[Federal Register Volume 62, Number 134 (Monday, July 14, 1997)]
[Notices]
[Pages 37594-37604]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-18289]


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DEPARTMENT OF JUSTICE

Antitrust Division


Proposed Modified Final Judgment and Memorandum in Support of 
Modification

    Notice is hereby given that a Motion to Modify, a Memorandum in 
Support of Modification, a proposed Modified Final Judgment and a 
Stipulation, and have been filed in the United States District Court 
for the District of Columbia in United States of America v. MCI 
Communications Corporation and BT Forty-Eight Company (``NewCo''), Civ. 
No. 94-1317 (TFH).
    As set forth in the plaintiff's uncontested Motion and Memorandum 
In Support of Modification, a number of factual and legal events have 
occurred since the entry of the existing Final Judgment, including 
British Telecommunications plc's (``BT'') plan, announced last fall, to 
purchase the remaining 80% of MCI Communications Corporation (``MCI'') 
for $21 billion.
    The existing final judgment, which stems from a 1994 acquisition by 
BT of 20% of MCI's stock, contains provisions designed to remedy 
allegations in the Complaint filed contemporaneously therewith, that BT 
would successfully act on its incentives to use its market power in the 
United Kingdom to discriminate in favor of MCI and/or BT's joint-
venture with MCI, at the expense of other U.S. telecommunications 
carriers in the market for international telecommunications services 
between the U.S. and the U.K. and the global network services market. 
The proposed Modified Final Judgment retains and, in some cases, 
strengthens these protections in order to take into account the full 
integration of BT and MCI, as well as changed market conditions since 
the existing Final Judgment was entered. Specifically, the proposed 
Modified Final Judgment increases the amount of information that the 
merged entity, who is named as a party to the modified decree, is 
required to report in order to facilitate the detection of specific 
instances of discrimination and to provide evidence that could be used 
in support of complaints to the relevant U.S. and U.K. regulatory 
agencies. The proposed Modified Final Judgment also revises the 
confidentiality provisions of the existing decree in order to reduce 
the risk that confidential, competitively sensitive information that BT 
obtains in the course of its relationships with other U.S. 
telecommunications providers are not disclosed to MCI through the 
corporate parent or as a result of any subsequent corporate 
reorganization. The proposed Modified Final Judgment also extends the 
time period of the existing decree and enhances the Department's 
ability to monitor and enforce compliance with the decree by giving the 
Department access to the merged entity's documents and personnel, 
wherever located.
    Public comment on the proposed Modified Final Judgment should be 
directed to Donald Russell, Chief, Telecommunications Task Force, Room 
8104, U.S. Department of Justice, Antitrust Division, 555-4th Street, 
N.W., Washington, D.C. 20001. Such comments and the Department's 
responses thereto will be filed with the Court. In its filing, the 
Department indicated that it would follow its standard 60-day comment 
period. On

[[Page 37595]]

July 7, 1997, however, the Court granted defendants' motion to shorten 
the comment period to 30 days.
Constance K. Robinson,
Director of Operations.

United States District Court for the District of Columbia

United States of America, Plaintiff, v. MCI Communications Corporation 
and BT Forty-Eight Company (``NewCo''), Defendants

[Civil Action No. 94-1317 (TFH)]

Stipulation

    It is stipulated and agreed by and between the undersigned 
parties by their respective attorneys, that:
    1. The Court has jurisdiction over the defendants and, for the 
limited purpose of enforcing this Stipulation, over British 
Telecommunications plc (``BT'').
    2. The parties to this Stipulation consent to the modification 
of the Final Judgment entered by this Court on September 29, 1994, 
as shown in the attached Modified Final Judgment filed with this 
Stipulation. The parties further consent that the Modified Final 
Judgment in the form attached may be entered by the Court, upon any 
party's motion, at any time after the completion of the procedures 
specified in the United States' Explanation of Procedures, attached 
to this Stipulation, without further notice to any party or other 
proceedings, provided that plaintiff has not withdrawn its consent, 
which it may do at any time before entry of the Modified Final 
Judgment by serving notice on the defendants and BT and by filing 
that notice with the Court.
    3. BT and defendant MCI have entered into a Merger Agreement and 
Plan of Merger dated November 3, 1996 (``Merger Agreement''), 
whereby MCI shall be merged into a wholly-owned subsidiary of BT. 
Upon completion of the merger, the parent company, BT, will be 
renamed Concert plc (``Concert''). The parties have agreed that this 
Court shall have jurisdiction over the parent company following the 
consummation of the proposed transaction, and that the parent 
company will be bound by the provisions of the Final Judgment and 
the Modified Final Judgment when it is entered. The parties are 
hereby estopped from arguing that this Court lacks venue or 
jurisdiction over the subject matter of this action or over Concert. 
The parties further agree that following its formation, Concert will 
become a party to the Modified Final Judgment.
    4. The parties to this Stipulation agree that as of the date of 
this Stipulation and pending entry of the Modified Final Judgment, 
MCI shall abide by the terms and conditions of Section II.A.3.ii of 
the Modified Final Judgment as though the same were in full force 
and effect as an order of the Court.
    5. The parties to this Stipulation agree that if the Merger 
Agreement is consummated before the Modified Final Judgment is 
entered, they shall abide by all of the terms and conditions of the 
Modified Final Judgment as though the same were in full force and 
effect as an order of the Court.
    6. The parties agree to notify the plaintiff in writing if MCI 
or Concert hereafter files with the Federal Communications 
Commission (``FCC'') or the United Kingdom's Office of 
Telecommunications (``OFTEL'') an application to assign (or transfer 
control of) any license or authorization held by MCI or BT relating 
to telecommunications services between the United States and the 
United Kingdom, or if Concert seeks to reorganize its corporate 
structure so as to combine NewCo and BT in the same corporate entity 
as set forth in Section VII.B of the Modified Final Judgment.
    7. The agreements governing disclosure to United States 
corporations that are referenced in Section IV.E of the Modified 
Final Judgment, shall provide that: (1) Non-public information 
received from the Department of Justice shall be used solely in 
connection with the filing of a complaint with or providing 
information to governmental authorities in the United States or the 
United Kingdom, and not for any other purpose; (2) such information 
shall not be disclosed to any persons other than those officers, 
directors, employees, agents or contractors of the corporation who 
need such information in order to file a complaint, to determine 
whether a complaint should be filed or to provide information to any 
governmental authority in the United States or the United Kingdom, 
and to those government authorities (including, but not limited to, 
the FCC and OFTEL); (3) all persons to whom any non-public 
information is disclosed will be advised of the limitations on the 
use and disclosure of such information; and (4) if unauthorized use 
or disclosure occurs, the Department of Justice may revoke or 
otherwise limit further access to such information by the 
corporation or any person unless the Department of Justice decides, 
in its sole discretion, that such revocation is unnecessary under 
the circumstances. The Department of Justice may add further 
conditions to any agreements referenced in Section IV.E of the 
Modified Final Judgment if it determines that such conditions are 
necessary for the protection of any non-public information. Any 
actions taken by the Department of Justice to redress the 
unauthorized use or disclosure of any non-public information shall 
neither preclude nor give rise to defendant's right to pursue to 
separate action against any person for the unauthorized use of 
disclosure or such information.
    8. In the event plaintiff withdraws its consent, as provided in 
paragraph 2 above, or if the proposed Modified Final Judgment is not 
entered pursuant to this Stipulation, this Stipulation shall be of 
no effect whatever, and the making of this Stipulation shall be 
without prejudice to any party in this or any other proceeding.

    For Plaintiff United States of America.

    Dated: July 2, 1997.
Yvette Benguerel,
D.C. Bar #442452,
David Myers
United States Department of Justice, Antitrust Division, 555 4th 
Street, N.W., Washington, D.C. 20001, (202) 514-5808.

    For British Telecommunications PLC.

    Dated: July 2, 1997.
David J. Saylor,
D.C. Bar # 96826,
Hogan & Hartson,
Columbia Square, 555 Thirteenth Street, N.W., Washington, D.C. 20004-
1109, (202) 637-8679.
    For MCI Communications Corporation.

    Dated: July 2, 1997.
Anthony C. Epstein,
D.C. Bar #250829
Jenner & Block,
601 Thirteenth Street, N.W., Suite 1200, Washington, D.C. 20005, (202) 
639-6080.

Certificate of Service

    I, Tracy Varghese, hereby certify under penalty of perjury that 
I am not a party to this action, that I am not less than 18 years of 
age, and that I have on this day caused the Motion to Modify, 
Memorandum In Support of Modification, Stipulation, and Modified 
Final Judgment, to be served on the defendants by mailing a copy, 
postage paid, to each of the defendants on the attached service 
list.

    Dated: July 7, 1997.
Tracy Varghese

Service List

    BT Forty-Eight Company.
David J. Saylor,
Hogan & Hartson,
Columbia Square, 555 Thirteenth Street, N.W., Washington, D.C. 20004-
1109.

    MCI Communications Corporations
Anthony C. Epstein,
Jenner & Block,
601 Thirteenth Street, N.W., Suite 1200, Washington, D.C. 20005.

