote reference#X01 Í  Í X01ÍÍM  Body Text  footnote text#footnote reference#)footnote reference) With respect to other cables, GTE has been able to determine that MCI has approximately 18 percent of all of the TAT11 U.S.end circuits and approximately 12 percent of all of the TAT8 U.S.end circuits allocated to it. WorldCom also has approximately 4 percent of all of the TAT11 U.S.end circuits and approximately 13 percent of all of the TAT8 U.S.end circuits allocated for its use. The premerger HHI for the market for U.S.end capacity on the TAT11 and 8 would be 2662 and 4967 respectively. Additionally, the merged company will have allocated to it 26 percent of all of the TAT11 U.S.end circuits and 25 percent of all of the TAT8 U.S.end circuits. The postmerger HHIs would be 2812 for the TAT11 U.S.end circuit market, and 5284 for the TAT8 U.S.end circuit market. Thus, the proposed merger would be likely to create or enhance market power under the DOJ/FTC merger guidelines. The merged company would have an 18 percent share of the overall ownership interest in TAT12/13 (the second highest percentage),  Body Text #footnote reference# N footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1# WorldCom )footnote reference)has ap$ footnote text$#footnote reference##X>0 181`111X1#proximately )footnote reference)0$ footnote text$#footnote reference##X>0 181`111X1#.8 percent overall )footnote reference)capacity ownership in TAT12/13$ footnote text$#footnote reference##X>0 181`111X1#. )footnote reference) See June 1997 TAT12/13 Schedules. $ footnote text$#footnote reference##X>0 181`111X1#This )footnote reference)interest, $ footnote text$#footnote reference##X>0 181`111X1#combined with MCIs 16.8 percent overall capacity ownership)footnote reference),$ footnote text$#footnote reference##X>0 181`111X1# would give the merged entity 17.6 percent overall ownership)footnote reference), s$ footnote text$#footnote reference##X>0 181`111X1#econd )footnote reference)only $ footnote text$#footnote reference##X>0 181`111X1#to AT&T w)footnote reference)ith an overall ownership interest of 22.7 percent. Id.   and, as Table 7 demonstrates, would have a total U.S.end circuit allocation of 34 percent (the highest percentage).  Body Text #footnote reference#^O footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1# )footnote reference)See Table 7.$ footnote text$#footnote reference##X>0 181`111X1# )footnote reference) It bears noting that following a merger, the merged company would have approximately 40 percent of the circuits between the United States and the United Kingdom. Currently, $ footnote text$#footnote reference##X>0 181`111X1#MCI has 496 of the 1674)footnote reference) Green Hill Lands End circuits allocated for its use; WorldCom has 170 out of the 1674 circuits allocated for its use. See June 1997 TAT12/13 Revised Schedule.^ The postmerger HHI would be 2251 for the TAT12/13 U.S.end circuit market, an increase of 344. Under the Department of Justices merger guidelines, this increase would be likely to create or facilitate the exercise of market power.  Body Text #footnote reference#P footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference) See Table 7; 1992 Horizontal Merger Guidelines, 57 Fed. Reg. at 41558  1.5.   Body Text  Table 7 Postmerger TAT12/13 U.S.end MIUS Assignments  T " ZZ" '@@@ " ZZ" '@@@T  A A I @ @ H Carrier  U.S.end MIUS Assigned  Percentage Owned      WorldCom/MCI 1378 34     AT&T 1298 32     Sprint 275 7     Others 1081 27     Postmerger HHI  2251       Post merger HHI Delta  344 #XP\  P6QXP# #XX2PQXP# #XP\  P6QXP#  Body Text#XX2PQXP# Adverse competitive effects of the merger. While the immediate increase in concentration from the merger certainly gives rise to serious market power concerns, the nearterm effects produce even greater cause for alarm. Although two new high capacity cable systems will be in operation by mid1998, one (Gemini) is 50 percent owned by WorldCom, and the other (Atlantic Crossing) is reported to be 70 percent presold, almost certainly to companies with significant existing capacity. As a result, nonowner entrants must obtain capacity on an indefeasible right of user (IRU) basis at potentially increased prices. Thus, if the merger of WorldCom and MCI is approved, capacity on of the four largest transAtlantic cable systems would be controlled in large measure by the merged company.  The potential for anticompetitive activity is heightened because there is a shortage of undersea cable capacity. The last two transAtlantic cables (TAT12/13) were completed only recently, but have already sold out their original ownership capacity. Because these new cables are either almost completely spoken for or owned by WorldCom itself, this capacity shortage may persist for some time.   Body Text  With the increased market power of the merged company in the international transport input market comes the risk of serious anticompetitive activity. In the BT/MCI II Order, the Commission cautioned that merged entities with market power in input markets might be able to raise the price of that input, either unilaterally or through coordinated interaction, which could harm consumers to the extent that, in the absence of regulation in the enduser market, the increased input price would be passed on in the form of higher enduser prices.#footnote reference#YQ footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference) BT/MCI II Order at 58.Y The Commission also cautioned that the merged company conceivably could injure competition by discriminating against unaffiliated producers of the enduser service.#footnote reference#AR footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference) Id.A Such behavior is a very real possibility where, as here, the merger would result in substantial control by WorldCom/MCI of U.S.end underseas cable capacity.  The net result of the merger thus would be increased barriers to entry and higher costs of service for retail U.S. international telecommunications markets. A constrained supply of cable circuits ! especially when combined with a restricted supply of private lines, as discussed above ! could deprive new entrants of an essential facility required to compete in the marketplace. The Commissions goal of fostering new entry and lower prices in international telecommunications will be frustrated if access to cable circuits is constrained.  The foregoing is especially true given that the entities currently controlling cable circuits are also in the retail business. This suggests that WorldCom/MCI will have the incentive and ability to restrict output (of cable circuits) to prevent competition in the retail market. Indeed, this merger not only creates the risk of unilateral anticompetitive behavior, it also could give rise to joint market power ! collusion ! among the three large U.S. carriers (WorldCom/MCI, AT&T, and Sprint).  