[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]


 
                   THE TELECOMMUNICATIONS ACT OF 2000

=======================================================================


                                HEARING

                               before the

                  SUBCOMMITTEE ON TELECOMMUNICATIONS,
                     TRADE, AND CONSUMER PROTECTION

                                 of the

                         COMMITTEE ON COMMERCE
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS

                             SECOND SESSION

                               __________

                             MARCH 14, 2000

                               __________

                           Serial No. 106-95

                               __________

            Printed for the use of the Committee on Commerce




                    U.S. GOVERNMENT PRINTING OFFICE
64-020CC                    WASHINGTON : 2000







                         COMMITTEE ON COMMERCE

                     TOM BLILEY, Virginia, Chairman

W.J. ``BILLY'' TAUZIN, Louisiana     JOHN D. DINGELL, Michigan
MICHAEL G. OXLEY, Ohio               HENRY A. WAXMAN, California
MICHAEL BILIRAKIS, Florida           EDWARD J. MARKEY, Massachusetts
JOE BARTON, Texas                    RALPH M. HALL, Texas
FRED UPTON, Michigan                 RICK BOUCHER, Virginia
CLIFF STEARNS, Florida               EDOLPHUS TOWNS, New York
PAUL E. GILLMOR, Ohio                FRANK PALLONE, Jr., New Jersey
  Vice Chairman                      SHERROD BROWN, Ohio
JAMES C. GREENWOOD, Pennsylvania     BART GORDON, Tennessee
CHRISTOPHER COX, California          PETER DEUTSCH, Florida
NATHAN DEAL, Georgia                 BOBBY L. RUSH, Illinois
STEVE LARGENT, Oklahoma              ANNA G. ESHOO, California
RICHARD BURR, North Carolina         RON KLINK, Pennsylvania
BRIAN P. BILBRAY, California         BART STUPAK, Michigan
ED WHITFIELD, Kentucky               ELIOT L. ENGEL, New York
GREG GANSKE, Iowa                    TOM SAWYER, Ohio
CHARLIE NORWOOD, Georgia             ALBERT R. WYNN, Maryland
TOM A. COBURN, Oklahoma              GENE GREEN, Texas
RICK LAZIO, New York                 KAREN McCARTHY, Missouri
BARBARA CUBIN, Wyoming               TED STRICKLAND, Ohio
JAMES E. ROGAN, California           DIANA DeGETTE, Colorado
JOHN SHIMKUS, Illinois               THOMAS M. BARRETT, Wisconsin
HEATHER WILSON, New Mexico           BILL LUTHER, Minnesota
JOHN B. SHADEGG, Arizona             LOIS CAPPS, California
CHARLES W. ``CHIP'' PICKERING, 
Mississippi
VITO FOSSELLA, New York
ROY BLUNT, Missouri
ED BRYANT, Tennessee
ROBERT L. EHRLICH, Jr., Maryland

                   James E. Derderian, Chief of Staff

                   James D. Barnette, General Counsel

      Reid P.F. Stuntz, Minority Staff Director and Chief Counsel

                                 ______

   Subcommittee on Telecommunications, Trade, and Consumer Protection

               W.J. ``BILLY'' TAUZIN, Louisiana, Chairman

MICHAEL G. OXLEY, Ohio,              EDWARD J. MARKEY, Massachusetts
  Vice Chairman                      RICK BOUCHER, Virginia
CLIFF STEARNS, Florida               BART GORDON, Tennessee
PAUL E. GILLMOR, Ohio                BOBBY L. RUSH, Illinois
CHRISTOPHER COX, California          ANNA G. ESHOO, California
NATHAN DEAL, Georgia                 ELIOT L. ENGEL, New York
STEVE LARGENT, Oklahoma              ALBERT R. WYNN, Maryland
BARBARA CUBIN, Wyoming               BILL LUTHER, Minnesota
JAMES E. ROGAN, California           RON KLINK, Pennsylvania
JOHN SHIMKUS, Illinois               TOM SAWYER, Ohio
HEATHER WILSON, New Mexico           GENE GREEN, Texas
CHARLES W. ``CHIP'' PICKERING,       KAREN McCARTHY, Missouri
Mississippi                          JOHN D. DINGELL, Michigan,
VITO FOSSELLA, New York                (Ex Officio)
ROY BLUNT, Missouri
ROBERT L. EHRLICH, Jr., Maryland
TOM BLILEY, Virginia,
  (Ex Officio)

                                 (ii)




                            C O N T E N T S

                               __________
                                                                   Page

Testimony of:
    Furchtgott-Roth, Hon. Harold W., Commissioner, Federal 
      Communications Commission..................................    11
    Powell, Hon. Michael K., Commissioner, Federal Communications 
      Commission.................................................    19
    Ryan, Bruce D., Partner, Paul, Hastings, Janofsky & Walker, 
      LLP........................................................    28
Material submitted for the record by:
    Bliley, Hon. Tom, Chairman, Committee on Commerce, prepared 
      statement of...............................................    54
    Stearns, Hon. Cliff, a Representative in Congress from the 
      State of Florida, prepared statement of....................    51

                                 (iii)





                   THE TELECOMMUNICATIONS ACT OF 2000

                              ----------                              


                        TUESDAY, MARCH 14, 2000

              House of Representatives,    
                         Committee on Commerce,    
                    Subcommittee on Telecommunications,    
                            Trade, and Consumer Protection,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10:10 a.m., in 
room 2322, Rayburn House Office Building, Hon. W.J. ``Billy'' 
Tauzin (chairman) presiding.
    Members present: Representatives Tauzin, Stearns, Shimkus, 
Pickering, Markey, Gordon, Wynn, and Dingell (ex officio).
    Staff present: Justin Lilley, majority counsel; Cliff 
Riccio, legislative clerk; and Andy Levin, minority counsel.
    Mr. Tauzin. Good morning and welcome to this legislative 
hearing on the Telecommunications Merger Review Act of the Year 
2000. The Chair will recognize himself for an opening 
statement.
    When we in Congress passed the Telecom Act 1996, we 
eliminated the FCC's statutory authority to review telecom 
mergers by repealing Section 221(a) of the Communications Act 
of 1934. Our intent was, of course, to return the function of 
reviewing mergers in a competitive industry to the Attorney 
General's office while terminating the FCC's ability to 
condition mergers based upon market concentration or other 
antitrust law concerns.
    To emphasize this was, in fact, the true intent of 
Congress, let me quote directly from the Joint Explanatory 
Statement of the Conference for the 1996 Act.
    ``By returning the review of mergers to the DOJ, the repeal 
of Section 221(a) would be consistent with one of the 
underlying themes of the bill, to get both agencies back to 
their proper roles and to end government by consent decree. The 
Commission should be carrying out the policies of the 
Communications Act, and the DOJ should be carrying out the 
policies of the antitrust laws. The repeal would not affect the 
Commission's ability to review the transfer of licenses. 
Rather, it would simply end the Commission's ability to confer 
antitrust immunity.''
    Well, despite our best efforts to make clear that the FCC's 
authority is limited to reviewing license transfers in 
connection with mergers, the Commission has nonetheless devised 
a random, ad hoc, subjective system for review that is 
imprudently broad, arbitrary and capricious and, by all 
objective reasoning, way out of control.
    In case after case, the FCC has cited the public interest, 
necessity and convenience standard in Sections 214 and 310(b)of 
the Communications Act to impose entirely subjective conditions 
upon license transfers, in particular deals that simply boggle 
the mind. In almost all of the cases, the affected companies 
are forced to comply as license transfers are generally crucial 
to the actual completion of a merger or an acquisition.
    Needless to say, these conditions have no basis in law, and 
meeting these conditions is seldom necessary to bring the 
affected parties in compliance with existing FCC rules and 
regulations. As a result, the FCC now routinely reviews telecom 
mergers in a manner that takes far too long, is far too costly 
for taxpayers and the industry, creates far too much 
uncertainty in telecom marketplaces, and is too duplicative of 
the review conducted by the DOJ and the FTC.
    What the FCC apparently fails to respect is that Congress 
never intended the public interest standard to bestow upon the 
Commission the broad authority to consider market concentration 
and other competitive aspects of mergers or acquisitions. To 
the contrary, the whole point of allowing the FCC to review 
license transfers in connection with mergers is to ensure that 
newly merged or acquiring companies are in compliance with 
existing FCC rules and regulations--rules and regulations, I 
might add, that the FCC must construct as a matter of law to 
serve the public interest in the first place. As a result, 
Sections 214 and 310 clearly contemplated that the public 
interest, necessity and convenience are inevitably served upon 
a determination by the FCC that the transfer of licenses in 
question does not violate existing Commission rules and 
regulations. Once such a determination is made, little else is 
required of the FCC to properly carry out its responsibilities 
under Sections 214 and 310.
    While I can understand the appeal of reviewing the many 
intriguing mergers that are taking place out there, the 
Commission is clearly abusing its authority so that it can have 
a hand in all the excitement. Well, that may make working down 
at the Portals much more interesting, I suppose, but it makes 
working on the Hill quite frustrating, and I take serious 
offense to the draconian tactics the FCC resorts to in these 
merger review processes.
    Because the FCC has refused to accept its appropriate role 
in this process, the members of our committee must now 
legislate in order to control the Commission's renegade 
practices.
    The discussion draft that we have before us today is a good 
starting point from which to begin clarifying the 
congressionally intended scope of the FCC's merger review 
authority.
    The bill mandates that the FCC's denial of conditional 
approval of an application for the extension of lines under 
214, or for the transfer of licenses under 310, be based only 
upon the determination of what is required under existing FCC 
rules and regulations. This will prevent case-by-case, 
subjective determinations of what is in the so-called public 
interest and keep the FCC from engaging in DOJ/FTC-type review 
activities under the guise of communications law authority.
    The bill as well imposes the following time limits on the 
Commission review:
    In general, the Commission would have 90 days to complete 
action on applications in connection with mergers and other 
transactions; the Commission would have 60 days to complete 
actions on such applications submitted by the ``2-percent'' 
companies; and the Commission would only have 60 days to review 
a pending application that has been pending for more than 30 
days.
    These time limits will, of course, give the FCC little time 
to do anything else but determine whether mergers or other 
transactions are in compliance with existing rules.
    I want to thank in particular Mr. Pickering and Mr. Burr 
who have been the architects of this draft and who are going to 
be the guardian angels of the legislation as we process it. 
This is incredibly important work. It is our first step at 
beginning to impose some common-sense new parameters around the 
work of the Commission, leading hopefully I hope, I believe, 1 
day to a real restructuring effort that will bring the FCC more 
into the modern age of communications.
    I want to close by informing you of a letter I received 
just this January that reminded me of a letter I received in 
January 1998 from the Chairman of the FCC. It is a letter that 
I received and also that Senator John McCain received in 
connection with requests we made for the FCC to begin under its 
biennial review the process of looking at cross ownership rules 
of newspaper and broadcast ownership.
    The letter is interesting because it contains a commitment 
that within 2 weeks--in fact, here is a quote, first as to the 
newspaper broadcast ownership rules, the mass media bureau is 
currently preparing a notice of inquiry that will review this 
rule as well as the FCC's other broadcast multiple ownership 
rules not already subject to other pending proceedings. The 
bureau anticipates presenting this item for Commission 
consideration in the first quarter of 1998.
    People in this industry have been waiting for the first 
quarter of 1998 for 2 years. Mr. McCain and I have been waiting 
for the chairman to keep his word to us since the first quarter 
of 1998. It is this type of delay, this type of a problem we 
see at the FCC that is causing us to begin this process today, 
and we will not end this process until I think we have 
adequately examined the entire procedural aspects by which the 
FCC does take up matters for review, does do what Congress I 
think intends it to do and does, in fact, act expeditiously 
upon its work on mergers and acquisition and other matters so 
that parties can feel some sense that they will be objectively 
treated before the Commission. They will have a chance, if they 
don't like the Commission's answer, to take it to a higher 
authority.
    I yield back the balance of my time and yield to my friend, 
Mr. Markey, for an opening statement.
    Mr. Markey. Thank you, Mr. Chairman, very much, and I want 
to commend you for calling this hearing this morning on media 
mergers. I think that today's hearing can assist the 
subcommittee in its analysis of the procedures and review the 
Commission procedures that they perform during proposed mergers 
to effectuate line or license transfers.
    At a time when there are sweeping changes being wrought 
throughout the society by digital technologies and when such 
radical changes are inducing a wave of media mergers as 
companies attempt to position themselves advantageously for the 
future, a review of the procedures that the FCC utilizes when 
such mergers require line or license transfers is quite timely.
    The FCC, as with any agency or government anywhere, should 
periodically review its functions and operations to ensure that 
it is fulfilling its statutory obligations and, to the extent 
possible, performing its job efficiently. This is precisely the 
effort currently under way at the Commission, and I applaud the 
Commission for the steps that it is taking in this regard.
    Concern about the Commission's actions during its reviews 
of line or license transfers generally break down into two 
categories. The first is quite straightforward. Many 
participants in the process complain that it takes too long. To 
be sure, it often does take a long time. That may be a result, 
in some instances, of inefficiency at the Commission. The 
length of time, however, may also reflect the fact that many 
mergers require the analysis and approval of numerous transfer 
applications.
    In addition, the duration of the FCC's review is sometimes 
more lengthy than reviews conducted by the Justice Department's 
Antitrust Division. This is because quite often the FCC waits 
until the Antitrust Division has completed its review before 
issuing its decision so that changes made to the transaction, 
as a result of consent decrees, can be accounted for so that 
the public has the opportunity to comment and also to ensure 
that FCC decisions are not used to undermine ongoing antitrust 
review. Recognizing that timing is important in many mergers, I 
look forward to the ongoing efforts at the Commission to 
streamline its process as well as the discussions with 
colleagues on the committee on other ideas to address issues of 
timeliness.
    The second concern expressed about this issue deals not 
with the duration of the FCC's review but rather with the 
substance of the FCC's review. The Communications Act requires 
the Commission to determine whether applications that are filed 
to transfer lines or licenses are in the public interest. Over 
the years, the Commission has performed this function countless 
times, and over time what constitutes the public interest has 
necessarily evolved to reflect the evolution in the state of 
telecommunications competition and changes in American society.
    This public interest review is different from the review 
conducted by the Antitrust Division of the Justice Department. 
The Clayton Act empowers the Justice Department to challenge a 
merger that may substantially lessen competition, a standard 
that is designed to preserve competition that already exists. 
Of course, in many areas of telecommunications policy where we 
have had historic monopoly providers or a limited number of 
licensees, a standard crafted to preserve existing competition 
is particularly ill-suited to the endeavor embraced by the 
Telecom Act of 1996 of creating ever more competition.
    This makes the FCC's task substantively different than that 
of the Justice Department. Although to the extent that the 
public interest standard requires analysis of the competitive 
effect of a line or license transfer, certain analyses will 
necessarily be similar at both agencies.
    I do not support eviscerating the public interest standard 
at the FCC simply because it is inconvenient for the media 
moguls or broadband barons of today. The public interest 
standard over the years has been utilized to open 
communications markets to competitive marketplace forces, to 
analyze foreign ownership implications and to reflect the broad 
hopes and desires of the American people or the licensees 
entrusted to utilize the public's air waves.
    I welcome efforts to see that the Commission does its job 
more efficiently, but we must remember that government is not 
established to be solely efficient. It is also tasked to 
perform certain functions on behalf of the public. In looking 
at these functions today, I hope people will reflect on the 
fact that, for whatever imperfections the current system holds, 
the FCC in its stewardship of the U.S. telecommunications 
industry has helped deliver to the American people the highest 
quality, most competitive, most innovative telecommunications 
marketplace in the world, and that result has clearly been in 
the public interest.
    Again, Mr. Chairman, I thank you for holding this hearing. 
I look forward to hearing from our witnesses.
    Mr. Tauzin. I thank my friend.
    The Chair is now pleased to recognize the author of the 
legislation and, as I said, the prime motivator behind our 
bill, Mr. Pickering of Mississippi.
    Mr. Pickering. Mr. Chairman, I want to thank you for 
holding this hearing today and for your work and that of your 
staff in working with Congressman Burr and Congressman Dingell 
as we put together this discussion draft. I look forward to 
hearing from the commissioners today, their insights of what 
can be done to address this issue, both through this 
legislation and through their regulatory review and 
streamlining process.
    Since the passage of the Telecommunications Act of 1996, 
the change in the telecommunications industry has been massive 
as companies try to position themselves for the new information 
age economy. Many of these companies are attempting to combine 
their strengths to better position themselves to compete in a 
deregulated marketplace.
    One of the problems these companies have faced recently is 
the regulatory uncertainty of the FCC's merger review process. 
As we all know, the telecommunications industry is one of the 
key driving forces of our economy. As such, we in the Congress 
need to ensure that unnecessary government intervention doesn't 
cause needless delay in bringing new and innovative products to 
the market. Even more so, we must ensure that the business 
community is not competitively disadvantaged by an endless and 
uncertain regulatory review process.
    When we passed the 1996 act, the Congress imposed a variety 
of time constraints on the FCC, again trying to reach the 
objective of certainty in the regulatory process. I believe 
that many of us who were involved in that process did not think 
we would subject the communications community to these lengthy 
and uncertain delays that are occurring at the FCC.
    One of the biggest problems that some of my constituents 
have raised with me is not knowing if a merger will take 3 
months, 9 months or even 16 months. There is no simply no logic 
nor rationale to the FCC's lengthy process, and this life of 
uncertainty or--of certainty of the unpredictable nature of the 
regulatory process can have devastating effects on both large 
and small companies.
    This potential for lengthy reviews can force companies to 
miss product rollouts, miss a window of opportunity to raise 
venture capital, and at times has been manipulated by a 
competitor to forestall a decision by the agency. We simply 
cannot allow these scenarios to continue.
    This legislation will do what all legislation should do. It 
requires the process of government to work for the community 
they are meant to serve.
    In closing, I thank the witnesses for appearing today. I 
look forward to hearing from their testimony.
    Mr. Chairman, I look forward to working with you as we go 
forward in this process, and I look forward to working with the 
ranking member and with Mr. Dingell. Thank you.
    Mr. Tauzin. I want to thank the gentleman again, thank him 
and his staff for the excellent work and I think an excellent 
product that is being developed.
    The Chair is now pleased to welcome the ranking minority 
member of the full committee, my dear friend Mr. Dingell, for 
an opening statement.
    Mr. Dingell. Mr. Chairman, thank you; and I want to commend 
you for bringing about this hearing and also to commend my 
colleagues, Mr. Pickering, yourself, Mr. Burr, Mr. Boucher and 
Mr. Klink, for their cosponsorship of the legislation under 
consideration today.
    I want to observe that this legislation is a reproof of 
very serious character to the FCC, and it seeks to do something 
which the FCC should be doing by itself. I grieve that not more 
of the commissioners are here to participate in this hearing 
because it would be I think most beneficial.
    There is today, I think, great need to address and to 
reform the way the FCC handles its merger reviews. These are a 
remarkable exercise in arrogance, and the behavior of the 
Commission, ofttimes by reason of delay and other matters, 
approaches what might well be defined as not just arrogance but 
extortion.
    There is indeed today no more timely and important area to 
target for FCC reform. Hardly a week goes by without some 
breaking news about a new merger, acquisition, joint venture or 
other significant transaction in the telecommunications sector. 
The FCC should interest itself in these matters, but it should 
do so in accordance with law, in accordance with the 
Administrative Procedure Act and in accordance with the simple 
requirements of due process and simple decency.
    These are significant events, and the government does have 
an important responsibility, more so now than ever before, to 
analyze them carefully and to make sure that they are not 
harmful to the public and that the action which follows is 
consistent with the broad public interest.
    At the same time, the government has a duty to conduct this 
analysis fairly and openly and in a way that avoids imposing 
undue costs, burdens or other uncertainties on the merging 
parties or on the public.
    This is a high responsibility, little heeded by the FCC. 
Unfortunately, the current process of merger review at the FCC 
has achieved few, if any, of these goals. Quite the opposite. 
The FCC has done something which I regard as particularly 
outrageous. It has a peculiar habit of identifying some 
potential competitive harm to the public and then on that basis 
proceeding to extract concessions from the parties, usually 
concessions which have absolutely nothing to do with the 
transaction itself or with the perceived harm that the FCC 
announces would flow from this event.
    This is an extraordinary and a curious process. It doesn't 
serve anybody well. It doesn't protect the public from 
anticompetitive actions. It delays the process, it is unfair, 
and, in many instances, it either does or appears to far exceed 
the authority of the FCC, which chooses this curious way to go 
forward in order to accomplish some purpose to which they are 
not entitled for entirely different purposes, and the perceived 
abuse of the competitive concerns that the FCC sets forth seems 
to disappear entirely in the transaction once the FCC has 
gotten what it wanted. One must ask how different this is from 
protection payments made in Chicago or New York in the days of 
Al Capone and prohibition.
    As mentioned, it does not serve the public well. It does 
not benefit the public at all, and in order for the public to 
benefit, I would think that the FCC should justify this by 
establishing a clear nexus between the conditions placed on the 
merger and the predicted detrimental effects of the 
transaction. Unfortunately, such a nexus rarely exists, and it 
all seems to vanish in some kind of a bureaucratic file at the 
FCC, if ever such a nexus did in fact exist.
    Let us look at the CBS-Westinghouse combination of a few 
years ago. The FCC found and thundered mightily about how this 
transaction could impose a competitive threat to the public if 
it were simply approved without conditions. Oddly enough, the 
competitive threats disappeared totally when the parties agreed 
to air more children's educational programming each week.
    The FCC has the power to address the question of children's 
programming, and I happen to think that they should. The 
question is, why did they choose this extraordinary way to 
address the children's programming question without ever having 
a proper proceeding to address it or to do it without tying it 
to some other set of events?
    Now, the public is I think served better by children's 
television and more of it, but I cannot see the connection 
between this condition and the competitive threat the 
Commission was announcing that it was going to alleviate, and I 
look forward to hearing the Commission tell us about what 
happened to their concerns on competition that are not manifest 
in the approval which they brought forward.
    So the public then is left to grapple with whatever 
detrimental effect the transaction might have imposed in 
exchange for some goody that the Commission extorts from the 
parties, sometimes by reason of conditions which they impose 
and sometimes by just the practice of imposing extortion delay 
upon the parties engaged in a business undertaking which is of 
great importance to them and which, in frankness, they are 
entitled to have decided quickly by the Commission, something 
which seems to be very difficult for the Commission to do, even 
when they are not trying to extort something from persons who 
have business before the Commission.
    A better description of the current merger review process 
could be essentially a paraphrase of the old story which 
appeared in book form, How to Win Without Actually Cheating. We 
might say how to write the rules without actually following 
them.
    These concessions only apply to the merging parties, are 
not to be found anywhere in jurisprudence, and they do not 
apply to the competitors who oftentimes achieve a significant 
advantage from the practice. The practice is at total odds with 
the substance and the intent of the Administrative Procedure 
Act which ensures similar regulatory treatment for all parties 
similarly situated. But here that practice is not practiced nor 
is it required, and, indeed, the parties often find it 
impossible to go to court because of the penalties which they 
would suffer both in delay and, quite honestly, in punitive 
actions by the Commission.
    Now, I know I am taking more time.
    Mr. Tauzin. The gentleman is recognized. I am enjoying this 
a great deal. I will let him finish his statement.
    Mr. Dingell. I hope, Mr. Chairman, the Commission is, 
because they are most needful of hearing these things which the 
applicants before them do not have either the power or the 
courage to express.
    Having said these things, these ad hoc concessions often 
obtained during late-night sessions and constructed in curious 
back rooms and curious process at the FCC fly in the face of 
due process requirements that are firmly implanted in existing 
law, and they are something which cannot be challenged by the 
helpless people who appear before an arrogant and oppressive 
Commission.
    Now, let us look, evading due process requirements is not 
in the public interest, and I would challenge any member of the 
Commission to tell us how that kind of action is benefiting the 
country or the industry or the consumer. It mainly serves 
competitors, who are, of course, under no obligation to abide 
by the same conditions that are extracted and extorted from the 
merging parties. Competitors have every incentive to gain their 
own fair advantage, and sometimes it is quite obvious that the 
Commission is conferring a significant advantage on one 
competitor or another by this kind of extraordinary process.
    It is equally obvious that the competitors can gain this 
advantage with little effort, since the merging parties are 
under great pressure to strike a deal with the Commission, one 
from which there is no relief in the courts because of the 
extraordinary arrogance demonstrated by the Commission in 
connection with these matters.
    But even if the FCC actually imposed conditions that had a 
reasonable nexus to the ills they purport to cure, they would 
be unnecessary and wasteful given the intensive antitrust 
review and enforcement authority already vested in the 
Department of Justice and the Federal Trade Commission. These 
agencies have legions of staff superbly trained in the business 
of evaluating competitive threats to the public.
    For the FCC to travel down the same road without a clear 
standard of review to ensure uniform treatment of all parties 
before the Commission is remarkable at best. But the fact that 
the Commission is able to find these conditions and then trade 
them off against other concessions by the parties in a process 
that at best can be described as extortionate tends to indicate 
that here we have a system and a situation very much in need of 
control and reform. And I would note that this is in addition 
to the fact that the process constitutes the height of 
bureaucratic inefficiency, and I would advise it is also a 
dangerous and arrogant affront to the democratic process that 
the Commission is supposed to observe.
    Mr. Chairman, I am pleased to support the bill before the 
subcommittee today because I believe it will inject a dose of 
rationality into the merger review process. I reiterate, I 
think we need a strong merger review process. I observe we do 
not now have it. And, indeed, it appears to be one not just 
characterized by arrogance, indifference, extortion, laziness 
and dalliance on the part of the Commission, but it is also one 
which I think does not meet the high standard of tests set 
forth both in the Constitution and in the administrative 
procedure law.
    As I understand the bill, it would narrow the focus of 
review by the FCC to simply determine whether the proposed 
transaction, if approved, would be in compliance with laws and 
regulations already on the book or new rules duly promulgated 
prior to transaction approval. I look forward to hearing the 
comments of the FCC on whether they accept this welcome and 
needed constraint on their arrogance.
    It is important to note, however, that the public interest 
standard itself and the Commission's broad rulemaking authority 
that is derived from it are in no way impaired by the bill. The 
FCC will retain all its existing powers to write rules as it 
deems necessary and appropriate to protect the public interest. 
The bill would simply ensure that even the merger review 
context rules apply to everyone and are developed in a fair and 
open process with full participation by the public. What a 
terrible thing it is that the Congress must introduce 
legislation of this kind to curb excesses in an arrogant 
agency.
    Thank you again, Mr. Chairman, for holding this hearing. I 
look forward to moving ahead with this first, very important 
step toward FCC reform. I am hopeful that it will not have to 
be followed by legislation to abolish the Commission.
    Mr. Tauzin. The gentleman's 5 minutes has expired. I want 
to thank the gentleman.
    The Chair will ask on a point of personal privilege to make 
a few additional comments, without objection.
    Let me first say, Mr. Dingell, that your concerns about the 
FCC duplicating the work of the Justice Department are 
amplified in today's report on this hearing where we are told 
that, as part of the FCC's current review of the AOL Time 
Warner merger, that the FCC's general counsel is seeking 
additional information to better define the new market. It is a 
market analysis. Again, something you would think would be done 
by the DOJ in connection with this merger, another good example 
of what we are talking about.
    I wanted to take a personal privilege to clarify something. 
We have with us today an excellent panel, and I want to thank 
the commissioners who are here today and Mr. Ryan for coming to 
share with us your thoughts on this topic. I made a lot of 
comments in preparation for this bill and for the hearings that 
I think will follow and hopefully the congressional action that 
will follow. Some have thought my comments were judicious.
    Let me first say I share Mr. Dingell's passion, Mr. 
Pickering's passion about our concerns in this area. No citizen 
of our country ought to be treated differently before a 
Commission than another citizen similarly situated, yet that is 
what is happening in this process, and that is so disturbing. 
And no citizen of this country ought to subjected to the kind 
of things that happen to too many citizens of this country 
while they are waiting interminably for the Commission to act 
on an application, and the examples that have been brought to 
me are horrifying, and they stir the kind of passion that I 
think I exhibited in my words.
    But I want to straighten something out. In none of my 
comments have I tried to reflect negatively upon the 
commissioners. I happen to respect Chairman Kennard and every 
one of the members of the Commission very greatly, and I know 
that all of you serve indeed our country because you believe in 
public service and you come to this office at the Commission 
with that intent. I think that is true of every one of our 
commissioners, and I have deep respect and admiration for every 
one of you.
    It is the practices, the policies, the mindset, the 
circumstances, the results of some of those activities that so 
trouble me and so stir me to the words that I have used in many 
speeches.
    I am not going to back down from those words. As Mr. 
Dingell has pointed out, it is time that we address some of 
these problems, and I don't want to bring anybody up and put 
paper bags on their heads to tell their stories, and I don't 
want anybody arrested and sent to prison. I am not after 
anybody's head. I am after changing the procedures by which 
people can be abused in this process and by which Americans 
suffer at the hands of people who take advantage of them 
because they have made been vulnerable in this process. That is 
what I seek to cure.
    I know that the members of the Commission who are here 
today to testify share those concerns with me. You have 
expressed them to me privately. We want to find an answer. So I 
thank you for coming.
    Mr. Kennard himself I think is still in Peru today, is not 
yet back, although we extended an invitation to him to testify, 
but we will be looking forward to his testimony and his 
perspective on this at future hearings. In the meantime, I am 
pleased to welcome this panel and, indeed, delighted that we 
have been honored to have Harold Furchtgott-Roth and 
Commissioner Powell and Bruce Ryan with us today to share their 
thoughts on this important questions.
    We will begin with Commissioner Furchtgott-Roth, and we 
have a 5-minute rule, but we have a light panel. This is the 
only panel; and, as I said, we have time. I will extend to you 
to the same curtesies I extended to Mr. Dingell in fully 
elaborating on your comments and appreciate you doing so at 
this time. Commissioner Roth.