United States District Court for the District of Columbia

[Civil Action No. 94-1317 (TFH)]

United States of America, Plaintiff, v. MCI Communications Corporation 
and BT Forty-Eight Company, (``NewCo''), Defendants

Motion of the United States for Modifications of the Final Judgment

    Plaintiff, the United States of America, moves this Court to 
modify the Final Judgment in the above-captioned matter. Plaintiff's 
motion is based on the following grounds:
    1. On June 15, 1994, the United States filed its complaint in 
the above-captioned case alleging that the acquisition by British 
Telecommunications plc (``BT'') of a 20% ownership interest in MCI 
Communications Corporation (``MCI'') created an incentive for BT, 
using its existing market power in the United Kingdom, to favor MCI 
at the expense of other United States international carriers in the 
market or markets for international telecommunications services in 
violation of Section 7 of the Clayton Act, 15 U.S.C. Sec. 18. The 
complaint also alleged that the formation of a joint venture between 
BT and MCI (``NewCo'') to provide seamless global network services 
to multinational corporations created an incentive for BT to

[[Page 37596]]

 use its dominance in the UK to favor the joint venture at the 
expense of other global network service providers in the provision 
of the UK segment essential to any seamless global network.
    2. The Final judgment, filed contemporaneously with the 
compliant and entered by the Court on September 29, 1994 after a 
Tunney Act review, contains provisions designed to reduce the risk 
that BT would use its market power to discriminate in favor of MCI 
or the joint venture. The Final Judgment further provides that the 
Department may seek a modification of the Final Judgment in order to 
prevent discrimination. The potential discrimination need not have 
been foreseen at the time the Complaint in this matter was filed. If 
a motion for modification is uncontested, it is analyzed under a 
public interest standard. After the Final Judgment was entered, BT 
and MCI consummated BT's 20% acquisition and formed the joint 
venture, NewCo.
    3. In November 1996, BT and MCI entered into a Merger Agreement 
and Plan of Merger pursuant to which MCI will be completely merged 
into a wholly-owned subsidiary of BT. The new parent company, BT, 
will then be renamed Concert, plc.
    4. Both the US and UK governments have enacted reforms since the 
final judgment was entered that altar the status of competition for 
international traffic between the US and the UK. Despite these 
changes, however, BT still maintains substantial market power in 
local and domestic long distance services in the United Kingdom and 
BT's dominance in these markets is unlikely to erode swiftly.
    5. Accordingly, certain modifications to the final judgment 
aimed at deterring and detecting discrimination need to be retained 
and, in some cases, strengthened in order to ensure that the 
resulting full integration of BT and MCI and changed market 
conditions will not impair the effectiveness of any protections 
afforded by the existing decree.
    6. The proposed modified final judgment, filed contemporaneously 
herewith, sets forth the specific modifications agreed to among the 
parties. Plaintiff's Memorandum In Support Of Modification 
demonstrates that the proposed modifications are necessary to 
address the concerns raised by the full integration of BT and MCI as 
well as certain regulatory changes and, therefore, are in the public 
interest.
    7. Defendants have authorized Plaintiff to state that they 
concur in this motion.
    8. The Department does not believe that this modification is 
subject to the Tunney Act. Because of the important issues involved, 
however, the Department intends to follow the comment procedures 
outlined in the attached Explanation of Procedures. After completion 
of the procedures, the Department will file another motion 
requesting that the Court enter the attached Modified Final 
Judgment.

    Respectfully submitted,
Joel I. Klein,
Acting Assistant Attorney General.
Lawrence R. Fullerton,
Deputy Assistant Attorney General.
Charles E. Biggio,
Senior Counsel.
Constance K. Robinson,
Director of Operations.
Donald J. Russell,
Chief, Telecommunications Task Force.
Nancy M. Goodman,
Assistant Chief, Telecommunications Task Force.
Yvette Benguerel,
DC Bar #442452
David Myers
Attorneys, United States Department of Justice, Antitrust Division, 555 
4th Street, N.W., Washington, D.C. 20001, (202) 514-5808.

    Dated: July 7, 1997.

United States District Court for the District of Columbia

[Civil Action No. 94-1317 (TFH)]

United States of America, Plaintiff, v. MCI Communications Corporation 
and BT Forty-Eight Company (``NewCo''), Defendants

Memorandum of the United States in Support of Modification of the Final 
Judgment

    The United States submits this memorandum in support of its 
motion to modify the Final Judgment entered in the above-captioned 
case. Contemporaneously with filing its motion and memorandum, the 
United States is also filing a proposed modified final judgment and 
a Stipulation wherein the parties have agreed to be bound by the 
provision of modified final judgment following consummation of the 
merger and pending entry of the modified final judgment by the 
Court. A number of factual and legal events have occured since the 
entry of the exisiting final judgment, including an agreement among 
the parties to enter into a full merger. The proposed modifications 
ensure that these events do not impair the effectiveness of the 
existing Final Judgment, and are in the public interest.

I. Introduction and Background

    On June 15, 1994, the United States filed its complaint in the 
above-captioned case. The complaint alleged, inter alia, that the 
acquisition by British Telecommunications plc (``BT'') of a 20% 
ownership interest in MCI Communications Corporation (``MCI'') 
created an incentive for BT, using its existing market power in the 
United Kingdom, to favor MCI at the expense of other United States 
international carriers in the market or markets for international 
telecommunications services between the United States and the United 
Kingdom. See Competitive Impact Statement of the United States 
Department of Justice (hereinafter ``CIS''), dated June 15, 1994, at 
11. The complaint also alleged that the formation of a joint venture 
between BT and MCI to provide seamless global network services to 
multinational corporations created an incentive for BT to use its 
dominance in the UK to favor the joint venture at the expense of 
other global network service providers in the provision of the UK 
segment essential to any seamless global network. See CIS at 14-17.
    The complaint recognized that BT could effectuate this 
discrimination in numerous ways, including: (1) Offering MCI and the 
joint venture interconnection and other telecommunications services 
on more favorable terms and conditions than MCI's competitors and/or 
providing MCI and the joint venture with advance notice of planned 
changes to BT's network; (2) providing MCI and the joint venture 
with confidential, competitively sensitive information that BT 
obtains from other telecommunications providers through BT's 
correspondent relationships and/or through BT's provision of 
interconnection or other telecommunications services within the 
United Kingdom; and (3) discriminating against other carriers by 
diverting some or all of BT's international switched traffic between 
the United Kingdom and the United States to MCI or the joint 
venture, outside the correspondent system.\1\ If other carriers 
could not respond to this diversion by diverting their own traffic, 
they would be left with larger net settlement payments (due to the 
loss of BT's offsetting minutes of traffic), placing them at a 
competitive disadvantage to MCI. It would also give BT an incentive 
to keep the US-UK accounting rate high. See id.
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    \1\ Under the correspondent system, carriers from one nation set 
up correspondent relationships with carriers from other nations to 
facilitate the movement of traffic between their respective 
countries. The negotiated rate at which such traffic is carried is 
called the Accounting Rate. In order to prevent foreign monopoly 
carriers from discriminating against United States carriers by 
threatening to send all of their traffic to any one US carrier 
unless the other carriers accepted a higher accounting rate (a 
practice known as ``whipsawing''), the FCC promulgated the 
International Settlements Policy or ISP. Pursuant to the ISP, each 
carrier must pay \1/2\ of the accounting rate, known as the 
Settlement Rate, for the completion of calls on the corresponding 
carrier's network; all US carriers must be charged the same 
accounting rate (non-discrimination); and traffic must be returned 
to a particular US carrier in proportion to the traffic received 
from that US carrier (proportionate return). Because the US sends 
more minutes of traffic to the UK than UK carriers send to the US, 
US carriers end up with a net settlement outpayment to UK carriers 
equal to the settlement rate multiplied by the imbalance of minutes.
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    The final judgment, filed contemporaneously with the complaint 
and entered by the Court on September 29, 1994 after a Tunney Act 
review, contains three categories of provisions designed to remedy 
the anticompetitive effects of the partial acquisition: (1) 
Transparency provisions;\2\ (2) confidentiality provisions;\3\ and 
(3) a provision designed to address the diversion issue.\4\ These 
provisions were specifically designed to diminish the risk that BT 
would successfully act on its incentive to use its

[[Page 37597]]

market power to discriminate in favor of MCI or the joint venture. 
After the final judgment was entered, BT and MCI consummated BT's 
20% acquisition and formed the joint venture, NewCo.\5\
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    \2\ See Sections II.A.1-5.
    \3\ See Sections II.B-D.
    \4\ See Section II.E.
    \5\ The joint venture ultimately came to be known as Concert 
Communications Company, not to be confused with Concert plc (the 
proposed name of the fully merged company as discussed below).
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    The final judgment also specifically provided a mechanism for 
allowing modifications of the judgment to expand, alter or reduce 
its terms in order for the United States to maintain the status quo 
or to prevent new forms of discrimination that would result in harm 
to United States consumers.\6\ Under the terms of the decree, the 
event or change that triggers the need for the modification need not 
have been foreseen at the time the final judgment was entered. Such 
an event could include new forms of discrimination that were not 
anticipated at the time the final judgment was entered and thus, not 
referenced or described in the CIS. See CIS at 32-33, 38.\7\ Whether 
based on foreseen or unforeseen circumstances, a modification that 
is uncontested is reviewed under a public interest standard. Id. at 
31-32. The modifications proposed herein have been agreed to by all 
parties, and this memorandum, therefore, analyzes the proposed 
modifications under a public interest standard.
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    \6\ The modification provision of the final judgment also allows 
the parties to seek changes in order to prevent undue hardship to 
them.
    \7\ Before concluding that discrimination against any particular 
competitor of MCI or NewCo necessitates modification of the final 
judgment, however, the Department would ordinarily first inquire 
whether the injured party had availed itself of existing regulatory 
remedies in the United States or the United Kingdom. See CIS at 32-
33.
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II. Factual and Legal Events Occurring Since the Final Judgment Was 
Entered

