#  September 12, 2001

## By Hand

Michelle Carey, Chief

Policy and Program Planning Division

Common Carrier Bureau

Federal Communications Commission

445 Twelfth Street, SW

Washington D.C., 20554

Re: CC Docket No. 00-206

[Request for Special Temporary Authority]{.underline}

Dear Ms. Carey:

On August 31, 2001, on behalf of WorldCom, Inc., we advised you by
letter that the Court had approved certain modifications to the Hold
Separate Stipulation and Order (HSO) cited in the Commission's January
17, 2001 Order[^1] approving the transfer of FCC licenses and
authorizations held by Intermedia Communications, Inc. ("Intermedia") to
WorldCom, Inc. ("WorldCom").[^2] As we explained in that letter, the
revisions to the HSO were supported by the Department of Justice and are
designed to ensure that the purpose and intention of the Final Judgment
entered in that proceeding are accomplished in a timely manner. In
particular, the revised HSO limits the hold-separate and divestiture
requirements to Intermedia's Internet lines of business. We further
indicated that in our view, the Court's approval of the changes to the
HSO did not require any action by the Commission, since the original HSO
expressly permitted the Department of Justice to approve divestiture of
less than all of Intermedia's assets.

We understand from our discussions that the FCC staff nonetheless may
conclude that revisions to the *January 17 Order* are necessary to
reflect the recent action by the Court. To facilitate the Bureau's
prompt review of this issue, we filed under separate cover today
additional information regarding the activities of WorldCom and
Intermedia Communications, Inc. in local telecommunications markets.
[^3]

As discussed below, WorldCom intends to implement changes in
Intermedia's business plan and other operations authorized by the
Court's action as quickly as possible. Pending the Commission's review
of the information that WorldCom has submitted, WorldCom respectfully
requests issuance of Special Temporary Authority to remove any question
about its immediate authority to give full effect to the revisions to
the HSO and to manage Intermedia in accordance with those revisions.[^4]
As we now show, grant of the requested will clearly serve the public
interest, convenience and necessity.[^5]

The unprecedented downturn in the telecommunications industry since the
fourth quarter of 2000 is well-documented, and the prospects for an
immediate recovery are virtually non-existent.[^6] Under the terms of
the original HSO, however, WorldCom had no authority to revise
Intermedia's business plan and operations to take into account the sea
change in market conditions that has occurred over the past year. Forced
to follow an utterly outdated plan in a completely changed market,
Intermedia has continued to incur enormous operating losses. For the
second quarter of 2001 alone, Intermedia reported operating losses of
almost \$292 million. [^7] In other words, the original HSO required
WorldCom to operate Intermedia in a manner that has caused WorldCom to
finance millions of dollars in operating losses *each day.* Although all
segments of Intermedia's business contribute to these losses, the
telecommunications operations are the most significant cause. WorldCom
clearly would much prefer to expend these resources in much more
productive areas.

To reduce the ongoing losses, WorldCom plans promptly to begin making
sensible business decisions about Intermedia's operations and customer
base, such as whether to continue to offer particular customer segments
service over Intermedia's existing service platform or to move them to
one of WorldCom's platforms. Continued management of Intermedia under
the outdated business plan diverts valuable resources from these efforts
to implement a sensible long-term business plan for Intermedia's
telecommunications customers. Further, prompt implementation of such
changes will eliminate any need for WorldCom to consider alternative
ways of reducing Intermedia's losses from its telecommunications
operations, such as by seeking authority under section 214 of the
Communications Act of 1934, as amended, to discontinue service.

