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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 Applications of ) ) File Nos. 03373 - 03384-CL-TC-98 Puerto Rico Telephone Authority,) 50516 - 50517-CW-TC-98 Transferor, ) 0000001430 ) 22760 - 22761-CR-TC-98 and ) 9713708 ) 9713707 GTE Holdings (Puerto Rico) LLC, ) 910998 Transferee, ) 1330-DSE-TC-98 ) ITC-T/C-19980902-00605 For Consent to Transfer Control of) Licenses and Authorization Held by) Puerto Rico Telephone Company and) Celulares Telef˘nica, Inc. ) MEMORANDUM OPINION AND ORDER Adopted: February 12, 1999 Released: February 12, 1999 By the Commission: Commissioner Furchtgott-Roth concurring in part with a separate statement to be released later. TABLE OF CONTENTS Paragraph I. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . .1 II. BACKGROUND. . . . . . . . . . . . . . . . . . . . . . . 2 A. The Applicants. . . . . . . . . . . . . . . . . . . 2 B. The Proposed Transaction. . . . . . . . . . . . . . 4 C. Regulatory and Legal History. . . . . . . . . . . . .8 III. LEGAL STANDARDS . . . . . . . . . . . . . . . . . . . 12 IV. ANALYSIS OF POTENTIAL PUBLIC INTEREST HARMS . . . . . 14 A. Potential Competitive Harms . . . . . . . . . . . . . 14 1. Analytical Framework. . . . . . . . . . . . . . . 14 2. Analysis. . . . . . . . . . . . . . . . . . . . . 21 a. Transition to Price Cap Regulation. . . . . . 22 b. Network Access for Local Exchange and Access Competitors 27 c. Potential Anticompetitive Effects in Interexchange Markets 31 d. Potential Anticompetitive Effects in International Markets 35 B. Other Public Interest Issues. . . . . . . . . . . . . . 42 1. Exercise of De Facto Control over PRTC by GTE Holdings 42 2. Unjust Enrichment . . . . . . . . . . . . . . . . 45 3. Other Matters . . . . . . . . . . . . . . . . . . 48 V. POTENTIAL PUBLIC INTEREST BENEFITS. . . . . . . . . . . . 50 A. Summary of Potential Public Interest Benefits . . . . . 52 1. Benefits of Privatization . . . . . . . . . . . . 52 2. GTE Holdings' Commitments . . . . . . . . . . . . 53 B. Analysis. . . . . . . . . . . . . . . . . . . . . . . . 58 VI. MISCELLANEOUS ISSUES. . . . . . . . . . . . . . . . . 60 A. Request for Hearing . . . . . . . . . . . . . . . . . 60 B. Common Ownership. . . . . . . . . . . . . . . . . . . 64 VII. CONCLUSION. . . . . . . . . . . . . . . . . . . . . . . 68 VIII. ORDERING CLAUSES. . . . . . . . . . . . . . . . . . . . 69 APPENDIX A List of Licenses APPENDIX B List of Formal Comments I. INTRODUCTION 1. In this Order, we consider the applications filed by Puerto Rico Telephone Authority (PRTA) and GTE Holdings (Puerto Rico) LLC (GTE Holdings) pursuant to sections 214 and 310(d) of the Communications Act of 1934, as amended ("the Act"), for approval to transfer control of certain wireless telecommunications licenses and an authorization to provide international resale service held by PRTA's wholly-owned subsidiaries, Puerto Rico Telephone Company (PRTC) and Telef˘nica de Puerto Rico, Inc. (TPRI), from PRTA to GTE Holdings, which is a wholly-owned subsidiary of GTE Corporation (GTE). In accordance with the terms of sections 214(a) and 310(d), PRTA and GTE Holdings (collectively, Applicants) must demonstrate that the transfer of the subject licenses and authorization will serve the public interest, convenience, and necessity. For the reasons set forth below, we conclude that the Applicants have met their burden, and accordingly we grant their applications for transfer of control. II. BACKGROUND A. The Applicants 2. PRTA is an instrumentality of the Commonwealth of Puerto Rico ("Government"). PRTA wholly owns PRTC, which is Puerto Rico's leading provider of telecommunications services, including local exchange, intra-island long distance, wireless, and Internet access services, in both business and residential markets. PRTC serves more than 1.3 million access lines, more than 155,000 cellular subscribers, and more than 237,000 paging customers. In addition to its cellular and paging licenses, PRTC holds licenses in Puerto Rico in the personal communications service (PCS), narrowband rural radiotelephone, common carrier point-to-point microwave, digital electronic messaging, telephone maintenance and private carrier paging, and fixed satellite services. 3. GTE Holdings is a wholly-owned subsidiary of GTE. Through various subsidiaries and affiliates, GTE provides local telephone service to more than 21.5 million access lines in 28 states. It is a leading cellular, PCS, and paging operator, with the potential to serve 61.3 million wireless customers in 17 states. GTE also offers nationwide long distance and international services and provides competitive local exchange service in several states. GTE also operates in foreign markets, providing telecommunications services generally in Canada, Venezuela, Argentina, and the Dominican Republic, and paging services in China. GTE does not offer telecommunications service within Puerto Rico, and does not own an attributable interest in any license to provide cellular, PCS, covered SMR or Part 22 paging services in Puerto Rico. GTE Holdings has certified in its application that prior to the present transaction, GTE did not intend to compete in telecommunications service markets in Puerto Rico. Compa¤ˇa Dominicana de Tel‚fonos, a wholly-owned subsidiary of GTE Holdings operating under the name GTE International, does employ approximately 13 people in Puerto Rico selling microwave and private branch exchange equipment. B. The Proposed Transaction 4. The proposed transfers of control are to proceed as part of a multi-step transaction. First, on September 1, 1998, PRTC was divided into two new companies, Celulares Telef˘nica, Inc. (CTI) and PRTC Merger Company, Inc. (PRTC), each of which is a wholly-owned subsidiary of PRTA. PRTC's cellular, PCS, paging, and satellite earth station licenses were assigned to CTI on the same date. Second, immediately prior to the transfer of control to GTE Holdings, PRTA will form a new wholly-owned subsidiary, Telecomunicaciones de Puerto Rico, Inc. (TELPRI), which will wholly own PRTC and CTI. These transactions together constitute a pro forma reorganization. 5. Following the reorganization described above, GTE Holdings will initially acquire 51 percent plus one share of TELPRI's stock from PRTA for $443.7 million, thus giving GTE Holdings 51 percent plus one share indirect ownership of CTI and the new PRTC. TELPRI or its subsidiaries will also "borrow $1.565 billion in the financial markets, which will be raised without any credit support by GTE Holdings and the Government and will be paid as a special dividend to the Government." Because GTE Holdings will assume partial responsibility for this debt when it acquires part ownership of TELPRI, the debt effectively increases the purchase price GTE Holdings will pay to PRTA. 6. Finally, through various financial mechanisms, a portion of the TELPRI shares held by both GTE Holdings and PRTA will be conveyed to Popular, Inc. (Popular), several private investors not affiliated with the Government, and a "newly created PRTC employee stock ownership plan and trust." At the conclusion of the proposed transaction, GTE Holdings, through its partial ownership of TELPRI, will own approximately 40 percent of PRTC and CTI, and PRTA will retain approximately 45 percent ownership of the companies. GTE Holdings, however, will exercise control over the companies through several mechanisms. Among other things, GTE Holdings will be entitled to elect five of nine TELPRI directors, thus giving it the ability to name the senior officers of TELPRI and its subsidiaries. Additionally, a shareholder agreement among GTE Holdings, Popular, and the local investors will give GTE Holdings certain powers, and GTE Holdings has entered into a management agreement with TELPRI and PRTC to take effect after the transaction is completed. GTE Holdings, Popular, and the local investors will also have an option to purchase additional TELPRI stock from PRTA at a fixed price within three years of the closing date, and PRTA will have a right to sell its shares through private placement or public offering. The parties anticipate that PRTA will begin reducing its remaining interest in TELPRI beginning 18 months after closing in order to raise funds to finance obligations of the Government's retirement system. 7. In addition to the transfer of control of wireless licenses held by PRTC and CTI, the parties also request approval to transfer control to GTE Holdings of an international switched resale section 214 authorization that the International Bureau has authorized for assignment from PRTA's subsidiary TPRI to CTI. GTE Holdings agrees to accept control of this authorization, subject to all current and future Commission regulations, as well as the reporting conditions specified in the order granting TPRI its international section 214 authorization. C. Regulatory and Legal History 8. On August 4, 1997, the Legislature of Puerto Rico passed Act No. 54, which authorized PRTA to establish a committee whose sole function was to divest PRTA's assets. The committee recommended the sale of PRTC to GTE, and PRTA entered into an agreement with GTE Holdings. On June 23, 1998, the contract between GTE Holdings and PRTA for the acquisition of PRTC received the last of the necessary approvals from Puerto Rico's legislature, and the contract was approved by the Governor of Puerto Rico on June 24, 1998. 