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If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 In re the Application of ) ) MCI COMMUNICATIONS CORP., ) Transferor, ) ) and ) ) SOUTHERN PACIFIC ) File No. ENF-94-006 TELECOMMUNICATIONS COMPANY , ) Transferee, ) ) For Consent to Transfer Control of Qwest ) File No. 9413177 Communications, Inc. ) MEMORANDUM OPINION AND ORDER Adopted: May 28, 1997 : Released: June 2, 1997 By the Commission: I. INTRODUCTION 1. We have before us an Application for Review (the "Application") filed by Microwave Acquisition Corp. ("MAC"), which seeks reversal of a Common Carrier Bureau order (the "Bureau Order") approving the transfer of control of Qwest Communications, Inc. ("Qwest") from MCI Communications Corp. ("MCI") to Southern Pacific Telecommunications Company ("Southern"). In the present Application, MAC renews certain arguments that it previously raised in its petition to deny the transfer. Having reviewed fully MAC's contentions, we find the Application to be without merit. Accordingly, for reasons discussed more fully below, we deny MAC's Application. II. BACKGROUND 2. Prior to the transfer previously approved in this proceeding, Qwest was a wholly- owned subsidiary of MCI and provided domestic interexchange telecommunications services, through its digital microwave transmission network and through interconnection with other carriers, to customers located throughout the eastern, southern, and midwestern United States. 3. On February 16, 1994, MCI entered into a stock purchase agreement (the "Agreement") to sell Qwest for approximately $20 million to Southern, a closely held Delaware corporation providing domestic long-distance transmission services and facilities to interexchange carriers and commercial businesses. On March 18, 1994, MCI and Southern (the "Transfer Applicants") filed their application, with the Private Radio Bureau, seeking the Commission's approval, under Section 310(d) of the Communications Act of 1934, as amended (the "Act"), of the transfer of Qwest from MCI to Southern. On April 6, 1994, the Private Radio Bureau gave public notice that the application had been accepted for filing. 4. Pursuant to the terms of the stock purchase agreement with Southern, MCI also filed, concurrently with the captioned application, a second application for Commission consent to the pro forma assignment of 15 additional Point-to-Point Microwave licenses to Qwest from another of MCI's wholly owned subsidiaries, MCI Telecommunications Corp. ("MCI Telecom"). Pro formaassignment applications are not subject to the public notice and other requirements of Section 309 of the Act; nonetheless, before it granted this second application on April 11, 1994, the Commission published an informational notice of this pro forma assignment in the same public notice that listed the captioned application. 5. On May 6, 1994, MAC, which claimed previously to have contracted with MCI to purchase Qwest from MCI, filed its timely petition to deny the transfer. As discussed below, the petition to deny challenged the proposed transfer on certain procedural grounds, and it argued that the transfer would lessen competition in the relevant markets. 6. In ruling on MAC's petition to deny, the Common Carrier Bureau (the "Bureau") concluded that MAC lacked standing to oppose the transfer. Specifically, the Bureau ruled that MAC's claimed injury -- MCI's alleged breach of the prior contract under which MAC claimed to be entitled to purchase Qwest -- was not "fairly traceable," within the meaning of applicable standing jurisprudence, to the Commission's action of approving the proposed transfer. Furthermore, the Bureau ruled that the remedy MAC sought, denial of approval for the transfer, would provide no redress for its claimed injury. In spite of these rulings, however, the Bureau treated MAC's petition as an informal objection under 47 C.F.R.  21.30(b), and considered its arguments in ruling on the transfer application. 7. With respect to the merits of the application, the Bureau found that, as required by Section 310(d), Southern had "the necessary financial resources and technical expertise to ensure that communications services provided by Qwest are consistent with the public interest." The Bureau also examined the competitive impact of the proposed transfer and concluded that it would "not substantially lessen competition." 