Proposed Modified Final Judgment and Memorandum in Support of Modification

DEPARTMENT OF JUSTICE

Antitrust Division

Proposed Modified Final Judgment and Memorandum in Support of

Modification

Notice is hereby given that a Motion to Modify, a Memorandum in

Support of Modification, a proposed Modified Final Judgment and a

Stipulation, and have been filed in the United States District Court

for the District of Columbia in United States of America v. MCI

Communications Corporation and BT Forty-Eight Company (``NewCo''), Civ.

No. 94-1317 (TFH).

As set forth in the plaintiff's uncontested Motion and Memorandum

In Support of Modification, a number of factual and legal events have

occurred since the entry of the existing Final Judgment, including

British Telecommunications plc's (``BT'') plan, announced last fall, to

purchase the remaining 80% of MCI Communications Corporation (``MCI'')

for $21 billion.

The existing final judgment, which stems from a 1994 acquisition by

BT of 20% of MCI's stock, contains provisions designed to remedy

allegations in the Complaint filed contemporaneously therewith, that BT

would successfully act on its incentives to use its market power in the

United Kingdom to discriminate in favor of MCI and/or BT's joint-

venture with MCI, at the expense of other U.S. telecommunications

carriers in the market for international telecommunications services

between the U.S. and the U.K. and the global network services market.

The proposed Modified Final Judgment retains and, in some cases,

strengthens these protections in order to take into account the full

integration of BT and MCI, as well as changed market conditions since

the existing Final Judgment was entered. Specifically, the proposed

Modified Final Judgment increases the amount of information that the

merged entity, who is named as a party to the modified decree, is

required to report in order to facilitate the detection of specific

instances of discrimination and to provide evidence that could be used

in support of complaints to the relevant U.S. and U.K. regulatory

agencies. The proposed Modified Final Judgment also revises the

confidentiality provisions of the existing decree in order to reduce

the risk that confidential, competitively sensitive information that BT

obtains in the course of its relationships with other U.S.

telecommunications providers are not disclosed to MCI through the

corporate parent or as a result of any subsequent corporate

reorganization. The proposed Modified Final Judgment also extends the

time period of the existing decree and enhances the Department's

ability to monitor and enforce compliance with the decree by giving the

Department access to the merged entity's documents and personnel,

wherever located.

Public comment on the proposed Modified Final Judgment should be

directed to Donald Russell, Chief, Telecommunications Task Force, Room

8104, U.S. Department of Justice, Antitrust Division, 555-4th Street,

N.W., Washington, D.C. 20001. Such comments and the Department's

responses thereto will be filed with the Court. In its filing, the

Department indicated that it would follow its standard 60-day comment

period. On

[[Page 37595]]

July 7, 1997, however, the Court granted defendants' motion to shorten

the comment period to 30 days.

Constance K. Robinson,

Director of Operations.

United States District Court for the District of Columbia

United States of America, Plaintiff, v. MCI Communications Corporation

and BT Forty-Eight Company (``NewCo''), Defendants

[Civil Action No. 94-1317 (TFH)]

Stipulation

It is stipulated and agreed by and between the undersigned

parties by their respective attorneys, that:

1. The Court has jurisdiction over the defendants and, for the

limited purpose of enforcing this Stipulation, over British

Telecommunications plc (``BT'').

2. The parties to this Stipulation consent to the modification

of the Final Judgment entered by this Court on September 29, 1994,

as shown in the attached Modified Final Judgment filed with this

Stipulation. The parties further consent that the Modified Final

Judgment in the form attached may be entered by the Court, upon any

party's motion, at any time after the completion of the procedures

specified in the United States' Explanation of Procedures, attached

to this Stipulation, without further notice to any party or other

proceedings, provided that plaintiff has not withdrawn its consent,

which it may do at any time before entry of the Modified Final

Judgment by serving notice on the defendants and BT and by filing

that notice with the Court.

