<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: August 25, 1994
McCAW CELLULAR COMMUNICATIONS, INC.
A Delaware Commission File I.R.S. Employer
Corporation No. 1-9854 No. 91-1379052
5400 Carillon Point, Kirkland, Washington 98033
Telephone Number (206) 827-4500<PAGE>
<PAGE> 2
Item 5. Other Events.
On August 25, 1994, the United States District Court for
the District of Columbia granted AT&T Corp. ("AT&T") a waiver
of Section I(D) of the Modification of Final Judgment, United
States v. American Telephone & Telegraph Co., 552 F. Supp. 131,
225-34 (D.D.C. 1982), aff'd sub nom. Maryland v. United States,
460 U.S. 1001 (1983) permitting AT&T to acquire McCaw Cellular
Communications, Inc.'s (the "Company") interest in cellular
properties controlled by Bell Operating Companies. A copy of
the Court's opinion and order is attached hereto as Exhibit
99(a).
The closing of the Company's proposed merger with AT&T
remains subject to certain other conditions. See the Company's
Current Report on Form 8-K dated August 8, 1994.
Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits.
(a) Financial statements of businesses to be acquired.
Not applicable.
(b) Pro Forma Financial Information.
Not applicable.
(c) Exhibits.
Exhibit
Number Description
99(a) Opinion and order, dated August 25, 1994<PAGE>
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
McCAW CELLULAR COMMUNICATIONS, INC.
R. GERARD SALEMME
-------------------------------
R. Gerard Salemme
Senior Vice President
Date: August 26, 1994<PAGE>
<PAGE>
EXHIBIT INDEX
Exhibit
Number
99(a) Opinion and order, dated August 25, 1994
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
- -----------------------------
UNITED STATES OF AMERICA, )
)
Plaintiff, )
)
v. ) Civil Action No. 82-0192
) (HHG)
WESTERN ELECTRIC COMPANY, )
INC., et al., )
)
Defendants. )
- -----------------------------
OPINION
On April 5, 1994, the Court denied without prejudice AT&T's
motion for an expedited ruling that section I(D) of the decree
entered in this case(1) is inapplicable to the proposed AT&T-
McCaw Cellular Communications ("McCaw") merger, or, in the
alternative, for an expedited waiver of any violation of the
decree that might arise as a result of the merger. See United
States v. Western Elec. Co., 154 F.R.D. 1 (D.D.C. 1994). Because
section I(D) of the decree prohibits AT&T from acquiring "the
stock or assets of any BOC,"(2) and because some of the cellular
systems in which McCaw currently owns a minority interest are
"BOCs" in that they are controlled by Regional Companies or
Regional Company affiliates, the Court held that their
acquisition by AT&T as a result of the merger would violate the
plain language of sections I(D) and IV(C) of the decree. Id. at
3-4.
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(1) See United States v. American Telephone and Telegraph
Co., 552 F. Supp. 131 (D.D.C. 1982), aff'd sub nom, Maryland v.
United States, 460 U.S. 1001 (1983).
(2) BOC is an acronym for "Bell Operating Company."
Although this Court has generally declined to use such acronyms
in its decisions because of its distaste for bureaucratic
terminology that only the initiated can understand, inasmuch as
BOC is actually a defined term in section IV(C) of the decree,
and because this definition is central to the Court's analysis in
both the April 5 Opinion and the instant Opinion, it will be used
here.
<PAGE>
<PAGE> 2
The Court next addressed the question of whether AT&T was
entitled to a modification of section I(D) or a waiver of any
violation occurring as a result of the proposed merger. Rejecting
AT&T's request for a "summary waiver," the Court concluded that the
appropriate inquiry was whether AT&T had satisfied the common law
decree modification standard endorsed by the Supreme Court in Rufo v.
Inmates of Suffolk County Jail, 112 S. Ct. 748 (1992). Concluding
further that AT&T had not yet made any "serious attempt" to meet that
standard, the Court decided that, on the record as it then existed,
AT&T's request had to be denied. United States v. Western Elec. Co.,
supra, 154 F.R.D. at 7.
AT&T has now filed a renewed motion for a waiver of section I(D)
of the decree insofar as it bars the proposed AT&T-McCaw merger.
This motion was supported by the Department Of Justice but opposed by
BellSouth Corporation. Various other interested parties have also
expressed their views.(3) Having determined that AT&T has now
satisfactorily demonstrated its entitlement under Rufo to the limited
waiver it seeks, the Court will grant AT&T's motion, subject to the
equitable conditions included in the Order issued with this
Opinion.(4)
- ----------------------
(3) An opposition to the motion was filed by a group of
interexchange resale carriers. In addition, responses were filed by
Ameritech, Bell Atlantic, MCI, U.S. West, and Nynex Corporation,
Pacific Telesis Group, and Southwestern Bell. Oral argument was
heard on the motion on July 21, 1994.
(4) Subsequent to the issuance of the Court's April 5 Opinion,
the United States filed with this Court a complaint against AT&T and
McCaw alleging that the proposed merger, if unrestrained, would
violate Section 7 of the Clayton Antitrust Act. See United States v.