Further, it is conceivable that WorldCom/MCI! by itself or in concert with the two other large carriers! would enjoy market power in the market for connecting facilities between the cable landing points and the public switched network. As the Commission recognized in the BT/MCI II Order, control of connecting facilities could squeeze existing U.S. carriers and new entrants and reduce price competitiveness.#footnote reference#S footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference) See BT/MCI II Order at 295297 (conditioning approval on commitment to provide access to connecting facilities). Because the combined entity would possess even more market power than would BTMCI on the U.S. end of undersea cables! and in U.S. connecting facilities! the risks of such conduct are far greater.  * * *  WorldCom and MCI have supplied no data to support their claims that the merger of the two companies will increase competition in the international telecommunications market. In fact, using publicly available data, it is apparent that the merged entity will assume a dominant position in the retail IMTS and private line markets. Moreover, through its ownership of cable circuits, the combined entity also will control an essential input ! cable capacity ! needed by new entrants to compete on a retail level. Because a merger of WorldCom and MCI would constrain competition in U.S. international telecommunications markets, both retail and wholesale, the FCC should deny the transfer applications. 2  heading 1X` hp x (# (# IV.WORLDCOM HAS FAILED TO ADDRESS THE COMPETITIVE EFFECTS OF THE MERGER ON LOCAL EXCHANGE AND EXCHANGE ACCESS SERVICES.  2   heading 1  Body Text (#` hp x (#The applicants allege that one of the proposed mergers overarching benefits is that the combined MCIWorldComs "greater resources, synergies and efficiencies" will permit "more aggressive" competition in local exchange markets than either company could achieve individually.  Body Text #footnote reference# QT footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference) Application at 2, 7.Q)footnote reference) Body Text To support this conclusion, the application makes much of the fact that MCIWorldCom will have "local facilities in over 100 markets."  Body Text #footnote reference#GU footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference) Id. at 2.G The applicants further allege that, when WorldCom's local facilities are combined with MCI's long distance customers, the merger will produce synergies to "optimize networks" and provide an expanded "range of services."  Body Text #footnote reference#UV footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference) Step II Application at 3234.U Finally, they opine that WorldCom's "management skills and experience," combined with MCI's "marketing expertise," will somehow promote local competition.  Body Text #footnote reference#HW footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference) Id. at 32.H  But beyond these sound bites, there is no factual basis to support the applicants claims. Rather than promoting local competition, the proposed merger of WorldCom and MCI simply combines two existing competitors or potential entrants into a single entity, with no evidence that there will be any measurable increase in competition or substantial benefits to end users. As discussed in Section I above, however, the applicants must prove that their proposed transaction actually produces procompetitive benefits that exceed the competitive harms wrought by the companies' combination. Given AT&Ts equivocation in its resolve to enter local markets,  Body Text #footnote reference#X footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference)See, e.g., AT&T Corp. Halts Efforts to Sell Local Residential Phone Service, Washington Post, Dec. 19, 1997, at G1. MCI. WorldCom, and Sprint are left as the three remaining most significant nationwide market participants for competitive local exchange and exchange access services. A merger of WorldCom and MCI would thus eliminate one actual local exchange competitor by merging it with one of the remaining two most significant nationwide market participants. As a result, the proposed merger raises competitive questions. Indeed, the "synergies" touted by the applicants apparently reflect in large part cost savings from diminished competition. As a recent Merrill Lynch report noted: ‘[i]n a startling and daring move, WorldCom not only completed its acquisition of 8 MFS and ... UUNet, but also announced plans to acquire another CLEC (Brooks Fiber), AOL's and Compuserve's Internet network businesses and then snatched MCI from both British Telecom and GTE ! a consolidating event that is expected to save billions by avoiding duplicate costs and competition with one another.  Body Text #footnote reference#X01ÍÍX01ÍÍY  Body Text  footnote text#footnote reference#)footnote reference)Merrill Lynch, Telecommunications 1998 ! The Year Ahead (December 1997), at 4 (emphasis added).  The Merrill Lynch analysis is reinforced by examining the markets in which WorldCom and MCI have local facilities. Rather than operating facilities in complementary markets, as the applicants have alleged, WorldCom and MCI have targeted the same local exchange markets. For example, MCI has facilities or plans to build out facilities in 31 markets. For its part, WorldCom already has existing facilities in 26 of those markets, an overlap of 84 percent of the two companies' markets.  Body Text #footnote reference#X01ÍÍX01ÍÍ}Z  Body Text  footnote text#footnote reference#)footnote reference) WorldCom's markets include the markets of Brooks Fiber, which WorldCom recently acquired.} It is, then, little wonder that the application lacks any detailed description of the "more than 100 markets" in which WorldCom and MCI allege they will have facilities, or the number of overlapping markets that will be created by the merger.  