  STATEMENTS OF HON. HAROLD W. FURCHTGOTT-ROTH, COMMISSIONER, 
  FEDERAL COMMUNICATIONS COMMISSION; HON. MICHAEL K. POWELL, 
 COMMISSIONER, FEDERAL COMMUNICATIONS COMMISSION; AND BRUCE D. 
     RYAN, PARTNER, PAUL, HASTINGS, JANOFSKY & WALKER, LLP

    Mr. Furchtgott-Roth. Thank you, Mr. Chairman.
    Chairman Tauzin, distinguished members of the subcommittee, 
thank you for inviting me to testify before you today on the 
FCC merger review process. It is a great honor for me to be 
here today. I must say I only wish we were downstairs in the 
main committee room, which has the towering figures of Chairman 
Bliley and Mr. Dingell.
    This is a great committee. I think it is the greatest 
committee in Congress. It is the committee of Madison. It is 
the committee that has had many distinguished chairmen over the 
years. It has had many great accomplishments, and to have been 
downstairs today would have been a poignant reminder of 
Chairman Bliley's recent announcement of his retirement. I will 
miss him dearly in this committee, and the past 6 years have 
been extraordinary years for this committee. It has 
accomplished great things, and it remains the greatest 
committee on Capitol Hill.
    During my tenure at the Commission, I have developed great 
concerns about the process and practices employed in FCC merger 
reviews, the general topic of today's hearing.
    First, the Commission has no specific set of standards that 
it applies when reviewing applications to transfer licenses 
under the public interests standard. Our decisional precedents 
provide little concrete guidance on the substantive standard 
for approval of Title II or Title III license transfers. The 
proposition that a merger is in the public interest if it is 
not anticompetitive or if it is at all procompetitive, it is 
too generalized to be of any real help. This places applicants 
in an untenable position and raises real concerns as to whether 
they have received fair notice of their legal obligations.
    The Commission must attempt to set out the substantive 
tests for the review of license transfer applications. In my 
opinion, the public interest test for license transfers is 
satisfied if at the time of filing the proposed transfer 
complies with all applicable provisions of the Communications 
Act and all extant Commission rules and regulations. This 
interpretation of the public interest promotes clarity and 
transparency for applicants and the Commission itself.
    The ability to gauge in advance whether a particular 
transaction is likely to be permissible or not could save 
parties a lot of time, a lot of energy and a lot of costs in 
the transactional marketplace. Besides that, it is only fair, 
and the ability to know which standards to apply would allow 
the Commission to dispatch its duties with greater efficiency. 
Clearly, if the Commission's inquiry were not such an open-
ended one, it would go a lot faster.
    I have also developed great apprehension about the 
Commission's practice of conditioning grants for license 
transfer applications. I think it is entirely appropriate under 
the Commission's organic statute for the Commission to 
condition license transfer on compliance with existing 
statutory provisions and on existing FCC regulations. All too 
often, however, the Commission places conditions on license 
transfers that have no basis in the text of the Communications 
Act. That is, the Commission requires companies to do certain 
things, things that it could not for lack of statutory 
authority require outright in a rulemaking as a quo for the 
quid of receiving a license. Thus, the Commission imposes rules 
on merging companies that at best have never been considered 
and at worst have been considered and rejected by Congress.
    Even where the condition in question could conceivably be 
grounded in the Communications Act, company-specific regulation 
by condition as opposed to industrywide regulation by 
rulemaking is a problematic practice. It is the exceedingly 
rare case I believe in which a substantive duty ought to be 
required of only one telecommunications company but not 
similarly situated other companies who happen not to have filed 
license transfer applications. Such patchwork regulation begins 
to look like irrational regulation.
    The selective application of regulatory burdens to some 
entities but not others is not only difficult to justify as a 
legal matter but creates competitive disadvantages in the 
marketplace. When one company, due to the fortuity of a license 
transfer application, is subject to strictures not applicable 
to its competitors, the Commission in effect handicaps that 
company and advantages its competitors.
    Let me also note that much of the quid pro quo at the FCC 
is conducted behind closed doors, beyond public view and 
scrutiny. There are secret deals that are not revealed to the 
public--some written down, some not written down. All too 
often, the public interest standard at the FCC ignores a 
critical component, the public.
    There are many examples in the Commission's recent 
proceedings that illustrate the problems that I have described. 
I think the most forceful one, however, is that involving 
Southwestern Bell and Ameritech.
    A recent article in the Legal Times by Randolph J. May, 
entitled ``Any Volunteers? The FCC unfairly regulates by 
condition when it extracts concessions from merging telecom 
companies,'' explains it well, ``to merge their local telephone 
companies, SBC Communications and Ameritech had to obtain the 
FCC's permission to transfer the necessary licenses. After 
months of waiting for agency approval, the companies, 
``volunteered,'' last October to abide by 30 regulatory 
conditions, filling more than 60 pages.''
    Let me note, Mr. Chairman, that among those conditions that 
SBC and Ameritech volunteered were conditions that, in essence, 
required SBC to break the law at the time of the license 
transfer and to break the law every day since then, to fall 
outside of the Communications Act, nondiscriminatory 
provisions. I have described this in detail in my separate 
statement in which I dissented from those conditions.
    Now, returning to Mr. May's article, he says, ``Regulation 
by condition is unsound, because it imposes new burdens only on 
the merging parties. In the case of SBC and Ameritech, the 
merged companies are in no different position than other 
incumbent carriers, like BellSouth, which are not subject to 
the same requirements. The bottom line is that this process 
unfairly singles out merger applicants for regulation that, if 
justified at all, should be applied on an industrywide basis.''
    We can only be thankful, Mr. Chairman, that some of the 
conditions imposed on SBC, certainly the ones that require it 
to break the law, have not been imposed on an industrywide 
basis, so occasionally the ad hoc process is not as bad as if 
it were industrywide.
    Mr. Chairman, I am aware that the Chairman of the 
Commission has established a task force to review the FCC's 
merger review process. As I have told him as well as the 
capable staff heading that project, I applaud him for the step 
in the right direction. It is gratifying to know that my 
comments on this topic during my tenure at the Commission have 
been heard by the Chairman, and I deeply appreciate his 
responsiveness to my concerns. It is not clear, however, that 
the scope of the task force's review will be adequate to solve 
the problems associated with merger reviews.
    The task force is focusing solely on the procedural issues 
involved in merger applications, primarily timing. I feel 
obligated to observe that the Commission's merger review team 
has no plans to address any substantive issues related to 
merger review, such as legal standards of review or the 
practice of conditioning mergers. Quick perusal of the Web page 
dedicated to the review effort will confirm this. Thus, Mr. 
Chairman, the Commission merger review does nothing to address 
the problems at which your legislation is aimed.
    While any procedural reforms are to be commended, the 
substantive issues must, in my opinion be addressed. Reform of 
merger review that goes only to process and leaves in place the 
problems of ill-defined standards and conditional grants and 
secret meetings will have no effect on what commentators have 
called the FCC's version of, ``let's make a deal.''
    Thank you, Mr. Chairman.
    [The prepared statement of Hon. Harold W. Furchtgott-Roth 
follows:]
  Prepared Statement of Hon. Harold W. Furchtgott-Roth, Commissioner, 
                   Federal Communications Commission
    Chairman Tauzin, distinguished Members of the Subcommittee, thank 
you for inviting me to testify before you today on the FCC's merger 
review process. It is an honor to be here.
The FCC Lacks ``Merger'' Review Authority
    As a threshold matter, I would like to define the scope of the 
Commission's actual authority when reviewing, under sections 214 and 
310 of the Communications, license transactions involving merging 
parties. Contrary to its frequent assertions, the Commission does not 
possess statutory authority under those provisions to review, writ 
large, the mergers or acquisitions of communications companies.
    Rather, that Act charges the Commission with a much narrower task: 
review of the proposed transfer of radio station licenses from one 
party to another and review of the proposed transfer of interstate 
operational authorizations for common carriers. Nothing in the 
Communications Act speaks of jurisdiction to approve or disapprove the 
mergers that may occasion a transferor's desire to pass licenses on to 
a transferee. Under that Act, the Commission is required to determine 
whether the transfer of licenses serves the public interest, 
convenience and necessity.
    To be sure, the transfer of radio licenses and common carrier 
authorizations is an important part of any merger. But it is simply not 
the same thing. A merger is a much larger and more complicated set of 
events than the transfer of FCC permits. While we can consider the use 
of the licenses by the proposed transferee, the Commission almost 
always involves itself in an extended discourse on, and analysis of, 
lines of the company's business that have nothing to with the use of 
the licenses at issue.
    By using the license transfer provisions of the Communications Act 
to bootstrap itself into possession of jurisdiction over the entire 
merger of two companies that happen to be the transferee and transferor 
of licenses, the Commission greatly expands its organic authority.
    The Commission does possess authority under the Clayton Act, which 
prohibits combinations in restraint of trade, to review mergers per se. 
See 15 U.S.C. section 21 (granting FCC authority to enforce Clayton Act 
where applicable to common carriers engaged in wire or radio 
communication or radio transmission of energy). That power is rarely 
invoked by the Commission, however. If the Commission intends to 
exercise authority over mergers and acquisitions as such, it ought to 
do so pursuant to the Clayton Act, not the licensing provisions of the 
Communications Act. And under those provisions, I repeat, we review 
radio license transfers, not mergers.
Duplication of Department of Justice & Federal Trade Commission Efforts
    The Commission's focus on mergers rather than on license and 
authorization transfers creates another problem: our work often 
duplicates that of the Department of Justice's Antitrust Division and 
the Federal Trade Commission.
    Merging companies should not have to jump through excessive federal 
antitrust hoops, and those hoops should be held out by the institutions 
with the express statutory authority and expertise to do so. Those 
agencies are the Department of Justice and the FTC. When the FCC gets 
into the game as well, it increases the costs of the merging parties 
and expends taxpayer funds, while adding little value from an antitrust 
perspective. A report issued last month by the International 
Competition Policy Advisory Committee reached this very conclusion.
    If the Commission limited its review to the actual subject matter 
of 310--the transfer of radio licenses, as opposed to the proposed 
merger that triggered the transfer--this problem of duplicated efforts 
and wasted resources would be avoided.
Potentially Arbitrary Review: Choice of Transfers for Full-Scale Review 
        and Substantive Standards To Be Applied
    I also have grave concerns about the process and practices employed 
in FCC merger reviews. The current system--or rather, the lack of a 
clearly delineated one--puts merging entities in an inequitable and 
difficult situation.
    The Commission annually approves tens of thousands of license 
transfers without any scrutiny or comment; others receive minimal 
review, and a select few are subjected to intense regulatory scrutiny. 
For example, mergers of companies like Mobil and Exxon involve the 
transfer of a substantial number of radio licenses, many of the same 
kind of licenses as those at issue in other high-profile proceedings, 
such as AT&T/TCI, and yet we take no Commission level action on those 
transfer applications. I do not advocate extensive review of all 
license transfer applications, but mean only to illustrate that we 
apply highly disparate levels of review to applications that arise 
under identical statutory provisions.
    Unfortunately, there is no established Commission standard for 
distinguishing between the license transfers that trigger extensive 
analysis by the full Commission and those that do not. Nor do any of 
the Commission's orders in ``merger'' reviews elucidate the standard. 
Regulated entities and even their often sophisticated counsel are left 
to wonder whether or not their applications will receive relatively 
quick, pro forma review by the relevant Bureau, or whether their 
applications will take many months to process and engender open 
meetings, so-called public ``fora,'' and full Commission action.
    If the Commission did establish a threshold test for determining 
which license transfer applications should receive strict scrutiny, the 
Commission would still need to set out the substantive tests for the 
differing scrutiny levels. As a general matter, our decisional 
precedents provide little concrete guidance on the substantive standard 
for approval of Title II or Title III license transfers: the 
proposition that a merger is in the ``public interest'' if it is not 
anti-competitive (or if it is also pro-competitive) is too generalized 
to be of any real help.
    Moreover, there is clearly a different ``public interest'' test 
being applied, sub silentio, in different cases under the very same 
statutory provisions, usually sections 310 and 214. The cases that 
undergo extensive inquiry exhaustively discuss all kinds of service 
areas and issues ancillary to the use of the actual radio licenses, and 
the decisions that are granted at the Bureau level are relatively 
perfunctory in their public interest analysis. We should, after 
identifying the threshold test for license transfers that warrant 
thorough inquiry, articulate clearer substantive criteria to guide the 
Commission's inquiry
    The long and short of it is this: regulated entities currently have 
little basis for knowing how their applications will be treated, either 
procedurally or substantively. The license transfer process at the 
Commission is lacking in any transparent, fixed and meaningful 
standards. A person--even a well-trained lawyer--who wished to prepare 
for this process could find scant guidance in public sources of law. 
Rather, one would have to be trained in the unwritten ways of this 
Commission to know what to expect, and those expectations would often 
have little to do with the text of the Communications Act.
    In my opinion, the ``public interest'' test for license transfers 
is satisfied if, at the time of filing, the proposed transfer complies 
with all applicable provisions of the Communications Act and all extant 
Commission rules and regulations. This interpretation of the public 
interest has the benefits of simplicity and administrability. It 
promotes clarity and transparency for regulated entities and the 
Commission itself.
    Under this understanding of the public interest, regulated entities 
could refer to Title 47 of the U.S. Code and of the Code of Federal 
Regulations in order to ascertain, ex ante, the substantive standards 
to which their contemplated transfers would be subject. The ability to 
gauge in advance whether a particular transaction is likely to be 
permissible or not could save parties a lot of time, energy, and costs 
in the transactional marketplace. And the ability to know which 
standards to apply would allow the Commission to dispatch its duties 
with greater efficiency; clearly, if the Commission's inquiry were not 
such an open-ended one, it would go a lot faster.
``Conditional'' Approval of License Transfer Applications
    Finally, I would like to express today, as I have done many times 
before, great apprehension about the Commission's practice of 
``conditioning'' grants for license transfer applications. I think it 
is entirely appropriate, under the Commission's organic statute, for 
the Commission to condition license transfer on compliance with 
existing statutory provisions and the FCC regulations that implement 
them. In fact, the Communications Act specifically contemplates such 
conditions. Section 303(r) provides that the ``Commission shall . . . 
prescribe such . . . conditions, not inconsistent with law, as may be 
necessary to carry out the provisions of this Act.''
    All too often, however, this Commission places conditions on 
license transfers that have no basis in the text of the Communications 
Act. That is, the Commission requires companies to do certain things--
things that it could not for lack of statutory authority require 
outright in a rulemaking--as a quo for the quid of receiving a license. 
Thus, the Commission imposes rules on merging companies that at best 
have never been considered, and at worst have been considered and 
rejected, by Congress.
    Even where the condition in question could conceivably be grounded 
in the Communications Act, company-specific, regulation-by-condition--
as opposed to industry-wide, regulation-by-rulemaking--is a problematic 
practice. If, in the context of a license transfer, opponents of the 
transfer allege that additional regulations are necessary to achieve a 
certain end, that contention is most properly addressed in the context 
of rulemaking, not a company-specific order. It is the exceedingly rare 
case, I believe, in which a substantive duty ought to be required of 
one only telecommunications company but not similarly situated others, 
who happen not to have filed license transfer applications. Such 
regulation begins to look like irrational regulation.
    The selective application of regulatory burdens to some entities 
but not others is not only difficult to justify as a legal matter, but 
creates competitive disadvantages in the marketplace. When one company, 
due to the fortuity of a license transfer application, is subject to 
strictures not applicable to its competitors, the Commission in effect 
handicaps that company.
    I am also concerned about situations in which this agency becomes 
an enforcer of the rules and regulations of other governmental 
agencies. We have no jurisdiction to enforce rules not promulgated 
under the Communications Act. We cannot and should not do the 
enforcement work of others, thus putting ourselves in the position of 
potential enforcer of non-FCC rules should the transferee fail to 
conform to that regulation. For instance, if the Department of Justice 
enters into an antitrust agreement with a party, we have no business 
attempting to enforce the obligations created thereunder in our 
licensing orders, as the Commission has in the past suggested.
    I am doubly concerned about conditional FCC approval when the rule 
at issue is not just that of another agency, but when that agency has 
made no formal, final, and material findings of a violation. That is, I 
do not think we should take official notice of alleged violations, 
including matters under investigation or in litigation, or of informal 
concerns that an agency is not yet ready or willing to pursue through 
their own established procedures. When we give formal weight to 
anything short of formal, final findings by other agencies, we create a 
situation that is rife with incentives for inter-agency gaming of the 
system, e.g., registering an objection with an agency about a matter 
that the complaining agency is not prepared to pursue itself, and 
requires the Commission to do extensive reviews in areas where it 
simply has no experience or authority.
    In sum, at the intersection of two areas--non-FCC rules and no 
final determination of a violation by a responsible entity--our 
authority to impose conditions on a license transfer is at its weakest. 
Where non-FCC rules are at issue but there is a final, record finding 
of a material infraction thereof, there is a middle ground: we should 
take notice of that fact in deciding upon the application but not 
condition approval upon compliance. Finally, where extant FCC rules are 
involved, our power to condition a proposed transfer upon compliance 
with those rules and to enforce compliance, if necessary, is at its 
apex. We should never, however, impose conditions that have no basis in 
the text of the Communications Act, thus using our license transfer 
authority to impose new substantive obligations that Congress never 
contemplated.
Conclusion
    There are many examples in the Commission's recent proceedings that 
illustrate the problems that I have described. I think the most 
forceful one, however, is that involving Southwestern Bell and 
Ameritech.
    A recent article in the Legal Times by Randolph J. May, entitled 
``Any Volunteers? The FCC unfairly regulates 'by condition' when it 
extracts concessions from merging telecom companies,'' explains it 
well. I quote:
        To merge their local telephone companies, SBC Communications 
        and Ameritech had to obtain the FCC's permission to transfer 
        the necessary licenses. After months of waiting for agency 
        approval, the companies ``volunteered'' last October to abide 
        by 30 regulatory conditions, filling more than 60 pages. Most 
        of these conditions-such as requiring the merged company to 
        substantially restructure, provide huge discounts for 
        competitors' use of its network, and roll out advanced services 
        to low-income households-go far beyond the requirements of the 
        Communications Act or the FCC's rules.
Legal Times, March 6, 2000, page 62. And, as the article further 
explains:
        [R]egulation by condition is unsound, because it imposes new 
        burdens only on the merging parties. In the case of SBC and 
        Ameritech, the merged companies are in no different position 
        than other incumbent carriers, like BellSouth, which are not 
        subject to the same requirements. The bottom line is that this 
        process unfairly singles out merger applicants for regulation 
        that, if justified at all, should be applied on an industrywide 
        basis.
Id.
    Mr. Chairman, I am aware that the Chairman of the Commission has 
established a task force to review the FCC's merger review process. As 
I have told him, as well as the capable staff heading that project, I 
applaud them for this step in the right direction. It is gratifying to 
know that my comments on this topic during my tenure at the Commission 
have been heard by the Chairman, and I deeply appreciate his 
responsiveness to my concerns.
    It is not clear, however, that the scope of the task force's review 
will be adequate to solve the problems associated with merger reviews. 
The task force is focusing solely on the procedural issues involved in 
merger applications, primarily timing. (As an aside, I note that on the 
topic of time limits, the Commission's blanket 180-day (or 6-month) 
proposal is arguably inconsistent with section 5 of the Communications 
Act, which provides that with respect to applications not requiring a 
hearing the Commission should have ``the objective of rendering a final 
decision . . . within three months from the date of filing.''
    More importantly, however, I feel obligated to observe that the 
Commission's merger review team has no plans to address any substantive 
issues related to merger review, such as legal standards of review or 
the practice of conditioning mergers. Quick perusal of the web page 
dedicated to the review effort will confirm this.
    Thus, Mr. Chairman, the Commission merger review does nothing to 
address the problems at which your legislation is aimed. While any 
procedural reforms are to be commended, the substantive issues must, in 
my opinion, be addressed. Reform of merger review that goes only to 
process, and leaves in place the problems of ill-defined standards and 
conditional grants, will have no effect on what commentators have 
called ``the FCC's version of `Let's make a deal.' '' Id.
    Thank you.

