9. Other Issues § 854(c)(8) § 854(d)
Section 854(c)(8) states that the Commission shall "Provide mitigation measures to prevent significant adverse consequences which may result." Unlike the other sub-sections of § 854, § 854(c)(8) does not establish criteria for reviewing the transaction, other than ordering that we provide mitigation measures to prevent "significant adverse consequences."201
Section 854(d) states that:
When reviewing a merger, acquisition, or control proposal, the commission shall consider reasonable options to the proposal recommended by other parties, including no new merger, acquisition, or control, to determine whether comparable short-term and long-term economic savings can be achieved through other means while avoiding the possible adverse consequences of the proposal.202
Consistent with the provision of this section, we will therefore consider whether there are "reasonable options" to the merger, including modifying conditions.
9.1. Position of Parties
The Applicants argue that the "proposed conditions lack any plausible nexus to any adverse effect of the merger, as required by § 854(c)(8). In essence, the protesting parties seek improperly to use this proceeding as an open mike on issues previously litigated and a grab bag of concessions that would advance their individual interests, but bear no direct relationship to the merger or anticompetitive effects."203
CALTEL proposes a series of mitigation measures, including: 1) a price cap plan for SBC's wholesale network elements; 2) the imposition of a cap on SBC's intrastate special access rates for five years; and 3) a requirement that SBC provide fair interconnection prices, terms and conditions for IP facilities and capabilities. 204
Cox cites § 854(c)(8) and argues that the Commission "is required to provide mitigation measures."205 Cox then argues that four conditions are needed: 1) a condition allowing CLECs to opt-in to interconnection agreements that SBC has negotiated and/or interconnection agreement provisions that SBC has arbitrated in California; 2) a condition requiring SBC to transit traffic consistent with TELRIC pricing and free of burdensome and unnecessary restrictions; 3) a condition requiring SBC to offer extensions on existing IP backbone agreements; and 4) a condition requiring AT&T to offer extensions on existing transport agreements.
Level 3 asks for 1) divestiture of overlapping in-region facilities; 2) a series of conditions on special access pricing; 3) require SBC to exchange all VoIP traffic at the local compensation rate; 4) require the merged company to return unused telephone number blocks; and 5) require that Verizon offer "stand-alone" DSL.
ORA proposes an extensive set of requirements tied specifically to the various elements of § 854(b) and § 854(c). An extensive summary is provided on pages 92-96 in ORA's Opening Brief.
PacWest proposes a merger condition to "ensure the availability of non-discriminatory interconnection with the packet-switched network facilities of SBC."206 The condition is:
In the absence of a negotiated agreement acceptable to any requesting CLEC, SBC's affiliates certificated as public utilities in California shall consent to participate in arbitration proceedings conducted by this Commission pursuant to Section 252 of the Communications Act, the purpose of which shall be to establish reasonable and non-discriminatory terms and conditions of interconnection between the networks of SBC's certificated affiliates in California and the network of the requesting CLEC. This interconnection shall include all technologies and network architectures deployed by the SBC affiliates in California, including but not limited to all packet-switched network technologies. As a condition of this merger, SBC shall further waive any claims that such interconnection obligation involving all of its deployed network architectures exceeds the scope of permissible arbitration under Section 252.207
Qwest proposes six conditions for the merger: 1) require that the merged company divest the AT&T overlapping facilities; 2) require SBC to offer intrastate and interstate special access, private line or its equivalent at the lowest rates offered by either SBC or AT&T; 3) require that SBC will show no favoritism post-merger to new affiliates or Verizon/MCI; 4) require that SBC will offer competitors in California any services or facilities that the post-merger entity purchases from other ILECs out-of-region and at the same rates, terms, and conditions that the post-merger entity obtains from those out-of-region ILECs; 5) require that SBC give wholesale customers a "fresh look" right for customers to terminate their contracts without termination liability; and 6) require that SBC offer "stand-alone" DSL.208
Telscape asks that the Commission require SBC to sell its UNE-L facilities at a 50 percent discount.209
TURN's chief focus is to fight approval of the merger, and proposing conditions is a minor part of TURN's showing. In a 132-page brief, only 9 pages focus on merger conditions.210 Nevertheless, the litany of conditions is extensive and includes:
1. A five years rate freeze for residential and small business basic exchange rates;
2. A requirement that the 1FR, 1MR, 1MB, and local measured usage and ZUM services be available on a stand-alone basis.
3. A requirement that Applicants agree to prominently list the availability of these services in phone books, on the web, and in bill inserts;
4. A requirement that Applicants offer an intrastate long distance calling without a minimum monthly fee;
5. A requirement that SBC provide a competitive alternative for residential and small business customers in Verizon's service territory no later than 18 months from the consummation of the merger. This alternative must be made available at prices comparable to or less than Verizon's.
