Attachment FCC 09-54

FCC 09-54

MEMORANDUM OPINION AND ORDER submitted by FCC

FCC 09-54

2009-06-25

This document pretains to ITC-T/C-20081126-00516 for Transfer of Control on a International Telecommunications filing.

IBFS_ITCTC2008112600516_719880

                                                Federal Communications Commission                                                          FCC 09-54


                                                           Before the
                                                Federal Communications Commission
                                                      Washington, D.C. 20554


In the Matter of                                                                  )
                                                                                  )
Applications Filed for the Transfer of Control of                                 )           WC Docket No. 08-238
Embarq Corporation to CenturyTel, Inc.                                            )


                                           MEMORANDUM OPINION AND ORDER


Adopted: June 24, 2009                                                                                                Released: June 25, 2009

By the Commission:                  Acting Chairman Copps and Commissioners Adelstein and McDowell issuing
                                    separate statements.


                                                          TABLE OF CONTENTS

                                                                                                                                                     Para.

I. INTRODUCTION .................................................................................................................................. 1
II. BACKGROUND .................................................................................................................................... 3
     A. Description of the Applicants .......................................................................................................... 3
        1. Embarq Corporation .................................................................................................................. 3
        2. CenturyTel, Inc.......................................................................................................................... 4
     B. Description of the Transaction......................................................................................................... 5
     C. Comments on the Transaction.......................................................................................................... 8
III. STANDARD OF REVIEW AND PUBLIC INTEREST FRAMEWORK ............................................ 9
     A. Public Interest Review ..................................................................................................................... 9
     B. CenturyTel’s Qualifications to Hold Licenses............................................................................... 13
IV. POTENTIAL PUBLIC INTEREST HARMS...................................................................................... 15
     A. Potential Horizontal Effects ........................................................................................................... 16
     B. Perpetuation and Spread of Discriminatory Practices.................................................................... 20
        1. Alleged Harms......................................................................................................................... 20
        2. Voluntary Commitments ......................................................................................................... 29
V. POTENTIAL PUBLIC INTEREST BENEFITS.................................................................................. 34
     A. Analytical Framework.................................................................................................................... 35
     B. Analysis.......................................................................................................................................... 37
VI. CONCLUSION .................................................................................................................................... 46
VII.ORDERING CLAUSES....................................................................................................................... 48
APPENDIX A – List of Commenters
APPENDIX B – List of Licenses and Authorizations Subject to Transfer of Control
APPENDIX C – Conditions


                                       Federal Communications Commission                                 FCC 09-54


I.         INTRODUCTION
         1.       Embarq Corporation (Embarq) and CenturyTel, Inc. (CenturyTel) (together, the
Applicants) filed a series of applications1 seeking Commission approval to transfer control of certain
wireless licenses and domestic and international section 214 authorizations from Embarq and CenturyTel
to a reorganized CenturyTel, which would combine the two companies.2 Grant of these applications will
result in the transfer of domestic and international section 214 authorizations and the assignment of
certain spectrum licenses.
         2.      Under the Communications Act of 1934, as amended (the Act), we must determine
whether the Applicants have demonstrated that the proposed transaction would serve the public interest,
convenience, and necessity.3 As each transaction considered by the Commission has a unique set of facts,
we evaluate the discrete evidence in the record to assess any public interest harms that may arise from this
transaction. In the instant transaction, we are mindful that rural areas face particular challenges when it
comes to the deployment of basic and advanced telecommunications services. The Commission must
remain vigilant in ensuring that technological advances are extended to these areas. We note that the
Applicants principally serve rural areas, and it is essential to assess whether the benefits of the merged
company outweigh the harms to consumers and businesses of all sizes in their combined, primarily rural
territory. In addition, some parties filing comments opposing the proposed transaction argue that the
transaction may pose a threat to competition in various wholesale markets. After careful consideration,
we conclude that opponents have presented a theory of harm under which the proposed transaction might
result in increased anticompetitive behavior. In response to these concerns, the Applicants have offered
certain voluntary commitments. We find that the Applicants’ voluntary commitments address these
potential harms, and that, on balance, the proposed transaction will benefit the public interest.
Accordingly, we grant our consent to the transfer and assignment applications conditioned on compliance
with the voluntary commitments listed in Appendix C, which shall constitute binding and enforceable
conditions of our approval.4
II.        BACKGROUND
           A.       Description of the Applicants
                    1.      Embarq Corporation
        3.      Embarq, a Delaware holding company, owns subsidiaries that operate as incumbent local
exchange carriers (incumbent LECs) in 18 states and provides local exchange services over nearly 5.9
million telephone access lines and broadband service to 1.4 million subscribers.5 The company’s
operating subsidiaries offer residential customers local and long distance phone service, high-speed
1
  See Embarq Corporation, Transferor, and CenturyTel, Inc., Transferee, Application for Transfer of Control of
Domestic Authorizations Under Section 214 of the Communications Act, as Amended, WC Docket No. 08-238
(filed Nov. 26, 2008) (Embarq/CenturyTel Application or Application); see also Applications Filed for the Transfer
of Control of CenturyTel, Inc. and its Subsidiaries, WC Docket No. 08-238, Public Notice, DA 09-791 (rel. Apr. 7,
2009) (Embarq/CenturyTel Second Public Notice).
2
 See infra note 11. We refer herein to both the transfer of control of Embarq and the transfer of control of
CenturyTel to a reorganized CenturyTel as “the transaction” or as “the merger.”
3
    See 47 U.S.C. §§ 214(a), 310(d).
4
 These conditions are effective as of the Transaction Closing Date, which is defined for these purposes as the date
on which the Applicants consummate the proposed transaction.
5
 Embarq’s subsidiaries provide service in the following states: Florida, Indiana, Kansas, Minnesota, Missouri,
Nebraska, Nevada, New Jersey, North Carolina, Ohio, Oregon, Pennsylvania, South Carolina, Tennessee, Texas,
Virginia, Washington, and Wyoming. Embarq’s subsidiary incumbent LECs and the states in which they operate
are listed in Exhibit 3 of the Application.



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                                      Federal Communications Commission                                    FCC 09-54


Internet access, and satellite video from DISH network.6 For business customers, Embarq’s subsidiaries
offer local voice and data services, long distance services, business class high-speed Internet services,
satellite video services from DIRECTV, enhanced data network services, voice and data communication
equipment, and managed network services.7 Embarq also offers payphone services in various parts of the
United States.8
                       2.     CenturyTel, Inc.
         4.      CenturyTel, a Louisiana holding company, conducts its business operations principally
through subsidiaries offering communications, high-speed Internet, and entertainment services in small-
to-mid-size cities through its copper and fiber networks.9 CenturyTel operates in 25 states and provides
local exchange services over roughly two million telephone access lines and high-speed Internet
connections to approximately 630,000 subscribers.10 CenturyTel’s offerings include long distance
services, cable television services, satellite television services, Internet Protocol Television (IPTV)
service, and wireless services. In certain local and regional markets, CenturyTel also provides services as
a competitive local exchange carrier (competitive LEC), along with other communications and business
services.11 In addition, CenturyTel operates a fiber network that provides wholesale and retail fiber-based
transport services to customers in the central United States.12
               B.      Description of the Transaction
        5.      On October 26, 2008, Embarq, CenturyTel, and Cajun Acquisition Company (CAC), a
Delaware corporation and CenturyTel subsidiary created to facilitate the transaction’s consummation,
entered into an Agreement and Plan of Merger (Merger Agreement).13 In accordance with the terms of
the Merger Agreement, Embarq and CAC will merge, with Embarq becoming the surviving corporation
and CAC ceasing to exist.14 As a result of the transaction, Embarq will become a direct, wholly owned
subsidiary of CenturyTel.15 Applicants state that the stockholders of pre-transaction Embarq expect to
own approximately 66 percent of post-transaction CenturyTel, and the shareholders of pre-transaction
CenturyTel expect to own approximately 34 percent of post-transaction CenturyTel.16 The post-




6
    See Embarq/CenturyTel Application at 3.
7
    See id.
8
    See id.
9
    See Embarq/CenturyTel Application, Exh. 2 (listing CenturyTel subsidiaries with domestic 214 authority).
10
   CenturyTel’s subsidiaries provide service in the following states: Alabama, Arkansas, Colorado, Georgia, Idaho,
Illinois, Indiana, Iowa, Kansas, Louisiana, Michigan, Minnesota, Mississippi, Missouri, Montana, New Mexico,
North Carolina, Ohio, Oklahoma, Oregon, Tennessee, Texas, Washington, Wisconsin, and Wyoming. See id. at 3.
11
  See id. at 2. CenturyTel has a regional fiber optic network it utilizes to provide Internet, data, video and voice
communications. CenturyTel’s LightCore facilities abut or overlap existing Embarq wire centers in Florida,
Indiana, Missouri, Minnesota and Kansas. See Embarq/CenturyTel Reply at 9–10.
12
     See id.
13
     See Embarq/CenturyTel Application at 3.
14
  Embarq will be the surviving corporation but will adopt the By-Laws and Certificate of Incorporation of CAC.
See id. at 4, n.5.
15
     See id. at 4.
16
     See id. at n.6.



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                                     Federal Communications Commission                                FCC 09-54


transaction CenturyTel board will be composed of eight CenturyTel-appointed directors and seven
Embarq-appointed directors.17
         6.      Because the current shareholders of Embarq will acquire an approximate 66 percent
interest in CenturyTel, the proposed merger involves a “substantial change in ownership” of CenturyTel
and its subsidiaries.18 At the same time, the former Embarq subsidiaries will become wholly-owned
subsidiaries of CenturyTel and the former CenturyTel directors will make up a majority of the post-
transaction board. Accordingly, the proposed merger involves the transfer of control of the licenses and
authorizations held by both companies’ respective subsidiaries.19
         7.      The Applicants contend that the merger will serve the public interest. Specifically, they
claim that: (1) the merger is likely to result in “more rapid deployment of advanced services, including
IPTV and next-generation broadband-based services;”20 (2) the combined entity will adopt CenturyTel’s
automated retail billing systems, thereby improving its services to retail customers;21 (3) the merged entity
will adopt Embarq’s wholesale operations support systems (OSS), which will result in better service to
wholesale customers, and make it easier for other carriers to compete in the local service market;22 and
(4) the merger will generate synergies of approximately $400 million annually within the first three years
of operation.23 The Applicants also assert that the merger will not result in any anticompetitive harm.24
Finally, the Applicants state that the merger will not disrupt services that CenturyTel and Embarq
customers currently receive.25




17
     See id.
18
  47 U.S.C. § 309(c)(2)(B); see In the Matter of Existing Shareholders of Citadel Broadcasting Corp. and of The
Walt Disney Co., etc. for Consent to Transfers of Control, Memorandum Opinion and Order and Notice of Apparent
Liability, 22 FCC Rcd 7083, 7085, 7107, paras. 2, 55 (2007) (Citadel-Disney Order); Reading Broadcasting, Inc.,
Decision, 17 FCC Rcd 14001, 14017, para. 44 (2002).
19
  Citadel-Disney Order, 22 FCC Rcd at 7107, para. 55. In the Citadel-Disney Order, the result of the Disney
shareholders’ acquiring more than 50% of Citadel’s stock was that Citadel lost its ability to maintain certain
grandfathered ownerships interests that no longer complied with the Commission’s radio ownership rules. Id. at
7085, 7108-09, paras. 2, 58.
20
     Embarq/CenturyTel Application at 7–9; Embarq/CenturyTel Reply at 8–9.
21
     Id.
22
  The record indicates that CenturyTel’s pre-merger wholesale ordering and provisioning systems are obstacles to
wholesale providers seeking to compete in the local telephone market. See, e.g., Letter from Charles W. McKee,
Director, Government Affairs, Sprint Nextel Corp., et al., to Marlene H. Dortch, Secretary, FCC, WC Docket No.
08-238, at 5 (filed Apr. 3, 2009) (Joint Commenters Apr. 3 Ex Parte Letter) (stating that “it is hard to imagine
interconnection and provisioning getting worse in CenturyTel areas”).
23
     See Embarq/CenturyTel Application, Ewing Declaration, para. 2.
24
   See Embarq/CenturyTel Application at 13–17. On November 21, 2008, the Federal Trade Commission
terminated the waiting period mandated by the Clayton Act for the proposed transaction. See Federal Trade
Commission, Granting of Request for Early Termination of the Waiting Period Under the Premerger Notification
Rules, 73 Fed. Reg. 75,117 (Dec. 10, 2008).
25
     See Embarq/CenturyTel Application at 11–12, 17.



