[Federal Register Volume 74, Number 40 (Tuesday, March 3, 2009)]
[Notices]
[Pages 9267-9277]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-4341]


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DEPARTMENT OF JUSTICE

Antitrust Division


Public Comment and Response on Proposed Final Judgment

    Pursuant to the Antitrust Procedures and Penalties Act, 15 U.S.C. 
16(b)-(h), the United States hereby publishes below the comment 
received on the proposed Final Judgment in United States et al. v. 
Verizon Communications Inc. and Alltel Corporation, No. 1:08-CV-01878-
EGS, which were filed in the United States District Court for the 
District of Columbia, on February 17, 2009, together with the response 
of the United States to the comment.
    Copies of the comment and the response are available for inspection 
at the Department of Justice Antitrust Division, 325 Seventh Street, 
NW., Room 200, Washington, DC 20530, (telephone (202) 514-2481), and at 
the Office of the Clerk of the United States District Court for the 
District of Columbia, 333 Constitution Avenue, NW., Washington, DC 
20001. Copies of any of these materials may be obtained upon request 
and payment of a copying fee.

Patricia Brink,
Deputy Director of Operations, Antitrust Division.

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

United States of America, State of Alabama, State of California, State 
of Iowa, State of Kansas, State of Minnesota, State of North Dakota, 
and State of South Dakota, Case No. 1:08-Cv-01878 (Egs), Plaintiffs, v. 
Verizon Communications Inc. and Alltel Corporation, Defendants

Plaintiff United States's Response to Public Comments

    Pursuant to the requirements of the Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16(b)-(h) (``APPA'' or ``Tunney Act''), 
plaintiff United States hereby responds to the public comment received 
regarding the proposed Final Judgment in this case. After careful 
consideration of the comment, plaintiff United States continues to 
believe that the proposed Final Judgment will provide an effective and 
appropriate remedy for the antitrust violation alleged in the 
Complaint. Plaintiff United States will move the Court for entry of the 
proposed Final Judgment after the public comment and this Response have 
been published in the Federal Register, pursuant to 15 U.S.C. Sec.  
16(b), (d).
    On October 30, 2008, plaintiff United States and the States of 
Alabama, California, Iowa, Kansas, Minnesota, North Dakota, and South 
Dakota filed the Complaint in this matter alleging that the proposed 
merger of two mobile wireless telecommunications service providers, 
Verizon Communications Inc. (``Verizon'') and Alltel Corporation 
(``Alltel''), would violate Section 7 of the Clayton Act, 15 U.S.C. 18 
in certain geographic areas of the United States. Simultaneously with 
the filing of the Complaint, plaintiff United States filed a proposed 
Final Judgment and a Preservation of Assets Stipulation and Order 
signed by plaintiff United States, the plaintiff States and the 
defendants consenting to the entry of the proposed Final Judgment after 
compliance with the requirements of the Tunney Act. Pursuant to those 
requirements, plaintiff United States filed a Competitive Impact 
Statement (``CIS'') in this Court on October 30, 2008; published the 
proposed Final Judgment and CIS in the Federal Register on November 12, 
2008, see 73 FR 66,922 (2008); and published a summary of the terms of 
the proposed Final Judgment and CIS, together with directions for the 
submission of written comments relating to the proposed Final Judgment, 
in the Washington Post for seven days beginning on November 19, 2008 
and ending on November 25, 2008. The defendants filed the statements 
required by 15 U.S.C. Sec.  16(g) on November 7, 2008. The 60-day 
period for public comments ended on January 24, 2009, and one comment 
was received as described below and attached hereto.

I. Background

    As explained more fully in the Complaint and the CIS, the likely 
effect of this transaction would be to lessen competition substantially 
for mobile wireless telecommunications services in 94 geographic areas 
in the states of Alabama, Arizona, California, Colorado, Georgia, 
Idaho, Illinois, Iowa, Kansas, Minnesota, Montana, Nebraska, Nevada, 
New Mexico, North Carolina, North Dakota, Ohio, South Carolina, South 
Dakota, Utah, Virginia, and Wyoming. To restore competition in these 
markets, the proposed Final Judgment, if entered, would require 
defendants to divest (a) Alltel's mobile wireless telecommunications 
businesses and related assets in 85 Cellular Market Areas (``CMAs''); 
(b) Verizon's mobile wireless telecommunications businesses and related 
assets acquired from Rural Cellular Corporation in August 2008 in seven 
CMAs; and (c) Verizon's mobile wireless telecommunications businesses 
and related assets (excluding those acquired from Rural Cellular 
Corporation in August 2008) in two CMAs. 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 punish violations thereof.

II. Legal Standard Governing the Court's Public Interest Determination

    Upon publication of the public comments and this Response, 
plaintiff United States will have fully complied with the Tunney Act. 
It will then ask the court to determine that entry of the proposed 
Final Judgment would be ``in the public interest,'' and to enter it. 15 
U.S.C. 16(e)(1). In making that determination, the court, in accordance 
with the statute as amended in 2004,\1\ is required to consider:
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    \1\ The 2004 amendments substituted ``shall'' for ``may'' in 
directing relevant factors for the court to consider and amended the 
list of factors to focus on competitive considerations and to 
address potentially ambiguous judgment terms. Compare 15 U.S.C. 
Sec.  16(e) (2004), with 15 U.S.C. 16(e)(1) (2006); see also United 
States v. SBC Commc'ns, Inc., 489 F. Supp. 2d 1, 11 (D.D.C. 2007) 
(concluding that the 2004 amendments ``effected minimal changes'' to 
Tunney Act review).

    (A) The competitive impact of such judgment, including 
termination of alleged violations, provisions for enforcement and 
modification, duration of 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 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). In considering these statutory factors, the 
court's inquiry is necessarily a limited one as the government is 
entitled to ``broad discretion to settle with the defendant within the 
reaches of the public interest.'' United States v. Microsoft Corp., 56 
F.3d 1448, 1461 (DC Cir.

[[Page 9268]]

