[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