AT&T, et al., C.A. 94-1555(HHG) (filed July 15, 1994). A proposed
final judgment, which proposes a settlement of that lawsuit by way of
consent decree, was filed simultaneously therewith, along with a
number of stipulations to which the parties have agreed. Pursuant to
these stipulations, the United States has agreed that the AT&T-McCaw
merger may proceed notwithstanding the antitrust violations alleged
in the complaint. In return, AT&T and McCaw have agreed to abide by
the provisions of the proposed final judgment pending the outcome of
the required "public interest" proceedings under the Tunney Act. See
15 U.S.C. Section 16.
The Court once again stresses, as it did in the April 5 Opinion,
that by resolving the narrow decree issues presented in this Opinion
the Court expresses no view with respect to the broader antitrust
issues raised in the newly filed action. Until the comment period
provided by the Tunney Act, 15 U.S.C. Section 16(b), has concluded,
and until the Court is presented with the full record in that case,
no conclusions can be reached with respect to the antitrust
allegations or the propriety of the proposed settlement.<PAGE>
<PAGE> 3
I
Although the Court reluctantly concluded in the April 5 Opinion
that Rufo provided the controlling standard for determining the
circumstances under which a grant of AT&T's modification or waiver
request might be warranted, on the record presented, the Court was
not required to apply Rufo in detail. As a consequence, during the
briefing of the current motion, as well as at oral argument, the
parties expressed some confusion and considerable disagreement with
respect to the exact nature of the Rufo test and how its elements
should be applied to the facts of this case. Therefore, a brief
summary of Rufo will serve as an initial roadmap for the Court's
analysis.(5)
The Rufo test has its foundation in Fed. R. Civ. P. 60(b), which
provides that a final judgment is subject to modification whenever
"it is no longer equitable that the judgment should have prospective
application." Therefore, according to the Supreme Court, "a party
seeking modification of a consent decree bears the burden of
establishing that a significant change in circumstances warrants
revision of the decree." Rufo, supra, 112 S. Ct. at 760. Assuming
that burden is met, "the court should [then] consider whether the
proposed modification is suitably tailored to the changed
circumstances." Id.
Changed circumstances warranting a modification may manifest
themselves through "either a significant change in factual conditions
or in law." Id. With respect to unforeseen factual conditions,(6)
the Supreme Court outlined three situations that might satisfy the
requirement: (1) where "changed factual conditions make compliance
with the decree substantially more onerous," (2) where the "decree
proves to be unworkable because of unforeseen obstacles," and (3)
where "enforcement of the decree without modification would be
detrimental to the public interest." Id. at 760 (citations omitted).
- ------------------------
(5) See also Vanguards of Cleveland v. City of Cleveland, 23
F.3d 1013 (6th Cir. 1994) (outlining application of Rufo).
(6) The Rufo Court noted that modification ordinarily would not
be appropriate where changed circumstances were actually anticipated
at the time the decree was entered. Thus, if "a party anticipated
changing conditions that would make performance of the decree more
onerous but nevertheless agreed to the decree, that party would have
to satisfy a heavy burden to convince a court that it agreed to the
decree in good faith, made a reasonable effort to comply with the
decree, and should be relieved of the undertaking under Rule 60(b)."
Id. at 760-61.
On the other hand, the Supreme Court also stated that
"[l]itigants are not required to anticipate every exigency that could
conceivably arise during the life of a consent decree." Id. at 760.<PAGE>
<PAGE> 4
With respect to changes in law, on the other hand, the Court
noted that:
A consent decree must of course be modified if, as it later
turns out, one or more of the obligations placed upon the
parties has become impermissible under federal law. But
modification of a consent decree may be warranted when the
statutory or decisional law has changed to make legal what
the decree was designed to prevent.
Id. at 762.
A second prong of the analysis established by the Supreme
Court requires that "[o]nce a moving party has met its burden of
establishing either a change in tact or in law warranting
modification of a consent decree, the District Court should
determine whether the proposed modification is suitably tailored
to the changed circumstance." Id. at 763. The requirement to
narrowly tailor any modification to resolve the problems created
by the change is necessary, according to the Court, because "a
consent decree is a final Judgment that may be reopened only to
the extent that equity requires." Id. at 764.
II
With the foregoing framework established, the Court will
undertake an analysis of the instant waiver request. It is worth
reiterating, however, particularly in light of the Supreme
Court's admonition that the judgment be reopened only when equity
requires, that the Court "will remain wary of attempts to alter
the agreement reached by the parties, and it will therefore apply
its discretion cautiously and sparingly." United States v.
Western Elec. Co., supra. 154 F.R.D. at 9. However, after
affording all parties an adequate opportunity to brief fully the
issues implicated by AT&T's request, and after careful
consideration of the relevant changes that have occurred
subsequent to divestiture as well as the limited nature of the
waiver sought, the Court concludes that AT&T has met its burden.
<PAGE>
<PAGE> 5
III
Changed Circumstances
It is clear that the decree was never intended to prevent
AT&T from competing in the cellular marketplace. In fact, with
the exception of the electronic publishing restriction contained
in section VIII(D),(7) the Court declined to impose any line of
business restrictions on AT&T. See United States v. American
Telephone and Telegraph Co., supra, 552 F. Supp. at 170. with
respect to cellular services specifically, the Court rejected the
arguments of some that AT&T should be prevented from competing in
such potential "bypass" technologies. Id. at l75.(8)
The hope at divestiture was that "bypass" technologies,
including cellular communications, might some day actually prove
a technical and economical alternative to the wireline
bottlenecks controlled by the Regional Companies, and thus create
competition in the local markets. Despite the concerns expressed
by some that such technologies might threaten to obsolete the
Regional Companies' wireline systems and, as a result, the
viability or the Regional Companies, the Court nevertheless
determined that such competition in the local markets was in the
public interest and should therefore be promoted. Id. As a
result, the Court concluded that to prevent AT&T's presence in
the local cellular market, in light of its technological and
financial strength, would have been "antithetical to the purposes
of the antitrust laws." Id. (9)
- ----------------------
(7) This restriction has since been lifted. See United
States v. Western Elec. Co., 1989 U.S. Dist. LEXIS 8646 (D.D.C.