9. On June 25, 1998, Telef˘nica Internacional, S.A., the parent company of Telef˘nica Larga Distancia de Puerto Rico, Inc. (TLD), submitted a competing bid for PRTC. The committee evaluated this proposal against GTE Holdings' bid, obtained an enhanced offer from GTE Holdings, and again recommended acceptance of GTE Holdings' bid. The Governor approved the Sale Agreement on July 21, 1998. 10. The parties submitted a filing with the United States Department of Justice (DOJ) as part of the pre-merger review process under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. On August 19, 1998, DOJ granted the parties' request for early termination of the waiting period, thus concluding the DOJ review process. GTE Holdings has also requested certification as a common carrier from the Puerto Rico Telecommunications Regulatory Board (PRTRB). GTE Holdings states that it expects approval of this application by the end of the month. 11. On July 24, 1998, PRTA, PRTC, and GTE Holdings filed applications with the Commission to transfer control of PRTC's radio licenses to GTE Holdings. On September 2, 1998, GTE Holdings and PRTA filed an additional application to transfer control of TPRI's international section 214 authorization. Eight parties, including providers of on-island and off-island telecommunications services in Puerto Rico, associations of such carriers, and representatives of labor and management interests, filed timely formal comments on the applications, petitions to deny the applications, or petitions to condition grant of the applications. These parties assert that the proposed transfer of control of the licenses and authorization to GTE Holdings is not in the public interest, and therefore that we should either deny or condition our approval of the proposed transaction. III. LEGAL STANDARDS 12. Under section 214(a) of the Communications Act, subject to certain exceptions and provisos that are not relevant here, no carrier may acquire or operate any line, or engage in transmission by means of a line, unless and until it first obtains from the Commission a certificate of public convenience and necessity. Section 310(d) provides, in pertinent part, that "[n]o construction permit, or station license, or any rights thereunder, shall be transferred, assigned, or disposed of in any manner, voluntarily or involuntarily, directly or indirectly, or by transfer of control of any corporation holding such permit or license, to any person except upon application to the Commission and upon finding by the Commission that the public interest, convenience, and necessity will be served thereby." 13. As we explained in the recent WorldCom-MCI Order, before the Commission can approve the transfer of control of authorizations and licenses in connection with a proposed merger or acquisition, sections 214(a) and 310(d) require the Commission to find that the proposed transfers will serve the public interest. Thus, at a minimum, we must find that the proposed transaction will not interfere with the objectives of the Communications Act. To determine whether the proposed transaction will be in the public interest, we must weigh the potential public interest harms of the transaction against the potential public interest benefits, including an evaluation of the possible competitive effects of the transfer. Applicants bear the burden of proving that the transaction, on balance, will serve the public interest. Where necessary, the Commission can attach conditions to the transfer of authorizations or licenses to ensure that the public interest is served by the transaction. IV. ANALYSIS OF POTENTIAL PUBLIC INTEREST HARMS A. Potential Competitive Harms 1. Analytical Framework 14. In conducting our public interest analysis of competitive conditions in markets affected by the proposed transaction, we apply the analytical framework we have used in our decisions approving the mergers of Bell Atlantic and NYNEX ("BA-NYNEX"), British Telecommunications and MCI Communications Corp. ("BT-MCI"), and WorldCom, Inc. and MCI Communications Corp. ("WorldCom-MCI"). All of these orders followed the approach used in the LEC In-Region Interexchange Order, where we found the DOJ and Federal Trade Commission 1992 Horizontal Merger Guidelines to be a useful analytical tool for evaluating the likely competitive effects of mergers and acquisitions. Our framework is designed to ensure that our assessment of the competitive effects of a merger is based on generally accepted economic principles relating to market analysis. 15. Under this analytical framework, we begin our analysis of potential anticompetitive effects by defining the relevant product and geographic markets. We then identify the market participants in those relevant markets, particularly those firms that are most likely to have substantial future competitive significance. Next, we consider whether the transaction is likely to result in either unilateral or coordinated effects that create, maintain, or enhance market power in the relevant markets. We also consider whether the transaction will impair our ability to implement and enforce the Communications Act's provisions to promote the opening of markets and constrain the anticompetitive exercise of market power as competition develops. Any potential anticompetitive effects that we find will ultimately be balanced against the potential benefits to determine whether the proposed transaction will be in the public interest. 16. As discussed above, PRTC is Puerto Rico's leading provider of telecommunications services, including local exchange, intra-island long distance, wireless and Internet access services, in both business and residential markets. Through various subsidiaries and affiliates, GTE provides local telephone services, wireless services, and nationwide long distance services. In several states, GTE provides competitive local exchange services. GTE also operates internationally, providing telecommunications services in Canada, Venezuela, Argentina, the Dominican Republic, and China. GTE does not offer telecommunications service within Puerto Rico. 17. The parties opposing the acquisition on competitive grounds raise issues concerning the future state of competition in markets for three general groups of services -- local exchange and exchange access services, domestic long distance services, and international services. All of the allegations concerning the possible competitive effects of the proposed acquisition focus on the provision of local, domestic long distance, and international services to customers in Puerto Rico. There are no allegations in the record concerning the elimination of PRTC as a competitor in current GTE markets, and we see no reason to conclude that PRTC possesses any assets, capabilities, or incentives distinguishing it from any other telecommunications firms as a likely or potential entrant in those markets. Accordingly, we limit our analysis of the competitive effects of the acquisition to markets for the relevant services in Puerto Rico. 18. Because GTE does not currently compete in any telecommunications services market in Puerto Rico, the proposed transaction will not increase market concentration in any of these markets. We further conclude that the proposed acquisition is not likely to eliminate a significant potential competitor. Applicants assert that GTE had no plans to offer telecommunications services in Puerto Rico as a competitor to PRTC, and there is no evidence in the record that causes us to question that assertion. Although GTE possesses significant financial resources and expertise, and has maintained a presence in Puerto Rico since the 1950s as a seller and servicer of telecommunications equipment, the record does not show that it has sufficient telecommunications assets or brand name reputation in Puerto Rico to render it a significant potential competitor to PRTC. Based on these facts, we conclude that the acquisition by GTE Holdings of PRTC should not eliminate one among a limited number of most significant potential participants from Puerto Rican telecommunications markets. 19. TLD, which provides interexchange and international services in Puerto Rico, argues that we should either assume that the proposed merger between GTE and Bell Atlantic has been approved when reviewing the applications before us, or we should defer consideration of the applications until after acting on the Bell Atlantic/GTE merger proposal. We conclude, however, that for purposes of the instant proceeding, we must analyze the potential effects of the proposed transaction upon Puerto Rican telecommunications markets as they currently exist. The proposed merger between GTE and Bell Atlantic is, therefore, not germane to our analysis in this order. When we later review the applications that have been filed in connection with the proposed merger between GTE and Bell Atlantic, we will consider the potential competitive effects of that transaction in light of the acquisition of PRTC by GTE Holdings. 