Body Text #footnote reference#[ footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference) Considering that constructing local facilities involves planning and some lead time, all of these markets must have been under construction by the time the merger was negotiated. The Commission should, at a minimum, require applicants to specify in detail: (1) all of the local markets in which each company was planning to construct facilities; (2) when construction began; (3) the proposed construction time periods; (4) the extent to which and when each company has or will terminate their existing construction plans as a result of this merger; and (5) the exact routes of each companys existing and planned network. Of course, in accordance with FCC policy on proving competitive claims, WorldCom and MCI must substantiate their claims by documentary and other evidence. In addition, the documentation for the first three categories of facts must have been in existence prior to the announced merger. The applicants competitive claims are further eroded by the inescapable fact that WorldCom and MCI are targeting the same segments of the market ! medium and large business customers.  Body Text #footnote reference#\ footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference)See MCI Press Release, "MCI Offers Local Calling To Businesses In Six New Markets, Dec. 18, 1997, stating that "MCI . . . today said it will ring in the new year by offering mid and largesized business customers facilitiesbased local calling in the six new markets of Cincinnati, Dallas, Houston, Fort Lauderdale, Fla., San Antonio and Washington, D.C., bringing the total number of markets where MCI offers local service to 31." The Press Release is available at http://www.biz.yahoo.com/prnews/971218/dc_mci_6_new_mkts_1.html. WorldCom's virtually exclusive commitment to the medium and large business market is wellknown.  In addition, WorldCom and MCI have failed to explain or quantify what facilities would be "optimized" or what new "range of services" would be offered as a result of the merger. In addition, the application lacks proof that the combined company's greater resources could enable it to compete in local markets better than either WorldCom or MCI could independently. Neither applicant has even alleged, let alone proved, that it individually cannot attract sufficient capital to be an aggressive local competitor. These significant competitive overlaps demonstrate that no real efficiencies or strategic market advances are gained by the instant transaction and that the applicants' fabricated "synergies" should be rejected. Simply stated, a merger involving a significant market participant and another major local exchange player at this early stage of competition requires far more information than WorldCom and MCI have provided.  2    Body Text heading 1X` hp x (# (# ב  Body Text WORLDCOM AND MCI HAVE FAILED TO ADDRESS THE SUBSTANTIAL ANTICOMPETITIVE IMPACT OF THE PROPOSED MERGER ON THE INTERNET MARKET. 2   heading 1  Body Text (#` hp x (# After the merger, MCI and WorldCom (through its various subsidiaries, including UUNet and ANS) would be the largest provider of Internet backbone capacity. They would also control other significant assets, such as underlying telecommunications links, related to the transmission and distribution of Internet traffic. Nonetheless, the parties once again have failed to provide any information regarding the impact of the proposed merger on the market for Internetrelated services. In reality, GTE believes the combination of MCI and WorldCom would seriously affect competition in the nationwide market for Internet backbone services and capacity.   Although the Commission has no jurisdiction to regulate the Internet, it should take cognizance of the merger's competitive effects on the Internet marketplace as part of its public interest analysis.  Body Text #footnote reference#f] footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference) See Bell Atlantic/NYNEX Order at 29, 33.f If the Commission declines to dismiss the applications outright for their egregious failure to comply with the requirements mandated by the Bell Atlantic/NYNEX Order, it must compel the applicants to provide information sufficient to permit the agency and interested parties to assess the full impact of the merger on Internetrelated markets. Such information must address, at a minimum, relevant product and geographic markets (including input markets), actual and potential competitors, and effects on competition and consumers. Once such information has been supplied, GTE and other interested parties must be given an adequate opportunity to review, analyze, and respond to the submissions. 2    Body Text heading 1X` hp x (# (#  đ  Body Text THE WORLDCOM/MCI MERGER WOULD DIMINISH COMPETITION IN THE NASCENT MARKET FOR BUNDLED TELECOMMUNICATIONS SERVICES. 2   heading 1  (#` hp x (# In the Bell Atlantic/NYNEX Order, the Commission suggested that telecommunications services packages that bundle a combination of services may become a separate product market as competition continues to develop.#footnote reference#h^ footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference) Bell Atlantic/NYNEX Order at  52.h Clearly, WorldComs stated plans to move the merged company aggressively into local service will have potentially farreaching effects on this nascent market. According to WorldCom and MCI, the merged entity will become the industry leader in building competitive local facilities to meet the needs of residential and business customers and, [w]ith an existing national long distance customer base... will seek to provide its customers with a comprehensive array of local, long distance, data wireless, and international communications services.#footnote reference#h_ footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference)Amendment to Applications at 2. See also MCI Press Release, supra note 92 (quoting MCI's Vice President of Local Service as saying, "Once again, MCI is responding to customers' demands for services by offering exactly what they want ! onestop shopping. No Bell company can do this.").h    The competitive effects of the proposed merger are impossible to foretell, as the applicants fail to present either a business plan or the information contained in their HartScottRodino filings that would facilitate such a determination. This failure, of course, ignores the Commissions unequivocal concern that, when faced with a proposed merger that affects markets that are themselves in a process of rapid change, it must consider the extent to which the merger is likely to affect future market structure, conduct and performance.#footnote reference#k` footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference)Bell Atlantic/NYNEX Order at  115120.k In the absence of any information from the applicants, the Commission simply cannot address the potential for a combined WorldCom/MCI to rely on its alreadylarge long distance market share, its power over important international routes and a growing local presence to prevent other competitors from offering bundled service packages on equal footing. Therefore, the applications must be summarily denied. 