April 1, 1999Mr. Richard C. Notebaert
Mr. Edward E. Whitacre, Jr.
Chairman and Chief Executive Officer
SBC Communications, Inc.
175 East Houston
San Antonio, TX 78205
In reviewing your proposed merger, the staff of the Commission has raised a number of significant issues with respect to potential public interest harms and questions about the claimed competitive and consumer benefits of the proposed combination. As you know, the Communications Act requires that the Commission determine whether the proposed merger is in the public interest and, at this stage, I have serious concerns about whether your proposal satisfies this requirement.
Among the actions which the Commission could take are to set your application for a full hearing or to approve it with conditions. In order to ensure that the record is complete with respect to these possible outcomes, I have asked the Commission's staff to explore with you and the other parties, on a cooperative and public basis, whether it would be possible to craft conditions that address the public interest concerns.
I would like the discussions about such conditions to begin as soon as possible and to be of limited duration so that a further decision with respect to the viability of your application can be made within 90 days. I have designated a team of senior representatives from the Commission staff to undertake these discussions with your companies and with the other parties to this case. Thomas Krattenmaker, Director of Research in the Office of Plans and Policy, and Robert Atkinson, Deputy Chief of the Common Carrier Bureau, will head the team for the staff.
The staff team will be contacting you shortly to set the ground rules and the schedule for discussions. Parties to the proceeding will also be invited to learn the ground rules and to present their views to staff. To facilitate the process, I have attached an outline of how I foresee the discussions progressing. This outline calls for a decision regarding the disposition of your application by the end of June.
The staff has reviewed the record developed in this proceeding. Based on that review, among the public interest issues raised by staff which cause me to be concerned are the following:
How can the Commission be assured that the merger will not interfere with the companies' willingness and ability to fully open their local markets to competition in accordance with the Communications Act (Act)?I assume that you are interested in pursuing discussions with the Commission staff. If so, please advise my office by Wednesday, April 7. However, if you prefer not to engage in this dialogue, I will ask the staff, based on the current record, to present its recommendations for further action to the full Commission as soon as possible.
How can the Commission be assured that the merger would promote the objective of the Telecommunications Act of 1996 to encourage competition in all telecommunications markets?
How can the Commission be assured that the public will promptly receive the claimed benefits from the proposed "national/local strategy" in view of section 271 of the Act?
How can the Commission be assured that the merger will not adversely affect the Commission's ability to fulfill its responsibilities under the Communications Act by reducing its ability to "benchmark" the performance and capabilities of telecommunications carriers?
How can the Commission be assured that the proposed combination will serve the Communications Act's public interest mandate by improving overall consumer welfare?
Thank you for your attention to this matter.
William E. Kennard
cc: Parties in CC Docket No. 98-141