B. Background

Applicants announced their planned merger in late 1999, and filed this application - as well as applications in other states, with the Federal Communications Commission (FCC), with the European Union and with the United States Department of Justice - soon after the announcement. Applicants claimed the merger would enhance their ability to compete with incumbent local exchange carriers (ILECs), enable them to offer consumers one stop shopping for a range of telecommunications services, and enhance their ability to compete in the broadband market.

WorldCom and Sprint called off their planned merger on July 13, 2000, after the United States Attorney General sued in federal court to block the merger¹ and the European Union voted to reject it.² The announcement came just two weeks after this Commission had held and completed a 13-day evidentiary hearing on the merger.

There is no evidence that Applicants' decision to terminate the merger was based on anything revealed in proceedings before this Commission. Nonetheless, the parties spent considerable time developing a record related to Applicants' products, services and pricing, especially for low volume callers; handling of customer complaints; and outreach and business in low income communities. Based on that record, TURN³ and Greenlining/LIF⁴ have asked us to find Applicants in violation of law in this decision. For several procedural reasons, we do not do so here. Nonetheless, we are sufficiently concerned with what we have learned to take several steps to make the record here available in other proceedings, and, if necessary, open an Investigation into Applicants' practices.

Because a merger inquiry often examines, among other things, the applicants' past business practices in an attempt to predict how they will operate as a combined entity in the future, the evidence adduced is often relevant to more than just the proposed transaction. Such is the case here: the record contains much information relevant to whether Applicants operate in the public interest. We do not wish to squander that record nor have Intervenors' efforts in developing it go unrewarded. Nor do we feel we can ignore the evidence before us to the extent it raises questions about whether Applicants fully disclose their prices, adequately serve low income and low volume customers, and deliver appropriate customer service. After all, both Sprint and WorldCom will continue business operations in California despite the merger's termination.

³ TURN asks the Commission to "order applicants to bring their business practices into conformity with both the law and their representations to this Commission, as follows:

Oral marketers for WorldCom and Sprint should disclose long distance options with no (or low) monthly fees or minimums whenever customer usage profiles suggest that such options might be appropriate for the customer. Sprint should discontinue any training which directs employees to decline to offer services to customers whose usage does not meet a desired level. WorldCom and Sprint should disclose on their websites their long distance options with no (or low) monthly fees or minimums as prominently as they disclose all other options. In its "fulfillment kit," WorldCom should disclose and detail all rates and charges equally prominently. Response of The Utility Reform Network to Applicants' Motion to Withdraw, filed August 18, 2000 (TURN Response).

intentionally turned away from serving the broader public immediately after promising the opposite, and instead engaged in continued de facto redlining against low-income and minority communities; violated its promises in the 1998 merger approval by failing to take any steps to make a facilities-based entry into the residential market or make its high speed data network available to low-income and minority communities; failed to promote, and in effect hid, the existence of its Family Assist Plan -- after promising in the 1998 proceeding to make this product available to low-income consumers -- so that those who most needed it would remain unaware of its existence; failed in its commitment to be beneficial to all California customers by largely ignoring non-English speaking customers in its marketing efforts and, more importantly, in its customer service; and allowed its zeal for profits and growth to lead it into marketing abuses which triggered both federal and state prosecutions in the last year alone, despite its 1998 commitments to quality service. WorldCom proposed in this proceeding several remedial measures, which need to be memorialized and strengthened. Response of Greenlining Institute and Latino Issues Forum to Motion of MCI WorldCom and Sprint to Withdraw Merger Application, filed August 18, 2000 (Greenlining/LIF Response).