[ Text | Word 97 ]

AOL/Time Warner En Banc Hearing, July 27, 2000
Opening Statement of Commissioner Harold W. Furchtgott-Roth

The parties before us today have submitted license transfer applications to the Commission. Unlike thousands of other license transfer applications that this Agency reviews each year, this one has been singled out for heightened scrutiny, and now, for the first time ever, a public en banc hearing. I cannot support the Commission's review of the merging parties beyond their license transfers for three reasons. First, although the Commission purports to review the merger of AOL and Time Warner, it in fact does not have the statutory authority to do so. Second, despite this unprecedented public hearing, the Commission's process lacks transparency. And third, today's hearing serves no purpose other than to provide a forum for criticism of the merger and for the parties, in turn, to plead for the Commission's approval.


As I have stated before, the FCC does not possess statutory authority under the Communications Act to review the mergers or acquisitions of communications companies. Rather, the licensing provisions of the Act require the Commission to review applications for license transfers. Specifically, the Act merely directs the FCC to determine whether the transfer of licenses serves the public interest, convenience and necessity. For tens of thousands of license transfers annually, that review is perfunctory. Nothing in the Act grants the Commission jurisdiction to approve or disapprove mergers that consequently involve the transfer of licenses.

To be sure, the transfer of licenses is an important part of any merger. But it is simply not the same thing. A merger is a much larger and more complicated set of events than the transfer of FCC permits. In includes, to name but a few things, the passage of legal title for many assets, corporate restructuring, stock swaps, and the consolidation of corporate headquarters and personnel. Clearly then, asking whether a particular license transfer would serve the public interest, convenience, and necessity entails a significantly more limited focus than contemplating the industry-wide effects of a merger between the transferee and the transferor.

Our inquiry should be limited to whether the proposed transferee has and will comply with applicable Commission regulations. Our inquiry should not consider, for example, how the combination of the two companies might affect other competitors in the industry. That is the responsibility of the federal antitrust agencies, the Department of Justice and the Federal Trade Commission. Yet, as with past prominent companies who have filed for license transfers as a consequence of a merger, the Commission has used the highly visible nature of the parties here today as an excuse to expand the Agency's jurisdiction to include merger review.

The Commission seems to believe that any matter or practice that occurs as the result of the merger is within its jurisdiction. While many seem to accept this theory without much question, its logic leads to absurd results. Surely not even the staunchest advocate of Commission authority would claim power to review AOL/Time Warner's plans for new corporate headquarters at Columbus Circle. But this event is an important part of the merger, and is no more related to the use of the radio licenses at issue as the other issues that the Commission seems intent on reviewing. At least, I have not heard any one draw a principled distinction among aspects of the merger - if that is the subject of review, not the license transfers - that would avoid this sort of ridiculous outcome.


The Commission's review of license transfers and in conjunction, its unauthorized review of mergers, lacks transparency and consistency. The Commission annually approves thousands of license transfers without any scrutiny or comment, while others receive minimal review, and a select few are subjected to intense regulatory scrutiny. Today, unfortunately, AOL and Time Warner are the first applicants required to expend time and money preparing for a public hearing before the full Commission.

This hearing illustrates the highly disparate levels of review given to applications that arise under identical statutory provisions. This is problematic because merging parties have no way of anticipating the scale of FCC review that will apply to them. Regulated entities have little basis for knowing, ex ante, how their applications will be treated, either procedurally or substantively. The Commission's review of license transfers should not be arbitrary and discriminatory, but rather, uniform and predictable.


Finally, I would like to emphasize that today's hearing is an entirely novel and unprecedented approach to the review of license transfers. As far as I can tell, there is no justification for this event other than the fact that AOL and Time Warner are large and highly visible companies in the communications industry. In all proceedings, the Commission notifies the public and receives written comments. This proceeding has been no different. We have received abundant comments from the public, including from most of the witnesses today.

And this proceeding has dragged on for six months, far too long. Mr. Chairman, you could end this at our next public meeting, next week. You could invoke Section 5(d) of the Communications Act with the objective, of rendering a final decision within three months from the date of filing in all original application, renewal, and transfer cases.

This hearing does not add to our knowledge. It is a public spectacle. In your remarks, I hope that each witness will answer the following questions:

What specific authority does this Commission have to consider the issues you raise?

If the answer is the "public interest" standard under Title III, how can this Commission apply a different public interest standard for AOL and Time Warner than it applies for any of the tens of thousands of other identical license transfer cases?

If your issue is not the public interest standard, why should the issue not be addressed through general rulemaking that would apply to the entire industry rather than to one firm?

Are the issues raised being reviewed by another federal agency with clearer statutory authority?