Statement by FCC General Counsel Chris Wright.
Re: FCC event announcing a draft of its requirements for companies involved in FCC antitrust merger reviews and other transactions proceedings.
Date: March 1, 2000.
Source: Tech Law Journal transcribed from its audio recording of the event, and converted into HTML.

As I am sure everybody here knows, there has been unprecedented consolidation in the communications industry, since the enactment of the 1996 Telecommunications Act. Bell Atlantic Nynex, AT&T TCI, MCI WorldCom, SBC PacTel, SBC Ameritech, are all major mergers that have occurred since 1996. AT&T MediaOne, Bell Atlantic GTE, Qwest U S West, CBS Viacom, Vodafone Mannesman, AOL Time Warner, and MCI WorldCom Sprint, are all pending. Each of these transactions involves the transfer of numerous telecommunications lines or spectrum licenses issued by the FCC.

In a speech to the Federal Communications Bar Association in October, the Chairman asked me to create a team to streamline and accelerate the merger review process. That goal is really just an aspect of the implementation of the Chairman's strategic plan for the agency, which is designed to produce a better, flat -- a faster, flatter, more functional agency. The Chairman's direction was particularly timely, however, since the three mergers that I mentioned the last in my list above, um, were each announced after the Chairman directed me to put a transaction team together, and accordingly to the New York Times, they are the three largest mergers ever.

The goal of the team, the Chairman explained in October, will be to expedite the review process, so that the issues arising in even the most complex transactions may be resolved within definite time periods. The Chairman concluded that the new team will work to make the merger review process predictable and transparent, so that applicants know what is expected of them, what will happen when, and the current status of their applications, unquote.

In response to the Chairman's direction, I asked each Bureau to designate a senior professional to serve as a liaison, and some of the Bureau liaisons are seated here today, and many others are in the audience. In addition, I was able to persuade Jim Bird to leave, leave private practice and work with the Bureau liaisons to develop and implement a plan to ensure that the license transfers accompanying even the most complex transactions may be handled within 180 days.

We started meeting regularly internally very shortly after the Chairman's speech in October to develop a plan to meet that goal. We then discussed our problems informally with the executive committees of the FCBA's Competition Committee, and with representatives of the public interest community. On January 21st, we had a brown bag lunch with about 70 FCBA and ABA members, and we heard a lot of interesting comments at that meeting, and we received a lot of emails following up.

We've used those comments to devise a plan to process license transfer applications accompanying mergers expeditiously. We are here this morning to describe that plan, and to obtain your answers to it. You have in front of you, or you should have in front of you, our draft timeline to make sure that license transfer decisions may be made within 180 days. You also have a memo discussing some of the issues we considered in putting our plan together. The timeline is a draft timeline. The primary purpose of this meeting is to obtain more input so that we can further refine it. But, I hope you will agree that we are far along in advancing the Chairman's directive that we make the merger process predictable and transparent so that applicants know what is expected of them, what will happen when, and the current status of their applications. Jim and some of the other members of the team will discuss the timeline and the memo in detail. I'd like to provide some background.

Although we are here to today to concentrate on process, rather than substance, it is always important to review at the threshold of any discussion the statutory basis for the Commission's actions. With respect to mergers, that basis lies primarily in Sections 214(a) and 310(d) of the Communications Act which require the Commission to approve all transfers of telecommunications lines, and spectrum licenses. Both statutory provisions direct the Commission to approve of those transfers only if it finds the transfer is in the public interest. Section 214(a) states "no carrier shall acquire or operate any line unless and until there shall first have been obtained from the Commission certificates of the present or future public convenience and necessity require or will require the construction or operation of such line." Section 310(d) similarly states "no construction permit or station license for wireless operations shall be transferred to any person except upon application to the Commission and upon finding by the Commission that the public interest, convenience and necessity will be served thereby."

The Commission has explained, most recently in the SBC Ameritech Order, that it applies a four part test to determine whether license transfers are in the public interest. We ask first whether the transfer will violate the statute. For example, Section 271 prohibits Bell Operating Companies from providing long distance companies from providing long distance service until they open their markets to competition. So interstate lines may not be transferred to a BOC that has not obtained approval under Section 271.

Second, we ask whether the transfer would violate proregulation. For example, we have a spectrum cap that prevents wireless companies from having more than 45 megahertz in any particular market. So, a wireless license cannot be transferred to be transferred in violation of that rule, without a waiver. Third, we ask whether the transfer would frustrate the purposes of the Act or a regulation. The Supreme Court held in 1953 in the RCA case that competition issues are relevant in defining the public interest standard, and there is no question after 1996 that fostering competition in all comp-- in all communications markets is an important national goal.