    The United States seeks to modify the final judgment, in part, 
because BT and MCI have now agreed to enter into a full merger. In 
November 1996, a Merger Agreement and Plan of Merger was executed 
pursuant to which MCI shall be merged into a wholly-owned subsidiary 
of BT. The new parent company, BT, will be renamed Concert plc. 
Although the Department thoroughly analyzed all of the competitive 
consequences associated with BT's initial 20% acquisition of MCI, 
the Department undertook an evaluation of the changes in market 
conditions since 1994 in order to determine whether a modification 
of the existing decree was appropriate under the circumstances.
    In addition to the full merger of BT and MCI, both the US and UK 
governments have enacted reforms since the Final Judgment was 
entered that alter the status of competition for international 
traffic between the US and the UK. Theses changes were designed to 
move international telecommunications services from the highly 
regulated correspondent system characterized by few providers (many 
of which have substantial market power in their home countries) and 
above-cost prices, to a more competitive environment. As discussed 
in more detail below, these regulatory changes and, in particular, 
the granting of International Simple Resale (``ISR'') licenses,\8\ 
have been somewhat effective in lowering the US-UK accounting rate. 
Despite these changes, however, the US-UK accounting rate is still 
above-cost and, thus, BT's incentive to discriminate against its and 
MCI's competitors still exists.
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    \8\ International Simple Resale or ISR means the use of 
telecommunications facilities to carry international 
telecommunications traffic without measuring usage (e.g., over 
private leased lines), where such traffic is carried over the public 
switched network in the nation where it originates and where it 
terminates.
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    In addition to BT's incentive to discriminate, concerns about 
BT's ability to discriminate against its and MCI's competitors also 
still exist. BT maintains substantial market power in local and 
domestic long distance services in the United Kingdom. Currently, BT 
has an 80% share of switched long distance revenues in the UK. 
Although cable companies have made some inroads into the local 
market, BT maintains a 91% share of local revenues. BT's position in 
these markets is unlikely to erode swiftly.\9\ For the foreseeable 
future, international carriers will be required to obtain 
interconnection and other services from BT in order to terminate 
calls in the UK.
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    \9\ These figures have not changed substantially since the 
complaint was filed in this case. See CIS at 7-8. Although UK 
regulators have taken steps to encourage competition, they do not 
require BT to unbundle local loops or to provide dialing parity and/
or presubscription to competing providers. Such requirements have 
been imposed in the US to speed the introduction of competition into 
telecommunications markets.
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    As a result of its new analysis, the Department has concluded 
that provisions of the Final Judgment aimed at deterring and 
detecting discrimination need to be retained and, in some cases, 
strengthened. In addition, certain modifications are required in 
order to ensure that the resulting full integration of BT and MCI 
will not impair the effectiveness of the protections afforded by the 
existing decree.

III. Explanation of the Proposed Modifications

    BT's merger with MCI, combined with the regulatory changes 
outlined above, justify modifying certain substantive and procedural 
provisions of the existing Final Judgment. These proposed 
modifications are discussed seriatim.

A. Transparency Provisions

    Sections II.A.1-6 of the existing Final Judgment require MCI and 
NewCo (the joint venture of BT and MCI that provides global network 
services), to report certain information, including but not limited 
to prices, terms and conditions of interconnection and other 
arrangements between MCI, NewCo and BT, data concerning the quality 
of service provided by BT to MCI and NewCo, and the total minutes of 
traffic that MCI sends to and receives from BT in each accounting 
rate category. See CIS at 18-26. These provisions were included to 
allow principal competitors of MCI and the joint venture (who have 
signed confidentiality agreements with the US government) to monitor 
whether BT is discriminating in favor of these entities and to 
provide evidence that could be used in support of complaints to the 
relevant US or UK government agencies.
    The proposed modified final judgment retains all of the 
transparency provisions of the existing final judgment with two 
notable modifications. First, in addition to MCI, the proposed 
modified final judgment directs the ultimate corporate parent, 
Concert plc, to report the requisite information.\10\ This ensures 
that the required information is reported regardless of what entity 
within Concert maintains it and whether Concert in the future 
undergoes substantial reorganization. The second modification 
requires MCI and Concert, in addition to reporting the total number 
of minutes that MCI sends to and receives from BT, to report 
information regarding time-of-day, point-of-termination and type of 
transmission facility. This information is designed to enable 
competitors to more easily detect a particular type of 
discrimination. Given BT's ownership of MCI there is a concern that 
BT could discriminate by sending better traffic (i.e., traffic that 
is less expensive to terminate and, therefore, more profitable) to 
MCI, thus disadvantaging MCI's competitors. The modified final 
judgment also requires the parties to report this information on a 
semiannual as opposed to annual, basis and no later than 60 days 
after the end of the six month period being reported.
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    \10\ Concert plc, the ultimate parent, is thus named as a party 
to the Modified Final Judgment. Because Concert plc is defined 
therein to include NewCo, and because Concert plc has agreed to 
assume liability for certain acts of NewCo, NewCois deleted as a 
separately named party to the modified final judgment.
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    Under a separate provision, defendants have also agreed to 
provide notification to the United States prior to any corporate 
reorganization that would combine the functions of or otherwise 
eliminate the separate identities of MCI, NewCo and BT. Such 
reorganizations may make it difficult for the parties to accurately 
report the data required under the transparency provisions or make 
the data reported insufficient to detect discriminatory conduct. The 
provision further establishes a procedure whereby the United States 
can obtain additional information prior to any such reorganization 
in order to evaluate the impact of such reorganization on the 
modified final judgment and, if required, to seek further 
modifications so as to maintain the viability of the modified final 
judgment.\11\
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    \11\ See Section VII.B of the proposed modified final judgment.
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B. Confidentiality Provisions

    Sections II.B, II.C and II.D of the existing Final Judgment 
prohibit MCI and NewCo from receiving confidential, competitively 
sensitive information that BT receives in the course of its 
correspondent relationships with other United States 
telecommunications providers and/or in the provision of 
interconnection or other telecommunications services within the 
United Kingdom. This prohibition made sense in the context of BT's 
20% acquisition because MCI remained an independent, fully 
accountable company.

[[Page 37598]]

    After the complete merger of MCI into BT, concerns abut the 
inappropriate use of such confidential information continue to 
exist. For a number of reasons, however, the complete merger of MCI 
into BT limits the enforceability of the existing provisions. First, 
after the merger, Concert plc, not MCI, will be the ultimate 
decision-maker. Confidential information could flow from BT to MCI 
and the joint venture through the corporate decision-maker, Concert. 
Second, after the merger, the defendants have proposed to transfer 
the responsibility for maintaining BT's correspondent relationships 
with other United States telecommunications carriers to the 
subsidiary with responsibility for the merged entity's global 
network services business. The threat of misuse of confidential 
information is exacerbated when both wholesale and retail functions 
are housed in the same subsidiary. Third, as discussed above, there 
is no guarantee that either MCI or NewCo will be maintained as 
separate subsidiaries from BT post-merger. The merged entity could 
thwart the existing confidentiality provisions by reorganizing in 
such a way as to combine the functions of, or otherwise eliminate, 
the separate identities of BT, MCI and NewCo.
    The proposed modified final judgment redresses these problems by 
prohibiting the parties from inappropriately using any confidential 
information they obtain from competitors. Specifically, the ultimate 
parent, Concert, as well as MCI, is prohibited from using any 
confidential, competitively sensitive information that BT (or any 
entity performing the same functions as BT) receives through its 
correspondent relationships and/or as a result of BT's provision of 
interconnection or other telecommunications services in the United 
Kingdom, for any purpose other than the purpose for which such 
information is obtained (or for which BT is otherwise authorized to 
use such information by the entity from whom such information is 
obtained) or to disclose such information to any person other than 
those persons, including supervisory persons, with a need to know 
such information.\12\
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    \12\ The modified final judgment also requires the parties to 
provide the Department with advance notice of any subsequent 
reorganization that would combine the functions of, or otherwise 
eliminate, the separate identities of BT, MCI and NewCo. The 
provision also allows the Department to seek additional information 
prior to any such reorganization in order to determine whether it 
would impair the effectiveness of any of the confidentiality 
provisions and, if so, to seek further modifications of the decree.
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C. Diversion Provision

