[Federal Register Volume 70, Number 240 (Thursday, December 15, 2005)]
[Notices]
[Pages 74350-74366]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-23815]


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DEPARTMENT OF JUSTICE

Antitrust Division


United States v. Verizon Communications Inc. and MCI, Inc.; 
Competitive Impact Statement, Proposed Final Judgment, Complaint, 
Stipulation

    Notice is hereby given pursuant to the Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16(b)-(h), that a Complaint, proposed Final 
Judgment, Stipulation, and Competitive Impact Statement have been filed 
with the U.S. District Court for the District of Columbia in United 
States v. Verizon Communications Inc., Civil Case No. 1:05CV02103 
(HHK). On October 27, 2005, the United States filed a complaint 
alleging that the proposed acquisition of MCI, Inc. (``MCI'') by 
Verizon Communications Inc. (``Verizon'') would violate Section 7 of 
the Clayton Act, 15 U.S.C. Sec.  18, by substantially lessening 
competition in the provision of locally private lines (also called 
``special access'') and other

[[Page 74351]]

telecommunications services that rely on local private lines in eight 
metropolitan areas: Baltimore; Boston; New York; Philadelphia; Tampa; 
Richmond, Virginia; Providence, Rhode Island; and Portland, Maine. The 
proposed Final Judgment requires the defendants to divest assets in 
those eight metropolitan areas in order to proceed with Verizon's $8.54 
billion acquisition of MCI. A Competitive Impact Statement filed by the 
United States on November 16, 2005 describes the Complaint, the 
proposed Final Judgment, the industry, and the remedies available to 
private litigants who may have been injured by the alleged violation.
    Copies of the Complaint, proposed Final Judgment, Stipulation, 
Competitive Impact Statement, and all further papers filed with the 
Court in connection with this Complaint will be available for 
inspection at the Antitrust Documents Group, Antitrust Division, 
Liberty Place Building, Room 215, 325 7th Street, NW., Washington, DC 
20530 (202-514-4281), and at the Office of the Clerk of the U.S. 
District Court for the District of Columbia. Copies of these materials 
may be obtained from the Antitrust Division upon request and payment of 
the copying fee set by Department of Justice regulations.
    Interested persons may submit comments in writing regarding the 
proposed consent decree to the United States. Such comments must be 
received by the Antitrust Division within sixty (60) days and will be 
filed with the Court by the United States. Comments should be addressed 
to Nancy Goodman, Chief, Telecommunications & Media Enforcement 
Section, Antitrust Division, U.S. Department of Justice, 1401 H Street, 
NW., Suite 8000, Washington, DC 20530 (202-514-5621). At the conclusion 
of the sixty (60) day comment period, the U.S. District Court for the 
District of Columbia may enter the proposed consent decree upon finding 
that it serves the public interest.

J. Robert Kramer II,
Director of Operations, Antitrust Division.

In the United States District Court for the District of Columbia

United States of America, United States Department of Justice, 
Antitrust Division, 1401 H Street, NW., Suite 8000, Washington, DC 
20530, Plaintiff, v. Verizon Communications Inc., 1095 Avenue of the 
Americas, New York, NY 10036; and MCI, Inc., 22001 Loudoun County 
Parkway, Ashburn, VA 20147, Defendants

    Civil Action No. ------
    CASE NUMBER 1:05CV02103
    JUDGE: Henry H. Kennedy
    DECK TYPE: Antitrust
    DATE STAMP: 10/27/2005

Complaint

    The United States of America, acting under the direction of the 
Attorney General of the United States, brings this civil action to 
enjoin the merger of two of the largest providers of telecommunications 
services in the United States, Verizon Communications, Inc. 
(``Verizon'') and MCI, Inc. (``MCI''), and alleges as follows:
    1. On February 14, 2005, Verizon entered into an agreement to 
acquire MCI. If approved, the transaction would create one of the 
nation's largest providers of telecommunications services. Plaintiff 
seeks to enjoin this transaction because it will substantially lessen 
competition for (a) Local Private Lines that connect hundreds of 
commercial buildings in Verizon's franchised territory to a carrier's 
network or other local destination, and (b) other telecommunications 
services that rely on Local Private Lines.
    2. Verizon and MCI compete in the sale of wireline 
telecommunications services to retail and wholesale customers in the 
United States.
    3. For hundreds of commercial buildings in the metropolitan areas 
of Baltimore-Washington, DC; Boston, Massachusetts; New York, New York; 
Richmond, Virginia; Providence, Rhode Island; Tampa, Florida; 
Philadelphia, Pennsylvania; and Portland, Maine, Verizon and MCI are 
the only two firms that own or control a direct wireline connection to 
the building. These building connections are used to supply voice and 
data telecommunications services to business customers. As described in 
this Complaint, the proposed merger is likely to substantially reduce 
competition for Local Private Lines and telecommunications services 
that rely on Local Private Lines to those buildings.

I. Jurisdiction and Venue

    4. This action is filed by the United States under Section 15 of 
the Clayton Act, 15 U.S.C. 25, to prevent and restrain the Defendants 
from violating Section 7 of the Clayton Act, 15 U.S.C. 18.
    5. Verizon and MCI are engaged in interstate commerce and in 
activities substantially affecting interstate commerce. The Court has 
jurisdiction over this action pursuant to Sections 15 and 16 of the 
Clayton Act, 15 U.S.C. 25, 26, and 28 U.S.C. 1331, 1337.
    6. Verizon and MCI transact business and are found in the District 
of Columbia. Venue is proper under Section 12 of the Clayton Act, 15 
U.S.C. 22, and 28 U.S.C. 1391(c).

II. The Defendants and the Transaction

    7. Verizon is a corporation organized and existing under the laws 
of the State of Delaware, with its headquarters in New York, New York. 
Verizon, formerly Bell Atlantic Corporation (``Bell Atlantic''), is the 
nation's largest regional Bell operating company (``RBOC''). Bell 
Atlantic was one of the seven regional holding companies to result from 
the breakup of AT&T's local telephone business in 1984. In 1996 Bell 
Atlantic acquired another of the seven original holding companies, 
NYNEX Corporation. In 2000 Bell Atlantic acquired GTE Corporation, an 
incumbent local exchange carrier (``ILEC'') that provided local 
exchange and other serivces in 28 states, and formed Verizon. Today, 
Verizon's wireline telecommunications operations serve about 51 million 
total switched access lines, including 32.4 million residential and 
17.8 million business lines, in 29 states plus the District of 
Columbia. In 2004, Verizon earned approximately $38.6 billion in 
revenues from its domestic wireline services, including at least $8.8 
billion in revenue from business customers. Verizon has fiber optic or 
copper connections to virtually all of the commercial buildings in its 
franchised territory.
    8. MCI is a corporation organized and existing under the laws of 
the State of Delaware, with its headquarters in Ashburn, Virginia, MCI 
is one of the nation's largest interexchange carriers (``IXC''), 
offering traditional long distance telephone service, as well as one of 
the largest competitive local exchange carriers (``CLEC''), offering 
local network exchange and access for voice and data services. MCI 
serves consumers and businesses across the United States and around the 
globe, and owns significant local network assets within Verizon's 29-
state operating territory including direct fiber optic connections to 
numerous commercial buildings. In 2004, MCI earned approximately $20.7 
billion in revenues, including almost $4 billion from domestic business 
customers.
    9. Pursuant to an Agreement and Plan of Merger dated February 14, 
2005, as amended on March 4, March 29, and May 2, 2005, Verizon agreed 
to acquire MCI for approximately $8.54 billion.

[[Page 74352]]

III. Trade and Commerce

A. Nature of Trade and Commerce
    10. Verizon owns and operates local telecommunications networks 
throughout its territory and provides local and long distance voice and 
data services to, inter alia, business customers and other 
telecommunications carriers.
    11. MCI owns and operates local networks in dozens of metropolitan 
areas in the United States, a substantial number of which are in 
Verizon territory. Like Verizon, MCI also provides local and long 
distance voice and data services to business customers and other 
telecommunications carriers. Significant numbers of MCI's customers 
have locations in Verizon's franchised territory, and the two firms 
compete to serve those wholesale and retail customers.
    12. One element of the parties' local networks are local loops, 
sometimes referred to as ``last-mile'' connections, which are typically 
either copper or fiber-optic transmission facilities that connect 
commercial buildings to a carrier's network. These last-mile 
connections are a critically important asset for providing service to 
business customers.
    13. A Local Private Line is a dedicated, point-to-point circuit 
offered over copper and/or fiber-optic transmission facilities that 
originates and terminates within a single metropolitan area and 
typically includes at least one local loop. Local Private Lines are 
sold at both retail (to business customers) and wholesale (to other 
carriers). Verizon refers to Local Private Line circuits as ``special 
access,'' and MCI refers to its own such circuits as ``metro private 
lines.''
    14. Depending on how they are configured, Local Private Lines can 
be used to carry voice traffic, data, or a combination of the two. 
Local Private Lines may be purchased as stand-alone products but are 
also an important input to value-added voice and data 
telecommunications services that are offered to business customers.
    15. For the vast majority of commercial buildings in its territory, 
Verizon is the only carrier that owns a last-mile connection to the 
building. Thus, in order to provide voice or data telecommunications 
services to customers in those Verizon-only buildings, competing 
carriers typically must lease the connection from Verizon as Local 
Private Line service (special access).
    16. For a small percentage of commercial buildings (though one that 
accounts for a substantial percentage of customer demand and revenue), 
Verizon's CLEC competitors have built or acquired their own last-mile 
fiber-optic connections, separate from Verizon's, to connect their 
networks to the buildings. The CLECs typically refer to buildings with 
these connections as their ``lit buildings'' or ``on-net buildings.'' 
Once a CLEC has incurred the high fixed cost to construct a last-mile 
connection to a building, the CLEC can usually provide service to 
business customers in the building at a lower marginal cost than it 
would otherwise be able to do if it had to lease the connection from 
the RBOC. It can also provide alternative access to other CLECs seeking 
to serve business customers in the building.
    17. MCI is among the leading CLECs in Verizon's territory in the 
number of buildings it has connected with its own last-mile fiber 
facilities. For hundreds of buildings in Verizon's territory, the only 
two carriers that own or control the direct building connection are MCI 
and Verizon.
    18. In the hundreds of buildings where MCI is the only CLEC with a 
last-mile connection, the merge of MCI and Verizon would reduce the 
number of carriers with an owned or controlled last-mile connection 
from two to one.
B. Relevant Product Markets
    19. The relevant product markets affected by this transaction are 
the markets for: (a) Local Private Lines, and (b) voice and data 
telecommunications services that rely on Local Private Lines.
    20. Verizon is the dominant provider of Local Private Lines 
(special access) in its franchised territory with $3.5 billion in 
special access sales in 2004. MCI is one of Verizon's largest 
competitors with $532 million in metro private line sales in 2004, of 
which more than $198 million were in Verizon territory.
    21. Local Private Lines are a recognized service category among 
telecommunications carriers and end-user business customers. Customers 
typically purchase Local Private Lines in standard bandwidth increments 
such as DS1 (``T1,'' 1.54 megabits per second), DS3 (44.74 megabits per 
second), OC3 (155.52 megabits per second), and higher. Local Private 
Lines can interconnect with industry-standard data networking and 
telephone equipment, and can be ``channelized'' to carry various 
amounts of voice and/or data traffic.
    22. Local Private Lines are distinct from switched local exchange 
telephone services. Switched local exchange lines route calls through a 
voice switch in the local carrier's central office and do not 
necessarily use a dedicated circuit. These switched circuits do not 
offer the guaranteed bandwidth, high service levels, and security that 
Local Private Lines provide.
    23. Competing carriers often rely on Local Private Line (special 
access) circuits to connect an end-user customer's location to their 
networks, enabling the competitor to supply value-added data 
networking, Internet access, local voice and long distance services to 
the customer. Although carriers can provide some types of voice and 
data services over switched local exchange lines (e.g., when an access 
line is pre-subscribed to a long distance carrier), most large business 
customers do not find those services to be a viable or cost-effective 
substitute for voice and data telecommunications services provided via 
Local Private Lines. In the event of a small, but significant, 
nontransitory increase in price for either Local Private Lines or voice 
and data telecommunications services provided via Local Private Lines, 
insufficient customers would switch to switched circuits to render the 
increase unprofitable.
C. Relevant Geographic Markets
    24. The relevant geographic markets for both Local Private Lines, 
as well as voice and data telecommunications services that rely on 
Local Private Lines, are no broader than each metropolitan area and no 
more narrow than each individual building.