And fourth, we ask whether a transfer is likely to provide affirmative benefits. That inquiry is plainly required under the statute, since the applicable statutory provisions direct the Commission to determine whether the transfer would serve the public interest.

Our team has not been charged with developing the substantive legislative proposals, or with rethinking the Commission's standards, but with examining processes to insure expeditious review. So, let me get back to processes.

The Administrative Procedure Act, generally, and Sections 214 and 309 of the Communications Act, specifically, are relevant here. Those provisions provide procedural rights to parties that want to challenge a license transfer application. It is important to keep that in mind.

We desire very much to streamline our review and move on to mergers that have affirmative public benefits, not to be delayed. But the statutes give rights to challengers too. And any decision that the Commission makes regarding license transfer must be made in compliance with the Communications Act and the APA, and ultimately subject to judicial review.

From the standpoint of a merging party the worst thing the Commission could do is give short shrift to those requirements, and rubberstamp a license transfer, because that would give challengers a strong legal position in court.

This is not the appropriate time to go through all the relevant statutory provisions, but it is useful to examine Section 309, which illustrates some of the procedural issues that we face, and as the most specific statutory provision, has especially guided our analysis. Section 309(d)(1) provides that anyone may file a petition to deny a license transfer application, and Section 309(b) provides that no license transfer application may be granted without giving parties thirty days following issuance of public notice by the Commission, of the acceptance for filing such application, or of any substantial amendment thereof. Let me repeat those requirements, because of course, these statutory provisions control our efforts to expedite review, and our plan is designed with procedural requirements of the Act very much in mind. The statute speaks of issuance of a public notice by the Commission of the acceptance for filing of a license transfer application, and gives parties thirty days from the issuance of a public notice to file petitions to deny. The statute also gives parties challenging the license transfer application thirty days to comment after any substantial amendment of an application. So, if major revisions are made to an application another round of comment is required by the statute. These requirements are specific examples of more general procedural rights provided challenged by the APA.

The statutes also provide procedural rights to applicants, and not all of those rights foster expedition. In particular, Section 309(e) generally directs the Commission not to deny a license transfer application without issuing a hearing designation order and conducting a proceeding before an administrative law judge. Section 5(d) of the Act, in turn, directs the Commission to seek to render final decision within six months after the conclusion of a hearing. Our aim is to go much faster. But please keep in mind that the Communications Act contemplates a lengthy process for complicated cases. Our timeline seeks to ensure that the procedural rights of applicants and commentors are protected, while also ensuring the Commission acts as expeditiously as possible. Let me make clear at this point that many license transfer applications, indeed the vast majority, are uncontroversial, and are routinely approved in short order. That is how it should be, and this group certainly does not intend to slow anything down. As the Chairman indicated, our main charge is ensuring that license transfer applications, even the very largest mergers, which often are controversial, are handled expeditiously as well.

In our experience, the applicants themselves often present two major impediments to considering the license applications accompanying large mergers quickly. First, merging parties often fail to provide us with complete information in a timely fashion. Second, applicants often seek to make major revisions to their applications late in the process. We are not proposing to automatically deny the applications when parties have failed to provide timely information, or who decide to make substantial changes to their applications late in the day. We would resolve their applications as expeditiously as possible. But we cannot promise to process applications promptly if the merging parties do not provide us with timely information, or if they present a moving target by proposing major revisions at a late date. The key to our timeline is that it tells merging parties who want to have their applications processed quickly what they need to do to get that accomplished. Our plan will permit resolution within 180 days if applicants file complete applications and do not make major revisions late in the process. It is designed, as the Chairman directed, and as I will state for the third time, to make the merger review process predictable and transparent, so that applicants know what is expected of them, what will happen when, and the current status of their applications.

Again, we do not promise to reach a decision within 180 calendar days if information is not provided in a timely fashion, or if the application is significantly revised at a late date. But the plan should ensure timely review for applicants who promptly give the Commission and the public a reasonable opportunity to examine their license transfer applications.

Well, let me turn this meeting over to Jim. After he and the other members of the team describe out proposal in more detail, we will open the floor to comment. I would ask the press to wait until after the meeting to ask questions. We will plan to stay for another 15 minutes to respond to questions from the press. And of course, I would like to remind everyone that it is not appropriate to comment on any pending matters. Rather, we seek seek your views on how to refine our plan to make the merger review process more predictable and transparent.

Jim.