July 18, 1989).
(8) "Bypass" technologies are those technologies that might
allow interexchange carriers (and others) to "bypass" the local
wireline networks of the Regional Companies and to reach directly
local subscribers. See id. at 175.
(9) In hindsight, of course, the Court's concerns with
respect to the impending threat to the Regional Companies from
bypass technologies have proved unfounded. Over ten years after
divestiture, and despite real strides in cellular and other
bypass technologies, there still appears to be no broad threat to
the Regional Companies' wireline businesses as a result of such
technologies.
<PAGE>
<PAGE> 6
It follows, of course, that the mere purchase by AT&T of
McCaw's cellular interests, without more, would present no decree
issues. AT&T is perfectly within its rights to enter the
cellular marketplace. But as the Court explained in the April 5
opinion, section I(D) of the decree is implicated by the proposed
AT&T-McCaw merger because certain of the cellular systems in
which McCaw owns a minority interest are majority-owned by
Regional Companies. That majority ownership directly confronts
the section I(D) prohibition against AT&T's acquisition of the
"assets of any BOC." The present inquiry, therefore, is whether
the current situation is the result of unanticipated changes --
either changes in fact or in law.
A
Changed Facts
The Court's April 5 Opinion explained in some detail the
initial bifurcation of cellular licenses by the FCC. See United
States v. Western Elec. Co., supra, 154 F.R.D. at 3. To recap,
"A" block licenses were initially awarded to firms unaffiliated
with exchange carriers, while "B" block licenses were initially
awarded to successors of the Bell System, i.e., the Regional
Companies. Subsequently, "B" block licenses have generally
remained in the hands of the Regional Companies or their
affiliates. In contrast, interests in the "A" block licenses
frequently have changed hands.(10) In fact, majority
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(10) AT&T has argued, not without some force, that the
FCC's licensing practices with respect to "A" block licenses
subsequent to entry of the decree resulted in an unforeseen and
significant change in facts which, standing alone, justifies the
waiver it seeks. In this regard, AT&T points to the FCC's
initial indication that it would use comparative hearing
procedures to determine the award of "A" block cellular licenses.
Due to an unexpectedly high number of license applications,
however, the FCC was forced to institute a lottery system in most
cellular markets. This created a strong incentive for the
pooling of interests and the creation of partnerships among firms
for the purpose of obtaining licenses. This fragmentation of the
ownership or cellular licenses, in turn, eventually led to the
partnerships that now exits between McCaw and the various
Regional Companies in the cellular systems at issue because the
Regional Companies purchased the interests of former partners of
McCaw or McCaw affiliates. BellSouth counters that,
notwithstanding its initial decision with respect to how to
proceed with the award of licenses, the FCC always left open the
possibility of using a lottery system. Because, as explained
below, the Court concludes that there has been an independent
change of factual circumstances warranting the waiver sought, the
Court need not pass on the merits of the AT&T-BellSouth
disagreement in this respect.<PAGE>
<PAGE> 7
interests in many of the "A" block licenses have been acquired by the
various Regional Companies outside their own wireline regions.
It was long the view of this Court that the decree prohibited
the acquisition of such interests. Because the ownership of these
interests resulted in the provision of extraregional exchange
services, and because the Court had interpreted the decree as
limiting the Regional Companies to providing exchange services within
their own regions, it followed that such acquisitions were
prohibited. See United States v. Western Elec. Co., 627 F. Supp.
1090, 1105-08 (D.D.C. 1986) (setting forth several bases for the
Court's conclusion, many of which related to the understanding of the
decree at or near the time it was approved). Nevertheless, the Court
of Appeals has taken a contrary view, see United States v. Western
Elec. Co., 797 F.2d 1082, 1090 (D.C. Cir. 1986) (finding no "explicit
or implicit geographic restriction . . . within the four corners of
the consent decree"), and this Court is of course bound by that
determination.
For purposes of the instant request, however, it is not
dispositive whether or not the language of the decree specifically
prohibited such purchases. Instead, it must be determined whether
the ownership of "A" block systems by the Regional Companies was
unforeseen. And on that question, even the Court of Appeals'
decision supports AT&T: "the parties and the district court never
considered the possibility that the BOCs might want to provide
exchange services outside their geographic region." Id. at 1091.(11)
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(11) And it is worth repeating that it was not simply the
Regional Companies' significant foray into extraregional exchange
services that was unanticipated. As this Court noted in 1984, "[n]o
one connected with the negotiation, the drafting, or the modification
of the decree envisioned that the Regional Holding Companies would
seek to enter new competitive markets on a broad scale within a few
months, let alone a few weeks after divestiture . . . ." United
States v. Western Elec. Co., 592 F. Supp. 846, 858 (D.D.C. 1984); see
also United States v. Western Elec. Co., 673 F. Supp. 525, 582
(D.D.C. 1987) (noting the surprising extent and breadth of the
Regional Companies' far-flung enterprises).
As AT&T correctly notes, the primary concern with respect to the
Regional Companies at divestiture was whether they could remain
financially viable on their own -- not whether they would soon be
acquiring other businesses. It was for this reason, among others,
that the Court assigned such established assets as the "Yellow Pages"
and the "Bell" name to them. United States v. Western Elec. Co.,
supra, 552 F. Supp. at 194; United States v. Western Elec. Co., 569
F. Supp. 1057, 1078-81 (D.D.C. 1983). <PAGE>
<PAGE> 8
There can be little doubt, therefore, that the current situation --
in which the "A" block cellular systems at issue have become "BOCs"
within the meaning of the decree -- was unforeseen. Although the decree
may not have specifically addressed the issue, "litigants are not
required to anticipate every exigency that could conceivably arise during
the life of a consent decree." Rufo, supra, 112 S. Ct. at 760. The
question remains, however, whether the Regional Companies' unforeseen
ownership interests in the "A" block cellular systems falls within any of
the three situations outlined by the Supreme Court in Rufo as a
significant change in fact that may warrant modification.(12)
1.Whether compliance with the decree
is substantially more onerous?