IV. Anticompetitive Effects

    25. Verizon and MCI are the only two carriers that own or control a 
Local Private Line connection to many buildings in each region. The 
merger would, therefore, effectively eliminate competition for 
facilities-based Local Private Line service to those buildings, and 
many retail and wholesale customers would no longer have MCI as a 
competitive alternative to Verizon. Although other competitors might 
resell Local Private Lines from Verizon, those competitors would not be 
as effective a competitive constraint because Verizon would control the 
price of the resold circuits. The merged firm would, therefore, have 
the ability to raise price to retail and wholesale customers of Local 
Private Lines.
    26. In addition, because the cost of dedicated local access via 
Local Private Line represents an important cost component of many 
value-added voice and data telecommunications services provided over 
such access, by (a) eliminating MCI as the only competitive alternative 
to Verizon for such services with its own Local Private Line connection 
to hundreds of buildings,

[[Page 74353]]

and (b) depriving other carriers seeking to provide such value-added 
services of the only fully-facilities based wholesale competitive 
alternative to Verizon in those buildings, the merger would tend to 
lessen competition for retail voice and data telecommunications 
services provided over dedicated access.

V. Entry

    27. Although other CLECs can, theoretically, build their own fiber 
connection to each building in response to a price increase by the 
merged firm, such entry is a difficult, time-consuming, and expensive 
process. Whether a CLEC builds a last mile connection to a given 
building depends upon many factors, including:
    a. The proximity of the building to the CLEC's existing network 
interconnection points;
    b. The capacity required at the customer's location (and thus the 
revenue opportunity);
    c. The availability of capital;
    d. The existence of physical barriers, such as rivers and railbeds, 
between the CLEC's network and the customer's location; and
    e. The ease or difficulty of securing the necessary consent from 
building owners and municipal officials.
    28. The costs of building a last-mile connection vary substantially 
for each location. Even if all the above criteria favor the 
construction of a last-mile connection in a particular case, a single 
such connection typically costs tens, sometimes hundreds, of thousands 
of dollars to build and activate. Thus, CLECs will typically only build 
in to a particular building after they have secured a customer contract 
of sufficient size to justify the anticipated construction costs for 
that building.
    29. Although entry may occur in response to a post-merger price 
increase in some of the buildings where MCI is the only connected CLEC, 
the conditions for entry are unlikely to be met in hundreds of those 
buildings. Thus, entry is unlikely to eliminate the competitive harm 
that would likely result from the proposed merger.

VI. Violation Alleged

    30. The United States hereby incorporates paragraphs 1 through 29.
    31. Pursuant to an Agreement and Plan of Merger dated February 14, 
2005, as amended on March 4, March 29, and May 2, 2005 Verizon and MCI 
intend to merge their businesses.
    32. The effect of the proposed acquisition of MCI by Verizon would 
be to lessen competition substantially in interstate trade and commerce 
in numerous geographic markets for (a) Local Private Lines and (b) 
voice and data telecommunications services that rely on Local Private 
Lines, in violation of Section 7 of the Clayton Act, 15 U.S.C. 18.
    33. The transaction would likely have the following effects, among 
others:
    a. Competition in the provision and sale of Local Private Lines in 
numerous Geographic markets would be eliminated or substantially 
lessened;
    b. Competition in the provision and sale of voice and data 
telecommunications services that rely on Local Private Lines in 
numerous geographic markets would be substantially lessened; and
    c. Prices for Local Private Lines, as well as voice and data 
telecommunications services provided via Local Private Lines, would 
likely increase to levels above those that would prevail absent the 
merger.

VII. Prayer for Relief

    The United States requests:
    34. That Verizon's proposed acquisition of MCI be adjudged to 
violate Section 7 of the Clayton Act, 15 U.S.C. 18;
    35. That Defendants be permanently enjoined and restrained from 
carrying out the Agreement and Plan of Merger, dated February 14, 2005, 
as amended on March 4, March 29, and May 2, 2005 or from entering into 
or carrying out any agreement, understanding, or plan by which Verizon 
would merge with or acquire MCI, its capital stock or any of its 
assets;
    36. That the United States be awarded costs of this action; and
    37. That the United States have such other relief as the Court may 
deem just and proper.

Dated: October 27, 2005.

 Respectfully submitted,

For Plaintiff United States:

Thomas O. Barnett,
Acting Assistant Attorney General.

J. Bruce McDonald,
Deputy Assistant Attorney General.

J. Robert Kramer II,
Director of Operations.

Nancy M. Goodman,
Chief, Telecommunications and Media Enforcement Section (D.C. Bar 
No. 251694).

Laury E. Bobbish,
Assistant Chief, Telecommunications and Media Enforcement Section.

Lawrence M. Frankel
(D.C. Bar No. 441532).

Claude F. Scott, Jr. (D.C. Bar No. 414906)
Mary N. Strimel (D.C. Bar No. 455303)
Matthew C. Hammond
Lauren J. Fishbein (D.C. Bar No. 451889)
Conrad J. Smucker (D.C. Bar No. 434590)
Jeremiah M. Luongo
Jared A. Hughes
David T. Blonder
William Lindsey Wilson
William B. Michael
Trial Attorneys, U.S. Department of Justice, Antitrust Division, 
Telecommunications and Media Enforcement Section,
1401 H Street, NW., Suite 8000, Washington, DC 20530.
Telephone: (202) 514-5621.
Facsimile: (202) 514-6381.

In the United States District Court for the District of Columbia

United States of America, Plaintiff; v. Verizon Communications Inc. and 
MCI, Inc., Defendants

    Civil Action No. 1:05CV02103 (HHK)

Final Judgment

    Whereas, plaintiff, United States of America, filed its Complaint 
on October 27, 2005, plaintiff and defendants, Verizon Communications 
Inc. (``Verizon'') and MCI, Inc. (``MCI''), by their respective 
attorneys, have consented to the entry of this Final Judgment without 
trial or adjudication of any issue of fact or law, and without this 
Final Judgment constituting any evidence against or admission by any 
party regarding any issue of fact or law;
    And Whereas, defendants agree to be bound by the provisions of this 
Final Judgment pending its approval by the Court;
    And Whereas, the essence of this Final Judgment is the prompt and 
certain divestiture of certain rights or assets by the defendants to 
assure that competition is not substantially lessened;
    And Whereas, plaintiff requires defendants to make certain 
divestitures for the purpose of remedying the loss of competition 
alleged in the Complaint;
    And Whereas, defendants have represented to the United States that 
the divestitures required below can and will be made and the defendants 
will later raise no claim of hardship or difficulty as grounds for 
asking the Court to modify any of the divestiture provisions contained 
below;
    New Therefore, before any testimony is taken, without trial or 
adjudication of any issue of fact or law, and upon cosnet of the 
parties, it is ordered, adjudged, and decreed:

I. Jurisdiction

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

II. Definitions

    As used in this Final Judgment:

[[Page 74354]]

    A. ``Verizon'' means defendant Verizon Communications Inc., a 
Delaware corporation with its headquarters in New York, New York, its 
successors and assigns, and its subsidiaries, divisions, groups, 
affiliates, partnerships and joint ventures, and their directors, 
officers, managers, agents, and employees.
    B. ``MCI'' means defendants MCI, Inc., a Delaware corporation with 
its headquarters in Ashburn, Virginia, its successors and assigns, and 
its subsidiaries, divisions, groups, affiliates, partnership and joint 
ventures, and their directors, officers, managers, agents, and 
employees.
    C. ``Acquirer'' or ``Acquirers'' means the entity or entities to 
whom defendants divest the Divestiture Assets.
    D. ``Divestiture Assets'' means IRUs for Lateral Connections to the 
locations listed in Appendix A and sufficient transport as described 
below and all additional rights necessary to enable those asets to be 
used by the Acquirer to provide telecommunications services. The 
Divestiture Assets shall include IRUs for transport facilities 
sufficient to connect the Lateral Connections to locations mutually 
agreed upon by defendants and the Acquirer, subject to the approval of 
the United States in its sole judgment. the term ``Divestiture Assets'' 
shall be construed broadly to accomplish the complete divestiture of 
assets and the purposes of this Final Judgment. With the approval of 
the United States, in its sole discretion, and at the Acquirer's 
option, the Divestiture Assets may be modified to exlude assets and 
rights that are not necessary to meet the competitive aims of this 
Final Judgment.
    E. ``IRU'' means indefeasible right of use, a long-term leasehold 
interest that gives the holder the right to use specified strands of 
fiber in a telecommunications facility. An IRU granted by defendants 
under this Final Judgment shall (1) be for a minimum of 10 years; (2) 
not require the Acquirer to pay a monthly or other recurring fee to 
preserve or make use of its rights; (3) include all additional rights 
and interests necessary to enable the IRU to be used by the Acquirer to 
provide telecommunications services; and (4) contain other commercially 
reasonable and customary terms, including terms for payment to the 
grantor for ancillary services, such as maintenance fees on a per 
occurrence basis; and (5) not unreasonably limit the right of the 
Acquirer to use the asset as it wishes (e.g., the Acquirer shall be 
permitted to splice into the IRU fiber, though such splice points must 
be mutually agreed upon by defendants and Acquirer).
    F. ``Lateral Connection'' means fiber strands from the point of 
entry of the building to the splice point with fiber used to serve 
different buildings and shall consist of the greater of (1) eight (8) 
fiber strands or (2) one-half of the currently unused fiber strands in 
MCI's facilities serving the building measured at the time of the 
filing of the Complaint. The fiber strands may be provided from those 
owned or controlled by either Verizon or MCI, as mutually agreed by 
defendants and Acquirer.

III. Applicability

    A. This Final Judgment applies to Verizon and MCI, as defined 
above, and all other person in active concern or participation with any 
of them who receive actual notice of this Final Judgment by personal 
service or otherwise.
    B. Defendants shall require, as a condition of the sale or other 
disposition of all or substantially all of their assets or of lesser 
business units that include the Divestiture Assets, that the purchasers 
agree to be bound by the provisions of this Final Judgment, provided 
however, that defendants need not obtain such an agreement from the 
Acquirers.

IV. Divestitures

    A. Defendants are ordered and directed, within 120 calendar days 
after the closing of Verizon's acquisition of MCI, or five (5) days 
after notice of the entry of this Final Judgment by the Court, 
whichever is later, to divest the Divestiture Assets in a manner 
consistent with this Final Judgment to an acquirer and on terms 
acceptable to the United States in its sole discretion. The United 
States, in its sole discretion, may agree to one or more extensions of 
this time period not to exceed sixty (60) days in total, and shall 
notify the Court in such circumstances. If approval or consent from any 
government unit is necessary with respect to divestiture of the 
Divestiture Assets by defendants or the Divestiture Trustee and if 
applications or requests for approval or consent have been filed with 
the appropriate governmental unit within 120 calendar days after the 
closing of Verizon's acquisition of MCI, but an order or other 
dispositive action on such applications has not been issued before the 
end of the period permitted for divestiture, the period shall be 
extended with respect to divestiture of those Divestiture Assets for 
which governmental approval or consent has not been issued until five 
(5) days after such approval or consent is received. Defendants agree 
to use their best efforts to divest the Divestiture Assets and to seek 
all necessary regulatory or other approvals or consents necessary for 
such divestitures as expeditiously as possible. This Final Judgment 
odes not limit the Federal Communications Commission's exercise of its 
regulatory powers and process with respect to the Divestiture Assets. 
Authorization by the Federal Communications Commission to conduct the 
divestiture of a Divestiture Asset in a particularly manner will not 
modify any of the requirements of this decree.
    B. In accomplishing the divestitures ordered by this Final 
Judgment, defendants promptly shall make known, by usual and customary 
means, the availability of the Divestiture Assets. Defendants shall 
inform any person making inquiry regarding a possible purchase of the 
Divestiture Assets that they are being divested pursuant to this Final 
Judgment and provide that person with a copy of this Final Judgment. 
Defendants shall offer to furnish to all prospective Acquirers, subject 
to customary confidentiality assurances, all information and documents 
relating to the Divestiture Assets customarily provided in a due 
diligence process except such information or documents subject to the 
attorney-client or work-product privileges. Defendants shall make 
available such information to the United States at the same time that 
such information is made available to any other person.
    C. Defendants shall permit prospective Acquirers of the Divestiture 
Assets to have reasonable access to personnel and to make inspections 
of the physical facilities of the Divestiture Assets; access to any and 
all environmental, zoning, and other permit documents and information; 
and access to any and all financial, operational, or other documents 
and information customarily provided as part of a due diligence 
process.
    D. Defendants shall warrant to all Acquirers of the Divestiture 
Assets that each asset will be operational on the date of sale.
    E. Defendants shall not take any action that will impede in any way 
the permitting, operation, or divestiture of the Divestiture Assets.
    F. At the option of the Acquirers, defendants shall enter into a 
contract for a period of up to one (1) year for transition services 
customarily necessary to maintain, operate, provision, monitor, or 
otherwise support the Divestiture Assets. The terms and conditions of 
any contractual arrangement meant to satisfy this provision must be 
reasonably related to market conditions.