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                                      Federal Communications Commission                                    FCC 09-54


           C.       Comments on the Transaction
         8.        On December 9, 2008, the Wireline Competition Bureau released a public notice seeking
comments and reply comments on the Application.26 Several commenters contend that, unless the
Commission imposes conditions on the merger, the proposed transaction will not serve the public interest.
More specifically, commenters opposing the merger argue that the merger benefits claimed by the
Applicants are speculative and will not result in verifiable, tangible benefits.27 They further argue that the
merged entity will have an increased incentive and ability to discriminate against its wholesale customers
by leveraging its increased footprint and adopting the worst practices of CenturyTel in the Embarq service
territories.28 In response to these allegations, the Applicants offer certain voluntary commitments to
enhance the ability of CenturyTel’s wholesale customers to compete in the local telephone service market
following the merger, and to provide consumers with certain assurances regarding broadband service
deployment and speeds.29
III.       STANDARD OF REVIEW AND PUBLIC INTEREST FRAMEWORK
           A.       Public Interest Review
       9.       Pursuant to sections 214(a) and 310(d) of the Act,30 the Commission must determine
whether the proposed transfer of control of certain licenses and authorizations held and controlled by
Embarq and CenturyTel will serve the public interest, convenience, and necessity.31 In making this
determination, we first assess whether the proposed transaction complies with the specific provisions of

26
  See Applications Filed for the Transfer of Control of Embarq Corporation to CenturyTel, Inc., WC Docket No.
08-238, Public Notice, DA 08-2681 (rel. Dec. 9, 2008); see also Embarq/CenturyTel Second Public Notice (seeking
comment on the transfer of licenses and authorizations from pre-merger CenturyTel to reorganized CenturyTel).
27
   See, e.g., COMPTEL Comments at 3–5 (arguing that conditions were necessary to make the merger benefit the
public interest); NuVox/Socket Comments at 8 (arguing that claimed benefits are not tangible); Joint Commenters
Apr. 3 Ex Parte Letter at 1, 2 (arguing that vague claims of efficiency are not verifiable benefits); Sprint Reply at 4
(stating that Applicants’ generic claims of customers benefiting from subscription to current and new services are
not verified merger specific benefits).
28
     See, e.g., Joint Commenters Apr. 3 Ex Parte Letter at 3–4, 8–9 n.42.
29
  See Letter from Gregory J. Vogt, Counsel for CenturyTel, Inc., and Samuel L. Feder, Counsel for Embarq
Corporation, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 08-238, (filed June 22, 2009)
(Embarq/CenturyTel June 22 Ex Parte Letter). The commitments in this letter are reproduced in Appendix C.
These conditions are voluntary, enforceable commitments but are not general statements of Commission policy and
do not alter Commission precedent or bind future Commission policy or rules.
30
     47 U.S.C. §§ 214(a), 310(d).
31
   Section 310(d) of the Act, 47 U.S.C. § 310(d), requires that we consider applications for transfer of Title III
licenses under the same standard as if the proposed transferee were applying for licenses directly under section 308
of the Act, 47 U.S.C. § 308. See, e.g., AT&T Inc. and BellSouth Corporation Application for Transfer of Control,
WC Docket No. 06-74, Memorandum Opinion and Order, 22 FCC Rcd 5662, 5672, para. 19 (2007)
(AT&T/BellSouth Order); SBC Communications, Inc. and AT&T Corp. Applications for Approval of Transfer of
Control, WC Docket No. 05-65, Memorandum Opinion and Order, 20 FCC Rcd 18290, 18300 n.60 (2005)
(SBC/AT&T Order); Verizon Communications, Inc. and MCI, Inc. Applications for Approval of Transfer of Control,
WC Docket No. 05-75, Memorandum Opinion and Order, 20 FCC Rcd 18433, 18443 n.59 (2005) (Verizon/MCI
Order); Applications of AT&T Wireless Services, Inc. and Cingular Wireless Corporation, WT Docket 04-70,
Memorandum Opinion and Order, 19 FCC Rcd 21522, 21542, para. 40 (2004) (Cingular/AT&T Wireless Order);
General Motors Corporation and Hughes Electronics Corporation, Transferors, and The News Corporation
Limited, Transferee, MB Docket No. 03-124, Memorandum Opinion and Order, 19 FCC Rcd 473, 485, para. 18
(2004) (News Corp./Hughes Order). Thus, we must examine the Applicants’ qualifications to hold licenses. See
infra Part III.B.



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                                     Federal Communications Commission                                       FCC 09-54


the Act, other applicable statutes, and the Commission’s rules. If the proposed transaction would not
violate a statute or rule, the Commission considers whether it could result in public interest harms by
substantially frustrating or impairing the objectives or implementation of the Communications Act or
related statutes. The Commission then employs a balancing test weighing any potential public interest
harms of the proposed transaction against the proposed public interest benefits.32 The Applicants bear the
burden of proving, by a preponderance of the evidence, that the proposed transaction, on balance, serves
the public interest.33 If we are unable to find that the proposed transaction serves the public interest for
any reason, or if the record presents a substantial and material question of fact, we must designate the
application for hearing.34
         10.     Our public interest evaluation necessarily encompasses the “broad aims of the
Communications Act,”35 which include, among other things, a deeply rooted preference for preserving
and enhancing competition in relevant markets, accelerating private sector deployment of advanced
services, ensuring a diversity of license holdings, and generally managing the spectrum in the public
interest.36 Our public interest analysis may also entail assessing whether the merger will affect the quality
of communications services or will result in the provision of new or additional services to consumers.37
In conducting this analysis, the Commission may consider technological and market changes, and the
nature, complexity, and speed of change of, as wells as trends within, the communications industry.38
         11.    Our competitive analysis, which forms an important part of the public interest evaluation,
is informed by, but not limited to, traditional antitrust principles.39 The Commission and the Department
32
  See, e.g., AT&T/BellSouth Order, 22 FCC Rcd at 5672, para. 19; Application of GTE Corporation, Transferor,
and Bell Atlantic Corporation, Transferee, CC Docket No. 98-184, Memorandum Opinion and Order, 15 FCC Rcd
14032, 14046, paras. 20, 22 (2002) (Bell Atlantic/GTE Order); Applications of Ameritech Corp. and SBC
Communications Inc., WC Docket No. 98-141, Memorandum Opinion and Order, 14 FCC Rcd 14712, 14737–38,
para. 48 (1999) (SBC/Ameritech Order); Applications of NYNEX Corp., Transferor, and Bell Atlantic Corp.,
Transferee, For Consent to Transfer Control of NYNEX Corp. and Its Subsidiaries, File No. NSD-L-96-10,
Memorandum Opinion and Order, 12 FCC Rcd 19985, 19987, para. 2 (1997) (Bell Atlantic/NYNEX Order).
33
  See, e.g., AT&T/BellSouth Order, 22 FCC Rcd at 5672, para. 19; Cingular/AT&T Wireless Order, 19 FCC Rcd at
21542–44, para. 40; News Corp./Hughes Order, 19 FCC Rcd at 483, para. 15; Application of EchoStar
Communications Corporation (a Nevada Corporation), General Motors Corporation, and Hughes Electronics
Corporation (Delaware Corporations) (Transferors) and EchoStar Communications Corporation (a Delaware
Corporation) (Transferee), CS Docket No. 01-348, Hearing Designation Order, 17 FCC Rcd 20559, 20574, para. 25
(2002) (EchoStar/DirecTV Order)).
34
   We are not required, in any event, to designate for hearing applications for the transfer or assignment of Title II
authorizations. See ITT World Commc’ns, Inc. v. FCC, 595 F.2d 897, 901 (2d Cir. 1979). We may do so, however,
if we find that a hearing would be in the public interest. With respect to the applications to transfer licenses subject
to Title III of the Act, however, if we are unable to find that the proposed transaction serves the public interest, or if
the record presents a substantial and material question of fact, section 309(e) of the Communications Act requires
that we designate the application for hearing. 47 U.S.C. § 309(e); see also EchoStar/DirecTV Order, 17 FCC Rcd at
20574, para. 25; Cingular/AT&T Wireless Order, 19 FCC Rcd at 21542–44, para. 40.
35
     AT&T/BellSouth Order, 22 FCC Rcd at 5673, para. 20.
36
  See Telecommunications Act of 1996, Pub. L. No. 104-104, § 706, 110 Stat. 56, 153 (1996 Act), codified at 47
U.S.C. § 157 nt; 47 U.S.C. §§ 254, 332(c)(7); 1996 Act, Preamble; SBC/AT&T Order, 20 FCC Rcd at 18301, para.
17; see also Application of WorldCom, Inc. and MCI Communications Corp. for Transfer of Control of MCI
Communications Corp. to WorldCom Inc., WC Docket No. 97-211, Memorandum Opinion and Order, 13 FCC Rcd
18025, 18030–31, para. 9 (1998) (WorldCom/MCI Order); cf. 47 U.S.C. §§ 301, 303, 309(j), 310(d), 521(4), 532(a).
37
     See AT&T/BellSouth Order, 22 FCC Rcd at 5673, para. 20.
38
     See id.
39
     See, e.g., AT&T/BellSouth Order, 22 FCC Rcd at 5673, para. 21.



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                                   Federal Communications Commission                                 FCC 09-54


of Justice (DOJ) each have independent authority to examine the competitive impacts of proposed
communications mergers and transactions involving transfers of Commission licenses, but the standards
governing the Commission’s competitive review differ somewhat from those applied by DOJ.40 Like
DOJ, the Commission considers how a transaction will affect competition by defining a relevant market,
looking at the market power of incumbent competitors, and analyzing barriers to entry, potential
competition and the efficiencies, if any, that may result from the transaction. DOJ, however, reviews
telecommunications mergers pursuant to section 7 of the Clayton Act, and if it wishes to block a merger,
it must demonstrate to a court that the merger may substantially lessen competition or tend to create a
monopoly.41 Under the Commission’s review, the Applicants must show that the transaction will serve
the public interest; otherwise the application is set for hearing.42 DOJ’s review is also limited solely to an
examination of the competitive effects of the acquisition, without reference to other public interest
considerations.43 The Commission’s competitive analysis under the public interest standard is somewhat
broader, for example, considering whether a transaction will enhance, rather than merely preserve,
existing competition, and takes a more extensive view of potential and future competition and its impact
on the relevant market.44
        12.      Our analysis recognizes that a proposed transaction may lead to both beneficial and
harmful consequences.45 For instance, combining assets may allow a firm to reduce transaction costs and
offer new products, but it may also create market power, create or enhance barriers to entry by potential
competitors, and create opportunities to disadvantage rivals in anticompetitive ways.46 Our public interest
authority enables us, where appropriate, to impose and enforce narrowly tailored, transaction-specific
conditions that ensure that the public interest is served by the transaction.47 Section 303(r) of the
Communications Act authorizes the Commission to prescribe restrictions or conditions not inconsistent
with law that may be necessary to carry out the provisions of the Act.48 Similarly, section 214(c) of the
Act authorizes the Commission to attach to the certificate “such terms and conditions as in its judgment

40
  See, e.g., Applications of Cellco Partnership d/b/a Verizon Wireless and Atlantis Holdings LLC for Consent to
Transfer Control of Licenses, Authorizations, and Spectrum Manager and De Facto Transfer Leasing Arrangements
and Petition for Declaratory Ruling that the Transaction is Consistent with Section 310(b)(4) of the
Communications Act, WT Docket No. 08-95, File Nos. 0003463892, et al., ITC-T/C-20080613-00270, et al., ISP-
PDR-20080613-00012, Memorandum Opinion and Order and Declaratory Ruling, 23 FCC Rcd 17444, 17462, para.
28 (2008) (Verizon Wireless/Alltel Order).
41
     15 U.S.C. § 18.
42
  See Verizon Wireless/Alltel Order, 23 FCC Rcd. at 17462, para. 28; Applications for Consent to the Transfer of
Control of Licenses XM Satellite Radio Holdings Inc., Transferor to Sirius Satellite Radio Inc., Transferee, MB
Docket No. 07-57, Memorandum Opinion and Order and Report and Order, 23 FCC Rcd 12348, 12365–66, para. 32
(2008) (XM/Sirius Order).
43
  See Verizon Wireless/Alltel Order, 23 FCC Rcd. at 17462, para. 28; XM/Sirius Order, 23 FCC Rcd 12364, para.
30.
44
  See, e.g., Verizon Wireless/Alltel Order, 23 FCC Rcd. at 17462, para. 28; XM/Sirius Order, 23 FCC Rcd at
12365–66, para. 32.
45
  See, e.g., Verizon Wireless/Alltel Order, 23 FCC Rcd. at 17462, para. 29; XM/Sirius Order, 23 FCC Rcd at 12366,
para. 33; AT&T/BellSouth Order, 22 FCC Rcd at 5674, para. 21.
46
  See, e.g., Verizon Wireless/Alltel Order, 23 FCC Rcd. at 17462, para. 29; XM/Sirius Order, 23 FCC Rcd at 12366,
para. 33; AT&T/BellSouth Order, 22 FCC Rcd at 5674, para. 21.
47
  See, e.g., Verizon Wireless/Alltel Order, 23 FCC Rcd. at 17463, para. 29; XM/Sirius Order, 23 FCC Rcd at 12366,
para. 33; AT&T/BellSouth Order, 22 FCC Rcd at 5674, para. 22.
48
  47 U.S.C. § 303(r); see also Verizon Wireless/Alltel Order, 23 FCC Rcd. at 17463, para. 29; XM/Sirius Order, 23
FCC Rcd at 12366, para. 33; AT&T/BellSouth Order, 22 FCC Rcd at 5674, para. 22.