On the record presented, the Court concludes that it can here begin
and end its inquiry into the situations outlined in Rufo. The Regional
Companies' post-divestiture acquisition of interests in "A" block
cellular licenses has expanded significantly the scope of section I(D)
beyond what was contemplated in 1982. The section I(D) prohibition now
applies to any cellular system in which a Regional Company holds a
controlling interest -- now a substantial number. As indicated, the
court has found that restrictions on AT&T's entrance into the cellular
markets would not be in the public interest. Therefore, the substantial
expansion or the forbidden cellular markets as a consequence of the
developments described above is patently an unforeseen factual change
that has made compliance with the section I(D) restriction "substantially
more onerous."(13)
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(12) The Court notes that the second situation described by the
Supreme Court -- when a decree proves to be unworkable because of
unforeseen obstacles -- is not implicated in this instance. There has
bean no suggestion to that effect. Therefore, only the remaining
situations will be explored.
(13) BellSouth has argued that because section I(D) is implicated
by only a few of the systems in which AT&T will acquire McCaw's
interests, AT&T could go forward with the vast majority of the merger
without seeking any waiver. BellSouth appears to argue that it follows
that the restriction is not nearly as burdensome as AT&T contends. But
even assuming that the merger could be restructured and consummated
absent the offending systems, a contention AT&T disputes, see Tr. Oral
Argument, at 81, that does not alter the Court's conclusion that changed
circumstances have made compliance with section I(D) substantially more
onerous.
The question is not whether removing the offending systems from the
proposed merger would be onerous, but whether market conditions as a
whole have created a more onerous limitation on AT&T than was originally
anticipated. For the same reason, BellSouth misses the point by arguing
that AT&T would not be precluded from purchasing "A" block licenses had
it rushed to purchase the interests ahead of the Regional Companies.<PAGE>
<PAGE> 9
2. Would enforcement of the decree without modification
be detrimental to the public interest?
In light of the foregoing, no detailed discussion of the public
interest test is necessary. However, for purposes of clarity and
completeness, a few observations on this topic are appropriate.
Initially, it must be understood that the issue presented under
Rufo is not whether the AT&T-McCaw merger as a whole would be in the
public interest. As the Court has previously explained, that is the
matter to be addressed in the Tunney Act proceedings regarding the
antitrust complaint recently filed by the United States.(14)
Instead, the issue is simply whether a court refusal of the waiver
request, and thus a disallowance of the acquisition by AT&T of the
cellular systems implicated by section I(D), would be detrimental to
the public interest.
On the record before the Court, the court must conclude that a
denial of the waiver would not necessarily be detrimental to the
public interest. The implicated cellular systems currently are BOCs
and are thus subject to all of the interexchange and equal access
requirements and restrictions provided by the decree for the
protection of the public interest. Moreover, these systems would
remain BOCs after the merger. The issue thus narrowed, the Court
concludes that a waiver of section I(D) to allow AT&T to acquire
interests in the implicated systems would, at worst, prove
competitively neutral -- and would thus have little effect on the
public interest.
- ----------------------------
(14) The Court recognizes that the public interest inquiry in
the Tunney Act proceedings is not without consequences here. For
instance, if one accepts AT&T's contention that failure to grant the
waiver will "kill[] the merger", Tr. of Oral Argument, at 81, it
would appear that by denying the waiver the Court essentially would
be preempting the public interest issue to be decided in the Tunney
Act proceedings. This results because a merger that ultimately might
have been found to support the public interest would not be
consummated. On the other hand, if the Tunney Act proceedings result
in a finding that the merger as a whole would be detrimental to the
public interest, then there would be no equitable basis for granting
the instant waiver, notwithstanding the change in facts previously
discussed. The Court has concluded, however, that the necessity for
such mental gymnastics can be largely foreclosed through the
inclusion of equitable conditions in the Court's order. See infra
part IV.B. (requirement that AT&T divest offending cellular interests
if the Court is unable to conclude that the proposed final judgment
is in the public interest after conclusion of the Tunney Act
proceedings).<PAGE>
<PAGE> 10
B
Changed Law
As an alternative to changed factual conditions, the Supreme
Court in Rufo noted that significant changes in law might warrant a
decree modification. Once again, in light of the Court's conclusions
with respect to AT&T's showing of changed factual conditions, no
detailed analysis of the "changed law" inquiry is required. However,
the following should be noted.
First, it is clear that none of the relevant obligations imposed
by the decree have subsequently "become impermissible." See Rufo,
supra, 112 S. Ct. at 762. The section I(D) prohibition
unquestionably remains legal. However, the second situation
described by the Supreme Court -- whether "statutory or decisional
law has changed to make legal what the decree was designed to
prevent," Id. -- arguably presents a closer question.
In this regard, the relevant changes in law, each of which were
necessary prerequisites to the Regional Companies' acquisition of the
extraregional cellular interests, can be identified as (1) the
decision of the FCC in 1986 to allow the Regional Companies to
acquire "A" block licenses, and (2) the decision of the Court of
Appeals, reversing this Court, and holding that the decree does not
prohibit the provision of exchange telecommunications services
outside of the Regional Companies' respective regions.
Upon closer consideration it is clear that the second situation
is also inapplicable. As previously discussed, the Court of Appeals
has held that the decree does not prevent, and thus could not have
been "designed to prevent," the Regional Companies' acquisition of
extraregional cellular licenses. See United States v. Western Elec.