1995); see generally United States v. SBC Commc'ns, Inc., 489 F. Supp. 
2d 1 (D.D.C. 2007) (assessing public interest standard under the Tunney 
Act).
    As the United States Court of Appeals for the District of Columbia 
Circuit has held, under the APPA a court considers, among other things, 
the relationship between the remedy secured and the specific 
allegations set forth in the government's complaint, whether the decree 
is sufficiently clear, whether enforcement mechanisms are sufficient, 
and whether the decree may positively harm third parties. See 
Microsoft, 56 F.3d at 1458-62. With respect to the adequacy of the 
relief secured by the decree, 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; United States v. Alcoa, Inc., 152 
F. Supp. 2d 37, 40 (D.D.C. 2001). 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 (citations omitted).\2\ In determining whether 
a proposed settlement is in the public interest, a district court 
``must accord deference to the government's predictions about the 
efficacy of its remedies, and may not require that the remedies 
perfectly match the alleged violations.'' SBC Commc'ns, 489 F. Supp. 2d 
at 17; see also Microsoft, 56 F.3d at 1461 (noting the need for courts 
to be ``deferential to the government's predictions as to the effect of 
the proposed remedies''); United States v. Archer-Daniels-Midland Co., 
272 F. Supp. 2d 1, 6 (D.D.C. 2003) (noting that the court should grant 
due respect to the United States's prediction as to the effect of 
proposed remedies, its perception of the market structure, and its 
views of the nature of the case).
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    \2\ Cf. BNS, 858 F.2d at 464 (holding that the court's 
``ultimate authority under the [APPA] is limited to approving or 
disapproving the consent decree''); United States v. Gillette Co., 
406 F. Supp. 713, 716 (D. Mass. 1975) (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'').
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    Courts have greater flexibility in approving proposed consent 
decrees than in crafting their own decrees following a finding of 
liability in a litigated matter. ``[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. Am. Tel. & Tel. Co., 
552 F. Supp. 131, 151 (D.D.C. 1982) (citations omitted) (quoting United 
States v. Gillette Co., 406 F. Supp. 713, 716 (D. Mass. 1975)), 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 decree even though the court would have 
imposed a greater remedy). To meet this standard, the United States 
``need only provide a factual basis for concluding that the settlements 
are reasonably adequate remedies for the alleged harms.'' SBC Commc'ns, 
489 F. Supp. 2d at 17.
    Moreover, the court's role under the APPA is limited to reviewing 
the remedy in relationship to the violations that plaintiff 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 plaintiff United States did not pursue. 
Id. at 1459-60. As this Court recently confirmed in SBC Commc'ns, 
courts ``cannot look beyond the complaint in making the public interest 
determination unless the complaint is drafted so narrowly as to make a 
mockery of judicial power.'' SBC Commc'ns, 489 F. Supp. 2d at 15.
    In its 2004 amendments, Congress made clear its intent to preserve 
the practical benefits of using consent decrees in antitrust 
enforcement, adding the unambiguous instruction that ``[n]othing 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). The language codified what the 
Congress that enacted the Tunney Act in 1974 intended, as Senator 
Tunney explained: ``[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). Rather, the procedure for the public interest 
determination is left to the discretion of the court, with the 
recognition that the court's ``scope of review remains sharply 
proscribed by precedent and the nature of Tunney Act proceedings.'' SBC 
Commc'ns, 489 F. Supp. 2d at 11.\3\
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    \3\ See United States v. Enova Corp., 107 F. Supp. 2d 10, 17 
(D.D.C. 2000) (noting that the ``Tunney Act expressly allows the 
court to make its public interest determination on the basis of the 
competitive impact statement and response to comments alone''); S. 
Rep. No. 93-298, 93d Cong., 1st Sess., at 6 (1973) (``Where the 
public interest can be meaningfully evaluated simply on the basis of 
briefs and oral arguments, that is the approach that should be 
utilized.''); United States v. Mid-Am. Dairymen, Inc., 1977-1 Trade 
Cas. (CCH) ] 61,508, at 71,980 (W.D. Mo. 1977) (``Absent a showing 
of corrupt failure of the government to discharge its duty, the 
Court, in making its public interest 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.'').
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III. Summary of Public Comment and Plaintiff United States's Response

    During the 60-day public comment period, plaintiff United States 
received one comment, from Public Service Communications, Inc., Public 
Service Telephone Company, and their related affiliates (collectively 
``PST''), which is attached hereto and summarized below. This comment 
relates primarily to mobile wireless services in the State of Georgia. 
Upon review, plaintiff United States believes that nothing in the 
comment warrants a change in the proposed Final Judgment or is 
sufficient to suggest that the proposed Final Judgment is not in the 
public interest. Copies of this Response and its attachments have been 
mailed to PST.

A. Factual Background

    The plaintiffs' Complaint alleges that the merger of Verizon and 
Alltel would tend to lessen competition substantially, in violation of 
Section 7 of the Clayton Act, in the provision of mobile wireless 
telecommunications services in geographic areas effectively represented 
by 94 FCC spectrum licensing areas, including eight CMAs in the state 
of Georgia.\4\ In recognition of the fact that wireless carriers 
frequently are more

[[Page 9269]]

competitive where they serve contiguous areas, see CIS at 16, the 
proposed Final Judgment requires that all the assets to be divested in 
the State of Georgia be sold together to a single buyer.\5\ Proposed 
Final Judgment, Section IV.I.
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    \4\ The wireless assets to be be divested in Georgia 
(collectively, the ``Georgia divestiture assets'') are located in 
the Albany, GA Metropolitan Statistical Area (``MSA'') and Georgia 
Rural Service Areas (``RSAs'') 6, 7, 8, 9, 10, 12, and 13.
    \5\ Section IV.I of the proposed Final Judgment allows plaintiff 
United States, in its sole discretion, upon consultation with the 
relevant plaintiff State, to allow the sale of less than all the 
wireless assets in Georgia to facilitate a prompt divestiture to an 
acceptable buyer. In addition, if an acceptable buyer is not found 
for the mobile wireless businesses, plaintiff United States, in its 
sole discretion, upon consultation with the relevant plaintiff 
State, can require defendants to include additional assets, for 
example, in order to attract an acceptable buyer. Proposed Final 
Judgment, Section V.E.
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B. Summary of Comment

    PST provides wireline telecommunications services (though not, 
currently, wireless) in the mostly rural area in Georgia between 
Columbus and Macon. Its service area covers portions of two of the CMAs 
to be divested in Georgia, including roughly half of Georgia RSA 6 and 
a small portion of Georgia RSA 9. PST believes that the divestitures 
contained in the proposed Final Judgment are inadequate.
    PST first contends that plaintiffs should have challenged the 
merger everywhere Verizon and Alltel competed and obtained ``national 
relief'' in the proposed Final Judgment. In its view, the Verizon/
Alltel transaction is national in scope. PST Comment at 2, 4-6. PST 
recognizes, however, that the relevant markets could be viewed as ``a 
series of CMA markets,'' in which case ``a different analysis is 
appropriate.'' PST Comment at 6. Therefore, PST also contends the 
plaintiffs should have challenged the merger in additional CMAs in 
Alabama and Georgia not alleged in the Complaint based on the market 
shares and spectrum holdings in these areas. It notes that plaintiff 
United States ``has not addressed the CMAs where market shares and 
concentration are high enough to injure competition, though below the 
artificial thresholds for divestiture in the proposed final Judgment.'' 
PST Comment at 7.
    Second, PST argues that the wireless assets to be divested in the 
Georgia CMAs alleged in the Complaint are inadequate to restore 
competition to premerger levels in these CMAs because they do not 
contain all the assets necessary for a divestiture purchaser to be a 
viable long-term competitor. PST Comment at 8. In order to cure the 
deficiencies it believes exist with respect to the proposed Final 
Judgment, PST proposes that wireless assets in the Columbus GA-AL MSA, 
Georgia RSA 5, and Alabama RSAs 5 and 8 be divested.\6\ PST Comment at 
13. According to PST, the proposed Georgia divestiture areas are likely 
to be less profitable than those in neighboring urban areas, due to the 
higher costs of serving sparsely populated regions and the relatively 
low per-capita income of rural residents. PST Comment at 8-9. In 
particular, PST believes that a purchaser of the Georgia divestiture 
assets must obtain wireless assets in the Columbus GA-AL MSA to 
properly serve customers in the divestiture areas because Columbus is a 
major economic and cultural center in the region. PST Comment at 9-12.
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    \6\ These CMAs are adjacent to three of the eight CMAs in 
Georgia and the two CMAs in Alabama where wireless assets are to be 
divested pursuant to the proposed Final Judgment. See Attachment 1, 
Map, Alabama and Georgia: Divested CMAs and PST Proposed 
Divestitures.
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C. Response to Comment

