Opinion ID: 391779
Heading Depth: 2
Heading Rank: 1

Heading: The CML Decision

Text: 20 On July 15, 1974 Comsat, in conjunction with IBM, applied for approval of changes in the structure of the CML venture. As proposed, Comsat General would have owned 45 percent, and IBM 55 percent, of the operating company. Some seventeen parties filed written submissions concerning the proposed entry, 32 and the Commission set the matter for oral argument en banc. 21 Opponents of the Comsat/IBM entry made three principal objections to it. First, they argued that IBM could dominate the satellite transmission of data communications by offering a packaged end-to-end data processing communications service compatible only with IBM equipment. Second, they argued that IBM could promote its satellite services to its computer and data processing customers, possibly by offering discounts or other advantages to customers for using both IBM equipment and IBM satellite services. Finally, they argued that IBM and Comsat, both of which do business with AT&T, would refrain from competing with AT&T in the voice and image communications market, and would concentrate instead on the data communications market. 22 In February 1975 the FCC released its CML Decision, 51 FCC2d 14 (1975), 33 disapproving the specific proposal, but delineating the circumstances under which entry by Comsat and IBM would be considered. The FCC decided not to hold evidentiary hearings on the antitrust issues, noting that they were substantially similar to issues already considered and decided in the earlier Domsat proceedings. Id. at 43-44, PP 47-48. Nevertheless, the Commission imposed restrictions on the Comsat/IBM entry to reduce the likelihood of anticompetitive effects. To prevent IBM's abuse of its dominant position in the computer and data processing industries, the FCC required the venture to provide for interconnection of its customers' data processing and communications systems on reasonable terms and without discrimination, and required it to submit a detailed description of such arrangements to the FCC in advance of its application. Moreover, the Commission required IBM to create a separate corporate entity to operate its satellite system. 34 This entity was forbidden to market IBM equipment, and IBM was forbidden to market satellite communications services except through the separate entity. To ensure that the venture would compete vigorously with AT&T, 35 the FCC required that Comsat and IBM adopt one of three permissible forms of business organization. One of them, called the balanced CML option, provided the framework for the plan now under review. The FCC described the option in this way: 23 Comsat General and IBM may choose to participate as partners in CML with another corporate partner(s) upon condition that no partner in CML shall have less than a 10% ownership interest or more than a 49% ownership interest or otherwise be in a position whereby it could exercise de facto control. 36 24 CML Decision, 51 FCC2d at 38. In addition, the FCC stated its intention to employ its continuing authority to impose additional restrictions should the Comsat/IBM venture later cause serious anticompetitive effects. Id. at 44, P 48. 25 Subject to these restrictions, the FCC determined that IBM, backed by its extensive financial resources and its experience concerning the usages and needs of customers in communications and data processing, offered the prospect of a strong and innovative competitor to AT&T. Moreover, in view of the formidable barriers to entry into the industry, the Commission concluded that requiring Comsat and IBM to enter the field separately might well deprive the industry of one or both as competitors. Therefore, the FCC adopted the policy that is now being challenged in this case: to permit a Comsat/IBM joint venture, subject to protective conditions. SBS, neEe CML, is the product of that policy.