    The complaint recognized that one of the ways BT could 
discriminate against MCI's competitors was by diverting some or all 
of its international switched traffic over private lines (a practice 
known as ``International Simple Resale'' or ``ISR'') to MCI. Because 
traffic sent over ISR is outside of the correspondent system, it is 
not subject to the FCC's rules regarding non-discrimination and 
proportionate return.\13\ If other carriers could not respond to 
this diversion by diverting their own traffic, they would be left 
with larger net settlement deficits (due to the loss of BT's 
offsetting minutes), hence higher costs. BT's ability to divert 
``could also give BT an increased incentive to keep international 
accounting rates above costs.'' CIS at 13-14. The existing Final 
Judgment sought to ameliorate these anticompetitive consequences by 
prohibiting BT and MCI from engaging in ISR until, inter alia, a 
selected list of other international telecommunications providers 
were granted ISR licenses by the UK government. The list of 
providers was included in Annex A to the existing Final Judgment.
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    \13\ One of the problems with the ISP is that accounting rates 
are significantly above-cost. Prior to December 1996, only BT and 
Mercury Communications, Ltd. were allowed to provide the 
corresponding half-circuit in the UK. Since US carriers had to 
correspond with BT or Mercury in order to terminate traffic in the 
UK, they had no choice but to accept whatever accounting rate that 
BT and Mercury were offering. ISR was devised as a way of bypassing 
the ISP and thus, exerting downward pressure on the accounting rate.
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    Since the existing Final Judgment was entered, all of the 
international telecommunications providers listed in Annex A have 
been granted ISR licenses by the UK government. The grant of these 
licenses alleviates concerns that BT and MCI could bypass the 
correspondent system on the US-UK route by sending traffic to the US 
over ISR when other US carriers could not, thereby gaining an unfair 
competitive advantage. Because this condition has been fulfilled, it 
has no continuing legal effect and therefore, is deleted in the 
proposed Modified Final Judgment.

D. Visitorial Provisions

    Section V of the final judgment allows the Department of Justice 
to monitor defendants' compliance by giving the Department access to 
records and documents of the defendants and also access to their 
personnel for interviews or to take sworn testimony. Under the 
original final judgment only MCI and NewCo were parties to the 
decree. In the modified final judgment, Concert has been made a 
party thus necessitating access by the Department to all of 
Concert's documents and personnel with information related to 
compliance issues. Consequently, where applicable, Concert has 
replaced NewCo in the visitorial provisions of the modified final 
judgment and language limiting the scope of these provisions to 
documents and information relating only to NewCo has been deleted. 
As modified, the visitorial provisions now grant the United States 
access in the United States to Concert's documents, and personnel, 
wherever located, for the purposes of determining or securing 
compliance with the modified final judgment.

E. Term of Decree

    The final judgment was entered on September 29, 1994 and by its 
terms would have expired on September 29, 1999. The modified final 
judgment will expire 10 years after the entry of the existing final 
judgment. Although there have been significant changes in the 
regulatory scheme in the UK and new entry into some segments of the 
UK telecommunications industry, BT still retains a substantial share 
of the UK local telecommunications market and is expected to retain 
its existing market power for a significant period of time. Given 
BT's continued dominance in the UK as well as its increased interest 
in MCI, the term of the decree was extended in order to ensure that 
US consumers were protected from any anticompetitive consequences of 
the merger until the risk of discrimination by the defendants has 
been dissipated by the development of competitive markets in the UK.

IV. Other Concerns Related to the US-UK Route

    In the course of the investigation of the proposed merger of BT 
and MCI, some competitors identified potential new ways in which the 
merged entity could discriminate and therefore lessen competition in 
the market for international traffic between the US and UK. 
Specifically, competitors have argued that the merged entity could 
deter or delay new facilities-based competitors on the US-UK route 
by refusing to sell requisite facilities to new entrants. These 
facilities include capacity on the transatlantic cable as well as 
interconnection and backhaul \14\ services at both ends of the 
circuit. For the reasons discussed below, the Department has 
concluded that it is not necessary at present to modify the Final 
Judgment to resolve these issues.\15\
---------------------------------------------------------------------------

    \14\ Backhaul can be defined as the transport of traffic from 
the international cable head-end to a point of interconnection with 
a carrier's domestic facilities.
    \15\ These concerns were not mentioned in the earlier CIS or 
included in the Complaint filed in June 1994, because, at that time, 
no one other than BT or Mercury could own facilities on the UK-end 
of the US-UK transatlantic route for the purposes of providing US-UK 
telecommunications services. On December 19, 1996, the UK government 
granted 45 new international facilities licenses (``IFLs'') thus 
allowing, for the first time in history, carriers other than BT and 
Mercury to become facilities-based providers of international 
telecommunications services in the UK. The UK indicated that it 
anticipated that these new licenses would put ``further downward 
pressure on international rates.'' See Press Notice of the United 
Kingdom's Department of Trade and Industry, dated December 19, 1996, 
attached hereto as Exhibit A.
---------------------------------------------------------------------------

    With respect to cable capacity, BT and MCI are major owners of 
capacity on transatlantic cables. Presently, BT and MCI are the 
first and third largest owners of capacity on the eastern end of TAT 
12/13, the main cable used to provide international 
telecommunications services between the US and UK.\16\ Indeed, BT 
controls approximately 43% of the eastern end capacity of the TAT 
12/13 cable and MCI controls approximately 13%. As a result of the 
merger, the combined entity will own over 56% of this capacity.
---------------------------------------------------------------------------

    \16\ TAT 12/13 is the largest transatlantic cable and utilizes 
state-of-the-art self-restoring technology. For these reasons, it is 
the most desirable cable for the transmission US-UK international 
traffic.
---------------------------------------------------------------------------

    The merged entity's increased ownership of TAT 12/13 cable 
capacity potentially strengthens its ability to disadvantage 
potential competitors by denying them access to needed facilities. 
Given the current shortage of capacity on the transatlantic

[[Page 37599]]

cables,\17\ such denials would be especially detrimental to the new 
IFLs recently licensed by the UK government who are currently 
seeking to enter the US-UK international route. As discussed above, 
it is this entry that is expected to create downward pressure on the 
US-UK accounting rate.
---------------------------------------------------------------------------

    \17\ On December 20, 1996, the day after the international 
facilities licenses were granted, MCI put in a demand for 252 
circuits on the TAT 12/13 cable. MCI's purchase triggered other co-
owners' standing orders (BT, for instance, received 155 circuits and 
AT&T acquired 205), exhausting the TAT 12/13 cable capacity and 
foreclosing access to TAT 12/13 cable capacity to all but a few 
IFLs.
    The transatlantic capacity shortage is expected to be a short-
term problem. A new planned cable, Gemini, is projected to come into 
service in March 1998 (the southern leg) and September 1998 (the 
northern leg). Moreover, the TAT 12/13 co-owners recently voted to 
deploy wave division multiplexing, which will result in a doubling 
of the capacity of the existing TAT 12/13 cable. Finally, another 
new cable known as Atlantic Crossing #1 is also under development. 
The two legs of the Atlantic Crossing #1 are planned to begin 
service in May 1998 and November 1998, respectively.
---------------------------------------------------------------------------

    Modification of the existing final judgment is not required to 
prevent Concert from delaying or deterring IFLs access to the TAT 
12/13 cable, however, because on May 14, 1997, the European 
Commission (``EC'') required, as a condition of its approval of the 
merger, that BT make TAT 12/13 cable capacity available to certain 
of these IFLs.\18\ Under this condition, BT is required to divest 
all of the capacity it obtained through its merger with MCI. The 
Department believes that this divestiture will relieve any potential 
problem associated with TAT 12/13 cable capacity shortages, and BT's 
and MCI's increased control over existing capacity.
---------------------------------------------------------------------------

    \18\ See Statement of the European Commission re: No. IP/97/406, 
dated May 14, 1997, attached hereto as Exhibit B.
---------------------------------------------------------------------------

    With respect to interconnection and backhaul, concerns have also 
been raised both with the Department and with the FCC about the 
availability of backhaul in the US.\19\ Entrants seeking to provide 
international telecommunications services between the US and the UK 
may have difficulty in obtaining US backhaul facilities as 
currently, there are only three entities that own backhaul 
facilities from the TAT 12/13 cable head-ends located in the US: 
AT&T, MCI and Sprint. However, the Department believes that it is 
appropriate to allow the FCC to evaluate this issue in the first 
instance. As the Department stated in its CIS, if it subsequently 
received complaints about potential discrimination, it would not 
seek to modify the existing final judgment unless the injured 
parties first sought relief from the appropriate regulatory agency. 
See CIS at 32-33. This condition was included in order to minimize 
the risk that the final judgment would contain provisions that were 
inconsistent with regulatory requirements in the US or the UK.
---------------------------------------------------------------------------

