Saturday, March 11, 2017

Consolidated/FairPoint Merger Merits Proper and Prompt Review in States

The proposed merger between Consolidated Communications and FairPoint Communications, if approved by regulators, would likely enhance competition for broadband services. So far, the transaction has sailed through federal agency reviews. Yet the proposed Consolidated/FairPoint merger still faces parallel reviews by several state public utility commissions (PUCs). Surely, the transaction deserves state PUC reviews that are timely and focused on likely competitive effects.
In a transaction worth $1.5 billion, Consolidated Communications and FairPoint Communications would combine their fiber networks, thereby expanding their Ethernet footprint and serving multi-location enterprise broadband customers as well as wireless backhaul customers with faster speeds and better reliability. The proposed Consolidated/FairPoint merger poses no apparent downside for residential or business customers of voice or broadband services. The two providers do not compete head-to-head anywhere. And neither party to the merger ranked in the top 10 for Ethernet ports in the U.S. at mid-year 2016.
Not surprisingly, the transaction speedily received antitrust clearance by the Federal Trade Commission. A review by the Federal Communications Commission, which elicited only one public comment, will likely be concluded in short order. However, the proposed Consolidated/FairPoint must still undergo a multiplicity of regulatory reviews by state PUCs. It has been reported that the transaction must receive approval in 17 states.
Mergers that are pro-competitive on their face should not be slowed down by numerous and overlapping reviews by federal and state regulatory agencies. More particularly, parallel state PUC reviews of merging telecommunications providers ought to consider only merger-specific competitive effects and be conducted in a timely manner. State PUC merger reviews that fail to follow such a course are highly problematic. As I explained in a March 6 blog post regarding the proposed CenturyLink/Level 3 merger:
State PUC regulators can succumb in merger reviews to many of the temptations that have plagued FCC reviews. Regulators can become preoccupied with non-merger specific issues and use their leverage to impose regulatory conditions on their approval that are unrelated to the transaction or perhaps more fit for industry-wide rulemakings.

Going forward, state PUCs reviewing the proposed Consolidated/FairPoint merger should consider only the transaction’s competitive impact. State PUCs should not impose unnecessary conditions and they should conclude their reviews promptly.