3. BT and defendant MCI have entered into a Merger Agreement and

Plan of Merger dated November 3, 1996 (``Merger Agreement''),

whereby MCI shall be merged into a wholly-owned subsidiary of BT.

Upon completion of the merger, the parent company, BT, will be

renamed Concert plc (``Concert''). The parties have agreed that this

Court shall have jurisdiction over the parent company following the

consummation of the proposed transaction, and that the parent

company will be bound by the provisions of the Final Judgment and

the Modified Final Judgment when it is entered. The parties are

hereby estopped from arguing that this Court lacks venue or

jurisdiction over the subject matter of this action or over Concert.

The parties further agree that following its formation, Concert will

become a party to the Modified Final Judgment.

4. The parties to this Stipulation agree that as of the date of

this Stipulation and pending entry of the Modified Final Judgment,

MCI shall abide by the terms and conditions of Section II.A.3.ii of

the Modified Final Judgment as though the same were in full force

and effect as an order of the Court.

5. The parties to this Stipulation agree that if the Merger

Agreement is consummated before the Modified Final Judgment is

entered, they shall abide by all of the terms and conditions of the

Modified Final Judgment as though the same were in full force and

effect as an order of the Court.

6. The parties agree to notify the plaintiff in writing if MCI

or Concert hereafter files with the Federal Communications

Commission (``FCC'') or the United Kingdom's Office of

Telecommunications (``OFTEL'') an application to assign (or transfer

control of) any license or authorization held by MCI or BT relating

to telecommunications services between the United States and the

United Kingdom, or if Concert seeks to reorganize its corporate

structure so as to combine NewCo and BT in the same corporate entity

as set forth in Section VII.B of the Modified Final Judgment.

7. The agreements governing disclosure to United States

corporations that are referenced in Section IV.E of the Modified

Final Judgment, shall provide that: (1) Non-public information

received from the Department of Justice shall be used solely in

connection with the filing of a complaint with or providing

information to governmental authorities in the United States or the

United Kingdom, and not for any other purpose; (2) such information

shall not be disclosed to any persons other than those officers,

directors, employees, agents or contractors of the corporation who

need such information in order to file a complaint, to determine

whether a complaint should be filed or to provide information to any

governmental authority in the United States or the United Kingdom,

and to those government authorities (including, but not limited to,

the FCC and OFTEL); (3) all persons to whom any non-public

information is disclosed will be advised of the limitations on the

use and disclosure of such information; and (4) if unauthorized use

or disclosure occurs, the Department of Justice may revoke or

otherwise limit further access to such information by the

corporation or any person unless the Department of Justice decides,

in its sole discretion, that such revocation is unnecessary under

the circumstances. The Department of Justice may add further

conditions to any agreements referenced in Section IV.E of the

Modified Final Judgment if it determines that such conditions are

necessary for the protection of any non-public information. Any

actions taken by the Department of Justice to redress the

unauthorized use or disclosure of any non-public information shall

neither preclude nor give rise to defendant's right to pursue to

separate action against any person for the unauthorized use of

disclosure or such information.

8. In the event plaintiff withdraws its consent, as provided in

paragraph 2 above, or if the proposed Modified Final Judgment is not

entered pursuant to this Stipulation, this Stipulation shall be of

no effect whatever, and the making of this Stipulation shall be

without prejudice to any party in this or any other proceeding.

For Plaintiff United States of America.

Dated: July 2, 1997.

Yvette Benguerel,

D.C. Bar #442452,

David Myers

United States Department of Justice, Antitrust Division, 555 4th

Street, N.W., Washington, D.C. 20001, (202) 514-5808.

For British Telecommunications PLC.

Dated: July 2, 1997.

David J. Saylor,

D.C. Bar # 96826,

Hogan & Hartson,

Columbia Square, 555 Thirteenth Street, N.W., Washington, D.C. 20004-

1109, (202) 637-8679.

For MCI Communications Corporation.

Dated: July 2, 1997.

