August 14, 1997

Commissioner Rachelle B. Chong

Re: In re the Applications of NYNEX Corporation, Transferor, and Bell Atlantic Corporation, Transferee, for Consent to Transfer Control of NYNEX Corporation and its Subsidiaries

I support today's decision granting the merger applications of two of the Bell Operating Companies, Bell Atlantic Corporation and NYNEX Corporation. This is a significant merger which comes in the midst of a whirlwind of great change in the telecommunications marketplace. This whirlwind has been wrought by the implementation of the historic Telecommunications Act of 1996, the dizzying pace of technological change, and the determined efforts of this Commission over the last decade-and-a-half to introduce more competition in the telephone market.

This particular merger has drawn heightened interest because Bell Atlantic and NYNEX are incumbent monopoly local service providers that were possible rivals due to their neighboring service areas. I write separately to emphasize that our grant of this application comes only after a very careful analysis of the likely market effects of the merger, and the imposition of certain enforceable procompetitive conditions to help ensure that the local network is opened -- and stays opened -- to new competitors.

In this order, we have performed an analysis using not only traditional antitrust principles, but also broader public interest considerations. In our public interest analysis, we considered whether the merger will enhance and promote competition as weighed against any harms to competition.⁽¹⁾ This balancing of public interest considerations took place against the backdrop of the "trends and needs of the industry" as a whole. In this case, I am pleased that we looked at this merger in the context of this unique time when we are implementing the 1996 Act. As we point out in this decision, competition in the local exchange and exchange access market is still, at best, in its earliest stages. Accordingly, we took a hard look at whether this merger truly would foster competition, or would have adverse competitive effects. We were acutely aware that Bell Atlantic would have been a competitor and among the most significant market participants in the local telephone market in LATA 132⁽²⁾ and the New York metropolitan area.

I am particularly pleased that we took a forward-looking approach in this order. Because the local telephone market is undergoing a historic transformation, we looked at the likely effects of the proposed merger on competition in the future. There, we made some assumptions that the most critical provisions of Sections 251 and 252 of the 1996 Act are being implemented⁽³⁾ and that there are no prohibitions against entry by new competitors. I hope we were not overly optimistic in making these assumptions. If it turns out we were wrong, the next Commission may wish to be less optimistic about such assumptions if another BOC merger comes its way.

Finally, some have voiced fears that a nationwide "Ma Bell" monopoly will be rebuilt if the remaining BOCs continue to merge. I believe these fears are misplaced. If Congress' goal of a procompetitive, deregulatory telecommunications marketplace is realized, there will be multiple competitors in the local telephone market -- including incumbent and competitive local telephone companies, long distance telephone companies, wireless telephone companies, and cable operators. In a vibrantly competitive environment, having five instead of six BOCs will not be particularly problematic. Having said that, I would be concerned if the remaining BOCs focused less on opening their networks to competition, than on merging with other BOCs, who are the most likely possible rivals in the short term.

^1. For example, they might include enhancing market power, slowing the decline of market power, or impairing our ability to establish and enforce our rules to ensure a competitive framework.

^2. LATA 132 is the Local Access and Transport Area encompassing New York, Long Island, and portions of Westchester County.

^3. These provisions include interconnection, unbundled network elements, resale, reciprocal compensation for transport and termination, collocation, dialing parity and number portability.