Co., supra, 797 F.2d at 1091. In fact, as previously discussed, the
Court of Appeals held that this possibility was never even
considered. Id. Notwithstanding this Court's view on that subject,
it is bound by the decision of the appellate court.(15)
- ----------------------------
(15) The Court need not address BellSouth's argument that the
matters previously described are not appropriately defined as
"changes" in law, but are merely "clarifications." See Rufo, supra,
112 S. Ct. at 763. The Court simply notes that to the extent the FCC
effected a 180 degree change of its position with respect to the
Regional Companies' acquisition of "A" block licenses, and to the
extent that the Court of Appeals reversed this Court on the precise
issue of whether the decree permitted such acquisitions, these hardly
constitute "clarifications." <PAGE>
<PAGE> 11
IV
Narrowly Tailored Waiver
Having concluded that AT&T has met its burden of
establishing a significant change in facts, the Court must next
address whether the proposed modification is "suitably tailored
to the changed circumstances." Rufo, supra, 112 S. Ct. at 763.
As set forth below, after considering the purpose and objective
of section I(D), as well as the limited nature of the instant
waiver request, the Court concludes that the waiver is suitably
tailored.
A
Purpose of Section I(D)
As the Court has previously noted, the "section I(D)
prohibition on the acquisition by AT&T of the stock or assets of
the Regional Companies was designed to prevent the re-emergence
of the telecommunications monopoly that was broken up in 1982."
United States v. Western Elec. Co., supra, 154 F.R.D. at 10. And
despite the passage of time and the sometimes adversarial
relationship that has developed between AT&T and the Regional
Companies over the years following divestiture, the Court remains
convinced that absent this prophylactic provision "there is a
real danger that at least some of the strides that have been made
in the last decade would be nullified or diluted." Id.
But for purposes of the instant motion, it must also be
recognized that the objective of section I(D) was not the
separation of AT&T and the Regional Companies merely for the sake
of separation. Instead, the objective was to remove the
incentive and opportunity for the local bottleneck monopolies to
discriminate in favor of AT&T's dominant interexchange
services.(16) And despite the literal violation with which the
Court is now confronted, that objective is not substantially
implicated here because (1) the "A" block cellular systems at
issue do not constitute bottleneck monopolies,(17) (2) the
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(16) The same rationale supports the decree's restriction
which prohibits the Regional Companies from providing
interexchange services. Absent such a provision, control of the
local bottleneck by the Regional Companies could be used to
discriminate in favor of themselves and to the detriment of
others. See United States v. American Telephone and Telegraph
Co., supra, 552 F. Supp. at 188-89.
(17) See United States v. Western Elec. Co., C.A. No. 82-
0192, at p. 8-9 (D.D.C. Feb 26, 1986).<PAGE>
<PAGE> 12
Regional Companies that own the controlling interests in the
systems do not control the local wirelines in the areas served by
the cellular systems and thus possess no monopoly power in those
areas,(18) and (3) the systems will remain subject to all
applicable decree restrictions after the merger because they will
continue to be "BOCs."(19)
Moreover, although the Court remains wary of any re-
combinations of AT&T and the Regional Companies,(20) even
BellSouth, which has most vigorously opposed AT&T's waiver
request from the outset, has previously taken the position that
section I(D) is implicated only when AT&T acquires an interest in
an entity in which a Regional Company possesses a controlling
interest.(21) Thus, it is disingenuous for BellSouth to argue
now that the bedrock principle of section
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(18) Id. Although the Court need not decide the issue
here, were AT&T seeking a waiver to acquire cellular interests in
"B" block licenses in partnership with a Regional Company, a
wholly different result might be warranted. Under such
circumstances, the Regional Company would control the local
wireline bottleneck in the area in which the "B" block cellular
system operates. The full implications of this distinction
simply were not developed on this record.
(19) It may also be worth noting that, although AT&T will
become a de facto partner with certain of the Regional Companies
in the systems at issue, AT&T, as successor to McCaw, will
directly compete with these same Regional Companies in other
areas where AT&T will own the "A" block license and the Regional
Company will own the "B" block license. Thus, even if the shared
interests of AT&T and the Regional Companies in these particular
systems raises the specter of the old Bell System, it is doubtful
that the same incentives to favor one another exist.
(20) See United States v. Western Elec. Co., supra, 154
F.R.D. at 4 n.6 (leaving open the issue of whether all
partnerships between AT&T and the Regional Companies, even those
in which a Regional Company owns less than a controlling
interest, implicate section I(D)).
(21) See Motion of BellSouth Corporation for a Declaratory
Ruling that AT&T's Proposed Acquisition of McCaw Cellular
Communications, Inc. Would Violate Section I(D) of the AT&T
Consent Decree and Cannot be Consummated Without a Modification
of the Decree, p. 1.
<PAGE>
<PAGE> 13
I(D) is the prohibition of every form of relationship between
these entities.(22)
The Court concludes, therefore, that the instant waiver,
limited and conditioned as discussed below and in the order
accompanying this Opinion, will not undermine the primary
objective or purpose of either section I(D) or the decree as a
whole.
B
The Waiver
It is essential to recognize that, notwithstanding the
instant waiver, section I(D) remains intact and viable. The
Court's decision here does not permanently or broadly modify the
reach of the provision and is not intended to eviscerate its
import. AT&T has merely sought and obtained a specific waiver of
the violation resulting from the company's acquisition of
interests in the several cellular systems currently jointly owned
by McCaw and a Regional Company.(23)
In addition, the Order accompanying this Opinion imposes a
number of conditions designed both to ensure that the objectives
of the decree are not undermined and to protect competition to
the extent legitimately appropriate within the bounds of the
decree.(24) With the exception of the final condition discussed
below, each has been proposed by AT&T and supported by The
Department of Justice.
