November 18, 1999
| Re: | AT&T Corp., British Telecommunications, plc, VLT Co. L.L.C., Violet License Co. LLC, and TNV [Bahamas] Limited Applications for Grant of Section 214 Authority, Modification of Authorizations and Assignment of Licenses in Connection with the Proposed Joint Venture Between AT&T Corp. and British Telecommunications, plc, IB Docket No. 98-212. |
I wholeheartedly endorse the Commission's ultimate decision to permit the AT&T/BT joint venture to go forward. It has been almost a year since the parties filed their applications, and our regulatory approval was long overdue.(1) Nonetheless, I write separately to express my continuing concern about the nature of the Commission's approach to mergers, and now sadly, joint ventures as well.
I. The Commission's License Transfer Review Process
As detailed elsewhere, I believe the Commission's license transfer review process is broken. With each transaction, the dangerous legacy of our policies becomes more clearly visible:(2)
Today's decision unfortunately adds a few more straws to the strained camel's back.
Once again the Commission has strayed from the issues raised by the actual transfer of these licenses. The Commission simply does not possess statutory authority under the Communications Act to review, writ large, the joint venture of AT&T and BT. Rather, "we are required to determine whether the transfer of station licenses serves the public interest, convenience and necessity and whether the transfer of authorizations for international resale serves the public convenience and necessity."(3) Nothing more is desirable or permissible. Issues unrelated to the transfer itself such as the API calls and programs described in this Order are simply, in my view, beyond the scope of our review.(4)
I also continue to be concerned that much of our review process is duplicative of the work of the Justice Department's Antitrust Division. The experience and expertise of the Justice Department are best suited to addressing any antitrust issues that may arise in these transactions. Moreover, DOJ uniformly enforces the antitrust laws across all sectors of the economy. Ultimately, I fear that our "heightened" antitrust review may actually penalize the communications industry based purely on their unfortunate fate of being subject to our license transfer jurisdiction.
It also seems, at best, odd that the agency must condition a license transfer on compliance with our existing rules - as if they were somehow discretionary for other licensees. For example, in its Order the Commission notes that: "Consistent with our rules, VLT and TLTD must file quarterly reports on provisioning and maintenance procured from BT directly or indirectly, including through Concert."(5) This is a reasonable enough conclusion, and well within our legitimate authority to review transactions to ensure compliance with our rules.(6) Such authority justifiably extends to clarifying whether our rules apply in the given circumstances of a transaction. However, today's Order does not stop there. Instead the Order adds a curious conclusion: "We nonetheless adopt AT&T/BTs' voluntary commitment to do so as a condition of this Order."(7) Our rules are binding on all licensees with equal force. Yet the Commission's transfer review process has now elevated the sanctity of a voluntary commitment above the requirements of our rules - even when each leads to an identical result. This process seems to place a discriminatory and heightened burden on AT&T/BT. This is particularly disconcerting when the "voluntary commitment" is potentially insulated from judicial review.(8)
Once again, I urge my fellow Commissioners to back away from the use of specific review proceedings to achieve general public policy goals. We have extensive authority to regulate telecommunications, there is no basis or need to expand that authority by using the ad hoc license transfer process to achieve our goals through the back door.
II. The Role of Other Governmental Agencies
To the Commission's credit, much of the delay involved in reaching today's decision was directly attributable to negotiations between the private parties (AT&T, BT, TNV, VLT and Violet) and the Department of Defense, the Department of Justice and the Federal Bureau of Investigation. Today's decision incorporates by reference the agreement between the private parties and these government agencies. A number of elements of this process are troubling.
First, under Section 214(b), the Commission is instructed to notify "the Secretary of Defense, the Secretary of State (with respect to such applications involving service to foreign points) and the Governor of each State in which such line is proposed to be. . . acquired. . . with the right of those notified to be heard. . . . "(9) Thus the Commission must take into account the views of these parties in assessing any proposed licensing action. This approach is consistent with the GATS, which provides for national security exceptions under Articles XIV bis. Similarly, in our Foreign Participation Order we assured the parties that we would "consider any such legitimate concerns [regarding national security or law enforcement] as we undertake our own independent analyses of whether grant of a particular authorization is in the public interest."(10) Thus our sole obligation is to consider these parties' input in our independent assessment of the transfer.(11)
Yet here we have gone far beyond that. While we do have comments from these parties on file, we delayed today's Order as we awaited the conclusion of private negotiations between the parties and these governmental agencies. Their ultimate agreement has now been incorporated into our Order. I am concerned that other federal agencies not add insult to the injury that our current "review" process imposes on licensees. The Commission's sanctioning of this agreement with other agencies creates another set of "voluntary" conditions that licensees have little choice but to accept, if they wish to transfer their licenses in any reasonable period of time. As I have noted elsewhere, the involuntary nature of these obligations is compounded by the practical inability of the parties to obtain meaningful judicial review of our determinations in a timeframe that preserves the viability of the underlying transaction. These are not voluntary conditions, they are the Commission's (and now other government agencies') price for doing business through license modifications. Such a process vastly exceeds the role of these other agencies as envisioned by Section 214.