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the public convenience and necessity may require.”49 Indeed, unlike the role of antitrust enforcement
agencies, our public interest authority enables us to rely upon our extensive regulatory and enforcement
experience to impose and enforce conditions to ensure that the transaction will yield overall public
interest benefits.50 Despite this broad authority, the Commission has held that it will impose conditions to
remedy harms that arise from the transaction and that are related to the Commission’s responsibilities
under the Act and related statutes.51
        B.       CenturyTel’s Qualifications to Hold Licenses
         13.     As a threshold matter, we must determine whether the Applicants meet the requisite
qualifications to hold and assign and transfer licenses under section 310(d) of the Act and the
Commission’s rules. In general, when evaluating assignments under section 310(d), we do not re-
evaluate the qualifications of the transferor.52 The exception to this rule occurs where issues related to
basic qualifications have been designated for hearing by the Commission or have been sufficiently raised
in petitions to warrant the designation of a hearing.53 This is not the case here. In the case of the transfer
49
  47 U.S.C. § 214(c); see also Verizon Wireless/Alltel Order, 23 FCC Rcd. at 17463, para. 29; XM/Sirius Order, 23
FCC Rcd at 12366, para. 33; AT&T/BellSouth Order, 22 FCC Rcd at 5674, para. 22.
50
  See, e.g., Verizon Wireless/Alltel Order, 23 FCC Rcd. at 17463, para. 29; XM/Sirius Order, 23 FCC Rcd at 12366,
para. 33; AT&T/BellSouth Order, 22 FCC Rcd at 5674, para. 22; see also Schurz Communications, Inc. v. FCC, 982
F.2d 1043, 1049 (7th Cir. 1992) (discussing Commission’s authority to trade off reduction in competition for
increase in diversity in enforcing public interest standard).
51
  See, e.g., Verizon Wireless/Alltel Order, 23 FCC Rcd. at 17463, para. 29; XM/Sirius Order, 23 FCC Rcd at 12366,
para. 33; AT&T/BellSouth Order, 22 FCC Rcd at 5674, para. 22.
52
  See Applications of Sprint Nextel Corporation and Clearwire Corporation For Consent to Transfer Control of
Licenses, Leases and Authorizations, WT Docket No. 08-94, Memorandum Opinion and Order and Declaratory
Ruling, 23 FCC Rcd 17570, 17582–83, para. 23 (2008) (Sprint Nextel/Clearwire Order); Verizon Wireless/Alltel
Order, 23 FCC Rcd at 17464, para. 31; Applications of Guam Cellular and Paging, Inc., and DoCoMo Guam
Holdings, Inc., for Consent to Transfer Control of Licenses and Authorizations; Applications of Guam Cellular and
Paging, Inc., and Guam Wireless Telephone Company, LLC, for Consent to Assignment of Licenses and
Authorizations; Petition for Declaratory Ruling that the Transaction is Consistent with Section 310(b)(4) of the
Communications Act, File Nos. 0002556700, ITC-T/C-20060405-00234, 002553437, ITC-ASG-20060404-00181,
ISP-PDR-20050404-00005, WT Docket No. 06-96, 21 FCC Rcd 13580, 13590, para. 14 (2006) (DoCoMo/Guam
Cellular Order); Applications of Midwest Wireless Holdings, L.L.C. and Alltel Communications, Inc., WT Docket
No. 05-339, Memorandum Opinion and Order, 21 FCC Rcd 11526, 11536, para. 17 (2006) (Alltel/Midwest Wireless
Order); Applications of Nextel Partners, Inc., Transferor, And Nextel Wip Corp. and Sprint Nextel Corporation,
Transferees, Memorandum Opinion and Order, 21 FCC Rcd 7358, 7362, para. 10 (Sprint Nextel/Nextel Partners
Order); Verizon/MCI Order, 20 FCC Rcd at 18526, para. 183; SBC/AT&T Order, 20 FCC Rcd at 18379, para. 171;
Applications of Nextel Communications, Inc. and Sprint Corporation for Consent to Transfer Control of Licenses
and Authorizations, WT Docket No. 05-63, Memorandum Opinion and Order, 20 FCC Rcd 13967, 13979, para. 24
(2005) (Sprint/Nextel Order); Applications of Western Wireless Corporation and Alltel Corporation for Consent to
Transfer Control of Licenses and Authorizations, WT Docket No. 05-50, Memorandum Opinion and Order, 20 FCC
Rcd 13053, 13063–64, para. 18 (2005) (Alltel/Western Wireless Order); Cingular/AT&T Wireless Order, 19 FCC
Rcd at 21546, para. 44; Applications of VoiceStream Wireless Corporation and Powertel, Inc., Transferors, and
Deutsche Telekom AG, Transferee, IB Docket No. 00-187, Memorandum Opinion and Order, 16 FCC Rcd 9779,
9790, para. 19 (2001) (Deutsche Telekom/VoiceStream Order).
53
  See Sprint Nextel/Clearwire Order, 23 FCC Rcd at 17582–83, para. 23; Verizon Wireless/Alltel Order, 23 FCC
Rcd at 17464, para. 31; DoCoMo/Guam Cellular Order, 21 FCC Rcd at 13590, para. 14; Alltel/Midwest Wireless
Order, 21 FCC Rcd 11536, para. 17; Sprint Nextel/Nextel Partners Order, 21 FCC Rcd at 7362, para. 10;
Verizon/MCI Order, 20 FCC Rcd at 18526, para. 183; SBC/AT&T Order, 20 FCC Rcd at 18379, para. 171;
Sprint/Nextel Order, 20 FCC Rcd at 13979, para. 24; Alltel/Western Wireless Order, 20 FCC Rcd at 13063–64, para.
18; Cingular/AT&T Wireless Order, 19 FCC Rcd at 21546, para. 44; Deutsche Telekom/VoiceStream Order, 16
FCC Rcd at 9790, para. 19.



                                                        8


                                     Federal Communications Commission                                     FCC 09-54


of control applications involving the Embarq subsidiaries, we need not re-evaluate Embarq’s basic
qualifications. In the case of the transfer of control applications involving the CenturyTel subsidiaries,
we need not re-evaluate the basic qualifications of the current CenturyTel shareholders.
         14.     Section 310(d) also requires that the Commission consider the qualifications of the
proposed transferee as if the transferee were applying for the license directly under section 308 of the
Act.54 In this proceeding, no issues have been raised with respect to the basic qualifications of either
CenturyTel or the current Embarq shareholders (who will be obtaining majority ownership of CenturyTel
under the terms of the Merger Agreement), both of which previously have been found qualified to control
entities holding FCC licenses and authorizations. Thus, we find that, at this time, there is no reason to re-
evaluate the qualifications of these entities.
IV.      POTENTIAL PUBLIC INTEREST HARMS
          15. We consider first the potential public interest harms arising from this proposed transaction,
before turning to potential benefits. Because Embarq and CenturyTel currently compete for customers in
at least some service territories, we first consider the potential horizontal effects of the transfers.55 We
consider the risk that allegedly anti-competitive practices will spread from CenturyTel into Embarq
territories, and we consider whether the combined entity’s larger footprint will enhance its incentive and
ability to spread or perpetuate discriminatory practices that would have been geographically or temporally
confined absent the transaction.
         A.       Potential Horizontal Effects
         16.     Because CenturyTel and Embarq currently compete against each other in certain local
markets, we consider the potential horizontal effects of this merger.56 Based on the record evidence, we
find that the proposed transaction is unlikely to harm competition or potential competition in those local
markets where the Applicants currently compete.57
         17.      There are 54 Embarq service territories that abut 59 CenturyTel territories; these adjacent
service territories affect less than three percent of the exchanges involved in the transaction and only
281,000 out of more than 7.3 million lines served.58 Despite the adjacencies, direct competition between

54
  Section 308 requires that applicants for Commission licenses set forth such facts as the Commission may require
as to citizenship, character, and financial, technical, and other qualifications. See 47 U.S.C. § 308. Our rules
implementing the provisions of section 308 regarding an applicant’s qualifications to hold the Commission licenses
involved in this transfer are set forth in Parts 5, 25, and 63 of the Commission’s rules. See 47 C.F.R. Parts 5, 25, 63;
see also DoCoMo/Guam Cellular Order, 21 FCC Rcd at 13590, para. 14; Alltel/Midwest Wireless Order, 21 FCC
Rcd at 11536, para. 17; Sprint Nextel/Nextel Partners Order, 21 FCC Rcd at 7362, para. 10; Verizon/MCI Order, 20
FCC Rcd at 18526, para. 183; SBC/AT&T Order, 20 FCC Rcd at 18379, para. 171; Alltel/Western Wireless Order,
20 FCC Rcd at 13063–64, para. 18; Cingular/AT&T Wireless Order, 19 FCC Rcd at 21546, para. 44.
55
 AT&T/BellSouth Order, 22 FCC Rcd at 5675, para. 23. We note that there are no competitive issues associated
with the wireless licenses involved in the subject transaction.
56
  A merger is horizontal when the merging firms sell competing products that are in the same relevant markets and
are therefore viewed as reasonable substitutes by purchasers of the products. News Corp./Hughes Order, 19 FCC
Rcd at 507, para 69.
57
  Cf. Joint Applications of Telephone and Data Systems, Inc. and Chorus Communications, Ltd. for Authority to
Transfer Control of Commission Licenses and Authorizations Pursuant to Sections 214 and 310(d) of the
Communications Act and Parts 22, 63 and 90 of the Commission’s Rules, CC Docket No. 01-73, Memorandum
Opinion and Order, 16 FCC Rcd at 15297, paras. 8–9 (CCB/WTB 2001) (granting transfer of control involving an
incumbent LEC and competitive LEC providing in-region service where merger would not harm competition).
58
 Embarq/CenturyTel Application at 13. Most of the adjacencies are located in four states: Missouri, Oregon,
Washington, and Minnesota. See id. at 15.



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                                      Federal Communications Commission                                    FCC 09-54


the two carriers is minimal: CenturyTel’s competitive LEC subsidiaries provide service in only three
Embarq incumbent LEC markets to only 130 enterprise customers, and Embarq does not currently
compete in any CenturyTel markets.59
         18. This lack of present competition between these two incumbent LECs is hardly surprising —
both carriers largely serve rural local exchanges60 and the adjacent exchanges are almost all small and
rural.61 Only five adjacent exchanges have over 10,000 access lines, with the largest being Embarq’s
Jefferson City, Missouri, exchange.62 We recognize that carriers are generally less likely to compete in
such territories because of the high costs of reaching consumers and the lower potential revenues of
serving fewer customers,63 and we thus acknowledge that here each carrier’s incentive to encroach on the
other’s territories is small.
         19. We are also not concerned that the merger will have significant anticompetitive effects in
the three local markets where CenturyTel currently competes with Embarq for enterprise customers.
First, as the Commission has previously observed, mid-sized and large enterprise customers tend to be
sophisticated purchasers of communications services64 and hence more likely to pick their local exchange
carrier based on all competitive options. Given the enhanced revenue opportunities in serving enterprise
customers,65 we recognize that competitive LECs are more likely to target such customers when entering
an area.66 Indeed, we see such competition in the three local markets where CenturyTel and Embarq
currently compete. In the Chaska, Minnesota exchange, for example, Applicants assert that they compete
with Level 3, ITC Deltacom, Paetec, Verizon, AT&T, ALEC, and Bandwidth.com, among others.67
Other competitors in the overlapping and adjacent exchanges include Alltel,68 AT&T Wireless, Digital
Telecommunications Inc., Granite Telecommunications LLC, Lakedale Link, Inc., Midwest Wireless,
Qwest Corporation, Sprint Nextel Communications, and US Cable Corporation.69 Thus, it appears that,
even after the merger, there will be a significant number of carriers competing for enterprise customers in
59
     Id. at 13–14.
60
     Id. at 2.
61
     The median size of adjacent exchanges is only 1,021 access lines. Id. at 15.
62
     That exchange has 18,945 residential and 26,544 business access lines. Id. at 16 n.33.
63
     See GTE/Bell Atlantic Order, 15 FCC Rcd at 14095, para. 117.
64
     See AT&T/BellSouth Order, 22 FCC Rcd at 5708, para. 82.
65
  For example, a price cap LEC’s monthly charge for each primary residential or single-line business local
exchange service subscriber line cannot exceed $6.50, 47 C.F.R. § 69.152(d)(1)(ii)(D), whereas a price cap LEC’s
monthly line charge for a multi-line business cannot exceed $9.20, 47 C.F.R. § 69.152(k)(1)(i), not including up to
an additional $4.31 per line per month that price cap carriers can recover either from a multi-line business’s pre-
subscribed interexchange carrier or from a multi-line business itself, 47 C.F.R. § 69.153(a). Thus, looking only at
the interstate portion of a carrier’s costs in a high-cost area, competitive LECs are best able to compete on price for
multi-line business customers (who pay subscriber line and pre-subscribed interexchange carrier charges of up to
$13.51 to the incumbent) rather than residential customers (whose subscriber line charge is capped at $6.50 a line).
66
  Cf. AT&T/BellSouth Order, 22 FCC Rcd at 5690–91, para. 55 (“When competitive LECs seek to enter a new
special access market, they generally concentrate their efforts in high density areas where the revenue opportunities
are the greatest — such as locations where enterprise customers are located.”).
67
     See Embarq/CenturyTel Application at 14.
68
 Verizon Wireless recently acquired Alltel and hence should be competing in its stead. See Verizon Wireless/Alltel
Order, 23 FCC Rcd 17444.
69
 See Letter from Mark D. Schneider, Counsel for Embarq Corporation, to Marlene H. Dortch, Secretary, FCC, WC
Docket No. 08-238, Exh. 1 at 1 (filed Dec. 10, 2009) (Embarq/CenturyTel Supplement) (listing competitors in
Embarq’s Plainview, MN exchange); id., Exh. 2 at 6 (listing competitors in CenturyTel’s Kellogg, MN exchange).