[[Page 74355]]

    G. Defendants shall warrant to the Acquirer of the Divestiture 
Assets that there are no material defects in the environmental, zoning, 
or other permits pertaining to the operation of each asset, and that 
following the sale of the Divestiture Assets, defendants will not 
undertake, directly or indirectly any challenges to the environmental, 
zoning, or other permits relating to the operation of the Divestiture 
Assets.
    H. Unless the United States otherwise consents in writing, the 
divestitures pursuant to Section IV, or by trustee appointed pursuant 
to Section V, of this Final Judgment, shall include the entire 
Divestiture Assets, and shall be accomplished in such a way as to 
satisfy the United States, in its sole discretion, that Divestiture 
Assets can and will be used by the Acquirer as part of a viable, 
ongoing telecommunications business. Divestiture of the Divestiture 
Assets may be made to more than one Acquirer, provided that (i) all 
Divestiture Assets in a given metropolitan area are divested to a 
single Acquirer unless otherwise approved by the United States, in its 
sole discretion, and (ii) in each instance it is demonstrated to the 
sole satisfaction of the United States that the Divestiture Assets will 
remain viable and the divestiture of such assets will remedy the 
competitive harm alleged in the Complaint. The divestitures, whether 
pursuant to Section IV or Section V of this Final Judgment,
    (1) shall be made to an Acquirer (or Acquirers) that, in the United 
States's role judgment, has the intent and capability (including the 
necessary managerial, operational, technical, and financial capability) 
of competing effectively in the provision of telecommunications 
services; and
    (2) shall be accomplished so as to satisfy the United States, in 
its sole discretion, that none of the terms of any agreement between 
the Acquirer (or Acquirers) and defendants gives defendants the ability 
unreasonably to raise the Acquirer's cost, to lower the Acquirer's 
efficiency, or otherwise to interfere in the ability of the Acquirer to 
complete effectively.
    I. To the extent leases, contracts, agreements, intellectual 
property rights, licenses or other commitments with third-parties are 
not assignable or transferable without the consent of the licensor or 
other third parties, defendants shall use their best efforts to obtain 
those consents.

V. Appointment of Trustee

    A. If defendants have not divested the Divestiture Assets within 
the time period specified in Section IV(A), defendants shall notify the 
United States of that fact in writing, specifically identifying the 
Divestiture Assets that have not been divested. Upon application of the 
United States, the Court shall appoint a trustee selected by the United 
States and approved by the Court to effect the divestiture of the 
Divestiture Assets.
    B. After the appointment of a trustee becomes effective, only the 
trustee shall have the right to sell the Divestiture Assets. The 
trustee shall have the power and authority to accomplish the 
divestiture to Acquirers acceptable to the United States, in its sole 
judgment, at such price and on such terms as are then obtainable upon 
reasonable effort by the trustee, subject to the provisions of Sections 
IV, V, and VI of this Final Judgment, and shall have such other powers 
as this Court deems appropriate. Subject to Section V(D) of this Final 
Judgment, the trustee may hire at the cost and expense of defendants 
any investment bankers, attorneys, technical experts, or other agents, 
who shall be solely accountable to the trustee, reasonably necessary in 
the trustee's judgment to assist in the divestiture.
    C. Defendants shall not object to a sale by the trustee on any 
ground other than the trustee's malfeasance. Any such objections by 
defendants must be conveyed in writing to the United States and the 
trustee within ten (10) calendar days after the trustee has provided 
the notice required under Section VI.
    D. The trustee shall serve at the cost and expense of defendants, 
on such terms and conditions as the plaintiff approves, and shall 
account for all monies derived from the sale of the assets sold by the 
trustee and all costs and expenses so incurred. After approval by the 
Court of the trustee's accounting, including fees for its services and 
those of any professionals and agents retained by the trustee, all 
remaining money shall be paid to defendants and the trust shall then be 
terminated. The compensation of the trustee and any professionals and 
agents retained by the trustee shall be reasonable in light of the 
value of the Divestiture Assets and based on a fee arrangement 
providing the trustee with an incentive based on the price and terms of 
the divestiture and the speed with which it is accomplished, but 
timeliness is paramount.
    E. Defendants shall use their best efforts to assist the trustee in 
accomplishing the required divestitures, including their best efforts 
to effect all necessary regulatory or other approvals or consents and 
will provide necessary representations or warranties as appropriate, 
related to the sale of the Divestiture Assets. The trustee and any 
consultants, accountants, attorneys, technical experts, and other 
persons retained by the trustee shall have full and complete access to 
the personnel, books, records, and facilities related to the 
Divestiture Assets, and defendants shall develop financial and other 
information relevant to the Divestiture Assets as the trustee may 
reasonably request, subject to reasonable protection for trade secret 
or other confidential research, development, or commercial information. 
Defendants shall take no action to interfere with or to impede the 
trustee's accomplishment of the divestiture.
    F. After its appointment, the trustee shall file monthly reports 
with the United States and the Court setting forth the trustee's 
efforts to accomplish the divestiture ordered under this Final 
Judgment. To the extent such reports contain information that the 
trustee deems confidential, such reports shall not be filed in the 
public docket of the Court. Such reports shall include the name, 
address, and telephone number of each person who, during the preceding 
month, made an offer to acquire, expressed an interest in acquiring, 
entered into negotiations to acquire, or was contacted or made an 
inquiry about acquiring, any interest in the Divestiture Assets, and 
shall describe in detail each contact with any such person. The trustee 
shall maintain full records of all efforts made to divest the 
Divestiture Assets.
    G. If the trustee has not accomplished such divestiture within six 
months after its appointment, the trustee shall promptly file with the 
Court a report setting forth (1) the trustee's efforts to accomplish 
the required divestiture, (2) the reasons, in the trustee's judgment, 
why the required divestiture has not been accomplished, and (3) the 
trustee's recommendations. To the extent such reports contain 
information that the trustee deems confidential, such reports shall not 
be filed in the public docket of the Court. The trustee shall at the 
same time furnish such report to the plaintiff who shall have the right 
to make additional recommendations consistent with the purpose of the 
trust. The Court thereafter shall enter such orders as it shall deem 
appropriate to carry out the purpose of the Final Judgment, which may, 
if necessary, include extending the trust and the term of the trustee's 
appointment by a period requested by the United States.
    H. In addition, notwithstanding any provision to the contrary, the 
United States, in its sole discretion, may require defendants to 
include additional assets, or allow, with the written approval of

[[Page 74356]]

the United States, defendants to substitute substantially similar 
assets, which substantially relate to the Divestiture Assets to be 
divested by the trustee to facilitate prompt divestiture to an 
acceptable Acquirer or Acquirers.

VI. Notice of Proposed Divestiture

    A. Within two (2) business days following execution of a definitive 
divestiture agreement, defendants or the trustee, whichever is then 
responsible for effecting the divestiture required herein, shall notify 
the United States of any proposed divestiture required by Section IV or 
V of this Final Judgment. If the trustee is responsible, it shall 
similarly notify defendants. The notice shall set forth the details of 
the proposed divestiture and list the name, address, and telephone 
number of each person not previously identified who offered or 
expressed an interest in or desire to acquire any ownership interest in 
the Divestiture Assets, together with full details of the same.
    B. Within fifteen (15) calendar days of receipt by the United 
States of such notice, the United States may request from defendants, 
the proposed Acquirer or Acquirers, any other third party, or the 
trustee, if applicable, additional information concerning the proposed 
divestiture, the proposed Acquirer or Acquirers, and any other 
potential Acquirer. Defendants and the trustee shall furnish any 
additional information requested within fifteen (15) calendar days of 
the receipt of the request, unless the parties shall otherwise agree.
    C. Within thirty (30) calendar days after receipt of the notice or 
within twenty (20) calendar days after the United States has been 
provided the additional information requested from defendants, the 
proposed Acquirer or Acquirers, any third party, and the trustee, 
whichever is later, the United States shall provide written notice to 
defendants and the trustee, if there is one, stating whether or not it 
objects to the proposed divestiture. If the United States provides 
written notice that it does not object, the divestiture may be 
consummated, subject only to defendants' limited right to object to the 
sale under Section V(C) of this Final Judgment. Absent written notice 
that the United States does not object to the proposed Acquirer or upon 
objection by the United States, a divestiture under Section IV or 
Section V shall not be consummated. Upon objection by defendants under 
Section V(C), a divestiture proposed under Section V shall not be 
consummated unless approved by the Court.

VII. Financing

    Defendants shall not finance all or any part of any purchase made 
pursuant to Section IV or V of this Final Judgment.

VIII. Preservation of Assets

    Until the divestiture required by this Final Judgment has been 
accomplished, defendants shall take all steps necessary to comply with 
the Stipulation signed by defendants and the United States. Defendants 
shall take no action that would jeopardize the divestiture ordered by 
this Court.

IX. Affidavits

    A. Within twenty (20) calendar days of the filing of the Complaint 
in this matter, and every thirty (30) calendar days thereafter until 
the divestiture has been completed under Section IV or V, defendants 
shall deliver to the United States an affidavit as to the fact and 
manner of its compliance with Section IV or V of this Final Judgment. 
Each such affidavit shall include the name, address, and telephone 
number of each person who, during the preceding thirty (30) days, made 
an offer to acquire, expressed an interest in acquiring, entered into 
negotiations to acquire, or was contacted or made an inquiry about 
acquiring, any interest in the Divestiture Assets, and shall describe 
in detail each contact with any such person during that period. Each 
such affidavit shall also include a description of the efforts 
defendants have taken to solicit buyers for the Divestiture Assets, and 
to provide required information to prospective Acquirers, including the 
limitations, if any, on such information. Assuming the information set 
forth in the affidavit is true and complete, any objection by the 
United States to information provided by defendants, including 
limitation on information, shall be made within fourteen (14) calendar 
days of the receipt of such affidavit.
    B. Within twenty (20) calendar days of the filing of the Complaint 
in this matter, defendants shall deliver to the United States an 
affidavit that describes in reasonable detail all action defendants 
have taken and all steps defendants have implemented on an ongoing 
basis to comply with Section VIII of this Final Judgment. Defendants 
shall deliver to the United States an affidavit describing any changes 
to the efforts and actions outlined in defendants' earlier affidavits 
filed pursuant to this section within fifteen (15) calendar days after 
the change is implemented.
    C. Defendants shall keep all records of all efforts made to 
preserve and divest the Divestiture Assets until one year after such 
divestiture has been completed.

X. Compliance Inspection

    A. For the purposes of determining or securing compliance with this 
Final Judgment, or of determining whether the Final Judgment should be 
modified or vacated, and subject to any legally recognized privilege, 
from time to time duly authorized representatives of the United States 
Department of Justice, including consultants and other persons retained 
by the United States, shall, upon written request of a duly authorized 
representative of the Assistant Attorney General in charge of the 
Antitrust Division, and on reasonable notice to defendants, be 
permitted.
    (1) Access during defendants' office hours to inspect and copy, or 
at plaintiff's option, to require that defendants provide copies of, 
all books, ledgers, accounts, records and documents in the possession, 
custody, or control of defendants, relating to any matters contained in 
this Final Judgment; and
    (2) To interview, either informally or on the record, defendants' 
officers, employees, or agents, who may have their individual counsel 
present, regarding such matters. The interviews shall be subject to the 
reasonable convenience of the interviewee and without restraint or 
interference by defendants.
    B. Upon the written request of a duly authorized representative of 
the Assistant Attorney General in charge of the Antitrust Division, 
defendants shall submit written reports, under oath if requested, 
relating to any of the matters contained in this Final Judgment as may 
be requested.
    C. No information or documents obtained by the means provided in 
this section shall be divulged by the United States to any person other 
than an authorized representative of the executive branch of the United 
States, except in the course of legal proceedings to which the United 
States is a party (including grand jury proceedings), or for the 
purpose of securing compliance with this Final Judgment, or as 
otherwise required by law.
    D. If at the time information or documents are furnished by 
defendants to the United States, defendants represent and identify 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 defendants mark each pertinent page of 
such material,

[[Page 74357]]

``Subject to claim of protection under Rule 26(c)(7) of the Federal 
Rules of Civil Procedure,'' then the United States shall given 
defendants ten (10) calendar days notice prior to divulging such 
material in any legal proceeding (other than grand jury proceedings).