Second, I am disturbed by the seeming arbitrariness of this side agreement between the private parties and the Department of Defense, the Department of Justice and the Federal Bureau of Investigation. While I do not question the underlying merits of the side agreement - they may well be necessary and wholly justified - it seems difficult to tie these requirements to the license transfers at issue here. Most significantly, why is this joint venture singled out for these requirements? Would it not be equally desirable to have all similarly situated carriers subject to these mandates? Does not this process elevate the relative happenstance of this joint venture into the sole variable that determines which carriers are subject to these significant law enforcement and security obligations set forth in the agreement? In other words, it seems unfair that a large international carrier -- that built its business through means other than mergers or joint ventures involving FCC licenses -- would never face these requirements. This side agreement ultimately penalizes a business development plan.
The Order seems to recognize this peril:
We note that the Agreement reflects a unique situation, and contains certain provisions that, if broadly applied, would have significant consequences for the telecommunications industry. These provisions, if viewed as precedent for other service providers and potential investors, would warrant further inquiry on our part. Therefore, this agreement does not establish precedent for future cases.(12)
The Order does not identify what is "unique" about this "situation," except that AT&T and BT had the misfortune to have a joint venture pending at this agency in late 1999. But the general observation of the passage is, at best, distressing. The majority opinion essentially concedes that the application of the terms of the "voluntary agreement" to the industry as a whole may have significant adverse consequences that would warrant our review. We cannot have it both ways - we use our authority to impose these onerous obligations, while distancing ourselves from the outcome.
In the end, if the parties want to negotiate a true voluntary agreement, they can do so on their own time without the cloud of our review process hanging over their heads. Indeed, I would applaud such a voluntary industry-wide effort to address national security and law enforcement issues without Commission involvement.(13) The troubling part of this "deal" is not the substance, but the Commission's role in sanctioning it. Despite the Order's caveats, the Commission's actions speak louder than its words. The agency has held up this transaction pending the agreement and incorporated its terms without so much as a change in punctuation.
Third, I note that our statutory notice obligation does not run to all of the governmental parties to this agreement - but only to the Secretary of Defense. Thus, it seems possible, if not likely, that the other governmental parties to whom notice is required (the Governors and the State Department) will soon understand that our merger review process is an opportunity for them to achieve their policy wish lists through "voluntary agreements" similar to the one we sanction here. Which Executive Branch objections or policy concerns would form the basis for a decision to delay our approval? Which governmental entities warrant such deference and which do not? Is there any limit on the germaneness of such side agreements? Could a state governor reach a voluntary agreement with a joint venture party to construct a new cable landing station in her state in exchange for the removal of her objections to the transfer? Would we delay the transaction pending such an agreement? My concern is that there seems to be no legally compelling way to distinguish the wishful Governor from the governmental parties in this case.
Finally, as I have discussed elsewhere, this agency is on dangerous ground when it purports not only to enforce our decision, but also potentially to play a role in the enforcement of other agency's regulatory determinations. Here the side agreement calls for the parties to seek judicial enforcement of the agreement or "(1) the DOJ, the FBI or the DOD may bring an action for relief (including equitable relief) before the FCC, and (2) the Affiliates and the Company may petition the FCC for a declaratory ruling with respect to the Affiliates' or the Company's obligations under this agreement."(14) As I stated in AT&T/TCI, "we have no jurisdiction to enforce rules not promulgated under the Communications Act. . . and we cannot and should not do the enforcement work of others."(15) Ultimately, this agency runs far afield when it conditions a license transfer on compliance with another's agency's agreement, putting ourselves in the position of potential enforcer of non-FCC requirements.(16) Instead of this approach, it would seem far more manageable if we were to note in our decision that the initial objections of these other governmental parties had been withdrawn based on a private side agreement. It seems unnecessary to incorporate that agreement into our approval or to condition the license on compliance with the third party contract.(17) Only when the Commission itself passed on these national security issues would any type of condition be appropriate.
*****
I understand and truly believe that the Commission and the other government agencies involved act on these transactions based on a sincere desire to serve the public interest. Many of the ends achieved by merger conditions and voluntary agreements are worthwhile. But the ease and largely standardless nature of the current license transfer process simply cannot be an appropriate vehicle. It denies parties their rights to judicial review; hides the ball from the public during the "negotiations" process; applies these "good" rules to only certain companies; subverts the rulemaking process by removing obligations from the code and placing them in a bevy of adjudicatory determinations; delays business transactions; and consumes immense resources from all parties. As my parents used to say: "There are no shortcuts in life." We all undermine the process and ultimately many of our common goals when we attempt to achieve our goals via shortcuts. I urge other agencies and my colleagues to join me in taking the necessarily more difficult and longer path to achieving these goals.