- -------------------------
(22) See BellSouth Corporation's Opposition to AT&T's
Motion for a Waiver of Section I(D) of the Decree Insofar as it
Bars the Proposed AT&T-McCaw Merger, at p. 11-12; Tr. Oral
Argument, at p 39.
(23) Contrary to the argument of BellSouth, the Court is
convinced that AT&T's actions do not represent "an attempt to
recreate" the Bell System. See Tr. Oral Argument, at 21. In
fact, the Court is quite convinced, based upon what has
transpired in these proceedings, that AT&T desperately wishes
that no partnership, and thus no section I(D) issue, existed.
(24) The Court has long utilized such conditions. See,
e.g. United States v. Western Elec. Co., supra, 627 F. Supp. at
1109 ("the grant of waivers may be conditioned by the Court upon
provisions designed to protect competition"); United States v.
Western Elec. Co., supra, 592 F. Supp. at 870 ("the Court must
have the option of conditioning [a waiver's] approval upon the
adoption of conditions or safeguards"). This practice appears to
have been acknowledged and implicitly approved by the Court of
Appeals. See United States v. Western Elec. Co., 12 F.3d 225,
236-37 (D.C. Cir. 1993).<PAGE>
<PAGE> 14
The Order affirmatively requires AT&T and its affiliates to
take no action that would interfere with the provision of equal
access or with the nondiscriminatory procurement of equipment by
the systems at issue following the merger, and it also requires
AT&T, McCaw and their affiliates to exercise whatever management
or voting rights they possess to oppose any changes in the
exchange access practices of those systems. In short, AT&T is
precluded from interfering in any way with the decree
responsibilities of the "BOC" systems following the merger.
Likewise, the Order obligates AT&T and its affiliates to
oppose changes in the operations of the "BOC" systems that would
violate the decree's mandates as well as other changes that would
undermine the equal access provisions currently in place. The
Order also imposes on AT&T an obligation to timely notify the
Department of Justice of proposed changes within the BOC systems.
In addition, the Order imposes specific obligations on AT&T and
its affiliates to instruct their officers and employees of the
obligations imposed by this Opinion and Order.
The Order also requires AT&T, in its capacity as an
interexchange carrier, to refuse to accept exchange access from
any of the "BOX" systems on terms more favorable than those
available to other interexchange carriers. In addition, in its
capacity as an infrastructure equipment supplier, AT&T will not
be permitted to be the beneficiary of any discrimination in any
of these systems' procurement of telecommunication products and
services, provision of technical information, interconnection, or
use of facilities.
Finally, the Order requires AT&T to divest its interests in
the "BOC" systems here at issue should the Court determine, after
full consideration of the record to be generated in the Tunney
Act proceedings to be conducted regarding the AT&T-McCaw merger
in C.A. No. 94-l555(HHG), that the consent judgment proposed by
the Department of Justice, AT&T, and McCaw, is not in the public
interest and cannot be modified so as to satisfy that
requirement.
The Court has imposed this condition on the basis that,
should it ultimately determine that the AT&T-McCaw merger is
detrimental to the public interest, equity would not support a
waiver of the decree notwithstanding AT&T's demonstration that
changed circumstances have resulted in section I(D) becoming
substantially more onerous. Had the Tunney Act proceedings been
concluded as of this date, and had the Court rejected the
proposed consent judgment in that case, the instant waiver would
also have been rejected (or mooted). Under such circumstances,
it would be inequitable for AT&T to retain the benefit of this
waiver merely because the present proceedings <PAGE>
<PAGE> 15
preceded the Tunney Act inquiry. Pursuant to both Rufo and Fed.
R. Civ. P. 60(b), it is ultimately an equitable result that is
being sought.
V
As a final matter, the Court is compelled once again to
address the incessant attempts of the various Regional Companies
to tie to the instant waiver request both the Tunney Act
proceedings and their own recently filed motions seeking broad
and far-ranging relief.(25) Notwithstanding this Court's
previous rejection of similar arguments,(26) five Regional
Companies have continued to argue that any consideration of
AT&T's waiver request should be conditioned on entry of an order
granting the Regional Companies' request for generic wireless
relief.(27) Moreover, four of the Regional Companies have moved
to consolidate consideration of AT&T's waiver motion with the
generic wireless motion and the Tunney Act proceedings in the
related case.(28) The Court once again rejects these attempts.
Although the matters raised in the various motions are obviously
related, there is simply no reason that they should be decided
together.
- -----------------------
(25) The Regional Companies' motions seeking generic
wireless relief are currently being briefed. The motion filed by
four of the Regional Companies to vacate the decree in its
entirety has been referred to the Department of Justice for
investigation and review.
(26) See United States v. Western Elec. Co., supra, 154
F.R.D. at 5 & n.8.; United States v Western Elec. Co., C.A. No.
82-0192 (D.D.C. July 8, 1994).
(27) See BellSouth Corporation's Opposition, p. 24;
Response of Nynex Corporation, Pacific Telesis Group and
Southwestern Bell Corporation, p. 8; Response of U.S. West, Inc.,
p. 1.
(28) See Motion of BellSouth Corporation, Southwestern Bell
Corporation, Nynex Corporation, and Pacific Telesis Group. This
request is particularly ironic given Nynex Corporation's
contention, in an antitrust action brought by Bell Atlantic and
Nynex against AT&T and McCaw in the Eastern District of New York,
that Tunney Act proceedings should remain separate and
independent of even antitrust suits brought to enjoin the same
merger at issue in the Tunney Act proceedings. See Bell Atlantic
v. AT&T, Civ. No. 94-3682(ERK) (E.D.N.Y.).
