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Telecoms urge relief from merger bureaucracy

The Federal Communications Commission's system for reviewing mergers is outdated and takes too long, according to the telecom and wireless industries.

WASHINGTON--The Federal Communications Commission's system for reviewing mergers is outdated, takes too long, and hurts investors who may wait for more than a year for large marriages to be completed, according to the telecom and wireless industries.

A group of senators and congressmen have spent the past year trying to pass legislation that would put a time limit on FCC merger reviews and better define the agency's use of its public-interest standard in reviewing those mergers.

The work is about to pay off--though there are no guarantees.

"We've got the votes" to pass a merger reform bill, said Mike Chappell, legislative director for the sponsor of the House bill, Rep. Chip Pickering, R-Miss. "But we want good bipartisan support."

Pickering's bill was approved by the House Telecommunications subcommittee in June, but the representative has been working with the bill's primary opponent, the subcommittee's highest-ranking Democrat, Ed Markey of Massachusetts, to resolve his complaints before moving to a full Commerce Committee vote.

Those modifications would bring Pickering's bill more in line with the Senate version.

If it passes, the bill will bring much-needed relief, industry analysts say. The largest mergers can take longer than 180 days to reach approval. Even smaller companies complain of far more than time delays with the commission's review process.

"It's the uncertainty that kills you," said one telecom company lobbyist whose company has been through the review process. Telecom companies are reluctant to criticize the FCC's merger review process openly, because they say they could face reprisals from the commission in a future proceeding.

"It hurts your stock because investors don't know what's going to happen with you," the lobbyist said. That becomes of particular concern with the more prominent mergers, whose reviews have been known to last more than a year.

Other common complaints are the uncertainty of what, exactly, the FCC is going to require from companies in a review, and what its standard for review is.

Unlike the Justice Department, which uses established antitrust law for its merger reviews, the FCC relies on the more slippery standard of whether a merger is in the public interest, which critics say gives the commission far too much authority.

The U.S. Telecom Association, which represents phone companies, wrote in a recent paper that the FCC "has evolved into a modern-day bottleneck." The USTA advocates a 90-day limit on merger reviews, saying that if that time passes, "the merger will be deemed approved."

The association noted that the FCC has taken up to 16 months to review some mergers already approved by the Justice Department.

"The FCC agrees its processes are outdated but wants to take five years to reform itself. This is far too long to wait in today's modern telecommunications world," the USTA's paper said.

Both the USTA and the Cellular Telecommunications Industry Association, which represents the wireless industry, advocate shifting the burden of proof of such reviews away from the individual companies and onto the FCC. That language is not in either of the FCC merger bills, although the position has some support on Capitol Hill.

Opposition on the Hill
There is a perception on Capitol Hill that the FCC's review process dates back to a time when it regulated Ma Bell, and now it can't handle the quick market moves of an Internet economy. In addition, the FCC's review is seen as redundant to that of the Justice Department and the Federal Trade Commission.

The Clinton administration, on the other hand, has defended the FCC as a primary means to ensure that consumers have the advantages of marketplace competition. The White House has acknowledged the need for reform but points to an internal reform process under way at the commission.

The reform bills on the Hill were faulted this past week by Kevin DiGregory, deputy assistant attorney general for Justice, at a hearing on foreign-government ownership of U.S. telecom companies. He argued that curtailing the FCC review process would harm the Justice Department's ability to coordinate reviews with the other agency and would jeopardize national security.

"The left hand (at Justice) doesn't know what the right hand is doing," said a Senate aide involved in that body's merger review bill.

The chief of the FCC review, James Bird, said in an interview that internal reforms are "moving along."

A policy is in effect that all information needed for a review must be gathered in 75 days, although the clock can be stopped if not all information is in. Bird said, "In fact, day 75 is too early" to gather all the information the commission needs to perform an informed review.

"Too much is changing" as mergers go forward, Bird said, and the public-comment period also tends to raise new questions the agency must pursue.