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FCC Transactions Forum March 1, 2000
"Overview of FCC Review of Complex Transactions"
Associate Bureau Chief, Cable Services Bureau
- The FCC approves most mergers and acquisitions involving the transfer of FCC
licenses and authorizations in short order. In the Cable Bureau, for example, out of
approximately 2500 transfers that we have approved during the wave of mergers,
acquisitions, and swaps from 1996 to the present, only one transaction (the
AT&T/TCI merger) took a significant period of time, and even that merger took less
than five months between the Public Notice and the final Order. The public focuses
on the very small percentage of cases that take a significant period of time because
they involve very large and complex transactions. I'm here to provide some
background regarding the Bureaus' handling of these major transactions, in order to
provide additional context to our efforts to establish a proposed timeline for these
- The public's interest in these major transactions is, in fact, a primary reason that we
need additional time to review them. We apply the same Public Interest standard to
all transfer applications. But those transactions expected to have major impact on
communications services -- whether in terms of the sheer number of consumers
affected or the competitive impact on communications services -- necessitate
additional steps to ensure that the public has a full opportunity to participate and to
follow developments in our review process. This process is very important because
the FCC is unique in being (1) the only forum for the public to comment on these
transactions and (2) the expert agency with the responsibility, not only to preserve
existing competition, but also to promote new competition in the provision of
communications services. After public comments are filed, the number and
complexity of the comments and relevant competitive issues raised determine the
amount of resources and time devoted to the review.
- The rapid changes occurring in the communications field and the convergence of
services between the different industries - with cable companies providing not only
video, but also telephony and Internet services, for example - means that many novel
issues are raised and we need to pool the expertise from all the different Bureaus.
- For those transactions that have major impact on the provision of communications
services, which usually require transfer of multiple FCC licenses and authorizations,
representatives from all the relevant Bureaus get together to meet with the transfer
applicants prior to the filing of the application in order to discuss the technical filing
procedures and the substantive information that should be included in the application.
- After the application is filed, we review it for accuracy and completeness from both a
technical standpoint and a substantive standpoint, before issuing a Public Notice to
invite public comment. Our close review has helped to correct many omissions and
errors in identifying relevant licenses and authorizations and their holders. It also has
facilitated the timely amendment of the application when necessary to provide
substantive information and arguments needed by commenters and Commission staff
to conduct an informed competitive analysis.
- These proceedings inevitably implicate major communications policy issues before
the Commission. For example, many of the most recent mega-mergers raise major
broadband issues, and several of the mergers of the last two years relate directly to the
Commission's policy to promote local telephony competition. The review team
accordingly must get an in-depth understanding of all these policy issues and the
related rules -- from the historical context of the Commission's many related
proceedings, to application of the existing rules to novel circumstances, to the impact
of these transactions on the Commission's later enforcement of our rules and broader
policy, and of course the manner in which our actions in this transfer proceeding may
advance rather than retard the Commission's policies.
- As a threshold matter, we have to determine whether the transaction would result in
the violation of any of our rules. In many cases, review of the applicants' holdings
reveal that the transaction would result in a violation of our cross-ownership rules or
ownership limits, requiring divestiture. The review team often has to struggle with
much more difficult issues of statutory and regulatory interpretation, however.
Because these transactions often result in novel business arrangements and
relationships, we often have to analyze and decide regulatory issues of first
- As to the competitive policy analysis, the public is well aware that we solicit and
review public comments and meet with interested parties to discuss the issues, and
review substantial volumes of documents produced by the applicants. The public
may not be as aware that the merger review team also conducts an extensive,
independent investigation and analysis of the issues. Aside from studying our
internal rules and policies, we compile and analyze the literature from academics,
Wall Street analysts, consumer groups, trade associations, all sources, on issues
related to these transactions, which often include the most prominent communications
issues of the day. We often invite these experts to meet us for further discussion on
these issues, which range from a business analysis of the corporate structure and
strategic plans of the applicants, their chance for success, and the impact on other
industry players, to an academic analysis of the development of the Internet and
related policy options.
- We also consult with the DOJ and FTC, sharing information and coordinating our
review to avoid duplication of efforts. We obtain waivers from the applicants in
order that we can review the confidential documents filed with the DOJ and FTC and
have confidential discussions with those agencies regarding our concurrent reviews.
We discuss ways to coordinate our efforts so that the DOJ and FTC can focus on their
responsibility to ensure that the transaction won't reduce existing competition, while
we can focus on our responsibility under the Communications Act, and particularly
the 1996 Act, to ensure that the transaction won't slow the growth of new
competition and the decline of market power by dominant firms in the relevant
- In some instances, our analysis of the issues has identified areas requiring further
production of information or discussion from the applicants. Substantial amounts of
time and resources are spent discussing these issues with the applicants to obtain the
relevant information and to review the documents produced.
- In a few cases, the parties decide to revise their applications late in the process. Some
of you no doubt are familiar with cases where the applicants have requested a waiver
of our rules. If we were operating under an inflexible timetable for review, we
probably would have had to deny the original application on the ground that the
transaction would violate our rules. Instead, we have operated with more flexibility,
allowing the parties to amend their application. Some applicants seek extensive
discussions with Commission staff regarding the issues prior to revising their
application. In one case, the parties asked the Commission to halt consideration of
their application until they could present a proposal for compliance with Section 271,
and they actually did not submit such a proposal until several months later. When the
parties do revise their application, the Commission provides a full opportunity for
public comment and evaluates the revised application in light of these comments.
- The complexity of the issues involved and the extensive public interest they generate
sometimes also necessitate a Commission en banc hearing or Bureau level public
forum to air the issues. A substantial amount of Commission staff's time and
resources also is spent responding to public inquiries about these transactions on
virtually a daily basis.
- Finally, at the end of this process, the merger review team presents its
recommendation to the Commissioners and drafts the order to reflect the various
parties' arguments and the staff's analysis. After a majority of the Commissioners
have reached a consensus, the staff revises the order as necessary to reflect the views
of the Commissioners.