20. For these reasons, we will confine our analysis to the potential competitive harms that could arise if the facilities now controlled by PRTC were to come under the direct control of GTE Holdings, as well as to the potential harms that could arise if GTE Holdings engages in anticompetitive practices. In doing so, we recognize that GTE Holdings will assume control over bottleneck local exchange facilities needed by other providers to compete effectively for customers in Puerto Rico. 2. Analysis 21. Carriers that provide local exchange, wireless, interstate, and international telecommunications services to customers in Puerto Rico, as well as associations including such carriers, have raised issues in connection with GTE Holdings' proposed acquisition of PRTC that are relevant to our competitive analysis. Many of these commenters propose that we grant the applications with conditions in order to address these competitive issues. We examine each of these issues in turn. a) Transition to Price Cap Regulation 22. Pursuant to section 61.39 of the Commission's rules, PRTC has elected to provide interstate access service under rate of return regulation. Because GTE is subject to price cap regulation, however, PRTC will be required within 12 months of our approval of this transfer of control to file interstate access tariffs for Puerto Rico using the price cap methodology. Competing local and interexchange carriers claim that PRTC's existing rates are unreasonably high, and that the Commission should investigate these rates or conduct an audit before permitting PRTC to impose interstate access rates under the Commission's price cap rules. 23. Historically, the Commission has used a carrier's existing interstate rates as a starting point for price cap regulation because those rates were deemed to reflect a "reasonable operation of rate-of-return regulation" and were "in general the best that rate-of-return regulation can produce." Commenters argue, however, that PRTC's rates do not meet this standard. Instead, commenters maintain, PRTC's current rates embody major inefficiencies, and a conversion at these current rates would afford PRTC opportunities to engage in cross-subsidization and cost-shifting. This, commenters add, would deny interstate customers a fair share of the substantial efficiency gains that conversion to price cap regulation should achieve. 24. We do not believe that we should withhold approval of this acquisition, or attach a condition to our approval, relating to the transition of PRTC to price cap regulation under our rules. Instead, we believe that we have sufficient authority under the Act and under our price cap rules to ensure a reasonable starting point for price cap regulation. We do note that we have rejected arguments in the past that we conduct either full-blown investigations or audits of incumbent LEC existing rates prior to the filing of interstate access rates under the Commission's price cap rules. To the contrary, we have held that where a LEC's rates became subject to an investigation which later resulted in a rate prescription, the Commission would adjust that LEC's price cap indices to reflect the rate prescription. PRTC's customers will be protected following the initiation of price cap regulation because we retain the right to make adjustments to any relevant price cap indices if we later find that PRTC's rates prior to price caps were unlawful pursuant to a future investigation under section 204 or 205 of the Act or a future complaint under section 208 of the Act. 25. We have long recognized that cost-plus rate of return regulation fails to provide carriers with the incentives to operate efficiently. PRTC's operation as a rate-of-return carrier may well have had this effect. None of the parties to this proceeding, however, allege sufficient specific facts to support their assertions that PRTC's rates under rate of return regulation are unjust and unreasonable pursuant to section 201(b) of the Act. Moreover, it is not clear that conducting a utility rate investigation under rate of return regulation would produce a substantial benefit, because, at most, it would produce rates that by definition would reflect the inefficiencies of rate of return regulation. Thus, we are not at present convinced that a rate investigation would likely result in a rate prescription that is substantially different from the rates that are now in effect. 26. Finally, we believe that privatization and the implementation of price cap regulation for PRTC after the acquisition are the best means to achieve lower rates. The Commission's price cap regulation forces local exchange carriers to become more productive than the industry was under rate of return regulation. In particular, in 1997, we adopted a productivity factor of 6.5 percent, which requires price cap LECs generally to reduce access rates 6.5 percent relative to the rate of inflation. We believe that the efficiency incentives of interstate price caps may result in lower prices for PRTC's other services, such as local exchange service. b) Network Access for Local Exchange and Access Competitors 27. Several providers of telecommunications services in Puerto Rico and their associations argue that after the acquisition, GTE Holdings will have the incentive and the ability to abuse PRTC's monopoly position in the Puerto Rico local telecommunications market by, among other things, failing to allow PRTC's competitors reasonable access to its network. To address this situation, commenters propose a variety of conditions relating to PRTC's compliance with its interconnection and other network access obligations, as well as related provisioning and reporting requirements. 28. We conclude that it is not necessary or appropriate to impose on PRTC and GTE Holdings the network access and related conditions that commenters suggest. First, many of the proposed conditions would simply require PRTC to comply with its existing legal obligations. For example, all incumbent LECs are required by law to comply with all of section 251's requirements and the Commission's currently effective rules implementing section 251. Similarly, PRTC will remain legally bound to comply with its preexisting interconnection agreements. Indeed, GTE Holdings states that it will honor these agreements and make the benefits of these agreements available to other carriers, as required by law. Commenters have not shown any special likelihood that GTE Holdings will fail to comply with these obligations. Indeed, with the exception of PCIA, no party even alleges that GTE has engaged in unlawful anticompetitive conduct with respect to network access requirements. PRTC, of course, will remain obligated after the acquisition to comply with the requirements of section 251 of the Communications Act, the Commission's implementing rules, and PRTC's interconnection agreements with competitive LECs and CMRS providers. We see no need to condition our approval of this transaction expressly upon compliance with these obligations. To the extent any disputes may arise in the future concerning PRTC's compliance with these provisions, the aggrieved parties will have recourse to the full panoply of legal remedies, including remedies before this Commission (potentially including accelerated enforcement proceedings), the PRTRB, and the courts. 29. We decline to require PRTC or GTE Holdings to comply with additional provisioning and performance monitoring requirements similar to those imposed upon Bell Atlantic in the BA- NYNEX Order. In the BA-NYNEX Order, the Commission conditioned its approval of various transfers in connection with Bell Atlantic's merger with NYNEX upon Bell Atlantic's agreement to comply with various requirements, including, among others, the preparation of quarterly Performance Monitoring Reports, provision and operational testing of uniform interfaces for use by carriers purchasing interconnection to obtain access to operations support systems, and good faith negotiation with carriers purchasing interconnection to establish reasonable performance standards in various areas. The circumstances attending this proposed acquisition, however, are quite distinct from the factual record underlying the BA-NYNEX Order. In the BA-NYNEX Order, the Commission's decision to impose conditions was based on specific potential competitive harms that arose because the proposed transaction involved two Bell Operating Companies with extensive assets that operated in contiguous territories, and in particular because Bell Atlantic controlled significant assets and capabilities that conferred upon it both the incentive and the ability to provide competitive services to customers then being served by NYNEX. In this proceeding, by contrast, there is no evidence suggesting that GTE has even considered providing telecommunications services in competition with PRTC in Puerto Rico, and GTE's only presence in Puerto Rico has been in areas other than the provision of telecommunications service. We therefore conclude that no basis has been shown for imposing conditions similar to those specified in the BA-NYNEX Order. 30. To the extent that commenters request that we impose other network access and related conditions, in addition to commitments to comply with existing obligations and conditions similar to those imposed in the BA-NYNEX Order, we similarly decline to impose such conditions. The commenters have failed to show any special risk of harms in the market for local telecommunications services in Puerto Rico from this transaction that would render such conditions necessary. Should any supportable allegations come to our attention in the future that PRTC or GTE Holdings may not be complying with our network access requirements, we will diligently investigate those allegations, and we will take firm enforcement action against any violations that we may find. c) Potential Anticompetitive Effects in Interexchange Markets 31. Some carriers and associations further argue that GTE should be prohibited from providing off-island long distance and international services until its PRTC affiliate complies with certain conditions. Specifically, commenters argue that PRTC should be required to provide non- affiliated carriers access to its local exchange network on terms and conditions equal to those granted to GTE and its affiliates. Commenters also ask the Commission to impose structural or accounting safeguards to prevent price squeezes and cross-subsidization. 