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September 14, 1998


Re: Memorandum Opinion and Order, Application of WorldCom, Inc. and MCI Telecommunications Corporation for Transfer of Control of MCI Communications Corporation to WorldCom, Inc. (CC Docket No. 97-211)

I am pleased the Commission is able to conclude its obligations in this matter by allowing MCI and WorldCom to do what they have been so eager to do for so many months: join forces to bring more of the benefits of competition to themselves and to the American consumer.

This Order is the culmination of an enormous amount of work by our dedicated and talented staff. I applaud the staff for their efforts to bring this highly complex proceeding to closure. I sincerely hope, moreover, that the framework we have erected here will serve as a useful template to help expedite future merger review proceedings. We must strive constantly to make the review process more efficient and thereby better keep pace with market developments.

Of course, as a proponent of vigorous antitrust enforcement, I would not celebrate the prospect of the union of MCI and WorldCom were I not confident (as much as our predictive tools allow) that the merger will not aggravate the potential for anti-competitive conduct. As the Order thoroughly documents, however, the likelihood that the proposed merger will result in such aggravation is minimal. I take particular solace in the fact that, with this Order, the Commission joins the ranks of several state, federal and international regulatory bodies, all of which have seen fit to approve this transaction.

In this statement, I explain the bases upon which I support this Order. Specifically, I believe this Order appropriately: (1) declines to give significant weight to considerations that fall outside our core function of setting telecommunications policy and the unique expertise deriving from that function; (2) expresses some willingness not to "re-invent the wheel" with respect to competitive analysis of mergers already reviewed by the Department of Justice; and (3) does not impose additional, unnecessary conditions on the merger.

Disciplining the Public Interest Standard

The primary reason I support adoption of this Order is that much of the analysis is consistent (or at least not inconsistent) with my views regarding the considerations that should discipline our pursuit of "the public interest." On several occasions in the broadcast context, I have expressed my discomfort with the "penumbral bounds" of the public interest standard.(1) I consequently have tried to develop basic principles that I believe should guide our exercise of this wide discretion.(2) I believe it may prove useful for the Commission to outline such principles in applying the public interest standard for purposes of telecommunications mergers, adjudication and regulation. Only by looking to such principles can the Commission, in my view, reach conclusions that are relatively predictable, reasoned applications of the public interest standard and not just the result of the most effective lobbying or political pressure, or our unguided subjective judgment. In this statement, I begin to sketch the principles I believe should apply in the telecommunications merger context. I also explain how this Order comports with these principles.

Fundamentally, I believe that the Commission's public interest authority to review transfers of authorization is not a license to sweep into the review every possible goal that one could argue is supported by or consistent with the statute. Nor should we allow our public interest authority to degenerate -- in reality or impression -- into serving as a "back door" to achieve results the Commission is unable (or unwilling) to accomplish more directly, through traditional rulemaking. Rather, I believe our public interest authority to review transfers of authorizations evidences Congress' recognition that it could not foresee every possible set of facts that might so endanger the pro-competitive, deregulatory framework of the statute that such facts warrant denial of the transfer. Congress gave this broad authority to an expert agency, the Commission, so it could use that expertise to take into consideration facts that Congress could not concretely anticipate.

Based on this fundamental belief, I submit that the decision whether to attribute significant (or any) weight to a particular factor in our public interest merger review should turn on whether:

(1) the Commission has authority even to consider that factor;

(2) the action the Commission would take with respect to that factor is part of our core function of setting telecommunications policy; and

(3) the action relies on our unique expertise in setting such policy and is not more readily handled by other processes or other institutions vested with Congressional authority.

Let me elaborate on these three principles.

Most obviously, the Commission should not be taking any action that Congress did not delegate it authority to take. Conversely, the Commission should not take action that would violate any statute or the Constitution. But given the breadth of the public interest standard itself, answering the authority question may provide clear guidance only in those extreme circumstances in which consideration of the factor would contravene the letter or spirit of some statutory or constitutional provision.

The Commission also should not place significant weight on considerations that do not fall within our core function of setting telecommunications policy. Does consideration of a particular factor center on the manner in which firms provide services to end users or to other service providers? Does consideration of the factor involve communications rate-or standard-setting or involve laying the ground rules for competition? Does the factor implicate areas of private conduct that the Commission consistently regulates in the context of telecommunications? If the answer to these and similar questions is "no," I would strongly favor attaching little, if any, weight to that factor in our merger analysis.

Perhaps most important in disciplining our public interest merger analysis is deciding whether consideration of a particular factor relies on our unique expertise. Telecommunications affects our lives in countless ways. Thus, it is no surprise that telecommunications may play some part in a wide variety of social issues. Simply because we regulate the provision of telecommunications, however, does not mean that we are experts on all of these issues. Thus, we should be hesitant to give issues with which we have no special talent a prominent place in our merger analysis, even though there may be strong moral and political motivations for doing so.

Instead, I firmly believe the Commission should work to focus its public interest merger analysis on considerations that leverage our unique expertise. We should constantly ask ourselves whether some other agency has roughly equivalent or even superior expertise and authority to address any given factor, either in reviewing the merger at issue or in some other context. In my view, moreover, where another agency has specific statutory jurisdiction to address a particular factor, we should seriously consider the propriety of exercising our broad public interest discretion.

