CenturyLink/Level 3 Seen Nearing FCC Clearance, Without Major New Conditions

CenturyLink appears close to winning FCC approval of its planned buy of Level 3 without many conditions, parties following the proceeding told us Wednesday. An agency spokesman confirmed a draft order on the transaction circulated among commissioners. Commissioner Mike O'Rielly voted to approve the item, an aide said. Other commissioner offices didn't comment.

"I assume the three Republicans are going to vote for the deal," said Phillip Berenbroick, senior policy counsel of Public Knowledge, which raised concerns in February comments (see 1702090035). "I don't know what the Democrats are going to do." FCC approval of communications license transfers is the final regulatory action needed by the companies. “We remain on track for a mid-to-late October close," a CenturyLink spokeswoman said.

CEOs of the combining companies spoke with Pai last week and urged expedited approval (see 1710170014). Wednesday was Day 182 of the FCC's nonbinding 180-day "shot clock" for the transaction. The California Public Utilities Commission on Wednesday released final text of its decision last week to OK CenturyLink/Level 3 (see 1710120038).

Berenbroick and others doubt the FCC will impose conditions beyond what other agencies already required or the companies accepted. DOJ agreed to provide antitrust clearance subject to a proposed consent decree requiring certain divestitures, and, separately, DOJ and other "Team Telecom" agencies said they wouldn't object on national security and law enforcement grounds, provided the commission requires CenturyLink compliance with a letter of assurances (see 1710020050). "This FCC is probably not going to go any further than DOJ did in conditioning the deal," Berenbroick said. The companies also committed to the FCC they wouldn't raise rates to 10 locations for five years (see 1710100033).

“I would be surprised if the commission added much beyond the divestitures DOJ imposed," said Cowen analyst Paul Gallant: "Other than CenturyLink and Level 3, no one has even lobbied the commission on the deal since June." A telecom industry official agreed: "I would be surprised if [the FCC] did more than DOJ."

When the FCC approves deals, it usually turns any Team Telecom terms into conditions and accepts the companies' voluntary commitments, said a telecom industry attorney. Sometimes it makes such commitments enforceable. If it's going to impose other conditions, there's usually significant debate in the record leading up to final action, which there hasn’t been in this case, the lawyer said. PK, Incompas, Windstream, Frontier Communications and a few others voiced concerns early this year, but none has been active lately in docket 16-403. The last filing by a critic was on June 21 by Telnyx, which urged the FCC to condition the transaction on commitments to assist enterprise and wholesale market competition through reasonably priced wholesale services (see 1704180020).

"The thing hanging over all of this" is the FCC's business data service deregulation, Berenbroick said, noting the commission order being challenged in court. When the FCC deregulates without adequate competition, "you get more consolidation and the competition never materializes," he said. "Consumers are left with a more consolidated and less innovative marketplace." He noted the previous, Democratic-run FCC cleared Verizon to take over XO Communications last year: "They put the cart before the horse." Democratic plans for some BDS regulation were scuttled under congressional pressure after Republican Donald Trump won the presidency (see 1611160048).