    Mr. Tauzin. Thank you very much, Commissioner.
    I am pleased to--by the way, before I introduce 
Commissioner Powell, let me ask unanimous consent that the 
written statement submitted by Chairman Kennard be made part of 
the record. Without objection, it is so ordered.
    [The prepared statement of Hon. William E. Kennard 
follows:]
   Prepared Statement of Hon. William E. Kennard, Chairman, Federal 
                       Communications Commission
    Thank you for the opportunity to submit this testimony for the 
record concerning the role of the Federal Communications Commission 
(FCC) in reviewing applications for transfers and assignments of 
licenses associated with mergers. I regret that this hearing was 
scheduled after I committed to appear at several overseas meetings. 
Nonetheless, I am pleased to discuss a critical service that the FCC 
performs for the American people, and to give you an update of our 
ongoing efforts to make the agency's merger review process more 
efficient, transparent, and predictable.
Mergers in the Context of the Evolving Communications Marketplace
    Mergers and acquisitions involving firms holding licenses are not a 
new phenomenon. The FCC always has considered whether or not the 
transfers of control that are part and parcel of such transactions 
serve the public interest. We are not using novel procedures or 
applying new standards of review when considering these applications. 
We are, however, cognizant of the effect on our process of three 
accelerating and related trends since 1996: technological innovation, 
deregulation, and consolidation.
    Technological innovation, visible in the explosive development of 
the Internet, the shift to ``converging'' digital and ``broadband'' 
technologies, and the creation and expansion of a multitude of new 
enterprises, offers both enormous promise for growth and competition 
and a significant threat to more established firms based on status quo 
technology.
    Much of this innovation has resulted from deregulation under the 
Telecommunications Act of 1996 (1996 Act). After its passage, we 
shifted from the old model of regulated monopolies to a new model of 
achieving and maintaining vigorous competition in telecommunications 
markets. The opportunities opened up by the 1996 Act have stimulated 
incentives to innovate, and the resulting technological change has 
heated up competition.
    Following passage of the 1996 Act, the industries that hold 
licenses and authorizations from the FCC have experienced unprecedented 
consolidation, involving both large numbers of mergers and individual 
mergers that have set record after record for the value of assets being 
bought. When MCI WorldCom and Sprint proposed what was then the largest 
merger in history, six of the ten largest merger deals in history were 
within the telecommunications sector. The MCI WorldCom-Sprint merger 
has since been overtaken, first by AOL-TimeWarner, and most recently by 
Vodaphone-Mannesman.
    In some ways, mergers may assist competition and technological 
innovation. For example, mergers create more aggressive and efficient 
firms with larger pools of assets for research and development and 
reduce the transaction costs of cooperation among separate firms with 
complimentary technologies. On the other hand, existing firms may 
combine or purchase newer firms for defensive motives. They may seek to 
gain control over a new technology that competes with them in order to 
reduce the speed of its impact, or they may seek to preserve their 
position by size and leveraging control over related markets, rather 
than competition on the merits. Typically large mergers reflect a 
mixture of offensive and defensive strategies.
    The rising tide of mergers brought to the FCC a flood of 
applications for transfers and authorizations. Some of the largest 
mergers have involved parts of the old telephone monopoly seeking to 
get back together. Other mergers have involved increasing concentration 
in markets where the 1996 Act has been relying on vigorous competition 
to achieve the goals of making advanced telecommunications services 
available as quickly and inexpensively as possible to all Americans. 
Because of their number, size, and ambiguous impact on competition in 
their industries, these mergers have generated intense public scrutiny.
The FCC Has a Legal Duty to Review Mergers
    The FCC has the responsibility under Sections 214 and 310 of the 
Telecommunications Act to review whether the transfers or assignments 
of licenses or the authorizations sought in connection with a merger 
are in the public interest. Under the Communications Act, the FCC 
reviews applications relating to mergers in public proceedings, subject 
to the Administrative Procedure Act (APA) and judicial review. As a 
result, the FCC has addressed the often controversial issues 
surrounding these combinations. We do so in a forum that provides an 
opportunity to use our substantial expertise to examine the potential 
consequences of the proposed transactions with full participation by 
interested members of the public. Applying its expertise and taking the 
public comments into account, the FCC prepares a written decision 
addressing the issues. All of the FCC's decisions are subject to 
judicial review.
    Competition remains an important consideration in these 
proceedings. The FCC must consider the impact of transactions on 
competition as part of the public interest standard. Also, creating 
competition where none existed before is a basic goal of the 1996 Act, 
but it is not the focus of the more general antitrust law provisions 
administered by the Department of Justice (DOJ) and the Federal Trade 
Commission (FTC). In addition, preserving competition is of particular 
concern in an environment where vigorous competition is being relied on 
to achieve goals formerly served by regulations and where mergers of 
unprecedented number and size are taking place.
The FCC is Working to Make the Process Better
    The dramatic increase in merger activity, the complexity of the 
issues involved, and the extensive public comment on major mergers have 
required a substantial commitment of the FCC's resources. The FCC and 
its staff have worked hard to meet this challenge. I have taken 
additional steps in the last several months to make the FCC's process 
for reviewing merger-related applications more efficient, transparent, 
and predictable.
    We now have in place a Transactions Team within the Office of 
General Counsel to develop and implement measures to improve the merger 
review process. Since its creation, the Transactions Team has consulted 
with the Federal Communications Bar Association and the Antitrust Bar 
to develop proposals for improving our review process. On March 1, 
2000, the Transactions Team presented specific proposals in a Public 
Forum at the Commission. Those proposals include:

 A timeline that identifies the stages of FCC review and 
        assigns times for performing tasks with the goal of reaching a 
        Commission decision on applications associated with even the 
        most complex mergers within 180 days following public notice, 
        as long as the applicants do their part by providing necessary 
        information promptly and not making major revisions late in the 
        process
 A home page on the FCC Internet site, launched on March 1, 
        2000, that will serve as a central location for providing 
        information on the process of review and for tracking the 
        progress of pending applications
 Clarifying instructions for filing applications and explaining 
        the processes for considering them
 Streamlining procedures to encourage early and full disclosure 
        of relevant information and efficient and meaningful public 
        comment, and
 Continued cooperation with other agencies to avoid duplication 
        and maximize efficient use of the relative strengths of the 
        agencies involved.
    These proposals can be implemented rapidly, without the need for 
changes in the FCC's existing procedural rules. Comments on these 
proposals are due by March 21, 2000 and we are already implementing 
several of them, subject to any changes that seem advisable in light of 
public comment. We believe that these proposals will achieve the goals 
of efficiency, transparency, and predictability, while preserving the 
FCC's valuable role as a forum for public consideration of these 
transactions by an agency with expertise in the industry.
    In addition, we are working toward resolving the status of pending 
applications relating to proposed mergers of radio stations that would 
result in very high concentration of ownership in local markets. This 
week, I have circulated to the Commission a proposed policy to guide in 
the expeditious processing of these cases. As soon as this policy is 
approved, we will expedite and resolve cases like Cumulus Broadcasting.
The Draft Bill Would Deny the FCC Sufficient Flexibility to Resolve 
        Merger Cases
    Finally, I would like to specifically address some of the proposals 
in a draft bill circulating on the Hill this past week known as ``The 
Telecommunications Merger Review Act of 2000.'' I believe that the 
steps we have taken and are taking address the issues of speed, 
certainty, and inter-agency cooperation in a manner consistent with the 
FCC's duties and responsibilities under the law.
    In contrast, the proposed bill would limit regulation to rulemaking 
and impose drastically shortened time limits on FCC action. These 
solutions would create speed and certainty only by sacrificing the 
meaningful participation of the American people, by eliminating 
regulatory flexibility in a context where it is most essential, and by 
casting significantly increased responsibilities (but no additional 
resources) on the DOJ and FTC while eliminating inter-agency 
cooperation. The bill is, in short, a recipe for making scrutiny of 
mergers less public, less flexible, and less likely.
    With respect to public participation, the FCC process offers the 
only forum where the merger is considered in a public proceeding 
conducted under the APA. The DOJ and FTC investigations are exercises 
in prosecutorial discretion, conducted under the cover of 
confidentiality, with no requirement to explain action or inaction 
unless a lawsuit is initiated.
    The bill requires final agency action within 60 or 90 days from the 
filing of an application, with no provision that the application be 
accurate or complete or that the applicant submit information to allow 
informed consideration by the agency or the public.\1\ By statute, the 
public has at least 30 days from public notice (which can occur only 
after the application is checked for accuracy and completeness) to file 
petitions to deny an application, and additional time is needed to 
allow responses to the petitions. This leaves the FCC very little time 
to obtain any additional information it needs in order to analyze the 
transaction and prepare a decision addressing the issues, including 
those raised by the public, sufficiently to survive judicial review. 
Speed in the administrative process will do the parties little good if 
decisions are reversed by the courts.
---------------------------------------------------------------------------
    \1\ The special 60-day treatment is questionable, both because it 
is based on competition issues, which the bill seeks to keep at other 
agencies, and because it is based on national market share, when local 
market share seems much more relevant.
---------------------------------------------------------------------------
    Requiring regulation by rulemaking, as opposed to case-by-case 
adjudication, is particularly inappropriate in the context of 
evaluating mergers in markets where technology is rapidly evolving. 
Rules work best when the future is fairly predictable and we can 
anticipate with confidence what factors will be relevant and what 
standards will reflect sound policy. Rules take a relatively long time 
to enact and to change and would not adapt to the quickly evolving 
communications industry. Of course, this oversimplifies the issue, 
since the question is not whether there will be any rules--there always 
are--but how much flexibility the standards will allow.
The FCC Role Is Not Duplicative of Other Agencies
    Finally, with respect to duplication with DOJ and the FTC, let me 
emphasize that the FCC has a special responsibility and somewhat 
different standard in cases involving the creation of competition to 
replace former regulated monopolies. We look at whether the proposed 
merger is consistent with the pro-competitive and market-opening goals 
of the 1996 Act, as opposed to the DOJ and FTC, which focus on possible 
injury to existing competition. As I noted previously, we also provide 
for public involvement in our review process and engage in procedures 
that are judicially reviewable. For these and other reasons, the 
Assistant Attorney General in charge of the DOJ Antitrust Division 
recently expressly disagreed with a tentative majority recommendation 
in the recent report of the International Competition Policy Advisory 
Commission (ICPAC) that the DOJ and FTC be given exclusive jurisdiction 
over competition issues in telecommunications. The report noted that 
ICPAC had not discussed its recommendations with the sector regulatory 
agencies and all members agreed that more study and consideration of 
the consequences of such action are needed before any final action.
    In sum, I want to emphasize that the FCC plays a crucial role in 
the review of merger transactions in the communications industry, and 
we are taking the steps to improve our review process while preserving 
its integrity and unique contributions. The FCC seeks to preserve a 
public forum in which proposed mergers can be evaluated and responded 
to in a flexible way that is most appropriate in a rapidly evolving 
marketplace, and that makes most efficient use of the combined 
resources of federal agencies.
    Thank you again for the opportunity to submit this testimony and 
for your attention to these important issues.

    Mr. Tauzin. Now, I am pleased to welcome the Honorable 
Michael Powell, FCC Commission. Mr. Powell.