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                                      Federal Communications Commission                               FCC 09-54


the three local markets at issue. Accordingly, we conclude that the limited horizontal aspects of the
proposed transaction do not raise competitive concerns.
           B.      Perpetuation and Spread of Discriminatory Practices
                   1.      Alleged Harms
        20.     Commenters opposing the merger contend that anticompetitive effects in the Embarq and
CenturyTel service territories are likely for two reasons. First, citing the Commission’s SBC/Ameritech
Order and its Bell Atlantic/GTE Order, commenters claim that, after the merger, the merged entity will
have an increased incentive and ability to discriminate against competitors in local retail markets.70
Second, opponents of the merger claim that “CenturyTel lacks the wholesale support infrastructure,
commitment and experience necessary to serve wholesale customers as required,” and they claim that the
“comparatively better practices and capabilities in place at Embarq will be replaced with those
CenturyTel uses to stymie competition in its service areas.”71
        21.       In addition to presenting these general theories of competitive harm, commenters
opposing the merger make a number of specific allegations, which fall into four general categories:
(1) those resulting from CenturyTel’s manual OSS; (2) those involving local number portability; (3) those
involving interconnection agreements and obligations; and (4) those involving wholesale pricing and fees.
We discuss below each of the four categories of alleged harm and the voluntary commitments that the
Applicants offered in response to these allegations.
        22.     Operations Support Systems (OSS). Commenters, as well as Embarq and CenturyTel,
agree that CenturyTel’s OSS “are largely manual with little if any automated or interactive capabilities”72
and that CenturyTel’s OSS “cannot provide as rapid and efficient processing as the Embarq systems.”73
The problems with CenturyTel’s OSS appear to disadvantage competitors in several ways.
         23.      For example, CenturyTel admits that its antiquated OSS has led it to adopt a policy
limiting the number of service requests, including number ports, any given competitor could make to 50
in a single day, the purpose being to “maintain[] parity of treatment for all submitting carriers.”74
Similarly, it does not deny allegations that, because of its problematic OSS, the information in
CenturyTel’s Customer Service Record (CSR) database “is often missing, inaccurate, or contradicts
information contained in CenturyTel’s other databases.”75

70
     See, e.g., NuVox/Socket Comments at 14; COMPTEL Comments at 3; Sprint Nextel Reply Comments at 5–6.
71
  NuVox/Socket Comments at 3; see also Joint Commenter April 3 Ex Parte Letter at 5 citing SBC/Ameritech
Order, 14 FCC Rcd at paras. 15[1]–155; NuVox/Socket Comments, Kohly Declaration, para. 8.
72
     NuVox/Socket Comments, Kohly Declaration, para. 11; DeltaCom Reply, Mastando/Sharp Declaration, para. 11.
73
     Embarq/CenturyTel Reply at 10.
74
  Letter from Gregory J. Vogt, Counsel for CenturyTel, Inc., and Samuel L. Feder, Counsel for Embarq
Corporation, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 08-238, at 2 (filed Apr. 10, 2009)
(Embarq/CenturyTel Apr. 10 Ex Parte Letter); see also NuVox/Socket Comments, Kohly Declaration, para. 36;
Sprint Reply at 10; Letter from John J. Heitmann, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 08-238,
Cox/Hankins Declaration, para. 7 (filed Feb. 27, 2009) (Charter Feb. 27 Ex Parte Letter).
75
   NuVox/Socket Comments, Kohly Declaration, para. 18; id. (“This is especially true with respect to customers
with multiple locations.”); see also DeltaCom Reply, Mastando/Sharp Declaration, para. 13. Because of these issues
and other problems with CenturyTel’s Location Service Request (LSR) validation system, commenters further
allege that simple ports can take multiple days or even weeks to process. Letter from Michael H. Pryor, Counsel for
Bresnan, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 08-238, at 7 (filed Apr. 20, 2009) (Bresnan Apr. 20
Ex Parte Letter); id., Hould/Strouf Declaration, paras. 5–12; see also NuVox/Socket Comments, Kohly Declaration,
para. 43 (noting that CenturyTel’s system “provide[s] no real-time or near real-time information when placing an
order”); DeltaCom Reply, Mastando/Sharp Declaration, para. 11 (same); NuVox/Socket Comments, Kohly


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                                     Federal Communications Commission                                     FCC 09-54


         24.    Commenters further allege that CenturyTel’s system for directory listings is “more
manual” and hence “error prone,”76 and that CenturyTel’s manual OSS has hampered its ability to
respond to competitors’ requests for repairs and installations in a timely manner.77 These allegations, if
true, put competitors at a disadvantage in the marketplace in competing for time-sensitive business
customers.
         25.     Local Number Portability. Commenters assert that CenturyTel has implemented several
anti-competitive practices with regard to local number portability. As noted, commenters allege, and
CenturyTel admits, that, because of its antiquated OSS, it has had to limit the number of service requests,
including number ports, that a given competitor could make in a single day.78 In addition, commenters
allege that CenturyTel has imposed several outright anti-competitive practices against them.79 For
example, opponents claim that CenturyTel has proposed, but not yet implemented, a requirement that
competitive LECs include “a CenturyTel subscriber’s Personal Identification Number” (PIN) — “a
randomly generated 11-digit number that appears only on the first bill that CenturyTel sends to a
subscriber” — “as one of the four fields required for all LSRs for porting submitted to CenturyTel.”80
Because customers are unlikely to remember that PIN or save their initial bill, commenters argue that
such a requirement, in practical effect, would force many customers to contact CenturyTel to retrieve the
PIN before being able to port their number to a new provider. This contact then gives CenturyTel
personnel an opportunity to try to retain the customer. Finally, Socket claims that its “customer[s] [have]




Declaration, para. 11 (noting that CenturyTel’s system “cannot provide addressing information or even whether a
specific customer location can even be served out of a particular end-office on a real-time or near real-time basis,”
creating processing delays of “several days”).
76
   DeltaCom Reply, Mastando/Sharp Declaration, para. 15; see also NuVox/Socket Comments, Kohly Declaration,
para. 25. At most, CenturyTel explains that inaccuracies are unintentional, Embarq/CenturyTel Apr. 10 Ex Parte
Letter at 5 n.13 (“Inaccuracies in directory lists are simply clerical accidents that must be resolved as the inaccuracy
is identified, and they are not caused by any intent to undermine competitive service providers.”), uncommon, id.
(claiming a “statistically minimal number of actual instances”), and someone else’s fault, id. (“CenturyTel and
Embarq have only limited control over the accuracy of the third party database providers’ listings, and they are
constantly vigilant in seeking that the listings are accurate.”).
77
  According to competitors, CenturyTel takes, on average, more than twice as long as Embarq to install DS1 lines
and to fulfill EEL orders. See NuVox/Socket Comments, Walsh/Cadieux Declaration, para. 7 (“From the time of
order, it takes CenturyTel, on average, sixteen (16) days to install a DS1. From the time of order it takes Embarq, on
average, seven (7) days.”); NuVox/Socket Comments, Kohly Declaration, para. 10 (“Embarq has a five-business day
interval for DS1 loop and EEL orders. In contrast, CenturyTel has a fifteen-business day interval for DS1 loop and
EEL orders.”); DeltaCom Reply, Mastando/Sharp Declaration, para. 14 (same); but see CenturyTel Reply, Glover
Declaration, para. 6 (CenturyTel consistently meets a nine business day interval.”). Moreover, commenters allege
that CenturyTel has failed to complete circuit installation in a timely manner 30% of the time in a recent survey,
NuVox/Socket Comments, Kohly Declaration, para. 16, and that CenturyTel has, in some instances, begun “marking
orders for xDSL-capable loops as complete when they, in fact, were not complete,” NuVox/Socket Comments,
Kohly Declaration, para. 16.
78
     Embarq/CenturyTel Apr. 10 Ex Parte Letter at 10.
79
  See, e.g., NuVox/Socket Comments, Kohly Declaration, para. 33 (“In Socket’s second complaint related to
CenturyTel’s refusal to port numbers in situations that CenturyTel maintained constituted location portability, the
MO PSC found that CenturyTel’s refusal violated its interconnection agreement with Socket. Specifically, the MO
PSC found that ‘The evidence shows that CenturyTel stands alone in its refusal to make such ports.’”).
80
  Charter Feb. 27 Ex Parte Letter, Cox/Hankins Declaration, paras. 9–10; see Embarq/CenturyTel Apr. 10 Ex Parte
Letter at 11.



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                                     Federal Communications Commission                                    FCC 09-54


indicat[ed] they were contacted by CenturyTel’s sales personnel and indicat[ed] the sales call was in
response to a Socket loop or port order.”81
        26.      Interconnection Agreements and Obligations. Commenters allege that CenturyTel has
manipulated the interconnection agreement process to disadvantage interconnecting competitors. Charter
claims that CenturyTel has not always negotiated in good faith with competitors but instead “has a history
of slow rolling the interconnection agreement negotiation process.”82 In addition, commenters contend
that CenturyTel at times has kept the corporate forms of its acquisitions, allegedly so that its competitors
must “maintain separate interconnection agreements, separate interconnection arrangements, and
generally conduct business separately with each,” even when those companies are “managed jointly with
many of the same people performing the same functions for each entity.”83
         27.     Commenters further allege that CenturyTel maintains separate corporate subsidiaries as a
shield against efficient interconnection arrangements. In Missouri, for example, CenturyTel uses a non-
incumbent LEC affiliate to manage its tandems and dedicated transport services, which commenters argue
sometimes causes unnecessary delays in maintenance and repairs and lets CenturyTel exempt itself from
unbundling interoffice transport for use in enhanced extended links (EELs).84 In cases where
CenturyTel’s interoffice transport is owned by this separate affiliate, CenturyTel insists that competitors
establish separate points of interconnection with each local operating company.85
         28.     Wholesale Pricing and Fees. Commenters allege that both CenturyTel and Embarq have
set prices and fees for certain wholesale services at anticompetitively high rates.86 Charter claims that
CenturyTel has imposed charges on certain service requests, indirectly raising the costs of porting a
number87 and complains that Embarq has charged it fees for listing a Charter customer in the Embarq
directory without providing any cost justification.88 Commenters also allege that both companies have
81
  NuVox/Socket Comments, Kohly Declaration, para. 35; see also Bresnan Apr. 20 Ex Parte Letter, Brester
Declaration, paras. 2–3 (explaining that when a customer called to disconnect her CenturyTel line, the representative
“told her that she would not be able to make 911 emergency calls if she used Bresnan’s phone service.”).
82
 Charter Feb. 27 Ex Parte Letter Cox/Hankins Declaration, para. 26. See also NuVox/Socket Comments, Kohly
Declaration, para. 33.
83
     NuVox/Socket Comments, Kohly Declaration, para. 30.
84
     Id., paras. 30–31; DeltaCom Reply, Mastando/Sharp Declaration, para. 18.
85
  NuVox/Socket Comments, Kohly Declaration, para. 30. See also DeltaCom Reply, Mastando/Sharp Declaration,
para. 18; Charter Feb. 27 Ex Parte Letter, Cox/Hankins Declaration, paras. 22, 25.
86
  See, e.g., Letter from CTI Networks, Inc., WC Docket No. 08-238 at 2 (Mar. 6, 2009); Letter from Michael H.
Pryor, Counsel for Bresnan Communications, LLC, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 08-238,
Attach. at 2 (June 18, 2009) (alleging that CenturyTel charges excessive fees to obtain CSRs, including $31.20 in
Montana and $20.00 in Colorado).
87
  Charter Feb. 27 Ex Parte Letter, Cox/Hankins Declaration, para. 8 (“In Texas, for example, CenturyTe1 charges
$11.29 for each LSR, including those for porting. In Wisconsin, CenturyTel charges an ‘Initial Service Order
Charge’ of $41.58 for each LSR, including port requests. . . . CenturyTel charged Charter a fee of $19.78 for port
requests from 2003 to 2007.”); Charter Feb. 27 Ex Parte Letter, Cox/Hankins Declaration, para. 8 (“CenturyTel has
proposed (and in all cases has advocated in arbitrations) the following Service Order Charges for port requests to be
applied in all three states: an Initial Service Order Charge of $14.02 for simple ports; an Initial Service Order Charge
of $65.77 for complex ports; and a Subsequent Service Order Charge of $7.53 for modification of an existing port
request.”).
88
  Charter Feb. 27 Ex Parte Letter, Cox/Hankins Declaration, para. 20; see also id. (“In recent interconnection
agreement negotiations, Embarq has attempted to impose a monthly recurring charge of between $0.40 and more
than $3.00 for each Charter customer listing that Embarq stores and maintains in Embarq’s directory assistance
database.”).