6. The submission of quarterly reports on the progress of competitive offerings in Verizon's territories.
7. The imposition of a non-trivial penalty, "e.g., $10 million," each month if SBC fails to meet a "target of providing meaningful competitive alternative within 18 months."
8. Make approval conditional upon Applicant's agreement to fund independent third-party monitoring of competitive conditions in California;
9. Require corporate affiliates to cooperate with third-party monitoring;
10. Require Applicants to agree to the service quality monitoring recommendation outlined in TURN's Comments in the Rulemaking on General Order 133-B;
11. Adopt further conditions to require the tracking of the deployment of new technology by wire center, along with statistics about wire center demography;
12. Make Commission approval contingent on Applicants agreement to fund two independent audits of SBC's affiliate transactions;
13. Require Applicants to commit in writing that all corporate affiliates of SBC will make their books and records available for inspection by Commission staff and the third-party auditor
14. Require that Applicants modify their standard non-disclosure and protective agreements so that it allows parties to use material obtained in one Commission docket in any other regulatory proceeding as long as the confidentiality of the information is maintained.
DRA argues that the Commission should adopt merger conditions in six areas: 1) ensure that applicants maintain and improve customer service for customers with disabilities; 2) require that applicants renew their commitment to universal design principles; 3) require improvements in accessibility of all communications; 4) improve polices related to bundled services and basic phone service; 5) ensure that an internal committee for voicing the concerns of the disability community is maintained; 6) establish auditing and reporting requirements.
9.2. Discussion
The intervenors in this proceeding have proposed a litany of conditions that they ask the Commission to apply to this transaction. To the extent possible, we have considered each proposed condition in the context of the adverse consequences that the intervenors alleged would result from the proposed transaction. As discussed at length in prior sections of this decision, we find no basis upon which to conclude that such adverse consequences which these conditions are designed to mitigate would result from this transaction. Therefore the request for conditions recommended by intervenors has little merit.
There are still other conditions that we have not listed above. The voluminous record in this proceeding makes it clear that the proposed transaction will not produce adverse anticompetitive consequences, and that the merger, when combined with the conditions set forth herein and the agreement reached by the Applicants, Greenlining and LIF, is in the public interest. There is therefore no rational basis for imposing any of the additional conditions on this transaction that are proposed by TURN, ORA, Telscape, CALTEL (with Covad), Cox, PacWest, Level 3 or Qwest. We therefore will not discuss these proposals in any more detail than we have done already, for it is clear that these conditions are neither needed to "prevent serious adverse consequences"211 nor do they represent "reasonable options."212
Concerning the proposals of DRA, we see no need to adopt the mitigation measures that they propose. The acquiring entity, SBC, has a record of providing good service to the disabled community, and ensuring this good service remains a focus of the Commission's regulatory program. Indeed, several of the proposed conditions such as "maintain ... customer service" and "renew their commitment" to the disabled are both vague in scope and demonstrative of SBC's current commitments to this community.213
201 As noted previously, for §§ 854(c)(1) through (7), we have considered mitigation measures at the same time as we have assessed the transaction against the criteria.
202 § 854(d)
203 Joint Applicants, Opening Brief, p. 88.
204 CALTEL, Opening Brief, p. 5.
205 Cox, Opening Brief, p. 18
206 PacWest, Opening Brief, p. 31.
207 PacWest, Opening Brief, p. 31, citing PacWest Ex. 109, p. 28.
208 Qwest, Opening Brief, pp. 33-41.
209 Telscape, Opening Brief, p. 4.
210 TURN, Opening Brief, pp. 123-131
211 § 854(c)(8)
212 § 854(d)
213 See DRA's Opening Brief.