    \19\ During the course of its investigation, the Department also 
examined interconnection in the US as well as interconnection and 
backhaul from the TAT 12/13 cable head-end located in the UK in 
order to determine whether any of these facilities constitute 
bottlenecks through which the merged entity could exert its market 
power to deter or delay new entry. After conducting numerous 
interviews with the industry as well as US and UK regulators, the 
Department is satisfied at this time that the reporting requirements 
of the decree, along with regulations currently or soon to be put 
into place in the US and the UK, are sufficient to alleviate any 
competitive concerns raised with respect to the merged entity's 
control over any of these facilities. Accordingly, the Department 
proposes taking no further relief in this proposed Modified Final 
Judgment with respect to interconnection in the US or the UK or 
backhaul from the TAT 12/13 cable head-end located in the UK.
---------------------------------------------------------------------------

    Accordingly, the Department is not seeking to modify the decree 
at this time in order to redress potential concerns associated with 
backhaul facilities in the US. Rather, the Department will continue 
its investigation of the extent and nature of the problem, if any, 
raised by the merged entity's control of backhaul facilities in the 
U.S. If the Department later concludes that the merged entity could 
discriminate against new entrants by denying or delaying IFLs access 
to backhaul facilities in the U.S. and that these concerns are not 
alleviated by regulatory conditions placed on the parties by the 
FCC, the Department will seek a further modification of the Final 
Judgment.\20\ The parties have agreed that they will not contest a 
modification that requires MCI to sell backhaul capacity, equivalent 
in quantity to the transatlantic capacity which the parties are 
required to offer pursuant to the EC's order, on reasonable terms 
and conditions, to certain IFLs or to those corresponding 
therewith.\21\
---------------------------------------------------------------------------

    \20\ Again, as with the transatlantic cable, any problem with 
backhaul capacity is expected to be short-term. New entry into the 
U.S. backhaul market could occur in 2-3 years.
    \21\ See Letter from Anthony C. Epstein To Yvette Benguerel, 
dated July 1, 1997, and Letter from David J. Saylor and Anthony C. 
Epstein to Yvette Benguerel, dated July 2, 1997, attached hereto as 
Exhibits C and D, respectively.
---------------------------------------------------------------------------

V. Modification Is In The Public Interest

    Pursuant to Section VII of the Final Judgment, an uncontested 
motion to modify the final judgment ``shall be granted if the 
proposed modification is within the reaches of the public 
interest.'' See, e.g., United States versus Western Electric Co., 
993 F.2d 1572, 1576 (D.D.C. 1993) (citing United States versus 
Western Electric Co., 900 F.2d 283, 307 (D.D.C. 1990) (hereinafter 
Triennial Review)). In the context of an uncontested motion to 
modify an existing consent decree, the ``public interest'' standard 
``directs the district court to approve an uncontested modification 
so long as the resulting array of rights and obligations is within 
the zone of settlements consonant with the public interest today.''' 
United States versus Western Electric Co., 993 F.2d at 1576 (quoting 
Triennial Review, 900 F.2d at 307) (emphasis in original). Thus, 
``it is not up to the court to reject an agreed-on change simply 
because the proposed diverged from its view of the public interest. 
Rather, the court [is] bound to accept any modification that the 
Department (with the consent of the other parties, we repeat) 
reasonably regarded as advancing the public interest.'' United 
States versus Western Electric Co., 993 F.2d at 1576. See also 
United States versus Microsoft Corp., 56 F.3d 1448, 1461-62 (D.C. 
Cir. 1995); United States versus Bechtel Corp., 648 F.2d 660, 666 
(9th Cir.), cert. denied, 454 U.S. 1083 (1981); United States versus 
BNS, Inc., 858 F.2d 456, 462 (9th Cir. 1988). Precedent requires 
that

the balancing of competing social and political interests affected 
by a proposed antitrust consent decree must be left, in the first 
instance, to the discretion of the Attorney General. The court's 
role in protecting the public interest is one of insuring that the 
government has not breached its duty to the public in consenting to 
the decree. The court is required to determine not whether a 
particular decree is one that will best serve society, but whether 
the settlement is `within the reaches of the public interest.' More 
elaborate requirements might undermine the effectiveness of 
antitrust enforcement by consent decree.

Bechtel, 648 F.2d at 666 (emphasis added); see BNS, 858 F.2d at 463; 
United States versus National Broadcasting Co., 449 F. Supp. 1127, 
1143 (C.D. Cal. 1978). See also Microsoft, 56 F.3d at 1461.

V. Conclusion

    For all of the foregoing reasons, the proposed modification is 
in the public interest, and the United States' motion for 
modification of the final judgment should be granted.
    Respectfully submitted,
Joel I. Klein,
Acting Assistant Attorney General.
Lawrence R. Fullerton,
Deputy Assistant Attorney General.
Charles E. Biggio,
Senior Counsel.
Constance K. Robinson,
Director of Operations.

    Dated: July 7, 1997.
Donald J. Russell,
Chief, Telecommunications Task Force.
Nancy M. Goodman,
Assistant Chief, Telecommunications Task Force.
Yvette Benguerel,
DC Bar # 442452,
David Myers,
Attorneys.
United States Department of Justice, Antitrust Division, 555 4th 
Street, N.W., Washington, D.C. 20001, (202) 514-5808.
    Exhibits A through C have not been reprinted here, however they 
may be inspected in Room 215, Department of Justice, 325 7th Street, 
N.W., Washington, D.C. and at the Office of the Clerk of the United 
States District Court for the District of Columbia.
July 2, 1997.

By Messenger

Ms. Yvette Benguerel,
Attorney, Telecommunications Task Force, Antitrust Division, U.S. 
Department of Justice, 555 Fourth Street, NW., Washington, DC. 20001


[[Page 37600]]


Re. United States v. MCI Communications Corporation and Concert 
Communications Company, Civil Action No. 94-1317-TFH (D.D.C)

    Dear Ms. Benguerel: MCI Communications Corporation (``MCI'') and 
British Telecommunications plc (``BT''), through their undersigned 
counsel, submit this letter with respect to their proposed merger to 
form Concert plc (``Concert'').
    As set forth in the attached letter that MCI will send to the 
Federal Communications Commission (``FCC'') on the date the proposed 
Modified Final Judgment is filed with the Court, MCI and BT do not 
object to the inclusion of certain conditions concerning the 
provision of backhaul facilities to the western TAT 12/13 cable 
head-ends in any FCC order approving the transfer of control of 
various licenses in connection with the proposed merger.

Exhibit D

    MCI and BT understand and agree that, if for any reason any FCC 
order approving the transfer of control does not incorporate the 
conditions set forth in the attached letter, the Department, in its 
sole discretion, may seek a further modification of the final 
judgment in the above-captioned case that incorporates any or all of 
these requirements. MCI and BT, on behalf of their successor 
Concert, further agree not to contest any such motion under Section 
VII of the decree. MCI and BT understand that the Department has 
concluded that the Tunney Act, 15 U.S.C. Sec. 16(b-h), does not 
apply to modifications of existing consent decrees, but that the 
Department would follow Tunney Act-like procedures with respect to 
any such motion for further modification under Section VII.
    The parties make these commitments in order to achieve a prompt 
resolution of this matter and without agreeing that they are 
necessary to comply with any legal duty.

    Respectfully submitted,
David J. Saylor,
Counsel for BT.
Anthony C. Epstein,
Counsel for MCI.
July 7, 1997.
Peter F. Cowhey,
Chief, International Bureau, Federal Communications Commission, 2000 
M St. NW--Room 800, Washington, D.C. 20554.

Re: EX PARTE in Merger of British Telecommunications plc and MCI 
Communications Corporation, General Docket No. 96-245

    Dear Mr. Cowhey: On behalf of MCI Communications Corporation 
(``MCI'') and British Telecommunications plc (``BT''), we are by 
this letter stating a commitment to offer a backhaul service, as 
described below, as a condition of transferring the licenses and 
authorizations at issue in this docket, subject to the Commission's 
determination that the commitments are consistent with the 
Communications Act. MCI and BT (``the parties'') make these 
commitments in order to achieve a prompt resolution of this matter 
and without agreeing that these commitments are necessary to comply 
with any legal duty.
    MCI and BT have no objection to the following requirements in 
any Commission order approving the above-captioned merger:
    a. MCI and Concert will make available backhaul capacity 
equivalent to a total of 147E-1 circuits, pursuant to the schedule 
described below, between the TAT 12/13 cable head-ends located in 
the United States and a point or points served by MCI's existing 
backhaul facilities.
    b. MCI and Concert will make these circuits available in four 
phases: capacity equivalent to a total of 63E-1 circuits available 
on the date that the Commission releases its order approving the 
merger; capacity equivalent to a total of 42 additional ET-1 
circuits available within 30 days after release of the order; 
capacity equivalent to 21 additional E-1 circuits available within 
60 days after release of the order; and capacity equivalent to 21 
additional E-1 circuits available within 90 days after release of 
the order.
    c. This backhaul capacity will be offered on a first-come, 
first-served basis to any carrier (directly or through its 
authorized representative), which is not a U.S. cable head-end owner 
or collocated at a U.S. cable head-end, that purchased from MCI, BT, 
or Concert the indefeasible right to use the U.S. end of the 147 
whole circuits on TAT 12/13 that the parties offered pursuant to the 
terms of the decision of the European Union dated May 11, 1997, 
relating to the proposed merger between MCI and BT. Each such 
carrier shall be eligible to purchase an amount of backhaul capacity 
equivalent to the capacity it purchased on TAT 12/13 pursuant to the 
terms of this decision, and for use in connection with the capacity 
that it purchased on TAT 12/13 pursuant to this decision.
    d. These circuits will be offered in each phase as a priority as 
DS-3 circuits and then as E-1 circuits. If more DS-3 or E-1 circuits 
are ordered simultaneously than are available in the next phase, MCI 
will select on a random basis the order or orders to be filled in 
that phase and will fill the remaining orders in the following 
phase. No later than the day following the release of the Commission 
order approving the merger, MCI will send to eligible carriers a 
written offer for backhaul service that includes all the terms and 
conditions described in this letter, including specific recurring 
and nonrecurring charges. Any order will be deemed received on the 
business day it is physically received by MCI, unless it is received 
less than fourteen days after the date of MCI's written offer, in 
which case it will be deemed received on the date fourteen days 
after the date of that letter.
    e. The obligation to make these circuits available shall end two 
years after the date of the release of the order.
    f. MCI and Concert will make these backhaul circuits available 
by carrier-to-carrier contract for terms of one, two, three, four, 
and five years pursuant to terms and conditions, including prices 
for the interoffice channel component, that are substantially the 
same as those reflected in MCI's then-effective interstate tariff 
for TDS 45 service for DS-3 backhaul circuits and in MCI's then-
effective interstate tariff for TDS 1.5 service for E-1 backhaul 
circuits, adjusted to recover different costs related to the 
provision of backhaul services. MCI will make circuits ready for use 
by the requesting carrier within a reasonable period of time. The 
contracts will not unreasonably restrict the ability of any carrier 
to resell these circuits.

