FCC conditionally approved license transfers involving combined 8...

any interest in XO because of concerns it would use its market power in Mexico to harm competition in U.S. market. FCC’s International, Wireless and Wireline Bureaus turned down those arguments. Approval of proposed license transfers, with conditions, comes amid press reports that financiers Carl Icahn and Theodore Forstmann had been discussing how to end their battle for control of XO. Forstmann and Telmex signed deal last Jan. under which each would hold 40% noncontrolling stake in XO. XO sought declaratory ruling, telling FCC it wouldn’t further public interest to bar indirect foreign ownership of XO’s wireless licenses in excess of 25% foreign ownership benchmark by Telmex and Irish citizen Gordon Holmes, who is general partner in Forstmann. Sec. 310(b) of Communications Act lets foreign govt. hold greater than 25% stake in corporate license unless FCC finds public interest would be served by refusing to grant licenses. XO told FCC proposed investments by Telmex and Holmes were attributable to WTO members Mexico and Ireland, entitling XO to rebuttable presumption that such stakes didn’t raise competitive concerns. Commission said XO also could accept up to 25% additional indirect equity from those or other foreign investors under certain conditions without seeking approval again from FCC under Sec. 310(b). FCC said anticompetitive effects wouldn’t result from decision. Forstmann already holds 58% stake in McLeod USA, which operates in same markets as XO. FCC cited XO argument that even if Forstmann took controlling interest in XO, there were at least 4 other CLECs, in addition to ILEC, in states where XO and McLeod operated. To overcome “rebuttable presumption” that entry by carriers from WTO member countries was in public interest, deal involving foreign carrier had to be shown to pose “very high risk” to competition in U.S., FCC said, and RCN had not made such showing. RCN cited its difficulty in negotiating fair local interconnection agreements with Telmex, alleged inaction by Mexican regulators and poor service quality as signs of Telmex’s “ability to discriminate.” Commission said: “While we are concerned about these allegations, we disagree with RCN’s assertions that our dominant carrier safeguard and our enforcement authority would be ineffective to prevent any harm to U.S. competition that such alleged conduct might cause.” FCC concluded RCN hadn’t established link between alleged discriminatory conduct in Mexico and harm to competition in U.S. Conditions also incorporated electronic surveillance and other security safeguards in agreement reached between XO, Justice Dept., FBI. Point was to protect U.S. in ability to carry out authorized electronic surveillance, prevent and detect foreign-based espionage and protect U.S. infrastructure.