               STATEMENT OF HON. MICHAEL K. POWELL

    Mr. Powell. Good morning, Chairman Tauzin and Mr. 
Pickering. It is always a pleasure to have the opportunity to 
appear before you, particularly on this subject which I think 
is rightly the subject of various reform efforts. It is the 
topic of several pending bills in the House and Senate. It also 
now has been mentioned as the focus of an FCC transaction team.
    Reforming the FCC's role in mergers is timely as the 
blinding pace of strategic consolidations in telecommunications 
and media markets continues unabated. I will offer some general 
background on FCC review and compare briefly the distinctions 
between that process and the antitrust authorities. I will then 
offer some broad areas of consideration which I think would 
deserve the most focused attention by this committee and the 
Congress.
    First of all, the Commission over time has come to 
interpret its obligation, which it has in the statute, of 
making an affirmative finding that a license transfer is in the 
public interest as a fairly broad mandate to shift the public 
interest burden to the applicants and to review the benefits 
and harm of the entire transaction. In selected transactions, 
this includes comprehensive merger analysis.
    Let me briefly contrast the distinctions between the FCC's 
review and that of the antitrust authorities. The FCC review is 
not formally rooted in the antitrust statutes. It is not bound 
by judicial precedents in that area. In fact, the courts have 
held the Commission's decision that a license transfer is, ``in 
the public interest'' is entitled to ``substantial judicial 
deference.'' And while the antitrust authorities must sue 
companies to block a merger, the FCC may block a merger or 
condition one on its own, with limited, if any, judicial 
review. The antitrust authorities must prove their case by a 
preponderance of the evidence to block a merger, whereas the 
FCC places the burden on the applicants to affirmatively prove 
the transaction is ``procompetitive.''
    In most cases, the FCC's review follows the same line of 
analysis as that found in the antitrust merger guidelines. 
There are no actual, meaningful differences in most cases in 
the analysis than one finds with the antitrust authorities. For 
example, we define product markets, we define geographic 
markets, we make HHI assessments of concentrations in those 
markets. We make judgments about whether that market power 
results in anticompetitive effects. These are fundamentally the 
classic benchmarks of antitrust analysis applied by the 
antitrust authorities as well.
    While many of the distinctions I outline below are often 
cited by opponents of duplicative FCC review, point in fact is 
that, in large measure, the reviews follow the same course of 
evaluation as is undertaken by the antitrust authorities.
    It is hard to say there is no role necessarily for the 
expert agency on communications functions. There are certainly 
communications policies that may be implicated by a license 
transfer that are not encompassed in the antitrust statutes and 
given little consideration by the antitrust authorities.
    The classic example in this area of concern is that of, for 
example, ``diversity of voices'' in media mergers. Congress has 
often chosen to protect such values in the statute, even where 
concentration would not rise to anticompetitive levels, for 
example in the cable horizontal ownership rules.
    Thus, the Commission's review, in my opinion, could be 
effectively limited to matters that violate the statute and to 
policies that are not fairly encompassed within the Clayton and 
Sherman Acts. I would ask that my full testimony be submitted 
to the record where I proffer a number of reform options in 
each of these areas for your consideration, and I will only 
list them briefly here.
    Mr. Tauzin. Without objection, all the written statements 
of the witnesses are made a part of the record.
    Mr. Powell. Thank you, Mr. Chairman.
    For example, with respect to duplicity, one thing that the 
committee would have to consider is the repeal of FCC authority 
under the Clayton Act. While the FCC has rarely, and to my 
knowledge never, invoked the Clayton Act for basis of review, 
under that statute it expressly has conferred authority to 
conduct merger reviews under that provision. Any attempt to 
reform the process that leaves that element in place would 
leave the Commission vested with full merger analysis 
authority.
    Second, I believe requiring deference to the antitrust 
authorities' competitive analysis is warranted. There are other 
ways in which the Commission can express its views. For 
example, permitting the FCC to file comments with antitrust 
authorities in communications transactions would be one 
example.
    Finally, I would limit FCC review to questions about 
whether the combined company would be in compliance with the 
Communication Act or, again, matters that are not fairly 
encompassed within the Clayton and Sherman Acts.
    The second broad area of concern I would point to would be 
in the area of review standards and conditions. I believe that 
despite the emphasis in this debate on timeliness and process, 
that the real failings of FCC review stem from the standards 
and burdens applied in the mergers that do have some plausible 
statutory bases. In fact, with one or two unfortunate 
exceptions, most mergers are actually completed in a fairly 
expeditious amount of time, at least as antitrust analysis 
goes. How long a merger may take is certainly a source of 
uncertainty, but that uncertainty exists with the antitrust 
authorities as well and thus short FCC deadlines alone may only 
have a marginal effect on that uncertainty.
    The uncertainty really stems from the result of not knowing 
exactly what the FCC will focus on, or what the FCC will 
require in order for it to deem a merger ``procompetitive'' 
under the public interest standard. The public interest 
standard clearly lacks guiding principles that can more 
predictably govern Commission decisions.
    Whatever the merits of the standard in some context, and I 
do believe there are some, its applications to merger analysis 
is flawed. For one, I believe the most significant flaw of our 
standard is that it demands that the applicants prove a merger 
is procompetitive, rather than placing the burden on the 
government to prove that it is harmful. Indeed, under this 
standard the courts have even required that the Commission 
articulate a strong basis for actually allowing a merger to go 
through. Thus, the Commission's process necessarily invites a 
vague and open-ended scramble for the applicants to prove 
procompetitive benefits and also invites an equal torrent of 
parties demanding all kinds of concessions to get over the 
procompetitive hurdle.
    Under the Administrative Procedures Act, the Commission 
ends up by law having to consider and respond to any and all of 
these showings, which results in a lot of the uncertainty and 
delay that concerns us.
    I would note this is in stark contrast to antitrust 
authority, which places the obligation on the government to 
prove that the merger is harmful, not that it is beneficial. If 
we have faith in markets and deregulation, I believe that the 
government should always bear the burden of stopping a 
combination, rather than market participants proving it would 
be good to the satisfaction of regulators. Moreover, I believe 
focusing on harms and measures to remedy those harms is a more 
focused and disciplined endeavor, than a subjective and 
undisciplined search for procompetitiveness.
    I have other problems with this standard as it is applied 
as a simple balancing test. I am uncomfortable with a standard 
that simply places harms on one side of the scale and then 
collects and places any hodgepodge of conditions, no matter how 
ill-suited to remedying those identified harms, on the other 
side of the scale.
    The balancing approach leads to a number of problems. 
First, it creates a great temptation to load up the benefits 
side of the scale with a big wish list of conditions that are 
nongermane to the merger's harmful effects; that is, a pebble 
of harm could result in a mountain of conditions to demonstrate 
procompetitiveness.
    Second, it makes it easier for identified harms, even 
significant ones, to be visited upon the public in exchange for 
other benefits.
    Let me elaborate on this point with a humorous example. You 
might come up to me and ask if it is all right to beat my dog, 
if you give my dog a squeaky toy in exchange. The dog may 
appreciate the addition to his collection of squeaky toys but 
not necessarily enjoy the beating nonetheless.
    When conditions are procompetitive but don't necessarily do 
anything to remediate the harms identified, they nonetheless 
will be visited on the public irrespective of the benefits that 
are identified on the condition side.
    My third concern with the conditions is that they are 
sought more often as surrogates for policies and rules of 
general, rather than merger-specific, applicability, but 
without the extensive deliberative process and the check of 
judicial review normally afforded in a rulemaking. There is 
absolutely nothing voluntary about the regulator-regulatee 
relationship, and the suggestion that anybody proffers out of 
the goodness of their heart a condition in the context of a 
merger is pure fantasy. It is more disturbing when one 
considers that, by virtue of the conditions being deemed 
voluntary, they are probably insulated from judicial review.
    I assure you the Commission would be heard to say in court 
that the issue is moot because the parties had agreed to those 
conditions and that no Commission action caused them to come 
into being.
    Possible suggestions in the reform area. Establish 
standards or thresholds for determining which, if any, license 
transfers should be subject to more comprehensive review as 
Commissioner Furchtgott-Roth has identified.
    Second, which I think is the critical crux of the matter, 
place the burden back on the Commission to demonstrate the 
transfer would not be in the public interest, rather than the 
other way around. And also require any conditions to actually 
be related to or cure a violation of the statute or clearly 
identified public harms.
    Finally, I would say a word about process, which has been a 
chief concern among parties contemplating merger transactions. 
This is especially concerning to a competitive, technology-
focused industry that is running on Internet time. I do, too, 
applaud the Commission's self-initiated efforts in this area, 
though much work remains to be done. I, too, would emphasize 
that, while it does something to increase the procedural 
process, it does nothing to address the fundamental standards.
    Some of the pending legislative initiatives that have been 
offered would require the Commission to grant or deny the 
merger applications within a set period. I believe that time 
constraints are wise, but I do caution they should not 
necessarily be completely rigid or unbending. Mergers are fact-
intensive reviews that are not always easily boxed into 
particular time windows. They may be fine if you accept the 
presumption that the merger is procompetitive.
    But in those cases when they may actually visit substantial 
harm on the public, we would want the Commission, or whatever 
authority, to engage in as fulsome and thorough review of that 
as possible.
    I believe that the best approach may be to create temporal 
benchmarks in which the Commission is obligated to take action 
and only upon full authorization of the Commission be permitted 
to proceed with the further aspects of the investigation and 
only for very confined and limited periods of time.
    In my written statement, I offer just a strawman of a 
possible procedural outline, including some benchmarks that I 
think are also consistent and faithful, to what Congress is 
trying to achieve and would provide some suggested frameworks 
for doing so.
    With that, I thank you for the opportunity to be here, as 
always; and, moreover, I offer my personal commitment and 
assistance on a going-forward basis as you work through this 
important and difficult issue.
    [The prepared statement of Hon. Michael K. Powell follows:]
  Prepared Statement of Hon. Michael K. Powell, Commissioner, Federal 
                       Communications Commission
    Good morning, Mr. Chairman and other distinguished members of the 
House Subcommittee on Telecommunications, Trade and Consumer 
Protection. Thank you for inviting me here to testify on the 
``Telecommunications Merger Review Act of 2000.''
    The FCC's ``merger'' review process is rightly the subject of 
various reform efforts. It is the topic of several pending bills in the 
House and Senate, and is now the focus of an FCC Team. Reforming the 
FCC's role in mergers is timely, as the blinding pace of strategic 
consolidations in telecommunications and media markets continues 
unabated. I appreciate this opportunity to offer my views about the 
fundamentals of a sound and more efficient merger review process. After 
providing some background, I will discuss three broad areas where 
reform should be considered: (1) the duplication of merger review 
between the FCC and U.S. antitrust authorities; (2) the standards 
applied by the FCC to mergers and the selection of conditions; and (3) 
the FCC's review process, including its timeliness. Although I know 
that there is a specific proposal that is the subject of this 
legislative hearing today, my remarks will focus on these broad areas 
of concern and offer several reform options for each area.
                             i. background
    The FCC's authority to review license transfers derives principally 
from various sections of Title III of the Communications Act of 1934 
(entitled ``Provisions Relating to Radio'') that direct the Commission 
to review applications to transfer licenses and determine ``whether the 
public interest, convenience, and necessity will be served by the 
granting of such application . . .'' 1 If the Commission so 
finds, it must grant the application. Section 214 of the Act is the 
source of authority for approving applications for the acquisition and 
transfer of lines by common carriers.2 Thus, strictly 
speaking, the precipitating event for our review is a request to 
transfer licenses and lines from one company to another. We are not, it 
should be emphasized, specifically directed by Congress to review the 
potential anticompetitive effects of the underlying transaction itself.
---------------------------------------------------------------------------
    \1\ 47 U.S.C. Sec. 309(a); id. Sec. Sec. 308, 310(d). Though we do 
have some express antitrust authority under the Clayton Act, to my 
knowledge the FCC has rarely (if ever) invoked such authority as the 
basis for reviewing a merger merger. See 15 U.S.C. Sec. 21(a).
    \2\ See 47 U.S.C. Sec. 214(a)-(d).
---------------------------------------------------------------------------
    Nonetheless, the Commission, over time, has come to interpret its 
obligation to make an affirmative finding that a license transfer is in 
the public interest as a fairly broad mandate to shift the public 
interest burden to the applicants and to review the benefits and harms 
of the transaction itself.3 In selected transactions, this 
has come to include comprehensive merger analysis. That is, an 
evaluation of the competitive benefits and harms of the entire 
transaction rather than a more limited determination that the lines and 
licenses would be put to valued public use.
---------------------------------------------------------------------------
    \3\ See, e.g. Applications of Ameritech Corp., Transferor, and SBC 
Communications, Inc., Transferee, For Consent to Transfer Control of 
Corporations Holding Commission Licenses and Lines Pursuant to Sections 
214 and 310(d) of the Communications Act and Parts 5, 22, 24, 25, 63, 
90, 95, and 101 of the Commission's Rules, CC Docket 98-141, Memorandum 
Opinion and Order, 14 FCC Rcd 14712 (1999); Applications For Consent to 
the Transfer of Control of Licenses and Section 214 Authorizations from 
TeleCommunications, Inc., Transferor to AT&T Corp., Transferee, CS 
Docket No. 98178, Memorandum Opinion and Order, 14 FCC Rcd 3160 (1999); 
Application of WorldCom, Inc. and MCI Communications Corporation for 
Transfer of Control of MCI Communications Corporation to WorldCom, 
Inc., CC Docket No. 97-211, Memorandum Opinion and Order, 13 FCC Rcd 
18025 (1998); Applications of NYNEX Corporation Transferor, and Bell 
Atlantic Corporation Transferee, For Consent to Transfer Control of 
NYNEX Corporation and Its Subsidiaries, File No. NSD-L-96-10, 
Memorandum Opinion and Order, 12 FCC Rcd 19985 (1997).
---------------------------------------------------------------------------
    It is useful to contrast FCC review with that of the federal 
antitrust authorities (Department of Justice and the Federal Trade 
Commission). The FCC's review is not formally rooted in the antitrust 
statutes and thus is not bound by judicial precedents in that area. In 
fact, the courts have held that the Commission's decision that a 
license transfer is ``in the public interest'' is entitled to 
``substantial judicial deference.'' 4 Additionally, while 
the antitrust authorities must sue companies in court to block a merger 
they believe is harmful, the FCC may block a merger (technically a 
license transfer) on its own, with limited, if any, judicial review. 
Moreover, this difference affects the burden of proof. The antitrust 
authorities must prove their case by a preponderance of the evidence to 
block a merger, whereas the FCC places the burden on the applicants to 
affirmatively prove the transaction is ``pro-competitive,'' a fairly 
recent pronouncement.5
---------------------------------------------------------------------------
    \4\ SBC Communications, Inc. v. FCC, 56 F.3d 1484, 1490 (D.C. Cir. 
1995), quoting FCC v. WNCN Listeners Guild, 450 U.S. 582, 596 (1981).
    \5\ See Applications of NYNEX Corporation, Transferor, and Bell 
Atlantic Corporation, Transferee, for Consent to Transfer Control of 
NYNEX Corporation and its Subsidiaries, File No. NSD-L-96-10, 
Memorandum Opinion and Order, 12 FCC Rcd 19985, 19994, 20061, para. 16, 
153 (1997). But see also Applications of Pacific Telesis Group, 
Transferor, and SBC Communications, Inc., Transferee, for Consent to 
Transfer Control of Pacific Telesis Group and its Subsidiaries, Report 
No. LB-96-32, Memorandum Opinion and Order, 12 FCC Rcd 2624 (1997). 
Eight months before the Bell Atlantic/Nynex decision, the Commission 
concluded in the SBC/PacTel proceeding that ``the proposed transfer 
will result in procompetitive effects, efficiencies, and other public 
interest benefits that could be real but, if they occur, will not 
likely be dramatic. We emphasize that it is not these benefits of the 
proposed transfer, but rather its lack of any significant and 
foreseeable anticompetitive effects, that has led us to approve it.'' 
Id. at 2661 para. 84 (emphasis added).
---------------------------------------------------------------------------
               ii. duplication of merger review functions
    Proponents of FCC review in defending the duplicative merger review 
process often cite the distinctions I have just outlined. However, the 
actual differences in analysis and outcome when one examines actual 
cases are substantially less. In most cases, the FCC's review follows 
the same line of analysis as that found in the merger guidelines 
employed by the antitrust authorities. We define product and geographic 
markets, we evaluate market power in those markets, we propound on the 
anticompetitive effects of the combination, and we consider 
efficiencies and barriers to entry to mitigate those effects. In the 
main, there are no meaningful differences in the analysis among the 
agencies. Thus, despite the different foundations, procedures and 
standards among the respective authorities, the evaluations by the FCC 
and the antitrust authorities are largely duplicative.6 This 
imposes significant costs on a transaction. The costs to the parties 
include greater uncertainty of result, increased legal costs to defend 
a proposed transaction before multiple agencies, and greater 
uncertainty of time before closure. The government bears a cost as well 
with the duplicative expenditure of resources inherent in concurrent 
jurisdiction. In the FCC's case, scarce resources are diverted from 
other critical activities, for example section 271 
applications.7
---------------------------------------------------------------------------
    \6\ I would call the Committee's attention to a recent report 
issued by the Department of Justice's International Competition Policy 
Advisory Committee, which specifically addresses the overlapping 
merger-related functions of the U.S. antitrust authorities, sectoral 
regulators like the FCC, and the states. See Final Report, Justice's 
International Competition Policy Advisory Committee to the Attorney 
General and Assistant Attorney General for Antitrust at 142-154 and 
Annex 3-B.
    \7\ It is important to note that the FCC has substantially fewer 
people trained in competitive analysis to review mergers than does DOJ 
or the FTC.
---------------------------------------------------------------------------
    This is not to say, however, that there is no role for the expert 
agency in some transactions. There are communications policies that may 
be implicated by a license transfer that are not encompassed in 
antitrust statutes and, thus, given little consideration by the 
antitrust authorities. The classic example is the impact on ``diversity 
of voices,'' when media licensees merge. Congress has often chosen to 
protect such values, even where a consolidation might not raise classic 
concentration concerns.8 In these cases, the FCC's review 
does not duplicate that of the antitrust authorities.
---------------------------------------------------------------------------
    \8\ See, e.g., 47 U.S.C. Sec. 533 (Cable Television Ownership 
Restrictions) and Pub. L. No. 104-104, Sec. 202 (Broadcast Ownership).
---------------------------------------------------------------------------
    In sum, while today's duplicative merger process within the federal 
government needs to be reformed, I believe that there is room to 
preserve a role for the FCC that is more complimentary or 
supplementary. The Commission should be constrained to consider only 
issues such as whether the merger would violate an express provision of 
the Communications Act or the Commission's rules. In addition, it is 
appropriate for it to consider the merger's impact on other 
communications policies such as media diversity and universal service 
that are not appropriately considered by antitrust authorities. 
However, I believe that the Commission should be required to defer to 
the antitrust authorities' competitive analysis and leave it up to them 
(and the courts) to address specific competitive harms that they 
identify.
    Finally, a full-blown merger review is not the only way for the 
FCC's expertise to come to bear. The Commission could file comments 
with the appropriate antitrust authority reviewing a merger or issue an 
advisory opinion on a given merger.
Reform Options
 Require deference to antitrust authorities' competitive 
        analysis. Permit FCC to file comments with antitrust 
        authorities in communications transaction.
 Limit FCC review to questions about whether the combined 
        company would be in compliance with the Communications Act, and 
        matters that are not fairly encompassed in the Clayton and 
        Sherman Acts.
                  iii. review standards and conditions
    There are two areas in which standards come into play. First, there 
is a serious question about what standards the Commission employs for 
determining which license transfers receive extensive merger 
evaluation. Commissioner Furchtgott-Roth has spoken extensively about 
this problem and I will not repeat his criticism, but I do agree that 
the Commission's process on this point is vulnerable to challenge as 
arbitrary. The second standard issue involves the standard under which 
we review mergers: the public interest standard.
    The ``public interest'' standard has been a part of the law since 
the inception of the Federal Radio Commission and, its successor, the 
FCC. This standard was introduced to communications regulation in a 
time when scholars and Congress believed in the supremacy of regulators 
in ordering economic relationships. But we are now in an era just after 
the pro-competitive, deregulatory 1996 Act in which Congress sought to 
remove decisions from the ``enlightened regulator'' to the market. It 
is hard to imagine a member of Congress today expressing the view 
articulated by Senator Clarence Dill, in the 1927 Radio Act debates, 
that the public interest standard would gain meaning by the staffing of 
the Commission with ``men of big abilities and big vision.''
    I am substantially less comfortable than Senator Dill with a 
standard that depends heavily on the quality and ``vision'' of those 
who happen to occupy a Commission seat at any given time. The standard 
clearly lacks guiding principles that can more predictably govern 
Commission decisions. Whatever the merits of the standard in some 
contexts (and there are some), I believe its application to merger 
analysis is flawed. Particularly, since its has been employed as a 
simple ``balancing process'' that weighs the potential public interest 
harms of the proposed transaction against its potential public interest 
benefits.
    Consistent with my long-standing concerns regarding our license 
transfer process, I have fundamental difficulties with the public 
interest standard as developed and applied in the Commission's merger 
reviews. Simply put, I am very uncomfortable with a standard that 
places harms on one side of a scale and then collects and places any 
hodgepodge of conditions--no matter how ill-suited to remedying the 
identified infirmities--on the other side of the scale. This balancing 
approach leads to a number of problems: First, the approach creates a 
great temptation to load up the benefits side of the scale with a big 
wish list of conditions that are non-germane to the merger's harmful 
effects. Second, the approach makes it easier for identified harms, 
even significant ones, to be visited upon the public in exchange for 
other benefits. Third, the conditions that are sought are more often 
surrogates for policies and rules of general, rather than merger-
specific, applicability, but without the extensive deliberative process 
and the check of judicial review normally afforded a 
rulemaking.9
---------------------------------------------------------------------------
    \9\ A fuller recitation of my critique of standards and conditions 
can be found in my separate statement, dissenting in part, in the SBC/
Ameritech merger Order.
---------------------------------------------------------------------------
    A. The Problem of the Mountain and the Pebble--To conceptualize the 
problems with the public interest standard when reviewing a license 
transfer (i.e., a merger), consider a simple balancing scale of the 
``see-saw'' variety. On the left side of the scale are public interest 
harms and, on the right, public interest benefits. The balancing 
approach requires that the benefits outweigh the harms. If the harms 
weigh but an ounce more than the proposed benefits, the standard (if 
faithfully applied as articulated) would require us to block the 
merger. This approach is troubling on one level, for if the government 
were neutral with respect to the asserted benefits, it still could be 
compelled to stop a merger based on essentially negligible harms. This 
has led me to believe that perhaps the FCC should bear the burden of 
demonstrating a basis for blocking or conditioning a merger (much as 
the antitrust authorities do) rather than placing an affirmative duty 
on applicants to show their combination is pro-competitive.
    The more serious problem arises with the public interest ``scale,'' 
however, when the Commission, rather than weighing the harms against 
the proffered benefits, attempts to tip the balance by adding weight to 
the benefits ``platter'' with conditions. The public interest standard, 
as the Commission applies it, does not require that the conditions cure 
or remedy the identified harms. The conditions need only outweigh the 
harms. Thus, the Commission is free to compensate for a pebble of harm 
on one side of the public interest scale by throwing a mountain of 
purportedly beneficial conditions on the other side of the scale. In 
other words, when conditions are not calibrated to remedy harms, there 
is no constraint on how voluminous or unrelated they might be. The 
consequence of this approach is that the slightest harm opens up a 
quarry of ``would-be-nice-to-haves'' that can be piled on the scale. 
Moreover, the coercive effect of having the applicants over a barrel 
hoping to gain merger approval dramatically improves the chances that 
the companies will ``agree'' to abide by the conditions. Thus, the 
temptation and the enticement to stack the scale with precious gems is 
irresistible to competing companies, interest groups and the Commission 
itself.
    B. ``Poor Joshua!'' 10--The second difficulty I have 
with the Commission's merger standard is that in theory, it will allow 
a merger to go forward that it finds will harm the public, as long as 
the public gets something good in return. In the humorous extreme, one 
could analogize this to allowing a stranger to beat your dog as long as 
he commits to giving the dog a bone and some fun squeaky toys. No 
doubt, the ``ol' boy'' has been quite anxious to get a bone and add to 
his saliva-laden collection of playmates, but not at the expense of a 
beating. Of course, this analogy is perhaps less humorous if one 
assumes that the public interest is entitled to better treatment than 
your dog.
---------------------------------------------------------------------------
    \10\  This famous refrain is drawn from DeShaney v. Winnebago 
County Dept. of Social Services, 489 U.S. 189 (1989) (J. Blackmun, 
dissenting) (holding that state had no constitutional duty to protect 
Joshua, a child, from his father after receiving reports of possible 
abuse). In DeShaney, Justice Blackmun wrote: ``Poor Joshua! Victim of 
repeated attacks by an irresponsible, bullying, cowardly, and 
intemperate father, and abandoned by respondents who placed him in a 
dangerous predicament and who knew or learned what was going on, and 
yet did essentially nothing except . . . dutifully record[ ] these 
incidents in [their] files.'' Id. at 213.
---------------------------------------------------------------------------
    Jests aside, the point is that when merger conditions are not 
designed to remedy harms, all the unrelated benefits in the world will 
not cure the loss to the public. If one is convinced of the 
significance of a proposed merger's harms, it is unsettling that the 
merger would proceed without significantly mitigating those harmful 
effects with remedial conditions.
    C. Wither Thoughtful Deliberation?--I think it a profound mistake 
to use license transfer proceedings as a way to advance policies of 
general applicability that are otherwise, and more appropriately, the 
subject of rulemakings. My reasons are three:
    First, no matter how much we try to include other parties, a merger 
review is primarily an intimate, bilateral dance between the government 
and the applicants. The nature of this dance is one of negotiation. 
Where there are some harms and the question is finding a set of 
conditions that will allow the merger to proceed, the tango proceeds 
until there is a meeting of the minds between the government and its 
suitor. The parties inevitably go back and forth in an effort to find a 
compromise where the government gets a satisfactory list of conditions, 
but not so many that the applicants walk away from the deal. Thus, the 
process is not sufficiently fulsome to broach broader policy questions. 
The point also shows the importance of requiring conditions to be 
merger specific.
    Second, by importing parts of rulemakings and transforming them 
into merger conditions, we risk substantially confusing both the 
industry and state commissions with respect to rules previously 
adopted. The conditions often overlap significantly with many of our 
ongoing proceedings to implement the Telecommunications Act of 1996. In 
tackling these other proceedings, the Commission must consider more 
than the interests of the merging parties. Relying on conditions that 
overlap with more general proceedings will require us to distinguish 
carefully this conditioning exercise from our broader duties under the 
Act.
    Third, I personally am uncomfortable essentially promulgating rules 
without the deliberative process of notice and comment normally 
afforded in a comprehensive rulemaking. Moreover, I think it 
unacceptable to pursue matters as conditions where they are insulated 
from judicial review. In a classic rulemaking, parties have the right 
to petition for review in court. But when a merger is approved with 
conditions, the applicants are unlikely to pursue a challenge to terms 
that regulators will claim they acceded to ``voluntarily'' as the price 
for gaining favorable approval.
    Finally, I do not subscribe to an essential assumption of this 
process, that is, the idea that a regulated entity can ``voluntarily'' 
offer and commit to broad-ranging legal obligations and penalties. 
There is never anything voluntary about the regulatory relationship. 
And, even if there were, I do not believe that the guiding structures 
of the regulatory process (either rulemaking or adjudication) should be 
supplanted by a unilateral offer from a license transfer applicant.
Reform Options
 Establish standards or thresholds for determining which, if 
        any, license transfers should be subject to more comprehensive 
        review.
 Establish guiding principles to curtail the breadth of the 
        public interest standard.
 Require conditions to either cure a violation of the statute, 
        or remedy clearly identified public harms.
 Place the burden on the Commission to demonstrate that a 
        license transfer would not be in the public interest.
                              iii. process
    This brings me to my last area of consideration, the process of 
reviewing mergers at the FCC. Chief among the concerns of parties 
contemplating merger transactions is how long will it take to get 
through all of the regulatory hurdles. This is especially concerning to 
a competitive, technology-focused industry that is now running on 
Internet time. I believe that reform in the substantive areas I have 
already discussed could alleviate much of the delay of major 
transactions caused by monkeying with competitive issues that are not 
within our core expertise, inviting and addressing all sorts of non-
germane challenges and negotiating ``voluntary'' conditions. But the 
process itself also needs examination.
    The FCC Office of General Counsel's ``Transactions Team'' has 
recently proposed a 180-day timeline for completing our review of major 
transactions. Under the staff's proposal, the clock would start at the 
release of the FCC staff's ``Public Notice'' announcing the 
applications underlying the transaction have been accepted for filing 
and inviting the filing of petitions and comments. I applaud the 
Commission's self-initiated efforts in this area, though much work 
remains to be done.
    Some of the pending legislative initiatives that have been offered, 
including the measure that is the subject of this hearing today, would 
require the Commission grant or deny the merger applications within a 
set period (e.g., 90 days) from the date the application is filed. I 
believe the current statute itself offers some guidance as to how to 
structure the chronology of review. I would note that section 5(d) of 
the Communications Act, added by Congress in the early 50s, provides 
for a non-binding ``objective'' of rendering a final decision (1) 
within three months from the date of filing in all original 
application, renewal, and transfer cases in which it will not be 
necessary to hold a hearing, and (2) within six months from the final 
date of the hearing in all hearing cases. In addition, Section 309 of 
the Act, especially subsections (d) and (e), provide a well-understood 
process of handling all Title III applications and oppositions thereto.
    I believe that time constraints are wise, but must not be 
completely rigid or unbending. Mergers are fact intensive reviews that 
are not always easily boxed into particular time windows. Moreover, 
short time frames may be fine for pro-competitive mergers, but in the 
face of real public harm, it is important for the government to act 
thoroughly and decisively. Short time frames may also allow the parties 
to game the process to deny the Commission the information it needs to 
make an informed judgment in order to run out the clock. I think the 
more prudent approach is to set clear temporal benchmarks and require 
the full Commission to authorize any further review, and then only for 
limited blocks of time. Let me offer an example:

(1) Filing and Quick-look: Once an application is filed, the 
        appropriate Bureau will give the application a ``quick-look'' 
        to ensure the application is complete. If so, the application 
        is accepted and placed on public notice (within 5 to 10 
        business days).
(2) Comment Period: For 30 days, parties in interest have an 
        opportunity to petition to deny the application under section 
        309, and the applicant will be afforded the opportunity to file 
        a reply.
(3) Stage 1 Review: After the comment period ends the bureau will 
        review the application to determine if the transfer would 
        result in public harms (45 to 60 days).
(4) Commission Review: At the end of stage 1 review, the Commission by 
        formal action must either:
    (a) Grant the application (and denying the petitions to deny) with 
            or without conditions;
    (b) Authorize further investigation by the staff for a defined 
            interval (e.g., 60 days), triggering stage 2 review, with 
            perhaps additional comment; or
    (c) Designate the application for administrative hearing in 
            accordance with section 309 of the Communications Act and 
            applicable provisions of the Administrative Procedures Act. 
            (Congress could authorize a less onerous paper hearing, 
            than a hearing on the record.)
(5) Decision: The vast majority of cases should take no longer than 60 
        to 90 days. In the most complex cases, where significant and 
        germane public harms have been identified in the Stage 1 
        review, our final decision should be rendered within six to 
        nine months from the filing of the application.
                             iv. conclusion
    I look forward to continuing to work with Members of Congress and 
with my colleagues on the scores of transactions that are likely to 
come before us and the initiatives to reform this process.
    Thank you for your attention. I will be happy to answer any 
questions you may have.

    Mr. Tauzin. Thank you.
    Let me thank you both for some very instructive testimony, 
and it is exactly what we were hoping we would receive today, 
some ideas and thoughts about how we might put our arms around 
this thing and solve it. I thank you very much.
    We are pleased to welcome Mr. Bruce Ryan, a partner of 
Paul, Hastings, Janofsky & Walker here in Washington, 
substituting for Mr. Richard Weening of Cumulus Media. Mr. 
Ryan.

                   STATEMENT OF BRUCE D. RYAN

    Mr. Ryan. Thank you, Mr. Chairman and members of the 
subcommittee. I am outside counsel to Cumulus Media and have 
represented them in connection with matters before both the 
Department of Justice Antitrust Division and the Federal 
Communications Commission.
    I thank you for the opportunity to appear before you today 
in connection with the consideration of the Telecommunications 
Merger Review Act of 2000.
    Richard Weening, the Executive Chairman of Cumulus, 
apologizes very much for not being able to attend this morning 
due to an unavoidable and last-minute complication, but we do 
thank you for allowing me to substitute for him.
    Cumulus Media is a radio broadcasting company based in 
Milwaukee, Wisconsin, which is focused on the acquisition, 
operation, and development of radio stations in mid-sized 
cities throughout the United States. Including acquisitions 
somewhere in the FCC approval process, Cumulus now owns, 
operates or has agreed to acquire over 300 radio stations in 
over 60 cities in the U.S.
    By number of stations, Cumulus is now the second largest 
radio station owner in the United States, assuming that the 
proposed merger between Clear Channel Communications and AM/FM 
is completed as planned.
    In the Telecommunications Act of 1996, Congress changed the 
rule as to the number of radio stations that one person or 
company could own or control in a city of a given size. The 
former two-station duopoly rule was replaced in Section 202(b) 
of the Telecom Act with a new set of ownership limits that 
specified the exact number of commercial radio stations that 
any one party may own, operate or control.
    The statute set from five to eight stations, depending on 
the total number of stations providing service in that 
location. These revised ownership limits in the statute were 
designed to help radio operators create clusters of multiple 
radio stations that could operate for less through cost savings 
and other efficiencies, while delivering more to listeners and 
advertisers within their service areas.
    The result of this congressional plan, we believe, has been 
to revitalize radio, enabling it to better compete with 
newspapers, television, and other advertising media and to 
become generally a much more viable business.
    Although the FCC has incorporated Section 202(b)'s 
ownership limits into its own regulations, the FCC also 
currently engages in detailed competitive reviews of radio 
mergers and acquisitions as part of the license transfer 
approval process. The FCC does this pursuant to authority it 
claims under the public interest standard of Section 310(d) of 
the Communications Act.
    Cumulus, Mr. Chairman, has three primary concerns with this 
approach. First, we believe strongly that the FCC cannot 
lawfully shrink the ownership limits of the Telecom Act. Since 
Section 202(b) already delineates with precision the number of 
radio stations that a single party may own in a local market of 
a given size, we believe that the FCC does not have a proper 
role to play in formulating a different policy based on its 
general views of the public interest.
    Second, we believe it imposes an unnecessary burden and 
simply is not a sensible use of government resources for the 
FCC to review acquisitions based on the same type of market 
concentration concerns that the Department of Justice already 
considers, and this appears to be what the FCC is doing in the 
case of radio, as Commissioner Powell described this morning.
    To date, the FCC has not articulated any justification for 
imposing this additional layer of competitive evaluation on 
radio mergers and acquisitions, and the FCC has not articulated 
any clear standards to govern its evaluation. The proper course 
is to leave such review where it belongs, with the expert 
agencies charged with enforcing the antitrust laws.
    Third, the unusual combination of the small size of many 
radio transactions, especially in the smaller and mid-sized 
media markets, and the need to obtain FCC approval of the 
acquisitions often means that the Hart-Scott-Rodino Act 
effectively has been stood on its head. Not only does the 
government, through two agencies, have the power to investigate 
small radio acquisitions, but it faces no time deadline in 
doing so. The result is that the parties to these relatively 
small deals have sometimes had to endure costly and duplicative 
competitive reviews, even for periods of time beyond those 
applicable to much larger transactions, and we mention a few of 
them in the prepared testimony.
    In our testimony, we describe some of Cumulus' experience 
under the current regulatory system and the reasons why we 
believe that the proposed bill may bring about helpful change. 
While most of Cumulus' radio license transfers have been 
processed very efficiently and promptly by the FCC staff and we 
believe the staff deserves credit for its diligent efforts to 
keep up with a sharply increased workload since the Telecom 
Act, some applications unfortunately have been sidetracked by 
subjective case-by-case assessment of competitive issues that 
are wholly outside the FCC's written rules.
    Delays and unnecessary regulatory burdens of this sort 
often threaten to disrupt small radio transactions and other 
transactions and can cause serious financial hardship to 
parties. We believe this legislation would help by shortening 
the FCC's merger review process by requiring action to be 
completed on most license transfer applications within 90 days. 
It also would help clarify the role of the FCC by eliminating 
duplicative competitive reviews and by requiring that denials 
or conditional approvals of applications be based solely on the 
requirements of existing FCC rules and regulations.
    Mr. Chairman, that concludes my testimony. I thank you, 
again, for the opportunity to appear today; and I would be 
happy to answer any questions the subcommittee may have.
    [The prepared statement of Richard Weening follows, as 
presented by Mr. Ryan:]
  Prepared Statement of Richard Weening, Executive Chairman, Cumulus 
                               Media Inc.
    Good Morning, Mr. Chairman and Members of the Subcommittee. I am 
Richard Weening, Executive Chairman of Cumulus Media Inc. Thank you for 
inviting my testimony. While the bill that is the subject of this 
hearing may primarily be focused on the regulatory approval process for 
large telephone company mergers and major multi-media transactions like 
AOL-Time Warner, based on Cumulus's experience with radio station 
license transfers since the passage of the Telecommunications Act of 
1996, we also are keenly interested in the subject matter of the 
``Telecommunications Merger Review Act of 2000''.
    Cumulus Media Inc. is a radio broadcasting company based in 
Milwaukee, Wisconsin. We are focused on the acquisition, operation and 
development of radio stations in mid-sized U.S. cities. Arbitron ranks 
markets by size from 1 to 275. We generally focus on markets ranked 50 
or smaller. Including acquisitions somewhere in the FCC approval 
process, we now own, operate or have agreed to acquire over 300 radio 
stations serving over 60 cities across the United States. By number of 
stations, Cumulus is now the second largest radio station owner in the 
U.S, assuming the Clear Channel-AM/FM merger is completed as planned.
    This morning I would like to describe for the Subcommittee some of 
the experiences of my own Company and how those experiences may 
illustrate the need for the type of legislative action you are 
considering.
                               background
The Telecommunications Act of 1996 and Its Positive Impact on Radio
    In Section 202(b) of the Telecommunications Act of 1996, Congress 
changed the rules as to the number of radio stations that one person or 
company could own or control in a city of a given size. The two-station 
``duopoly'' limit was replaced with a new rule that allows ownership of 
five to eight stations depending on the total number of stations 
providing service to the city. In making the new rules, Congress 
attempted to balance the urgent economic and competitive realities that 
dictated multiple-station ownership with the avoidance of undue 
concentration of control. To achieve this balance, the revised 
ownership limits were designed to help owners create ``clusters'' of 
multiple radio stations that could operate for less--while delivering 
more to listeners and advertisers within their service areas--and, at 
the same time, become or remain viable businesses.
    Subsequent experience under the Act has confirmed the wisdom of 
Congress's judgment on this issue. Our experience shows that five or 
more stations operated as a cluster not only is critical to achieving 
operating economies of scale, but is essential to making radio 
competitive with other media. These multiple radio station clusters can 
afford to operate live and local programming on each station, while 
sharing facilities and support personnel to reduce operating costs. 
More importantly, multiple radio clusters can offer advertisers a range 
of choice and flexibility in demographic targeting that was previously 
only available from newspapers and television.
    Competing with newspapers and television is a major sea change for 
radio. Here's why: Radio has always had a disproportionately small, 10% 
share of the total advertising pie. I say ``disproportionately'' 
because radio actually commands over 40% of the total time consumers 
spend with media. The conventional wisdom is that this anomaly is due 
in part to the fact that any single radio station format is targeted to 
reach only a single demographic target, while the sections of a 
newspaper and different television programs offer advertisers the 
choice of many targets. In short, for many advertisers, television and 
newspaper offered more flexibility and was simply easier to buy.
    Under the Telecommunications Act, multiple-station clusters can now 
offer different stations like the sections of a newspaper--putting 
radio on a level playing field with entrenched newspaper monopolies and 
broadcast television. And to the extent that these new multiple-station 
clusters can access a share of the relatively much larger budgets 
historically allocated to newspaper and television, the radio business 
model becomes viable and everyone wins. The advertiser gets a real 
alternative to newspaper and TV. The listener gets a better programming 
product with live and local on-air personalities. The community gets a 
viable business.
    In the mid-size markets we serve, the economic problems of radio 
were typically more severe, and the positive impact of the 
Telecommunications Act is even more plainly evident. In the mid-size 
markets, multiple-station ownership is driving a renaissance for local 
radio, giving small communities greater choice and diversity in music 
and sources of information. Local advertisers also stand to benefit 
from the diverse formats and broad reach of the stations, and the 
ability to negotiate competitively priced advertising buys.
    I did a little research into whether the members of Congress who 
framed the Telecommunications Act understood the unique economics of 
radio in the mid-size and smaller markets. In fact, they did. They 
appreciated the special challenges facing radio in the smaller markets 
and addressed these needs with structured tiers in the statutory 
ownership limits to permit consolidation of station ownership in both 
smaller and larger markets. As Senator Burns observed when considering 
that legislation, radio ownership restrictions in mid-size and smaller 
markets ``handcuff broadcasters and prevent them from providing the 
best possible service to listeners in all of our States.'' 144 Cong. 
Rec. 92, S7904 (June 7, 1995). Similarly, Senator Pressler noted that, 
following earlier FCC liberalization of radio ownership restrictions, 
``economies of scale kicked in, stations gained financial strength in 
consolidation, and competition for advertising improved.'' 141 Cong. 
Rec. 94, S8076 (June 9, 1995). The legislation's proponents thus 
accurately foresaw an ``immense resurgence and burst of energy from new 
companies'' following the further ownership deregulation in the 
Telecommunications Act. 141 Cong. Rec. 95, S8198 (June 12, 1995) 
(statement of Senator Pressler).
    The Telecommunications Act has had exactly the effect intended by 
Congress. In virtually all markets, but particularly where help is 
needed the most--the smaller markets-- radio is undergoing a 
renaissance characterized by more live and local programming, more 
advertisers, more revenue and more service to the community. This has 
resulted in significant new competition for newspapers and television.
The Cumulus Model
    The Cumulus business strategy is exactly what the Act envisions. We 
acquire independently owned radio stations and combine them into a 
cluster to share infrastructure resources like engineering, accounting, 
physical facilities and the like. This allows us to reduce operating 
costs, and then use the cost savings and efficiencies gained through 
consolidation to help fund increased investments in research, 
programming and sales. Our primary approach is to enhance the quality 
of radio for listeners, which in turn strengthens the power and utility 
of the radio medium for advertisers. The result is a revitalized group 
of radio stations capable of increasing market share against newspaper, 
television and other media by delivering more choice to advertisers and 
a better product to listeners.
    Typically, we replace satellite-delivered programming (which often 
was all that the individual small station owner could afford) with 
locally-originated content and live on-air personalities, thus 
dramatically improving the quality of each station's programming. We 
also employ sophisticated research techniques to ensure that each 
station is delivering the product the listeners want, ``brand'' each 
station as a separate entity, and substantially upgrade and expand the 
sales organization. Each station also has its own programming director 
to manage the product and its own sales manager to coordinate the sales 
team, as we increase employment opportunities on the programming and 
sales side by hiring many people without prior radio experience. In 
addition, an information technology infrastructure is being employed 
that allows Cumulus stations in one market to benefit from innovations 
developed by Cumulus stations in other markets.
    We also know that, contrary to the understandable fears and 
expectations expressed by some FCC Commissioners, consolidation in 
radio means more not less, localism and more, not less, diversity in 
programming. I am pleased to say that we are making this happen every 
day in over 60 cities across the nation.
FCC and DOJ Reviews of Radio Transactions
    In the initial period following passage of the Telecommunications 
Act, most radio consolidation occurred in the larger markets, and the 
FCC did not play a particularly active role in reviewing market 
concentration. The Department of Justice (``DOJ'') reviewed many of 
these transactions under the Hart-Scott-Rodino (``HSR'') Act because 
they were generally large mergers involving multiple markets that met 
the HSR size thresholds. The HSR statute required advance notice to the 
DOJ, but also required the DOJ to conduct its review promptly, within 
the specified statutory time periods. In a number of these large merger 
cases where DOJ had competitive concerns, the parties agreed to spin-
off several stations in one or more cities to satisfy those concerns. 
At the same time, the FCC would generally grant the license transfer 
applications in a timely manner.
    As the Telecom Act moved into its second and third years (1997 and 
1998), radio consolidation moved to mid-size markets, with Cumulus and 
several other companies leading the way. Cumulus began making its 
acquisitions in mid-1997, and we accelerated our activity rapidly over 
the next two years. Initially, the DOJ was not active in investigating 
mid-size market transactions, as most were not reportable under the HSR 
Act. The FCC also acted fairly promptly on license transfer 
applications.
     Beginning in about late 1998, however, FCC applications for a 
number of transactions, including some filed by Cumulus, began to slow 
down considerably. We understand that was due, at least in part, to 
internal agency debate regarding the appropriate role of the FCC in 
reviewing these transactions for market concentration concerns and the 
standards it should use in such reviews. Cumulus and other firms 
maintained that the Act had already specified the number of radio 
stations that could be owned in any one market, and thus that the FCC 
did not have a proper role to play in formulating a different policy. 
The FCC has not agreed with this position.
    What eventually developed is the current FCC practice of issuing 
``special'' public notices regarding certain license transfer 
applications, based primarily on publicly reported levels of radio 
advertising revenue shares, even where the license transfer 
applications fully comply with the numerical station limits set forth 
in the Telecom Act These notices generally invite public comment on 
market concentration issues whenever a license transfer application 
would result in the buyer's acquiring 50% or more, or the buyer and 
another radio owner acquiring 70% or more, of the radio advertising 
revenues in a local Arbitron Metro (as measured by the standard 
industry revenue estimates compiled by BIA Research, Inc.). To date, 
however, the FCC has not issued any rule or formal policy statement on 
this practice, and the FCC has not articulated precisely what policy 
objective it is trying to achieve or what standards it employs in this 
process.
    As the Subcommittee is aware, the DOJ has been active in 
investigating radio acquisitions in markets of all sizes. Cumulus alone 
has responded to DOJ inquiries concerning radio station acquisitions in 
at least seven different markets. All but one of these transactions 
fell below the reporting thresholds of the HSR Act; some of these 
transactions were as small as $1.5 million and occurred in radio 
advertising markets as small as $5 million in total revenues. In each 
transaction, Cumulus has fully cooperated with the DOJ in providing 
information to address any questions or competitive concerns that the 
DOJ has had.
    The FCC has stated that its policy is not to act on license 
transfer applications while a DOJ investigation is pending, regardless 
of whether or not the DOJ files comments in response to one of the 
FCC's ``special'' public notices. The current administrative process 
thus effectively postpones FCC action on a license transfer application 
until the DOJ completes any separate antitrust review, which in the 
case of smaller transactions below the applicable HSR thresholds are 
not subject to any mandatory timetables. At the same time, the FCC 
reserves the right to revisit a competitive analysis of the transaction 
in acting on the license transfer application after the DOJ is finished 
with its work. The FCC may then come to the same, or a different, 
conclusion based on its own analysis of the market and ``other relevant 
economic criteria.'' Great Empire Broadcasting, Inc., FCC 99-142 (June 
11, 1999), at 4-5, para. 10).
              problems with the current regulatory process
    Cumulus has three primary concerns with the way in which these 
types of applications for transfers of radio licenses are currently 
being handled by the FCC.
Conflict with Congressional Directives and Lack of Clear Standards
    First, we and many other radio firms believe that the 
Telecommunications Act already specifies the number of radio stations 
that may be owned in any one market, and thus that the FCC does not 
have a proper role to play in formulating a different policy that would 
shrink the ownership limits of the Act. When the FCC begins to decide, 
on a case-by-case basis, that particular applications will not be 
approved on the ground that the number of stations results in too much 
market concentration, the FCC is second guessing the policy judgment 
that Congress has already made. No matter how well-intentioned the 
FCC's policy initiatives in this area may be, we do not think the FCC's 
authority to implement the "public interest" standard allows the FCC to 
substitute its judgment for that of Congress on a subject specifically 
dealt with in the statute.
    Nor has the FCC offered any concrete criteria for deciding how, 
when or under what circumstances the public interest should dictate 
that approval of a particular acquisition should not be granted because 
of undue market concentration, even if it is within the numerical 
limits specified by Congress. This type of case-by-case review, without 
clear standards, invites administrative delays and procedural 
confusion. In addition, competitors seeking to block lawful and pro-
competitive radio consolidation transactions often are encouraged by 
this process to file groundless petitions, which only adds to the 
delays because the FCC must then address these complaints in compliance 
with its rules and procedures governing restricted, adjudicatory 
proceedings. Cumulus continues to have a number of its license transfer 
applications mired in this unnecessary administrative process.
Duplication of DOJ's Antitrust Function
    Second, it simply is not a sensible use of government resources for 
the FCC to review acquisitions based on the same market concentration 
and antitrust concerns that the DOJ or the Federal Trade Commission 
(``FTC'') already considers. As Commissioner Powell has stated in 
previous testimony before this Subcommittee, the FCC's review of 
mergers and acquisitions ``should be generally limited to those areas 
in which [the FCC] can claim primary expertise.'' (Opening Statement of 
Michael K. Powell, Commissioner, FCC, Oct. 26, 1999, at 8). However, 
when one looks at recent FCC decisions evaluating the competitive 
implications of radio station transactions, it is striking how much the 
FCC's ``competitive analysis'' seems to duplicate the role of the 
Department of Justice. The FCC appears to examine many of the same 
factors that are set forth in the Horizontal Merger Guidelines adopted 
by the DOJ and FTC, as well as the levels of revenue shares permitted 
by the DOJ in previous consent decrees. See, e.g., Great Empire 
Broadcasting, Inc., at pp. 4-8. This largely duplicative approach is 
also reflected in FCC staff requests for detailed competitive 
information in connection with a number of license transfer 
applications.
    We believe that it would make more sense for the FCC to defer to 
the primary expertise of the antitrust enforcement agencies, as it has 
in other situations where allegations of competitive harm are raised 
against broadcast licensees. With all due respect to the FCC's hard 
working staff, I agree with Commissioner Powell that the FCC simply 
does not possess the same personnel, experience and process as the DOJ 
in terms of antitrust and competitive economics, and thus is not as 
well positioned as the DOJ to conduct meaningful competitive reviews of 
mergers and acquisitions in the communications industry on a consistent 
basis. Moreover, even in those situations where the FCC is permitted to 
consider competitive factors, the courts have emphasized that 
competition measures adopted under the FCC's general ``public 
interest'' authority must relate to the agency's specific statutory 
charge. What this means to me is that--assuming any competitive inquiry 
at all is permissible in light of the express Telecommunications Act 
provisions on radio station ownership ``the FCC's inquiry must be 
carefully focused on how competition affects the interest of the public 
in receiving quality service from the particular FCC-licensed 
communications facility at issue.
    Thus, I very much agree with Commissioner Powell's admonition that, 
if the FCC is to have any complementary role in the review of mergers 
as part of its license transfer authority, it needs to have some 
``disciplined procedures and limiting principles to ensure the rapid 
processing of such transactions, to preserve the rights of the parties 
and to avoid duplication with other authorities.'' (Statement of 
Commissioner Powell, Oct. 26, 1999, at 9). In our segment of the 
industry, Cumulus strongly believes that service to radio listeners--
which should be the primary concern of the FCC--in fact is adversely 
affected by the blocking or delaying of efficient consolidation 
transactions. Indeed, one clear sign that such transactions actually 
serve to increase, not decrease, competition is the fact that every 
single petition that has been filed against a Cumulus license transfer 
to date has been filed by a competing radio owner, rather than by a 
consumer (i.e., a listener or advertiser).
The Anamolous Situation of Small Transactions
    Third, the unusual combination of the small size of the typical 
Cumulus radio acquisition and the need to obtain FCC approval for the 
acquisition means that the Hart-Scott-Rodino Act can effectively be 
turned on its head: Not only does the Government (through two separate 
agencies) now investigate small radio acquisitions, but it faces no 
time deadline in doing so. Let me explain what I mean.
    The Hart-Scott-Rodino Act suggested that acquisitions below the 
``radar screen'' of the statute, by virtue of their size, were not of 
sufficient antitrust concern to warrant pre-merger notification. The 
HSR Act imposes time limits for large acquisitions by which the DOJ or 
the FTC must take certain steps or request additional information if 
either agency intends to challenge a merger before it is consummated. 
But no acquisition of a radio station, no matter how small, can be 
consummated without the approval of the FCC. And no time limits 
constrain the DOJ in radio acquisitions that are not subject to the HSR 
limits.
    The peculiar arrangement between the FCC and the DOJ that I 
outlined above--whereby the FCC will first await the outcome of a DOJ 
investigation and then proceed with its own second-level review--
combined with the inapplicability of the HSR time deadlines, means that 
either agency can take as long as it chooses to investigate whatever it 
wants regarding a pending transaction. The result is that the parties 
to these relatively small transactions sometimes must endure very 
lengthy and costly regulatory reviews that are not applicable to much 
larger transactions, without clear standards or certainty of outcome.
    While we see these significant problems, Mr. Chairman, Cumulus has 
not experienced the problem that the sponsors of the Telecommunications 
Merger Review Act of 2000 have raised, involving the attachment of 
conditions on the FCC's approval of license transfers. In addition, I 
want to thank Chairman Kennard for reaching out to try to work with us 
on these issues and to try to expedite the FCC staff's review of 
license transfer applications through measures such as his newly 
created ``Transactions Team''. I also have no doubt that the FCC 
Commissioners and staff involved in these efforts have acted diligently 
and in good faith, consistent with their available resources and their 
view of what the FCC's proper role should be. In fact, Cumulus alone 
has completed over 90 radio acquisition transactions, and by and large 
the FCC's Mass Media Bureau staff has processed these very efficiently 
and promptly. I believe the FCC staff should be commended for its 
diligent efforts to keep up with a sharply increased workload in this 
area.
    At the same time, we respectfully disagree with the FCC that it 
should be engaged in detailed competitive reviews of radio mergers and 
acquisitions as part of its license transfer approvals. We believe that 
this adds a duplicative layer of antitrust review that is inconsistent 
with the specific terms of the Telecommunications Act. And we believe 
that this problem is made worse by the fact that no time deadline 
applies and that no clear rules or standards appear to exist.
                         cumulus's experiences
    A few examples of Cumulus transactions that have been caught up in 
this uncertain regulatory process for extended periods of time may help 
illustrate the problem to this Subcommittee.
    1. One case involved the consolidation of several small radio 
stations in Florence, South Carolina and surrounding areas that had not 
been viable on their own. Cumulus filed license transfer applications 
with the FCC beginning in February 1998 to acquire the stations. None 
of these applications was contested before the FCC by any listener or 
advertiser, or any other party for that matter; the applications 
complied fully with Section 202(b) of the Telecommunications Act; and 
grant of these applications did not require a waiver of any existing 
FCC rule. Nevertheless, the FCC staff informed Cumulus that action upon 
the license transfer applications was being deferred due to potential 
concerns relating to the percentage of radio advertising revenues 
involved, and because the DOJ had opened an investigation into the 
proposed acquisitions. Persistent efforts for more than a year to 
obtain FCC action on the applications were unsuccessful.
    Ultimately, the DOJ closed its investigation and informed the FCC 
that it had done so in February 1999. About a month and a half later, 
the FCC finally granted the license transfer applications, with no 
explanatory statement. This was over 13 months after the first 
application had been filed (in February1998), and nearly 10 months 
after the last of the three applications had been filed (in June 1998).
    2. In another case, Cumulus proposed to acquire one FM station and 
two small AM stations to combine with an existing group of three 
stations in Grand Junction, Colorado. This FCC license transfer 
application was also filed in February 1998. Two competing radio 
operators in the market filed petitions against the application, 
requesting the FCC to conduct a competitive evaluation and to deny the 
application based on market concentration grounds, even though the 
application complied with the Telecommunications Act. The FCC took no 
action on the application for almost two years. The DOJ conducted its 
own competitive review for over a year. Finally, several months after 
the DOJ's inquiry had been resolved and Cumulus had dismissed its 
application for one of the two AM stations, the FCC issued its decision 
denying the petitions and granting the license transfers on January 13, 
2000.
    3. In several more recent license transfer applications, the FCC 
requested detailed competitive information concerning uncontested 
Cumulus radio station acquisitions in three small markets. In each 
case, there was no petition or objection by any listener or advertiser, 
and no pending DOJ investigation. Nevertheless, the applications were 
``red flagged'' by the FCC for ``additional analysis of the ownership 
concentration in the relevant market,'' and the FCC staff thereafter 
requested economic and financial data concerning efficiencies, 
competitive rivalry for advertisers and related factors that one would 
ordinarily expect to see evaluated (if at all) by the antitrust 
enforcement agencies.
     In one of these cases, Cumulus proposed to acquire a 
single AM radio station in Midland-Odessa, Texas that derived less than 
$50,000 in advertising revenues in 1998. This station was very poorly 
operated out of dilapidated facilities and was fraught with technical 
problems, including a collapsed tower. Not surprisingly, the DOJ never 
raised any competitive concern regarding this transaction. The FCC's 
desire to explore in depth non-existent competitive issues not only 
imposed an undue burden on the applicants, but was hard for Cumulus to 
understand given that Cumulus intended to invest its resources to 
upgrade the station and thereby enhance service to listeners, which 
should be the FCC's primary concern. Ultimately, the FCC granted this 
application following Cumulus's submission of the required information.
     In the other two cases ``involving stations in Toledo, 
Ohio and Augusta-Waterville, Maine'' the FCC requested similar detailed 
competitive information concerning acquisitions that were specifically 
reviewed and not challenged by the DOJ months earlier. The Toledo 
application was ultimately granted, while the Augusta-Waterville 
application remains pending almost one year after the DOJ completed its 
competitive review and closed its investigation without challenging the 
transaction.
    All told, the FCC has now ``red flagged'' literally hundreds of 
proposed license transfers. By my calculation, Cumulus alone has had 
over 75 license transfers flagged or otherwise subjected to competitive 
reviews. Typically, the FCC issues public notices that merely state, in 
general terms, that the FCC intends to conduct additional analyses of 
competition issues, citing its authority to review such applications 
under the largely undefined ``public interest'' standard. If Cumulus's 
past experience holds true, we may continue to see such notices and/or 
requests for detailed competitive information in future cases, 
regardless of whether the DOJ raises any competitive concerns under the 
antitrust laws, and regardless of whether any advertisers or listeners 
complain.
    Delays and unnecessary regulatory burdens of this sort often 
threaten to disrupt small radio transactions and cause serious 
financial hardship to the parties, especially to the independent 
operators who are trying to sell their stations and realize a return on 
their many years of hard work and investment. In addition, in some 
case, such delays can end up causing further deterioration of the radio 
stations, due to the extended period of uncertainty regarding who will 
own the stations and employ the professionals working in these 
stations, and due to FCC rules prohibiting buyers from prematurely 
acquiring control of the stations.
            the telecommunications merger review act of 2000
    The Telecommunications Merger Review Act of 2000 proposes to create 
a new Section 417 of the Communications Act, which would require that 
the FCC's denial or conditional approval of a license transfer 
application be based only on a determination of what is required under 
existing FCC rules and regulations. In the case of radio station 
acquisitions, this would require that license transfer applications 
comply with the station ownership limitations specified in Section 
202(b) of the Telecommunications Act of 1996 and the FCC's multiple-
ownership rules implementing those limits. But it would prevent such 
license transfer proceedings from becoming sidetracked by subjective, 
case-by-case determinations of whether the consolidation permitted by 
Congress is in the ``public interest'' in the view of a majority of the 
FCC's Commissioners.
    I support the objectives of this legislation since it appears to be 
designed to solve many of the problems that I have described--by 
shortening the FCC merger review process, eliminating some of the 
present regulatory uncertainty, and ensuring that the FCC's actions on 
license transfer applications do not duplicate the competitive reviews 
conducted by the DOJ or the Federal Trade Commission. I believe this 
would clarify the respective roles of the FCC and the antitrust 
enforcement agencies and provide greater predictability for business 
persons entering into transactions in the radio industry. It also would 
prevent limited FCC resources from being diverted to unnecessary 
competitive analyses prompted by a myriad of complaints by competitors 
whose real agenda is to block or delay radio consolidation transactions 
that will improve service to listeners and benefit consumers.
    I thank you again for the opportunity to testify at today's 
hearing.