2  heading 1X` hp x (# (#  đCONCLUSION 2   heading 1  Body Text (#` hp x (# In seeking approval of the largest telecommunications merger in history, WorldCom and MCI have submitted an application composed of puffery and sound bites. The Commission, of course, requires far more: parties seeking approval of a telecommunications merger must prove that the transaction will not restrain competition in any relevant market, will affirmatively promote competition, and will advance the public interest. Not only have the applicants ignored this obligation, but they have failed to provide any facts, documentation, or analysis to support their amorphous procompetitive and proconsumer claims.   In reality, there are compelling reasons to discount the picture painted by the applicants. Their veneer of rosy assertions cannot mask the fact that the merger would raise serious competitive concerns permeating virtually every domestic and international telecommunications market. In the long distance market, the merger would combine the second and fourth largest of only four nationwide facilitiesbased competitors, facilitate coordinated pricing, eliminate the only significant maverick competitor, and encourage unilateral price increases and service diminution to resellers. In international markets, the merged company would enjoy indisputable market power on a multitude of routes and control a high proportion of international transport facilities. And in the emerging competitive local exchange and bundled services markets, there are clear indications that the merger could affect competitive conditions.  đIn view of the foregoing, GTE Service Corporation and its affiliated telecommunications companies hereby respectfully request the Commission to deny the applications of WorldCom, Inc. and MCI Communications Corporation for Transfer of Control of MCI Communications Corporation.  Respectfully submitted, GTE SERVICE CORPORATION  By:_________________________By:______________________ William P. Barr, Executive ViceRichard E. Wiley  President & General CounselR. Michael Senkowski   Body Text  andJeffrey S. Linder Ward W. Wueste, Vice President Peter D. Shields  Deputy General Counsel GTE SERVICE CORPORATIONWILEY, REIN & FIELDING One Stamford Forum1776 K Street, N.W. Stamford, CT 06904Washington, D.C. 20006 (202) 4297000  Body Text January 5, 1998   Body Text    n  Body Text  headerX` hp x (#(#  header(#` hp x (#nZ  Body Text  headerX` hp x (#(#  header(#` hp x (#Z  Body Text footerX` hp x (#(#footerpage number "page number" footer(#` hp x (#  Body Text   APPENDIX 1  Declaration of Debra R. Covey   ! headerX` hp x (#(#  header(#` hp x (#!footerX` hp x (#(#footerpage number "page number" footer(#` hp x (#з Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554   ` hp x (#cp x (# In the Matter of)  ) Applications of WorldCom, Inc. and) MCI Communications Corporation)CC Docket No. 97211 for Transfer of Control of) MCI Communications Corporation to) WorldCom, Inc.)  cp x (#` hp x (# To: The Commission  DECLARATION OF DEBRA R. COVEY  1. 1. 1. 1. 1. 1. 1. 1.1I am Vice PresidentOperations Support for GTE Communications Corporation. GTE Long Distance ( GTE LD) is a division of GTE Communications. My responsibilities include, but are not limited to, negotiation and administration of contracts and relationships with suppliers of wholesale long distance services to GTE LD for resale as welI as for GTEs own companywide internal use. I submit this Declaration in Support of GTEs Petition to Deny the abovecaptioned application of WorldCom, Inc. for transfers of control of MCI Communications Corporation. 1GTE LD is a purchaser and reseller of wholesale long distance services ranging from bulk capacity (such as 1+ outbound and basic 800 minutes) to advanced features and capabilities (such as enhanced 800 and frame relay services). GTE LD predominantly has purchased wholesale long distance services from WorldCom, MCI, Sprint and AT&T (Big 4 IXCs). Only these Big 4 IXCs can effectively compete to provide nationwide wholesale long distance services for resale. The remaining providers of wholesale capacity lack the points of presence and other embedded infrastructure, interoperability, functionality, and other features desired by resellers such as GTE LD. 1WorldCom won the competition against MCI, Sprint and AT&T in 1996 for GTE LDs first, and to date only, major multiyear wholesale long distance voice contract. Under this contract, WorldCom is supplying a significant portion of GTEs long distance needs. WorldCom also has proven itself to be a responsive supplier. 1As evidenced by its contract with GTE LD, WorldCom has been a driving force behind competition among the nationwide facilitiesbased IXCs to offer long distance service to resellers. In winning its contract with GTE, for example, WorldCom offered substantially lower rates and better terms than the competition on the transport segment of basic 1+ service (which is far and away the most soughtafter long distance service). (The terms of GTE LDs contract with WorldCom are confidential.) body text,bt#XXX  Pg9C.XP##XX2PQXP#1In addition, WorldCom has committed to provide advanced features and capabilities to wholesale customers such as GTE LD for resale. WorldCom has offered to make available, for example, various enhanced 800 features for resale. WorldCom has also offered to provide frame relay and private line services for resale although GTE LD has not yet chosen to purchase such service from WorldCom. Moreover, WorldCom has regular procedures in place to develop additional advanced features for resale in the future, and has expressed a willingness to review and develop any advanced features requested by GTE LD for resale. These advanced capabilities are essential elements of the services that GTE LD resells or plans to resell. 1In contrast, the other nationwide IXCs generally have offered less attractive rates and have been reluctant to provide GTE LD with advanced features and capabilities that would be used to compete against their own retail service offerings. AT&T has generally pursued a highprice strategy that has frequently rendered it a less competitive choice as a wholesale supplier of long distance services. MCI and Sprint are somewhat more price competitive than AT&T, but none of these three provides for resale the range of advanced capabilities that they offer to their own retail customers. MCI was the runnerup to WorldCom in the original competition for GTEs long distance voice contract.   #body text,bt# Body TextI declare under the penalty of perjury that the foregoing is true and correct. Executed on January 2, 1998.   Body Text body text,bt#XXX  Pg9C.XP#` hp x (# p x (# #XX2PQXP#à  Debra R. Covey  p x (#` hp x (#  #body text,bt#    1  headerX` hp x (#(#  header(#` hp x (#1 footerX` hp x (#(#footerpage number "page number" footer(#` hp x (#    APPENDIX 2    International Private Line HHI Analysis   ! headerX` hp x (#(#  header(#` hp x (#!footerX` hp x (#(#footerpage number "page number" footer(#` hp x (#з APPENDIX 2  INTERNATIONAL PRIVATE LINE HHI ANALYSIS  U%v @@@@@@@@@@ U%v @@@@@@@@@@ 66  Chart 1: WorldCom MCI Private Line Overlap Markets Europe #footnote reference#_a footnote text#X>0 181`111X1##footnote reference##X>0 181`111X1#)footnote reference)The abbreviations in the row entitled DOJ Conclusion have the following meanings: LCMP means likely to create or enhance market power; NFA means no further action; and SCC means the increase raises significant competitive concerns._ 66 6 A A A A A A A A A I @ @ @ @ @ @ @ @ @ H6#I2PQP#Area/Country#XX2PQXP##I2PQP#Austria#XX2PQXP##I2PQP#Belgium#XX2PQXP##I2PQP#Denmark#XX2PQXP##I2PQP#France#XX2PQXP##I2PQP#Germany#XX2PQXP##I2PQP#Greece#XX2PQXP##I2PQP#Ireland#XX2PQXP##I2PQP#Italy #XX2PQXP##I2PQP#Luxembourg6           6#XX2PQXP##I2PQP#Post Merger HHI#XX2PQXP##I2PQP#9,247#XX2PQXP##I2PQP#3,815#XX2PQXP##I2PQP#3,572#XX2PQXP##I2PQP#3,453#XX2PQXP##I2PQP#4,539#XX2PQXP##I2PQP#7,688#XX2PQXP##I2PQP#3,939#XX2PQXP##I2PQP#4,497 #XX2PQXP##I2PQP#5,8166           6#XX2PQXP##I2PQP#Post Merger Delta#XX2PQXP##I2PQP#3,327#XX2PQXP##I2PQP#245#XX2PQXP##I2PQP#562#XX2PQXP##I2PQP#968#XX2PQXP##I2PQP#1,836#XX2PQXP##I2PQP#3,052#XX2PQXP##I2PQP#924#XX2PQXP##I2PQP#246 #XX2PQXP##I2PQP#3476                    6#XX2PQXP##I2PQP#DOJ Conclusion#XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP#LCMP  #XX2PQXP##I2PQP# LCMP 66#XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP# #XX2PQXP##I2PQP#6 A A A A A A A A I @ @ @ @ @ @ @ @ H6#XX2PQXP##I2PQP#Area/Country#XX2PQXP##I2PQP#The Netherlands#XX2PQXP##I2PQP#Norway#XX2PQXP##I2PQP#Portugal#XX2PQXP##I2PQP#Spain#XX2PQXP##I2PQP#Sweden#XX2PQXP##I2PQP#Switzerland#XX2PQXP##I2PQP#Turkey#XX2PQXP##I2PQP#U.K. #XX2PQXP##I2PQP#6          6#XX2PQXP##I2PQP#Post Merger HHI#XX2PQXP##I2PQP#3,794#XX2PQXP##I2PQP#5,500#XX2PQXP##I2PQP#4,166#XX2PQXP##I2PQP#4,174#XX2PQXP##I2PQP#4,403#XX2PQXP##I2PQP#3,099#XX2PQXP##I2PQP#8,313#XX2PQXP##I2PQP#3,179 #XX2PQXP##I2PQP#6          6#XX2PQXP##I2PQP#Post Merger Delta#XX2PQXP##I2PQP#547#XX2PQXP##I2PQP#135#XX2PQXP##I2PQP#859#XX2PQXP##I2PQP#991#XX2PQXP##I2PQP#1,445#XX2PQXP##I2PQP#118#XX2PQXP##I2PQP#531#XX2PQXP##I2PQP#861 #XX2PQXP##I2PQP#6                  6#XX2PQXP##I2PQP#DOJ Conclusion#XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP#LCMP  #XX2PQXP##I2PQP#` ` hp x (##XX2PQXP#  Ude@@@@@@@@ Ude@@@@@@@@ .. Chart 2: WorldCom MCI Private Line Overlap Markets Africa #I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP#..#XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP#. A A A A A A A I @ @ @ @ @ @ @ H.#XX2PQXP##I2PQP#Area/Country#XX2PQXP##I2PQP#Angola#XX2PQXP##I2PQP#Cameroon#XX2PQXP##I2PQP#Egypt#XX2PQXP##I2PQP#Kenya#XX2PQXP##I2PQP#St. Helena#XX2PQXP##I2PQP#Seychelles#XX2PQXP##I2PQP#South Africa.         .#XX2PQXP##I2PQP#Post Merger HHI#XX2PQXP##I2PQP#10,000#XX2PQXP##I2PQP#10,000#XX2PQXP##I2PQP#9,360#XX2PQXP##I2PQP#10,000#XX2PQXP##I2PQP#10,000#XX2PQXP##I2PQP#10,000#XX2PQXP##I2PQP#4,446.         .#XX2PQXP##I2PQP#Post Merger Delta#XX2PQXP##I2PQP#3,459#XX2PQXP##I2PQP#3,292#XX2PQXP##I2PQP#3,334#XX2PQXP##I2PQP#4,630#XX2PQXP##I2PQP#4,603#XX2PQXP##I2PQP#4,915#XX2PQXP##I2PQP#1,931.                .#XX2PQXP##I2PQP#DOJ Conclusion#XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# LCMP ` ` hp x (##XX2PQXP#  Chart 3: WorldCom MCI Private Line Overlap Markets Middle East  ^ U(@@@@ U(@@@@^  A A A I @ @ @ H#I2PQP#Area/Country#XX2PQXP##I2PQP#Bahrain#XX2PQXP##I2PQP#Lebanon#XX2PQXP##I2PQP#Saudi Arabia     #XX2PQXP##I2PQP#Post Merger HHI#XX2PQXP##I2PQP#6,465#XX2PQXP##I2PQP#10,000#XX2PQXP##I2PQP#5,011     #XX2PQXP##I2PQP#Post Merger Delta#XX2PQXP##I2PQP#33#XX2PQXP##I2PQP#2,609#XX2PQXP##I2PQP#527        #XX2PQXP##I2PQP#DOJ Conclusion#XX2PQXP##I2PQP# NFA #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# LCMP  | U~..~@@@@@@@ U~..~@@@@@@@| *  *#XX2PQXP# Chart 4: WorldCom MCI Private Line Overlap Markets Caribbean **#I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP#* A A A A A A I @ @ @ @ @ @ H*#XX2PQXP##I2PQP#Area/Country#XX2PQXP##I2PQP#Antigua #XX2PQXP##I2PQP#The Bahamas#XX2PQXP##I2PQP#Barbados#XX2PQXP##I2PQP#Bermuda#XX2PQXP##I2PQP#Cayman Islands#XX2PQXP##I2PQP#Cuba*        *#XX2PQXP##I2PQP#Post Merger HHI#XX2PQXP##I2PQP#7,533#XX2PQXP##I2PQP#4,766#XX2PQXP##I2PQP#5,025#XX2PQXP##I2PQP#3,717#XX2PQXP##I2PQP#5,001#XX2PQXP##I2PQP#3,425*        *#XX2PQXP##I2PQP#Post Merger Delta#XX2PQXP##I2PQP#535#XX2PQXP##I2PQP#883#XX2PQXP##I2PQP#1,365#XX2PQXP##I2PQP#1,343#XX2PQXP##I2PQP#1,143#XX2PQXP##I2PQP#355*              *#XX2PQXP##I2PQP#DOJ Conclusion#XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# LCMP **#XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP#* A A A A A A I @ @ @ @ @ @ H*#XX2PQXP##I2PQP#Area/Country#XX2PQXP##I2PQP#Dominican Rep.#XX2PQXP##I2PQP#Haiti#XX2PQXP##I2PQP#Jamaica#XX2PQXP##I2PQP#Neth. Antilles#XX2PQXP##I2PQP#Trinidad & Tobago#XX2PQXP##I2PQP#Brit. Virgin Islands*        *#XX2PQXP##I2PQP#Post Merger HHI#XX2PQXP##I2PQP#2,794#XX2PQXP##I2PQP#3,858#XX2PQXP##I2PQP#5,227#XX2PQXP##I2PQP#4,732#XX2PQXP##I2PQP#5,200#XX2PQXP##I2PQP#3,714*        *#XX2PQXP##I2PQP#Post Merger Delta#XX2PQXP##I2PQP#301#XX2PQXP##I2PQP#487#XX2PQXP##I2PQP#767#XX2PQXP##I2PQP#810#XX2PQXP##I2PQP#736#XX2PQXP##I2PQP#700*              *#XX2PQXP##I2PQP#DOJ Conclusion#XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# LCMP  Body Text` ` hp x (##XX2PQXP#   Body Text   U/U9@@@@@@@@ U/U9@@@@@@@@ .  . Chart 5: WorldCom MCI Private Line Overlap Markets North America ... A A A A A A A I @ @ @ @ @ @ @ H.#I2PQP#Area/Country#XX2PQXP##I2PQP#Canada#XX2PQXP##I2PQP#Costa Rica#XX2PQXP##I2PQP#El Salvador#XX2PQXP##I2PQP#Guatemala#XX2PQXP##I2PQP#Honduras#XX2PQXP##I2PQP#Mexico#XX2PQXP##I2PQP#Panama.         .#XX2PQXP##I2PQP#Post Merger HHI#XX2PQXP##I2PQP#4,738#XX2PQXP##I2PQP#5,112#XX2PQXP##I2PQP#7,463#XX2PQXP##I2PQP#4,797#XX2PQXP##I2PQP#4,338#XX2PQXP##I2PQP#3,638#XX2PQXP##I2PQP#3,085.         .#XX2PQXP##I2PQP#Post Merger Delta#XX2PQXP##I2PQP#14#XX2PQXP##I2PQP#1,754#XX2PQXP##I2PQP#70#XX2PQXP##I2PQP#968#XX2PQXP##I2PQP#235#XX2PQXP##I2PQP#752#XX2PQXP##I2PQP#452.                .