XI. No Reacquisition

    Defendants may not reacquire (or lease back without the approval of 
the United States, in its sole discretion) any part of the Divestiture 
Assets during the term of this Final Judgment.

XII. Retention of Jurisdiction

    This Court retains jurisdiction to enable any party to this Final 
Judgment to apply to this Court at any time for further orders and 
directions as may be necessary or appropriate to carry out or construe 
this Final Judgment, to modify any of its provisions, to enforce 
compliance, and to punish violations of its provisions.

XIII. Expiration of Final Judgment

    Unless this Court grants an extension, this Final Judgment shall 
expire ten years from the date of its entry.

XIV. Public Interest Determination

    The parties have complied with the requirements of the Antitrust 
Procedures and Penalties Act, 15 U.S.C. 16, including making copies 
available to the public of this Final Judgment, the Competitive Impact 
Statement, and any comments thereon and the United States' response to 
comments. Based upon the record before the Court, which includes the 
Competitive Impact Statement and any comments and response to comments 
filed with the Court, entry of this Final Judgment is in the public 
interest.

 Date:-----------------------------------------------------------------

Court approval subject to procedures of Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16.

-----------------------------------------------------------------------
United States District Judge

                                                   Appendix A
----------------------------------------------------------------------------------------------------------------
               Address                          City                 State         Zip       Metropolitan area
----------------------------------------------------------------------------------------------------------------
City Hall Plz.......................  Boston.................  MA..............    02201  Boston-Worcester.
10 Tara Blvd........................  Nashua.................  NH..............    03062  Boston-Worcester.
100 Nagog Park......................  Acton..................  MA..............    01720  Boston-Worcester.
1000 Technology Park Dr.............  Billerica..............  MA..............    01821  Boston-Worcester.
109 State St........................  Boston.................  MA..............    02109  Boston-Worcester.
Hunting Ave.........................  Boston.................  MA..............    02116  Boston-Worcester.
110 Spit Brook Rd...................  Nashua.................  NH..............    03062  Boston-Worcester.
12 Hartwell Ave.....................  Lexington..............  MA..............    02421  Boston-Worcester.
12 New England Executive Park.......  Burlington.............  MA..............    01803  Boston-Worcester.
125 Cambridgepark Dr................  Cambridge..............  MA..............    02140  Boston-Worcester.
125 Middlesex Tpke..................  Bedford................  MA..............    01730  Boston-Worcester.
1255 Boylston St....................  Boston.................  MA..............    02215  Boston-Worcester.
1295 Boylston St....................  Boston.................  MA..............    02215  Boston-Worcester.
132 Brookline Ave...................  Boston.................  MA..............    02215  Boston-Worcester.
135 Santilli Hwy....................  Everett................  MA..............    02149  Boston-Worcester.
141 Ledge St........................  Nashua.................  NH..............    03060  Boston-Worcester.
1550 Soldiers Field Rd..............  Boston.................  MA..............    02135  Boston-Worcester.
161 Devonshire St...................  Boston.................  MA..............    02110  Boston-Worcester.
165 Dascomb Rd......................  Andover................  MA..............    01810  Boston-Worcester.
175 Great Rd........................  Bedford................  MA..............    01730  Boston-Worcester.
180 Hartwell Rd.....................  Bedford................  MA..............    01730  Boston-Worcester.
2 Charlesgate W.....................  Boston.................  MA..............    02215  Boston-Worcester.
2 Fenway Plz........................  Boston.................  MA..............    02215  Boston-Worcester.
2 Heritage Dr.......................  Quincy.................  MA..............    02171  Boston-Worcester.
211 Congress........................  Boston.................  MA..............    02110  Boston-Worcester.
220 Bear Hill Rd....................  Waltham................  MA..............    02451  Boston-Worcester.
235 Wyman St........................  Waltham................  MA..............    02451  Boston-Worcester.
25 Linnell Cir......................  Billerica..............  MA..............    01821  Boston-Worcester.
25 Mall Rd..........................  Burlington.............  MA..............    01803  Boston-Worcester.
262 Washington St...................  Boston.................  MA..............    02108  Boston-Worcester.
275 Wyman St........................  Waltham................  MA..............    02451  Boston-Worcester.
28 Crosby Dr........................  Bedford................  MA..............    01730  Boston-Worcester.
29 Randolph Rd......................  Bedford................  MA..............    01731  Boston-Worcester.
3 Clock Tower Pl....................  Maynard................  MA..............    01754  Boston-Worcester.
30 Hamilton Rd......................  Lexington..............  MA..............    02420  Boston-Worcester.
300 Longwood Ave....................  Boston.................  MA..............    02115  Boston-Worcester.
31 Nagog Park.......................  Acton..................  MA..............    01720  Boston-Worcester.
33 Arch St..........................  Boston.................  MA..............    02110  Boston-Worcester.
330 Brookline Ave...................  Boston.................  MA..............    02215  Boston-Worcester.
35 Dunham Rd........................  Billerica..............  MA..............    01821  Boston-Worcester.
35 Northeastern Blvd................  Nashua.................  NH..............    03062  Boston-Worcester.
4 Crosby Dr.........................  Bedford................  MA..............    01730  Boston-Worcester.
40 Old Bolton.......................  Stow...................  MA..............    01775  Boston-Worcester.
4040 Mystic Valley Pkwy.............  Medford................  MA..............    02155  Boston-Worcester.
419 Boylston........................  Boston.................  MA..............    02116  Boston-Worcester.
420 Bedford St......................  Lexington..............  MA..............    02420  Boston-Worcester.
426 Washington St...................  Boston.................  MA..............    02108  Boston-Worcester.
44 Binney St........................  Boston.................  MA..............    02115  Boston-Worcester.
465 Hunting Ave.....................  Boston.................  MA..............    02115  Boston-Worcester.
5 Clock Tower Pl....................  Maynard................  MA..............    01754  Boston-Worcester.
55 North Rd.........................  Bedford................  MA..............    01730  Boston-Worcester.
550 King St.........................  Littleton..............  MA..............    01460  Boston-Worcester.

[[Page 74358]]

 
561 Virginia Rd.....................  Concord................  MA..............    01742  Boston-Worcester.
565 Memorial Dr.....................  Cambridge..............  MA..............    02139  Boston-Worcester.
60 1st Ave..........................  Waltham................  MA..............    02451  Boston-Worcester.
600 Technology Park Dr..............  Billerica..............  MA..............    01821  Boston-Worcester.
61 Hancock St.......................  Quincy.................  MA..............    02171  Boston-Worcester.
63 3rd Ave..........................  Burlington.............  MA..............    01803  Boston-Worcester.
65 Boston Post Rd W.................  Marlborough............  MA..............    01752  Boston-Worcester.
650 Elm St..........................  Manchester.............  NH..............    03101  Boston-Worcester.
67 S Bedford St.....................  Burlington.............  MA..............    01803  Boston-Worcester.
7 Shattuck Rd.......................  Andover................  MA..............    01810  Boston-Worcester.
7 Van De Graaff Dr..................  Burlington.............  MA..............    01803  Boston-Worcester.
700 Boylston St.....................  Boston.................  MA..............    02116  Boston-Worcester.
745 Boylston St.....................  Boston.................  MA..............    02116  Boston-Worcester.
77 S Bedford St.....................  Burlington.............  MA..............    01803  Boston-Worcester.
8 Commerce Dr.......................  Bedford................  NH..............    03110  Boston-Worcester.
8 Cotton Rd.........................  Nashua.................  NH..............    03063  Boston-Worcester.
80 Central St.......................  Boxborough.............  MA..............    01719  Boston-Worcester.
81 Grenier St.......................  Bedford................  MA..............    01731  Boston-Worcester.
90 Central..........................  Boxborough.............  MA..............    01719  Boston-Worcester.
900 Technology Park Dr..............  Billerica..............  MA..............    01821  Boston-Worcester.
91 Hartwell Ave.....................  Lexington..............  MA..............    02421  Boston-Worcester.
1 International Blvd................  Mahwah.................  NJ..............    07495  New York.
1 Malcolm Ave.......................  Teterboro..............  NJ..............    07608  New York.
1 Rockwood Rd.......................  Sleepy Hollow..........  NY..............    10591  New York.
1 Sharp Plz.........................  Mahwah.................  NJ..............    07430  New York.
10 Union Sq E.......................  New York...............  NY..............    10003  New York.
100 Route 206 North.................  Peapack................  NJ..............    07977  New York.
100 Wood Ave S......................  Iselin.................  NJ..............    08830  New York.
1000 Harbor Blvd....................  Weehawken..............  NJ..............    07086  New York.
106 Corporate Park Dr...............  White Plains...........  NY..............    10604  New York.
1101 Westchester Ave................  White Plains...........  NY..............    10604  New York.
1111 Westchester Ave................  White Plains...........  NY..............    10604  New York.
112 Mulberry St.....................  Newark.................  NJ..............    07102  New York.
1212 Avenue of the Americas.........  New York...............  NY..............    10036  New York.
125 Kingsland Ave...................  Clifton................  NJ..............    07014  New York.
1441 Chestnut Ave...................  Hillside...............  NJ..............    07205  New York.
15 Columbus Cir.....................  New York...............  NY..............    10019  New York.
1639 State Rt 10....................  Parsippany.............  NJ..............    07054  New York.
173 Belmont Dr......................  Somerset...............  NJ..............    08873  New York.
180 Water St........................  New York...............  NY..............    10038  New York.
1865 Broadway.......................  New York...............  NY..............    10023  New York.
199 Chambers St.....................  New York...............  NY..............    10007  New York.
2 Campus Dr.........................  Parsippany.............  NJ..............    07054  New York.
200 Metroplex Dr....................  Edison.................  NJ..............    08817  New York.
221 W 26th St.......................  New York...............  NY..............    10001  New York.
226 E 54th St.......................  New York...............  NY..............    10022  New York.
226 Westchester Ave.................  White Plains...........  NY..............    10604  New York.
230 US Highway 206..................  Flanders...............  NJ..............    07836  New York.
242 W 36th St.......................  New York...............  NY..............    10018  New York.
25 W 39th St........................  New York...............  NY..............    10018  New York.
253 Broadway........................  New York...............  NY..............    10007  New York.
27 Randolph St......................  Carteret...............  NJ..............    07008  New York.
27 W 23rd St........................  New York...............  NY..............    10010  New York.
286 Eldridge Rd.....................  Fairfield..............  NJ..............    07004  New York.
2975 Westchester Ave................  Purchase...............  NY..............    10577  New York.
30 Dunnigan Dr......................  Suffern................  NY..............    10901  New York.
30 Freneau Ave......................  Matawan................  NJ..............    07747  New York.
346 Broadway........................  New York...............  NY..............    10013  New York.
346 Madison Ave.....................  New York...............  NY..............    10017  New York.
360 Park Ave S......................  New York...............  NY..............    10010  New York.
380 Route 59........................  Airmont................  NY..............    10901  New York.
4 Manhattanville Rd.................  Purchase...............  NY..............    10577  New York.
460 W 54th St.......................  New York...............  NY..............    10019  New York.
465 Endo Blvd.......................  Garden City............  NY..............    11530  New York.
485 US Highway 1....................  Edison.................  NJ..............    08817  New York.
501 Franklin Ave....................  Garden City............  NY..............    11530  New York.
511 Benedict Ave....................  Tarrytown..............  NY..............    10591  New York.
55 Carter Dr........................  Edison.................  NJ..............    08817  New York.
580 White Plains Rd.................  Tarrytown..............  NY..............    10591  New York.
63 Madison Ave......................  New York...............  NY..............    10016  New York.
7 Amherst Pl........................  White Plains...........  NY..............    10601  New York.
7 Campus Dr.........................  Parsippany.............  NJ..............    07054  New York.