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                                     Federal Communications Commission                                 FCC 09-54


leveraged their “monopol[ies] in the provision of critical special access facilities”89 to charge
unreasonably high special access rates and to squeeze resale competitors out of the market.90
Commenters further allege that both companies have engaged in price-squeezing behavior.91
                   2.       Voluntary Commitments
         29.     In response to these alleged harms of the proposed merger, the Applicants offer a number
of voluntary commitments.92 In order to address concerns about CenturyTel’s wholesale operations, the
Applicants commit to “integrate, and adopt for CenturyTel CLEC orders, the automated [OSS] of Embarq
within fifteen months of the transaction’s close,” and in the interim, to “devote additional resources to its
existing manual CLEC order processing system to ensure that all local number portability requests are
promptly processed.”93 Applicants also commit to processing CenturyTel’s wholesale LNP orders
through Embarq’s OSS.94 Further, the CenturyTel companies commit to no longer limit the number of
ports that can be processed.95
         30.      In order to address allegations that CenturyTel insisted that competitors negotiate
separate interconnection negotiations for CenturyTel LECs within the same state, the Applicants commit
to “negotiate all [r]ural company interconnection contracts in a state at the same time and all [n]onrural
company interconnection contracts in a state at the same time.”96 In these unified negotiations, the
Applicants commit to limit requests for terms unique to individual operating companies in a state to
“rates, different physical interconnection points reflecting network configurations, or where unified terms
are otherwise technically infeasible.”97
         31.     In order to address concerns that Embarq’s wholesale performance might deteriorate
following the merger, the Applicants commit to “maintain substantially the service levels that Embarq has
provided for wholesale operations, subject to reasonable and normal allowances for the integration of
CenturyTel and Embarq systems.”98 They further commit, for a period of two years following the
transaction closing date, to make available to competitive LECs, and to the FCC upon request, quarterly
performance metric data comparing Embarq service levels to a benchmark value set at the 12-month

89
  Sprint Reply at 9; NuVox/Socket Comments at 35 (citing NuVox/Socket Comments, Walsh/Cadieux Declaration,
para. 4); NuVox/Socket Comments at 35 (“[T]here are few, if any, competitive sources of these facilities . . . .”).
For present purposes, we define special access as a dedicated transmission link between two places. See Special
Access Rates for Price Cap Local Exchange Carriers; AT&T Corp. Petition for Rulemaking to Reform Regulation of
Incumbent Local Exchange Carrier Rates for Interstate Special Access Services, WC Docket No. 05-25, RM-10593,
Order and Notice of Proposed Rulemaking, 20 FCC Rcd 1994, 1997, para. 7 (2005); see also SBC/AT&T Order, 20
FCC Rcd at 18304, para. 24; Verizon/MCI Order, 20 FCC Rcd at 18447, para. 24.
90
  Sprint Reply at 9 (suggesting that each carrier’s special-access rates are so high as to let them “realize obscene
profits”); NuVox/Socket Comments, Kohly Declaration, para. 19 (Embarq imposes “‘line conditioning’ charges on
DS1 loops” that “range from $100 to $350 per loop and are in addition to the standard non-recurring charge for DS1
loops of $330.83.”).
91
     See, e.g., NuVox/Socket Comments, Kohly Declaration, para. 38–39; Accelerated Reply at 2.
92
     See Embarq/CenturyTel June 22 Ex Parte Letter. These voluntary commitments are reproduced in Appendix C.
93
     Appendix C.
94
     Id.
95
     Id.
96
     Id.
97
     Id.
98
     Id.



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                                    Federal Communications Commission                                    FCC 09-54


average results achieved from April 1, 2008 through March 31, 2009.99 Applicants commit that “Embarq
will maintain service at a level that is no less than one standard deviation from the benchmark value, 90
percent of the time.”100
         32.     In order to address specific complaints in the record about certain of CenturyTel’s current
          101
practices, the Applicants commit to improve CenturyTel companies’ processing of wholesale orders,
including provisioning intervals for DS-1 Loops, hot cut processes, maintenance and repair, and
unlocking E-911 records.102 The CenturyTel and Embarq operating companies also commit to offer to
“Internet service providers for their provision of broadband Internet access service to ADSL capable retail
customer premises, ADSL transmission service in their respective territories that is functionally the same
as the services they offered as of the date of the merger closing.”103 Each local operating company’s
wholesale ADSL transmission offering will be set at “a price not greater than its retail price in the same
state for ADSL service that is separately purchased by customers who also subscribe to that local
operating company’s local telephone service.”104
          33.      We find that, as a theoretical matter, the merger may result in increased anticompetitive
behavior on the part of the Applicants. Consistent with the “Big Footprint” theory that the Commission
addressed in prior BOC mergers,105 we find that the increase in the size of CenturyTel’s study area
resulting from the merger may increase its incentive to engage in anticompetitive activity, although we
think it is likely to have a lesser effect in the instant case than in the prior BOC mergers.106 Additionally,
to the extent that CenturyTel has been less willing to cooperate with competitors than Embarq — as
numerous commenters allege — following the merger, CenturyTel may extend this behavior to the
Embarq territories.107 In order to address these potential harms, the Applicants have proposed a series of
voluntary commitments, summarized above and included in Appendix C. After consideration of the
record, we find that these voluntary commitments adequately address both of these concerns, and as
discussed below, we therefore make them enforceable conditions of the merger.

99
     Id.
100
      Id.
101
   See, e.g., Letter from John J. Heitmann to Marlene H. Dortch, Secretary, FCC, WC Docket No. 08-238 at 3 (May
21, 2009) (NuVox/Socket May 21 Ex Parte Letter) (arguing that the Commission should impose conditions
requiring the adoption of Embarq’s “best practices” in the CenturyTel territories).
102
      See Appendix C.
103
      Id.
104
      Id.
105
   See SBC/Ameritech Order, SBC/Ameritech Order, 14 FCC Rcd at 14797–98, paras. 192–93; see also
AT&T/BellSouth Order, 22 FCC Rcd at 5751–53, paras. 183–85; Bell Atlantic/GTE Order, 15 FCC Rcd at 14115–
16, paras. 176–78.
106
   As the Commission explained in the SBC/Ameritech Order, a merger between two incumbent LECs may increase
the merged entity’s incentive to engage in anticompetitive behavior by allowing it to capture or internalize a higher
proportion of the benefits of such anticompetitive strategies against regional or national competitors. See
SBC/Ameritech Order, 14 FCC Rcd at 14798, para. 193. The larger the resulting incumbent LEC is, the greater is its
ability to internalize these spillover effects. Because CenturyTel after the merger will still be smaller than AT&T or
SBC or Verizon was, it will be unable to internalize as large a proportion of the benefits of anticompetitive activity
as those companies. Accordingly, we do not find that the “Big Footprint” theory raises the same concerns here as it
did in past mergers.
107
   See SBC/Ameritech Order, 14 FCC Rcd at 14950, para. 571 (distinguishing between a determination that an
applicant has the requisite “character” qualifications to hold a Commission license and the public interest
determination concerning whether the benefits of a particular merger outweigh the harms).



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                                    Federal Communications Commission                                  FCC 09-54


V.         POTENTIAL PUBLIC INTEREST BENEFITS
         34.     We next consider whether the transaction is likely to generate verifiable, merger-specific
public interest benefits.108 In doing so, we ask whether the combined entity will be able, and is likely, to
pursue business strategies resulting in demonstrable and verifiable benefits that could not be pursued but
for the combination.109 As discussed below, we find that the proposed transaction is likely to generate
some merger-specific public interest benefits, although in some cases it is difficult to quantify the
magnitude of these benefits.
           A.      Analytical Framework
         35.     The Commission applies several criteria in deciding whether a claimed benefit is
cognizable. First, the claimed benefit must be transaction or merger specific (i.e., the claimed benefit
“must be likely to be accomplished as a result of the merger but unlikely to be realized by other means
that entail fewer anticompetitive effects”).110 Second, the claimed benefit must be verifiable. Because
much of the information relating to the potential benefits of a merger is in the sole possession of the
Applicants, they are required to provide sufficient evidence supporting each claimed benefit to enable the
Commission to verify its likelihood and magnitude.111 In addition, as the Commission has noted, “the
magnitude of benefits must be calculated net of the cost of achieving them.”112 Furthermore, the
Commission will discount or dismiss speculative benefits that it cannot verify. Thus, as the Commission
explained in the EchoStar/DirecTV Order, “benefits that are to occur only in the distant future may be
discounted or dismissed because, among other things, predictions about the more distant future are
inherently more speculative than predictions about events that are expected to occur closer to the
present.”113 Third, the Commission “will more likely find marginal cost reductions to be cognizable than


108
  See, e.g., AT&T/BellSouth Order, 22 FCC Rcd at 5760, para. 200; WorldCom/MCI Order, 13 FCC Rcd at
18134–35, para. 194.
109
  See, e.g., Verizon/América Móvil Order, 22 FCC Rcd at 6210, para. 34; Bell Atlantic/GTE Order, 15 FCC Rcd at
14130, para. 209; SBC/Ameritech Order, 14 FCC Rcd at 14825, para. 255.
110
   AT&T/BellSouth Order, 22 FCC Rcd at 5761, para. 202; EchoStar/DirectTV Order, 17 FCC Rcd at 20630, para.
189; see also Bell Atlantic/NYNEX Order, 12 FCC Rcd at 20063–64, para. 158 (“Pro-competitive efficiencies
include only those efficiencies that are merger-specific, i.e., that would not be achievable but for the proposed
merger. Efficiencies that can be achieved through means less harmful to competition than the proposed merger . . .
cannot be considered to be true pro-competitive benefits of the merger.” (footnote omitted)); SBC/Ameritech Order,
14 FCC Rcd at 14825, para. 255 (“Public interest benefits also include any cost saving efficiencies arising from the
merger if such efficiencies are achievable only as a result of the merger . . . .”); Applications for Consent to the
Transfer of Control of Licenses from Comcast Corporation and AT&T Corp., Transferors, to AT&T Comcast
Corporation, Transferee, MB Docket No. 02-70, Memorandum Opinion and Order, 17 FCC Rcd 23246, 23313,
para. 173 (2002) (explaining that the Commission considers whether benefits are “merger-specific”); cf. DOJ/FTC
Guidelines § 4.
111
   See AT&T/BellSouth Order, 22 FCC Rcd at 5761, para. 202; EchoStar/DirectTV Order, 17 FCC Rcd at 20630,
para. 190; see also Bell Atlantic/NYNEX Order, 12 FCC Rcd at 20063, para. 157 (“These pro-competitive benefits
include any efficiencies arising from the transaction if such efficiencies . . . are sufficiently likely and
verifiable . . . .”); BellSouth/Comcast Order, 17 FCC Rcd at 23313, para. 173 (explaining that the Commission
considers whether benefits are verifiable . . . .”); SBC/Ameritech Order, 14 FCC Rcd at 14825, para. 255; DOJ/FTC
Guidelines § 4 (“[T]he merging firms must substantiate efficiency claims so that the Agency can verify by
reasonable means the likelihood and magnitude of each asserted efficiency, how and when each would be achieved
(and any costs of doing so), [and] how each would enhance the merged firm’s ability to compete . . . .”).
112
  AT&T/BellSouth Order, 22 FCC Rcd at 5761, para. 202; EchoStar/DirectTV Order, 17 FCC Rcd at 20631, para.
190.
113
      EchoStar/DirectTV Order, 17 FCC Rcd at 20631, para. 190.



                                                        16


                                       Federal Communications Commission                                   FCC 09-54


reductions in fixed cost”114 because “reductions in marginal cost are more likely to result in lower prices
for consumers.”115
         36.     The Applicants bear the burden of demonstrating that the potential public interest benefits
of the proposed transfer outweigh the potential public interest harms.116 As such, the Commission applies
a “sliding scale approach” to evaluating benefit claims.117 Under this sliding scale approach, where
potential harms appear “both substantial and likely, the Applicants’ demonstration of claimed benefits
also must reveal a higher degree of magnitude and likelihood than we would otherwise demand.”118 On
the other hand, where potential harms appear less likely and less substantial, we will accept a lesser
showing to approve the merger.119
            B.       Analysis
        37.     The Applicants claim that the merger will likely result in several types of benefits. As
discussed below, while we do not accept all of the Applicants’ claims or their exact quantification of
benefits, we do agree that the merger is likely to result in benefits that will accrue to consumers.
         38.      The Applicants first claim that the transaction is likely to result in cost savings and
greater economies of scale and scope.120 The Applicants contend that the merger will generate synergies
of approximately $400 million annually within the first three years of operation.121 The Applicants
anticipate that the sources of these synergies include, “reduction of corporate overhead, elimination of
duplicate functions, realization of enhanced revenue opportunities, and achievement of increased
operational efficiencies through the adoption of best practices and capabilities from each company.”122
Commenters respond that the claimed benefits from these synergies are vague and not sufficiently
verifiable.123




114
      Id. at para. 191; see also AT&T/BellSouth Order, 22 FCC Rcd at 5761, para. 202.
115
  AT&T/BellSouth Order, 22 FCC Rcd at 5761, para. 202; EchoStar/DirectTV Order, 17 FCC Rcd at 20631, para.
191; see also DOJ/FTC Guidelines § 4.
116
  See AT&T/BellSouth Order, 22 FCC Rcd at 5761, para. 201; SBC/Ameritech Order, 14 FCC Rcd at 14825, para.
256; see also Bell Atlantic/NYNEX Order, 12 FCC Rcd at 20063, para. 157.
117
      AT&T/BellSouth Order, 22 FCC Rcd at 5761, para. 203 (internal quotation marks omitted).
118
   EchoStar/DirectTV Order, 17 FCC Rcd at 20631, para. 192 (quoting SBC/Ameritech Order, 14 FCC Rcd at
14825); cf. DOJ/FTC Guidelines § 4 (“The greater the potential adverse competitive effect of a merger . . . the
greater must be cognizable efficiencies in order for the Agency to conclude that the merger will not have an
anticompetitive effect in the relevant market. When the potential adverse competitive effect of a merger is likely to
be particularly large, extraordinary great cognizable efficiencies would be necessary to prevent the merger from
being anticompetitive.”).
119
      See, e.g., AT&T/BellSouth Order, 22 FCC Rcd at 5762, para. 203.
120
      See Embarq/CenturyTel Application at 6.
121
      See id., Ewing Declaration, para. 2.
122
      Id.
123
    See, e.g., COMPTEL Comments at 3–5 (arguing that conditions were necessary to make the merger benefit the
public interest); NuVox/Socket Comments at 8 (arguing that claimed benefits are not tangible); Joint Commenters
Apr. 3 Ex Parte Letter at 1, 2 (arguing that vague claims of efficiency are not verifiable benefits); Sprint Reply at 4
(stating that Applicant’s generic claims of customers benefiting from subscription to current and new services are
not verified merger specific benefits).



