#  November 18, 1999

# 

# SEPARATE STATEMENT OF COMMISSIONER HAROLD FURCHTGOTT-ROTH

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]

-   often our "conditions" are not even remotely tethered to our
    statutory authority to review license transfers;

-   there is no apparent method to the madness by which some transfers
    receive heightened scrutiny, while others do not;

-   at times the Bureau reviews transactions, other times the full
    Commission acts;

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-   the Commission continues to assert jurisdiction over submarine cable
    license transfers that would be more properly left to the Executive
    Branch; and

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-   the Commission continues to characterize the arm twisting associated
    with these transactions as part of some mythical voluntary process.

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.