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Press Statement
News Release

STATEMENT OF CHAIRMAN WILLIAM E. KENNARD

In the Matter of Applications for Consent to the Transfer of Control of Licenses and Section 214 Authorizations from MediaOne Group, Inc. to AT&T Corp
(CS Docket No. 99-251)

My approval of this merger is a conditioned approval. I rely on the specific commitments and concessions made by AT&T, detailed conditions that will require AT&T to divest significant portions of its cable holdings, as well as the strict compliance deadlines and enforcement mechanisms we adopt today. This decision strikes the appropriate balance between promoting competition in local telephone service and protecting competition in cable and high-speed Internet service.

Under Section 310(d) of the Communications Act, when presented with an application to transfer licenses, we must determine whether the application serves the public interest, convenience, and necessity. Therefore, with the able assistance of the Cable Services Bureau, we undertook a careful, thorough, and deliberate assessment of the potential public interest harms and benefits of this transaction.

Merger Conditions

AT&Tís application, as originally filed, was inconsistent with the public interest and presented significant diversity and competition concerns. As proposed, AT&T-MediaOne would have served 34.4 million consumers or 51.3 percent of cable subscribers nationwide (41.8 percent of subscribers to multichannel video programming distributors). However, the merger we approve today looks very different from the application initially presented to us by the parties.

First, AT&T has made meaningful commitments and concessions. It has already completed all necessary steps to comply with our channel occupancy rules. MediaOne has reduced its ownership in Time Warnerís local telephony subsidiary. In December 1999, AT&T also committed to provide non-discriminatory access to unaffiliated Internet service providers, and more recently, AT&T has promised that non-discriminatory principles will also apply in MediaOne territories. Finally, AT&T-MediaOne must also divest its interests in broadband ISP Road Runner, as part of the proposed consent decree with the Department of Justice.

Second, we impose specific, non-severable conditions on the merger that will prevent the merged entity from serving as a gatekeeper in the video programming market. This condition addresses one of my most serious concerns about the original merger application¾ AT&Tís proposal to serve more than half of all cable subscribers and maintain influence over much of the nationís most popular cable television programming.

Therefore, as an express condition of our approval, AT&T must comply with our 30 percent horizontal ownership rule by May 19, 2001, twelve months from the date the U.S. Court of Appeals for the D.C. Circuit upheld the constitutionality of the statute which authorizes our horizontal ownership rule. Within six months after closing its merger with MediaOne, AT&T must make an irrevocable election among three divestiture options. AT&T must also comply with specific interim conditions and enforcement mechanisms designed to protect the public interest while the merged entities complete these divestitures.

We expressly reject AT&Tís argument that our horizontal ownership and attribution rules should not apply to its union with MediaOne. We also deny its request to grant the merged entity flexibility to comply with whatever horizontal ownership rules are in effect in 18 months. Neither of these options would have served the public interest.

Protecting and Promoting Competition and Diversity

During our review of this merger, a number of commenters urged the Commission to go beyond its horizontal ownership rules and direct AT&T to divest specific cable holdings. These arguments, however, failed to identify specific harms that would not be sufficiently mitigated by a strict application of our current rules, given the state of the marketplace as it exists today.

As outlined above, our current horizontal limits impose constraints on AT&T that will preserve the competitiveness and diversity of the video programming market, while allowing the economies of scale and significant investment necessary to foster the deployment of new and advanced services to American consumers. Our horizontal limits ensure that AT&Tís acquisition of MediaOne will prevent it¾ either on its own or in collusion with other parties¾ from foreclosing meaningful opportunities for new video programmers to enter the market. Therefore, while AT&T can invest in developing competitive telephone and broadband alternatives beyond the 30 percent subscriber limit, it cannot provide video services to those consumers, even as a wholesaler of popular video content.

I look forward to seeing the benefits of competition in the local telephony marketplace that AT&T has argued will result from its merger with MediaOne. I will be following with keen interest AT&T-MediaOneís efforts in this regard, and I daresay, so will the American people.