32. In 1987, in the Puerto Rico Order, the Commission required PRTC to comply with certain requirements, including requirements relating to equal access, network information disclosure, customer proprietary network information (CPNI), and reporting of service data, as a condition of obtaining section 214 authorizations to provide interstate and international facilities-based service. These conditions were reaffirmed in several subsequent orders in connection with the provision of off- island service by PRTC's affiliates. Most recently, in awarding an international resale section 214 authorization to TPRI, the International Bureau noted that the Puerto Rico Order conditions continue to apply to PRTC, and it evaluated PRTC's compliance with those conditions. KMC argues that we should prevent the evasion of our earlier orders, and prevent other threats to competition, by affirming the applicability of the Puerto Rico Order to PRTC and conditioning the provision of off-island services by GTE and its subsidiaries on PRTC's compliance with the provisions of that order. As discussed, we have consistently required PRTC to comply with the provisions of the Puerto Rico Order as a condition of its affiliates' provision of off-island services, and as a result PRTC is obligated to comply with those conditions today. Moreover, no party to this proceeding argues that these conditions should not continue to apply. Under these circumstances, we will not in this Order reexamine our policy of requiring PRTC's compliance with the Puerto Rico Order conditions in order for its affiliates to provide off-island service. Hence, we condition our approval of the transfers of control on PRTC's continued compliance with the conditions set forth in the Puerto Rico Order, to the extent they have not been supplanted by generally applicable regulatory requirements. 33. We will not impose conditions other than those established in the Puerto Rico Order, such as structural safeguards, to prevent GTE from engaging in price squeeze behavior or cross- subsidization. TLD argues that the proposed transaction would give GTE the ability and incentive to engage in a price squeeze that would harm competition in interexchange services, noting in particular that GTE affiliates would control both ends of a large percentage of interexchange calls originating or terminating in Puerto Rico. We have, however, been presented with similar arguments in other merger transactions, and we have consistently declined either to deny approval to transfers of control or to condition our approval on the ground that existing statutory provisions and our existing rules provided insufficient safeguards against price squeeze behavior. Indeed, in the BA-NYNEX Order, which involved a merger of two incumbent LECs that would result in an increase in the percentage of calls originating and terminating in-region, we rejected an identical argument. TLD's further argument that it would be especially injured by a price squeeze because 95 percent of its customers are located in Puerto Rico similarly does not demonstrate that GTE could successfully implement a price squeeze notwithstanding our rules. For the reasons discussed in our previous orders, we therefore dismiss the price squeeze arguments raised in this proceeding. 34. We further conclude that, in light of our existing rules, special separation and reporting requirements are unnecessary to prevent GTE from engaging in cross-subsidization. In particular, our rules require GTE to establish separate affiliates that comply with specific conditions of separation from PRTC for the provision of in-region CMRS and in-region interstate or international interexchange services. In addition, PRTC will be subject to accounting and cost allocation requirements designed to deter discriminatory affiliate transactions and the anticompetitive shifting of costs between price- regulated and competitive services. The record neither suggests that GTE may fail to comply with these requirements nor establishes any special reason why these requirements may be inadequate to prevent anticompetitive activity in this case. We therefore conclude that existing safeguards are sufficient to ensure that GTE will not leverage its monopoly power in the Puerto Rican local exchange market into other markets through cost misallocation or affiliate transactions. d) Potential Anticompetitive Effects on International Markets 35. GTE owns 100 percent of Compa¤ˇa Dominicana de Tel‚fonos C. Por A. (Codetel), the incumbent provider of telecommunications services in the Dominican Republic. It also controls Compa¤ˇa Anonima Nacional Tel‚fonos de Venezuela (CANTV), the incumbent provider in Venezuela. Commenters argue that GTE's affiliations with Codetel and CANTV present a risk of price squeeze behavior by GTE in its provision of international service between Puerto Rico and these two markets, and that safeguards are required to prevent such behavior. 36. TLD calculates that traffic between Puerto Rico and the Dominican Republic accounts for roughly half of international traffic to and from Puerto Rico. It states that the opportunity for a price squeeze by GTE on this route "is at a maximum" because settlement rates paid by U.S. carriers to terminate traffic with GTE's affiliate Codetel "are significantly further above cost than the GTE/PRTC access charges are likely to be." Similar conditions exist on the Puerto Rico-Venezuela route, according to TLD, due to GTE's control of the incumbent carrier CANTV. 37. TLD requests that we require, as a condition of approving the proposed transaction, that settlement rates on the Puerto Rico-Dominican Republic and Puerto Rico-Venezuela routes be reduced to the Commission's international settlement rate benchmark of $0.19 per minute. MCI WorldCom requests that we modify the international section 214 authorization being transferred from PRTA to GTE Holdings to conform with the international authorization previously granted to GTE Telecom, another affiliate of GTE. It notes that GTE Telecom's authorization requires that U.S. carrier settlement rates with Codetel and CANTV be at or below the benchmark settlement rate of $0.19 before GTE Telecom can provide facilities-based service to the Dominican Republic and Venezuela. In addition, KMC requests that GTE not be permitted to provide international services on Puerto Rico routes until its Puerto Rican affiliate complies with the conditions imposed in the Puerto Rico Order and various other conditions. 38. As discussed above, we are conditioning our approval of the transfers of control on PRTC's continued compliance with the conditions imposed in the Puerto Rico Order. In addition, GTE Holdings has specifically committed to ensure fulfillment of two reporting conditions that the International Bureau imposed in May, 1998 on the international section 214 authorization originally granted to PRTA's subsidiary TPRI, for which GTE Holdings here requests a transfer of control. We accept GTE Holdings' commitment to file these reports, and we specifically condition our grant of the international transfer application on GTE Holdings' satisfaction of these reporting conditions. 39. At the same time, we conclude that it is unnecessary to impose any other conditions on the provision of resold international service from Puerto Rico by CTI or any other GTE affiliate in order to prevent a price squeeze. In particular, we deny TLD's request that we require a flash-cut by Codetel and CANTV to the $0.19 benchmark settlement rate as a condition of approving the instant applications for transfer of control. Such a condition conflicts with Commission policy and is not supported by the record. The Commission addressed in its Benchmarks Order the potential for price squeeze behavior by U.S. carriers that make settlement payments to affiliated foreign carriers to terminate U.S. international traffic. In order to prevent predatory price squeeze behavior by U.S. carriers on routes where they have a foreign carrier affiliate, the Benchmarks Order prohibits U.S. carriers from initiating facilities-based service on an affiliated route until the affiliated foreign carrier negotiates a settlement rate with its U.S. carrier correspondents that is in effect and is at or below the relevant benchmark settlement rate for that route. As GTE notes, however, the international section 214 authorization that would become controlled by GTE Holdings is limited to the provision of resold switched services. PRTA's off-island subsidiary TPRI is not authorized to provide facilities-based service to the Dominican Republic and Venezuela. The Commission in the Foreign Participation Order specifically rejected the need to impose a benchmarks condition on an affiliated carrier's provision of resold, switched services to an affiliated market, and nothing in this record establishes any special reason why the resold service at issue here should be treated differently. For this reason, we also reject as unnecessary and unsupported MCI WorldCom's request that we impose a benchmarks condition on the transfer of control over TPRI's international switched resale authorization to GTE Holdings. To the extent a GTE subsidiary seeks to provide facilities-based service between Puerto Rico and the Dominican Republic or Venezuela, that subsidiary will be subject to the Benchmarks Order condition. 