    Mr. Tauzin. Thank you very much, Mr. Ryan.
    The Chair will recognize himself for the appropriate time 
and members in order.
    Let me first thank you, Mr. Ryan and your company, for 
coming to testify to tell us of your experiences. Indeed, I 
would guess you would congratulate the FCC when it has 
processed your applications expeditiously.
    But you cite some fairly egregious exceptions to that 
process. You cite one in particular dealing with Toledo, an 
application--Augusta-Waterville, where an application remains 
pending almost a year after DOJ completed its competitive 
review, closed its investigation, without challenging the 
transaction. In other words, you have been sitting now for a 
year waiting for the FCC to act on a station transfer, a year 
after DOJ has not found any problems with the acquisition; is 
that correct?
    Mr. Ryan. That is correct, Mr. Chairman.
    Mr. Tauzin. Let me turn to the Commission. Why does that 
happen? Why does that occur? Why does an application like that 
get red-flagged by the Commission, unopposed by the DOJ or any 
other party, sit there for a year while its employees and the 
financial--the people who are putting up the money behind the 
purchase and the sale wait for something to happen? I am sure 
you are right, it damages a lot of things both for the 
communities served by the radio station, employees and 
professionals who want to work for it. Why does a year go by 
without any action on petitions like that? Either one of you. 
Give us an idea of what goes on there.
    Mr. Furchtgott-Roth. Mr. Chairman, the Commission receives 
tens of thousands of license transfer applications every year--
tens of thousands. The vast majority are processed in a very 
routine basis. We do not have written rules that have been 
formally adopted by the Commission that provide the public with 
any guidance to know whether their license application or 
license transfer application will be processed in a timely 
manner along with tens of thousands of others or whether they 
are going to be unfortunate and put in a different line.
    Mr. Tauzin. Mr. Commissioner, who red-flags these things? 
Is it done at the bureau? Somebody down at the bureau decided 
to red-flag his application? And who un-red-flags them? Who is 
responsible for acting on that Augusta-Waterville application?
    Mr. Furchtgott-Roth. It is down in the bureau.
    Mr. Tauzin. It is down in the bureau? Mr. Powell?
    Mr. Powell. Mr. Chairman, I would point out a number of 
other unique things in the context of media mergers, in 
particular radio, in light of the changes that Congress made in 
the statute. There has been in the early phases some fairly 
serious debate as to whether, when Congress modified the 
ownership restrictions and allowed companies to own a certain 
number of stations, whether they intended that to be absolute.
    For example, the community of industry argued that if it 
was allowed to own eight under the statute, for example, that 
should preclude any competitive analysis. For example, DOJ 
ultimately took the view that, no, that was not their view 
because Congress didn't expressly repeal the Clayton and 
Sherman antitrust----
    Mr. Tauzin. But once DOJ does that review, why the year?
    Mr. Powell. Because the other area, as we talked at the 
outset, is that there are the objectives of ``diversity of 
voices'' that are not competitive concerns that are largely, I 
would submit, what gets these things snared at the FCC.
    Mr. Tauzin. Let me tell you what happens, Mike. What 
happens is that--this is not your company, so you are not on 
the spot here. But I get visited by people like you, Mr. Ryan, 
who tell me I have been sitting there for 2 years, and on a 
weekly basis somebody visits me with a message that they can 
get it unstuck for me over there if I just hire them and make a 
donation to their cause. That is what happens to people in the 
real world who sit around waiting for subjective action on 
their petition who don't know why they are being held up, who 
never--were never told why they are being held up.
    And in one case, Mr. Powell, it is a black-owned 
broadcaster. I mean, that is pretty sad. It is not a diversity 
of voice issue. He is just sitting there waiting for action and 
gets visited.
    What I am saying is that the problems Mr. Ryan poses are 
not only problems of process at the Commission. They create 
effects out there that are damaging to the businesses that are 
trying to conduct broadcasting in America and simply trying to 
transfer licenses that fall within the ownership numbers that 
are presented and do not necessarily involve any diversity of 
voice questions.
    I mean, the problem is there are no standards we don't 
know. They don't know. And I don't know what to tell people who 
come to me with those kind of stories, and I don't know what to 
say to them other than the fact that we have got to somehow 
change the rules so that it does not happen to them anymore. So 
that Mr. Ryan has a real answer to give to the parties involved 
in this transaction as to why it cannot go forward, why it is 
just hung up. That is what disturbs me.
    I want to talk about the SBC thing. And you mentioned it, 
the 26 voluntary conditions. Both of you have spoken to that as 
the way voluntary conditions do not necessarily address the 
perceived harm, the way they do not even necessarily have 
anything to do with the burden of proof problem, even though I 
agree with you, Mr. Powell, I think that is an excellent place 
for us to look at reform.
    In the SBC case, Commissioner Roth, you indicated that one 
of those conditions required SBC to violate the law. What were 
you referring to?
    Mr. Furchtgott-Roth. A couple of aspects, if I can recall 
from memory. It is at my web site of my separate statement. And 
let me be quick to note, these are just the written voluntary 
requirements. SBC commits, and I don't know whether they in 
fact wanted this or not, to provide fairly steep discounts for 
any platform that would be limited in number to a certain 
number of customers in any State, which I think would violate 
the nondiscrimination provisions of section 251 and 202.
    Mr. Tauzin. So your suggestion is that they have 
voluntarily agreed to do something which is violative of that 
section?
    Mr. Furchtgott-Roth. It also violates the pick-and-choose 
provisions of Section 252. And, look, who knows what went on 
behind closed doors when there were these negotiations?
    Mr. Tauzin. You make this point. Chairman Kennard in his 
written statement said if we set some limits on the duration of 
these reviews that the public is somehow going to be out of the 
process. But right now these deals are being done behind closed 
doors, and voluntary conditions are being worked out behind 
closed doors in secret meetings with only some people present 
at those meetings. Who is present in those meetings?
    Mr. Furchtgott-Roth. Not me, not you, no one in the public. 
No transcripts.
    Mr. Tauzin. Who is there?
    Mr. Furchtgott-Roth. If we knew, they would not be secret.
    Mr. Tauzin. That may be the best testimony I have heard in 
a long time. You are the master of the obvious.
    Let me point out, Commissioner Powell, that while it is 
true the 1996 Act didn't amend the antitrust laws of the 
Justice Department, it did amend the communication laws of 
America which covered diversity, which did say we have got some 
new limits on ownership. I want to emphasize that. I think Mr. 
Ryan's point is awfully good. That the Commission cannot and 
should not think that it can set new numbers through the use of 
other considerations. When the Congress very specifically 
amended the communication law and said these are the new 
ownership cap numbers.
    Mr. Powell. Just to expound and clarify that point, first 
of all, in my own view as a legal interpretive matter, I 
believe that when Congress set a number, that it, itself, had 
made some judgment about the appropriate number of voices for 
the diversity concern. That is not shared necessarily among all 
of my colleagues, but that's my view. I do think that with 
respect to those who are properly empowered to tender the 
antitrust statutes that Joel Klein could seek to block a merger 
short of the number that is authorized in the Communications 
Act citing the antitrust statute, but we do not have that 
authority.
    Where it gets confusing, which has been a fascinatingly 
difficult area, is that we dress things up often in competitive 
speak that are real about public interest concerns, about voice 
and media diversity, which are not illegitimate concerns, but 
they also are not the subject of HHI indexes. The problem is 
people are hungry for some sort of analytical tool that says 
well, you might be able to own 8, but at 6, diversity is too 
impugned or impaired. And I don't think that can fully be 
crafted, but people have tried. But it is a red herring, in my 
opinion, to be concerned about one subject, which even may be a 
legitimate course of concern and inquiry, and pretend that it 
is about concentration, because that confuses the analysis in a 
way that I think is really disturbing and troubling and causes 
us to make some very significant mistakes in those markets.
    Mr. Tauzin. An excellent observation. Let me also commend 
you. I think clearly time is important and I am concerned about 
your benchmark plan, because if the FCC fails to meet one of 
those benchmarks, I can see it dragging the process out. We 
have to be careful there. But while time is important and while 
the bill needs to address time, I think you put your finger on 
it when you talked about the fact that these conditions, not 
even related necessarily nor germane to the so-called harm that 
may be connected to a merger, these conditions are agreed, 
therefore, not even subject to judicial review. That they 
substitute for policy the Commission ought to be making, or we 
ought to be making for the community at large instead of being 
imposed upon voluntarily a single merged entity in a 
competitive marketplace. They create unfairness, that they 
create policy for a single entity, and they create unreviewable 
policy for single entities. And they open the door for the kind 
of arrogance that Mr. Dingell spoke to where an agency can 
write its own law for an individual citizen of this country. 
That to me is the most disturbing, and if we could address that 
and address the burden of proof issues, I think we would go a 
long way toward ending some of that business, and I thank you 
for those contributions.
    Mr. Powell. If I could make one more point, Mr. Chairman. 
Off the top of my head, I am not so sure whether I believe the 
SBC-Ameritech conditions were illegal, but putting that aside, 
they are still problematic without being nefarious because what 
the conditions ultimately stem from is subjects and concerns 
that are usually the subject of ongoing rulemakings or other 
express statutory provisions. And what tends to happen is there 
is a danger that you are going to create an alternate document 
that is covering the same basic subject matter and same basic 
pronouncements that are being simultaneously pursued in some 
general rulemaking.
    The danger for conflict and misinterpretation is enormous. 
And just to be fair here, it is not just the Commission or its 
arrogance that gets away with something. Make no mistakes. So 
do the companies. Ed Whitacre didn't agree to the terms of 
these conditions out of the goodness of his heart, because they 
would hurt real bad. They make calculated judgments, and in the 
intimacy of developing the conditions, the Commission also is 
over a barrel in the sense that it wants a solution and it 
needs the company to accede to those conditions.
    Mr. Tauzin. Do you know who was in that room when those 
conditions were made?
    Mr. Powell. I rarely know who is in that room.
    Mr. Tauzin. My understanding is that SBC ended up making 
contributions of nearly $50 million to various groups and 
associations in connection with that merger. Was that part of 
the conditions?
    Mr. Powell. Not that I am aware of.
    Mr. Tauzin. That was just outside the room somewhere? The 
Commission had no knowledge of that? No interaction with that?
    Mr. Powell. Mr. Chairman, I can only speak for myself and 
my office. Those kinds of activities, if they exist and the 
things that you have pointed as being severely disturbing, I 
personally have no specific knowledge.
    Mr. Tauzin. You wouldn't have any way of knowing what is 
going on there, while merger review was under process; right? 
Those things are done, not even in the secret meetings of the 
FCC. Those things are done totally outside the FCC?
    Mr. Furchtgott-Roth. Mr. Chairman, if I might add, private 
parties make lots of decisions all the time outside of the 
involvement of the FCC, and that is the way it ought to be. But 
there should be some public record, some public accountability 
when private parties do things at the behest of the FCC, or 
with some suspicion that this is going to influence the FCC in 
some way.
    The other point is the FCC is not over a barrel. We have 
very simple statutory guidelines of what we ought to do, and 
they are in section 5(d), and both Commissioner Powell and I 
note this in our written testimony. There is no mystery about 
how long these things should go on. It is 3 months for a 
standard application and standard license transfer. If there is 
a problem, send it to hearing.
    Then it goes on for a bit longer. But this idea that a 
license application or an application--under 214 or 310 lingers 
for more than 90 days is not consistent with the statute. Not 
consistent with statutory directives, and no amount of 
unwritten rules at the Commission and no amount of even formal 
rules being adopted by the Commission to extend that deadline 
can bring that into compliance with the statute as it is 
already written.
    Mr. Tauzin. Thank you. My time has expired. The gentleman 
from Maryland, Mr. Wynn is recognized.
    Mr. Wynn. Thank you very much, Mr. Chairman. I too want to 
comment to the witnesses the testimony that which I heard was 
very informative, and I want to mention to Commissioner Powell 
that I thought he made an excellent speech at the Georgetown 
luncheon, it was quite informative.
    I have a question relating to this secret meeting line of 
inquiry. If people were not there, didn't know about it, I am 
not sure they even know that the meetings occurred. So to start 
throwing around this notion that there were all these secret 
meetings that no one can document is, I think, somewhat unfair 
and cast an aspersion when people cannot even say that, in 
fact, anything occurred.
    The other question relates to--I don't want to say an 
aspersion, but somewhat of an aspersion about SBC that they 
have actually broken the law, and if that is true, I want to 
know who has brought charges. What agency, body, entity has 
charged SBC with violating the law? Or is this an 
interpretation that actions by SBC may be in violation of the 
law? Because I think that is very serious, and we ought not be 
saying, at least in my opinion, that people have violated the 
law unless someone is prepared to bring charges, or has in fact 
brought charges.
    Commissioner Roth, I guess I have to refer that to.
    Mr. Furchtgott-Roth. Mr. Wynn, thank you. When I came to 
the Commission, I had a fairly consistent standard that would 
provoke a dissent from me, which is, I would vote for something 
as long as it was consistent with the statute. And I have had 
to dissent quite a lot. And I think that it is documented in my 
dissent on the SBC Ameritech license transfer exactly how I 
think the conditions violated the statute.
    Now, those are conditions that were imposed by the 
Commission upon SBC.
    Mr. Wynn. I thought you said they were voluntary conditions 
that the SBC accepted?
    Mr. Furchtgott-Roth. Mr. Wynn, that is precisely the whole 
problem here is the distinction between what SBC ``volunteers'' 
after months of secret meetings.
    Mr. Wynn. That we do not know actually occurred?
    Mr. Furchtgott-Roth. Well, they were strange secret 
meetings in the following sense that Chairman Kennard publicly 
announced that there would be secret meetings.
    Mr. Wynn. Those we do know occurred.
    Mr. Furchtgott-Roth. Right, there were FCC staff assigned 
to conduct these meetings. The public was not invited, members 
of the public asked me specifically if they could participate 
in these secret meetings.
    Mr. Wynn. Were you privy to the staff who participated in 
these secret meetings?
    Mr. Furchtgott-Roth. There were staff who came to report to 
my office with summaries of them, yes. But I was not privy to 
go to the meetings, no.
    Mr. Wynn. But you were able to find out what occurred?
    Mr. Furchtgott-Roth. I--well, no. I mean, I was able to get 
summaries of what happened.
    Mr. Wynn. I am not going to go quibble over that one, go 
ahead.
    Mr. Furchtgott-Roth. But Mr. Wynn, there is a situation, 
and I don't know where the conditions reflect volunteering by 
SBC to balance off alleged harms with some set of goods that 
Commissioner Powell refers to. But there are a lot of 
conditions there and some of them, I think are fairly clearly 
outside of the law.
    Mr. Wynn. Well, perhaps someone will prosecute on that 
basis. To date, they have not.
    I am concerned though, that conditions, agreements, 
settlements have traditionally been part of our culture, our 
way of doing business. And now they are somehow being indicted 
because they are ``voluntary,'' but not really. And I am 
uncomfortable with this notion. If companies who come before 
government entities regularly agree to conditions for whatever 
their reasons may be, if they say they are voluntary, we have 
to accept them as such. I do not interrupt that as being 
policymaking, nor do I interrupt that as being nefarious in any 
way. We accept them in the legal community as conditions 
agreements and settlements. Now, all of a sudden, they are 
being indicted. I am concerned about that.
    Let me move on because I don't want to belabor this 
particular point. Commissioner Powell indicated that many 
times, these conditions do not cure the harm. And I can 
appreciate what you are saying. It seems to me that they are 
designed to ameliorate the harm or to offset or balance the 
scales in some way. If you do not use the vehicle of conditions 
and you find, in fact, harm, do you have any other options? And 
I guess the second point I would make is yeah, the dog got 
beat, but he is better off with the toy after the beating than 
without.
    Mr. Powell. I am not sure about that.
    Mr. Wynn. The toys remain. What would you do if you did not 
use conditions and you, in fact, saw competitive harm, but you 
did not believe it rose to the level that should bar the 
merger, but yet you knew the public was being harmed to some 
significant degree?
    Mr. Powell. I think for me the short answer is, if they are 
really serious, you block it. I mean, one of the problems with 
this is I am equally as forceful about our obligation to stop 
things as I am to let things go.
    The problem here is with the conditions. I agree with you, 
conditions are absolutely legitimate vehicles potentially for 
the settlement of government investigatory activity, but when 
they are rooted to what is the prerequisite, identifiable harm. 
No. 1, they lack a lot of discipline, there is a lot of 
amorphousness about what you are putting on the scale because 
it is not rooted in something that is identifiable. Another 
thing that worries me is that they could become a shortcut. The 
Commission lacks the courage to get to the bottom of the 
transaction, and conditions become a very convenient way for 
everybody to just wrap it up, a way for us to get out of----
    Mr. Wynn. It seems to be prevalent here, which is an 
objective which seems to be prevalent here: Wrap it up.
    Mr. Powell. I think efficiency is prevalent, but efficiency 
including wrapping it up means getting to an answer quickly, 
and that answer should continue to be possible to be no.
    In some instances, I believe that for some people's views 
with respect to certain mergers and conditions that did not 
cure the harm, it would have been a more defensible position to 
vote against them than it would have been to pursue a mountain 
of conditions that ultimately in some loose sense balance your 
concerns about them.
    If you would not mind, I would like to say another thing 
about the questions you asked a minute ago, because I 
personally want to be clear and on the record.
    I will distinguish what Chairman Tauzin is talking about 
outside the process. I am not sure I know what all of those 
are. I have heard many similar concerns, but I personally do 
not know anything about it. These meetings are not secret in 
the cloistered sense. I mean, I know who is there. The bureau 
is there. The professionals, the men and women who are charged 
with reviewing the mergers are the ones who are there. Moreover 
they often held, obviously, public forums in the context of 
SBC-Ameritech. They held open forums in the view of the public 
to discuss some of the proposed conditions.
    Furthermore, the conditions, once they are drafted, are 
subject to public notice and consideration. Let's be fair about 
that.
    But where they are still problematic is that they are the 
product of an intimate negotiation. They do not include very 
much input or evaluation by other parties that might have 
interest who are not necessarily permitted or privy to be part 
of their development. I think that is the honest and 
intellectual critique of what goes on.
    And I think Commissioner Furchtgott-Roth is right. There is 
something disturbing, even to me, that we are not expected to 
be a full part of the formative phase. We are sort of given the 
opportunity to vote when it becomes crystallized and 
formalized. But you would be astonished the amount of work I 
have to do to find out in some of these cases what really 
happened. Not because the bureau won't come up and talk about 
it, but to get a fulsome explanation is a little more 
difficult. So I think that is the fair recitation.
    Mr. Gordon. Mr. Chairman, I would like one quick question.
    Mr. Tauzin. Let me please--I have extended the time of the 
gentleman without objection. Mr. Pickering has been here from 
the start. I think we need to go to him and then I will 
recognize the gentleman if the gentleman will allow me.
    Let me, by the way, mention to my friend, Mr. Wynn, and all 
of you, that our staff at O&I has the notes from those 
meetings, that they were surrendered in the course of discovery 
to SBC. And the notes of those meetings are available, and the 
degree to which those conditions were, in fact, voluntary or 
not can be read in those notes. I would invite my friend to 
actually visit with staff, and the notes can be made available 
to him and he might get a better picture of what occurred.
    Mr. Gordon. Is it your understanding that a Commissioner 
could not attend that meeting if he asked?
    Mr. Furchtgott-Roth. I could give a quick answer, the 
answer is no. I asked if my staff could attend and they were 
flat out refused.
    Mr. Gordon. Your staff?
    Mr. Tauzin. The Chair will ask order again and the Chair 
will recognize Mr. Pickering for a round of questions.
    Mr. Pickering. Commissioner Furchtgott-Roth, let me thank 
you for, one, identifying the problem that we have at the FCC 
and defining both in its application to the law and in 
practice. Commissioner Powell, let me thank you for giving good 
instructive recommendations as we go forward in this process. 
Mr. Ryan, let me thank you for your profile in courage. There 
are many.
    Mr. Ryan. Or my clients.
    Mr. Pickering. There are many in this community that have 
told us the horror stories that we are discussing now who may 
not be willing to publicly speak because they may have a merger 
pending at the FCC. I would say that I think your courage in 
testifying will probably serve your interests, and I hope help 
get the reform because we will be watching from the committee 
how you and your clients are treated.
    Going back to the earlier discussion, and what Commissioner 
Furchtgott-Roth raised in the application of law, we are a 
Nation that abides by the rule of law. We do not give licenses 
or government favors based on what, in many places, occurs as 
extortion or bribery. That there is a payment and in return for 
a payment you get favorable government action. We try to apply 
the law and the process equally and fairly. And if SBC did give 
certain parties $50 million, to me that meets the definition of 
extortion. And it has nothing to do with pro-competitive 
standards or regulatory standards or public interest standards, 
if that is any part of an agreement to have a merger approved 
by Regulatory Commission. And I think those are things that we 
do need to look at.
    But getting to the issue at hand, and the discussion draft 
and where we go from here, if you look back at the 1996 act, 
Congress eliminated the FCC prior statutory role to review 
telecom merger by excising section 221(a) of Communications Act 
of 1934. And the conference report it was stated by returning 
review of mergers in a competitive industry to the DOJ, this 
repeal would be consistent with one of the underlying themes of 
the bill to get both agencies back to their proper roles and to 
end government by consent decree. The Commission should be 
carrying out the policies of the Communications Act, and the 
DOJ should be carrying out the policies of the antitrust laws.
    If we look at the FCC announcement today on the Qwest-U.S. 
West merger, they get it half right and half wrong, and I agree 
with your comments, Commissioner Roth, in that they talk about 
the license transfer application on section 271 compliance. 
They tie part of it to having full compliance with section 271, 
which I think is the right emphasis and the right objective of 
getting the incentives to make sure there is compliance with 
271 and the opening of local markets. But then they go beyond 
that and get in conflict with what the intent of the 1996 Act 
was and that DOJ look at the anticompetitive or the antitrust 
issues, and you look at the conforming and compliance with the 
1996 Act.
    To that end, we, in our instruction, draft in section 417, 
talk about the conditions under which FCC could deny 
applications. And we specifically say where the applicant in 1A 
where the applicant is in violation of the rules and 
regulations in effect on the date of the application is 
received, and then on 2A, the language states that the FCC can 
condition approval only when necessary to ensure the applicant 
is in compliance with the rules and regulations on the date the 
application is approved.
    Mr. Powell, you had mentioned that not only do we need to 
look at the time, but the standards by which we should make 
these approvals, or the approvals should be justified. Is that 
the type of constraints or restraining of FCC review that you 
believe is appropriate?
    Mr. Powell. One observation, which I am not sure is an 