[[Page 74359]]

 
70 W Red Oak Ln.....................  West Harrison..........  NY..............    10604  New York.
707 Broad St........................  Newark.................  NJ..............    07102  New York.
75 Virginia Rd......................  White Plains...........  NY..............    10603  New York.
80 Grasslands Rd....................  Elmsford...............  NY..............    10523  New York.
800 Westchester Ave.................  Rye Brook..............  NY..............    10573  New York.
845 N Broadway......................  White Plains...........  NY..............    10603  New York.
875 Merrick Ave.....................  Westbury...............  NY..............    11590  New York.
Davis Ave...........................  White Plains...........  NY..............    10601  New York.
100 S Broad St......................  Philadelphia...........  PA..............    19110  Philadelphia.
1100 N Market St....................  Wilmington.............  DE..............    19801  Philadelphia.
1400 Liberty Ridge Dr...............  Chesterbrook...........  PA..............    19087  Philadelphia.
2 Walnut Grove Dr...................  Horsham................  PA..............    19044  Philadelphia.
301 W 11th St.......................  Wilmington.............  DE..............    19801  Philadelphia.
400 Chesterfield Pkwy...............  Malvern................  PA..............    19355  Philadelphia.
400 Market St.......................  Philadelphia...........  PA..............    19106  Philadelphia.
460 E Swedesford Rd.................  Wayne..................  PA..............    19087  Philadelphia.
620 Lee Rd..........................  Chesterbrook...........  PA..............    19087  Philadelphia.
735 Chesterbrook Blvd...............  Chesterbrook...........  PA..............    19087  Philadelphia.
750 East Swedesford Road............  Valley Forge...........  PA..............    19482  Philadelphia.
900 W Valley Rd.....................  Wayne..................  PA..............    19087  Philadelphia.
1 Mcalister Farm Rd.................  Portland...............  ME..............    04103  Portland.
10 Free St..........................  Portland...............  ME..............    04101  Portland.
111 Wescott Rd......................  South Portland.........  ME..............    04106  Portland.
121 Free St.........................  Portland...............  ME..............    04101  Portland.
137 Kennebec St.....................  Portland...............  ME..............    04101  Portland.
144 State St........................  Portland...............  ME..............    04101  Portland.
145 Newbury St......................  Portland...............  ME..............    04101  Portland.
148 Middle St.......................  Portland...............  ME..............    04101  Portland.
162 Canco Rd........................  Portland...............  ME..............    04103  Portland.
164 Middle St.......................  Portland...............  ME..............    04101  Portland.
2 Ledgeview Dr......................  Westbrook..............  ME..............    04092  Portland.
20 Milk St..........................  Portland...............  ME..............    04101  Portland.
25 Bradley Dr.......................  Westbrook..............  ME..............    04092  Portland.
25 Preble St........................  Portland...............  ME..............    04101  Portland.
261 Commercial St...................  Portland...............  ME..............    04101  Portland.
3 Canal Plz.........................  Portland...............  ME..............    04101  Portland.
33 Sewall St........................  Portland...............  ME..............    04102  Portland.
4 Westbrook Cmn.....................  Westbrook..............  ME..............    04092  Portland.
400 Congress St.....................  Portland...............  ME..............    04101  Portland.
400 Southborough Dr.................  South Portland.........  ME..............    04106  Portland.
45 Bradley Dr.......................  Westbrook..............  ME..............    04092  Portland.
500 Southborough Dr.................  South Portland.........  ME..............    04106  Portland.
51 Nonesuch Cove Rd.................  Scarborough............  ME..............    04074  Portland.
510 Congress St.....................  Portland...............  ME..............    04101  Portland.
565 Congress St.....................  Portland...............  ME..............    04101  Portland.
636 Riverside St....................  Portland...............  ME..............    04103  Portland.
65 Bradley St.......................  Portland...............  ME..............    04102  Portland.
696 Congress St.....................  Portland...............  ME..............    04102  Portland.
1 R I H T Way.......................  Riverside..............  RI..............    02915  Providence.
10 Admiral St.......................  Providence.............  RI..............    02908  Providence.
10 Dorrance St......................  Providence.............  RI..............    02903  Providence.
111 Brewster St.....................  Pawtucket..............  RI..............    02860  Providence.
111 Dorrance St.....................  Providence.............  RI..............    02903  Providence.
120 Corliss St......................  Providence.............  RI..............    02904  Providence.
125 Dupont Dr.......................  Providence.............  RI..............    02907  Providence.
127 Dorrance St.....................  Providence.............  RI..............    02903  Providence.
146 Westminster St..................  Providence.............  RI..............    02903  Providence.
155 S Main St.......................  Providence.............  RI..............    02903  Providence.
196 Richmond St.....................  Providence.............  RI..............    02903  Providence.
2 Richmond Sq.......................  Providence.............  RI..............    02906  Providence.
20 Washington Pl....................  Providence.............  RI..............    02903  Providence.
21 Peace St.........................  Providence.............  RI..............    02907  Providence.
259 Pine St.........................  Providence.............  RI..............    02903  Providence.
291 Westminster St..................  Providence.............  RI..............    02903  Providence.
30 Chestnut St......................  Providence.............  RI..............    02903  Providence.
4 Richmond Sq.......................  Providence.............  RI..............    02906  Providence.
40 Catamore Blvd....................  East Providence........  RI..............    02914  Providence.
400 Westminster St..................  Providence.............  RI..............    02903  Providence.
444 Westminster St..................  Providence.............  RI..............    02903  Providence.
50 Kennedy Plz......................  Providence.............  RI..............    02903  Providence.
56 Pine St..........................  Providence.............  RI..............    02903  Providence.
75 Fountain St......................  Providence.............  RI..............    02902  Providence.

[[Page 74360]]

 
76 Dorrance St......................  Providence.............  RI..............    02903  Providence.
86 Weybosset St.....................  Providence.............  RI..............    02903  Providence.
89 Ship St..........................  Providence.............  RI..............    02903  Providence.
1000 Semmes Ave.....................  Richmond...............  VA..............    23224  Richmond.
11100 W Broad St....................  Glen Allen.............  VA..............    23060  Richmond.
1200 E Main St......................  Richmond...............  VA..............    23219  Richmond.
1313 E Main St......................  Richmond...............  VA..............    23219  Richmond.
1450 E Parham Rd....................  Richmond...............  VA..............    23280  Richmond.
2040 Thalbro St.....................  Richmond...............  VA..............    23230  Richmond.
22150 Tomlyn St.....................  Richmond...............  VA..............    23230  Richmond.
2235 Staples Mill Rd................  Richmond...............  VA..............    23230  Richmond.
4120 Cox Rd.........................  Glen Allen.............  VA..............    23060  Richmond.
4461 Cox Rd.........................  Glen Allen.............  VA..............    23060  Richmond.
4600 Cox Rd.........................  Glen Allen.............  VA..............    23060  Richmond.
4851 Lake Brook Dr..................  Glen Allen.............  VA..............    23060  Richmond.
7814 Carousel Ln....................  Richmond...............  VA..............    23294  Richmond.
9950 Mayland Dr.....................  Richmond...............  VA..............    23233  Richmond.
9960 Mayland Dr.....................  Richmond...............  VA..............    23233  Richmond.
100 S Ashley Dr.....................  Tampa..................  FL..............    33602  Tampa.
10410 Highland Manor Dr.............  Tampa..................  FL..............    33610  Tampa.
10420 Highland Manor Dr.............  Tampa..................  FL..............    33610  Tampa.
10430 Highland Manor Dr.............  Tampa..................  FL..............    33610  Tampa.
10500 University Center Dr..........  Tampa..................  FL..............    33612  Tampa.
110 Douglas Rd E....................  Oldsmar................  FL..............    34677  Tampa.
1410 N Westshore Blvd...............  Tampa..................  FL..............    33607  Tampa.
1511 N Westshore Blvd...............  Tampa..................  FL..............    33607  Tampa.
18301 Crane Nest Drive..............  Tampa..................  FL..............    33647  Tampa.
18335 Digital Dr....................  Tampa..................  FL..............    33647  Tampa.
1915 N Dale Mabry Hwy...............  Tampa..................  FL..............    33607  Tampa.
2002 N Lois Ave.....................  Tampa..................  FL..............    33607  Tampa.
2502 N Rocky Point Dr...............  Tampa..................  FL..............    33607  Tampa.
2701 N Rocky Point Dr...............  Tampa..................  FL..............    33607  Tampa.
3505 E Frontage Rd..................  Tampa..................  FL..............    33607  Tampa.
3608 Queen Plam Dr..................  Tampa..................  FL..............    33619  Tampa.
3800 Citibank Center Tampa..........  Tampa..................  FL..............    33610  Tampa.
3802 Coconut Palm Dr................  Tampa..................  FL..............    33619  Tampa.
4343 Anchor Plaza Pkwy..............  Tampa..................  FL..............    33634  Tampa.
501 Brooker Creek Blvd..............  Oldsmar................  FL..............    34677  Tampa.
5050 W Lemon St.....................  Tampa..................  FL..............    33609  Tampa.
5120 W Clifton St...................  Tampa..................  FL..............    33634  Tampa.
5201 W Kennedy Blvd.................  Tampa..................  FL..............    33609  Tampa.
5300 W Knox St......................  Tampa..................  FL..............    33634  Tampa.
5401 Hangar Ct......................  Tampa..................  FL..............    33634  Tampa.
550 N Reo St........................  Tampa..................  FL..............    33609  Tampa.
5755 Hoover Blvd....................  Tampa..................  FL..............    33634  Tampa.
8800 Grand Oak Cir..................  Tampa..................  FL..............    33637  Tampa.
8875 Hidden River Pkwy..............  Tampa..................  FL..............    33637  Tampa.
1 Curie Ct..........................  Rockville..............  MD..............    20850  Washington-Baltimore.
1000 Wilson Blvd....................  Arlington..............  VA..............    22209  Washington-Baltimore.
10000 Derekwood Ln..................  Lanham.................  MD..............    20706  Washington-Baltimore.
1001 G St NW........................  Washington.............  DC..............    20001  Washington-Baltimore.
107 Carpenter Dr....................  Sterling...............  VA..............    20164  Washington-Baltimore.
10802 Parkridge Blvd................  Reston.................  VA..............    20191  Washington-Baltimore.
10942 Beaver Dam Rd.................  Cockeysville...........  MD..............    21030  Washington-Baltimore.
10955 Golden West Dr................  Hunt Valley............  MD..............    21031  Washington-Baltimore.
111 S Calvert St....................  Baltimore..............  MD..............    21202  Washington-Baltimore.
1111 Constitution Ave NW............  Washington.............  DC..............    20002  Washington-Baltimore.
11200 Pepper Rd.....................  Hunt Valley............  MD..............    21031  Washington-Baltimore.
120 E Baltimore St..................  Baltimore..............  MD..............    21202  Washington-Baltimore.
1200 1st St SE......................  Washington.............  DC..............    20303  Washington-Baltimore.
12001 Indian Creek Ct...............  Beltsville.............  MD..............    20705  Washington-Baltimore.
12007 Sunrise Valley Dr.............  Reston.................  VA..............    20191  Washington-Baltimore.
1201 Seven Locks Rd.................  Rockville..............  MD..............    20854  Washington-Baltimore.
12012 Sunset Hills Rd...............  Reston.................  VA..............    20190  Washington-Baltimore.
12355 Sunrise Valley Dr.............  Reston.................  VA..............    20191  Washington-Baltimore.
12600 Fair Lakes Cir................  Fairfax................  VA..............    22033  Washington-Baltimore.
12701 Fair Lakes Cir................  Fairfax................  VA..............    22033  Washington-Baltimore.
1301 Pennsylvania Ave NW............  Washington.............  DC..............    20004  Washington-Baltimore.
13461 Sunrise Valley Dr.............  Herndon................  VA..............    20171  Washington-Baltimore.
1350 I St NW........................  Washington.............  DC..............    20005  Washington-Baltimore.
1375 Piccard Dr.....................  Rockville..............  MD..............    20850  Washington-Baltimore.
1390 Piccard Dr.....................  Rockville..............  MD..............    20850  Washington-Baltimore.