40. We also note that, in addition to adopting a benchmark settlement rate condition for affiliated U.S. carriers, the Benchmarks Order directed U.S. carriers generally to negotiate settlement rates not to exceed $0.19 per minute with carriers in the Dominican Republic and Venezuela by January 1, 2001. U.S. carriers have, in fact, filed settlement rate arrangements with Codetel and CANTV that would reduce their respective settlement rates to the $0.19 benchmark rate by the applicable target date of January 1, 2001. 41. As noted above, the international section 214 authorization granted to TPRI will be assigned to CTI prior to consummation of the proposed transfer of control to GTE Holdings. Because CTI's international section 214 authorization is limited to the resale of unaffiliated U.S carriers' switched services, we find that CTI will continue to be eligible for non-dominant carrier regulation on the routes between Puerto Rico and the Dominican Republic and Venezuela. B. Other Public Interest Issues 1. Exercise of De Facto Control over PRTC by GTE Holdings 42. ABETG, which is a voluntary membership organization representing management employees of PRTC and CTI, and the Honorable Carlos Vizcarrondo, a member of the House of Representatives of the Commonwealth of Puerto Rico, contend that GTE Holdings has already assumed de facto control of the radio licenses of PRTC and CTI in violation of section 310(d) of the Communications Act of 1934. ABETG/Vizcarrondo argue that courts have interpreted section 310(d) to prohibit de facto as well as de jure transfers of control without the Commission's authorization. ABETG/Vizcarrondo contend that the Commission and the courts have traditionally examined six factors to determine whether an outside company is exercising de facto control over an entity: 1) whether the licensee has unfettered use of all facilities and equipment; 2) who controls daily operations; 3) who determines and carries out policy decisions, including preparing and filing applications with the Commission; 4) who is in charge of employment, supervision, and dismissal of personnel; 5) who is in charge of the payment of financing obligations, including expenses arising out of operating; and 6) who receives the monies and profits from the operation of the facilities. ABETG/Vizcarrondo further contend that Article V of the Sale Agreement imposes notification and consent obligations on PRTA's two operating subsidiaries for certain activities undertaken before completion of the formal transfer of control that cause GTE Holdings to violate section 310(d). ABETG/Vizcarrondo argue that these conditions clearly preclude the subsidiaries' unfettered use of their facilities, promote undue control by GTE Holdings of the current licensees' daily operations, and affect the subsidiaries' ability to determine and carry out policy decisions and the hiring of employees. ABETG/Vizcarrondo contend that these provisions also constitute prima facie evidence that GTE Holdings has extensively intruded into and exercised control over the licensees' finances, including the expenses arising out of operating. In their Response, ABETG/Vizcarrondo further contend that several recent actions by GTE, including the designation of future PRTC and CTI officers and consultations with employees of those companies, show that GTE has been impermissibly exercising de facto control over PRTC and CTI. 43. GTE Holdings and PRTA rebut the charges raised in the ABETG/Vizcarrondo petition, arguing that the Sale Agreement provisions, taken individually or collectively, do not grant GTE Holdings impermissible control over PRTC and CTI, but are ordinary and reasonable investor protections designed to ensure that PRTC does not depart from its own ordinary business practices without first obtaining the consent of the buyer, which GTE Holdings claims will not unreasonably be withheld. PRTA and GTE Holdings contend that many transactions approved by the Commission contain agreements similar to those cited by ABETG/Vizcarrondo. 44. We believe the provisions cited by ABETG/Vizcarrondo fall within the scope of accepted purchaser safeguards that the Commission has previously found not to constitute a premature transfer. Specifically, the provisions include limitations on the target companies entering into new lines of business, making substantial and material alterations to current contracts or agreements, disposing of material assets, and making substantial outlays of capital. In addition, the activities cited in the ABETG/Vizcarrondo Response show only that GTE Holdings is preparing to assume control of PRTC and CTI once the transaction is completed, not that it controls these companies today. Consequently, we find no violation of section 310(d). 2. Unjust Enrichment 45. Under Section 1.2111(a) of the Commission's rules, "[a]n applicant seeking approval for a transfer of control or assignment . . . of a license within three years of receiving a new license through a competitive bidding process must, together with its application for transfer of control or assignment, file with the Commission's [sic] statement indicating that its license was obtained through competitive bidding." Section 1.2111(a) further requires the applicant to file the associated contracts for sale, option agreements, or other documents disclosing the consideration that the applicant would receive in return for the transfer or assignment of its license. 46. ABETG/Vizcarrondo contend that the applications for transfer of control are flawed as the applicants have not made an appropriate unjust enrichment showing as required by Section 1.2111(a), thereby violating section 308(b) of the Communications Act. ABETG/Vizcarrondo acknowledge that the applicants affirm in their unjust enrichment showing that PRTC's PCS authorizations were obtained through competitive bidding within the past three years, and they submit a copy of the Sale Agreement. However, ABETG/Vizcarrondo contend that the applicants did not include several other contracts in the unjust enrichment showing, even though they are required by section 1.2111(a) and are mentioned on the list of exhibits to the Sale Agreement. GTE Holdings responds that the applicants' submission fully documents the consideration that PRTA will receive for the transfer of its licenses, and that the other agreements properly were not submitted because they do not address this issue. 47. We conclude that PRTA has made a sufficient unjust enrichment showing under section 1.2111(a). Under section 1.2111, a purchaser of an auctioned license pursuant to a set-aside, installment financing, or bidding credits may be required to make a payment to the government as a condition of transferring that license under terms that would otherwise constitute unjust enrichment. PRTA, however, did not acquire its licenses pursuant to a set-aside, installment financing, or bidding credits. Under these circumstances, we find that PRTA's unjust enrichment showing, which consists of a disclosure that PRTA purchased PCS licenses through competitive bidding within the previous three years and submission of the Sale Agreement, is sufficient. 3. Other Matters 48. HIETEL/UIET and ABETG/Vizcarrondo, which together represent PRTC's skilled labor, professional, technical, and managerial employees, raise several additional issues. Specifically, these commenters claim that approval of this transaction would compromise the sovereignty of Puerto Rico and that the people of Puerto Rico were never consulted in the sale of PRTC. It is alleged that the decision to sell PRTC should have been considered at a referendum because under the Constitution of Puerto Rico there are certain subjects on which the Legislative and Executive Branches cannot act without consulting the people. Commenters further argue that the procedures under which the transaction was negotiated and approved violated the Puerto Rico statute authorizing negotiation of the sale, as well as other principles of Puerto Rican law. In addition, it is asserted that a majority of the Puerto Rican people oppose the transaction. Further, the commenters contend that the people of Puerto Rico will experience negative effects from PRTC's transition from a government-owned entity to a private concern. HIETEL/UIET argue that as a government-owned entity, PRTC is required to place the needs of the Puerto Rican community ahead of any profit consideration, whereas GTE Holdings will place the highest priority on obtaining profits. The commenters contend that the people of Puerto Rico have grown "emotionally attached" to and "financially dependent" on PRTC, and that the GTE Holdings-PRTC transfer will disrupt that "attachment." Finally, certain commenters contend that the purchase price is too low. 49. Although we are sympathetic to the concerns of the petitioners, we have no jurisdiction to address the contention that the sovereignty of Puerto Rico would be compromised if the transaction is approved. Nor can we respond to allegations grounded in Puerto Rican law. We recognize the controversial nature of the Puerto Rico Government's decision to sell PRTC, and we understand the deeply held views on both sides of that decision. We believe, however, that questions such as whether the decision to sell PRTC is in the best interest of the people of Puerto Rico and whether the purchase price agreed upon was fair are matters within the domain of the duly constituted authorities of Puerto Rico. V. POTENTIAL PUBLIC INTEREST BENEFITS 50. Having examined the potential public interest harms of the proposed acquisition, we next examine the potential benefits attributable to the transaction. Applicants contend that the acquisition of PRTC by GTE Holdings will promote the public interest by transferring control of a government-owned system to a telecommunications company with extensive experience in providing local services within the United States as well as internationally. Applicants further contend that GTE Holdings' parent company has the financial wherewithal to support PRTC, and that GTE's experience and technical prowess will enable GTE Holdings to effectively manage PRTC and introduce new and advanced services. In this regard, GTE Holdings states that it is committed to PRTC's investing $1 billion over five years to improve telephone service in Puerto Rico. GTE Holdings also offers commitments to improve PRTC's overall service, refrain from raising rates for basic residential service for three years, provide Internet access at discounted rates to educational institutions, and avoid involuntary termination of PRTC employees. 