    PST does not object to the divestiture of assets in the 94 CMAs, 
including the eight Georgia CMAs. Instead PST contends that the remedy 
should be broader and encompass divestitures of wireless assets in 
additional CMAs. PST contends that the merger will have an adverse 
impact on competition nationwide, but notes that no national relief was 
required. PST Comment at 2, 5. Also, PST claims plaintiff United States 
should have identified, and alleged, competitive injury in four 
additional geographic areas: ``Alabama RSAs 5 and 8, Georgia RSA 5, and 
the Columbus GA-AL MSA'' and remedied harm in these areas in the 
proposed Final Judgment. PST Comment at 5, 7.
    These arguments are not ones that should concern the Court in its 
public interest inquiry. As the Court of Appeals has warned, the APPA 
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, and yet, PST invites the Court to do exactly that. The Complaint 
alleges that the United States ``comprises numerous local geographic 
markets for mobile wireless telecommunications services,'' Complaint 
15, and the ``relevant geographic markets * * * where the transaction 
would substantially lessen competition for mobile wireless 
telecommunications services are effectively represented by the 94 FCC 
spectrum licensing areas specified in Appendix A.'' Complaint 16.\7\ 
Thus, the Complaint does not allege competitive harm in specific CMAs 
beyond the 94, nor did it allege a ``national market'' or harm in such 
a market. Absent such allegations, it would be inappropriate for this 
Court to inquire into the advisability of implementing a remedy to 
address competitive concerns in geographic areas outside the 94 alleged 
CMAs.\8\ The proposed Final Judgment's lack of a remedy for purported 
harm in geographic markets that plaintiff United States neither found 
nor alleged is not a flaw, but rather a perfectly appropriate tailoring 
of relief to the alleged violation.\9\
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    \7\ Plaintiff United States investigated all areas of the United 
States in which Verizon and Alltel compete, including whether the 
proposed merger would impact mobile wireless telecommunications 
services nationwide. The 100 CMAs listed in the Complaint and 
related decree modifications are the only areas where plaintiff 
United States concluded the merger was likely to substantially 
lessen competition.
    \8\ As this Court has held, courts ``cannot look beyond the 
complaint in making the public interest determination unless the 
complaint is drafted so narrowly as to make a mockery of judicial 
power.'' SBC Commc'ns, 489 F. Supp. 2d at 15. Plainly, with 
allegations of competitive harm in 94 geographic license areas 
covering millions of potential subscribers, the Complaint in this 
matter is not so narrowly drafted.
    \9\ Plaintiff United States's determination of which areas to 
allege in the Complaint was based on a thorough investigation of 
each area that included consideration of: the number of mobile 
wireless providers and their competitive strengths and weaknesses; 
market shares and concentration; the availability of new spectrum; 
whether any providers are spectrum constrained or otherwise limited 
in their ability to add customers; the breadth and depth of coverage 
by different providers (including coverage in relation to population 
density); the retail presence of each provider; local wireless 
number portability data; and the likelihood of new entry or 
expansion. CIS at 10. PST's allegations of harm are based simply on 
unreliable guesses about market shares and information about total 
spectrum holdings. Shares and spectrum holdings are just two of many 
factors that need to be considered, not a complete competitive 
analysis. United States v. Baker Hughes, Inc., 908 F.2d 981, 984 
(D.C. Cir. 1990) (stating that evidence of market concentration 
``simply provides a convenient starting point for a broader inquiry 
into future competitiveness''); FTC v. Arch Coal, Inc., 329 F. Supp. 
2d 109, 130 (D.D.C. 2004) (recognizing that ``this circuit has 
cautioned against relying too heavily on a statistical case of 
market concentration alone'').
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    PST's second argument is that the divestiture of wireless assets in 
additional geographic areas in Georgia and Alabama is necessary because 
the Georgia divestiture assets contained in the proposed Final Judgment 
are insufficient to permit a divestiture buyer to fully replace the 
competition that would otherwise be lost in the CMAs where harm is 
alleged. PST Comment at 8. According to PST, a purchaser of the Georgia 
assets cannot be a viable long-term competitor unless it also obtains 
the assets of neighboring areas of Georgia and Alabama, in particular 
the Columbus GA-AL MSA. PST Comment at 9-12. However, the information 
reviewed by plaintiff United States suggests that this contention 
regarding

[[Page 9270]]