                                                           17


                                     Federal Communications Commission                             FCC 09-54


         39.      Second, the Applicants claim that the merger is likely to result in “more rapid
deployment of advanced services, including IPTV and next-generation broadband-based services.”124
Specifically, the Applicants contend that: (1) CenturyTel’s experience and investment in IPTV will be
able to be transferred to Embarq; (2) combining CenturyTel’s backbone network with Embarq’s network
will enable the realization of “transport” economies of scale; and (3) consumers will benefit from the
parties’ ability to share CenturyTel’s 700 MHz spectrum and Embarq’s experience with IP business
services.125
         40.      CenturyTel and Embarq both provide broadband to 87 percent of their respective
geographic territories today at speeds considered to be first generation data (or higher) per our 2008
Broadband Data Gathering Order.126 The Applicants have specifically committed in this proceeding to
substantially increasing the broadband service available to consumers in the areas they serve over the next
three years. The Applicants will offer retail broadband Internet access to 100 percent of the merged
company’s retail single-line residential and single-line business access lines within three years of the
transaction closing date.127 To meet this commitment, the merged company has committed to make
available retail broadband Internet access service with a download speed of 768 kbps to 90 percent of
such lines within three years using wireline technologies.128 The merged company will make available
retail broadband Internet access service in accordance with the Commission’s current definition of
broadband to the remaining 10 percent of lines using alternative technologies and operating arrangements,
including but not limited to satellite and terrestrial wireless broadband technologies. In addition, the
merged company has committed to make available retail broadband Internet access service with a
download speed of (1) 1.5 Mbps to 87 percent of the merged company’s retail single-line residential and
single-line business access lines within two years of the transaction closing date and (2) 3 Mbps to 75
percent of such lines within one year of the transaction closing date, 78 percent of such lines within two
years, and 80 percent within three years.129
        41.      Third, the Applicants claim that rural consumers will benefit. According to the
Applicants, the “combination of two mid-sized local wireline providers with investment grade ratings . . .
will position the combined enterprise to capitalize on the collective knowledge of local customers’ needs
and to deliver innovative product offerings to these rural and smaller markets.”130
        42.    Fourth, the Applicants claim that the combined entity will utilize the best of current
CenturyTel and Embarq systems to improve retail and wholesale systems.131 For example, the Applicants
expect the combined entity to adopt CenturyTel’s automated billing systems, thereby improving its


124
      Embarq/CenturyTel Application at 7–9; Embarq/CenturyTel Reply at 8–9.
125
      See Embarq/CenturyTel Application at 7–9; Embarq/CenturyTel Reply at 8.
126
   See Embarq/CenturyTel Reply at 15, Closz Declaration, para. 6, Glover Declaration, para. 4; Development of
Nationwide Broadband Data to Evaluate Reasonable and Timely Deployment of Advanced Services to All
Americans, Improvement of Wireless Broadband Subscribership Data, and Development of Data on Interconnected
Voice over Internet Protocol (VoIP) Subscribership, WC Docket No. 07-38, Report and Order and Further Notice of
Proposed Rulemaking, 23 FCC Rcd 9691, 9700–01, para. 20 & n.66 (2008) (2008 Broadband Data Gathering
Order).
127
      Appendix C.
128
      Id.
129
      Id.
130
      Embarq/CenturyTel Application at 9.
131
      See Embarq/CenturyTel Apr. 29 Ex Parte Letter at 3.



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                                     Federal Communications Commission                                      FCC 09-54


services to retail customers.132 In addition, they have committed that the merged entity will adopt
Embarq’s wholesale OSS, which will result in better service to wholesale customers, and make it easier
for other carriers to compete in the local service market.133
         43.     Fifth, the Applicants claim that the merger will benefit the public interest because
CenturyTel’s current access rates will “decline further than if it remained separate from Embarq because
of its commitment to utilize the CALLS plan $ 0.0065 Average Traffic Sensitive (ATS) target rate after it
converts to price cap status,” rather than the higher $0.0095 ATS target rate that otherwise would
apply.134 In the CenturyTel Price Cap Order, the Wireline Competition Bureau determined that “after the
merger, the combined company would have more than 19 access lines per square mile at the holding
company level” and must therefore lower its ATS rate.135
          44.     We conclude that the transaction is likely to result in some merger-specific benefits.
First, although we do not fully accept the Applicants’ claim of $400 million in cost savings, and although
we find that many of the claimed savings are likely to be in the form of reduced fixed costs rather than
reduced marginal costs, we nevertheless find that the merger is likely to result in savings in fixed and
marginal costs, some of which are likely to accrue to the benefit of consumers.136 Similarly, although we
do not necessarily accept all of the Applicants’ original claims concerning the broadband benefits likely
to result from the merger, we do find that the merger, as conditioned, is likely to result in more rapid
deployment of broadband services to consumers in the merged entity’s service territory, which is
principally rural. Significantly, Applicants commit to offer retail broadband Internet access service to
retail single-line residential and single-line business access lines according to a specific deployment
timetable that includes minimum speed commitments, as described earlier in this section.137
        45.       We also find that the merger should result in lower access rates because of the change in
regulatory status for CenturyTel, which should benefit long-distance callers. Finally, we find that one of
the major benefits of the proposed merger is that the Applicants can adopt each other’s best practices. In
particular, we find that, by adopting CenturyTel’s billing software and Embarq’s wholesale OSS, the
Applicants will be better able to serve both retail and wholesale customers, and that local competitors will
be better able to compete. In this regard, we are further encouraged by the Applicants’ commitment to


132
      Id.
133
   See, e.g., Appendix C (committing that within 15 months of the Transaction Closing Date, wholesale OSS will be
provided through the Embarq companies’ automated IRES and successor EASE system. The record indicates that
CenturyTel’s pre-merger wholesale ordering and provisioning systems are obstacles to wholesale providers seeking
to compete in the local telephone market. See, e.g., Joint Commenters Apr. 3 Ex Parte Letter at 5 (stating that “it is
hard to imagine interconnection and provisioning getting worse in CenturyTel areas”).
134
   Embarq/CenturyTel Apr. 29 Ex Parte Letter at 3. The Commission recently granted CenturyTel permission to
convert its current rate of return properties to price caps. See CenturyTel, Inc. Petition for Conversion to Price Cap
Regulation and Limited Waiver Relief, WC Docket No. 08-191, Order, DA 09-855 (WCB rel. Apr. 17, 2009)
(CenturyTel Price Cap Order). Applicants maintain that they made the commitment “even though the rules would
have allowed the CenturyTel formerly rate-of-return study areas to retain their primarily rural target rate if the price
cap conversion ha[d] been granted prior to the merger.” See Embarq/CenturyTel Apr. 29 Ex Parte Letter at 3–4.
135
      CenturyTel Price Cap Order at para. 7.
136
    Compare AT&T/BellSouth Order, 22 FCC Rcd at 5769–72, paras. 215–21 (crediting part of the Applicants’
claimed benefits where credible evidences existed to support a finding of some efficiency, but the precise magnitude
of the benefits was difficult to quantify), with GTE/Bell Atlantic Order, 15 FCC Rcd at 1412, para. 242 (finding
vague claims of operational efficiencies to be “difficult to evaluate” and “unpersuasive” where Applicants did not
demonstrate or state cost savings would be passed on to consumers).
137
      See Appendix C.



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                                     Federal Communications Commission                              FCC 09-54


implement Embarq’s OSS within 15 months. We find that these benefits will affirmatively advance
competition, thereby benefiting the public interest.138
VI.        CONCLUSION
         46.     We find that several significant public interest benefits are likely to result from the
proposed transaction. As discussed above, we also find, as several commenters suggest, that the proposed
transaction poses certain potential anticompetitive risks. In response to these concerns, the Applicants
offered several voluntary commitments. We find that these voluntary commitments adequately address
the potential competitive harms, and we therefore make these commitments an express condition of our
approval of this merger.
         47.     We further find that, in light of the commitments made by the Applicants, the potential
public interest benefits from the proposed merger, taken as a whole, outweigh any potential public interest
harms. We are particularly cognizant of the fact that the Applicants serve primarily rural areas.
Furthermore, we recognize that the telecommunications landscape in rural areas appears to be in
transition and more changes may result from the American Recovery and Reinvestment Act of 2009,139
comprehensive reform of the Universal Service Fund, and future transactions. Despite anticipated
changes, we stress that this merger is evaluated based on the record before us. It does not set a precedent
for future transactions, and we expect that the Applicants will comply with any changes to the law that
occur in the future. Accordingly, we find that the transaction, on balance, serves the public interest,
convenience and necessity.
VII.       ORDERING CLAUSES
         48.     Accordingly, having reviewed the applications and the record in this matter, IT IS
ORDERED, pursuant to sections 4(i) and (j), 214, 309, and 310(d) of the Communications Act of 1934,
as amended, 47 U.S.C. §§ 154(i), (j), 214, 309, 310(d), that the applications filed by Embarq and
CenturyTel for the transfer of control of the domestic section 214 authorizations set forth in Appendix B
and for the transfer of control of licenses and international section 214 authorizations set forth in
Appendix B ARE GRANTED.
        49.     IT IS FURTHER ORDERED, as a condition of this grant and pursuant to section 214(c)
of the Communications Act of 1934, as amended, 47 U.S.C. § 214(c), that Embarq and CenturyTel shall
comply with the conditions set forth in Appendix C of this Order, and such compliance shall be
enforceable by the Commission.
         50.     IT IS FURTHER ORDERED that the above grant shall include authority for Embarq
Corporation and CenturyTel, Inc. to acquire control of: (a) any license or authorization issued to Embarq
Corporation and CenturyTel, Inc. and their subsidiaries during the Commission’s consideration of the
transfer of control applications or the period required for consummation of the transaction following
approval; (b) construction permits held by such licensees that mature into licenses after closing; and
(c) applications filed by such licensees and that are pending at the time of consummation of the proposed
transfer of control.




138
   Sprint argues that Applicants must demonstrate that the merger will affirmatively advance competition, rather
than merely preserve it. See, e.g., Sprint Reply at 5 (quoting Verizon Wireless/Alltel Order, 23 FCC Rcd 11401,
para. 28; SBC/Ameritech Order, 14 FCC Rcd at 14738, para. 49). Given our finding that the transaction will
affirmatively advance competition, as described above, we need not comment on whether such a demonstration is in
fact necessary.
139
      American Recovery and Reinvestment Act of 2009, Pub. L. No. 111-5, 123 Stat. 115 (2009).



                                                        20


                              Federal Communications Commission                        FCC 09-54


        51.      IT IS FURTHER ORDERED, pursuant to section 1.103 of the Commission’s rules, 47
C.F.R. § 1.103, that this Memorandum Opinion and Order IS EFFECTIVE upon release.

                                             FEDERAL COMMUNICATIONS COMMISSION




                                             Marlene H. Dortch
                                             Secretary




                                               21


                                  Federal Communications Commission                                 FCC 09-54


                                                APPENDIX A
                                                Commenters

Comments                                                         Abbreviation
COMPTEL                                                          COMPTEL Comments
New Jersey Division of Rate Counsel                              NJ Rate Counsel Comments
NuVox Communications, Inc., NuVox Communications                 NuVox/Socket Comments
of Missouri, Inc., Socket Telecom, LLC


                                             Reply Commenters

Reply Comments                                                   Abbreviation
Accelerated Data Works, Inc.                                     Accelerated Reply
Communications Workers of America, International                 CWA/IBEW Reply
Brotherhood of Electrical Workers1
DeltaCom, Inc.                                                   DeltaCom Reply
Embarq Corp., CenturyTel, Inc.                                   Embarq/CenturyTel Reply
Independent Telephone & Telecommunications Alliance              ITTA Reply
National Association of State Utility Consumer Advocates         NASUCA Reply
New Jersey Division of Rate Counsel                              NJ Rate Counsel Reply
Sprint Nextel Corporation                                        Sprint Reply




1
  See Letter from Debbie Goldman, Telecommunications Policy Director and Jimmy Gurganus, Vice President,
Communications Workers of America and Edwin D. Hill, President, International Brotherhood of Electrical
Workers to Marlene H. Dortch, Secretary, FCC, WC Docket 08-238 (filed Mar. 5, 2009) (stating that it was no
longer necessary to participate in the proceeding).