51. In the following paragraphs, we first describe individually each of the potential public interest benefits that the applicants claim will flow from this transaction, as well as any comments regarding those claimed benefits. We then analyze as a whole the extent to which this transaction will promote the public interest by conferring public benefits, and weigh those benefits against any public interest harms. A. Summary of Potential Public Interest Benefits 1. Benefits of Privatization 52. GTE Holdings argues that this transaction will promote longstanding Commission policy objectives in favor of privatization. MCI WorldCom contends that GTE Holdings' claim that "privatization" is among the principal public interest benefits is unfounded because the Government of Puerto Rico had decided to privatize PRTC even before GTE Holdings submitted a bid. GTE Holdings argues that the Commonwealth's willingness to privatize and the success of privatization hinged on the existence of a qualified buyer with a strong commitment to serving the public. 2. GTE Holdings' Commitments 53. Investments. GTE Holdings states that it has specifically committed to invest more than $850 million in facilities and services during the next five years and has projected an investment of more than $300 million of unallocated funds to permit PRTC to react in a timely fashion to market conditions or meet unanticipated expenses, and that this investment will promote upgrades in PRTC's facilities and improvements in services. ABETG/Vizcarrondo and MCI WorldCom dispute GTE Holdings' claim that its arrival into Puerto Rican markets will speed the deployment of upgraded and expanded services. MCI WorldCom argues that GTE Holdings has not described with any particularity the "new and advanced" services that PRTC would provide in Puerto Rico following the acquisition, the benefits that would accrue to customers from these services, or the projected date of their availability. ABETG/Vizcarrondo contend that GTE Holdings' promise (not contained in the Sale Agreement) to invest over $1 billion over the next five years to further improve PRTC's facilities is meaningless in light of two facts: (1) that PRTC's entire network is technologically superior to GTE's entire network, and (2) that over the past 5 years PRTA's total capital expenditures in PRTC's facilities amounted to over $1.6 billion. ABETG/Vizcarrondo further contend that the reason for GTE Holdings' smaller projected investment is that PRTC's primary goal was a commitment to offer the best available technology to the largest number of people, whereas GTE Holdings' goal is generating huge profits. MCI WorldCom claims that GTE Holdings' promise is misleading since most of GTE Holdings' projected expenditures are those which PRTC would otherwise make in the course of normal system growth and maintenance. MCI WorldCom also claims that GTE Holdings has not claimed that PRTC, with $1.2 billion in annual operating revenues, would be unable to fund capital expenditures at the same level as GTE Holdings proposes. 54. Service Quality. GTE Holdings claims that it will apply GTE's expertise to promote improved overall service by improving customer service, network management, and long distance, wireless and internet services. GTE Holdings claims that as an affiliate of the nation's fourth-largest LEC, its capabilities and know-how are a matter of public record, and it lists GTE's accomplishments in the areas of customer service improvements, network management, wireless improvements, long distance, and internet services. GTE Holdings also cites GTE's efforts in tackling the Year 2000 problem. GTE Holdings lists a number of potential post- acquisition projects that it intends to undertake, including microwave network upgrades, ATM network engineering design and optimization, point-of-sale devices, external plant construction plans, intraLATA toll dialing parity implementation, residential terminal equipment evaluation, and central office planning. In response, ABETG/Vizcarrando contend that GTE's history in both United States and foreign markets shows that GTE Holdings will direct its investment only toward improving service for high-end customers, and not for the mass market. MCI WorldCom argues that PRTC could have purchased GTE's management expertise through a management contract without relinquishing PRTA's control. 55. Residential Rates. GTE Holdings pledges that its tariffs for basic residential service will not be raised for three years after the closing date of the transaction, unless PRTC is required to raise rates pursuant to applicable law. GTE Holdings claims that this commitment ensures that local telephone customers will not bear any risk of rate increases in the wake of the transaction. ABETG/Vizcarrondo question whether GTE Holdings can keep this commitment, arguing that the transition from rate of return to price cap regulation will impose a great burden upon federal and local universal service programs since the competitive nature of the access environment in Puerto Rico renders it unlikely that PRTC will be able to raise its common carrier line (CCL) rates to entirely replace the revenue lost from the common line pool. Hence, the company will seek cost recovery in the least competitive intrastate market, which includes local basic services. ABETG argues that Puerto Rican consumers can ill- afford an increase in rates since Puerto Rico has a per capita income approximately one-third that of the U.S. mainland and an unemployment rate of over 13%. ABETG argues that a rate increase would hamper efforts to improve the household penetration rate for telephone service, which currently stands at 76% of Puerto Rican households as compared to over 95% penetration in the U.S. mainland. 56. Internet Access. GTE Holdings claims that its acquisition of PRTC will facilitate the availability of Internet services to educational institutions across Puerto Rico. GTE Holdings claims that from the closing date of the transaction until the fifth anniversary of this order, PRTC will provide non-profit secondary and post-secondary educational institutions in Puerto Rico Internet access at a 35% discount, thus making Internet availability more affordable and accessible for the Commonwealth's schools. 57. Employee Commitments. Finally, GTE Holdings, claiming that it recognizes the importance of stability in PRTC's employee base to the welfare of Puerto Rico's economy, has pledged not to make any involuntary terminations, except for cause, of PRTC employees employed on May 27, 1998. GTE Holdings contends that this commitment not only will provide stability for PRTC's employees, but also will benefit the Puerto Rican economy generally. ABETG/Vizcarrondo and HIETEL/UIET argue that this commitment is inadequate to protect the interests of PRTC's employees. B. Analysis 58. We agree with APCT that applicants cannot meet their burden of showing that this transaction will benefit the public interest by simply reciting a list of vague, speculative claims. We determine, however, that these applicants have demonstrated that this transfer will result in significant acquisition-specific benefits. In particular, we find that telecommunications consumers and the people of Puerto Rico will benefit from private ownership of the island's principal local exchange service provider by a well-financed and experienced company. Although we note that the government of Puerto Rico had decided to pursue privatization even before GTE Holdings submitted a bid, completion of the privatization process depends on reaching agreement with a qualified buyer, obtaining necessary approvals, and closing the transaction. We also find that GTE Holdings' commitments to invest substantial sums in infrastructure improvements and improve service quality are sufficiently detailed and credible. We believe these improvements are specifically attributable to GTE Holdings' purchase of PRTC because the record does not demonstrate that such upgrades would have occurred absent the acquisition. Finally, we believe the public could benefit from GTE Holdings' commitments to maintain residential rates and provide Internet access to educational institutions, as well as GTE Holdings' commitments to PRTC's employees. 