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.

? 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.

? 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.

? 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.

? 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.   

? 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.

? 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.