#XX2PQXP##I2PQP#DOJ Conclusion#XX2PQXP##I2PQP# NFA #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# SCC #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# LCMP  ` ` hp x (##XX2PQXP#ё | UdcF#@@@@@@@ UdcF#@@@@@@@| *  * Chart 6: WorldCom MCI Private Line Overlap *  * Markets South America *** A A A A A A I @ @ @ @ @ @ H*#I2PQP#Area/Country#XX2PQXP##I2PQP#Argentina#XX2PQXP##I2PQP#Bolivia#XX2PQXP##I2PQP#Brazil#XX2PQXP##I2PQP#Chile#XX2PQXP##I2PQP#Colombia#XX2PQXP##I2PQP#Ecuador*        *#XX2PQXP##I2PQP#Post Merger HHI#XX2PQXP##I2PQP#4,909#XX2PQXP##I2PQP#6,035#XX2PQXP##I2PQP#4,961#XX2PQXP##I2PQP#3,887#XX2PQXP##I2PQP#3,492#XX2PQXP##I2PQP#7,797*        *#XX2PQXP##I2PQP#Post Merger Delta#XX2PQXP##I2PQP#1,299#XX2PQXP##I2PQP#3,018#XX2PQXP##I2PQP#1,068#XX2PQXP##I2PQP#1,038#XX2PQXP##I2PQP#843#XX2PQXP##I2PQP#2,817*              *#XX2PQXP##I2PQP#DOJ Conclusion#XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# LCMP **#XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP#* A A A A A I @ @ @ @ @ H*#XX2PQXP##I2PQP#Area/Country#XX2PQXP##I2PQP#Paraguay#XX2PQXP##I2PQP#Peru#XX2PQXP##I2PQP#Suriname#XX2PQXP##I2PQP#Uruguay#XX2PQXP##I2PQP#Venezuela#XX2PQXP##I2PQP#*       *#XX2PQXP##I2PQP#Post Merger HHI#XX2PQXP##I2PQP#10,000#XX2PQXP##I2PQP#6,036#XX2PQXP##I2PQP#8,703#XX2PQXP##I2PQP#10,000#XX2PQXP##I2PQP#4,544#XX2PQXP##I2PQP#*       *#XX2PQXP##I2PQP#Post Merger Delta#XX2PQXP##I2PQP#4,971#XX2PQXP##I2PQP#376#XX2PQXP##I2PQP#22#XX2PQXP##I2PQP#3,200#XX2PQXP##I2PQP#743#XX2PQXP##I2PQP#*            *#XX2PQXP##I2PQP#DOJ Conclusion#XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# NFA #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# roooooo@@@@@@oooooo@@@@@@r &  &#XX2PQXP#  | UBX@@@@@@@ UBX@@@@@@@| *  * Chart 7: WorldCom MCI Private Line Overlap *  * Markets Asia **#I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP#* A A A A A A I @ @ @ @ @ @ H*#XX2PQXP##I2PQP#Area/Country#XX2PQXP##I2PQP#China#XX2PQXP##I2PQP#Hong Kong#XX2PQXP##I2PQP#India#XX2PQXP##I2PQP#Indonesia#XX2PQXP##I2PQP#Japan#XX2PQXP##I2PQP#Korea*        *#XX2PQXP##I2PQP#Post Merger HHI#XX2PQXP##I2PQP#5,281#XX2PQXP##I2PQP#3,924#XX2PQXP##I2PQP#6,153#XX2PQXP##I2PQP#5,003#XX2PQXP##I2PQP#4,181#XX2PQXP##I2PQP#4,306*        *#XX2PQXP##I2PQP#Post Merger Delta#XX2PQXP##I2PQP#274#XX2PQXP##I2PQP#643#XX2PQXP##I2PQP#2,864#XX2PQXP##I2PQP#394#XX2PQXP##I2PQP#982#XX2PQXP##I2PQP#716*              *#XX2PQXP##I2PQP#DOJ Conclusion#XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# LCMP **#XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP#* A A A A A I @ @ @ @ @ H*#XX2PQXP##I2PQP#Area/Country#XX2PQXP##I2PQP#Malaysia#XX2PQXP##I2PQP#Philippines#XX2PQXP##I2PQP#Singapore#XX2PQXP##I2PQP#Taiwan#XX2PQXP##I2PQP#Thailand#XX2PQXP##I2PQP#*       *#XX2PQXP##I2PQP#Post Merger HHI#XX2PQXP##I2PQP#4,938#XX2PQXP##I2PQP#4,391#XX2PQXP##I2PQP#3,750#XX2PQXP##I2PQP#4,114#XX2PQXP##I2PQP#5,855#XX2PQXP##I2PQP#*       *#XX2PQXP##I2PQP#Post Merger Delta#XX2PQXP##I2PQP#856#XX2PQXP##I2PQP#1,269#XX2PQXP##I2PQP#580#XX2PQXP##I2PQP#799#XX2PQXP##I2PQP#172#XX2PQXP##I2PQP#*            *#XX2PQXP##I2PQP#DOJ Conclusion#XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# Body Text` ` hp x (##XX2PQXP#   Body Text   UB@@@@@@@@@ UB@@@@@@@@@ 2  2  Chart 8: WorldCom MCI Private Line Overlap Markets 2  2  Oceana and the former Eastern Block 222 A A A A A A A A I @ @ @ @ @ @ @ @ H2#I2PQP#Area/Country#XX2PQXP##I2PQP#Australia#XX2PQXP##I2PQP#New Zealand#XX2PQXP##I2PQP#American Samoa#XX2PQXP##I2PQP#Guam #XX2PQXP##I2PQP#N. Mariana Islands#XX2PQXP##I2PQP#Albania#XX2PQXP##I2PQP#Hungary#XX2PQXP##I2PQP#Russia2          2#XX2PQXP##I2PQP#Post Merger HHI#XX2PQXP##I2PQP#3,866#XX2PQXP##I2PQP#5,430#XX2PQXP##I2PQP#6,305#XX2PQXP##I2PQP#4,736#XX2PQXP##I2PQP#6,895#XX2PQXP##I2PQP#10,000#XX2PQXP##I2PQP#8,958#XX2PQXP##I2PQP#7,6022          2#XX2PQXP##I2PQP#Post Merger Delta#XX2PQXP##I2PQP#904#XX2PQXP##I2PQP#90#XX2PQXP##I2PQP#2,851#XX2PQXP##I2PQP#1,115#XX2PQXP##I2PQP#1,407#XX2PQXP##I2PQP#4,808#XX2PQXP##I2PQP#4,031#XX2PQXP##I2PQP#1,4792                  2#XX2PQXP##I2PQP#DOJ Conclusion#XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# SCC #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# LCMP    H headerX` hp x (#(##XX2PQXP#  header(#` hp x (#HfooterX` hp x (#(##XX2PQXP#footerpage number "page number" footer(#` hp x (#` ` hp x (##XX2PQXP#   APPENDIX 3  IMTS HHI ANALYSIS   - headerX` hp x (#(#  header(#` hp x (#-footerX` hp x (#(#footerpage number "page number" footer(#` hp x (# APPENDIX 3 IMTS HHI ANALYSIS   U;a@@@@@@@@ U;a@@@@@@@@ .  . Chart 1: WorldCom MCI IMTS Overlap Markets Europe ... A A A A A A A I @ @ @ @ @ @ @ H.#I2PQP#Area/Country#XX2PQXP##I2PQP#Andorra#XX2PQXP##I2PQP#Austria#XX2PQXP##I2PQP#Belgium#XX2PQXP##I2PQP#Denmark#XX2PQXP##I2PQP#Finland#XX2PQXP##I2PQP#France#XX2PQXP##I2PQP#Germany.         .#XX2PQXP##I2PQP#Post Merger HHI#XX2PQXP##I2PQP#3,347#XX2PQXP##I2PQP#4,636#XX2PQXP##I2PQP#4,340#XX2PQXP##I2PQP#4,370#XX2PQXP##I2PQP#4,275#XX2PQXP##I2PQP#4,616#XX2PQXP##I2PQP#5,005.         .#XX2PQXP##I2PQP#Post Merger Delta#XX2PQXP##I2PQP#5#XX2PQXP##I2PQP#12#XX2PQXP##I2PQP#207#XX2PQXP##I2PQP#124#XX2PQXP##I2PQP#334#XX2PQXP##I2PQP#174#XX2PQXP##I2PQP#70.                .#XX2PQXP##I2PQP#DOJ Conclusion#XX2PQXP##I2PQP# NFA #XX2PQXP##I2PQP# NFA #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# SCC ..#XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP#  U;a@@@@@@@@ U;a@@@@@@@@ . A A A A A A A I @ @ @ @ @ @ @ H.#XX2PQXP##I2PQP#Area/Country#XX2PQXP##I2PQP#Greece#XX2PQXP##I2PQP#Iceland#XX2PQXP##I2PQP#Ireland#XX2PQXP##I2PQP#Italy#XX2PQXP##I2PQP#Luxembourg#XX2PQXP##I2PQP#Malta#XX2PQXP##I2PQP#The Netherlands.         .#XX2PQXP##I2PQP#Post Merger HHI#XX2PQXP##I2PQP#5,365#XX2PQXP##I2PQP#4,854#XX2PQXP##I2PQP#5,243#XX2PQXP##I2PQP#5,349#XX2PQXP##I2PQP#4,060#XX2PQXP##I2PQP#6,333#XX2PQXP##I2PQP#4,699.         .#XX2PQXP##I2PQP#Post Merger Delta#XX2PQXP##I2PQP#5#XX2PQXP##I2PQP#0#XX2PQXP##I2PQP#4#XX2PQXP##I2PQP#62#XX2PQXP##I2PQP#125#XX2PQXP##I2PQP#10#XX2PQXP##I2PQP#141.                .#XX2PQXP##I2PQP#DOJ Conclusion#XX2PQXP##I2PQP# NFA #XX2PQXP##I2PQP# NFA #XX2PQXP##I2PQP# NFA #XX2PQXP##I2PQP# SCC #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# NFA #XX2PQXP##I2PQP# LCMP ..#XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP#  U;a@@@@@@@@ U;a@@@@@@@@ . A A A A A A A I @ @ @ @ @ @ @ H.#XX2PQXP##I2PQP#Area/Country#XX2PQXP##I2PQP#Norway#XX2PQXP##I2PQP#Portugal#XX2PQXP##I2PQP#Spain#XX2PQXP##I2PQP#Sweden#XX2PQXP##I2PQP#Switzerland#XX2PQXP##I2PQP#Turkey#XX2PQXP##I2PQP#United Kingdom.         .#XX2PQXP##I2PQP#Post Merger HHI#XX2PQXP##I2PQP#4,542#XX2PQXP##I2PQP#5,563#XX2PQXP##I2PQP#4,920#XX2PQXP##I2PQP#4,496#XX2PQXP##I2PQP#4,566#XX2PQXP##I2PQP#4,592#XX2PQXP##I2PQP#4,715.         .#XX2PQXP##I2PQP#Post Merger Delta#XX2PQXP##I2PQP#203#XX2PQXP##I2PQP#87#XX2PQXP##I2PQP#106#XX2PQXP##I2PQP#157#XX2PQXP##I2PQP#189#XX2PQXP##I2PQP#20#XX2PQXP##I2PQP#126.                .#XX2PQXP##I2PQP#DOJ Conclusion#XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# SCC #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# NFA #XX2PQXP##I2PQP# LCMP ` ` hp x (##XX2PQXP#  U\jvAwg@@@@@@@@@@ U\jvAwg@@@@@@@@@@ 6  6  Chart 2: WorldCom MCI IMTS Overlap Markets Africa 66`  6 A A A A A A A A A I @ @ @ @ @ @ @ @ @ H6#I2PQP#Area/Country#XX2PQXP##I2PQP#Algeria#XX2PQXP##I2PQP#Angola#XX2PQXP##I2PQP#Burkina#XX2PQXP##I2PQP#Gabon#XX2PQXP##I2PQP#Madagascar#XX2PQXP##I2PQP#Nigeria#XX2PQXP##I2PQP#Seychelles#XX2PQXP##I2PQP#South Africa #XX2PQXP##I2PQP#Tunisia6           6#XX2PQXP##I2PQP#Post Merger HHI#XX2PQXP##I2PQP#4,978#XX2PQXP##I2PQP#3,836#XX2PQXP##I2PQP#4,020#XX2PQXP##I2PQP#5,119#XX2PQXP##I2PQP#9,993#XX2PQXP##I2PQP#4,511#XX2PQXP##I2PQP#4,440#XX2PQXP##I2PQP#4,028 #XX2PQXP##I2PQP#5,1896           6#XX2PQXP##I2PQP#Post Merger Delta#XX2PQXP##I2PQP#42#XX2PQXP##I2PQP#7#XX2PQXP##I2PQP#24#XX2PQXP##I2PQP#116#XX2PQXP##I2PQP#4,469#XX2PQXP##I2PQP#0#XX2PQXP##I2PQP#157#XX2PQXP##I2PQP#3 #XX2PQXP##I2PQP#06                    6#XX2PQXP##I2PQP#DOJ Conclusion#XX2PQXP##I2PQP# NFA #XX2PQXP##I2PQP# NFA #XX2PQXP##I2PQP# NFA #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# NFA #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# NFA  #XX2PQXP##I2PQP# NFA ` ` hp x (##XX2PQXP# r U<@@@@@@ U<@@@@@@r &  & Chart 3: WorldCom MCI IMTS Overlap Markets Middle East &&#I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP#& A A A A A I @ @ @ @ @ H&#XX2PQXP##I2PQP#Area/Country#XX2PQXP##I2PQP#Bahrain#XX2PQXP##I2PQP#Iran#XX2PQXP##I2PQP#Israel#XX2PQXP##I2PQP#Jordan#XX2PQXP##I2PQP#Kuwait&       &#XX2PQXP##I2PQP#Post Merger HHI#XX2PQXP##I2PQP#4,695#XX2PQXP##I2PQP#4,951#XX2PQXP##I2PQP#4,544#XX2PQXP##I2PQP#4,453#XX2PQXP##I2PQP#5,233&       &#XX2PQXP##I2PQP#Post Merger Delta#XX2PQXP##I2PQP#0#XX2PQXP##I2PQP#0#XX2PQXP##I2PQP#161#XX2PQXP##I2PQP#0#XX2PQXP##I2PQP#27&            &#XX2PQXP##I2PQP#DOJ Conclusion#XX2PQXP##I2PQP# NFA #XX2PQXP##I2PQP# NFA #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# NFA #XX2PQXP##I2PQP# NFA &&#XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP#& A A A A A I @ @ @ @ @ H&#XX2PQXP##I2PQP#Area/Country#XX2PQXP##I2PQP#Lebanon#XX2PQXP##I2PQP#Oman#XX2PQXP##I2PQP#Qatar#XX2PQXP##I2PQP#Saudi Arabia#XX2PQXP##I2PQP#United Arab Emir.&       &#XX2PQXP##I2PQP#Post Merger HHI#XX2PQXP##I2PQP#4,511#XX2PQXP##I2PQP#4,505#XX2PQXP##I2PQP#4,857#XX2PQXP##I2PQP#6,025#XX2PQXP##I2PQP#4,476&       &#XX2PQXP##I2PQP#Post Merger Delta#XX2PQXP##I2PQP#346#XX2PQXP##I2PQP#271#XX2PQXP##I2PQP#1#XX2PQXP##I2PQP#35#XX2PQXP##I2PQP#35&            &#XX2PQXP##I2PQP#DOJ Conclusion#XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# NFA #XX2PQXP##I2PQP# NFA #XX2PQXP##I2PQP# NFA ` ` hp x (##XX2PQXP# r Up(L @@@@@@ Up(L @@@@@@r &  & Chart 4: WorldCom MCI IMTS Overlap Markets &  &` hp  Caribbean/North America &&` & A A A A A I @ @ @ @ @ H&#I2PQP#Area/Country#XX2PQXP##I2PQP#Cuba#XX2PQXP##I2PQP#Dominican Rep.#XX2PQXP##I2PQP#Neth. Antilles#XX2PQXP##I2PQP#Canada#XX2PQXP##I2PQP#Costa Rica&       &#XX2PQXP##I2PQP#Post Merger HHI#XX2PQXP##I2PQP#5,419#XX2PQXP##I2PQP#4,577#XX2PQXP##I2PQP#4,936#XX2PQXP##I2PQP#4,781#XX2PQXP##I2PQP#6,147&       &#XX2PQXP##I2PQP#Post Merger Delta#XX2PQXP##I2PQP#80#XX2PQXP##I2PQP#109#XX2PQXP##I2PQP#450#XX2PQXP##I2PQP#60#XX2PQXP##I2PQP#14&            &#XX2PQXP##I2PQP#DOJ Conclusion#XX2PQXP##I2PQP# SCC #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# SCC #XX2PQXP##I2PQP# NFA &&#XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP#& A A A A A I @ @ @ @ @ H&#XX2PQXP##I2PQP#Area/Country#XX2PQXP##I2PQP#El Salvador#XX2PQXP##I2PQP#Guatemala#XX2PQXP##I2PQP#Mexico#XX2PQXP##I2PQP#Nicaragua#XX2PQXP##I2PQP#Panama&       &#XX2PQXP##I2PQP#Post Merger HHI#XX2PQXP##I2PQP#6,025#XX2PQXP##I2PQP#5,402#XX2PQXP##I2PQP#5,467#XX2PQXP##I2PQP#5,998#XX2PQXP##I2PQP#5,675&       &#XX2PQXP##I2PQP#Post Merger Delta#XX2PQXP##I2PQP#0#XX2PQXP##I2PQP#60#XX2PQXP##I2PQP#51#XX2PQXP##I2PQP#10#XX2PQXP##I2PQP#45&            &#XX2PQXP##I2PQP#DOJ Conclusion#XX2PQXP##I2PQP# NFA #XX2PQXP##I2PQP# SCC #XX2PQXP##I2PQP# SCC #XX2PQXP##I2PQP# NFA #XX2PQXP##I2PQP# NFA ` ` hp x (##XX2PQXP# r Up("I@@@@@@ Up("I@@@@@@r &  & Chart 5: WorldCom MCI IMTS Overlap Markets South America &&` & A A A A A I @ @ @ @ @ H&#I2PQP#Area/Country#XX2PQXP##I2PQP#Bolivia#XX2PQXP##I2PQP#Brazil#XX2PQXP##I2PQP#Chile#XX2PQXP##I2PQP#Peru#XX2PQXP##I2PQP#Venezuela&       &#XX2PQXP##I2PQP#Post Merger HHI#XX2PQXP##I2PQP#4,427#XX2PQXP##I2PQP#5,252#XX2PQXP##I2PQP#4,704#XX2PQXP##I2PQP#5,109#XX2PQXP##I2PQP#5,264&       &#XX2PQXP##I2PQP#Post Merger Delta#XX2PQXP##I2PQP#28#XX2PQXP##I2PQP#32#XX2PQXP##I2PQP#277#XX2PQXP##I2PQP#26#XX2PQXP##I2PQP#116&            &#XX2PQXP##I2PQP#DOJ Conclusion#XX2PQXP##I2PQP# NFA #XX2PQXP##I2PQP# NFA #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# NFA #XX2PQXP##I2PQP# LCMP ` ` hp x (##XX2PQXP#  UZU @@@@@@@@@ UZU @@@@@@@@@ 2  2  Chart 6: WorldCom MCI IMTS Overlap Markets Asia/Pacific 22` 2 A A A A A A A A I @ @ @ @ @ @ @ @ H2#I2PQP#Area/Country#XX2PQXP##I2PQP#Bangladesh#XX2PQXP##I2PQP#Brunei#XX2PQXP##I2PQP#Hong Kong#XX2PQXP##I2PQP#India#XX2PQXP##I2PQP#Indonesia#XX2PQXP##I2PQP#Japan#XX2PQXP##I2PQP#Korea#XX2PQXP##I2PQP#Malaysia2          2#XX2PQXP##I2PQP#Post Merger HHI#XX2PQXP##I2PQP#4,950#XX2PQXP##I2PQP#4,438#XX2PQXP##I2PQP#4,376#XX2PQXP##I2PQP#4,454#XX2PQXP##I2PQP#4,301#XX2PQXP##I2PQP#4,275#XX2PQXP##I2PQP#4,456#XX2PQXP##I2PQP#4,0882          2#XX2PQXP##I2PQP#Post Merger Delta#XX2PQXP##I2PQP#55#XX2PQXP##I2PQP#209#XX2PQXP##I2PQP#299#XX2PQXP##I2PQP#8#XX2PQXP##I2PQP#1#XX2PQXP##I2PQP#148#XX2PQXP##I2PQP#94#XX2PQXP##I2PQP#612                  2#XX2PQXP##I2PQP#DOJ Conclusion#XX2PQXP##I2PQP# SCC #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# NFA #XX2PQXP##I2PQP# NFA #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# SCC #XX2PQXP##I2PQP# SCC 22#XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP#2 A A A A A A A A I @ @ @ @ @ @ @ @ H2#XX2PQXP##I2PQP#Area/Country#XX2PQXP##I2PQP#Pakistan#XX2PQXP##I2PQP#Philippines#XX2PQXP##I2PQP#Singapore#XX2PQXP##I2PQP#Taiwan#XX2PQXP##I2PQP#Australia#XX2PQXP##I2PQP#Cook Islands#XX2PQXP##I2PQP#Fiji#XX2PQXP##I2PQP#New Zealand2          2#XX2PQXP##I2PQP#Post Merger HHI#XX2PQXP##I2PQP#4,527#XX2PQXP##I2PQP#4,474#XX2PQXP##I2PQP#4,228#XX2PQXP##I2PQP#4,070#XX2PQXP##I2PQP#4,296#XX2PQXP##I2PQP#4,372#XX2PQXP##I2PQP#5,107#XX2PQXP##I2PQP#4,2132          2#XX2PQXP##I2PQP#Post Merger Delta#XX2PQXP##I2PQP#0#XX2PQXP##I2PQP#23#XX2PQXP##I2PQP#272#XX2PQXP##I2PQP#31#XX2PQXP##I2PQP#340#XX2PQXP##I2PQP#20#XX2PQXP##I2PQP#25#XX2PQXP##I2PQP#1262                  2#XX2PQXP##I2PQP#DOJ Conclusion#XX2PQXP##I2PQP# NFA #XX2PQXP##I2PQP# NFA #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# NFA #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# NFA #XX2PQXP##I2PQP# NFA #XX2PQXP##I2PQP# LCMP  ` ` hp x (##XX2PQXP# Ñ | UJ~y@@@@@@@ UJ~y@@@@@@@| *  * Chart 7: WorldCom MCI IMTS Overlap Markets Eastern Europe **` #I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP#* A A A A A A I @ @ @ @ @ @ H*#XX2PQXP##I2PQP#Area/Country#XX2PQXP##I2PQP#Albania#XX2PQXP##I2PQP#Azerbaijan#XX2PQXP##I2PQP#Belarus#XX2PQXP##I2PQP#Czech Republic#XX2PQXP##I2PQP#Estonia#XX2PQXP##I2PQP#Hungary*        *#XX2PQXP##I2PQP#Post Merger HHI#XX2PQXP##I2PQP#7,534#XX2PQXP##I2PQP#5,146#XX2PQXP##I2PQP#4,148#XX2PQXP##I2PQP#5,030#XX2PQXP##I2PQP#6,023#XX2PQXP##I2PQP#5,386*        *#XX2PQXP##I2PQP#Post Merger Delta#XX2PQXP##I2PQP#7#XX2PQXP##I2PQP#1,443#XX2PQXP##I2PQP#25#XX2PQXP##I2PQP#10#XX2PQXP##I2PQP#9#XX2PQXP##I2PQP#53*              *#XX2PQXP##I2PQP#DOJ Conclusion#XX2PQXP##I2PQP# NFA #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# NFA #XX2PQXP##I2PQP# NFA #XX2PQXP##I2PQP# NFA #XX2PQXP##I2PQP# SCC **#XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP##XX2PQXP##I2PQP#* A A A A A A I @ @ @ @ @ @ H*#XX2PQXP##I2PQP#Area/Country#XX2PQXP##I2PQP#Lithuania#XX2PQXP##I2PQP#Poland#XX2PQXP##I2PQP#Romania#XX2PQXP##I2PQP#Russia#XX2PQXP##I2PQP#Serbia#XX2PQXP##I2PQP#Uzbekistan*        *#XX2PQXP##I2PQP#Post Merger HHI#XX2PQXP##I2PQP#5,609#XX2PQXP##I2PQP#4,842#XX2PQXP##I2PQP#4,795#XX2PQXP##I2PQP#4,482#XX2PQXP##I2PQP#5,015#XX2PQXP##I2PQP#8,041*        *#XX2PQXP##I2PQP#Post Merger Delta#XX2PQXP##I2PQP#15#XX2PQXP##I2PQP#0#XX2PQXP##I2PQP#238#XX2PQXP##I2PQP#51#XX2PQXP##I2PQP#149#XX2PQXP##I2PQP#10*              *#XX2PQXP##I2PQP#DOJ Conclusion#XX2PQXP##I2PQP# NFA #XX2PQXP##I2PQP# NFA #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# SCC #XX2PQXP##I2PQP# LCMP #XX2PQXP##I2PQP# NFA    \ headerX` hp x (#(##XX2PQXP#  header(#` hp x (#\H headerX` hp x (#(##XX2PQXP#  header(#` hp x (#HfooterX` hp x (#(##XX2PQXP#footerpage number "page number" footer(#` hp x (# Body Text` ` hp x (##XX2PQXP#CERTIFICATE OF SERVICE I hereby certify that on this 5th day of January, 1998, I caused copies of the foregoing Petition to Deny to be delivered by first class U.S. mail to the following: Michael H. Salsbury Mary L. Brown Larry A. Blosser MCI COMMUNICATIONS CORPORATION 1801 Pennsylvania Avenue, N.W. Washington, D.C. 200063606 Andrew D. Lipman Jean L. Kiddoo SWIDLER & BERLIN, CHTD. 3000 K Street, N.W., Suite 300 Washington, D.C. 20007 Catherine R. Sloan Robert S. Koppel WORLDCOM, INC. 1120 Connecticut Avenue, N.W. Washington, D.C. 20036 *Chief, Network Services Division Federal Communications Commission 2000 M St., N.W., Room 235 Washington, D.C. 20554 (2 copies) *International Reference Room International Bureau Federal Communications Commission 2000 M St., N.W., Room 102 Washington, D.C. 20554 (2 copies) *Wireless Reference Room Wireless Telecommunications Bureau Federal Communications Commission 2025 M St., N.W., Room 5608 Washington, D.C. 20554 (2 copies)   Body Text ‘  Body Text *John Nakahata Federal Communications Commission 1919 M Street, N.W., Room 814 Washington, D.C. 20554 *Chairman William F. Kennard Federal Communications Commission 1919 M Street, N.W., Room 814 Washington, D.C. 20554 *Regina Keeney Federal Communications Commission 2000 M Street, N.W., 8th Floor Washington, D.C. 20554 *Commissioner Harold FurchtgottRoth Federal Communications Commission 1919 M Street, N.W., Room 802 Washington, D.C. 20554 *Paul Misener Federal Communications Commission 1919 M Street, N.W., Room 802 Washington, D.C. 20554 *Jane Mago Federal Communications Commission 1919 M Street, N.W., Room 844 Washington, D.C. 20554 *Helgi Walker Federal Communications Commission 1919 M Street, N.W., Room 802 Washington, D.C. 20554 *James Casserly Federal Communications Commission 1919 M Street, N.W., Room 832 Washington, D.C. 20554 *Commissioner Gloria Tristani Federal Communications Commission 1919 M Street, N.W., Room 826 Washington, D.C. 20554 ‘*Rick Chessen Federal Communications Commission 1919 M Street, N.W., Room 826 Washington, D.C. 20554 *Richard Metzger Federal Communications Commission 1919 M Street, N.W., Room 500 Washington, D.C. 20554 *Karen Gulick Federal Communications Commission 1919 M Street, N.W., Room 826 Washington, D.C. 20554 *Paul Gallant Federal Communications Commission 1919 M Street, N.W., Room 826 Washington, D.C. 20554 *Susan Fox Federal Communications Commission 1919 M Street, N.W., Room 814 Washington, D.C. 20554 *Ari Fitzgerald Federal Communications Commission 1919 M Street, N.W., Room 814 Washington, D.C. 20554 *Commissioner Michael Powell Federal Communications Commission 1919 M Street, N.W., Room 844 Washington, D.C. 20554 *Peter E. Tenhula Federal Communications Commission 1919 M Street, N.W., Room 844 Washington, D.C. 20554 *Kyle D. Dixon Federal Communications Commission 1919 M Street, N.W., Room 844 Washington, D.C. 20554 ‘*Commissioner Susan Ness Federal Communications Commission 1919 M Street, N.W., Room 814 Washington, D.C. 20554 *James L. Casserly Federal Communications Commission 1919 M Street, N.W., Room 814 Washington, D.C. 20554 *John Muleta Federal Communications Commission 1919 M Street, N.W., Room 500 Washington, D.C. 20554 *Richard Welch Federal Communications Commission 1919 M Street, N.W., Room 500 Washington, D.C. 20554 *Larry Strickling Federal Communications Commission 1919 M Street, N.W., Room 650L Washington, D.C. 20554 *Christopher Wright Federal Communications Commission 1919 M Street, N.W., Room 614 Washington, D.C. 20554 *Daniel Phythyon Federal Communications Commission 1919 M Street, N.W., Room Washington, D.C. 20554 *Ruth Milkman Federal Communications Commission 1919 M Street, N.W., Room 500 Washington, D.C. 20554 *Diane Cornell Federal Communications Commission 2000 M Street, N.W., 8th Floor Washington, D.C. 20554 ‘*David Solomon Federal Communications Commission 1919 M Street, N.W., Room 614 Washington, D.C. 20554 *Paula Michele Ellison Federal Communications Commission 1919 M Street, N.W., Room 614 Washington, D.C. 20554 *Kevin Martin Federal Communications Commission 1919 M Street, N.W., Room 802 Washington, D.C. 20554  Body Text *Gregory Cooke Federal Communications Commission 2000 M Street, N.W., Room 210R Washington, D.C. 20554 *Carol Mattey Federal Communications Commission 1919 M Street, N.W., Room 544 Washington, D.C. 20554 *Rebecca Dorch Federal Communications Commission 1919 M Street, N.W., Room 658 Washington, D.C. 20554 *International Transcription Service, Inc. 1231 20th Street, N.W. Washington, D.C. 20036  ` hp x (#p x (# ¬Robin B. Walker p x (#F` hp x (# * via hand delivery