8. With respect to the procedural challenges that MAC raised, the Bureau found, inter alia: (1) that the Private Radio Bureau, where the Transfer Applicants filed their transfer application, had the appropriate authority to accept such applications for filing and publish notice thereof; (2) that the public notice of the proposed transfer was adequate; and (3) that, as a non- dominant carrier, Southern was not required to obtain a certificate under Section 214 of the Act before receiving the proposed transfer of licenses. III. DISCUSSION 9. In its Application for Review, MAC finds fault with four aspects of the Bureau Order. First, it challenges the Bureau's ruling that MAC lacked standing to oppose transfer of Qwest to Southern. Second, it asserts that the Private Radio Bureau lacked the proper authority to accept for filing the transfer application. Third, MAC argues that the public notice of the transfer application was insufficient because it did not list all of the licenses held by Qwest that the transfer would affect. Lastly, MAC disputes the Bureau's conclusion that a Section 214 certificate was not required for the instant transfer. We address MAC's arguments in this order below. A. Standing 10. The Parties' Contentions. In its Application, MAC argues that the Bureau erred in determining that MAC lacked standing to contest the proposed transfer because its claimed injury was not fairly traceable to action by the Commission, nor was the injury likely to be redressed by the remedy that MAC sought -- denial of consent to the proposed transfer. MAC contests the bases for the Bureau's standing decision by citing to Telephone & Data Systems, Inc. v. FCC, a 1994 decision by the U.S. Court of Appeals for the District of Columbia Circuit. Relying on language from that decision, MAC contends that, because the license transfer "would have been illegal without [Commission] action," its claimed injury is fairly traceable to Commission action for purposes of the standing inquiry. Furthermore, again based on language in TDS v. FCC, MAC asserts that it meets the redressability portion of the standing inquiry because the Commission's denial of consent for the transfer would represent a "necessary first step on the path that could ultimately lead to relief fully redressing the injury." On the other hand, the Transfer Applicants defend the Bureau's decision against MAC's attacks, asserting that MAC has interpreted overly broadly the holding in TDS. 11. Discussion: We are unpersuaded by MAC's attempts to bring this proceeding within the requirements for standing that have been applied both by the Commission and by the federal courts. As noted in the Bureau Order, Section 309(d)(1) of the Act restricts to "parties in interest" the universe of entities that may raise challenges like MAC's petition to deny the proposed transfer. Under this portion of the Act, a "party in interest" must meet essentially the same requirements as those for standing, under 47 U.S.C.  402(b), to appeal a Commission decision to a federal court. Thus, entities claiming standing must allege and prove: (1) personal injury, (2) that is "fairly traceable" to the challenged action, and (3) a substantial likelihood that the relief requested will redress the injury claimed. 12. Causation: There appears to be no dispute that the first element of this standing analysis, the injury of which MAC complains, consists of the transfer of Qwest to Southern, instead of MAC, in alleged breach of a contract that MAC claims it had entered with MCI. MAC contends that, under TDS v. FCC, this injury is "fairly traceable" to Commission action. This decision, however, does not support MAC's argument. 13. In TDS v. FCC, the appellant, TDS, had secured an option to buy the majority interest in a licensee's then-unbuilt cellular network once the construction had been completed. However, the holder of the majority interest in the licensee previously had entered an agreement with the licensee's other owners requiring a supermajority vote to sell control of the licensee. In order to exercise its option to purchase the majority interest in the licensee, TDS sought to abrogate the supermajority agreement, arguing that it violated section 310(d) of the Act by effectively transferring the licensee's control over the network without Commission approval. As part of its subsequent order granting the licensee permission to begin construction of the network, the Commission declined to abrogate the supermajority agreement between the licensee's owners. 14. Before the circuit court, the parties agreed that TDS's claimed injury was its inability to exercise its purchase option because a minority interest holder in the licensee had blocked the supermajority approval necessary to permit sale of control to TDS. The two remaining portions of the standing inquiry, however, causation and redressability, remained in dispute. Addressing the issue of causation, the court noted that "injurious private conduct is fairly traceable to the administrative action contested in the suit if that action authorized the conduct or established its legality." Thus, the TDS court ruled that the Commission's contested order "affirmatively upheld the legality of the very provisions whose exercise has inflicted injury on TDS, provisions that a contrary holding would have abrogated." 15. In the present case, however, the causal relationship between the Commission's action and MAC's claimed injury is substantially more attenuated than that in TDS. There, the validity of the contract provision from which the claimed injury arose was directly before the Commission: in ruling on the construction application, the Commission was squarely presented with the opportunity to avert the claimed injury by invoking Section 310(d) to invalidate the supermajority provision, but it chose not to do so. On the other hand, in the present proceeding, as noted in the Bureau Order and as MAC asserts in its Application, the claimed injury proceeded from the fact that MAC's alleged contract to purchase Qwest was never consummated. The Commission had no control over the failure of this alleged contract, and no portion of the contract was before the Commission at any time in this proceeding. Rather, as noted in the Bureau Order, the Commission simply consented to the transfer of Qwest to Southern; it did not "require or cause the transfer of control." We therefore find that MAC has failed to establish that its claimed injury is fairly traceable to Commission action. 