the sufficiency of the remedy is ultimately without merit.
    Plaintiff United States has substantial expertise in constructing 
remedies and reviewing potential buyers of mobile wireless assets.\10\ 
Plaintiff United States carefully considers all relevant factors before 
agreeing to a divestiture settlement taking into account that the 
ability of a divestiture buyer to succeed in a particular area will 
depend on the specific nature of the area, the assets it is acquiring, 
and what other businesses and expertise the buyer already possesses. 
Plaintiff United States also carefully reviews the qualifications and 
business plans of proposed purchasers before approving 
divestitures.\11\ Divestiture packages are not tailored to favor one 
potential buyer over another.\12\ Instead, plaintiff United States 
seeks to ensure that the collection of assets will allow the purchaser 
to adequately compete. In order to replace the competition lost as a 
result of the merger, the buyer need not be the preferred provider of 
every customer but only be attractive to a large enough number of 
potential customers so as to be a viable competitor.
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    \10\ This is the sixth case in which plaintiff United States has 
required such a divestiture in the last five years. United States et 
al. v. Cingular Wireless Corp., SBC Communications Inc., BellSouth 
Corp. and AT&T Wireless Services, Inc., Civ. No. 1:04CV01850 (RBW) 
(D.D.C. filed Oct. 24, 2004); United States v. Alltel Corp. and 
Western Wireless Corp., Civ. No. 1:05CV01345 (RCL) (D.D.C. filed 
July 6, 2005); United States v. Alltel Corp. and Midwest Wireless 
Holdings, L.L.C., Civ. No. 06-3631 (PJS/AJB) (D. Minn. filed Sept. 
7, 2006); United States v. AT&T Inc. and Dobson Communications 
Corp., Civ. No. 1:07CV01952 (RMC) (D.D.C. filed Oct. 30, 2007); and 
United States et al. v. Verizon Communications Inc. and Rural 
Cellular Corp., Civ. No. 1:08CV00993 (EGS) (D.D.C. filed June 10, 
2008).
    \11\ The proposed Final Judgment states that plaintiff United 
States, in its sole discretion, upon consultation with the relevant 
plaintiff State, must be satisfied that the purchaser has the 
managerial, operational, technical and financial capability to 
compete effectively with the divested assets. Proposed Final 
Judgment, Section IV.H.
    \12\ Although PST may wish to have the combination of wireless 
assets that is most attractive to its existing wireline customers in 
portions of Georgia RSAs 6 and 9 (close to the Columbus GA-AL MSA), 
plaintiff United States needs to consider what assets are necessary 
for a buyer, in general, to effectively compete.
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    Plaintiff United States recognizes that there are efficiencies of 
scale associated with serving a broad, contiguous geographic area, and 
it is largely for this reason that the proposed Final Judgment requires 
the Georgia divestiture assets to be sold together to a single 
acquirer.\13\ See CIS at 16-17; proposed Final Judgment, Section IV.I. 
The divestitures in Georgia required by the proposed Final Judgment 
include not only Georgia RSAs 6 and 9, PST's existing service areas, 
but five other RSAs and the metropolitan area of Albany, GA. See 
proposed Final Judgment, Section IV.I.
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    \13\ It is not, however, always necessary or appropriate to 
divest multiple CMAs in a state as a single group. See Proposed 
Final Judgment, Section IV.I (providing that three CMAs in Virginia, 
one CMA in Arizona, one CMA in California, and one CMA in New Mexico 
can be sold separately).
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    PST's comment suggests that the assets being sold are insufficient 
to allow the purchaser to be a long-term viable competitor given the 
rural nature of the area. PST Comments at 8. However, the Georgia 
mobile wireless business assets cover a large portion of the state of 
Georgia, serving a population of more than 1.3 million people.\14\ The 
purchaser will acquire approximately 200,000 subscribers and a business 
that generates annual revenues of over $150 million. The asset package 
also includes a substantial amount of cellular spectrum which has 
significant advantages in serving rural areas, see CIS at 5-6, and the 
potential to not only provide mobile wireless services to local 
residents but also to sell roaming services to other providers who do 
not have networks in these areas of the state. Given the extent of the 
assets being sold, plaintiff United States believes that a buyer will 
be found that can effectively compete in the long term.
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    \14\ See http://wireless.fcc.gov/auctions/data/maps/cntysv2000_census.xls.
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    Moreover, there are a number of viable wireless businesses in the 
United States that operate in a small number of license areas with 
similar revenues and subscriber counts. For example, Bluegrass Cellular 
offers service in approximately 10 license areas and has approximately 
130,000 subscribers, and Alaska Communications Systems provides service 
in approximately seven license areas, has approximately 144,000 
subscribers and its 2007 wireless revenues were approximately $137 
million.
    PST's other argument for additional divestitures hinges in large 
part on its belief that a wireless carrier seeking to provide service 
to the Georgia divestiture areas needs to be able to serve the Columbus 
GA-AL MSA as well because two of the Georgia divestiture RSAs (Georgia 
RSA 6 and 9) are economically interconnected with the Columbus GA-AL 
MSA.\15\ But plaintiff United States found insufficient evidence to 
support the contention that a buyer needs wireless assets in Columbus 
in order to successfully serve the proposed Georgia divestiture 
areas.\16\ For example, less than 1% of the residents of the eight CMAs 
in Georgia where wireless assets are to be divested commute to Columbus 
to work.\17\ Even if only Georgia RSAs 6 and 9 are considered, less 
than 3% of residents commute to Columbus.\18\ The addition of the 
Columbus GA-AL MSA to the divestiture package would therefore have 
little, if any, impact on the buyer's ability to serve customers in the 
divestiture area at their homes and workplaces. Moreover, to the extent 
the divestiture buyer needs coverage of the Columbus GA-AL MSA for some 
small percentage of its minutes, it can likely achieve that via a 
roaming agreement, which wireless carriers routinely enter to expand 
their coverage to areas where they own no wireless facilities.\19\
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    \15\ PST Comment at 9-10. For instance, PST claims that Columbus 
is connected with Georgia RSAs 6 and 9 because of the colleges, 
hospitals, and cultural attractions located in Columbus. Id.
    \16\ Plaintiff United States also found insufficient evidence to 
suggest that the proposed merger would cause competitive harm in the 
Columbus GA-AL MSA itself.
    \17\ See http://wireless.fcc.gov/auctions/data/maps/cntysv2000_census.xls (population of each county in 2000); http://www.census.gov/population/www/cen2000/commuting/index.html (number 
of residents per county commuting to other counties for work in 
2000).
    \18\ Id.
    \19\ There are reasons to question whether the purchaser will 
need to be ``unduly dependent on roaming.'' PST Comment at 9. First, 
the purchaser may already own a wireless network that serves the 
surrounding area or other major portions of the country. Second, the 
purchaser may be able to offer carriers in the surrounding 
metropolitan areas of Macon, Columbus and Atlanta roaming services 
in the rural portions of the state in exchange for an agreement to 
allow its customers to roam in these metropolitan areas.
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    This Court has held that the United States need not prove that the 
settlement represents a ``perfect'' remedy of the harms alleged in the 
Complaint. Rather, it needs to provide ``a factual basis for concluding 
that the settlements are reasonably adequate remedies for the alleged 
harms.'' SBC Commc'ns, 489 F. Supp. 2d at 17. In addition, the DC Court 
of Appeals has held that district courts should be ``deferential to the 
government's predictions as to the effect of the proposed remedies.'' 
Microsoft, 56 F.3d at 1461. There is no basis to believe that 
divestitures in the Columbus GA-AL MSA, or any other CMAs mentioned by 
PST, are necessary to ensure the success of the divested business, 
either because of a particularly strong nexus between Columbus and the 
divestiture properties, or because of a need to achieve greater 
scale.\20\
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    \20\ Although plaintiff United States does not expect there to 
be a lack of bidders for the Georgia divestiture assets, if no 
acceptable purchaser was proposed, plaintiffs could reconsider, 
under Section V.E of the proposed Final Judgment whether to require 
defendants to add additional assets to the divestiture package.

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[[Page 9271]]

    The settlement contained in the proposed Final Judgment ensures 
that a buyer of the proposed Georgia divestiture assets will have the 
assets necessary to establish a viable competitor in each of the CMAs 
alleged in plaintiffs' Complaint. Accordingly, the settlement is within 
the reaches of the public interest and the proposed Final Judgment 
should be entered by this Court.

IV. Conclusion

    After careful consideration of this public comment, plaintiff 
United States still concludes that entry of the proposed Final Judgment 
will provide an effective and appropriate remedy for the antitrust 
violation alleged in the Complaint and is, therefore, in the public 
interest. Pursuant to Section 16(d) of the Tunney Act, plaintiff United 
States is submitting the public comment and its Response to the Federal 
Register for publication. After the comments and its Response are 
published in the Federal Register, plaintiff United States will move 
this Court to enter the proposed Final Judgment.

Respectfully submitted,

/s/ Hillary B. Burchuk-------------------------------------------------

Hillary B. Burchuk (D.C. Bar No. 366755),

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

Jared A. Hughes,

Attorneys, Telecommunications & Media Enforcement Section, Antitrust 
Division, U.S. Department of Justice, City Center Building, 1401 H 
Street, N.W., Suite 8000, Washington, D.C. 20530, (202) 514-5621, 
Facsimile: (202) 514-6381.

Certificate of Service

    I hereby certify that on February 17, 2009, a copy of the foregoing 
Plaintiff United States's Response to Public Comments was mailed via 
first class mail, postage prepaid, upon counsel for Public Service 
Communications, Inc., addressed as follows:
    David U. Fierst, Esq., Stein, Mitchell & Muse L.L.P., 1100 
Connecticut Ave., NW., Suite 1100, Washington, DC 20036.