59. In support of our conclusion, we further note that this transaction has been approved by the legislature and Governor of the Commonwealth of Puerto Rico, the duly elected representatives of the people of Puerto Rico. Finally, we need not ascertain the exact magnitude of the benefits of the proposed acquisition because "where, as here, potential harms are unlikely, the Applicants' demonstration of potential benefits need not be as certain." VI. MISCELLANEOUS ISSUES A. Request for Hearing 60. After the close of the period for filing formal comments, ABETG/Vizcarrondo requested that the Commission conduct one or more public hearings in Puerto Rico concerning the proposed transaction. They argue that the majority of the Puerto Rican people oppose the transaction, and that a public hearing is necessary because the Commission's processes are unknown to the Puerto Rican people, English is a hardship for many, and many view the instant proceeding as "pro forma." 61. Although we recognize the importance within Puerto Rico of the Government's decision to sell control of PRTC, we do not believe that the public hearing requested is warranted under the circumstances of this case. Section 309(e) of the Act specifies that in a licensing proceeding, "[i]f . . . a substantial and material question of fact is presented or the Commission for any reason is unable to make the finding [of public convenience and necessity] . . . , it shall formally designate the application for [a] hearing." The hearing requirement therefore is triggered in one of two ways. First, a party may raise factual questions in its petition to deny. Second, the Commission may lack sufficient information on which to make an informed judgment. 62. We do not believe that the request here comes close to meeting either of these two standards. First, the issues raised in the request and the record here do not reflect disputes over material facts, but focus on issues concerning the competitive impact of the merger and the public interest. As the D.C. Circuit has articulated, these types of issues "'manifestly do not' require a live hearing." Second, we conclude that the voluminous record here provides us with sufficient evidence to determine, without conducting an evidentiary hearing, that the Applicants' request serves the public interest, convenience, and necessity. The record before us includes not only formal comments, but also a large number of informal comments in the form of letters, many from individual citizens in Puerto Rico, that raise a wide range of issues concerning this transaction. The request for hearing does not identify any issues or information relevant to our review under the Communications Act that is likely to come out at a public hearing that has not already been presented to us in this proceeding and addressed in this Order. We note that we routinely decide applications of this kind without conducting public hearings. 63. We are well aware that many Puerto Ricans do not support their Government's decision to relinquish control over PRTC. We do not believe, however, that this political opposition requires us to schedule a public hearing. As we have stated, we do not view it as within our province under the Communications Act to second guess a decision made by the elected representatives of the people of Puerto Rico. B. Common Ownership 64. Applicants request that, pursuant to section 212 of the Communications Act and Part 62 of the Commission's rules, the Commission find and declare that, upon consummation of the Sale Agreement, GTE and PRTC and their subsidiaries will be "commonly owned carriers" as that term is defined in the Commission's rules. Under section 212, a person generally may not hold the position of officer or director of more than one carrier subject to the Act unless authorized by the Commission upon a showing that neither public nor private interests will be affected thereby. A person may, however, upon due finding by the Commission, hold interlocking officerships or directorships in "two or more carriers, one of which directly or indirectly owns more than 50 percent of the stock of the other carrier or carriers, or 50 percent or more of whose stock is owned directly or indirectly by the same person." 65. GTE Holdings asserts that after the merger, GTE Holdings and PRTC will be under common ownership because GTE Holdings will temporarily control 51 percent plus one share of TELPRI's stock, and even after some of this stock is transferred to other parties, GTE Holdings will continue to exercise de jure and de facto control over PRTC. TLD contends, however, that the statutory and regulatory definition of common ownership creates a bright-line test that requires greater than 50 percent ownership, and has nothing to do with de jure or de facto control. TLD further contends that the prohibition on interlocking directorates in section 212 of the Act was "'designed to guard against anticompetitive behavior arising from the interlocking of companies through sharing of officers or directors.'" TLD argues that when carriers are commonly owned, the Commission treats them as a single entity that cannot engage in collusive behavior and that is exempt from the prohibition on interlocking directorates. TLD argues that this treatment is inappropriate when the 50 percent test is not satisfied. 66. GTE Holdings contends in reply that its initial commitment to acquire 51 percent plus one share of TELPRI satisfies the specific benchmark in section 212 for a finding of common ownership, even though some of this stock may later be purchased by other investors. Furthermore, GTE Holdings contends that at the end of the transaction it will clearly retain de jure and de facto control of PRTC. Specifically, it will be entitled to elect a majority of TELPRI's directors and thus to name all of its senior officers, and it intends to name the chief executive officer of TELPRI. Additionally, GTE Holdings claims that a post-transaction shareholder agreement will give it added control over the governance and operations of PRTC. GTE Holdings contends that the Commission has previously held that control or common ownership may exist even when an entity holds less than 50 percent of a carrier's stock, and that the touchstone of control is the ability to determine a company's policies and conduct its affairs. GTE Holdings maintains that at the close of the transaction, it will clearly meet this test. GTE Holdings contends that both the language and the legislative history of section 212 support this interpretation. 67. On the record before us, we cannot conclude that GTE and GTE Holdings, on the one hand, and TELPRI, PRTC, and CTI, on the other hand, will be under common ownership after the acquisition within the meaning of section 212 and our implementing rules. Although GTE Holdings will briefly own more than 50 percent of TELPRI's stock, the sale documents contemplate that its ownership share will be less than 50 percent at the end of the transaction. Although GTE Holdings argues that section 212 does not require ownership to remain over 50 percent, that interpretation not only would render the statute meaningless, but is plainly inconsistent with our rules. Moreover, the plain language of the statute and regulations requires over 50 percent direct, indirect, or common ownership, regardless of de jure or de facto control. In this regard, GTE Holdings cites ample authority that one party may control another without owning a majority of its stock, but these cases are not on point because they do not address the express majority ownership requirement of section 212. We therefore decline to issue the finding of common ownership that Applicants request. We note, however, that the Commission has the power to authorize interlocking officerships and directorates upon a showing that neither public nor private interests will be adversely affected thereby. In the event that prospective officers or directors of the companies involved in this transaction file applications under section 62.11, we delegate to the Wireless Telecommunications Bureau authority to decide such applications, and we direct the Bureau to resolve such applications promptly. VII. CONCLUSION 68. After considering all of the issues raised by commenters and parties opposing Applicants' requests, we conclude that the proposed acquisition by GTE Holdings of PRTC is unlikely to produce any meaningful public interest harms. We also find that it is likely to produce at least some tangible public interest benefits. Accordingly, subject to the conditions in the following paragraph, we grant Applicants' requests that control over the licenses and authorization at issue currently held by PRTC, CTI, and TPRI be transferred to GTE Holdings in connection with their transaction. VIII. ORDERING CLAUSES 69. Accordingly, having reviewed the applications and the record in this matter, IT IS ORDERED, pursuant to sections 4(i), 4(j), 214(a), 214(c), 309, and 310(d) of the Communications Act of 1934, as amended, 47 U.S.C.  154(i), 154(j), 214(a), 214(c), 309, and 310(d), that the specific applications filed by Puerto Rico Telephone Authority (PRTA), Puerto Rico Telephone Company (PRTC), and GTE Holdings (Puerto Rico) LLC (GTE Holdings) in the above-captioned proceeding ARE GRANTED, conditioned upon GTE Holdings' compliance with the conditions established in Telef˘nica de Puerto Rico, Inc., Order, Authorization and Certificate, 13 FCC Rcd 12344 (Int. Bur. 1998), and upon PRTC's continued compliance with the conditions imposed in Inquiry into Policies to be Followed in the Authorization of Common Carrier Facilities to Provide Telecommunications Service off the Island of Puerto Rico, Report and Order, 2 FCC Rcd. 6600 (1987), as discussed in  32 and note 80 of this Order. 