16. Redressability: As noted above, in this Application, MAC also challenges the Bureau's conclusion that the remedy MAC sought -- denial of consent to the transfer of Qwest to Southern -- would not redress the injury that it claims. For this portion of its argument, MAC again relies exclusively on the decision in TDS v. FCC. We are not persuaded by MAC's arguments. 17. In TDS, the court noted, and indeed the Commission had conceded, that "under the Communications Act [the Commission] ha[d] the power to remedy the violation by simply ousting" the minority interest holder in the licensee from control, "thus preserving the value of TDS's option." In light of this fact, the court noted that it would relax the normal, "'exacting scrutiny' of redressability." Accordingly, it ruled that standing would exist if "the relief sought would constitute a `necessary first step on a path that could ultimately lead to relief fully redressing the injury.'" 18. MAC quotes this standard for redressability, attempting to portray its situation as similar to that of TDS. It cannot, however, establish that, in the instant proceeding, the Commission "has the power to remedy the violation," as it did in TDS. Rather, MAC simply asserts that "the Commission's reversal of the Bureau's action need not result today in the transfer of Qwest to MAC; but the denial of the MCI/SP transfer application is an essential step in the ultimate vindication of MAC's contract rights." MAC fails to demonstrate how the Commission's denial of consent to the transfer is a necessary preliminary step toward the relief that it seeks -- vindication of the rights it claims under the alleged contract to purchase Qwest. 19. As noted in the Bureau Order, "MAC can obtain redress for any injury caused by MCI's alleged breach in its state court action, since that court can order specific performance or other appropriate relief." Indeed, under longstanding Commission policy, of which the courts have approved, it would be improper for the Commission to attempt to provide relief for MAC's claimed injury, which is essentially a private, contractual claim. We thus conclude that the denial of consent to the challenged transfer is in no way an essential preliminary step in the vindication of the rights that MAC claims here. Accordingly, MAC has failed to establish the third requirement for standing. For this reason, as well as those discussed above in connection with causation, we deny the portion of MAC's Application that seeks review of the Bureau's ruling on the issue of standing. B. Authority of the Private Radio Bureau 20. The Parties' Contentions. MAC next requests that we reconsider the portion of the Bureau Order ruling that the application to transfer Qwest to Southern was properly accepted for filing. MAC argues that the Private Radio Bureau, where the Transfer Applicants filed their request for approval of the transfer, never received the delegated authority that MAC contends was necessary for it to accept and initially process the application. Consequently, MAC asserts, the process of filing and public notice of the transfer application must be repeated. The Transfer Applicants counter that the Commission's Rules clearly provided that the Private Radio Bureau would be responsible for initial processing of transfer applications. 21. Discussion. As noted in the Bureau Order, the Commission stated on several different occasions that the Private Radio Bureau was responsible for the initial processing of certain categories of transfer applications. First, in a September 3, 1992 Public Notice, the Commission announced that it was transferring "certain processing responsibilities for . . . Common Carrier Point- to-Point Microwave . . . applications from the Common Carrier Bureau's Washington, D.C. offices to the Private Radio Bureau's Gettysburg, Pennsylvania offices effective October 1, 1992." The 1992 Processing Notice specifically stated that the Private Radio Bureau office in Gettysburg would handle "Point-to-Point Microwave application processing functions" for "routine assignments and transfers of control," but that the Bureau's offices in Washington, D.C., would continue to "[r]eview and evaluate all . . . cases involving Petitions to Deny." 22. In a January 1993 Public Notice, the Commission restated the authority of the Private Radio Bureau initially to process certain transfer applications: "Effective October 1, 1992, processing of applications in the Common Carrier Point-to-Point Microwave . . . Service[] was transferred to the Private Radio Bureau's Licensing Division in Gettysburg, Pennsylvania." By its order of March 22, 1993, the Commission amended its Rules explicitly to provide that these applications should be filed with its Gettysburg office, which had been processing the applications since October 1992. And again by order of September 22, 1994, we reaffirmed the authority of the Private Radio Bureau to process these applications, noting that it "issue[d], under delegated authority, common carrier licenses for Part 21 domestic public fixed services." 