1 See Applications and Public Interest Statement in Support of the Global Venture of AT&T Corp. and British Telecommunications, plc (AT&T/BT Application)(Nov. 10, 1998).
2 See e.g. Separate Statements of Commissioner Harold Furchtgott-Roth in: Applications for Consent to the Transfer of Control of Licenses and Section 214 Authorizations from Tele-Communications, Inc., Transferor, AT&T Corp., Transferee, CS Docket No. 98-178 (Feb. 18, 1999); Proposed SBC/Ameritech Conditions, (June 30, 1999); Applications of Ameritech Corp., Transferor, and SBC Communications, Inc., Transferee, For Consent to Transfer Control of Corporations Holding Commission Licenses and Lines Pursuant to Sections 214 and 310(d) of the Communications Act and Parts 5, 22, 24, 25, 63, 90, 95, and 101 of the Commission's Rules, CC Docket 98-141 (October 6, 1999); Application of Airtouch Communications Inc. Transferor and Vodafone Group PLC, Transferee for consent to Transfer Control of Licenses and Authorizations, WTB DA 99-1200 (June 21, 1999); Joint Application for a License to Land and Operate a Submarine Cable Network Between the United States and Japan, FCC 99-167 (July 9, 1999). See also Testimony of Commissioner Harold W. Furchtgott-Roth before the U.S. House of Representatives Committee on the Judiciary, Subcommittee on Commercial and Administrative Law Oversight Hearing, May 25, 1999.
3 See AT&T/TCI; As discussed in my separate statement regarding the Japan-U.S. Cable Network consortium, I believe we lack jurisdiction to receive, review or grant applications for submarine cable landing/operating licenses.
4 Order ¶ ¶ 54-61.
5 Order ¶ 85; see also Order ¶ 93.
6 As I have stated elsewhere, ensuring compliance with our rules is an appropriate part of our license transfer review process. See Separate Statement of Commissioner Harold Furchtgott-Roth, in Re: Applications for Consent to the Transfer and Control of Licenses and Section 214 Authorization from Tele-Communications, Inc., Transferor, to AT&T Corp., Transferee, CS Docket No. 98-178 (Feb. 18, 1999).
7 Order ¶ 85.
8 Also strange is the Commission's decision to invite enforcement of certain requirements. See Order ¶ 70 (regarding idled half-circuits). Presumably consistent with a "policy [that] disfavors allowing capacity to remain idle," we would "entertain a petition to require the sale of those idled half-circuits at market rates" from any party regarding any carrier. Approval of a joint venture should not leave the impression that we will engage in discriminatory enforcement.
9 In an apparent violation of Section 214(b), the Commission neither provided notice to the requisite governors nor did it direct the parties to do so.
10 Rules and Policies on Foreign Participation in the U.S. Telecommunications Market, IB Docket No. 97-142, ¶ 62 (Nov. 26, 1997); Ironically, "we emphasize[d] . . . that we expect national security, law enforcement, foreign policy and trade policy concerns to be raised in very rare circumstances. Contrary to the fears of some commenters, the scope of the concerns that the Executive Branch will raise in the context [of transfers] . . . is narrow and well-defined." Id. at ¶ 63. In my view, the Foreign Participation Order's theory of the role of the Executive is far more consistent with our obligations than our practice in this proceeding.
11 We are not required by statute to grant any particular weight to such input. However, I would obviously take the issues raised by these government parties very seriously.
12 Order ¶ 79.
13 The agreement itself seems to provide a vehicle for such an accord through the Defense Department's facility security clearance approval process under the National Industrial Security Program Operating Manual. Obviously Congress may assign the Commission a specific role in these matters by statute. See 47 U.S.C. §§ 1001-1021.
14 See Order Appendix B at § 4.3.1.
15 Separate Statement of Commissioner Harold Furchtgott-Roth, in Re: Applications for Consent to the Transfer and Control of Licenses and Section 214 Authorization from Tele-Communications, Inc., Transferor, to AT&T Corp., Transferee, CS Docket No. 98-178 (Feb. 18, 1999).
16 Dangerous too is the Commission's intrusion into other nation's regulatory bailiwicks. The decision notes that "it is not clear that Oftel's non-discrimination policy is sufficient to prevent BT from manipulating the deployment of particular technologies. . . ." The Commission should reject the temptation to evaluate the efficacy of others' regulatory regimes and instead focus on the impact of those policies on the legitimate considerations of this agency in evaluating transfers.
17 Nonetheless I understand that here the incorporation of the side agreement was made an explicit condition of the withdrawal of the government parties' objections. I would urge the Commission to work with the other governmental parties to remove such provisions from any future side agreements.