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Federal Communications Commission
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This is an unofficial announcement of Commission action. Release of the full text of a Commission order constitutes official action. See MCI v. FCC. 515 F 2d 385 (D.C. Circ 1974).

Report No. CC 97-42COMMON CARRIER ACTIONAugust 14, 1997

Move Will Facilitate Competition From Maine to West Virginia

The Commission has approved the merger of Bell Atlantic and NYNEX subject to enforceable conditions that will open the combined Bell Atlantic and NYNEX regions to new competitors and encourage the development of local telecommunications competition. The Commission found that the transfer of control of certain licenses and authorizations from NYNEX to Bell Atlantic, conditioned on the compliance of Bell Atlantic and NYNEX with commitments they proposed, is in the public interest.

The Commission concluded that, considering the entire record including Bell Atlantic's and NYNEX's proposed commitments, Bell Atlantic and NYNEX had met their burden of demonstrating that the transaction is in the public interest. In approving the transfer of licenses, the Commission weighed both the potential harms and the potential benefits to the public interest, including whether the proposed merger and the commitments would, on balance, enhance competition.

The Commission found that the merger will eliminate Bell Atlantic as a likely significant independent competitor to NYNEX in telecommunications markets in the New York City area. The Commission concluded that Bell Atlantic and NYNEX are two of the five most likely significant market participants in those markets. The Commission concluded that such a merger, therefore, would likely increase, or slow the decrease of, NYNEX's market power. The merger would also eliminate the pro-competitive effects of Bell Atlantic as an entrant on the market-opening process. The Commission concluded that Bell Atlantic and NYNEX did not demonstrate that the claimed efficiencies of the merger offset the potential adverse effects of the transaction on the development of competition.

The Commission also concluded, however, that the commitments proposed by Bell Atlantic and NYNEX on July 19, 1997, both mitigate the negative effects of the transaction in the New York metropolitan area market, and have the pro-competitive

benefit of enhancing the pace at which local telecommunications competition will develop throughout the combined Bell Atlantic and NYNEX regions. On balance, these pro-competitive benefits outweighed the potential harms to competition from the merger. The Commission found, therefore, that Bell Atlantic and NYNEX on balance have carried their burden of demonstrating that the transaction is in the public interest.

In the Memorandum Opinion and Order approving the transaction, the Commission conditioned approval of the transfers on compliance with the proposed commitments. Parties may seek appropriate enforcement of the conditions from the Commission. The conditions will sunset after four years.

As a result of these conditions, Bell Atlantic and NYNEX will take a number of steps that will allow competitors to enter and compete more easily in the combined Bell Atlantic and NYNEX regions. The companies will:

  • provide detailed performance monitoring reports to competitive carriers, states, and the Commission, regarding the performance of their networks and operational support systems ("OSS"), the systems necessary for new competitors to provide local telecommunications service;

  • negotiate performance standards and enforcement mechanisms covering all five aspects of OSS (pre-ordering, ordering, provisioning, repair and maintenance, and billing) and network performance as well as negotiate with requesting carriers to establish enforcement mechanisms to ensure compliance with each performance standard, including private or self-executing remedies;
  • develop and implement, within 15 months, uniform OSS interfaces covering the entire combined Bell Atlantic and NYNEX regions;

  • engage in carrier-to-carrier testing of OSS systems with any carrier that requests such testing and provide evidence to the Commission of their ability to handle reasonably expected demand for all OSS functions with respect to resold services, unbundled network elements and combinations of unbundled network elements;

  • offer interconnection, unbundled network elements and transport and termination at rates based on forward looking economic cost;

  • offer, in conjunction with unbundled switching, shared transport priced on a minute of use basis, routed in the same manner as Bell Atlantic and NYNEX's own traffic, and without the imposition of access charges;

  • offer an optional plan that would permit entrants to pay recurring charges for certain otherwise non-recurring charges, and a separate optional small competing carrier installment payment plan, for collocation and certain other large non-recurring charges; and

  • offer, in interconnection negotiations and arbitrations, payment mechanisms for common construction costs and interconnector-specific construction and equipment costs related to collocation that apportion costs among the incumbent LEC and collocating carriers consistent with the Commission's decision in its Second Physical Collocation Order, CC Dkt 93-162, FCC 97-208. (rel. June 13, 1997).

The Commission stated these conditions will make it more likely that other market participants can enter, expand or become more significant market participants in the combined Bell Atlantic and NYNEX regions and mitigate the competitive harms that could otherwise result from the elimination of Bell Atlantic as a likely independent market participant. The conditions, particularly the pricing and non-recurring charge conditions, reduce the risk and high sunk costs associated with entry and expansion. The combination of reporting requirements and negotiated performance standards subject to enforcement mechanisms will help to provide competing carriers with an enforceable means to ensure they will consistently receive nondiscriminatory access and interconnection. The OSS-related conditions will ease entry throughout the combined Bell Atlantic and NYNEX regions by making it possible to use the same interfaces and OSS systems from Maine to West Virginia, an area encompassing the entire northeast corridor. This will allow entrants to decide the scope of entry that best fits their business plans, and in particular will facilitate the ability of competitors to enter both New York and New Jersey simultaneously. The conditions increase the likelihood that other entrants will be able to establish a brand reputation over time for providing high quality telecommunications services, compensating at least in part for the loss of the availability of Bell Atlantic's capabilities as a competitor to NYNEX in the relevant markets.

Finally, the Commission noted that as competitive concerns increase, it becomes significantly more difficult for merging parties to carry out their burden to show that the proposed transaction is in the public interest. For some potential mergers, the harm to competition may be so significant that it cannot be offset sufficiently by pro-competitive commitments or efficiencies.

Action by the Commission August 14, 1997 by Memorandum Opinion and Order (FCC 97-286). Chairman Hundt, Commissioners Quello, Ness, and Chong, with Commissioners Quello and Chong issuing separate statements.


News media contact: Rochelle Cohen at (202) 418-0253.
Common Carrier Bureau contacts: Geraldine Matisse at (202) 418-2320 and
Office Of Genearl Counsel contact: John Nakahata at (202) 418-1880