/s/--------------------------------------------------------------------

Hillary B. Burchuk (D.C. Bar No. 366755)

Telecommunications & Media Enforcement Section, Antitrust Division, 
U.S. Department of Justice, City Center Building, 1401 H Street, 
NW., Suite 8000, Washington, DC 20530 (202) 514-5621, Facsimile: 
(202) 514-6381.

January 12, 2009
HAND DELIVERED
Nancy M. Goodman
Telecommunications & Media Enforcement Section
Antitrust Division
U.S. Department of Justice
1401 H Street N.W., Suite 8000
Washington D.C. 20530
Re: United States et al v. Verizon Communications, Inc. and Alltel 
Corp. Case No. 1:08-cv-01878-EGS
Dear Ms. Goodman:
    This comment is submitted on behalf of Public Service 
Communications, Inc., Public Service Telephone Company, and their 
related affiliates (collectively ``PST''), in response to the 
Competitive Impact Statement filed with the United States District 
Court for the District of Columbia on October 30, 2008 by the Plaintiff 
United States of America in the above referenced case. The Impact 
Statement was published in the Federal Register on November 12, 2008. 
PST respectfully submits that the proposed acquisition by Verizon 
Wireless of Alltel Corporation will injure competition among wireless 
mobile telephone service providers nationwide and in multiple CMAs in 
Georgia and adjacent Alabama. The United States Department of Justice 
also concluded that the acquisition will injure competition in many 
CMAs around the country.
    We contend that the Department should modify the proposed 
settlement with the Defendants Verizon Communications, Inc. 
(``Verizon'') and Alltel Corporation (``Alltel''), by requiring them to 
divest overlapping cellular systems in four Georgia and Alabama CMAs, 
namely CMA 153 (Columbus, GA MSA), CMA 375 (Georgia 5--Haralson RSA), 
CMA 311 (Alabama 5--Cleburne RSA) and CMA 314 (Alabama 8--Lee RSA).
    As we will explain, the central flaw in the proposed Consent 
Judgment is that it does not adequately ameliorate the competitive 
injury found by the Department, and lacks any reasoned analysis why the 
relief obtained is limited.
    More specifically, the Department recognized that this acquisition 
will combine the second and fifth ranked competitors in a highly 
concentrated national market, but did not require any national relief. 
The Department also recognized that the acquisition will cause injury 
in many CMAs, but required divestitures only in 94 CMAs where the 
combined post-acquisition market share for Verizon and Alltel exceeds 
55% and the post-acquisition Herfindahl-Hirschman Index (HHI) exceeds 
4000. We do not object to the requirement that overlapping assets in 
these 94 CMAs be divested. We object to the failure to require 
divestiture in CMAs where post-acquisition shares do not reach these 
astronomical levels but nonetheless exceed normal thresholds. In other 
words, according to the competitive impact statement, no divestiture is 
required where the combined share is less than 55% or the post-
acquisition HHI is less than 4000 even though normal merger analysis 
finds competitive injury at much lower levels.
    The Department also failed to consider whether it is practicable to 
divest mobile phone assets in rural CMAs with small populations without 
also divesting neighboring urban areas. Entry costs in the mobile 
telephone industry are steep, and entry is not feasible without a 
significant population base in a defined geographic area.

Description of PST

    PST is a family-owned telecommunications company providing wireline 
telephone, cable television and internet services in 1,050 square miles 
of territory between Macon and Columbus, Georgia. Its headquarters is 
in Reynolds, a small town with a population of slightly more than 1,000 
persons.
    The service area covered by PST is mostly rural, with a number of 
small mostly farming communities. It is sparsely populated. PST serves 
a total of 10,724 wireline customers in the following counties: Bibb 
(1,829 lines), Crawford (3,169 lines), Macon (108 lines), Marion (64 
lines), Monroe (288 lines), Muscogee (20 lines), Talbot (1,590 lines), 
Taylor (3,492 lines), and Upson (164 lines). PST is interested in 
entering the mobile cellular market in its current service area, and in 
surrounding, more populous areas. However, as described below, PST does 
not believe that the proposed divestiture of cellular markets in the 
State of Georgia, as presently endorsed by the Department, will yield a 
viable competitive operation, unless the Columbus market and certain 
adjoining properties are added.

Description of Acquisition

    Verizon Wireless, a joint venture of Verizon Communications, Inc. 
and Vodafone, has entered into an agreement to acquire Alltel. Verizon 
is paying $5.9 billion, and will become responsible for debt of $22.2 
billion. The total value of the acquisition is therefore approximately 
$28.1 billion. Verizon is the second largest mobile wireless service 
provider in the United States. It has recently acquired the 10th 
largest service provider. Alltel is the fifth largest mobile wireless 
service provider. The Competitive Impact Statement indicates (at p. 4) 
that the combined entity will control approximately 36 percent of all 
revenues generated in the United States

[[Page 9272]]

from mobile wireless communications services.
    This is the second major wireless acquisition by Verizon in recent 
months. On June 10, 2008, Verizon and the Department entered into a 
consent Judgment as a result of the acquisition of Rural Cellular 
Corporation (``RCC''). According to the Competitive Impact Statement 
filed in that case, prior to that acquisition, Verizon was the second 
largest provider of mobile wireless telecommunications services in the 
United States. At the time that acquisition was announced (mid 2007), 
Verizon had more than 65 million subscribers, and annual revenues of 
$43 billion. According to the FCC's Twelfth Annual Report and Analysis 
of Competitive Market Conditions With Respect to Commercial Mobile 
Services (January 28, 2008), Verizon, with 59 million subscribers, was 
second only to AT&T, which had 60.9 million subscribers. The 
Competitive Impact Statement (at p. 3) indicates that Verizon's 
subscriber count has now grown to 70 million.
    In the State of Georgia, the proposed Final Judgment would require 
that Verizon and Alltel divest the following markets:

Albany MSA (CMA 261)
GA RSA 6 (CMA 376)
GA RSA 7 (CMA 377)
GA RSA 8 (CMA 378)
GA RSA 9 (CMA 379)
GA RSA 10 (CMA 380)
GA RSA 12 (CMA 382)
GA RSA 13 (CMA 383)

    In the State of Alabama, the proposed Final Judgment would require 
that Verizon and Alltel divest the following markets:

Dothan MSA (CMA 246)
AL RSA 7 (CMA 313)

    PSC is on record asking the Federal Communications Commission 
(``FCC'') and the Department to order the divestiture of the following 
additional markets, in order to ensure the creation of a viable 
competitor within the States of Georgia and Alabama:

Columbus MSA (CMA 153)
GA RSA 5 (CMA 375)
AL RSA 5 (CMA 311)
AL RSA 8 (CMA 314)

    PST notes that the Albany MSA and GA RSA 6 were not included in the 
original divestiture proposal formulated by Verizon and Alltel, but 
were added only upon review by the Department, following comments by 
PST showing the need to add these (and other) markets to the 
divestiture list.