An Open Access Commitment

Some parties have urged us to impose an "open access" condition on the merged entity. We have declined to do so here. As I have noted previously, the development and deployment of high-speed, broadband Internet access is vitally important to the nation as it will deliver the next generation of Internet services to Americans. Consumers should have a choice among alternative broadband providers. I believe that there are powerful marketplace incentives to ensure that consumers have such choices. Therefore, I have consistently advocated that we allow the nascent broadband marketplace a chance to develop before imposing a government-ordered regime.

I have been encouraged by voluntary commitments by AT&T and other cable operators to open their systems so as to accommodate consumer choice. Indeed, AT&T has made these commitments to the FCC on the record in this proceeding, including the commitment that they will not restrict video streaming. Notwithstanding these commitments, however, we have yet to see a fully developed and functioning system that provides broadband service alternatives to consumers. Therefore, my continued support for the Commissionís vigilant restraint policy ultimately depends on how AT&T fulfills its voluntary commitments in the broadband arena.

FCCís Merger Review Framework

Finally, an important issue has been raised about the relationship between the Commissionís rules and the public interest standard embodied in sections 214(a) and 310(d)) of the Communications Act. I write separately today to clarify the public interest framework we applied here and to emphasize the critical importance and continued relevance of the Commissionís mandate to balance specific public interest harms and benefits.

As the Commission has gained more experience reviewing merger-related applications, we have in recent years articulated our approach to the public interest standard in terms of the four questions outlined in the text of the Commissionís decision in this case: (1) whether the transaction would result in a violation of the Communications Act or any other applicable statutory provision; (2) whether the transaction would result in a violation of Commission rules; (3) whether the transaction would substantially frustrate or impair the Commissionís implementation or enforcement of the Communications Act, or would interfere with the objectives of the Communications Act and other statutes; and (4) whether the transaction promises to yield affirmative public interest benefits.

This four-part public interest framework is not new and clarifies the Commissionís historical approach to applying the public interest standard. The fact that a particular case does not expressly recite the test does not mean that it is inconsistent with this framework.

I understand that critics of this framework are concerned that it may not give adequate weight to the Commissionís rules. They note that it was originally articulated in cases involving common carriers and recommend that we apply a different, less flexible standard where the Commission has adopted many specific and prophylactic rules. I disagree. The four-part framework takes appropriate account of the Commissionís rules, and, like the public interest standard it implements, is properly applied to our decisions.

The relationship between the Commissionís rules and the public interest standard was eloquently described by Judge Harold Leventhal over thirty years ago in a seminal case reversing the FCC for not giving adequate attention to an application for a waiver of one of its rules:

"The Commission is charged with administration in the Ďpublic interest.í That an agency may discharge its responsibilities by promulgating rules of general application which, in the overall perspective, establish the Ďpublic interestí for a broad range of situations, does not relieve it of an obligation to seek out the Ďpublic interestí in particular, individualized cases." WAIT Radio v. FCC, 418 F.2d 1153, 1157 (D.C. Cir. 1969).

Rules are important and are not to be departed from lightly. Our public interest framework acknowledges this by directing us to first ask questions about consistency with the Communications Act and our rules. But, under the public interest standard, when circumstances that were not considered in the original rulemaking arise, they properly may call either for waiver of the rule or for the imposition of additional requirements not imposed by the rule.

In the case before us, for example, both the applicants (in their request for additional time to come into compliance with the cable horizontal ownership rules) and the opponents (in their requests for additional conditions) ask the Commission to depart from a strict application of the its rules. Under the circumstances of this case, the Commission determines, on the one hand, that a limited departure from the ruleís requirements is warranted to allow the applicants a commercially reasonable period of time to come into compliance with the horizontal ownership rule. On the other hand, the record does not reveal public interest harms not sufficiently mitigated by the existing rules that would require the imposition of additional conditions.

The Commissionís decision in this case, with its balanced consideration and response to the requests from the opposing parties to depart from our rules, seems the best answer to the concern that the four-part public interest framework would create too much uncertainty about when the agency might depart from its rules. By contrast, alternate approaches would either over-emphasize the rigidity of our rules or allow too little priority to the Commissionís "obligation to seek out the Ďpublic interestí in particular, individualized cases." WAIT Radio, 418 F.2d at 1157.

I, therefore, fully support the reasoning and outcome of this case.