Anthony C. Epstein,

D.C. Bar #250829

Jenner & Block,

601 Thirteenth Street, N.W., Suite 1200, Washington, D.C. 20005, (202)

639-6080.

Certificate of Service

I, Tracy Varghese, hereby certify under penalty of perjury that

I am not a party to this action, that I am not less than 18 years of

age, and that I have on this day caused the Motion to Modify,

Memorandum In Support of Modification, Stipulation, and Modified

Final Judgment, to be served on the defendants by mailing a copy,

postage paid, to each of the defendants on the attached service

list.

Dated: July 7, 1997.

Tracy Varghese

Service List

BT Forty-Eight Company.

David J. Saylor,

Hogan & Hartson,

Columbia Square, 555 Thirteenth Street, N.W., Washington, D.C. 20004-

1109.

MCI Communications Corporations

Anthony C. Epstein,

Jenner & Block,

601 Thirteenth Street, N.W., Suite 1200, Washington, D.C. 20005.

United States District Court for the District of Columbia

[Civil Action No. 94-1317 (TFH)]

United States of America, Plaintiff, v. MCI Communications Corporation

and BT Forty-Eight Company, (``NewCo''), Defendants

Motion of the United States for Modifications of the Final Judgment

Plaintiff, the United States of America, moves this Court to

modify the Final Judgment in the above-captioned matter. Plaintiff's

motion is based on the following grounds:

1. On June 15, 1994, the United States filed its complaint in

the above-captioned case alleging that the acquisition by British

Telecommunications plc (``BT'') of a 20% ownership interest in MCI

Communications Corporation (``MCI'') created an incentive for BT,

using its existing market power in the United Kingdom, to favor MCI

at the expense of other United States international carriers in the

market or markets for international telecommunications services in

violation of Section 7 of the Clayton Act, 15 U.S.C. Sec. 18. The

complaint also alleged that the formation of a joint venture between

BT and MCI (``NewCo'') to provide seamless global network services

to multinational corporations created an incentive for BT to

[[Page 37596]]

use its dominance in the UK to favor the joint venture at the

expense of other global network service providers in the provision

of the UK segment essential to any seamless global network.

2. The Final judgment, filed contemporaneously with the

compliant and entered by the Court on September 29, 1994 after a

Tunney Act review, contains provisions designed to reduce the risk

that BT would use its market power to discriminate in favor of MCI

or the joint venture. The Final Judgment further provides that the

Department may seek a modification of the Final Judgment in order to

prevent discrimination. The potential discrimination need not have

been foreseen at the time the Complaint in this matter was filed. If

a motion for modification is uncontested, it is analyzed under a

public interest standard. After the Final Judgment was entered, BT

and MCI consummated BT's 20% acquisition and formed the joint

venture, NewCo.

3. In November 1996, BT and MCI entered into a Merger Agreement

and Plan of Merger pursuant to which MCI will be completely merged

into a wholly-owned subsidiary of BT. The new parent company, BT,

will then be renamed Concert, plc.

4. Both the US and UK governments have enacted reforms since the

final judgment was entered that altar the status of competition for

international traffic between the US and the UK. Despite these

changes, however, BT still maintains substantial market power in

local and domestic long distance services in the United Kingdom and

BT's dominance in these markets is unlikely to erode swiftly.

5. Accordingly, certain modifications to the final judgment

aimed at deterring and detecting discrimination need to be retained

and, in some cases, strengthened in order to ensure that the

resulting full integration of BT and MCI and changed market

conditions will not impair the effectiveness of any protections

afforded by the existing decree.

6. The proposed modified final judgment, filed contemporaneously

herewith, sets forth the specific modifications agreed to among the

parties. Plaintiff's Memorandum In Support Of Modification

demonstrates that the proposed modifications are necessary to

address the concerns raised by the full integration of BT and MCI as

well as certain regulatory changes and, therefore, are in the public

interest.