Moreover, there is simply no plausible basis for a claim that the
combination of WorldCom and Intermedia telecommunications assets would
raise anticompetitive concerns. The Department of Justice fully
supported the changes to the original HSO. Indeed, the Department joined
the motion asking the Court to approve the changes and the Court signed
the order authorizing the changes on the same day that it was filed.
Moreover, no party in this proceeding has even alleged that the
combination of the companies' telecommunications assets would raise
competitive issues. As the information and analysis submitted with the
initial application, and supplemented by the information furnished
today, plainly show,[^8] the telecommunications markets that Intermedia
and WorldCom have entered are either characterized by intense
competition among scores of competitors with no single dominant carrier
(such as the long distance market) or dominated by a single monopoly
carrier where the combined share of Intermedia and WorldCom is, by any
measure, *de minimis.* In either case, the combination of the
telecommunications assets of the two firms cannot implicate any serious
competitive concerns.

In sum, grant of the requested special temporary authority will clearly
serve the public interest, convenience, and necessity. It will remove
any question that WorldCom can act promptly to reduce the millions of
dollars in operating losses currently incurred by Intermedia on a daily
basis and to develop long-term plans for serving Intermedia's
telecommunications customers. Further, there is simply not a shred of
evidence to suggest that this combination raises any competitive
concerns. Consequently, WorldCom respectfully requests that the
Commission grant the requested relief as expeditiously as possible.

In the event that the Commission has any questions regarding this
request, please contact the undersigned.

Respectfully submitted

A.  Richard Metzger, Jr.

> Ruth Milkman

Attorneys for WorldCom, Inc.

cc: Magalie R. Salas, Secretary

James Bird

Henry Thaggert

Nandan Joshi

[^1]: *See* *In re Applications of Intermedia Communications, Inc.,
    Transferor, and WorldCom, Inc., Transferee, for Consent to Transfer
    Control of Corporations Holding Commission Licenses and
    Authorizations Pursuant to Sections 214 and 310(d) of the
    Communications Act and Parts 21, 63, 90, and 101,* Memorandum
    Opinion and Order (DA 01-130), CC Docket No. 00-206 (rel. Jan. 17,
    2001) (*January 17 Order*).

[^2]: Letter from A. Richard Metzger, Jr. to Michelle Carey, Chief,
    Policy and Program Planning Division, Common Carrier Bureau, CC Dkt
    No. 00-206 (August 31, 2001).

[^3]: *See* Letter from A. Richard Metzger, Jr. to Michelle Carey,
    Chief, Policy and Program Planning Division, Common Carrier Bureau,
    CC Dkt No. 00-206 (September 12, 2001) (September 12 Letter).

[^4]: It bears mention that this request clearly does not involve
    temporary approval of a transfer of control, since the transfer of
    control of Intermedia to WorldCom has already been approved.

[^5]: *See, e.g., In re Application of GTE Corp., Transferor, and Bell
    Atlantic Corp., Transferee,* Order, slip op. at para. 3 (Pol. Prog.
    Plan. Div., Aug. 30, 2001).

[^6]: *See, e.g.*, Aldo Svaldi, "Telecom Defaults Drawing Comparisons to
    S&L Crisis," Denver Post, (Aug. 12, 2001) (stating that
    telecommunications borrowers defaulted on more than \$16 billion
    worth of bonds in the first half of 2001 and warning that many
    competitive carriers cannot generate sufficient revenues to cover
    the interest on their debt); *see also* Steven Rosenbush and Peter
    Elstrom, "8 Lessons from the Telecom Mess" Business Week Online
    (Aug. 13, 2001) (noting that at least a dozen companies have filed
    for bankruptcy protection and noting that telecommunications
    companies have laid off 170,000 workers since January 2001).

[^7]: Intermedia SEC Form 10Q, 2^nd^ Quarter 2001 at p. 12 (filed Aug.
    14, 2001) (citing losses from operations of \$291.6 million for the
    three months ended June 30, 2001). There have been no changes since
    the end of the second quarter that would materially reduce
    Intermedia's operating losses.

[^8]: *See Application of Intermedia Communications, Inc., Transferor,
    and WorldCom, Inc. Transferee,* CC Dkt No. 00-206, at 7-16;
    September 12 Letter, at 1-2.