                                                      22


                              Federal Communications Commission            FCC 09-54


                                         APPENDIX B

                               List of Licenses and Authorizations
                                 Subject to Transfer of Control

Domestic Section 214 Authorizations

File No.                    Authorization Holder
See WC Docket No. 08-238    Carolina Telephone and Telegraph Company LLC
                            Central Telephone Company of Texas
                            Central Telephone Company of Virginia
                            Central Telephone Company
                            CenturyTel Acquisition, LLC
                            CenturyTel Broadband Services, LLC
                            CenturyTel Broadband Wireless, LLC
                            CenturyTel Fiber Company II, LLC
                            CenturyTel Long Distance, LLC
                            CenturyTel of Adamsville, Inc.
                            CenturyTel of Alabama, LLC
                            CenturyTel of Arkansas, Inc.
                            CenturyTel of Central Arkansas, LLC
                            CenturyTel of Central Indiana, Inc.
                            CenturyTel of Central Louisiana, LLC
                            CenturyTel of Central Wisconsin, LLC
                            CenturyTel of Chatham, LLC
                            CenturyTel of Chester, Inc.
                            CenturyTel of Claiborne, Inc.
                            CenturyTel of Colorado, Inc.
                            CenturyTel of Cowiche, Inc.
                            CenturyTel of Eagle, Inc.
                            CenturyTel of East Louisiana, LLC
                            CenturyTel of Eastern Oregon, Inc.
                            CenturyTel of Evangeline, LLC
                            CenturyTel of Fairwater-Brandon-Alto, LLC
                            CenturyTel of Forestville, LLC
                            CenturyTel of Idaho, Inc.
                            CenturyTel of Inter-Island, Inc.
                            CenturyTel of Lake Dallas, Inc.
                            CenturyTel of Larsen-Readfield, LLC
                            CenturyTel of Michigan, Inc.
                            CenturyTel of Midwest - Michigan, Inc.
                            CenturyTel of Midwest-Wisconsin, LLC
                            CenturyTel of Minnesota, Inc.
                            CenturyTel of Missouri, LLC
                            CenturyTel of Monroe County, LLC
                            CenturyTel of Montana, Inc.
                            CenturyTel of Mountain Home, Inc.
                            CenturyTel of North Louisiana, LLC
                            CenturyTel of North Mississippi, Inc.
                            CenturyTel of Northern Michigan, Inc.
                            CenturyTel of Northern Wisconsin, LLC


                                               23


 Federal Communications Commission             FCC 09-54


CenturyTel of Northwest Arkansas, LLC
CenturyTel of Northwest Louisiana, Inc.
CenturyTel of Northwest Wisconsin, LLC
CenturyTel of Odon, Inc.
CenturyTel of Ohio, Inc.
CenturyTel of Ooltewah-Collegedale, Inc.
CenturyTel of Oregon, Inc.
CenturyTel of Port Aransas, Inc.
CenturyTel of Postville, Inc.
CenturyTel of Redfield, Inc.
CenturyTel of Ringgold, LLC
CenturyTel of San Marcos, Inc.
CenturyTel of South Arkansas, Inc.
CenturyTel of Southeast Louisiana, LLC
CenturyTel of Southern Wisconsin, LLC
CenturyTel of Southwest Louisiana, LLC
CenturyTel of the Gem State, Inc.
CenturyTel of the Midwest-Kendall, LLC
CenturyTel of the Southwest, Inc.
CenturyTel of Upper Michigan, Inc.
CenturyTel of Washingon, Inc.
CenturyTel of Wisconsin, LLC
CenturyTel of Wyoming, Inc.
CenturyTel Solutions, LLC
Coastal Communications, Inc.
Coastal Long Distance Services LLC
Coastal Utilities, Inc.
Embarq Communications, Inc.
Embarq Communications of Virginia, Inc.
Embarq Florida, Inc.
Embarq Minnesota, Inc.
Embarq Missouri, Inc.
Embarq Payphone Services, Inc.
Gallatin River Communications, LLC
Gallatin River Long Distance Solutions, LLC
Gulf Coast Services, Inc.
Gulf Communications, LLC
Gulf Long Distance LLC
Gulf Telephone Company
Madison River Communications, LLC
Madison River Long Distance Solutions LLC
Mebtel Long Distance Solutions LLC
Mebtel, Inc.
Spectra Communications Group, LLC
Telephone USA of Wisconsin, LLC
United Telephone Company of Eastern Kansas
United Telephone Company of Indiana, Inc.
United Telephone Company of Kansas
United Telephone Company of New Jersey, Inc.
United Telephone Company of Ohio
United Telephone Company of Pennsylvania LLC


                  24


                                 Federal Communications Commission                           FCC 09-54


                                United Telephone Company of Southcentral Kansas
                                United Telephone Company of Texas, Inc.
                                United Telephone Company of the Carolinas LLC
                                United Telephone Company of the Northwest
                                United Telephone Company of the West
                                United Telephone Southeast LLC


International Section 214 Authorizations

File No.                        Authorization Holder                        Authorization Number
ITC-T/C-20081126-00516          Embarq Communications, Inc.                 ITC-214-20050816-00337
ITC-T/C-20081126-00517          Embarq Communications of Virginia, Inc.     ITC-214-20050816-00336
ITC-T/C-20090330-00138          CenturyTel Long Distance, LLC               ITC-214-19990224-00099
ITC-T/C-20090330-00139          Coastal Long Distance Services LLC          ITC-214-19930720-00130
ITC-T/C-20090330-00140          Gulf Long Distance LLC                      ITC-214-19930622-00106
ITC-T/C-20090330-00141          Madison River Communications Corp           ITC-214-20000706-00385
ITC-T/C-20090330-00142          Madison River Long Distance Solutions LLC   ITC-214-19980820-00614


Section 310(d) Authorizations

File No.               Licensee                                             Lead Call Sign
0003657510             United Telephone Company of Indiana                  KN6109
0003663154             United Telephone Company of the Northwest            KOQ78
0003663160             Central Telephone Company of Texas                   WLC623
0003663165             United Telephone Southeast LLC                       KJH26
0003663168             United Telephone Company of the Carolinas LLC        KIC29
0003663173             Embarq Florida, Inc.                                 KIB95
0003663174             Carolina Telephone and Telegraph Company LLC         KD53122
0003663176             Embarq Missouri, Inc.                                KVI22
0003663178             United Telephone Company of Kansas                   WNYU738
0003663179             Central Telephone Company                            KPY34
0003663182             United Telephone Company of the West                 WBP56
0003663183             Embarq Minnesota, Inc.                               KQ5115
0003663187             United Telephone Company of Ohio                     KQH49
0003663188             United Telephone Company of Pennsylvania LLC         KNBM625
0003663190             Central Telephone Company of Virginia                KZT930
0003786855             Cascade Autovon Company                              KNKH863
0003786963             CenturyTel Broadband Services, LLC                   WQGC937
0003786968             CenturyTel Fiber Company II, LLC                     WPSR450
0003787027             CenturyTel of Adamsville, Inc.                       KNAJ618
0003787075             CenturyTel of Alabama, LLC                           WFY653
0003787078             CenturyTel of Arkansas, Inc.                         KNKG844
0003787079             CenturyTel of Central Arkansas, LLC                  KA53549
0003787082             CenturyTel of Central Indiana, Inc.                  WPCK831
0003787083             CenturyTel of Central Louisiana, LLC                 KRA982
0003787084             CenturyTel of Claiborne, Inc.                        WRM205
0003787085             CenturyTel of Colorado, Inc.                         WMQ709
0003787086             CenturyTel of Cowiche, Inc.                          WHA647
0003787088             CenturyTel of Eagle, Inc.                            KBC96


                                                  25


                               Federal Communications Commission                 FCC 09-54


0003787089              CenturyTel of Eastern Oregon, Inc.         KDJ674
0003787090              CenturyTel of Evangeline, LLC              KZX579
0003787091              CenturyTel of Idaho, Inc.                  KNHP406
0003787092              CenturyTel of Inter Island, Inc.           KNKI716
0003787099              CenturyTel of Lake Dallas, Inc.            KB6738
0003787100              CenturyTel of Larsen Readfield, LLC        WNKW579
0003787102              CenturyTel of Michigan, Inc.               KNKS204
0003787104              CenturyTel of Midwest-Michigan, Inc.       KNKS208
0003787669              CenturyTel of Missouri, LLC                KJE503
0003787670              CenturyTel of Montana, Inc.                KPG94
0003787671              CenturyTel of Mountain Home, Inc.          KDK315
0003787673              CenturyTel of Northern Wisconsin, LLC      WNSU421
0003787674              CenturyTel of Northwest Arkansas, LLC      WNSD631
0003787675              CenturyTel of Northwest Wisconsin, LLC     WNDD228
0003787676              CenturyTel of Odon, Inc.                   WPCK886
0003787678              CenturyTel of Ohio, Inc.                   KKK916
0003787680              CenturyTel of San Marcos, Inc.             KFD427
0003787683              CenturyTel of Southeast Louisiana, LLC     KZX578
0003787684              CenturyTel of Southern Wisconsin, LLC      KNGX448
0003787686              CenturyTel of the Gem State, Inc.          WDZ806
0003787687              CenturyTel of the Midwest-Kendall, LLC     KPRG595
0003787688              CenturyTel of the Midwest-Wisconsin, LLC   KNAZ701
0003787691              CenturyTel of the Southwest, Inc.          KNKG836
0003787692              CenturyTel of Upper Michigan, Inc.         KNKP350
0003787693              CenturyTel of Washington, Inc.             KGN894
0003787695              CenturyTel of Wisconsin, LLC               WPHN901
0003787696              CenturyTel of Wyoming, Inc.                KNKH883
0003787700              CenturyTel Security Systems, Inc.          WPCI524
0003787736              Coastal Utilities, Inc.                    KNKK960
0003787737              Gallatin River Communications, LLC         KA6609
0003787740              Gulf Telephone Company                     WPTC630
0003787744              Spectra Communications Group, LLC          KNCX720
0003788071              CenturyTel Service Group, LLC              WPJK533
0003788276              Actel, LLC                                 WPLM449
0003788283              CenturyTel Solutions, LLC                  WPLM450
0003788286              CenturyTel Broadband Wireless, LLC         WQGB236
0003788287              CenturyTel Investment of Texas, Inc.       KNLG238


Earth Station License

File No.                     Authorization Holder                  Call Signs
SES-T/C-20090330-00383       CenturyTel Televideo, Inc.            E5214, WY78




                                                26


                                 Federal Communications Commission                               FCC 09-54


                                              APPENDIX C

                                                Conditions

         The Applicants have offered certain voluntary commitments, enumerated below. Because we
find these commitments will serve the public interest, we accept them as conditions of our approval.
Unless otherwise specified herein, these commitments are effective as of the Transaction Closing Date,
which is defined for these purposes as the date on which the Applicants consummate the proposed
transaction approved herein. The commitments described herein shall be null and void if CenturyTel and
Embarq do not consummate the proposed transaction, and there is no Transaction Closing Date. Unless
otherwise specified herein, these commitments will expire three years from the Transaction Closing Date.

         It is not the intent of these commitments to restrict, supersede, or otherwise alter state or local
jurisdiction under the Communications Act of 1934, as amended, or over the matters addressed in these
commitments, or to limit state authority to adopt rules, regulations, performance monitoring programs, or
other policies that are not inconsistent with these commitments.

CenturyTel and Embarq Commitments

For Embarq operating companies, the merged company will maintain substantially the service levels that
Embarq has provided for wholesale operations, subject to reasonable and normal allowances for the
integration of CenturyTel and Embarq systems.

    ·   For two years after the Transaction Closing Date, the merged company will maintain
        service levels for the Embarq operating companies that are comparable to those Embarq
        wholesale customers experienced pre-merger.
    ·   Orders will be processed in compliance with federal and state law, as well as the terms of
        applicable interconnection agreements.
    ·   For two years after the Transaction Closing Date, Embarq will continue to produce and
        make available CLEC service performance reporting via its wholesale website consistent
        with state commission requirements, except during system integration. Such
        performance data is available to any requesting CLEC today with respect to its carrier
        specific data for each respective state. In addition, access to the system and/or
        performance data will be made available to the FCC upon request.
    ·   For two years after the Transaction Closing Date, the Embarq operating companies will
        maintain the following service metrics on a quarterly basis, separately for the states of
        Florida, Nevada, Ohio, North Carolina, Virginia, and all other states in the aggregate:
        Ø Pre-ordering – average response time to pre-order queries calculated in seconds, which
          measures the number of seconds from Embarq’s receipt of a query from a CLEC to the time
          Embarq returns the requested data to the CLEC.
        Ø Provisioning – average completed interval measured in days, which measures the average
          number of business days from receipt of a valid, error-free service request to the completion
          date in the service order entry system for new, move and change service orders, separately for
          all UNE, resale, and other CLEC services;
        Ø Repair/Maintenance – customer trouble report rate, which measures the total number of
          network customer trouble reports received within a calendar month per 100 units/UNEs,
          separately for all UNE, resale, and other CLEC services;



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                                Federal Communications Commission                              FCC 09-54


        Ø Repair/Maintenance – average time to restore (service), which measures the average duration
          from the receipt of the customer trouble report to the time the trouble is cleared, separately
          for all UNE, resale, and other CLEC services; and
        Ø Work Center – center responsiveness, which measures the average time it takes Embarq’s
          work center to answer a call expressed as the percentage of calls that are answered within 20
          seconds.
    ·   For the above-described metrics, Embarq will maintain a comparison of actual quarterly
        results to a benchmark value to be set at the 12-month average results achieved from
        April 1, 2008 through March 31, 2009. Embarq will maintain service at a level that is no
        less than one standard deviation from the benchmark value, 90 percent of the time.
    ·   These metrics will be reported manually during system integration and made available to
        CLECs and the FCC as described above.
    ·   The Applicants will combine each company’s wholesale systems into a single platform
        for the merged company. To integrate systems, new code must be developed and
        implemented. It is possible that wholesale customers may experience temporary
        conversion related issues as systems are converted. The merged company will use best
        efforts to minimize any potential impacts on wholesale customers.
    ·   A reasonable transition is anticipated whereby the Applicants intend to migrate onto their
        new systems on a market-by-market basis to facilitate a smooth transition.
    ·   Applicants will notify wholesale customers 30 days in advance of the anticipated
        integration of wholesale OSS on a market-by-market basis.