oversight or an intent, but the legislative draft does not 
refer to the statute, only to the Commission's rules and 
regulations. I assume it to mean the statute as well. There is 
a little bit of a circular risk here just to point out. 
Arguably, the public interest is in the statute. It is there in 
section 309, it is there in section 310, it is there in section 
214, and if anyone were so inclined they would say they are in 
full compliance with your proposed legislation by doing exactly 
what they are doing today. That is one thing that I would 
suggest that we need to talk about.
    I do think it could be spelled out in more detail, but the 
attempt to make sure that conditions bear some germaness to the 
identifiable provisions of which you are citing for harm which 
I have testified is critical. The only looseness there is you 
wouldn't want to say it violates this provision, but the 
conditions are about another provision. You would certainly 
want them to be--that might be the absolute letter of the law, 
but that is not, I don't think, what you are trying to get at.
    So I do think in the main, it is the right effort, I still 
think that there is probably more to be said about the 
standard. And, again, I think if nothing was done, my own view 
would be if everything else stayed the same, if the burden 
shifted to the Commission to prove harm rather than to require 
benefits, so much more of this would start to fall in place.
    Mr. Pickering. If we just did two things, if we gave the 
time lines similar to what DOJ has under their process, and we 
shifted the burden away from the applicant and to the 
government, would that in essence correct most of the problem?
    Mr. Powell. My own view is that it corrects a substantial 
amount of the problem of the--just consider, for example, the 
differences in the burden. And some of this, to be fair, is the 
intersection of the Administrative Procedures Act that I think 
sometimes gets left out of the equation. But because the 
statutory standard requires an affirmative finding that it is 
in the public interest which we have interrupted to be 
procompetitive, we have to prove to them why we let a merger go 
through, rather than prove why it doesn't. And when you have to 
prove why a merger goes through, No. 1, you can see how much 
more time that consumes for a merger that you might be inclined 
to say yes. You sort of have to write it up and go through the 
record. Because of the Administrative Procedures Act, we have 
points in the process in which opposing parties can throw all 
kinds of things in the record about why it is not 
procompetitive. And you know the APA, we have to slovenly march 
through lots of those comments and identify on the record why 
we have rejected them. You can see how much time is consumed 
just by process.
    I can tell you, there are mergers where very early on, we 
know they are going to be approved. They still take forever 
because of all of these obligations. If you look at the DC 
Circuit cases, they are also quite insistent that we do so. If 
the burden is otherwise, it seems to me, No. 1, you have 
invited fewer opportunities to come in and say here is my list 
of goodies I want on the list. It also may deal with some of 
the chairman's concerns about extraneous or other side duties 
because they do not go to harm. Those are just going to 
benefit. And if they are nongermane, then I think it works.
    And then temporal benchmarks I am a big believer in, so I 
might dispute how much flexibility you allow for some 
continuance. But I think those are the two cruxes of the 
matter, if there can be two cruxes. I don't know if there can 
be.
    Mr. Pickering. Mr. Chairman, if you would allow one more 
question.
    Mr. Tauzin. Chair has been very generous with all members. 
Proceed.
    Mr. Pickering. Commissioner Furchtgott-Roth, our bill, the 
discussion draft, looks at time lines and trying to constrain 
the scope, trying to establish what is the appropriate standard 
by which the review would be conducted.
    Would you take a position that the FCC should have no role 
in mergers and acquisitions and they should be done solely by 
the DOJ?
    Mr. Furchtgott-Roth. Mr. Pickering, I think the statutory 
authority of the Commission is quite clear. We have a 
responsibility to review license transfer applications and, in 
some cases, license transfer applications may lead to an 
inconsistency, either with the statute or with existing 
Commission rules, and in those cases, I think the Commission 
ought to step in. But I think is outside of the broader context 
of mergers. It is simply to see, are you complying with 
Commission rules?
    Mr. Pickering. But just on mergers, should the FCC continue 
to have a role in approving mergers?
    Mr. Furchtgott-Roth. The only role we have now is through 
the Clayton Act, and that is the way that the law currently is 
written.
    Mr. Pickering. Should we change the law?
    Mr. Furchtgott-Roth. Mr. Pickering, I have had a long-
standing view of--I am not going to--I think the law can work 
the way it is written and I am not here to lobby for any 
changes.
    Mr. Pickering. Thank you very much, Mr. Chairman.
    Mr. Tauzin. I thank the gentleman.
    Mr. Shimkus from Illinois is recognized.
    Mr. Shimkus. Thank you, Mr. Chairman. Not being a lawyer, I 
find this debate very interesting, just from a nonlegal 
perspective. And so I am not going to get into the section 
this, section that. I mean, that is why we have other people 
with other skills.
    But I do, and I think my colleagues on the other side were 
getting a little fired up about the issue of not having access 
to bureau meetings. And from a simple person from southern 
Illinois, I would ask this question: why wouldn't commissioners 
be ex officios or staff, be ex officios of major negotiations 
of hearings that are going to come before you? I mean, would 
you think it would be--am I missing something in is there an 
inappropriateness to be sitting in on negotiations before you 
review the license transfer? Is there some legal thing that--I 
don't understand why, if you wanted access to evaluate and 
follow the process before the completed process was slapped on 
your desk for your review, and your comments and your vote, is 
there--am I missing something?
    Mr. Tauzin. Will the gentleman yield? Would there be any 
problem with having a bill that said that every Commissioner 
has a right to be present at any one of these negotiate 
sessions? Would there be anything wrong with that?
    Mr. Powell. No. There are no legal concerns with 
commissioners, of course, being part of the deliberative 
process that results in a decision. There is sometimes concerns 
about whether you can be said to have prejudged an issue if 
someone attempted to suggest that you had reached a decision 
outside the context of the record. I think that what the 
Commission would have to be very careful about, particularly 
with Commissioner participation is just that, which I don't 
think anybody should have any problem with, that you can 
sufficiently and fairly be said to have reached your decision 
about the matter on a written record that is available for 
public scrutiny. And said to the extent that these meetings 
occur with participation of commissioners, it might put a 
higher premium on saying that there is a full documentation, so 
nobody could say that Mike Powell made up at mind on something 
that nobody had any access to. That would be the issue and I 
don't think it is insurmountable.
    Mr. Furchtgott-Roth. Mr. Shimkus, if I could just return 
to--the specific act is the SBC-Ameritech license transfer 
matter, not--SBC and Ameritech petitioned the Commission to 
transfer licenses. There was public notice, there was 
voluminous public comment. It was only after the Commission 
received public comment that there began the series of 
meetings.
    In my view, we had sufficient information at the time the 
public comment cycle was completed to have rendered a decision 
within 90 days, or within some reasonable period of time.
    I was--it was as far as I know an unprecedented process. I 
don't know that there were not similar situations, but what was 
particularly unique about this was the public announcement that 
there would be this series of meetings, whether you want to 
call them secret or private. In any case the public was not 
allowed to participate. The public was kept in the dark. And a 
lot of other people were as well.
    Mr. Powell. Mr. Shimkus, I just wanted to expand on your 
last question, because I forgot another one that Mr. Ryan 
pointed out. Under the Sunshine Act, three commissioners cannot 
be together and deliberate outside of a public context, so that 
would be another limitation. The three of us could not show up 
at the same meeting that was not noticed as a public forum and 
participate, and that is a real impediment in a lot of things 
that we do.
    Mr. Pickering. Mr. Shimkus, could I ask a follow-up 
question?
    Mr. Shimkus. Please.
    Mr. Pickering. In any of these voluntary agreements are 
they published? Do they have sunshine full disclosure in any 
way?
    Mr. Powell?
    Mr. Powell. If I understand the question, yes. I mean, they 
are ultimately codified. They are ultimately provided for 
public notice and they are appended to the final order of the 
Commission.
    Mr. Pickering. But are there some agreements outside these 
so-called secret agreements, if SBC gave $50 million--I am not 
saying they did or did not--but if they did, is that part of 
the public record?
    Mr. Powell. Apparently not. Just to be clear, I have no 
idea. I mean, if such things exist, they are not part of any 
deliberative activity I have participated in. So I just do not 
know anything to shed light on that.
    Mr. Shimkus. If I could just reclaim my time just to see if 
I could get an answer. Would, with respect to the sunshine 
applications, would making the commissioners or their 
representatives ex officios of some extraneous deliberative 
process, would that be helpful and would you be supportive of 
that?
    Mr. Furchtgott-Roth. Mr. Shimkus, bearing in mind my view 
that the Commission could do----
    Mr. Shimkus. I understand.
    Mr. Furchtgott-Roth. [continuing] the whole process without 
changing the statute----
    Mr. Shimkus. But obviously if I could butt in, obviously 
they can, but they are not.
    Mr. Furchtgott-Roth. I am not certain why there needs to be 
the negotiations in the first instance.
    Mr. Shimkus. Okay, but if there are.
    Mr. Furchtgott-Roth. Let me note something. The 
negotiations go on not simply because the bureau staff on their 
own motion goes out and decides to do them.
    Mr. Shimkus. You are sounding like a politician.
    Mr. Furchtgott-Roth. I am not. I am just a public servant 
here.
    Mr. Shimkus. Could this public servant just answer? Would 
that be something that you think would be helpful or harmful?
    Mr. Furchtgott-Roth. Mr. Shimkus, I think that the 
Commission consists of five commissioners, and I think except 
as specifically noted in the statute, they all have equal 
responsibilities and equal powers. And so I would think that 
anything that would say that would reinforce that would be----
    Mr. Tauzin. Will the gentleman yield?
    Mr. Shimkus. You can have my time.
    Mr. Tauzin. Let me see if you can help you. You mentioned 
the sunshine law would not allow any three of you to get 
together in a process that might be deliberative without the 
public being present. Does that apply to your staffs?
    Mr. Powell. No.
    Mr. Tauzin. So your staffs could attend these meetings if 
he were allowed to? Was your staff allowed to attend any of 
these meetings?
    Mr. Furchtgott-Roth. No.
    Mr. Tauzin. You were told you could not come and your staff 
could not come?
    Mr. Furchtgott-Roth. I did not request to attend but my 
staff was told no.
    Mr. Tauzin. Your staff was told no. So we have got a 
situation where a series of private meetings are announced in 
this case, and the commissioners and their staff are both told 
to stay out of it. We are going to negotiate this on our own. 
The bureau is going to do it.
    That is essentially what happened. And the question I think 
Mr. Shimkus is trying to get to is first of all, would it be 
good public policy for us to be legislating on how these secret 
meetings should be conducted? Is that sanctioning it? And would 
you want us to legislate your right to be there? Would you want 
us to do that? Or your right to have your staff there at least, 
if staff presence would not violate the sunshine law? And I 
guess Mr. Shimkus is just asking for an opinion. Do you think 
that is a good policy or not for us to legislate your right to 
be at private meetings, even those that may not be as secret as 
others?
    Mr. Powell. It would not hurt. But the reason it is a 
difficult question to answer, it is a little embarrassing to 
believe that it rises to the necessity of legislation.
    Mr. Tauzin. It really does.
    Mr. Powell. It is certainly superfluous. I agree with 
Harold we have, in the existing statute, every right. And I 
also believe that if I tore the house down, I could get in any 
meeting that I needed to. But the problem is you have to keep 
track of what is going on and when they are, and that is 
actually more the challenge than getting there.
    Mr. Tauzin. You have to know what is going on and that is 
the tough part.
    Mr. Powell. And you have to want to be there. These things 
are constant and unending.
    Mr. Tauzin. I remember a time, Commissioner Roth, when you 
did have to tear down the walls and go public with the fact 
that they would not even share information with you, the 
bureau. The staff that works for the Commission was refusing to 
share information with the Commission. Isn't that correct?
    Mr. Furchtgott-Roth. Yes, sir.
    Mr. Tauzin. We have some real problems here, do we not? The 
answer is yes. Bottom line is that you made some good 
suggestions. Let me ask a couple of questions and I will yield 
back to any members who may want--there are several approaches, 
I think Mr. Pickering was trying to feel this out.
    If we did shift the burden of proof to the Commission to 
actually find harm, could the Commission not still, or the 
bureau, might still have negotiating sessions where extraneous 
conditions were attached to the approval of a process?
    Mr. Powell. Yes, I think that now you start to get a lot 
further toward what I think Mr. Wynn was talking about. That 
is, if the Commission affirmatively finds as a prerequisite to 
condition exercise that there is harm sufficient to block the 
merger, I think you are where you would expect to be, that we 
can either do so or we believe that you believe could be 
approved conditional on certain things.
    What is critical to its validity to me is first, making a 
decision about the harms and your willingness to act on them. 
And then I don't think the conditioning exercise all by itself 
is nefarious, but I think that you would you want procedurally 
to do it in a way that----
    Mr. Tauzin. But here is a problem with the other one that 
you cited, Commissioner Powell. If there is not a provision in 
our bill that specifically says the Commission has to order 
these conditions, then you do not have a reviewable 
circumstance. The poor party is caught with having voluntarily 
agreed. I mean, that is the essence of this problem. You 
pointed out in your testimony is that there are two evils 
involved here. One is that mountains of conditions might be 
voluntarily agreed to to satisfy a pebble of harm that may not 
be even related to the mountain of conditions that have been 
added to the process. That is a harm. That is bad. And you cite 
it correctly.
    The second is that once the poor applicant has agreed to 
all of these things at the sacred or private meeting, whatever 
it was, that he is estopped from going to court to complain 
about it. At least, if the law requires the Commission to order 
those things, he might have a chance if we had a proper law 
written that said it has to be something required by the 
regulations of the Commission, by some actual statute; and two, 
that it had to have some relation to the harm involved. If we 
had a law that said that, at least that party would have a 
right to go to court and say that the Commission has 
overstepped its bounds in requiring me to do this. But that 
poor person is out of court if he voluntarily agrees to it.
    That is the game. That is the government by consent decree 
that goes on in this circumstance. The parties kicking and 
screaming looked at these notes kicking and screaming, agree to 
conditions and find themselves totally out of any chance to go 
and ask a court to review them to see if they were illegal or 
extra legal. So it seems to me that simply shifting the burden 
of proof without affirmatively requiring the Commission to 
address the harm by ordering conditions on the merger creates a 
problem.
    I am going to give you an example. I am going to give you 
an example of an actual case. An applicant in a merger 
situation in the DOJ process is told we want you to agree not 
to acquire this part of the advertising business in this 
community. We do not want you to own that much, whatever it 
was.
    Applicant says fine. I will agree to that. Then DOJ says 
wait a minute, we want you to also agree that you will never 
acquire it. You have to sign a statement saying that you will 
never acquire it. And he says why do I have to sign that and 
they said, well, we do not want to buy a lawsuit that we cannot 
win. DOJ does that. That is a problem at DOJ. I wish we had 
jurisdiction there. I would like to go cure those problems. We 
are working on that, by the way. We may yet get there.
    But that applicant then comes to the FCC and can go through 
the same process all over again. If DOJ does not catch him, the 
FCC can. And the condition that he can be required to 
voluntarily agree to becomes something he can never complain 
about in court, even though it was suprajudicial, even though 
could not have been defended in court by any action of the 
agency. Had it ordered as a condition to the merger.
    Now, that to me is the essence of what you tell the 
committee today we ought to try to cure. And I think--so it 
really goes to the heart of the problems and the procedures. 
And let me say to all of you, that I think it goes a long way 
to curing what goes on on the outside as well. If as a party to 
the process I know that I am going to get an answer on a 
certain date, that I am going to get an answer that I can 
appeal to a court if I think I have been unfairly treated; I do 
not have to yield to outside pressures to make donations or to 
hire people or to do whatever I have got to do because somebody 
is holding out to me that they can somehow make a difference 
for me somewhere. I am no longer vulnerable to those problems. 
And it seems to me that is where I think Mr. Pickering and Mr. 
Dingell and I want to go. And, again, you helped us a great 
deal, and I think focusing our attention on the right cures, 
and I thank you very much.
    Let me see if any of my colleagues have any additional 
questions.
    Mr. Pickering.
    Mr. Pickering. Mr. Chairman, I would just like to say, I 
look forward to working with the commissioners and the 
Commission, and with you as we try to find the right balance on 
the time lines and if we do need to build flexibility within 
the process, I look forward to looking at where the burden 
should be upon which party. And I look forward to looking at 
clearly establishing standards by which the FCC shall look at 
mergers and acquisitions and by which they can make conditions.
    So I hope the discussion draft is a good place to start and 
look forward to working with all the members of this committee 
and the Commission and the community affected as we move this 
very important reform process forward. Because we need to keep 
in mind this is not about the FCC, it is not about Congress, 
this is about the marketplace and the applications and the 
technologies and the innovations and the competition and the 
convergence that will truly provide the public interest benefit 
we all hope to see.
    Mr. Tauzin. I thank the gentleman.
    Mr. Wynn, do you have any final thoughts or questions?
    Mr. Wynn. No, sir.
    Mr. Tauzin. Mr. Shimkus?
    Mr.  Shimkus. No.
    Mr. Tauzin. There is something that intrigues me. We are a 
free speech society and yet we got rid of the ICC and we 
deregulated trucking and we have kept the agency to regulate 
speech in America and we go through all this horrible process 
and argument about how we are regulating speech. It just makes 
me wonder about whether we shouldn't embark as soon as we can 
on some real restructuring and reform for marketplace of ideas 
and speech that is becoming so incredibly diverse as the 
Internet catches on.
    At some point, I will ask your comments about that and ask 
you to give us some thoughts about what ought to be basic 
restructuring in the reform bill.
    In the meantime, let me thank you. You have added 
measurably to our store of knowledge and advanced our 
processes, and the hearing stands adjourned.
    [Whereupon, at 12:12 p.m., the subcommittee was adjourned.]
    [Additional material submitted for the record follows:]
Prepared Statement of Hon. Cliff Stearns, a Representative in Congress 
                       from the State of Florida
    Mr. Chairman: Thank you for holding this hearing on the FCC's 
merger review authority and accompanying legislation, the 
Telecommunications Merger Review Act of 2000. I would like to thank 
Commissioners Furchtgott-Roth and Powell, as well as Mr. Weening, for 
appearing before the subcommittee this morning. I am, however, 
disappointed that Chairman Kennard's schedule could not accommodate his 
testifying before the subcommittee, for it is primarily because of his 
direction we are holding this hearing and discussing legislation.
    Since passage of the Telecommunications Act of 1996, the 
telecommunications landscape has significantly changed shape. Changes 
in law and the regulatory framework, coupled with technological 
advancements and increased gobalization, have spurred a tremendous 
amount of merger activity, with many telephone, long-distance, media, 
and cable companies either merging or forming partnerships and 
alliances. Many of these changes have brought consumers lower prices, 
innovation, and high-quality goods. However, there are mergers which 
hurt consumers by limiting innovation, raising prices, or reducing 
quality, and anti-trust laws and consumer protection provisions serve 
as triggers to ensure consumers and competition are not harmed.
    So the purpose of today's hearing is to explore the current scope 
of the FCC's authority to review telecom-related mergers, as well as 
consider the need for legislation to limit the FCC's role in merger 
approvals.
    Mr. Chairman, does the way the FCC currently conduct merger reviews 
need reform? The answer is a resounding yes. For the FCC, itself, has 
formed a Transactions Team to review its own merger review process and 
to develop procedures to streamline and accelerate the Commission's 
merger review process. Why wasn't this done sooner?
    While I do not fault the Commission for its self-initiation in 
streamlining the merger review process, I remain skeptical as to 
whether the end result will be substantive. For nothing the Commission 
implements will change its duplicative jurisdiction with the Department 
of Justice's Antitrust Division in reviewing telecommunications 
mergers, and I fear the FCC will continue to apply it's ``public 
interest'' test in conditioning merger approvals.
    Mr. Chairman I remain skeptical as to whether the FCC even has an 
antitrust role in approving mergers. For Section 601(b) of the 1996 
Telecom Act repealed the FCC's only specific statutory merger authority 
under Section 221(a) of the Communications Act, while also repealing 
the FCC's authority under the Clayton Act. Nonetheless, the Commission 
now cites other provisions of the Communications Act to direct merger 
review authority.
    Members of this committee may also be interested in The 
International Competition Policy Advisory Committee's Final Report 
presented to Attorney General Janet Reno and Assistant Attorney General 
for Antitrust Joel I. Klein last month. The Final Report includes 
policy recommendations on international antitrust issues such as 
multijurisdictional merger review, anti-cartel enforcement and the 
interface of trade and competition policy.
    Specifically, the Advisory Committee found that ``the multiplicity 
of reviewing bodies and the use of different standards for judging 
mergers makes it difficult . . . to understand the merger review 
process. This may have the cumulative effect of decreasing 
transparency. This possibility is strongest where sectoral regulators, 
acting under the mandate of broad ``public interest'' standards, 
account for competition policy concerns in exercising their 
jurisdiction over mergers. Sectoral regulators often have authority to 
take into account social welfare considerations that extend beyond the 
traditional focus of antitrust analysis. In many instances it may be 
difficult to determine whether traditional antitrust concerns or social 
welfare objectives motivated the sectoral regulators' decision to 
intervene.'' Furthermore, the Advisory Committee raised an additional 
concern that regulatory agencies, such as the FCC, are vulnerable to 
capture by industry and generally more susceptible to political 
influence compared with the DOJ.
    Additionally, Commissioners Furchtgott-Roth and Powell, testifying 
today, have publicly expressed concerns over the seemingly duplicative 
jurisdiction of the Antitrust Division and the FCC during 
telecommunications merger reviews. For the Antitrust Division examines 
how the proposed merger might eliminate current competition or future 
potential competition in a way that harms consumers. It investigates 
and analyzes factors such as market concentration, potential adverse 
effects, ease of entry into the market at issue, and efficiencies 
likely to be created by the merger. Additionally, its analysis includes 
determining whether the merger would lessen innovation in developing 
new technologies. The FCC, then turns around and conducts the same 
analysis, thereby producing no meaningful differences in the analysis.
    Mr. Chairman, I would also like to make as part of the official 
record Commissioner Furchtgott-Roth's November 5, 1999, op-ed piece in 
the Wall Street Journal, titled ``The FCC Racket'' in which he argues 
that the FCC's authority over merger review has become too broad and 
without the necessary limits and standards and how the Commission's 
``elaborate ruse--merger authority, voluntary conditions, and public 
involvement--has created a self-perpetuating myth that the FCC has far-
reaching authority to sanction orreject mergers in the public 
interest.''
    Thank you again Mr. Chairman. I look forward to the testimony of 
our witnesses.
                                 ______
                                 