7. Defendants have authorized Plaintiff to state that they

concur in this motion.

8. The Department does not believe that this modification is

subject to the Tunney Act. Because of the important issues involved,

however, the Department intends to follow the comment procedures

outlined in the attached Explanation of Procedures. After completion

of the procedures, the Department will file another motion

requesting that the Court enter the attached Modified Final

Judgment.

Respectfully submitted,

Joel I. Klein,

Acting Assistant Attorney General.

Lawrence R. Fullerton,

Deputy Assistant Attorney General.

Charles E. Biggio,

Senior Counsel.

Constance K. Robinson,

Director of Operations.

Donald J. Russell,

Chief, Telecommunications Task Force.

Nancy M. Goodman,

Assistant Chief, Telecommunications Task Force.

Yvette Benguerel,

DC Bar #442452

David Myers

Attorneys, United States Department of Justice, Antitrust Division, 555

4th Street, N.W., Washington, D.C. 20001, (202) 514-5808.

Dated: July 7, 1997.

United States District Court for the District of Columbia

[Civil Action No. 94-1317 (TFH)]

United States of America, Plaintiff, v. MCI Communications Corporation

and BT Forty-Eight Company (``NewCo''), Defendants

Memorandum of the United States in Support of Modification of the Final

Judgment

The United States submits this memorandum in support of its

motion to modify the Final Judgment entered in the above-captioned

case. Contemporaneously with filing its motion and memorandum, the

United States is also filing a proposed modified final judgment and

a Stipulation wherein the parties have agreed to be bound by the

provision of modified final judgment following consummation of the

merger and pending entry of the modified final judgment by the

Court. A number of factual and legal events have occured since the

entry of the exisiting final judgment, including an agreement among

the parties to enter into a full merger. The proposed modifications

ensure that these events do not impair the effectiveness of the

existing Final Judgment, and are in the public interest.

I. Introduction and Background

On June 15, 1994, the United States filed its complaint in the

above-captioned case. The complaint alleged, inter alia, that the

acquisition by British Telecommunications plc (``BT'') of a 20%

ownership interest in MCI Communications Corporation (``MCI'')

created an incentive for BT, using its existing market power in the

United Kingdom, to favor MCI at the expense of other United States

international carriers in the market or markets for international

telecommunications services between the United States and the United

Kingdom. See Competitive Impact Statement of the United States

Department of Justice (hereinafter ``CIS''), dated June 15, 1994, at

11. The complaint also alleged that the formation of a joint venture

between BT and MCI to provide seamless global network services to

multinational corporations created an incentive for BT to use its

dominance in the UK to favor the joint venture at the expense of

other global network service providers in the provision of the UK

segment essential to any seamless global network. See CIS at 14-17.

The complaint recognized that BT could effectuate this

discrimination in numerous ways, including: (1) Offering MCI and the

joint venture interconnection and other telecommunications services

on more favorable terms and conditions than MCI's competitors and/or

providing MCI and the joint venture with advance notice of planned

changes to BT's network; (2) providing MCI and the joint venture

with confidential, competitively sensitive information that BT

obtains from other telecommunications providers through BT's

correspondent relationships and/or through BT's provision of

interconnection or other telecommunications services within the

United Kingdom; and (3) discriminating against other carriers by

diverting some or all of BT's international switched traffic between

the United Kingdom and the United States to MCI or the joint

venture, outside the correspondent system.\1\ If other carriers

could not respond to this diversion by diverting their own traffic,

they would be left with larger net settlement payments (due to the

loss of BT's offsetting minutes of traffic), placing them at a

competitive disadvantage to MCI. It would also give BT an incentive

to keep the US-UK accounting rate high. See id.