    Sincerely,
Mary L. Brown.

United States District Court for the District of Columbia

[Civil Action No. 94-1317 (TFH)]

United States of America, Plaintiff, v. Concert PLC and MCI 
Communications Corporation, Defendants

Modified Final Judgment

    Whereas, plaintiff, United States of America, filed its 
Complaint in this action on June 15, 1994 and a Final Judgment was 
entered on September 29, 1994,
    And whereas, plaintiff and defendants, by their respective 
attorneys, have consented to the entry and modification of this 
Final Judgment without trail or adjudication of any issue of fact or 
law,
    And whereas, defendants have further consented to be bound by 
one provision of this modified final judgment pending its approval 
by the Court and to be bound by all the provisions of this modified 
final judgment if the Merger Agreement is consummated before this 
modified final judgment is approved by the Court,
    And whereas, plaintiff the United States believes that entry of 
this modified final judgment is in the public interest,
    Therefore, it is hereby Ordered, Adjudged, and Decreed that this 
modified final judgment shall replace the existing final judgment, 
dated September 29, 1994, in all respects:
    And it is further Ordered, Adjudged, and Decreed that:

I. Jurisdiction

    This Court has jurisdiction of the subject matter of this action 
and of each of the parties consenting to this modified final 
judgment. The Complaint states a claim upon which relief may be 
granted against the defendants under Section 7 of the Clayton Act, 
15 U.S.C. Sec. 18, as amended.

II. Substantive Restrictions and Obligations

    A. Concert and MCI shall not offer, supply, distribute, or 
otherwise provide in the United States any telecommunications or 
enhanced telecommunications service that makes use of 
telecommunications services provided by BT in the United Kingdom or 
between the United States and the United Kingdom, unless the 
following information is disclosed in the United States by Concert 
and MCI or such disclosure is expressly waived, in whole or in part, 
by plaintiff through written notice to defendants and the Court:
    1. Within 30 days following any agreement or change to an 
agreement--The prices, terms, and conditions, including any 
applicable discounts, on which telecommunications services are 
provided by BT to NewCo in the United Kingdom

[[Page 37601]]

pursuant to interconnection arrangements, whether formal or 
informal;
    2. Within 30 days following any agreement or change to an 
agreement, or the provision of service absent any specific 
agreement--The prices, terms, and conditions, including any 
applicable discounts, on which telecommunications services, other 
than those provided pursuant to interconnection arrangements as 
described in Section II.A.1 hereinabove, are provided by BT to NewCo 
in the United Kingdom for use by NewCo in the supply of 
telecommunications or enhanced telecommunications services between 
the United States and the United Kingdom, or are provided by BT in 
the United Kingdom in conjunction with such NewCo services where BT 
is acting as the distributor for NewCo;
    3. With respect to international switched telecommunications or 
enhanced telecommunications service jointly provided by BT and MCI 
on a correspondent basis between the United States and the United 
Kingdom, and to the extent not already disclosed publicly pursuant 
to the rule and regulations of the Federal Communications 
Commission,
    (i) Within 30 days following any agreement or change to an 
agreement, or the provision of service absent any specific 
agreement, the accounting and settlement rates and other terms and 
conditions for the provision of each such service; and
    (ii) On a semiannual basis, and within 60 days of the end of the 
six month period, for any international direct dial or integrated 
services digital network (``ISDN'') service (except for ISDN traffic 
that is not subject to a proportionate return requirement), 
separately for each accounting rate, MCI's minutes of traffic to and 
from BT and, separately, BT's minutes of traffic to MCI and to each 
United States international telecommunications providers by time of 
day (e.g., traffic originating in six-hour periods beginning at 
midnight), by point of termination (e.g., traffic to each area code 
in the United States in the North American Numbering Plan), and by 
type of transatlantic transmission facility (e.g., satellite versus 
submarine cable).
    4. On a semiannual basis--A list of telecommunications services 
provided by BT to NewCo in the United Kingdom for use by NewCo in 
the supply of telecommunications or enhanced telecommunications 
services between the United States and the United Kingdom, or 
provided by BT in the United Kingdom in conjunction with such NewCo 
services where BT is acting as the distributor for NewCo, showing:
    (i) The types of circuits (including capacity) and 
telecommunications services provided;
    (ii) The actual average time intervals between order and 
delivery of circuits (separately indicating average intervals for 
analog circuits, digital circuits up to 2 megabits, and digital 
circuits 2 megabits and larger) and telecommunications services; and
    (iii) The number of outages and actual average time intervals 
between fault report and restoration of service for circuits 
(separately indicating average intervals for analog and for digital 
circuits) and telecommunications services;
but excluding the identities of individual customers of BT, MCI, or 
NewCo or the location of circuits or telecommunications services 
dedicated to the use of such customers;
    5. A list showing:
    (i) On a semiannual basis, separately for analog international 
private line circuits (IPLCs) and for digital IPLCs jointly provided 
by BT and MCI between the United States and the United Kingdom, the 
actual average time intervals between order and delivery by BT;
    (ii) On an annual basis, separately for analog IPLCs and for 
digital IPLCs jointly provided by BT and MCI between the United 
States and the United Kingdom, the number of outages and actual 
average time intervals between fault report and restoration of 
service, for any outages that occurred in the international 
facility, in the cablehead or earth station outside the United 
States, or the network of a telecommunications provider outside the 
United States, indicating separately the number of outages and 
actual average time intervals to restoration of service in each such 
area; and
    (iii) On a semiannual basis, for circuits used to provide 
international switched telecommunications services or enhanced 
telecommunications services on a correspondent basis between the 
United States and the United Kingdom, the average number of circuit 
equivalents to MCI during the busy hour;
    6. Within 30 days of receipt of any information described 
herein--Information provided by BT to MCI or NewCo about planned 
telecommunications system operated pursuant to its license that 
would affect interconnection arrangements, whether formal or 
informal, between BT and NewCo or interconnection arrangements 
between BT and other licensed operators, provided that if MCI 
receives any such information from BT separately from NewCo, MCI 
shall similarly be required to disclose such information in the same 
manner as NewCo.
    The obligations of this Section II.A shall not extend to the 
disclosure of intellectual property or other proprietary information 
of the defendants or BT that has been maintained as confidential by 
its owner, except to the extent that it is of a type expressly 
required to be disclosed herein, or is necessary for licensed 
operators to interconnect with Concert's United Kingdom public 
telecommunications system operated pursuant to its license or for 
United States international telecommunications providers to use 
Concert's international telecommunications or enhanced 
telecommunications correspondent services.
    B. Neither Concert nor MCI shall use any information that is 
identified as proprietary by United States telecommunications or 
enhanced telecommunications service providers (and maintained as 
confidential by them) and is obtained by BT from such providers as 
the result of BT's provision of interconnection or other 
telecommunications services in the United Kingdom, for any purpose 
other than BT's provision of interconnection or other 
telecommunications services in the United Kingdom, and any such 
information shall not be disclosed to any person other than those 
persons within BT who need such information in order for BT to 
provide interconnection or other telecommunications services in the 
United Kingdom, except that any United States telecommunications or 
enhanced telecommunications service providers may authorize BT to 
use such providers' proprietary information for some other purpose 
if such authorization is in writing and specifically sets forth the 
purpose for which such information is to be used. Such written 
authorizations shall be appended to any reports required to be filed 
with the Department of Justice pursuant to Section V herein. Nothing 
in this Section II.B shall prevent Concert or BT from disclosing any 
information to any governmental authority as required by law or 
regulation.
    C. Neither Concert nor MCI shall use any confidential, non-
public information obtained as a result of BT's correspondent 
relationships with other United States international 
telecommunications or enhanced telecommunications service providers, 
for any purpose other than conducting BT's correspondent 
relationships with such providers, and such information shall not be 
disclosed to any person other than those persons within BT who need 
such information in order to conduct BT's correspondent 
relationships with other United States international 
telecommunications and enhanced telecommunications service 
providers, except to the extent that such disclosure is necessary 
for Concert or MCI to comply with their obligations under Section 
IIA.3(ii) concerning disclosure of the total volume of traffic (but 
not the individual traffic volumes for other providers) received by 
BT from the United States and sent by BT to the United States that 
is subject to proportionate return, or under Section II.A.5 (but not 
including individual information on other providers), and except 
further than any United States telecommunications or enhanced 
telecommunications service providers may authorize BT to use such 
providers' proprietary information for some other purpose if such 
authorization is in writing and specifically sets forth the purpose 
for which such information is to be used. Such written authorization 
shall be appended to any reports required to be filed with the 
Department of Justice pursuant to Section V herein. Nothing in this 
Section II.C shall prevent Concert, MCI or BT from disclosing any 
information to any governmental authority as required by law or 
regulation.
    D. Neither Concert nor MCI shall use any non-public information 
about the future prices or pricing plans of any provider of 
international telecommunications services between the United States 
and the United Kingdom obtained through BT's correspondent 
relationships with other United States international 
telecommunications providers, for any purpose other than accounting 
rate negotiations between BT and such providers, and such 
information shall not be disclosed to any person other than those 
persons within BT who need such information in order to negotiate 
BT's accounting rates with other United States international