          [Friday, November 5, 1999--The Wall Street Journal]

                             The FCC Racket
                       By Harold Furchtgott-Roth
    It's difficult to think of a large communications firm that hasn't 
at least discussed a merger over the past few years. In each case, 
companies, legislators and the media chant the mantra: This merger 
would require Federal Communications Commission approval.
    This is simply false. Although the FCC has limited authority to 
review certain mergers under the Clayton Act, the agency has never 
invoked that authority during the recent spate of condition-laden FCC 
``merger approval'' orders. Invoking the Clayton Act requires the 
commission to undertake the uncertainty and expense of winning a court 
case in order to block any deal. The Justice Department and the Federal 
Trade Commission are subject to these rigorous standards and the 
corresponding limitations imposed by antitrust precedent. But the FCC, 
extracting itself from that legal shackle, has created a merger 
approval ``process'' that is lawless, standardless and endless.
    Under the law, no merger requires FCC approval. Companies are 
required to apply only to transfer FCC licenses, much like changing 
title to an automobile. The FCC routinely processes tens of thousands 
of license-transfer applications annually with nary a whimper. But 
periodically the agency singles out a few, particularly those 
associated with the mergers of large, heavily regulated companies, for 
``special'' treatment.
    This treatment is virtually indefinable, but inordinately powerful: 
It brings companies to their knees begging for ``voluntary'' conditions 
that drive up their costs of doing business. The process itself is both 
arbitrary and indecipherable. The commission has no consistent rules on 
the handling of license transfers, and it asserts this limitless 
authority without deadlines or accountability. Because the conditions 
are ``voluntary'' and the merger is time-sensitive, firms are virtually 
barred from seeking judicial review.
    Consider the recent case of SBC's request to acquire Ameritech's 
FCC licenses. An initial review revealed no violation of federal law or 
FCC rules. Yet with no official written notice, one commission official 
publicly pronounced that the transfers were outside the public 
interest--without defining what the ``public interest'' is.
    SBC and Ameritech sensed that their transaction was in peril, but 
they had no clear explanation why. What to do? Demand written 
clarification? Go to court to challenge the process? Tell Congress and 
the media of the mistreatment?
    If recent history is any guide, none of the above. Instead, CEOs 
privately contact the FCC and find out the ransom price to free their 
licenses. They do not publicly complain too much because that would 
annoy the FCC, which has ultimate regulatory control over their 
business, both today and tomorrow. They do not go to court, out of fear 
that the corresponding delay will sink this and future deals. They 
cannot allow anything--no matterhow arbitrary and demanding--to 
threaten their mergers.
    What does the commission want? Don't expect it to be written down 
anywhere, because a written quid pro quo might be illegal. Commission 
staffers engage in months of secret negotiations without a clear 
written record of what is being negotiated or why. The FCC issues 
public pronouncements about open processes, and yet denies anyone from 
the public access to, or minutes from, the secret meetings. Then, 
remarkably, a complex and detailed set of ``voluntary'' promises are 
submitted to the FCC for approval. Like puffs of smoke from the 
Vatican, it is a sign: The deed is done.
    Initially, of course, the merging companies had filed documents to 
prove that the license transfers are in the public interest without any 
conditions. But after a few months of private FCC meetings, these 
companies discover that their shareholders and the public interest will 
be advanced only by volunteering to a condition-laden transfer.
    In the SBC/Ameritech merger, most of these conditions were neither 
consistent with the law nor more stringent. Some conditions require the 
companies to discriminate among different customers, thereby violating 
federal law. All these conditions are to occur after the license 
transfers. They are little more than promises of future behavior, 
whether for good or ill. And the conditions are often not even remotely 
related to the actual licenses being transferred.
    The ``proposed'' conditions are then sent out for public comment. 
This is often only a pro forma exercise. For example, most of the 
competitors of SBC/Ameritech were adamantly opposed to the conditions. 
They argued that they were better off to have the licenses transferred 
to SBC without any conditions, but with the full and unambiguous 
protection of the law. Yet not a single substantive change to the 
conditions was made after public comment.
    The results can be even more disturbing than the process. For three 
years, SBC/Ameritech will be a regulatory Frankenstein, different from 
every other regulated entity in America. It will have all of the 
trappings of a regulated telecommunications carrier, plus FCC-blessed 
regulatory appendages in every shape and form. Customers and regulators 
can throw away their copies of the Communications Act and the 
commission's regulations. The real rules are now in the FCC's orders 
approving this particular transaction.
    What happens if SBC/Ameritech fails to meet the conditions? Then 
the company could owe $2 billion in ``voluntary'' payments to the 
federal government or to charitable institutions. These payments are 
not ``fees,'' because no government service is provided in return, nor 
are they ``fines'' or ``penalties,'' because no federal law or 
regulation would be violated. A company could not lawfully approach a 
member of Congress or the administration--or vice versa--and ask for 
favorable consideration in return for such ``voluntary'' contributions. 
Yet no one has dared to ask about the enforcement of these payments.
    This elaborate ruse--merger authority, voluntary conditions, and 
public involvement--has created a self-perpetuating myth that the FCC 
has far-reaching authority to sanction or reject mergers in the public 
interest. In fact, the only thing that clearly emerges from the FCC's 
merger review process is that the public has no interest in this sham.
                                 ______
                                 
 Prepared Statement of Hon. Tom Bliley, Chairman, Committee on Commerce
    Thank you, Mr. Chairman.
    The Subcommittee will consider legislation this morning that would 
substantially limit the FCC's authority to review telecom-related 
mergers.
    This is an important hearing, indeed. The telecommunications 
industry is in the midst of rapid consolidation.
    Bell companies are combining with each other . . . AT&T is trying 
to purchase MediaOne . . . MCI wants to acquire Sprint . . . AOL looks 
to own Time Warner . . . and just yesterday, Tribune Broadcasting 
announced that it would be acquiring Times Mirror.
    So what should the FCC's role be in this period of industry 
consolidation?
    This is a difficult question, to which there is no easy answer. 
Among other things, the answer should include a requirement that the 
FCC conduct itself in an open and transparent manner--not just in the 
way it reviews mergers . . . but in any rulemaking or adjudication.
    It's true that the 1996 Act assigned the FCC important 
responsibilities. But Congress didn't make the FCC a ``czar.''
    In recent months, no one has tried to make this point more 
forcefully than Chairman Tauzin. Mr. Chairman, I share your interest in 
establishing FCC practices and procedures that promote transparency. 
The American public deserves nothing less.
    It is therefore an opportune time for this Subcommittee to initiate 
this review. I note that the draft legislation before the Subcommittee 
this morning would limit the amount of time the FCC can take in 
reviewing mergers. The legislation would also limit the FCC's ability 
to make public interest considerations in the course of reviewing 
mergers.
    I commend the drafters of this legislation for their hard work, and 
I look forward to the witnesses comments.
    In particular, this Subcommittee needs to know whether this 
legislation would cure the problem. Or is it possible that the cure is 
worse than the disease? That is, will tight time and scope limitations 
only promote more, and not less, back-room dealing?
    Again, I want to thank Chairman Tauzin for holding this hearing, 
and I look forward to the testimony of today's witnesses.
    I yield back the balance of my time.


                                  




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