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1401 H St NW........................  Washington.............  DC..............    20005  Washington-Baltimore.
16050 Industrial Dr.................  Gaithersburg...........  MD..............    20877  Washington-Baltimore
16060 Industrial Dr.................  Gaithersburg...........  MD..............    20877  Washington-Baltimore.
1709 New York of Ave NW.............  Washington.............  DC..............    20006  Washington-Baltimore.
1722 I St NW........................  Washington.............  DC..............    20006  Washington-Baltimore.
1759 Business Center Dr.............  Reston.................  VA..............    20190  Washington-Baltimore.
1760 Business Center Dr.............  Reston.................  VA..............    20190  Washington-Baltimore.
1800 G St NW........................  Washington.............  DC..............    20006  Washington-Baltimore.
1800 Robert Fulton Dr...............  Reston.................  VA..............    20191  Washington-Baltimore.
1820 Fort Myer Dr...................  Arlington..............  VA..............    22209  Washington-Baltimore.
1861 International Dr...............  McLean.................  VA..............    22102  Washington-Baltimore.
1900 Campus Commons Dr..............  Reston.................  VA..............    20191  Washington-Baltimore.
1916 Isaac Newton SQ W..............  Reston.................  VA..............    20190  Washington-Baltimore.
2 E Chase St........................  Baltimore..............  MD..............    21202  Washington-Baltimore.
200 Fairbrook Dr....................  Herndon................  VA..............    20170  Washington-Baltimore.
200 International Cir...............  Cockeysville...........  MD..............    21030  Washington-Baltimore.
2010 Corporate RDG..................  McLean.................  VA..............    22102  Washington-Baltimore.
2021 L St NW........................  Washington.............  DC..............    20036  Washington-Baltimore.
20300 Century Blvd..................  Germantown.............  MD..............    20874  Washington-Baltimore.
20400 Century Blvd..................  Germantown.............  MD..............    20874  Washington-Baltimore.
210 N Charles St....................  Baltimore..............  MD..............    21201  Washington-Baltimore.
21355 Ridgetop Cir..................  Dulles.................  VA..............    20166  Washington-Baltimore.
21545 Ridgetop Cir..................  Sterling...............  VA..............    20166  Washington-Baltimore.
2216 Gallows Rd.....................  Dunn Loring............  VA..............    22027  Washington-Baltimore.
2240 Broadbirch Dr..................  Silver Spring..........  MD..............    20904  Washington-Baltimore.
22461 Shaw Rd.......................  Sterling...............  VA..............    20166  Washington-Baltimore.
22800 Davis Dr......................  Sterling...............  VA..............    20164  Washington-Baltimore.
2401 E St NW........................  Washington.............  DC..............    20241  Washington-Baltimore.
250 E St SW.........................  Washington.............  DC..............    20024  Washington-Baltimore.
2650 Park Tower Dr..................  Vienna.................  VA..............    22180  Washington-Baltimore.
2707 Wilson Blvd....................  Arlington..............  VA..............    22201  Washington-Baltimore.
2811 Lord Baltimore Dr..............  Baltimore..............  MD..............    21244  Washington-Baltimore.
300 14th St SW......................  Washington.............  DC..............    20228  Washington-Baltimore.
301 W Preston St....................  Baltimore..............  MD..............    21201  Washington-Baltimore.
307 International Cir...............  Cockeysville...........  MD..............    21030  Washington-Baltimore.
35 Market Pl........................  Baltimore..............  MD..............    21202  Washington-Baltimore.
3910 Keswick Rd.....................  Baltimore..............  MD..............    21211  Washington-Baltimore.
4 Choke Cherry Rd...................  Rockville..............  MD..............    20850  Washington-Baltimore.
401 14th St SW......................  Washington.............  DC..............    20024  Washington-Baltimore.
401 M St SW.........................  Washington.............  DC..............    20024  Washington-Baltimore.
403 Glenn Dr........................  Sterling...............  VA..............    20164  Washington-Baltimore.
4201 Wilson Blvd....................  Arlington..............  VA..............    22203  Washington-Baltimore.
4330 E West Hwy.....................  Bethesda...............  MD..............    20814  Washington-Baltimore.
4350 Fairfax Dr.....................  Arlington..............  VA..............    22203  Washington-Baltimore.
450 Springpark Pl...................  Herndon................  VA..............    20170  Washington-Baltimore.
5 Choke Cherry Rd...................  Rockville..............  MD..............    20850  Washington-Baltimore.
500 N Capitol St NW.................  Washington.............  DC..............    20001  Washington-Baltimore.
5161 River Rd.......................  Bethesda...............  MD..............    20816  Washington-Baltimore.
523 E Monument St...................  Baltimore..............  MD..............    21202  Washington-Baltimore.
5260 Western Ave....................  Chevy Chase............  MD..............    20815  Washington-Baltimore.
540 Huntmar Park Dr.................  Herndon................  VA..............    20170  Washington-Baltimore.
5515 Security Ln....................  Rockville..............  MD..............    20852  Washington-Baltimore.
5600 Fishers Ln.....................  Rockville..............  MD..............    20852  Washington-Baltimore.
575 Herndon Pkwy....................  Herndon................  VA..............    20170  Washington-Baltimore.
6000 McDill Blvd....................  Washington.............  DC..............    20340  Washington-Baltimore.
6009 Oxon Hill Rd...................  Oxon Hill..............  MD..............    20745  Washington-Baltimore.
601 12th St S.......................  Arlington..............  VA..............    22202  Washington-Baltimore.
601 D St NW.........................  Washington.............  DC..............    20004  Washington-Baltimore.
601 F St NW.........................  Washington.............  DC..............    20004  Washington-Baltimore.
6495 New Hampshire Ave..............  Hyattsville............  MD..............    20783  Washington-Baltimore.
656 Quince Orchard Rd...............  Gaithersburg...........  MD..............    20878  Washington-Baltimore.
6610 Rockledge Dr...................  Bethesda...............  MD..............    20817  Washington-Baltimore.
666 11th St NW......................  Washington.............  DC..............    20001  Washington-Baltimore.
6710 Oxon Hill Rd...................  Oxon Hill..............  MD..............    20745  Washington-Baltimore.
6801 Rockledge Dr...................  Bethesda...............  MD..............    20817  Washington-Baltimore.
6903 Rockledge Dr...................  Bethesda...............  MD..............    20817  Washington-Baltimore.
7020 Virginia Manor Rd..............  Beltsville.............  MD..............    20705  Washington-Baltimore.
7067 Columbia Gateway Dr............  Columbia...............  MD..............    21046  Washington-Baltimore.
7129 Ambassador Rd..................  Baltimore..............  MD..............    21244  Washington-Baltimore.
7500 Boston Blvd....................  Springfield............  VA..............    22153  Washington-Baltimore.
7811 Montrose Rd....................  Rockville..............  MD..............    20854  Washington-Baltimore.
7925 Westpark Dr....................  McLean.................  VA..............    22102  Washington-Baltimore.

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8230 Leesburg Pike..................  Vienna.................  VA..............    22182  Washington-Baltimore.
8230 Old Courthouse Rd..............  Vienna.................  VA..............    22182  Washington-Baltimore.
8400 Baltimore Ave..................  College Park...........  MD..............    20740  Washington-Baltimore.
8521 Leesburg Pike..................  Vienna.................  VA..............    22182  Washington-Baltimore.
8620 Westwood Center Dr.............  Vienna.................  VA..............    22182  Washington-Baltimore.
8930 Stanford Blvd..................  Columbia...............  MD..............    21045  Washington-Baltimore.
9201 Corporate Blvd.................  Rockville..............  MD..............    20850  Washington-Baltimore.
9210 Corporate Blvd.................  Rockville..............  MD..............    20850  Washington-Baltimore.
9211 Corporate Blvd.................  Rockville..............  MD..............    20850  Washington-Baltimore.
9270 Gaither Rd.....................  Gaithersburg...........  MD..............    20877  Washington-Baltimore.
9307 Gerwig Ln......................  Columbia...............  MD..............    21046  Washington-Baltimore.
9704 Medical Center Dr..............  Rockville..............  MD..............    20850  Washington-Baltimore.
9840 O'Brian Road...................  Fort Meade.............  MD..............    20755  Washington-Baltimore.
Langley Hqtrs.......................  Langley................  VA..............    22101  Washington-Baltimore.
NASA Goddard SFC Bldg 1.............  Greenbelt..............  MD..............    20771  Washington-Baltimore.
Rte 198 Racetrack Road..............  Laurel.................  MD..............    20725  Washington-Baltimore.
----------------------------------------------------------------------------------------------------------------

In the United States District Court for the District of Columbia

United States of America, Plaintiff, v. Verizon Communications, Inc. 
and MCI, Inc., Defendants

    Civil Action No.: 1:05CV02103 (HHK)
    Filed: November 16, 2005

Competitive Impact Statement

    Plaintiff United States of America (``United States''), pursuant to 
Section 2(b) of the Antitrust Procedures and Penalties Act (``APPA'' or 
``Tunney Act''), 15 U.S.C. 16(b)-(h), files this Competitive Impact 
Statement relating to the proposed Final Judgment submitted for entry 
in this civil antitrust proceeding.

I. Nature and Purpose of the Proceeding

    Defendants entered into an Agreement and Plan of Merger dated 
February 14, 2005--subsequently amended on March 4, March 29, and May 
2--pursuant to which Verizon Communications, Inc. (``Verizon'') will 
acquire MCI, Inc. (``MCI''). The United States filed a civil antitrust 
Complaint on October 27, 2005 seeking to enjoin the proposed 
acquisition. The Complaint alleges that the likely effect of this 
acquisition would be to lessen competition substantially for Local 
Private Lines and other telecommunications services that rely on Local 
Private Lines in eight metropolitan areas in violation of Section 7 of 
the Clayton Act, 15 U.S.C. 18. This loss of competition would result in 
customers facing higher prices for Local Private Lines and other 
telecommunications services that rely on Local Private Lines than they 
would absent the merger.
    At the same time the Complaint was filed, the United States also 
filed a Stipulation and proposed Final Judgment that are designed to 
eliminate the anticompetitive effects of the acquisition. Under the 
proposed Final Judgment, which is explained more fully below, 
Defendants are required to divest indefeasible rights of use (``IRUs'') 
for lateral connections to certain buildings located in a number of 
metropolitan areas as listed in Appendix A of the proposed Final 
Judgment (collectively the ``Divestiture Assets''). Under the terms of 
the Stipulation, Defendants will take certain steps to ensure that 
these assets are preserved and maintained.
    The United States and Defendants have stipulated that the proposed 
Final Judgment may be entered after compliance with the APPA. Entry of 
the proposed Final Judgment would terminate this action, except that 
the Court would retain jurisdiction to construe, modify, or enforce the 
provisions of the proposed Final Judgment and to punish violations 
thereof. Defendants have also stipulated that they will comply with the 
terms of the Stipulation and the proposed Final Judgment from the date 
of signing of the Stipulation, pending entry of the proposed Final 
Judgment by the Court and the required divestitures. Should the Court 
decline to enter the proposed Final Judgment, Defendants have also 
committed to continue to abide by its requirements and those of the 
Stipulation until the expiration of time for appeal.

