# FCC Transactions Forum March 1, 2000

## "Overview of FCC Review of Complex Transactions"

## To-Quyen Truong

**Associate Bureau Chief, Cable Services Bureau**

-   The FCC approves most mergers and acquisitions involving the
    transfer of FCC licenses and authorizations in short order. In the
    Cable Bureau, for example, out of approximately 2500 transfers that
    we have approved during the wave of mergers, acquisitions, and swaps
    from 1996 to the present, only one transaction (the AT&T/TCI merger)
    took a significant period of time, and even that merger took less
    than five months between the Public Notice and the final Order. The
    public focuses on the very small percentage of cases that take a
    significant period of time because they involve very large and
    complex transactions. I'm here to provide some background regarding
    the Bureaus' handling of these major transactions, in order to
    provide additional context to our efforts to establish a proposed
    timeline for these transfer reviews.

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-   The public's interest in these major transactions is, in fact, a
    primary reason that we need additional time to review them. We apply
    the same Public Interest standard to all transfer applications. But
    those transactions expected to have major impact on communications
    services \-- whether in terms of the sheer number of consumers
    affected or the competitive impact on communications services \--
    necessitate additional steps to ensure that the public has a full
    opportunity to participate and to follow developments in our review
    process. This process is very important because the FCC is unique in
    being (1) the only forum for the public to comment on these
    transactions and (2) the expert agency with the responsibility, not
    only to preserve existing competition, but also to promote new
    competition in the provision of communications services. After
    public comments are filed, the number and complexity of the comments
    and relevant competitive issues raised determine the amount of
    resources and time devoted to the review.

-   The rapid changes occurring in the communications field and the
    convergence of services between the different industries -- with
    cable companies providing not only video, but also telephony and
    Internet services, for example -- means that many novel issues are
    raised and we need to pool the expertise from all the different
    Bureaus.

-   For those transactions that have major impact on the provision of
    communications services, which usually require transfer of multiple
    FCC licenses and authorizations, representatives from all the
    relevant Bureaus get together to meet with the transfer applicants
    prior to the filing of the application in order to discuss the
    technical filing procedures and the substantive information that
    should be included in the application.

-   After the application is filed, we review it for accuracy and
    completeness from both a technical standpoint and a substantive
    standpoint, before issuing a Public Notice to invite public comment.
    Our close review has helped to correct many omissions and errors in
    identifying relevant licenses and authorizations and their holders.
    It also has facilitated the timely amendment of the application when
    necessary to provide substantive information and arguments needed by
    commenters and Commission staff to conduct an informed competitive
    analysis.

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-   These proceedings inevitably implicate major communications policy
    issues before the Commission. For example, many of the most recent
    mega-mergers raise major broadband issues, and several of the
    mergers of the last two years relate directly to the Commission's
    policy to promote local telephony competition. The review team
    accordingly must get an in-depth understanding of all these policy
    issues and the related rules \-- from the historical context of the
    Commission's many related proceedings, to application of the
    existing rules to novel circumstances, to the impact of these
    transactions on the Commission's later enforcement of our rules and
    broader policy, and of course the manner in which our actions in
    this transfer proceeding may advance rather than retard the
    Commission's policies.

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-   As a threshold matter, we have to determine whether the transaction
    would result in the violation of any of our rules. In many cases,
    review of the applicants' holdings reveal that the transaction would
    result in a violation of our cross-ownership rules or ownership
    limits, requiring divestiture. The review team often has to struggle
    with much more difficult issues of statutory and regulatory
    interpretation, however. Because these transactions often result in
    novel business arrangements and relationships, we often have to
    analyze and decide regulatory issues of first impression.

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-   As to the competitive policy analysis, the public is well aware that
    we solicit and review public comments and meet with interested
    parties to discuss the issues, and review substantial volumes of
    documents produced by the applicants. The public may not be as aware
    that the merger review team also conducts an extensive, independent
    investigation and analysis of the issues. Aside from studying our
    internal rules and policies, we compile and analyze the literature
    from academics, Wall Street analysts, consumer groups, trade
    associations, all sources, on issues related to these transactions,
    which often include the most prominent communications issues of the
    day. We often invite these experts to meet us for further discussion
    on these issues, which range from a business analysis of the
    corporate structure and strategic plans of the applicants, their
    chance for success, and the impact on other industry players, to an
    academic analysis of the development of the Internet and related
    policy options.

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-   We also consult with the DOJ and FTC, sharing information and
    coordinating our review to avoid duplication of efforts. We obtain
    waivers from the applicants in order that we can review the
    confidential documents filed with the DOJ and FTC and have
    confidential discussions with those agencies regarding our
    concurrent reviews. We discuss ways to coordinate our efforts so
    that the DOJ and FTC can focus on their responsibility to ensure
    that the transaction won't reduce **existing** **competition**,
    while we can focus on our responsibility under the Communications
    Act, and particularly the 1996 Act, to ensure that the transaction
    won't slow the growth of **new competition** and the decline of
    market power by dominant firms in the relevant communications
    markets.

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-   In some instances, our analysis of the issues has identified areas
    requiring further production of information or discussion from the
    applicants. Substantial amounts of time and resources are spent
    discussing these issues with the applicants to obtain the relevant
    information and to review the documents produced.

-   In a few cases, the parties decide to revise their applications late
    in the process. Some of you no doubt are familiar with cases where
    the applicants have requested a waiver of our rules. If we were
    operating under an inflexible timetable for review, we probably
    would have had to deny the original application on the ground that
    the transaction would violate our rules. Instead, we have operated
    with more flexibility, allowing the parties to amend their
    application. Some applicants seek extensive discussions with
    Commission staff regarding the issues prior to revising their
    application. In one case, the parties asked the Commission to halt
    consideration of their application until they could present a
    proposal for compliance with Section 271, and they actually did not
    submit such a proposal until several months later. When the parties
    do revise their application, the Commission provides a full
    opportunity for public comment and evaluates the revised application
    in light of these comments.

-   The complexity of the issues involved and the extensive public
    interest they generate sometimes also necessitate a Commission en
    banc hearing or Bureau level public forum to air the issues. A
    substantial amount of Commission staff's time and resources also is
    spent responding to public inquiries about these transactions on
    virtually a daily basis.

-   Finally, at the end of this process, the merger review team presents
    its recommendation to the Commissioners and drafts the order to
    reflect the various parties' arguments and the staff's analysis.
    After a majority of the Commissioners have reached a consensus, the
    staff revises the order as necessary to reflect the views of the
    Commissioners.