Injury to Competition

    It is generally accepted that the relevant product market for 
analyzing an acquisition of mobile wireless service providers is mobile 
wireless telecommunications. See, for example, United States v. Verizon 
Communications, Inc. and Rural Cellular Corporation, (D.D.C. 2008), 
Competitive Impact Statement at 4 (``there are no cost-effective 
alternatives to mobile wireless telecommunications services'') (RCC 
Impact Statement). See also In the Matter of AT&T Inc. and Dobson 
Communications Corp., WT Docket 07-153 (11/15/07) at ] 21 
(``mobile telephony service,'' including both voice and data over 
mobile wireless telephones).
    Geographic markets in mobile telephone acquisitions are generally 
based on the FCC spectrum licensing areas, called Cellular Market Areas 
(CMAs), consisting of Metropolitan Statistical Areas (MSAs) and Rural 
Service Areas (RSAs). See, e.g., RCC Impact Statement at 4.
    In this case, Verizon in its application with the FCC for approval 
of the acquisition described wireless competition as being national in 
scope. Description of Transaction, In re Applications of Atlantis 
Holdings LLC and Cellco Partnership d/b/a Verizon Wireless, June 13, 
2008 at 29. Verizon's expert report submitted to the FCC addressed only 
the national markets, not the CMAs. Declaration of Dennis Carlton, 
Allan Shampine, and Hal Sider, June 13, 2008 at 4, 20. The Department 
noted the nationwide impact (Competitive Impact Statement at 3) but 
ordered divestitures only at the CMA level.
    If the market is viewed as nationwide, the acquisition will clearly 
have an adverse impact on competition. Market shares and concentration 
are high. According to the FCC, the HHI was nearly 2700 at the end of 
2006, and the market has become more concentrated since then. FCC's 
Twelfth Annual Report and Analysis of Competitive Market Conditions 
With Respect to Commercial Mobile Services (January 28, 2008) 
(``Twelfth Annual Report'') at 6. It is not possible to calculate the 
post-acquisition HHI without knowing more about Alltel's volume in the 
94 CMAs to be divested and the CMAs to be retained, but the increase is 
highly likely to exceed the thresholds in the merger guidelines. 
According to the Twelfth Annual Report at 17, Verizon's nationwide 
share in 2006 was about 26%. Thus, any non-negligible acquisition of 
Alltel will necessarily cause the HHI to increase by more than 50, and 
a very small acquisition will cause an increase of 100.
    As noted in the Competitive Impact Statement (at page 4), the 
Department found in the case of this mega-merger that ``the proposed 
transaction, as initially agreed to by the defendants, would lessen 
competition substantially for mobile wireless telecommunications 
services in a large number of CMAs,'' including CMAs in the States of 
Georgia and Alabama. Pursuant to their analysis of the merger, the 
Plaintiffs United States of America and several individual states 
(including Georgia and Alabama) have ``concluded that Verizon's 
proposed acquisition of Alltel likely would substantially lessen 
competition, in violation of Section 7 of the Clayton Act, in the 
provision of mobile wireless telecommunications services in the 
relevant geographic areas alleged in the Complaint.'' The primary 
remedy for this impending adverse affect on competition is the proposed 
requirement that Verizon divest the affected markets.
    As discussed below, it is not clear from the Competitive Impact 
Statement that competition will not be harmed within the CMA 153 
(Columbus, GA MSA), CMA 375 (Georgia 5--Haralson RSA), CMA 311 (Alabama 
5--Cleburne RSA) and CMA 314 (Alabama 8--Lee RSA) markets. However, 
even if it is assumed arguendo that these individual markets will not 
be adversely affected, divestiture of these markets is necessary to 
ensure that the competitor to be created in the State of Georgia is a 
viable one, and will be able to continue effective operations as 
necessary to offset the harms caused by the combination of two of the 
biggest competitors in the state.

Competitive Harm in Columbus and Surrounding CMAs

    If the market is viewed as a nationwide market, then limited 
divestitures in smaller geographic markets scattered around the country 
may be insufficient to restore competitive vigor. Given that the pre-
acquisition nationwide HHI is already approximately 2700,\1\ it is a 
fair assumption that the post-acquisition HHI, even assuming some 
divestitures, will still be very high, and that the increase will 
exceed the recognized benchmarks for injury to competition.
---------------------------------------------------------------------------

    \1\ FCC's Twelfth Annual Report and Analysis of Competitive 
Market Conditions With Respect to Commercial Mobile Services 
(January 28, 2008) at 6, There have been a number of significant 
acquisitions since the 12th Annual Report, including Verizon's 
acquisition of RCC, AT&T's acquisition of Dobson, and the T-Mobile 
acquisition of SunCom. As a result of these acquisitions, 
concentration is likely to be higher than it was at the time of the 
12th Annual Report, but that information is not available to the 
public.
---------------------------------------------------------------------------

    If the market is viewed as a series of CMA markets, a different 
analysis is

[[Page 9273]]

appropriate. As noted above, the Department has found 94 CMAs where the 
acquisition will result in concentration that far exceeds normal 
thresholds, but the Department has not addressed whether there are 
other CMAs where the acquisition will lead to concentration that 
exceeds threshold levels, though not by such gross amounts.
    Nationwide HHI, according to the FCC, was 2674 at the end of 2006. 
12th Annual Report at 6. According to the 1997 Horizontal Merger 
Guidelines, a market is considered highly concentrated when its HHI 
exceeds 1800, which this does by a substantial amount. According to the 
FCC figures for year end 2006, the Verizon acquisition of Alltel 
(assuming no divestitures) will increase the HHI by about 260.\2\ 
According to the Merger Guidelines, in a highly concentrated market, an 
increase in the HHI of 50 or more points potentially raises significant 
competitive concerns. Increases of more than 100 points are 
presumptively likely to create or enhance market power or facilitate 
its exercise.
---------------------------------------------------------------------------

    \2\ The Department will have access to more recent market share 
information. We believe that the market will have grown more 
concentrated in the last year and a half, and the Verizon share 
(post-acquisition of RCC) will be larger than it was in December 
2006.
---------------------------------------------------------------------------

    Thus, on a nationwide basis, the market is highly concentrated, and 
this acquisition will increase concentration significantly. It is not 
possible for a party other than the Department or the FCC to compute 
HHI in any particular CMA. However, the post-acquisition HHI on a 
nationwide basis is highly likely to exceed 2800 with an increase well 
in excess of 100. Moreover, the nationwide increase in HHI is likely to 
exceed 250. Thus, it is a fair inference that in individual CMAs the 
post-acquisition HHI will exceed acceptable levels. The Department is 
requiring divestitures only where the post-acquisition HHI exceeds 
4000. No divestitures are required where the post-acquisition HHI is 
between 2800 and 4000, although by any realistic analysis, an 
acquisition resulting in such high concentrations is likely to injure 
competition. The Department has not addressed the CMAs where market 
shares and concentration are high enough to injure competition, though 
below the artificial thresholds for divestiture in the proposed final 
Judgment.
    There is another way to identify CMAs where the acquisition will 
lead to injury. The FCC finds likely injury to competition where, in 
any particular CMA, there is either (1) a post-acquisition HHI of 2800 
with an increase of 100,\3\ or (2) an increase of 250 regardless of the 
HHI, or (3) the acquiring party will hold a 10 percent or greater 
interest in 95 MHz of cellular, PCS, SMR and 700 MHz spectrum. In the 
Matter of AT&T, Inc. and Dobson Communications Corp., WT Docket, 07-153 
(11/19/07) at ] 40. It is possible to measure Verizon's and Alltel's 
spectrum in specific CMAs. For example, in CMA 153, the Verizon/Alltel 
combination will hold 104 MHz in each of the three constituent counties 
(one in Alabama and two in Georgia); and in CMA 314, covering 5 
counties in adjacent Alabama, the combination will hold 107 MHz in one 
county, and varying amounts ranging from 72 to 92 in the other four.\4\
---------------------------------------------------------------------------