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\1\ Under the correspondent system, carriers from one nation set

up correspondent relationships with carriers from other nations to

facilitate the movement of traffic between their respective

countries. The negotiated rate at which such traffic is carried is

called the Accounting Rate. In order to prevent foreign monopoly

carriers from discriminating against United States carriers by

threatening to send all of their traffic to any one US carrier

unless the other carriers accepted a higher accounting rate (a

practice known as ``whipsawing''), the FCC promulgated the

International Settlements Policy or ISP. Pursuant to the ISP, each

carrier must pay \1/2\ of the accounting rate, known as the

Settlement Rate, for the completion of calls on the corresponding

carrier's network; all US carriers must be charged the same

accounting rate (non-discrimination); and traffic must be returned

to a particular US carrier in proportion to the traffic received

from that US carrier (proportionate return). Because the US sends

more minutes of traffic to the UK than UK carriers send to the US,

US carriers end up with a net settlement outpayment to UK carriers

equal to the settlement rate multiplied by the imbalance of minutes.

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The final judgment, filed contemporaneously with the complaint

and entered by the Court on September 29, 1994 after a Tunney Act

review, contains three categories of provisions designed to remedy

the anticompetitive effects of the partial acquisition: (1)

Transparency provisions;\2\ (2) confidentiality provisions;\3\ and

(3) a provision designed to address the diversion issue.\4\ These

provisions were specifically designed to diminish the risk that BT

would successfully act on its incentive to use its

[[Page 37597]]

market power to discriminate in favor of MCI or the joint venture.

After the final judgment was entered, BT and MCI consummated BT's

20% acquisition and formed the joint venture, NewCo.\5\

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\2\ See Sections II.A.1-5.

\3\ See Sections II.B-D.

\4\ See Section II.E.

\5\ The joint venture ultimately came to be known as Concert

Communications Company, not to be confused with Concert plc (the

proposed name of the fully merged company as discussed below).

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The final judgment also specifically provided a mechanism for

allowing modifications of the judgment to expand, alter or reduce

its terms in order for the United States to maintain the status quo

or to prevent new forms of discrimination that would result in harm

to United States consumers.\6\ Under the terms of the decree, the

event or change that triggers the need for the modification need not

have been foreseen at the time the final judgment was entered. Such

an event could include new forms of discrimination that were not

anticipated at the time the final judgment was entered and thus, not

referenced or described in the CIS. See CIS at 32-33, 38.\7\ Whether

based on foreseen or unforeseen circumstances, a modification that

is uncontested is reviewed under a public interest standard. Id. at

31-32. The modifications proposed herein have been agreed to by all

parties, and this memorandum, therefore, analyzes the proposed

modifications under a public interest standard.

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\6\ The modification provision of the final judgment also allows

the parties to seek changes in order to prevent undue hardship to

them.

\7\ Before concluding that discrimination against any particular

competitor of MCI or NewCo necessitates modification of the final

judgment, however, the Department would ordinarily first inquire

whether the injured party had availed itself of existing regulatory

remedies in the United States or the United Kingdom. See CIS at 32-

33.

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II. Factual and Legal Events Occurring Since the Final Judgment Was

Entered

The United States seeks to modify the final judgment, in part,

because BT and MCI have now agreed to enter into a full merger. In

November 1996, a Merger Agreement and Plan of Merger was executed

pursuant to which MCI shall be merged into a wholly-owned subsidiary

of BT. The new parent company, BT, will be renamed Concert plc.

Although the Department thoroughly analyzed all of the competitive

consequences associated with BT's initial 20% acquisition of MCI,

the Department undertook an evaluation of the changes in market

conditions since 1994 in order to determine whether a modification

of the existing decree was appropriate under the circumstances.

In addition to the full merger of BT and MCI, both the US and UK

governments have enacted reforms since the Final Judgment was

entered that alter the status of competition for international

traffic between the US and the UK. Theses changes were designed to

move international telecommunications services from the highly

regulated correspondent system characterized by few providers (many

of which have substantial market power in their home countries) and

above-cost prices, to a more competitive environment. As discussed

in more detail below, these regulatory changes and, in particular,

the granting of International Simple Resale (``ISR'') licenses,\8\

have been somewhat effective in lowering the US-UK accounting rate.