23. MAC reads the above pronouncements to indicate only that transfer applications should be mailed to the Private Radio Bureau in Gettysburg, but that they would be processed exclusively by the Common Carrier Bureau because that task was not a specifically enumerated function of the Private Radio Bureau. MAC's argument is contrary to the Commission's published statements on the issue. Both of the Public Notices discussed above explicitly stated that the Private Radio Bureau would have responsibility for "processing" the applications, at least to the extent that they remained unopposed. Thus, as the Fifth Circuit has noted under similar circumstances, we believe that the Commission's orders and other publications "clearly envisioned that the [Private Radio Bureau] would play an active role in the decision making process and would be something more than a `mail drop' for various filings." 24. Furthermore, as noted in the Bureau Order, any defect in the Private Radio Bureau's review and acceptance for filing of the transfer application was harmless error. Commission Rule 21.26 explicitly provides the "listing of the application on public notice as accepted for filing" does not "indicate[] that the application has been found acceptable," nor does it preclude the "subsequent return or dismissal of the application if it is found to be defective." In light of the above considerations, we believe that MAC's arguments regarding the filing process of the instant transfer application exalt form over substance; this portion of its Application is therefore denied. We decline to adopt a rule that would prohibit the various bureaus from providing each other with administrative assistance on what are simply ministerial matters. 25. MAC also contends, for the first time in its present Application, that the Bureau was without authority to approve the transfer application because, shortly before the release of the Bureau Order, we granted the Wireless Telecommunications Bureau authority over matters relating to wireless telecommunications. Our Rules prohibit the reliance, in an application for review, "on questions of fact or law upon which the designated authority has been afforded no opportunity to pass." Because MAC has not previously raised this argument before the Bureau, it cannot form the proper subject for an application for review. We therefore decline to address this argument here. C. Adequacy of Notice of Transfer 26. The Parties' Contentions. MAC next renews an argument that it made before the Bureau regarding the sufficiency of the public notice of the proposed transfer of control of Qwest. It asserts that in this proceeding the notice was inadequate because it did not list all of the licenses belonging to Qwest that would be affected by the transfer. MAC also challenges the notice of the pro forma transfer of stations from MCI Telecom to Qwest (from one MCI subsidiary to another) on the ground that it did not list any of the stations involved. The Transfer Applicants respond by arguing that the notice necessarily was adequate because it provided enough information for MAC to choose to file its petition to deny. Furthermore, the Transfer Applicants argue, unlike the cases involving cut-off notices on which MAC relies, it was the Commission's standard practice not to list each of the licenses affected by a proposed transfer. The Transfer Applicants assert that this practice was justified because, in a transfer proceeding, the public does not have the right to file competing applications for control of the licenses being transferred. 27. Discussion. Consistent with the Bureau's ruling, we reject MAC's arguments regarding the notice of the transfer application in this proceeding. It is well established that notice in this type of proceeding must be "reasonably calculated . . . to apprise interested parties of the pendency of [an] action and afford them an opportunity to present their objections." It must "enable individuals to know of governmental actions affecting their rights so that they may act to protect those rights." Thus, "[a]ctual knowledge of the pendency of an action removes any due process concerns about notice." As the Transfer Applicants assert, MAC's filing of its petition to deny demonstrates that it received adequate notice of the proposed transfer. Accordingly, we reject MAC's argument based on the notice's omission of an exhaustive listing of the licenses to be transferred. 