II. Description of the Events Giving Rise to the Alleged Violation

A. The Defendants and the Proposed Transaction
    Verizon is a corporation organized and existing under the laws of 
the State of Delaware, with its headquarters in New York, New York. 
Verizon, formerly Bell Atlantic Corporation (``Bell Atlantic''), is the 
nation's largest regional Bell operating company (``RBOC''). Bell 
Atlantic was one of the seven regional holding companies created as a 
result of the breakup of AT&T's telephone business into local and long 
distance components initially in 1984. Since then, Bell Atlantic formed 
Verizon, including its acquisitions of another RBOC, NYNEX Corporation, 
and GET Corporation, an incumbent local exchange carrier (``ILEC'') 
that provided local exchange and other services in 28 states. Verizon 
owns and operates local telecommunications networks throughout its 
territory and provides local and long distance voice and data services 
to, inter alia, business customers and other telecommunications 
carriers. Today, Verizon's wireline telecommunications operations serve 
about 51 million total switched access lines, including 32.4 million 
residential and 17.8 million business lines, in 29 states plus the 
District of Columbia. In 2004, Verizon earned approximately $38.6 
billion in revenues from its domestic wireline services, including at 
least $8.8 billion in revenue from business customers. Verizon has 
fiber-optic or copper connections to virtually all of the commercial 
buildings in its franchised territory.
    MCI is a corporation organized and existing under the laws of the 
State of Delaware, with its headquarters in Ashburn, Virginia. MCI is 
one of the nation's largest interexchange carriers (``IXC''), offering 
traditional long distance telephone service, as well as one of the 
largest competitive local exchange carriers (``CLEC''), offering local 
network access for voice and data services. MCI serves consumers and 
businesses across the United States and around the globe, and owns 
significant

[[Page 74363]]

local network assets within Verizon's 29-state operating territory 
including direct fiber-optic connections to numerous commercial 
buildings. In 2004, MCI earned approximately $20.7 billion in revenues, 
including almost $4 billion from domestic business customers.
    Pursuant to an Agreement and Plan of Merger dated February 14, 
2005, as amended on March 4, March 29, and May 2, 2005, Verizon agreed 
to acquire MCI for approximately $8.54 billion. The proposed 
transaction, as agreed to by Defendants, would lessen competition 
substantially for Local Private Lines and other telecommunication 
services that rely on Local Private Lines in eight metropolitan areas. 
This acquisition is the subject of the Complaint and proposed Final 
Judgment filed by the United States.
B. Local Private Lines
    A Local Private Line is a dedicated, point-to-point circuit offered 
over copper and/or fiber-optic transmission facilities that originates 
and terminates within a single metropolitan area and typically includes 
at least one local loop. A local loop, sometimes referred to as a 
``last-mile'' connection, is typically either a copper or fiber-optic 
transmission facility that connects commercial buildings to a carriers' 
network, making the local loop a critically important asset for 
providing telecommunications services to business customers.
    Local Private Lines are a recognized service category among 
telecommunications carriers and end-user business customers and are 
sold at both retail (to business customers) and wholesale (to other 
carriers). Depending on how they are configured, Local Private Lines 
can be used to carry voice traffic, data, or a combination of the two. 
Local Private Lines may be purchased as stand-alone products but are 
also an important input to value-added voice and data 
telecommunications services for business customers and represent a 
significant portion of the costs incurred in providing those services. 
Customers typically purchase Local Private Lines in standard bandwidth 
increments such as DS1 (``T1,'' 1.54 megabits per second), DS3 (44.74 
megabits per second), OC3 (155.52 megabits per second), and higher. 
Local Private Lines can interconnect with industry-standard data 
networking and telephone equipment, and can be ``channelized'' to carry 
various amounts of voice and/or data traffic. Local Private Lines are 
distinct from switched local exchange telephone services, which route 
calls through a voice switch in the local carrier's central office and 
do not necessarily use a dedicated circuit. Customers do not consider 
switched local exchange services to be a substitute because they do not 
offer the guaranteed bandwidth, high service levels, and security that 
Local Private Lines provide.
    Competing carriers often rely on Local Private Line circuits to 
connect an end-user customer's location to their networks, enabling the 
competitor to supply value-added data networking, Internet access, 
local voice and long distance services to the customer. Although 
carriers can provide some types of voice and data services over 
switched local exchange lines (e.g., when an access line is pre-
subscribed to a long distance carrier), most large business customers 
do not find those services to be a viable or cost-effective substitute 
for voice and data telecommunications services provided via Local 
Private Lines. In the event of a small, but significant, nontransitory 
increase in price for either Local Private Lines or voice and data 
telecommunications services provided via Local Private Lines, 
insufficient customers would switch to switched circuits to render the 
increase unprofitable.
    For the vast majority of commercial buildings in its territory, 
Verizon is the only carrier that owns a last-mile connection to the 
building. Thus, in order to provide Local Private Line circuits or 
voice or data telecommunications services to customers in those 
Verizon-only buildings, competing carriers typically must lease the 
connection from Verizon as Local Private Line service, which Verizon 
refers to as ``special access'' and MCI refers to as ``metro private 
line.'' For a small percentage of commercial buildings (though these 
buildings account for a significant amount of customer demand and 
revenue), Verizon's CLEC competitors have built or acquired their own 
last-mile fiber-optic connections, separate from Verizon's, to connect 
their networks to the buildings. The CLECs typically refer to buildings 
with these connections as their ``lit buildings'' or ``on-net 
buildings.'' Once a CLEC has incurred the high fixed cost to construct 
a last-mile connection to a building, the CLEC can usually provide 
service to business customers in the building at a lower marginal cost 
than it would otherwise be able to do if it had to lease the connection 
from the RBOC. It can also provide alternative access to other CLECs 
seeking to serve business customers in the building.
    The relevant geographic market for both Local Private Lines, as 
well as voice and data telecommunications services that rely on Local 
Private Lines, is no broader than each metropolitan area and no more 
narrow than each individual building.
C. The Competitive Effects of the Transaction on Local Private Lines
    Verizon's acquisition of MCI will substantially lessen competition 
in the markets for (a) Local Private Lines and (b) voice and data 
telecommunications services that rely on Local Private Lines. Verizon 
is the dominant provider of Local Private Lines in its franchised 
territory, and MCI is one of its largest competitors. MCI is among the 
leading CLECs in Verizon's territory in the number of buildings it has 
connected with its own last-mile fiber facilities. For hundreds of 
commercial buildings located in the metropolitan areas of Baltimore-
Washington, DC; Boston, Massachusetts; New York, New York; Richmond, 
Virginia; Providence, Rhode Island; Tampa, Florida; Philadelphia, 
Pennsylvania; and Portland, Maine, Verizon and MCI are the only two 
firms that own or control a direct wireline connection to the building. 
In these buildings, the merger of Verizon and MCI would reduce the 
number of carriers with an owned or controlled last-mile connection 
from two to one.
    The merger would, therefore, effectively eliminate competition for 
facilities-based Local Private Line service to those buildings, and 
many retail and wholesale customers would no longer have MCI as a 
competitive alternative to Verizon. Although other competitors might 
resell Local Private Lines from Verizon, those competitors would not be 
as effective a competitive constraint because Verizon would control the 
price of the resold circuits. The merged firm would, therefore, have 
the ability to raise price to retail and wholesale customers of Local 
Private Lines. In addition, because the cost of dedicated local access 
via Local Private Line represents an important cost component of many 
value-added voice and data telecommunications services provided over 
such access, the merger would tend to lessen competition for retail 
voice and data telecommunications services provided over dedicated 
access by (a) eliminating MCI as the only competitive alternative to 
Verizon for such services with its own Local Private Line connection to 
hundreds of buildings and (b) depriving other carriers seeking to 
provide such value-added network services of the

[[Page 74364]]

only fully-facilities based wholesale competitive alternative to 
Verizon in those buildings.
    Although other CLECs can, theoretically, build their own fiber 
connection to each building in response to a price increase by the 
merged firm, such entry is a difficult, time-consuming, and expensive 
process. Whether a CLEC builds a last-mile connection to a given 
building depends upon many factors, as noted in the Complaint, and the 
costs of building a last-mile fiber-optic connection vary substantially 
for each location. Because a single such connection may cost hundreds 
of thousands of dollars to build and light, CLECs will typically only 
build in to a particular building after they have secured a customer 
contract of sufficient size and length to justify the anticipated 
construction costs for that building. While entry may occur in some 
buildings where MCI is the only CLEC present in response to a post-
merger price increase, the conditions for entry are unlikely to be met 
in the hundreds of buildings that are the subject of the Complaint. For 
these buildings, the expected customer demand and proximity of other 
CLEC fiber to the building (two important factors in the decision to 
build in) indicate that such entry, even in the face of a price 
increase, is unlikely to be profitable for any CLEC. Thus, entry would 
not be timely, likely, or sufficient to eliminate the competitive harm 
that would likely result from Verizon's proposed acquisition of MCI.
    For these reasons, the United States concluded that Verizon's 
proposed acquisition of MCI will likely substantially lessen 
competition, in violation of Section 7 of the Clayton Act, in the 
provision of Local Private Lines an other telecommunication services 
that rely on Local Private Lines in the eight metropolitan areas listed 
above.

III. Explanation of the Proposed Final Judgment

    The divestiture requirements of the proposed final Judgment will 
eliminate the anticompetitive effects of the acquisition in Local 
Private Lines and other telecommunications services that rely on Local 
Private Lines in the relevant areas. The proposed Final Judgment 
requires Defendants, within 120 days after the closing of Verizon's 
acquisition of MCI, or five (5) days after notice of the entry of the 
Final Judgment by the Court, whichever is later, to divest the 
Divestiture Assets. The Divestiture Assets consist of IRUs for lateral 
connections (or last-mile connection) to hundreds of buildings in the 
identified metropolitan areas along with transport facilities 
sufficient to enable the IRUs to be used by the purchaser to provide 
telecommunications services. Defendants must take all reasonable steps 
necessary to accomplish the divestitures quickly and shall cooperate 
with prospective purchasers.
    These assets must be divested in such a way as to satisfy the 
United States in its sole discretion that they will be used by the 
purchaser to compete effectively and remedy the harm alleged in the 
Complaint in the markets for Local Private Lines and other 
telecommunications services that rely on Local Private Lines. In 
reviewing the purchaser or purchasers of the Divestiture Assets, the 
United States will be particularly focused on the purchaser's ability 
to be a viable competitor in offering Local Private Lines on both a 
retail and/or wholesale basis. Purchasers that are already offering 
similar services in or near the metropolitan area are more likely to be 
viable competitors than other potential purchasers.
    Divesting the last-mile connections to the hundreds of buildings in 
Verizon's territory will remedy the harm alleged in the Complaint. 
Although other CLECs have local fiber networks in each of the 
metropolitan areas at issue, they cover only a small percentage of 
buildings, and the buildings covered vary from CLEC to CLEC. As a 
result, there are numerous buildings where MCI is the only CLEC with a 
last-mile connection. It is the decreased competition in the provision 
of these last-mile connections to buildings where MCI is the only CLEC 
that creates the harm alleged in the Complaint. Whether the geographic 
market for the sale of Local Private Line or other telecommunications 
services that rely on Local Private Lines is as broad as the 
metropolitan area or as narrow as individual locations or buildings, 
divesting these last-mile connections will restore the lost facilities-
based competition. The proposed Final Judgment also strengthens 
metropolitan area competition by divesting to a single purchaser in 
each area all of the buildings that were unique to MCI.
    To ensure that the purchaser has adequate capacity to serve 
customers in a given location, the lateral or last-mile connection to 
be divested will consist of an IRU for the greater of (1) eight (8) 
fiber strands or (2) one-half of the currently unused fiber strands in 
MCI's facilities serving the building measured at the time of the 
filing of the Complaint, from the point of entry of the building to the 
splice point with fiber used to serve different buildings. This should 
be sufficient capacity for the purchaser to serve current demand and 
allow for future growth and changes in the local service area while 
allowing Verizon to retain the MCI circuits being used to serve current 
customers without disruption to their service. In addition, to 
accommodate network engineering and design requirements, the 
divestiture IRUs can be granted for fiber strands owned or controlled 
by either Verizon or MCI, as mutually agreed by Defendants and the 
purchaser.
    Last-mile connections, however, are of little use if they are not 
connected to a network. Therefore, the proposed Final Judgment also 
requires the divestiture of IRUs for transport facilities sufficient to 
connect the divested last-mile connections to locations mutually agreed 
upon by Defendants and the purchaser. This will ensure that the 
purchaser can connect the last-mile connections to its network 
facilities and provide both Local Private Lines and any other 
telecommunications services that rely on Local Private Lines that a 
customer in the building may require.
    An IRU (or indefeasible right of use) is a long-term leasehold 
interest commonly used in the telecommunications industry that gives 
the holder the right to use specified strands of fiber in the 
telecommunications facility. The proposed Final Judgment contemplates 
that the purchaser and Defendants will negotiate commercially 
reasonable IRUs, that must meet minimum requirements, including: (1) To 
ensure that the purchaser has the asset for a long enough time period 
to serve customers while taking into account the dynamic nature of the 
telecommunications industry and the useful life of the existing fiber, 
the IRU must be for a minimum of 10 years; (2) to minimize ongoing 
carrying costs for the IRU, the IRU cannot contain a monthly or other 
recurring fee; and (3) to ensure that Defendants cannot limit the 
purchasers' use of the last-mile connection, the IRU cannot 
unreasonably limit the right of the purchaser to use the asset as it 
wishes (e.g., the purchaser shall be permitted to splice into the IRU 
fiber, though such splice points must be mutually agreed upon by 
Defendants and purchaser). This last requirement, allows the purchaser 
to splice into the IRUs to serve locations other than those listed in 
Appendix A of the proposed Final Judgment, at mutually agreed upon 
splice points.
    The requirements of the proposed Final Judgment ensure that the 
purchasers can use the Divested Assets

