FCC's CenturyLink/Level 3 OK With Limited Conditions Shows Deep Split Over Review Standard
The FCC approved CenturyLink's planned buy of Level 3 with targeted conditions aimed at addressing transaction-specific concerns. The Republican majority said the order clarified the standard of review for mergers and acquisitions by sticking to a statutory mandate and declining to impose unrelated conditions. But the Democratic minority said the order, plus one approving the sale of Securus to SCRS Acquisition, warped the standard by narrowing consideration of the public interest, and set the stage for undue M&A. Both orders were released Monday, with CenturyLink/Level 3 in the evening (see 1710300065).
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The commission said CenturyLink/Level 3 would serve the public interest, with conditions to remedy related harms. The agency said the combination "will have only a de minimis effect" on last-mile business data service (BDS) competition in CenturyLink's ILEC region, and "no harmful competitive impact" outside that territory, taking into account the FCC conditions and DOJ-imposed divestitures (see 1710030021). There won't be "any transaction-specific competitive harm from the potential loss of Level 3 as an independent facilities-based provider of long-haul transport, including dark fiber," said the order, which listed 10 locations where the companies' can't raise BDS rates for five years because business services overlap.
"We don’t change the standard of review," said Chairman Ajit Pai. "We do make clear what had become increasingly hazy in recent years. This clarity will help the public to see that transactional review is an occasion to carefully consider how the transaction itself impacts the public interest, not an opportunity to extract a range of concessions, tangentially-related at best." He said if there are harms, the FCC "will consider narrowly-tailored, transaction-specific conditions to remedy the harm." Fellow Republican Commissioners Mike O'Rielly and Brendan Carr, who backed the order, also welcomed the standard's clarification.
Democratic commissioners said the standard changed for the worse. Mignon Clyburn suggested a $34 billion BDS competitor takeover "in a highly-concentrated market" should have triggered "market-based conditions," not "short-term price controls on 10 buildings." She said the FCC historically reviewed M&A "holistically and in a multi-faceted manner" that "balanced" public-interest harms and benefits, including through remedies outside antitrust review. The "revised" standard "will bring about untold negative consequences that will soon become apparent as the commission reviews transactions," she dissented. Rosenworcel backed deal approval but dissented on "departure from the traditional merger balancing test," which she said should have been put out for comment: "I worry that our capricious disregard for precedent is simply part of a larger effort to speed the way for the next billion-dollar transaction."
The agency is simply adhering "to the Communications Act and longstanding FCC precedent" in imposing only narrowly tailored remedies to transaction-specific harms, said Carr. He disputed procedural problems, calling the review an "adjudication" with "dozens of citations" to precedent.
O'Rielly said past FCC reviews "ventured into murky -- and potentially illegal -- waters by applying balancing tests and imposing conditions that had no connection" to mergers. He said he joined Carr in pushing to remove "some of the same problematic language" from a bureau-level item, after it was raised to a commission-level item at the request of two commissioners. He also cited concerns about "gamesmanship" when items are elevated, noting his proposal to give commissioners a say while "preventing process abuses and unnecessary delays."
Clyburn and Rosenworcel said the Securus/SCRS approval also changed the standard and should have gone beyond a $1.7 million fine of the inmate calling service (ICS) provider for misleading the commission. "A deeply-rooted preference to protect and promote competition in relevant markets, accelerate deployment of advanced services, ensure a diversity of license holdings, and manage spectrum in the public interest, have traditionally been a part of [FCC] consideration," they dissented. "Today’s item sets an ominous precedent by narrowing the Commission’s standard of review to effectively take the public interest out of the equation."
Wright Petitioners lamented absence of stronger actions against Securus, which they proposed to address alleged violations of ICS rules. The agency drew "boundaries of its review so narrowly that the other rule violations outlined in the Petitioners' pleadings were not considered," leaving ICS charges inflated, said the inmate family advocates Tuesday. They said FCC suggestions the issues could be dealt with through an enforcement complaint ignore the burdens and delays that places on inmate families.
Pai said the proposed conditions weren't transaction-specific and the standard makes clear "a transaction is not an opportunity apply extraneous conditions."
The review standard was about more than just the recent deals, a Democratic FCC official told us Tuesday. "There's a large broadcast transaction pending ... that the majority seems to be carefully paving the way for," said the official in a reference to Sinclair/Tribune. A Pai spokesman referred us to his statement about not changing the review standard.