[[Page 37602]]

telecommunications providers. Nothing in Section II.D shall prevent 
Concert or BT from disclosing any information to any governmental 
authority as required by law or regulation.

III. Applicability and Effect

    The provisions of this modified final judgment shall be binding 
upon defendants, their affiliates, subsidiaries, successors, and 
assigns, officers, agents, servants, employees, and attorneys, and 
upon these persons in active concert or participation with them who 
receive actual notice of this modified final judgment by personal 
service or otherwise. Defendants shall cooperate with the United 
States Department of Justice in ensuring that the provisions of this 
Modified Final Judgment are carried out. Neither this modified final 
judgment nor any of its terms or provisions shall constitute any 
evidence against, an admission by, or an estoppel against the 
defendants. The effective date of this modified final judgment shall 
be the date upon which it is entered.

IV. Definitions

    For the purposes of this Final Judgment:
    A. ``BT'', prior to the consummation of the Merger Agreement and 
the creation of Concert, means British Telecommunications plc, and 
any subsidiary, affiliate, predecessor, successor, or assign of 
British Telecommunications plc, and following the consummation of 
the Merger Agreement and the creation of Concert, BT means any other 
entity or entities partially (20% or more) or wholly owned or 
controlled by Concert and providing interconnection or other 
telecommunications services within the United Kingdom or from the 
United Kingdom to the United States, but does not include MCI or 
NewCo.
    B. ``Concert'' means Concert plc, and any subsidiary, affiliate, 
predecessor, successor, or assign of Concert plc, or any other 
entity that is partially (20% or more) or wholly owned or controlled 
by Concert plc, including without limitation, BT, MCI and NewCo.
    C. ``Correspondent'' means a bilaterally negotiated arrangement 
between a provider of telecommunications services in the US or the 
UK and a provider of telecommunications services in the other of the 
US or the UK for provision of an international telecommunications or 
enhanced telecommunications service, by which each party undertakes 
to terminate in its country traffic originated by the other party. A 
service managed by NewCo, and provided without correspondent 
relationships with any other provider, shall not be deemed to 
constitute a correspondent service.
    D. ``Defendant'' or ``defendants'' means Concert and MCI.
    E. ``Disclose,'' for purposes of Paras. II.A.1-6, means 
disclosure to the United States Department of Justice Antitrust 
Division, which may further disclose such information to any United 
States corporation that directly or through a subsidiary or 
affiliate holds or has applied for a license from either the United 
States Federal Communications Commission or the United Kingdom 
Department of Trade and Industry to provide international 
telecommunications services between the United States and the United 
Kingdom. Disclosure by the Department of Justice to any corporation 
described above shall be made only upon agreement by such 
corporation, containing the terms prescribed in the Stipulation 
entered into by BT, defendant MCI and the United States on July 2, 
1997, not to disclose any non-public information to any other 
person, apart from governmental authorities in the United States or 
United Kingdom and not to use such information for any purpose other 
than to obtain relief from said governmental authorities. Where 
Concert or MCI is required to disclose, in Section II.A, particular 
telecommunications services provided, this shall include disclosure 
of the identity of each of the services, and reasonable detail about 
each of the services to the extent not already published elsewhere, 
but shall not require disclosure of underlying facilities used to 
provide a particular service that is offered on a unitary basis, 
except to the extent necessary to identify the service and the means 
of interconnection with the service.
    F. ``Enhanced telecommunications service'' means any 
telecommunications service that involves as an integral part of the 
service the provision of features or capabilities that are 
additional to the conveyance (including switching) of the 
information transmitted. Although enhanced telecommunications 
services use telecommunications services for conveyance, their 
additional features or capabilities do not lose their enhanced 
status as a result.
    G. ``Facility'' means: (i) Any line, trunk, wire, cable, tube, 
pipe, satellite, earth station, antenna or other means that is 
directly used or designed or adapted for use in the conveyance, 
transmission, origination or reception of a telecommunications or 
enhanced telecommunications service; (ii) any switch, multiplexer, 
or other equipment or apparatus that is directly used or designed or 
adapted for use in connection with the conveyance, transmission, 
origination, reception, switching, signaling, modulation, 
amplification, routing, collection, storage, forwarding, 
transformation, translation, conversion, delivery or other provision 
of any telecommunications or enhanced telecommunications service, 
and (iii) any structure, conduit, pole, or other thing in, on, by, 
or from which any facility as described in (i) or (ii) is or may be 
installed, supported, carried or suspended.
    H. ``MCI'', prior to the consummation of the Merger Agreement, 
means MCI Communications Corporation, and any subsidiary, affiliate, 
predecessor, successor, or assign of MCI Communications Corporation, 
and following the consummation of the Merger Agreement, MCI means 
any other entity or entities partially (20% or more) or wholly owned 
or controlled by Concert and providing telecommunications services 
within the United States or from the United States to the United 
Kingdom, but does not include BT or NewCo.
    I. ``Merger Agreement'' means the Agreement and Plan of Merger, 
dated November 3, 1996 (including any subsequent modifications or 
amendments to such agreement), entered into by and among British 
Telecommunications plc, MCI Communications Corporation and Tadworth 
Corporation.
    J. ``NewCo'' means Concert Communications Company, the joint 
venture of MCI and BT created pursuant to the terms of the Joint 
Venture Agreement entered into by MCI and BT as of August 4, 1993 
(including any subsequent modifications or amendments to such 
agreement), and any subsidiary, affiliate, predecessor (whether the 
predecessor is jointly owned by MCI and BT or separately owned by 
either of them), successor, or assign of such joint venture, or any 
other entity or entities partially (20% or more) or wholly owned or 
controlled by Concert and having among its purposes substantially 
the same purposes as described for NewCo in the Joint Venture 
Agreement, but does not include MCI or BT.
    K. ``Telecommunications service'' means the conveyance, by 
electrical, magnetic, electromagnetic, electromechanical or 
electrochemical means (including fiber-optics, as well as satellite, 
microwave and other wireless transmission), of information 
consisting of:

--Speech, music and other sounds;
--Visual images;
--Signals serving for the impartation (whether as between persons 
and persons, things and things or persons and things) of any matter, 
including but not limited to data otherwise than in the form of 
sounds or visual images;
--Signals serving for the actuation or control of machinery or 
apparatus; or
--Translation or conversion that does not alter the form or content 
of information as received from that which is originally sent.

``Convey'' and ``conveyance'' include transmission, switching, and 
receiving, and cognate expressions shall be construed accordingly. A 
telecommunications service includes all facilities used in providing 
such service, and the installation, maintenance, repair, adjustment, 
replacement and removal of any such facilities. A service that is 
considered a ``telecommunications service'' under this definition 
retains that status when it is used to provide an enhanced 
telecommunications service, or when used in combination with 
equipment, facilities or other services.
    L. ``United Kingdom'' and ``UK'' mean England, Wales, Scotland, 
Northern Ireland and all territories, dependencies or possessions of 
the United Kingdom (excluding the Isle of Man) for which 
international telecommunications traffic is not normally separately 
reported to the United States Federal Communications Commission by 
United States telecommunications carriers.
    M. ``United States'' and ``US'' mean the fifty states, the 
District of Columbia, and all territories, dependencies, or 
possessions of the United States.
    N. ``United States international telecommunications provider'' 
means any person or entity actually providing international 
telecommunications services or enhanced telecommunications services 
to users in the United States, and that is

[[Page 37603]]

incorporated in the United States, or that is ultimately controlled 
by United States persons within the meaning of 16 CFR Sec. 801.1.

