IX. Protests

Protests to the proposed change in control were filed by The Utility Reform Network (TURN), and jointly by GTE Internetworking Incorporated and GTE Media Ventures Incorporated (collectively GTE), on September 9, 1999, pursuant to Rule 44. As addressed in our prior Categorization discussion, neither TURN nor GTE addressed the proposed category as required by Rule 6(a)(2).

TURN opposes the proposed change on the basis that the Applicants did not address the impact of the same cable facilities being used by MediaOne to provide local telephone service for residential high-speed Internet access via cable modems.

TURN contends that "it is entirely possible" that the Commission would soon be able to exercise jurisdiction over Internet access provided over cable networks. Hence, upon obtaining such jurisdiction, it would be this Commission's duty to ensure that this market is developing in a fashion that best meets California's goals of promoting lower prices and the ubiquitous availability of a wide choice of state-of-the-art services.

TURN concludes that any final approval of the application should be conditioned upon a subsequent review of the effect that the merger would have on residential high-speed Internet access, competition, choice, and price. Given AT&T's policy of closed access to its transmission facilities, TURN further recommends that the Commission require AT&T to provide nonaffiliated Internet Service Providers (ISPs) nondiscriminatory access to AT&T's transmission facilities for residential cable modem service as a condition of final approval of the merger.

GTE opposes the proposed merger between AT&T and MediaOne Group on the basis that it poses a threat to competition in the broadband Internet services emerging market. This is because AT&T would acquire control of MediaOne's high-speed cable Internet service, Road Runner. GTE asserts that this acquisition, coupled with AT&T's previously acquired TCI high-speed cable Internet service Excite@Home through a prior merger, would provide AT&T with access to over 80% of the broadband market. GTE further asserts that the proposed merger should be denied because Applicants failed to satisfy the requirements of § 854(a), (b)(3), and (c) that the proposed merger not adversely affect competition, that the impacts on the resultant entity be assessed, and that it be in the public interest.

GTE concludes that this statutory test would not be met because the proposed acquisition would severely harm competition by giving AT&T control of a large broadband customer base, and the ability to keep customers within the confines of its own network. GTE does not believe that an assessment of the resultant entity can be made at this time because the Commission cannot assess the resultant entity's probable financial condition, quality of service, quality of management, effects on employees and shareholders, state and local economies, or the Commission's jurisdiction. Even if § 854(b)(3) and (c) were found to not apply to the transaction before us, GTE believes the application must be denied because Applicants failed to satisfy the "public interest" criteria.

Alternatively, GTE proposes that the merger could be approved if the broadband Internet service market anticompetitive impact is resolved in this proceeding. In this regard, GTE recommends that AT&T and MediaOne Group be required to adopt specific conditions prior to any approval of the change in control. These conditions would require AT&T, MediaOne Group, and any other cable provider contractually affiliated with Excite@Home or Road Runner to allow any ISP to interconnect with their networks on nondiscriminatory equivalent terms, conditions, and access rates, and further, that Excite@Home and Road Runner continue to be maintained as distinctly separate subsidiaries.

On October 1, 1999, Applicants filed a response to TURN's and GTE's protests. Applicants contend that the protests lack merit because Applicants merely seek Commission approval for the change of control of a lower tier MediaOne group subsidiary, MediaOne Telecom, not its cable operations. Hence, Protestants` alleged impacts on broadband Internet and other cable service do not flow from and bear no nexus to the transfer of control of MediaOne Telecom.

Although Protestants are concerned about the impact of open access to ISPs over cable, Applicants assert that open access is not a valid issue because the Commission has no jurisdiction over either cable or the Internet. Even if the Commission had jurisdiction to act, Applicants conclude that the only alleged impacts on broadband Internet service competition linked to the merger, are those GTE issues based on an assumed merger of AT&T's Excite@Home subsidiary with Road Runner.

A protest must state facts constituting the grounds for the protest, the effect of the application on the protestant, and the reasons the protestant believes the application, or a part of it, is not justified. Pursuant to Rule 6(a)(2), any person protesting an application is also required to state in the protest any comments or objections regarding applicant's statement on the proposed category, need for hearing, issues to be considered, and proposed schedule. The proposed category of this proceeding was addressed in our prior Categorization discussion.

Only GTE requested that an evidentiary hearing be held. Upon the grant of an evidentiary hearing GTE planned to submit testimony regarding the competitive and public interest effects of the proposed merger to demonstrate that the merger would severely harm competition, and that it should be denied.

However, a protestant's request for an evidentiary hearing does not ensure that an evidentiary hearing will be held. The decision on whether an evidentiary hearing should be held is based on the content of the protest. (Rule 44.4.) Having carefully read and considered the application, the protests, and the reply to the protests, we find that the proposed transaction is subject to scrutiny under § 854(a). We also conclude that there is sufficient information in the record to determine whether the application complies with the requirements of §§ 851-854 as asserted by Applicants, and whether the application should be approved. Hence, the application can be adequately addressed in the following discussion of the application's compliance with §§ 852, 854(b)(3) and (c), and 854(a). An evidentiary hearing is not necessary in this matter.

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