<PAGE>
<PAGE> 16
Initially, there is no basis for insisting that the instant
motion be tied to final resolution of the Tunney Act proceedings.
Those proceedings, which will address the antitrust allegations
made by the United States with respect to the merger as a whole,
will encompass issues far broader than those at issue in the
instant waiver request. In fact, each of the antitrust concerns
addressed in the new matter would have arisen irrespective of the
wavier issue resolved herein. Moreover, as discussed above, the
Court has fashioned an appropriate condition for the current
waiver with respect to the ultimate outcome of the Tunney Act
proceedings. For that reason, the motion of the Regional
Companies for consolidation will be denied.
For similar reasons, it is not necessary to tie AT&T's
motion to the motions recently filed by the Regional Companies.
AT&T's motion addresses a specific and narrow issue. In this
respect, the motion is similar to dozens, if not hundreds, of
motions that the Court has previously considered and granted over
the years in favor of Regional Companies. The Regional
Companies' pending motions, in contrast, request broad and
significant changes in the decree -- one of the motions seeking
to vacate the decree entirely. The Regional Companies cannot
reasonably expect to fuse consideration of these broad requests
by simply tagging onto AT&T's relatively discrete motion.
Moreover, the attempts to tie resolution of the instant
waiver request to those of the Regional Companies, and more
specifically to the motion for generic wireless relief, is
logically flawed. As previously indicated, the only systems
implicated by the AT&T request will remain subject to all of the
restrictions which the Regional Companies would eliminate by way
of their wireless motion.(29) Thus, the grant of AT&T's waiver
does nothing to affect the decree's status quo with respect to
restrictions on wireless systems.
Finally, the Court cannot help but note the irony manifested
by the Regional Companies' insistence that this Court immediately
decide such significant and far-reaching policy issues as those
presented in their pending motions. Just as it appears that
Congress may now exercise its prerogative in the
telecommunications field, the Court is invited -- actually
prompted and prodded -- to quickly rule on issues obviously
implicated by the pending legislation. The Court is confounded
by the sudden show of confidence.
- ---------------------
(29) As BellSouth has repeatedly argued, AT&T could
acquire most of McCaw's interests without any implication of the
decree. See BellSouth Corporation's Opposition, p. 17; Tr. Oral
Argument, p. 89.<PAGE>
<PAGE> 17
It is no secret that the Regional Companies have argued for
many years, beginning shortly after divestiture, that a single
District Court Judge in a single courtroom in Washington, D.C.,
should not be overseeing the telecommunications policy of this
nation -- an assertion with which this Court has long agreed. Why
then, when it appears that their cry for relief by way of the
legislative route may soon be answered, should This Court rush to
decide these fundamental policy issues? Might not such a course
actually appear unseemly in light of the pending legislation?
Would it not be more appropriate to defer a decision, at least in
the short term, and thus defer to Congress?(30)
Whatever the appropriate course may be, the Court will not
unnecessarily delay consideration of the motions.(31) Should
Congress act in the near future and render moot some or all of
the issues raised by these motions, the Court will gladly defer.
Should that not occur, the Court intends to fully and fairly
consider the motions that have been filed, and to render a
decision on the merits in due course.
August 25, 1994 HAROLD H. GREENE
------------------------------
HAROLD H. GREENE
United States District Judge
- ------------------------
(30) It is true, of course, that during the trial of this
case, more than twelve years ago, the Court was requested by the
parties to delay further proceedings due to the possibility of
legislation. The Court refused. But at that time there was
absolutely no indication that such legislation was imminent, and
hindsight confirms that view. In contrast, news reports suggest
that both Congress and the Executive branch have recently
emphasized the need for telecommunications legislation and that
major strides toward the passage of such legislation have been
made.
(31) Of course, the Court will be in no position to act
upon the motion to vacate the decree until the Department has
completed its investigation.
<PAGE>
<PAGE> 1
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
- ------------------------------
UNITED STATES OF AMERICA, )
)
Plaintiff. )
)
v. ) Civil Action No. 82-0192
) (HHG)
WESTERN ELECTRIC COMPANY,. )
INC., at al., )
)
Defendants. )
)
- ------------------------------
ORDER
Upon consideration of the submissions of the interested
parties and the entire record in this case, and for the reasons
stated in the Opinion accompanying this Order, it is this 25th
day of August, 1994
ORDERED that the motion of BellSouth Corporation,
Southwestern Bell Corporation, Nynex Corporation, and Pacific
Telesis Group to consolidate consideration of the BOCs' motions
for generic wireless relief and AT&T's motion for a waiver of
section I(D) with the proceedings under the Tunney Act be and it
is hereby DENIED; and it is further
ORDERED that AT&T's motion for a waiver of section I(D) of
the decree insofar as it bars the proposed AT&T-McCaw merger be
and it is hereby GRANTED; and it is further
ORDERED that
1. Subject to each of the conditions stated in this Order,
the provisions of section I(D) of the decree are waived insofar
as they would prohibit AT&T from acquiring McCaw Cellular
Communications Corporation, and the interest that it, its wholly
owned subsidiaries, and its 52%-owned LIN Broadcasting Company
subsidiary (collectively referred to as "McCaw") currently have,
directly or indirectly, in the "A" Block cellular systems in
which a Bell Operating Company acquired a controlling or other
interest after divestiture and prior to the date of this order
(Los Angeles, Napa, Salinas, San Francisco, San Jose, and Santa
Rosa, California; Athens, Georgia; Lawrence and Topeka, Kansas; <PAGE>
<PAGE> 2
Pittsfield and Worcester, Massachusetts; Muskegon, Michigan;
Kansas City, St. Joseph, and St. Louis, Missouri; Las Cruces, New
Mexico; Anderson and Columbia, South Carolina; Dallas, Galveston,
and Houston, Texas); in Buffalo, New York, Pittsburgh,
Pennsylvania, or any other "A" Block system in which McCaw has an
interest and in which a BOC hereafter acquires a majority or
other interest from some other entity between this date and the
time that the AT&T-McCaw merger closes (all of which are "I(D)
Cellular Systems" within the meaning of this Order); and in the
Cellular One partnership.