28. Furthermore, we concur with Transfer Applicant's argument -- and, indeed the Bureau's ruling -- that the authority on which MAC relies for this argument is easily distinguishable. Each of the cases on which MAC relies in this portion of its Application involved the publication of incomplete notice regarding applications for new licenses or enlarged service areas for existing licenses. The notices in these cases established deadlines for the filing of competing applications, but, in light of the incomplete information in the published notices, prospective, competing applicants could not adequately ascertain what frequencies or service area were involved. Consequently, they were not apprised, in time to file competing applications, that their future access to the subject service areas or frequencies might be foreclosed. 29. By contrast, in the instant transfer proceeding, the Commission was precluded by statute from considering competing, third-party applications. Accordingly, the published notice was necessary only to apprise the public of the opportunity to file petitions to deny -- an opportunity of which MAC was aware. The proposed transfer of Qwest to Southern, by definition, contemplated transfer of all of the licenses controlled by Qwest at the time of the notice; more precise information regarding these licenses was available to the public through the review of the transfer application itself. Contrary to MAC's argument, it is not incumbent on the Commission to provide every detail of possibly relevant information in its public notices. 30. With respect to MAC's argument regarding the notice of the pro forma transfer of licenses from MCI Telecom to Qwest, we agree with the Bureau that, under Section 309(c)(2)(B) of the Act, the Commission was not required to provide any public notice of the transfer of licenses between two of MCI's wholly-owned subsidiaries. Accordingly, we reject MAC's claim that the notice of this transfer was inadequate. We thus reject in full the portion of MAC's Application relating to the notice of the challenged transfer. D. Applicability of Section 214 31. The Parties' Contentions. Lastly, MAC argues that the transfer of Qwest to Southern, approved in the Bureau Order, is invalid because, consistent with Section 63.07 of the Commission's Rules, Southern did not obtain a certificate under Section 214 of the Act. For this proposition, MAC relies on the Supreme Court's decision in MCI Telecommunications Corp. v. American Telephone & Telegraph Co., which invalidated the Commission's permissive detariffing policy for non-dominant common carriers as being inconsistent with Section 203 of the Act. MAC argues that here, as it was held to have done in MCI v. AT&T, the Commission improperly has dispensed with a statutory requirement. 32. The Transfer Applicants counter that the blanket authority for non-dominant carriers, under Section 214, which was accomplished by Section 63.07 of the Commission's Rules, merely formalized long-standing Commission practice in Section 310 transfer of control proceedings. Additionally, the Transfer Applicants point out that the Commission's determination to relax Section 214 requirements was not challenged and was not before the Court in MCI v. AT&T. 33. Discussion. As noted in the Bureau Order, in Section 63.07 of our Rules, we granted to non-dominant carriers, blanket authority under Section 214 of the Act to operate new telecommunications facilities, provided that they obtain the necessary Commission authorizations to use the radio frequencies associated with their networks. In various orders, we have provided extensive discussion of the legal authority and policy considerations that supported this construction of Section 214. We will not repeat those here. 34. We are unpersuaded by MAC's argument based on MCI v. AT&T. That case dealt with the Commission's authority under Section 203, a portion of the Act entirely separate from Section 214, which is at issue here. Accordingly, we do not believe that the Court's decision there to invalidate the Commission's permissive detariffing policy properly can be read as speaking, in any manner at all, to the propriety of our decision with respect to Section 214. Rather, as noted in the Bureau Order, MAC's argument in this regard amounts to an impermissible collateral attack on a Commission decision that is no longer subject to administrative or judicial review. Accordingly, we also deny this portion of MAC's Application. V. CONCLUSION 35. For the reasons stated above, we conclude that the Bureau did not err in ruling that MAC lacked standing to object to the transfer of Qwest from MCI to Southern. Additionally, we find that the Bureau did not err in rejecting MAC's arguments that: (1) the Private Radio Bureau lacked the authority to accept for filing the transfer application; (2) the public notice of the transfer application was inadequate; and (3) Southern is required to obtain a Section 214 certificate before it may obtain control of Qwest. We therefore deny MAC's Application for Review. VI. ORDERING CLAUSES 36. Accordingly, IT IS ORDERED, pursuant to Sections 4(i) and 5(c) of the Communications Act of 1934, as amended, 47 U.S.C.  154(i), 155(c), that the Application for Review filed by MAC on January 27, 1995, IS DENIED. 37. IT IS FURTHER ORDERED that this proceeding IS TERMINATED. FEDERAL COMMUNICATIONS COMMISSION William F. Caton Acting Secretary