CenturyTel will integrate, and adopt for CenturyTel CLEC orders, the automated Operation Support
Systems (“OSS”) of Embarq within fifteen months of the transaction’s close.

    ·   This condition means that wholesale OSS will be provided through the Embarq
        companies’ automated IRES and successor EASE system.


In the interim, CenturyTel will devote additional resources to its existing manual
CLEC order processing system to ensure that all local number portability requests are
promptly processed.

    ·   As of April 20, 2009, CenturyTel had already added 36% more employees to the existing
        14 employees to handle port orders from carriers, for a total of 19. This number of
        employees will be maintained during the interim until integration. The merged company
        will continue to monitor the resources required to meet this commitment and will
        increase the number of employees necessary to port numbers in four business days and
        provide a firm order confirmation within one business day for normal levels of orders in
        compliance with FCC rules, subject to any requests by interconnectors for a later number
        porting date.
    ·   CenturyTel companies will not limit the number of ports that can be processed.
    ·   All CenturyTel CLEC customers are covered under this commitment.




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                                 Federal Communications Commission                              FCC 09-54


Applicants will improve CenturyTel companies’ processing of wholesale orders as follows:

    ·   Local number portability orders will be processed through Embarq OSS within fifteen
        months of the Transaction Closing Date.
    ·   Provisioning intervals for DS1 loops may be amended, upon request, to include a 9
        business day provisioning interval maximum.
    ·   No later than thirty months after the Transaction Closing Date, the CenturyTel companies
        will provision DS1 loops within 6 business days, 80 percent of the time.
    ·   Within 120 days of the Transaction Closing Date, the merged company will implement
        and make available to CLECs Embarq’s TELRIC-compliant coordinated loop and bulk
        loop hot cut processes for use with UNE loops, xDSL-capable UNE loops and x-DSL
        capable UNE subloops offered by Embarq and CenturyTel operating companies.
    ·   Within fifteen months of the Transaction Closing Date, maintenance and repair calls for
        DS1 or higher UNE services will be answered at the Embarq wholesale services
        operations center. In addition, the merged company will provide dedicated resources to
        handle wholesale maintenance and repair calls.
    ·   When a number is ported from CenturyTel, E-911 records will be unlocked at the time of
        porting. Trouble reports involving locked E-911 records will be addressed within 24
        hours.


The Applicants are willing to negotiate multiple interconnection contracts in a state at the same time in
most circumstances when such consolidated negotiations will aid in addressing common issues.

    ·   In many states, the Applicants operate both Rural and Nonrural companies with unique
        network and cost characteristics. For a period of two years after the Transaction Closing
        Date, the merged company is willing to negotiate all Rural company interconnection
        contracts in a state at the same time and all Nonrural company interconnection contracts
        in a state at the same time. These unified negotiations will include negotiation of
        common terms, but the company reserves the right during those unified negotiations to
        ask for individual terms which are unique to each operating company in the state. These
        individual terms are limited to rates, different physical interconnection points reflecting
        network configurations, or where unified terms are otherwise technically infeasible.
    ·   Each legal entity will continue to have its own interconnection contract, but these
        contracts will be negotiated jointly as indicated above. Joint negotiations will
        substantially ease the burden on interconnecting carriers.
    ·   As the carriers integrate operations, the companies expect that the merged company will
        naturally gravitate toward consistent terms in a state, albeit separately for Rural and
        Nonrural operating companies, subject to the necessary unique terms described above.
    ·   No Embarq or CenturyTel legal entity shall terminate or change the conditions of a
        currently effective interconnection agreement that is in its initial term as of the
        Transaction Closing Date, including the point of interconnection (POI), for a period of
        three years after the Transaction Closing Date, unless requested by the interconnecting
        party.




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                                 Federal Communications Commission                               FCC 09-54


    ·   No Embarq or CenturyTel legal entity shall terminate or change the conditions of any
        other effective interconnection agreement, including the POI, for a period of two years
        after the Transaction Closing Date, unless requested by the interconnecting party. This
        commitment excludes inactive agreements, which are those agreements that are not used
        by an interconnector to obtain service or for which a termination notice was sent prior to
        May 10, 2009.
    ·   A party may use § 252(i) to opt in to an interconnection agreement for no more than the
        remaining length of that particular agreement pursuant to the previous two bullets. No
        opt-ins are permitted for inactive agreements.
    ·   Neither the Applicants nor the interconnected carrier waive any rights to seek an
        amendment to reflect prior and future changes of law.
    ·   During this period, the interconnection agreement may be terminated only via the
        interconnected carrier’s request unless terminated pursuant to the agreement’s “default
        provisions.”


For a period of 12 months after the Transaction Closing Date, the merged company agrees not to file a
forbearance petition that seeks to alter the current status of any facility currently offered as a loop or
transport UNE under Section 251(c)(3) of the Act or to request any new pricing flexibility for special
access services in any market.


For three years after the Transaction Closing Date, the CenturyTel and Embarq operating companies
will offer to Internet service providers, for their provision of broadband Internet access service to ADSL-
capable retail customer premises, ADSL transmission service in their respective territories that is
functionally the same as the services they offered as of the Transaction Closing Date. Each local
operating company’s wholesale offering will be at a price not greater than its retail price in the same
state for ADSL service that is separately purchased by customers who also subscribe to that local
operating company’s local telephone service.

    ·   An ADSL transmission service shall be considered “functionally the same” as the service
        the CenturyTel or Embarq local operating company offered within its individual local
        operating company territory as of the Transaction Closing Date if the ADSL transmission
        service relies on ATM transport from the DSLAM (or equivalent device) to the interface
        with the Internet service provider, and provides a maximum asymmetrical downstream
        speed of up to 3.0 Mbps, where available (the “Broadband ADSL Transmission
        Service”).
    ·   Nothing in this commitment shall require any CenturyTel or Embarq local operating
        company to serve any geographic areas it currently does not serve with Broadband ADSL
        Transmission Service or to provide Internet service providers with broadband Internet
        access transmission technology that was not offered by that local operating company to
        such providers in its operating company territory as of the Transaction Closing Date.




                                                     30


                                Federal Communications Commission                                FCC 09-54


The merged company expects to make substantial additional investment in broadband services. The
merged company will offer retail broadband Internet access service to 100 percent of its broadband
eligible access lines within three years of the Transaction Closing Date.

   ·   To meet this commitment the merged company will make available retail broadband
       Internet access service with a download speed of 768 kbps to 90 percent of its broadband
       eligible access lines using wireline technologies within three years of the Transaction
       Closing Date. The merged company will make available retail broadband Internet access
       service in accordance with the FCC’s current definition of broadband to the remaining
       broadband eligible access lines using alternative technologies and operating
       arrangements, including but not limited to satellite and terrestrial wireless broadband
       technologies.
   ·   In addition, the merged company will make available retail broadband Internet access
       service with a download speed of (1) 1.5 Mbps to 87% of the broadband eligible access
       lines within two years of the Transaction Closing Date and (2) 3 Mbps to 75% of
       broadband eligible access lines within one year of the Transaction Closing Date, 78% of
       broadband eligible lines within two years of the Transaction Closing Date, and 80% of
       broadband eligible lines within three years of the Transaction Closing Date.
   ·   Broadband eligible access lines are defined as retail single-line residential and single-line
       business access lines.




                                                    31


                                 Federal Communications Commission                              FCC 09-54


                                      STATEMENT OF
                             ACTING CHAIRMAN MICHAEL J. COPPS

RE:    Applications Filed for the Transfer of Control of Embarq Corporation to CenturyTel, Inc., WC
Docket No. 08-238

        Today, we consider the merger of CenturyTel and Embarq—two wireline telecommunications
companies operating in largely rural areas. A key question presented by the proposed transaction is: will
rural America fare better or worse as a result of this transaction? Having looked at both the potential
benefits and the potential harms that could result from this merger, I find that the scale tips in favor of
permitting it to proceed.

        As one example, I believe that rural consumers and wholesale customers will benefit from the
merged entity’s commitment to maintain service levels consistent with the better of the management and
operating practices of the pre-merger companies. The service levels that Embarq has provided for
wholesale operations will be maintained and, with the adoption of Embarq’s Operation Support Systems
by CenturyTel, the newly merged company will be wholly modernized in its order processing. In
addition, the merged company will improve specific practices, including local number portability order
processing, and will streamline interconnection agreement negotiations.

         A major focus here is broadband and making sure that every corner of the country has high-
speed, value-laden technology and service. I believe that the steps which the applicants make toward
realization of this objective will move us in the right direction. As a result, the merged company will
provide consumers in its territory with services they may not have seen before and had not expected to see
in the near future.

         This particular commitment goes significantly beyond the commitments of previous mergers, but
it should not be construed as ideal. It should be regarded by no one as a standard or indicative of what to
expect from the Commission when it considers future mergers or, for that matter, the national broadband
plan that the Commission is currently pursuing. Our country is woefully behind many others in
delivering real broadband to our citizens and, going forward, will have to raise its aspirations and
expectations appreciably. Consumers, businesses, innovators and all of us as citizens should expect much
more from national broadband policy than we have seen in recent years. Fortunately, we now, finally,
have a genuine national commitment to get the job done.

        I thank the Commission staff, the applicants, stakeholders and other concerned parties, and my
Commission colleagues who put in significant time and effort to make sure that this transaction is
consistent with the needs of rural America and, more generally, the public interest.




                                                    32


                                 Federal Communications Commission                             FCC 09-54


                                     STATEMENT OF
                           COMMISSIONER JONATHAN S. ADELSTEIN

RE:    Applications Filed for the Transfer of Control of Embarq Corporation to CenturyTel, Inc., WC
Docket No. 08-238

        I am pleased to support the merger of Embarq and CenturyTel with a key set of pro-consumer,
voluntary, enforceable commitments. These commitments tip the public interest balance toward approval
because they address the concerns raised in the record that the combination will harm competition.

         The parties have agreed to measures that are essential to ensure the merger is in the public
interest. I am particularly pleased by the commitment to bring broadband at speeds of at least 3 Mbps to
at least 80 percent of their combined region, which is mostly rural, within three years, and 87 percent at
1.5 Mbps within two years, along with strong commitments to the remainder of its combined territory.
These buildout commitments go far toward bringing broadband and all its economic opportunities to
those the company will serve in rural America.

        Further, the combined company will reduce competitors’ costs of negotiating interconnection
agreements by using template contracts and granting more opt-in rights. The combined company will
also use pre-merger “best practices” to ensure that the new company’s wholesale operations improve
upon – not simply combine – legacy systems. The record is heavy with complaints that CenturyTel’s
largely manual OSS and number porting processes thwart competition. Today’s commitments will bring
Embarq’s automated processes to the CenturyTel region.

         Finally, I am especially pleased that the parties have agreed to additional commitments on key
wholesale products. The parties have agreed to make their retail ADSL offerings available on a
wholesale basis at prices at or below retail, thereby addressing a major competitive concern. The parties
have also agreed for 12 months to not seek either forbearance for UNE loops and transport, nor to seek
pricing flexibility for special access throughout their combined region. These commitments ensure a
measure of stability for competitors and consumers alike.

        With these commitments, today’s action is a win for consumers that would not have happened
without Chairman Copps leading from the top the type of merger review that has been missing from the
Commission for quite a while now. I also want to thank the Wireline Competition Bureau for the detailed
analysis that made the quality of this item and the voluntary commitments possible.




                                                    33


                                Federal Communications Commission                             FCC 09-54


                                    STATEMENT OF
                           COMMISSIONER ROBERT M. McDOWELL

RE:    Applications Filed for the Transfer of Control of Embarq Corporation to CenturyTel, Inc., WC
Docket No. 08-238

        I am pleased to support this merger and look forward to the consumer benefits that will result
from the combination of Embarq and CenturyTel. The merger will benefit consumers in many ways,
including creating synergies that will spur network investment and speeding the roll-out of broadband and
other advanced services throughout the combined entity’s service area.

        I am, however, concerned by the nature of some of the conditions that are attached to this merger.
I have repeatedly stated, and our precedent requires, that conditions should be narrowly-tailored to
remedy only merger-specific harms, not to implement policies that are better addressed in a rulemaking of
general applicability.

       Finally, as we work to reform FCC processes going forward, I hope that the Commission will
endeavor to meet its 180-day “shot clock” for merger reviews more consistently.




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Document Created: 2019-04-05 21:42:07
Document Modified: 2019-04-05 21:42:07

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