70. IT IS FURTHER ORDERED, pursuant to sections 4(i), 4(j), 214(a), 214(c), 309, and 310(d) of the Communications Act of 1934, as amended, 47 U.S.C.  154(i), 154(j), 214(a), 214(c), 309, and 310(d), that the above grant shall include authority for GTE Holdings to acquire control of: a) any authorization issued to PRTC and its affiliates that are the subject of this transaction during the Commission's consideration of the transfer of control applications and the period required for consummation of the transaction following approval; b) construction permits held by licensees involved in this transfer that mature into licenses after closing and that may have been omitted from the transfer of control applications; and c) applications that will have been filed by such licensees and that are pending at the time of consummation of the proposed transfer of control. 71. IT IS FURTHER ORDERED that all references to GTE Holdings, PRTA, and PRTC in this Order shall also refer to their respective officers, directors and employees, as well as to any affiliated companies and their officers, directors and employees, to the extent consistent with the context of the reference. 72. IT IS FURTHER ORDERED, pursuant to sections 4(i), 4(j), 214(a), 214(c), 309, and 310(d) of the Communications Act of 1934, as amended, 47 U.S.C.  154(i), 154(j), 214(a), 214(c), 309, 310(d), that the Petition of Asociacion Bonafide de Empleados Telef˘nicos Gerenciales (Bonafide Association of Puerto Rico Telephone Company Managerial Employees) and the Honorable Carlos Vizcarrondo, Member of the House of Representatives of the Commonwealth of Puerto Rico, to Deny the Grant of the Radio License Applications IS DENIED. 73. IT IS FURTHER ORDERED, pursuant to sections 4(i), 4(j), 214(a), 214(c), 309, and 310(d) of the Communications Act of 1934, as amended, 47 U.S.C.  154(i), 154(j), 214(a), 214(c), 309, and 310(d), that the Petition of Hermandad Independiente de Empleados Telef˘nicos and the Uni˘n Independiente de Empleados Telef˘nicos to Deny the Radio License Applications IS DENIED. 74. IT IS FURTHER ORDERED, pursuant to sections 4(i), 4(j), 214(a), 214(c), 309, and 310(d) of the Communications Act of 1934, as amended, 47 U.S.C.  154(i), 154(j), 214(a), 214(c), 309, and 310(d), that the Petition of the Asociacion de Proveedores Competitivos de Telecomunicaciones, Inc. to Condition the Grant of the Radio License Applications IS DENIED. 75. IT IS FURTHER ORDERED, pursuant to sections 4(i), 4(j), 214(a), 214(c), 309, and 310(d) of the Communications Act of 1934, as amended, 47 U.S.C.  154(i), 154(j), 214(a), 214(c), 309, and 310(d), that the Petition of KMC Telecom, Inc. to Deny, or in the Alternative to Condition the Grant of, the Radio License Applications IS DENIED. 76. IT IS FURTHER ORDERED, pursuant to sections 4(i), 4(j), 214(a), 214(c), 309, and 310(d) of the Communications Act of 1934, as amended, 47 U.S.C.  154(i), 154(j), 214(a), 214(c), 309, and 310(d), that the Petition of Telef˘nica Larga Distancia de Puerto Rico, Inc. to Condition the Grant of the Radio License Applications IS DENIED. 77. IT IS FURTHER ORDERED, pursuant to sections 4(i), 4(j), and 309(d) of the Communications Act of 1934, as amended, 47 U.S.C.  154(i), 154(j), and 309(d), that the Petition of Asociacion Bonafide de Empleados Telef˘nicos Gerenciales (Bonafide Association of Puerto Rico Telephone Company Managerial Employees) and the Honorable Carlos Vizcarrondo, Member of the House of Representatives of the Commonwealth of Puerto Rico for Public Hearings IS DENIED. 78. IT IS FURTHER ORDERED, pursuant to sections 4(i), 4(j), and 212 of the Communications Act of 1934, as amended, 47 U.S.C.  154(i), 154(j), and 212, and section 62.12 of the Commission's rules, 47 C.F.R.  62.12, that the request of GTE Holdings for a declaration of common ownership between GTE Holdings and its affiliates, on the one hand, and PRTC and its affiliates, on the other hand, IS DENIED. 79. IT IS FURTHER ORDERED that this Memorandum Opinion and Order SHALL BE EFFECTIVE upon release in accordance with 47 C.F.R.  1.103. FEDERAL COMMUNICATIONS COMMISSION Magalie Roman Salas Secretary APPENDIX A List of Licenses Part 22 - Broadband Cellular Service File No. Licensee Call Sign Market No. 03373-CL-TC-98 Puerto Rico Telephone Company KNKA384 0091B 03374-CL-TC-98 Puerto Rico Telephone Company KNKA399 0147B 03375-CL-TC-98 Puerto Rico Telephone Company KNKA460 0202B 03376-CL-TC-98 Puerto Rico Telephone Company KNKA464 0204B 03377-CL-TC-98 Puerto Rico Telephone Company KNKA471 0169B 03378-CL-TC-98 Puerto Rico Telephone Company KNKN371 0725B 03379-CL-TC-98 Puerto Rico Telephone Company KNKN397 0726B 03380-CL-TC-98 Puerto Rico Telephone Company KNKN414 0727B 03381-CL-TC-98 Puerto Rico Telephone Company KNKN486 0728B 03382-CL-TC-98 Puerto Rico Telephone Company KNKN505 0723B 03383-CL-TC-98 Puerto Rico Telephone Company KNKN532 0724B 03384-CL-TC-98 Puerto Rico Telephone Company KNKN957 0729B Part 24 - Personal Communications Service ("PCS") File No. Licensee Call Sign Market No. 50516-CW-TC-98 Puerto Rico Telephone Company KNLG211 B488 - Block E 50517-CW-TC-98 Puerto Rico Telephone Company KNLH423 B489 - Block D Part 22 - Narrowband Paging Service File No. Licensee Call Sign 0000001430 Puerto Rico Telephone Company KKB724, KNKC341, KNKC869 & KNLW497 Part 22 - Narrowband Rural Radiotelephone Service File No. Licensee Call Sign 22760-CR-TC-98 Puerto Rico Telephone Company WAF797 22761-CR-TC-98 Puerto Rico Telephone Company WBB821, WBB823 & WOG21 Part 101 - Common Carrier Point-to-Point Microwave Service File No. Licensee Call Sign 9713708 Puerto Rico Telephone Company WBB286 (1 of 63) Part 101 - Digital Electronic Message Service ("DEMS") File No. Licensee Call Sign 9713707 Puerto Rico Telephone Company WHB418 (1 of 5) Part 90 - Land Mobile Service Telephone Maintenance and Private Carrier Paging File No. Licensee Call Sign 910998 Puerto Rico Telephone Company KCZ959 (1 of 4) Part 25 - Fixed Satellite Service File No. Licensee Call Sign 1330-DSE-TC-98 Puerto Rico Telephone Company E970101 SECTION 214 APPLICATION The following application for consent to transfer of control of CTI, a subsidiary of PRTA to GTE Holdings. File No. ITC-T/C-19980902-00605 Celulares Telef˘nica, Inc. APPENDIX B List of Formal Pleadings Applications July 24, 1998 Applications of GTE Holdings (Puerto Rico) LLC for Transfers of Control of the Radio Licenses Held by the Puerto Rico Telephone Company ("Radio License Applications") September 2, 1998 Application of GTE Holdings (Puerto Rico) LLC and Puerto Rico Telephone Authority for Transfer of Control of International Section 214 Authorization ("Section 214 Application") (collectively, the "Applications") Comments and Petitions to Deny or Condition October 1, 1998 Petition of the Asociacion Bonafide de Empleados Telef˘nicos Gerenciales (Bonafide Association of Puerto Rico Telephone Company Managerial Employees) and the Honorable Carlos Vizcarrondo, Member of the House of Representatives of the Commonwealth of Puerto Rico, to Deny the Grant of the Radio License Applications ("ABETG/Vizcarrondo Petition") Petition of Hermandad Independiente de Empleados Telef˘nicos and the Uni˘n Independiente de Empleados Telef˘nicos to Deny the Applications ("HIETEL/UIET Petition") October 2, 1998 Comments of Sprint Communications Company L.P. on the Radio License Applications ("Sprint Comments") October 9, 1998 Petition of the Asociacion de Proveedores Competitivos de Telecomunicaciones, Inc. to Condition the Grant of the Applications ("APCT Petition") Petition of KMC Telecom, Inc. to Deny, or in the Alternative to Condition the Grant of, the Radio License Applications ("KMC Petition") Comments of MCI WorldCom, Inc. on the Applications ("MCI WorldCom Comments") Comments of the Personal Communications Industry Association on the Applications ("PCIA Comments") Petition of Telef˘nica Larga Distancia de Puerto Rico, Inc. to Condition the Grant of the Applications ("TLD Petition") Reply Comments and Oppositions to Petitions October 20, 1998 Reply Comments of APCT ("APCT Reply Comments") Consolidated Opposition filed by GTE Corporation and GTE Holdings (Puerto Rico) LLC to the Petitions to Deny, Petitions to Condition, and Comments ("GTE Consolidated Opposition") Reply Comments of Puerto Rico Telephone Authority and Opposition of Puerto Rico Telephone Authority to the Petitions ("PRTA Reply Comments") (erratum received November 5, 1998) Responses to Reply Comments and Responses to Oppositions to Petitions October 30, 1998 Response of KMC to the GTE Consolidated Opposition and to the PRTA Reply Comments, ("KMC Response") December 2, 1998 Response of ABETG and the Honorable Carlos Vizcarrondo to the Reply Comments and to the GTE Consolidated Opposition ("ABETG/Vizcarrondo Response") December 16, 1998 Response of PRTA to the ABETG/Vizcarrondo Response ("PRTA Response") Petition for Public Hearings December 1, 1998 Petition of ABETG and the Honorable Carlos Vizcarrondo for Public Hearings ("ABETG/Vizcarrondo Public Hearing Petition") December 15, 1998 Reply of GTE to ABETG/Vizcarrondo Public Hearing Petition ("GTE Public Hearing Reply")