2. The provision of section I(C) of the decree that "AT&T
and its affiliates shall take no action that interferes with the
BOCs' requirements of nondiscrimination established by section
II" shall remain in full force and effect. AT&T, its affiliates,
employees, and agents shall take no action that interferes with
the provision of equal access or the nondiscriminatory
procurement of equipment by I(D) Cellular Systems or that causes
a violation of section II (A) or II(B) of the decree. AT&T,
McCaw, and their affiliates shall exercise whatever management or
voting rights that AT&T and its affiliates have to oppose any
proposed changes in the existing exchange access practices or
procedures of any BOC cellular system that impair the
requirements of section II(A) and Appendix B of the decree as
long as those requirements remain in effect.
3. AT&T, its affiliates, employees, and agents shall
(1) oppose any proposed changes to the operation of
any I(D) Cellular System that would violate sections II(A)
or II(B) of the decree;
(2) oppose any proposed changes to the operation of
any I(D) Cellular System that would end presubscription or
carrier selection; give any provider of interexchange
services preferential access to customer information; deny
any interexchange carriers reasonable access to customer
information; allow any provider or interexchange services to
receive new kinds of interconnection to cellular systems,
other exchange access services, or interexchange traffic
routing functions that are not generally available to all
interexchange carriers and that were not publicly announced
at least 60 days before they were made available; or impose
new interconnection or access charges unless applicable to
all providers of interexchange service on a
nondiscriminatory basis and publicly announced at least 60
days before their imposition, unless such I(D) Cellular
System has been determined by the United States or by the
Court not to be a "BOC," and
<PAGE>
<PAGE> 3
(3) shall notify the Justice Department of any such
proposed change within 10 days of the time AT&T or its
affiliates learn of the decision for its adoption. The
Court further declares McCaw will be an "affiliate" of AT&T
upon the closing of the AT&T-McCaw merger, but that no
cellular system that is a B0C within the meaning of section
IV(C) of the Decree will be an affiliate of AT&T.
4. The requirements of paragraphs 2 and 3 of this Order
shall not apply to any corporation or partnership in which McCaw,
LIN or AT&T has no right or disclaims its rights to participate
in the selection of directors, officers, managers or general
partners; to participate in the management of the cellular
system; and to obtain nonpublic information relating to the
operation of the cellular system. AT&T shall identify to the
Department of Justice the cellular systems to be exempted from
paragraphs 2 and 3 pursuant to this paragraph 4, shall certify
that it does not have the rights and shall not exercise the
rights enumerated in this paragraph, and shall until the
withdrawal of such certification be enjoined from exercising such
rights.
5. AT&T and its affiliates shall: advise their officers
and other personnel with significant responsibility for these
matters of the obligations under this Order; admonish them that
it is the policy of AT&T and its affiliates that this Order be
complied with and that non-compliance will result in appropriate
disciplinary action, which may include dismissal; advise them
that AT&T's legal advisers are available at all reasonable times
to confer with such persons regarding any compliance questions;
and require each such officer and management personnel to sign
and submit to their employer, within 15 days of the entry of this
Order, a certificate acknowledging receipt of a copy of this
Order and a written directive of the employer's policy requiring
compliance with the policy and representing that the undersigned
has read this order and the policy and understands that
violations may result in appropriate disciplinary actions which
may include dismissal, and in conviction of contempt of court,
imprisonment, or fine.
6. AT&T and its affiliates shall further require any
officer or management personnel designated to serve as a voting,
management, or other representative of AT&T or its affiliate on
any cellular system that is a BOC under the Decree to sign and
submit to its employer, annually on the anniversary date of the
entry of this Order, a certificate attesting that the officer or
other management employee has complied with the requirements of
this Order in the past year and knows of no violation of equal
access requirements by BOC cellular systems other than those
previously reported to the Department of Justice.
<PAGE>
<PAGE> 4
7. AT&T shall not accept exchange access from any I(D)
Cellular System except on an unbundled, tariffed basis, that is
equal in type, quality and price to that provided to unaffiliated
interexchange carriers, unless such I(D) Cellular System has been
determined by the United States or by the Court not to be a BOC.
AT&T shall not accept the benefit of discrimination by any such
I(D) Cellular System in such System's procurement of
telecommunications products or services, establishment or
dissemination of technical information, interconnection and use
of facilities, or provision of new services and the planning for
and implementation of the construction or modification of
facilities used to provide exchange access and information
access.
8. If the Court should determine, after full consideration
of the record to be generated in the Tunney Act proceedings to be
conducted regarding the AT&T-McCaw merger in C.A. No. 94-
1555(HHG), that the final judgment proposed by the Department of
Justice, AT&T, and McCaw, is not in the public interest and
cannot be modified so as to satisfy that requirement, AT&T shall
be required, within 120 days of such determination to divest all
interests in the I(D) Cellular Systems.
HAROLD H. GREENE
----------------------------
HAROLD H. GREENE
United States District Judge