The Commission's credibility -- and thus its influence -- in Congress, the courts and elsewhere in our federal system depends in large measure on the extent to which we act within our jurisdiction and do not stray from the confines of our unique, core expertise. The Supreme Court has in principle supported this idea in stating that "reviewing courts do not owe deference to an agency's interpretation of statutes outside its particular expertise and special charge to administer."(3) Simply put, we cannot command respect as an "expert agency" if our pronouncements turn on subjects in which we are not expert or which do not rely on our unique capabilities. Likewise, the soundness and clarity of our analysis will suffer if we try to fold into our merger analysis every possible regulatory goal that strikes our fancy or that might be inferred from provisions of the statute. Thus, I am particularly pleased that this Order does not weigh too heavily considerations that are inherently speculative and that bear at best a tenuous relationship to the underlying motives and direct consequences of the proposed merger.

I would apply the three guiding principles I have articulated -- authority, core function and unique expertise -- to the types of considerations in this Order as follows:

With respect to allegations of intentional discrimination, I believe there may be a plausible argument that the Commission's consideration of some discrimination concerns falls within our core function of setting telecommunications policy and the unique expertise that derives from that function. In particular, I believe there may be merit in attaching some weight to discrimination concerns in our merger review when such discrimination contravenes carriers' universal service obligations or the traditional duty of common carriers to treat all customers equally. Section 201 of the statute, for example, mandates that "[i]t shall be the duty of every common carrier engaged in interstate or foreign communication by wire or radio to furnish such communication service upon reasonable request therefor."(4) To the extent allegations of racial and other forms of discrimination amount to violations of that duty, there may be an argument that such alleged violations should be given weight in our merger analysis. I would be open to considering this and other such arguments that focus on the Commission's core function and unique expertise in setting communications policy.

Other discrimination and disparate treatment concerns, such as employment diversity and minority representation -- however sympathetic or onerous to the republic -- generally fall neither within the Commission's core function of setting telecommunications policy, nor within the Commission's unique expertise in setting such policy. Thus, I believe the Commission should leave these latter concerns primarily to the courts and other agencies (e.g., the Department of Justice, Equal Employment Opportunity Commission).(5) In those limited circumstances in which these concerns might fall within our core function and unique expertise, the Commission should not address these concerns in an ad hoc way, pursuant to its obligation to ensure that transfers of certain types of authorizations are consistent with the public interest. Instead, the Commission should pursue such goals in the context of a rulemaking.(6) This approach would at least make it more likely that all of the parties interested in the topic participate in the proceeding. Parties that might be concerned about how the Commission will police discriminatory conduct may not think to comment on a particular merger, whereas they may take notice of a general rulemaking on discrimination.

With respect to some of the labor-related concerns raised on the record, I would submit that allegations that employment levels will be adversely affected by a given merger should be afforded little, if any, weight in the Commission's merger analysis. Even if we believe we have jurisdiction to consider this factor as part of our merger review, it lies outside our core function of setting communications policy and the unique expertise deriving from that function. Indeed, I believe employment levels are more directly an issue for collective bargaining and the well-established body of labor law. Furthermore, parties who wish to obtain relief regarding employment levels may seek such relief in the courts and before other government entities like the National Labor Relations Board.

I fully recognize that the federal government may play an important role in pursuing some of the social or other goals raised by the commenters that fall outside the rubric of traditional competitive analysis. For example, I firmly believe that the federal government, viewed as a whole, must be vigilant to prevent intentional racial discrimination to the extent the Constitution allows. I also believe the government may play a useful role in devising incentives consistent with market principles that enhance minority participation in the communications sector (e.g., minority tax certificates in the broadcast context).

But just because it may be appropriate for some part of the federal government to pursue particular social goals does not mean that the Federal Communications Commission must apply the balm for all that ails us; that would be like playing doctor without a license or adequate training. Congress has seen fit to give primary responsibility for overseeing such areas as labor relations and anti-discrimination efforts to other agencies. At best, duplicating such oversight at the Commission may strain precious resources and encourage parties to "forum shop" among various agencies in attempt to obtain desired outcomes.

I support this Order, in part, because it does not afford significant weight to considerations such as employment levels and job discrimination that I believe should not figure prominently in our telecommunications merger analysis. As such, I believe the Order evidences at least some reluctance by the Commission to let the scope of our merger analysis sweep too broadly.

Avoiding Re-inventing the Wheel

I also support this Order because the analysis leaves open the possibility that the Commission may take into consideration actions taken (or not taken) by the Department of Justice with respect to a proposed merger. This position derives, in part, from my belief that the Commission should focus its public interest merger analysis on factors relating to its unique expertise.