V. Visitorial and Compliance Provisions

    A. Concert agrees to maintain sufficient records and documents 
to demonstrate compliance with the requirements of this modified 
final judgment.
    B. For the purposes of determining or securing compliance of 
defendants with this modified final judgment, duly authorized 
representatives of the plaintiff, upon written request of the 
Attorney General or the Assistant Attorney General in charge of the 
Antitrust Division, and on reasonable notice to the relevant 
defendant, shall have access without restraint or interference to 
Concert and MCI in the United States:
    1. During their office hours to inspect and copy all records and 
documents in their possession or control relating to matters 
contained in this modified final judgment; and
    2. To interview or take sworn testimony from their officers, 
directors, employees, trustees, or agents, who may have counsel 
present, relating to any matter contained in this modified final 
judgment.
    C. Concert consents to make available to duly authorized 
representatives of the plaintiff, for the purposes of determining 
whether defendants have complied with the requirements of this final 
judgment and to secure their compliance:
    1. At the premises of the Antitrust Division in Washington, DC., 
within sixty days of receipt of written request by the Attorney 
General or Assistant Attorney General in charge of the Antitrust 
Division, records and documents in the possession or control of 
Concert, wherever located; and
    2. For interviews or sworn testimony, in the United States if 
requested by plaintiff but subject to their reasonable convenience, 
officers, directors, employees, trustees or agents, who may have 
counsel present.
    D. Upon written request of the Attorney General or the Assistant 
Attorney General in charge of the Antitrust Division, a defendant 
shall submit written reports, under oath if requested, relating to 
any of the matters contained in this decree.
    E. No information or documents obtained by the means provided in 
this Section V shall be divulged by the plaintiff to any person 
other than the United States Department of Justice, the Federal 
Communications Commission (``FCC''), and their employees, agents and 
contractors, except in the course of legal proceedings to which the 
United States is a party, or for the purpose of securing compliance 
with this decree, or for identifying to the United Kingdom Office of 
Telecommunications (``OFTEL''), the European Commission (``EC''), or 
other appropriate United Kingdom or EC regulatory agencies, conduct 
by defendants that may violate United Kingdom or EC law or 
regulations or Concert's license to operate its United Kingdom 
public telecommunications system (but no documents received from 
defendants pursuant to this Section V shall be disclosed to United 
Kingdom or EC authorities by the Department of Justice), or as 
otherwise required by law. Prior to divulging any documents, 
interviews or sworn testimony obtained pursuant to this Section V to 
the Federal Communications Commission or prior to divulging any 
interviews or sworn testimony obtained pursuant to this Section V to 
the EC, plaintiff will obtain assurances that such materials are 
protected from disclosure to third parties to the extent permitted 
by law.
    F. If at the time information or documents are furnished by a 
defendant to plaintiff pursuant to this Section V, such defendant 
represents and identifies in writing the material in any such 
information or documents to which a claim of protection may be 
asserted under Rule 26(c)(7) of the Federal Rules of Civil 
Procedure, and said defendant marks each pertinent page of such 
material, ``Subject to a claim of protection under Rule 26(c)(7) of 
the Federal Rules of Civil Procedure,'' then 10 days notice shall be 
given by plaintiff to such defendant prior to divulging such 
material in any legal proceeding (other than a grand jury 
proceeding) to which that defendant is not a party.

VI. Retention of Jurisdiction

    Jurisdiction is retained by this Court for the purposes of 
enabling any of the parties to this modified final judgment to apply 
to this Court at any time for such further orders or directions as 
may be necessary or appropriate to carry out or construe this 
decree, to modify or terminate any of its provisions, to enforce 
compliance, and to punish any violations of its provisions.

VII. Modification

    A. Any party to this modified final judgment may seek 
modification of its substant ive terms and obligations, and other 
parties to the modified final judgment shall have an opportunity to 
respond to such a motion. If the motion is contested by another 
party, it shall only be granted if the movant makes a clear showing 
that (i) a significant change in circumstances or significant new 
event subsequent to the entry of the modified final judgment 
requires modification of the modified final judgment to avoid 
substantial harm to competition or consumers in the United States, 
or to avoid substantial hardship to defendants, and (ii) the 
proposed modification is (a) in the public interest, (b) suitably 
tailored to the changed circumstances or new events and would not 
result in serious hardship to any defendant, and (c) consistent with 
the purposes of the antitrust laws of the United States and with the 
telecommunications regulatory regime of the United Kingdom. Neither 
the absence of specific reference to a particular event in the 
modified final judgment nor the foresee-ability of such an event at 
the time this modified final judgment was entered, shall preclude 
this Court's consideration of any modification request. This 
standard for obtaining contested modifications shall not require the 
United States to initiate a separate antitrust action before seeking 
modifications. The same standard shall apply to any party seeking 
modification of this modified final judgment. If a motion to modify 
this modified final judgment is not contested by any party, it shall 
be granted if the proposed modification is within the reaches of the 
public interest. Where modifications of the modified final judgment 
are sought, the provisions of Section V of this modified final 
judgment may be invoked to obtain any information or documents 
needed to evaluate the proposed modification prior to decision by 
the Court.
    B. Concert agrees to notify the plaintiff in writing if MCI or 
Concert hereafter files with the FCC or OFTEL an application to 
assign (or transfer control of) any license or authorization held by 
MCI or BT relating to telecommunications services between the United 
States and the United Kingdom, or if Concert seeks to reorganize its 
corporate structure so as to combine NewCo and BT in the same 
corporate entity. Within five (5) days of receipt by plaintiff of 
such notice, plaintiff may request form defendants additional 
information concerning the proposed assignment, transfer or 
reorganization. Defendants shall furnish any additional information 
requested within ten (10) days of receipt of the request. Such 
assignment, transfer or reorganization shall not take effect until 
thirty (30) days after receipt of the notice or, if additional 
information is requested by plaintiff, until twenty (20) days after 
receipt of the additional information. If the plaintiff determines, 
in its sole discretion, that such an assignment, transfer or 
reorganization would impair the effectiveness of any of the 
provisions of this modified final judgment, then the plaintiff, in 
the exercise of its discretion and without waiving its right to 
obtain any other remedy, may seek further modification of this 
modified final judgment, which modification will be reviewed as set 
forth in Section VII.A hereinabove. Concert and MCI agree that they 
will not oppose any request by the plaintiff for expedited 
consideration by the Court of any such request for further 
modification.

VIII. Sanctions

    Nothing in this modified final judgment shall prevent the United 
States from seeking, or this Court from imposing, against defendants 
or any other person, any relief available under any applicable 
provision of law.

IX. Further Provisions

    A. The entry of this modified final judgment is in the public 
interest.
    B. The substantive restrictions and obligations of this modified 
final judgment shall be removed after ten years have passed from 
September 29, 1994, the date of entry of the final judgment, unless 
this modified final judgment has been previously terminated.

United States District Judge.

United States District Court for the District of Columbia

[Civil Action No. 94-1317 (TFH]

United States of America, Plaintiff, v. MCI Communications Corporation 
and BT Forty-Eight Company (``NewCo''), Defendants

United States' Explanation of Procedures

    The United States submits this short memorandum summarizing the 
procedures

[[Page 37604]]

regarding the Court's entry of the proposed modified final judgment. 
Although the United States does not believe that this modified final 
judgment is subject to the Antitrust Procedures and Penalties Act, 
15 U.S.C. Secs. 16(b)-(h), it intends to follow procedures similar 
to those set out in this Act in order to allow for interested 
parties to submit comments to the Court prior to the Court's 
determination of whether the entry of the modified judgment is in 
the public interest.
    1. Today, the United States has filed a modified final judgment, 
a Stipulation pursuant to which the parties have consented to entry 
of the modified final judgment and a Memorandum In Support Of 
Modification explaining the proposed modifications and the reasons 
therefor.
    2. The United States intends to publish the proposed modified 
final judgment and its Memorandum In Support Of Modification in the 
Federal Register and in certain newspapers at least 60 days prior to 
the time that the United States files a motion for the entry of the 
proposed modified final judgment. The notice will inform members of 
the public that they may submit comments concerning the modified 
final judgment to the United States Department of Justice, Antitrust 
Division.
    3. During the sixty-day period, the United States will consider, 
and at the close of that period respond to, any comments received.
    4. After the expiration of the sixty-day period, the United 
States will file with the Court the comments, the United States' 
response and a Motion for Entry of the Modified Final Judgment 
(unless the United States has decided to withdraw its consent to 
entry of the Modified Final Judgment, as permitted by Paragraph 2 of 
the Stipulation).
    5. At that time, or any time thereafter, the Court may enter the 
modified final judgment without a hearing, if it finds that the 
modified final judgment is in the public interest.

    Dated: July 7, 1997.

    Respectfully submitted,
Yvette Benguerel,
D.C. Bar #442452.
U.S. Department of Justice, Antitrust Division, Telecommunications Task 
Force, 555 4th Street, N.W., Washington, D.C. 20001, (202) 514-5808.
[FR Doc. 97-18289 Filed 7-11-97; 8:45 am]
BILLING CODE 4410-11-M