1. Mergers and Acquisitions in Telecommunications TC 310 June 12, 2008

2. Putting Bell Back Together Vertical (and some horizontal) consolidation No longer concerned?  Regulation ineffective  New Technology  Economies of Scale, Scope  Globalization

3. Prediction Problems Prediction necessary by regulators  What would happen if they do merge  What happens if they don't merge Agencies have made serious prediction problems  Ex. IBM and AT&T Nature of Telecommunications  Network Effects  Quick technology changes  Unanticipated Technologies (VoIP)‏

4. Overlapping Jurisdictions FCC  Telecommunication broadly under Title I DoJ  Sherman and Clayton Anti-trust Acts States  Jurisdiction over traditional telecommunications  No wireless, no information services

5. DoJ Procedures Hart-Scott-Rodino Antitrust Improvements  (1971)‏  Merger in Telecom, get review period  Merger accepted, DoJ does nothing  Merger disliked, DoJ must be proactive File enjoiner  Burden of proof is on DoJ

6. FCC Procedures Opposite of DoJ Burden of proof is on merging companies Block by doing nothing 1934 Act  Telecom merger is a new name plate  Entry prohibited until FCC permits  Public Interest mandate  Flexibility to add conditions for public interest FCC and DoJ differ on their desire for conditions

7. Guidelines FTC and DoJ create guidelines  FCC uses them voluntarily Concentrated Markets  Undue market share  Competition significantly increases  Feasibility of increased capacity  Ease of entry

8. Guidelines II Potential Competition  Increase competition, not just lessoning  Used under following conditions High market concentration Few equal companies in market Enter even without merger Feasible to enter without merger Resources deconcentrate market

9. Public Interest Standard Applied Generally promotes  Competition, deregulation, national policy  Antitrust perspective of competition  Increase advanced telecom, info services  Would a merger help, hinder above three  Merger specific conditions

10. Merger Trends FCC mostly approves mergers DoJ mostly approves mergers  They have been small to small companies Lack of precedents, ad hoc instead  Dislike of geographic/local mergers  Favor wireless expansion  Favors vertical integration  Global mergers good, just don't hurt U.S. Increased burden of proof

11. Take Away Unlike other areas, interaction between FCC, DoJ, and FTC  FCC weilds more power, ability to do nothing, no strict guidelines Mergers are potentially good for competition  Global  New markets Current merger trends all about economics  What else do we value?