In my view, there is potential in the future for the Commission to devise ways -- formal or informal -- to take into consideration how the Department deals with a particular merger in our own merger analysis. I believe this potential exists even where the Commission performs an independent analysis or the method and scope of our analysis differ from that employed by the Department. As our reliance on the Department's horizontal merger guidelines demonstrates, there may at times be significant overlap between the analytical frameworks employed by the Commission and the Department. To suggest otherwise would strain credulity. Based on my acknowledgment of this analytical overlap, and my deep respect for the diligence and considerable expertise of the Department, I am hopeful that the Commission will, in the future, be able to minimize duplications of effort in the area of competitive analysis and thereby use our regulatory resources most efficiently.

Declining to Impose Unnecessary Conditions

Finally, I support the result here because it evidences at least some reluctance to impose additional, unnecessary conditions on mergers. I believe the Commission must be extremely circumspect about imposing conditions or extracting commitments from the applicants to do things that fall well outside their legal obligations under the statute. New entrants into the local exchange market, for example, are not obligated under the statute to serve every type of customer, no matter how desirable that result might be. Thus, I would seriously question imposing such a requirement on new entrants through the merger review process.

Moreover, just as I believe the Commission should not let its public interest analysis sweep too broadly, I firmly believe that if we begin to impose merger conditions too easily or make those conditions too excessive, we will injure the Commission's credibility and influence. We also may thereby substitute regulators' judgments about how communications resources should be allocated for the judgments of consumers and competitors in the marketplace.

In my view, this Order is consistent with these beliefs. I would point out that, other than with respect to the divestiture of Internet assets prompted by the Justice Department and European Commission, we have imposed no significant conditions on this merger.(7) Rather, the Order merely evidences expectations that MCI and WorldCom have honestly represented their intentions to conduct their activities in the manner they have stated on the record (e.g., their representations regarding the types of customers they will serve). As such, I believe the "mere expectations" expressed in the Order amount primarily to reminders that parties should not lie or misrepresent their intentions to the Commission.

In conclusion, I should note that I would be especially reluctant to try to punish former applicants if, as they begin to carry out their stated intentions, they find they must divert from their commitments in merger applications for business reasons or legitimate concerns regarding the regulatory environment. Moreover, I would vigorously oppose any efforts by the Commission, formally or informally, to require applicants to submit commitments regarding how the merged entity will conduct its business. Again, the Commission will work harm to its credibility and, I believe, the public interest if it is perceived to be attempting to achieve aims through such "voluntary" commitments that the Commission is unable or unwilling to achieve through more direct means.

For the foregoing reasons, I am pleased to support approval of the proposed merger. I commend the Commission staff for its hard work in this proceeding, and I look forward to working together with everyone at the Commission as we review future proposed transactions.

1. 1 See, e.g., FCC Commissioner Michael K. Powell, " The Public Interest Standard: A New Regulator's Search for Enlightenment," Speech Before the American Bar Association 17th Annual Legal Forum on Communications Law (April 5, 1998); FCC Commissioner Michael K. Powell, "Willful Denial and First Amendment Jurisprudence," Remarks Before the Media Institute (April 22, 1998). Justice Felix Frankfurter said that the "vagueish penumbral bounds expressed by the standard of the public interest" "[leave] wide discretion and [call] for imaginative interpretation." FCC v. RCA Communications, Inc., 346 U.S. 86, 90, 91 (1953). My effort to develop principles for exercising our public interest discretion is an effort to ensure that this discretion is bounded by more than the Commission's collective imagination.

2. 2 My decisional schematic for broadcast poses five basic questions:

(1) does the Commission have the authority to do what is asked?;

(2) if we have the authority, is it nonetheless better to leave the matter to Congress or await more specific instruction from Congress;

(3) is the issue better addressed by a state or another federal agency;

(4) if the Commission has authority and is the arm of the government best suited to act, should we?; and,

(5) would any action we take be Constitutional?

FCC Commissioner Michael K. Powell, " The Public Interest Standard: A New Regulator's Search for Enlightenment," Speech Before the American Bar Association 17th Annual Legal Forum on Communications Law (April 5, 1998).

3. 3 Ardestani v. Immigration and Naturalization Service, 502 U.S. 129, 148 (1991) (citing Adams Fruit Co. v. Barrett, 494 U.S. 638, 649-50 (1990)). See also Syracuse Peace Council v. FCC, 867 F.2d 654, 658 ("In making a public interest judgment under the Communications Act, the Commission is exercising both its congressionally-delegated power and its expertise; it clearly enjoys broad deference on issues of both fact and policy."). (D.C. Cir. 1989). The courts' statements appear to acknowledge that, in deciding what degree of deference should be given an agency action, judges will not find it irrelevant that the action does not fall within the agency's core expertise.

4. 4 47 U.S.C. 201(a).

5. 5 I express no opinion here regarding equal employment opportunity concerns in the broadcast context, which may present unique circumstances that I do not address in this statement.

6. 6 For example, if one can demonstrate a history of intentional racial discrimination, remedies for which fall within our core function and the unique expertise deriving from that function, it may be appropriate for the Commission to conduct a rulemaking to put in place remedial policies, consistent with the law. See generally City of Richmond v. J.A. Croson Co., 488 U.S. 469 (1989).

7. 7 Note, however, that the transfer of MCI's direct broadcast satellite (DBS) license to WorldCom is subject to the outcome of pending applications for review of the initial license grant to MCI.