[[Page 74365]]

to begin competing immediately for customers in these buildings and 
will have the rights and cost structure necessary to be effective by 
(1) minimizing carrying costs so that viability is not threatened if 
customers are not immediately procured and (2) giving the purchaser 
flexibility in use of the last-mile connections by allowing splicing 
into the fiber.
    Lastly, with the approval of the United States, in its sole 
discretion, and at the purchaser's option, the Divestiture Assets may 
be modified to exclude assets and rights that are not necessary to meet 
the aims of this Final Judgment. This will allow for minor 
modifications of the Divestiture Assets to exclude assets that may not 
be necessary in order to remedy the competitive harm.
A. Timing of Divestitures
    To rapidly restore lost competition, the United States requires 
divestitures to be completed within the shortest time period reasonable 
under the circumstances. In this case, the proposed Final Judgment 
requires, in Section IV.A, divestiture of the Divestiture Assets, 
within 120 days after the closing of Verizon's acquisition of MCI, or 
five (5) days after notice of the entry of the Final Judgment by the 
Court, whichever is later. The United States in its sole discretion may 
extend the date for divestiture of the Divestiture Assets by up to 
sixty (60) days. The divestiture timing provisions of the proposed 
Final Judgment will ensure that the divestitures are carried out in a 
timely manner, and at the same time will permit Defendants an adequate 
opportunity to accomplish the divestitures through a fair and orderly 
process.
B. Use of a Divestiture Trustee
    In the event that Defendants do not accomplish the divestiture 
within the periods prescribed in the proposed Final Judgment, the Final 
Judgment provides that the Court will appoint a trustee selected by the 
United States to effect the divestitures. To ensure that the 
divestiture trustee can promptly locate and divest to an acceptable 
purchaser, the United States, in its sole discretion, may require 
Defendants to include additional assets, or allow Defendants to 
substitute substantially similar assets, which substantially relate the 
Divestiture Assets to be divested by the divestiture trustee.
    The proposed Final Judgment provides that Defendants will pay all 
costs and expenses of the divestiture trustee. The divestiture 
trustee's commission will be structured, under Section V.D of the 
proposed Final Judgment, so as to provide an incentive for the 
divestiture trustee based on the price obtained and the speed with 
which the divestitures are accomplished. After his or her appointment 
becomes effective, the divestiture trustee will file monthly reports 
with the Court and the United States setting forth his or her efforts 
to accomplish the divestitures. Section V.G of the proposed Final 
Judgment requires the divestiture trustee to divest the Divestiture 
Assets to an acceptable purchaser or purchasers no later than six (6) 
months after his or her appointment. At the end of six (6) months, if 
all divestitures have not been accomplished, the trustee and the United 
States will make recommendations to the Court, which shall enter such 
orders as appropriate in order to carry out the purpose of the trust, 
including extending the trust or term of the trustee's appointment.

IV. Remedies Available to Potential Private Litigants

    Section 4 of the Clayton Act, 15 U.S.C. 15, provides that any 
person who has been injured as a result of conduct prohibited by the 
antitrust laws may bring suit in federal court to recover three times 
the damages the person has suffered, as well as costs and reasonable 
attorneys' fees. Entry of the proposed Final Judgment will neither 
impair nor assist the bringing of any private antitrust damage action. 
Under the provisions of Section 5(a) of the Clayton Act, 15 U.S.C. 
16(a), the proposed Final Judgment has no prima facie effect in any 
subsequent private lawsuit that may be brought against Defendants.

V. Procedures Available for Modification of the Proposed Final Judgment

    The United States and Defendants have stipulated that the proposed 
Final Judgment may be entered by the Court after compliance with the 
provisions of the APPA, provided that the United States has not 
withdrawn its consent. The APPA conditions entry upon the Court's 
determination that the proposed Final Judgment is in the pubic 
interest.
    The APPA provides a period of at least sixty (60) days preceding 
the effective date of the proposed Final Judgment within which any 
person may submit to the United States written comments regarding the 
proposed Final Judgment. Any person who wishes to comment should do so 
within sixty (60) days of the date of publication of this Competitive 
Impact Statement in the Federal Register. All comments received during 
this period will be considered by the Department of Justice, which 
remains free to withdraw its consent to the proposed Final Judgment at 
any time prior to the Court's entry of judgment. The comments and the 
response of the United States will be filed with the Court and 
published in the Federal Register.
    Written comments should be submitted to: Nancy M. Goodman, Chief, 
Telecommunications and Media Enforcement Section, Antitrust Division, 
U.S. Department of Justice, 1401 H Street, NW., Suite 8000, Washington, 
DC 20530.

The proposed Final Judgment provides that the Court retains 
jurisdiction over this action, and the parties may apply to the Court 
for any order necessary or appropriate for the modification, 
interpretation, or enforcement of the Final Judgment.

VI. Alternatives to the Proposed Final Judgment

    The United States considered, as an alternative to the proposed 
Final Judgment, a full trial on the merits against Defendants. The 
United States could have continued the litigation and sought 
preliminary and permanent injunctions against Verizon's acquisition of 
MCI. The United States is satisfied, however, that the divestiture of 
assets and other relief described in the proposed Final Judgment will 
preserve competition for Local Private Lines and other 
telecommunications services that rely on Local Private Lines in the 
metropolitan areas identified in the Compliant.

VII. Standard of Review Under the APPA for the Proposed Final Judgment

    The APPA requires that proposed consent judgments in antitrust 
cases brought by the United States be subject to a sixty (60) day 
comment period, after which the Court shall determine whether entry of 
the proposed Final Judgment ``is in the public interest.'' 15 U.S.C. 
16(e)(1). In making that determination, the Court shall consider:

    (A) The competitive impact of such judgment, including 
termination of alleged violations, provisions for enforcement and 
modification, duration or relief sought, anticipated effects of 
alternative remedies actually considered, whether its terms are 
ambiguous, and any other competitive considerations bearing upon the 
adequacy of such judgment that the court deems necessary to a 
determination of whether the consent judgment is in the public 
interest; and
    (B) The impact of entry of such judgment upon competition in the 
relevant market or markets, upon the public generally and 
individuals alleging specific injury from the violations set forth 
in the complaint

[[Page 74366]]

including consideration of the public benefit, if any, to be derived 
from a determination of the issues at trial.

15 U.S.C. 16(e)(1)(A) & (B). As the United States Court of Appeals for 
the District of Columbia Circuit had held, the APPA permits a court to 
consider, among other things, the relationship between the remedy 
secured and the specific allegations set forth in the government's 
complaint, whether the consent judgment is sufficiently clear, whether 
enforcement mechanisms are sufficient, and whether the consent judgment 
may positively harm third parties. See United States v. Microsoft 
Corp., 56 F.3d 1448, 1458-62 (D.C. Cir. 1995).
    ``Nothing in this section shall be construed to require the court 
to conduct an evidentiary hearing or to require the court to permit 
anyone to intervene.'' 15 U.S.C. 16(e)(2). Thus, in conducting this 
inquiry, ``[t]he court is nowhere compelled to go to trial or to engage 
in extended proceedings which might have the effect of vitiating the 
benefits of prompt and less costly settlement through the consent 
decree process.'' 119 Cong. Rec. 24,598 (1973) (statement of Senator 
Tunney).\1\
---------------------------------------------------------------------------

    \1\ See United States v. Gillette Co., 406 F. Supp. 713, 716 (D. 
Mass. 1975) (recognizing it was not the court's duty to settle; 
rather, the court must only answer ``whether the settlement achieved 
[was] within the reaches of the public interest''). A ``public 
interest'' determination can be made properly on the basis of the 
Competitive Impact Statement and Response to Comments filed by the 
Department of Justice pursuant to the APPA. Although the APPA 
authorizes the use of additional procedures, 15 U.S.C. 16(f), those 
procedures are discretionary. A court need not invoke any of them 
unless it believes that the comments have raised significant issues 
and that further proceedings would aid the court in resolving those 
issues. See H.R. Rep. No. 93-1463, 93d Cong., 2d Sess. 8-9 (1974), 
reprinted in 1974 U.S.C.C.A.N. 6535, 6538-39.
---------------------------------------------------------------------------

    Rather:

[a]bsent a showing of corrupt failure of the government to discharge 
its duty, the Court, in making its public finding, should * * * 
carefully consider the explanations of the government in the 
competitive impact statement and its responses to comments in order 
to determine whether those explanations are reasonable under the 
circumstances.

United States v. Mid-America Dairymen, Inc., 1977-1 Trade Cas. (CCH) ] 
61,508, at 71,980 (W.D. Mo. 1977).
    Accordingly, with respect to the adequacy of the relief secured by 
the proposed Final Judgment, a court may not ``engage in an 
unrestricted evaluation of what relief would best serve the public.'' 
United States v. BNS Inc., 858 F.2d 456, 462 (9th Cir. 1988) (citing 
United States v. Bechtel Corp., 648 F.2d 660, 666 (9th Cir. 1981)); see 
also Microsoft, 56 F.3d at 1460-62. Courts have held that:

[t]he 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 the 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) (citations omitted).\2\
---------------------------------------------------------------------------

    \2\ Cf. BNS, 858 F.2d at 464 (holding that the court's 
``ultimate authority under the [APPA] is limited to approving to 
disapproving the consent decree''); Gillette, 406 F. Supp. at 716 
(noting that, in this way, the court is constrained to ``look at the 
overall picture not hypercritically, nor with a microscope, but with 
an artist's reducing glass''); see generally Microsoft, 56 F.3d at 
1461 (discussing whether ``the remedies [obtained in the decree are] 
so inconsonant with the allegations charged as to fall outside of 
the `reaches of the public interest''').
---------------------------------------------------------------------------

    The proposed Final Judgment, therefore, should not be reviewed 
under a standard of whether it is certain to eliminate every 
anticompetitive effect of a particular practice or whether it mandates 
certainty of free competition in the future. Court approval of a final 
judgment requires a standard more flexible and less strict than the 
standard required for a finding of liability. ``[A] proposed decree 
must be approved even if it falls short of the remedy the court would 
impose on its own, as long as it falls within the range of 
acceptability or is `within the reaches of public interest.''' United 
States v. AT&T Corp., 552 F. Supp. 131, 151 (D.D.C. 1982) (citations 
omitted) (quoting Gillette, 406 F. Supp. at 716), aff'd sub nom. 
Maryland v. United States, 460 U.S. 1001 (1983); see also United States 
v. Alcan Aluminum Ltd., 605 F. Supp. 619, 622 (W.D. Ky. 1985) 
(approving the consent judgment even though the court would have 
imposed a greater remedy).
    Moreover, the Court's role under the APPA is limited to reviewing 
the remedy in relationship to the violations that the United States has 
alleged in its Complaint, and does not authorize the Court to 
``construct [its] own hypothetical case and then evaluate the decree 
against that case.'' Microsoft, 56 F.3d at 1459. Because the ``court's 
authority to review the decree depends entirely on the government's 
exercising its prosecutorial discretion by bringing a case in the first 
place,'' it follows that ``the court is only authorized to review the 
decree itself,'' and not to ``effectively redraft the complaint'' to 
inquire into other matters that the United States did not pursue. Id. 
at 1459-60.

VIII. Determinative Documents

    There are no determinative materials or documents within the 
meaning of the APPA that were considered by the United States in 
formulating the proposed Final Judgment.

Dated: November 16, 2005.

 Respectfully submitted,

 /s/-------------------------------------------------------------------
Laury E. Bobbish,
Assistant Chief.

 /s/-------------------------------------------------------------------
Lawrence M. Frankel (D.C. Bar No. 441532)

Claude F. Scott, Jr. (D.C. Bar No. 414906)
Mary N. Strimel (D.C. Bar No. 455303)
Matthew C. Hammond
Lauren J. Fishbein (D.C. Bar No. 451889)
Conrad J. Smucker (D.C. Bar No. 434590)
Jeremiah M. Luongo
Jared A. Hughes
David T. Blonder
William Lindsey Wilson
William B. Michael
Trial Attorneys, U.S. Department of Justice, Antitrust Division, 
Telecommunications and Media Enforcement Section,
1401 H Street, NW., Suite 8000, Washington, DC 20530.
Telephone: (202) 514-5621.
Facsimile: (202) 514-6381.
[FR Doc. 05-23815 Filed 12-14-05; 8:45 am]
BILLING CODE 4410-11-M