    \3\ The Department does not address the possibility of a CMA 
with a post-acquisition HHI in excess of 2800 but less than 4000. In 
any such CMA, the FCC would find an injury to competition, as would 
the normal Department merger analysis, but no divestiture will be 
required.
    \4\ In the six Georgia CMAs where the proposed Final order 
requires divestitures, the overlap is typically less. In CMA 377 (6 
Georgia counties) there is no overlap in two of the counties, and an 
overlap of 82 in the other four. In CMA 378 (10 Georgia counties), 
the overlap is 72 MHz in 9 of the counties and 82 in the tenth. In 
CMA 379 (12 Georgia counties), the overlap is 82 in 6 counties and 
92 in the other 6. In CMA 380 (12 Georgia counties), the overlap is 
102 in one county, 82 in 9 and 72 in two. In CMA 382 (6 Georgia 
counties), the overlap ranges from 72 to 112. In CMA 383 (9 Georgia 
counties), the overlap is 102 MHz in two counties and 82 in the 
other 7. Combined spectrum is therefore likely to indicate a 
competitive problem in the CMAs to be divested and even more so in 
the adjoining CMAs Verizon wants to retain.
---------------------------------------------------------------------------

    Despite PST's comments raising concerns about the above additional 
markets in Georgia and Alabama, the Competitive Impact Statement does 
not furnish an HHI analysis for, or otherwise specifically address, 
these markets. PST respectfully requests that the Department amend the 
Competitive Impact Statement to do so. However, as discussed below, 
even if the HHI for the additional divestiture markets does not surpass 
the anticompetitive level, the relationship of these markets to the 
areas that will suffer harm must be evaluated.

Divestitures

    The proposed divestitures must also be evaluated from the 
perspective of what is necessary to restore competition. As the 
Department recognizes in the Antitrust Division Policy Guide to Merger 
Remedies, a divestiture will be ineffective to restore competition 
unless it includes all assets necessary for the purchaser to be an 
effective long-term competitor. Indeed, the Competitive Impact 
Statement confirms (at p. 13) that the States of Georgia and Alabama 
have an interest in, and consultation right to, ensure that the 
purchaser of the divested Alltel assets in their states will be ``a 
viable, ongoing business that can compete effectively in each relevant 
area.''
    In this instance, the proposed divestitures in Georgia will not 
include necessary assets. The inadequacy flows from the fact that the 
divestiture in Georgia will be restricted to certain CMAs, and those 
CMAs do not include the high density urban areas and corridors of 
commerce (including neighboring portions of Alabama) needed for 
successful operation of a wireless network. The CMAs where the proposed 
divestitures will occur are generally populated by lower income 
residents than in the CMAs to be retained. Consequently, the residents 
of the to-be-divested CMAs are less likely to have mobile devices and 
more likely to be price conscious. In other words, profits in those 
areas are likely to be lower than in the CMAs in which Verizon seeks to 
retain assets and customers of Alltel. Moreover, the CMAs in Georgia 
where assets will be divested are sparsely populated in relation to the 
areas to be retained by Verizon, resulting in increased operational 
costs.
    PST analyzed the counties included in the six Georgia CMAs in which 
Verizon originally proposed to divest overlapping properties. PST 
compared them to the counties in the additional CMAs the overlapping 
assets of which PST contended should also be divested. This analysis 
was provided to the Department. The analysis showed that in the 
Verizon-chosen CMAs, populations are generally lower than in the CMAs 
proposed by PST. As recognized in the Remedies Guide, where an 
installed base of customers is required in order to operate at an 
effective scale, the divested assets should convey that base, or 
quickly enable the purchaser to obtain an installed customer base. The 
mobile wireless market requires significant infrastructure or it will 
be unduly dependent on roaming, which under the best of circumstances 
will not be profitable.
    In CMA 377, where Verizon agreed to divest overlapping properties, 
there are six counties. Two of them (as of the 2000 census) had 
populations of about 45,000, one had 21,000, and the other three were 
in the 8,000-10,000 range. By contrast, Muscogee County in CMA 153, 
where Verizon and Alltel cumulatively hold 104 MHz of spectrum but 
which Verizon is not required to divest, the 2000 population was about

[[Page 9274]]

186,000. The adjacent Russell County, Alabama (also in CMA 153) had a 
2000 population of about 50,000.
    The size disparity is important for reasons other than the obvious 
need for a customer base large enough to earn a fair return. One aspect 
of the competition among the wireless service providers is the 
availability of attractive cell phone devices. For example, AT&T's 
ability to offer its customers the iPhone was a major competitive 
benefit for AT&T. The smaller wireless carriers are disadvantaged in 
obtaining attractive devices, and the population disparity between the 
CMAs Verizon will be permitted to retain and those it is will be 
obligated to divest will make it that much more difficult for any new 
entrant to obtain the customer base necessary to gain access to the 
more desirable telephones. There are also certain mandates imposed by 
the FCC. For example, there must be a system of automatic tracking of 
cell phones used to call 911. These mandates involve substantial fixed 
costs, which will constitute a significant barrier to entry by any 
small provider of wireless service, but will not be a major problem if 
the costs can be spread among a large enough customer base. For this 
reason also, the proposed consent judgment allowing Verizon to keep 
mobile phone assets in the more populous areas of Georgia while 
divesting the less populous areas will not restore the competition lost 
as a result of the acquisition.
    Moreover, the average household income in the CMAs chosen for 
divestiture by Verizon is lower than in the state as a whole or in the 
CMAs where we contend additional divestitures should be ordered. Median 
household income in Georgia in 2004 was $42,600. In the 6 counties in 
CMA 377, the median household income in 2004 ranged from about $24,000 
to $33,500. In CMA 153, median household income in 2004 was $35,100 in 
Muscogee, nearly $35,500 in Chattahoochie, and $29,600 in Russell 
County, Alabama.
    The inclusion of CMA 261 and CMA 376 in the divestiture markets, 
following PST's showing that these markets should be included, 
constituted a step in the right direction. However, this step does not 
go far enough, because the linchpin for the areas to be divested in 
Georgia is the Columbus CMA, and surrounding suburban areas. In this 
regard, Columbus furnishes the residents of markets such as the GA 6 
RSA and GA 9 RSA with the following:
    a. Nine colleges, including Columbus State University, Columbus 
Technical College, Beacon College, Meadows Junior College, Calvary 
Christian Life Ministries, the Medical Center, Inc. School of 
Radiologic Technology, and others. It is well-known that college 
students are prime users of mobile telephones, and often use only 
mobile phones rather than landlines.
    b. Columbus Georgia Convention and Trade Center provides access to 
182,000 sq. ft. usable floor space, 27 breakout rooms, Ballrooms and 
Exhibit Halls.
    c. RiverCenter for the Performing Arts provides regional access to 
the Columbus Symphony Orchestra, Broadway performances, comedy, and 
musical entertainment.
    d. Multiple hospitals, including the St. Francis Hospital; Columbus 
Doctors Hospital; Hughston Orthopedic Hospital; and Columbus Regional 
Medical Center, among other medical facilities.
    More importantly, Columbus is where the residents of the more rural 
markets go for jobs, major medical procedures, and to market their 
produce and goods. This fact is confirmed by both pre-existing private 
sector analyses of the commercial and societal factors impacting areas 
to be divested in Georgia, performed by Rand-McNally.
    The FCC uses the CMA in analyzing regulatory aspects of cellular 
service transactions, because long ago, cellular licenses were awarded 
along CMA boundaries. However, these boundaries do not necessarily 
reflect the realities of the marketplace. In this regard, the FCC has 
recognized that Rand McNally's Major Trading Areas (MTAs) and Basic 
Trading Areas (BTAs) as more indicative of real-world marketplace 
factors. Thus, the FCC decided to use the Rand-McNally areas for 
certain mobile telecommunications spectrum auctions, stating:

    We conclude that a combination of MTA and BTA service areas 
would promote the rapid deployment and ubiquitous coverage of PCS 
and a variety of services and providers. We recognize that the 
majority of parties express support for MSA/RSAs as the definition 
of PCS service areas. We conclude, however, that using MSAs/RSAs 
likely would result in unnecessary fragmentation of natural markets. 
MTAs and BTAs were designed by Rand McNally based on the natural 
flow of commerce. Specifically, the trading area ``boundaries have 
been drawn on a county-line basis because most statistics relevant 
to marketing are published in terms of whole counties. The 
boundaries have been determined after an intensive study of such 
factors as physiography, population distribution, newspaper 
circulation, economic activities, highway facilities, railroad 
service, suburban transportation, and field reports of experienced 
analysts [citing Rand McNally 1992 Commercial Atlas & Marketing 
Guide at 39].

    See Amendment of the Commission's Rules to Establish New Personal 
Communications Services, Second Report and Order, 73 RR 2d 1477, 8 FCC 
Rcd 7700, 7732 [1993 FCC LEXIS 6517] (October 22, 1993).
    Rand McNally also rates cities individually based on their economic 
function. Columbus is a 3-AA or ``major significant local business 
center,'' meaning it is the most important city in the area for 
purposes of local business. Rand McNally's formulation of its MTAs and 
BTAs, and the designation of business centers, takes into consideration 
whether a city or town is a natural center for shopping-goods 
purchases, entertainment, education and medical care. See Rand McNally 
Atlas, ``Economic Data for the United States'', p. 48 (1984). As shown 
above, Columbus serves as the center of shopping, entertainment, 
education and medical care for the Western Georgia-Eastern Alabama 
area.
    Significantly, the Columbus BTA includes the following counties:

------------------------------------------------------------------------
 
------------------------------------------------------------------------
Barbour...................................  AL
Russell...................................  AL
Chattahoochee.............................  GA
Harris....................................  GA
Marion....................................  GA
Muscogee..................................  GA
Quitman...................................  GA
Schley....................................  GA
Stewart...................................  GA
Sumter....................................  GA
Talbot....................................  GA
Webster...................................  GA
------------------------------------------------------------------------

    Of the above counties, two (Harris and Talbot) are part of the GA 6 
RSA area that the proposed Final Judgment proposes to divest. And six 
of the counties (Marion, Quitman, Schley, Stewart, Sumter and Webster) 
are part of the GA 9 RSA area that would be divested. Another county 
(Barbour) is part of the AL 8 RSA. The remaining three counties 
(Russell, Chattahoochee and Muscogee) make up the Columbus MSA. Thus, 
Rand-McNally's analysis of key economic, health and social factors 
indicates that a significant part of the Columbus Basic Trading Area 
includes areas that are to be divested. The proposed divestiture will 
not only create a gap in coverage, but will leave the purchaser without 
the socio-economic heart of the market it is trying to serve. This is a 
formula for failure as a competitor: Without the population contained 
in the Columbus MSA and surrounding suburbs such as the AL 5 and 8 RSAs 
and the GA 5 RSA, it will be difficult if not impossible for the 
purchaser to achieve the efficiencies recognized by the Department as 
important to a viable operation. See

[[Page 9275]]

Competitive Impact Statement at p. 16. And without this high density, 
low cost population area, it will be more expensive and difficult for 
the purchaser to meet the FCC's E911 and other regulatory mandates, 
because there will be far fewer customers over which to spread the 
fixed costs of such compliance. Moreover, without coverage into 
Columbus, the area where a large part of the population of the divested 
area travel for economic, health, entertainment and other reasons, 
customers will see little benefit in keeping their service with the 
purchaser.\5\ As a result, the purchaser will fail as a competitor in a 
relatively short period of time; and all of the competitive harms to 
consumers that the Plaintiffs have concluded could happen in the 
absence of another source of competition will indeed happen.
---------------------------------------------------------------------------

    \5\ The possibility of reaching a roaming agreement for coverage 
of the Columbus MSA is of little comfort. A provider's only 
significant protection against unreasonably high roaming fees is the 
ability to comparison shop among multiple service providers in other 
geographic areas. Thus, any acquisition that removes a significant 
potential supplier of roaming services may increase roaming fees to 
other, smaller competitors. That is the potential problem here. 
Alltel provides service primarily in rural areas where roaming 
alternatives may be limited. Removing it from the market enhances 
Verizon's market power to raise roaming rates. Verizon reassured the 
FCC that it will honor all existing roaming contracts. That is a 
meaningless gesture. Of course it will honor existing contracts; 
failure to do so is breach and exposes Verizon to litigation. The 
real question is whether the acquisition will affect Verizon's 
incentives to enter into future roaming contracts at a reasonable 
price. Where one potential alternative source of roaming service is 
removed from an already-highly concentrated market, the answer is 
obvious. Verizon will have less incentive to offer low roaming fees 
for future contracts.
---------------------------------------------------------------------------

    The need to provide a fair opportunity to succeed is particularly 
necessary given the current economic climate. Credit is tight, and 
consumers are resistant to spending of all kinds. Prospective 
purchasers (other than the major carriers, a purchase by which would 
also increase concentration) will have a difficult time making an 
acquisition in Georgia and Alabama and making it work. Excluding the 
Columbus area from any divestiture will make it that much more 
difficult to restore competition.

Conclusion

    For these reasons, we urge on behalf of PST that the Department 
modify the proposed Final Judgment, to require that Verizon divest the 
acquired assets in CMA 153, 311, 314 and 375, as well as the other 
Georgia and Alabama CMAs listed in Competitive Impact Statement.
 Sincerely,
David U. Fierst
cc: Hillary B. Burchuk, DOJ, Lawrence M. Frankel, DOJ, Jared A. Hughes, 
DOJ
BILLING CODE 4410-11-P

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[GRAPHIC] [TIFF OMITTED] TN03MR09.012


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[FR Doc. E9-4341 Filed 3-2-09; 8:45 am]
BILLING CODE 4410-11-C