Despite these changes, however, the US-UK accounting rate is still

above-cost and, thus, BT's incentive to discriminate against its and

MCI's competitors still exists.

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\8\ International Simple Resale or ISR means the use of

telecommunications facilities to carry international

telecommunications traffic without measuring usage (e.g., over

private leased lines), where such traffic is carried over the public

switched network in the nation where it originates and where it

terminates.

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In addition to BT's incentive to discriminate, concerns about

BT's ability to discriminate against its and MCI's competitors also

still exist. BT maintains substantial market power in local and

domestic long distance services in the United Kingdom. Currently, BT

has an 80% share of switched long distance revenues in the UK.

Although cable companies have made some inroads into the local

market, BT maintains a 91% share of local revenues. BT's position in

these markets is unlikely to erode swiftly.\9\ For the foreseeable

future, international carriers will be required to obtain

interconnection and other services from BT in order to terminate

calls in the UK.

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\9\ These figures have not changed substantially since the

complaint was filed in this case. See CIS at 7-8. Although UK

regulators have taken steps to encourage competition, they do not

require BT to unbundle local loops or to provide dialing parity and/

or presubscription to competing providers. Such requirements have

been imposed in the US to speed the introduction of competition into

telecommunications markets.

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As a result of its new analysis, the Department has concluded

that provisions of the Final Judgment aimed at deterring and

detecting discrimination need to be retained and, in some cases,

strengthened. In addition, certain modifications are required in

order to ensure that the resulting full integration of BT and MCI

will not impair the effectiveness of the protections afforded by the

existing decree.

III. Explanation of the Proposed Modifications

BT's merger with MCI, combined with the regulatory changes

outlined above, justify modifying certain substantive and procedural

provisions of the existing Final Judgment. These proposed

modifications are discussed seriatim.

A. Transparency Provisions

Sections II.A.1-6 of the existing Final Judgment require MCI and

NewCo (the joint venture of BT and MCI that provides global network

services), to report certain information, including but not limited

to prices, terms and conditions of interconnection and other

arrangements between MCI, NewCo and BT, data concerning the quality

of service provided by BT to MCI and NewCo, and the total minutes of

traffic that MCI sends to and receives from BT in each accounting

rate category. See CIS at 18-26. These provisions were included to

allow principal competitors of MCI and the joint venture (who have

signed confidentiality agreements with the US government) to monitor

whether BT is discriminating in favor of these entities and to

provide evidence that could be used in support of complaints to the

relevant US or UK government agencies.

The proposed modified final judgment retains all of the

transparency provisions of the existing final judgment with two

notable modifications. First, in addition to MCI, the proposed

modified final judgment directs the ultimate corporate parent,

Concert plc, to report the requisite information.\10\ This ensures

that the required information is reported regardless of what entity

within Concert maintains it and whether Concert in the future

undergoes substantial reorganization. The second modification

requires MCI and Concert, in addition to reporting the total number

of minutes that MCI sends to and receives from BT, to report

information regarding time-of-day, point-of-termination and type of

transmission facility. This information is designed to enable

competitors to more easily detect a particular type of

discrimination. Given BT's ownership of MCI there is a concern that

BT could discriminate by sending better traffic (i.e., traffic that

is less expensive to terminate and, therefore, more profitable) to

MCI, thus disadvantaging MCI's competitors. The modified final

judgment also requires the parties to report this information on a

semiannual as opposed to annual, basis and no later than 60 days

after the end of the six month period being reported.

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\10\ Concert plc, the ultimate parent, is thus named as a party

to the Modified Final Judgment. Because Concert plc is defined

therein to include NewCo, and because Concert plc has agreed to

assume liability for certain acts of NewCo, NewCois deleted as a

separately named party to the modified final judgment.

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Under a separate provision, defendants have also agreed to

provide notification to the United States prior to any corporate

reorganization that would combine the functions of or otherwise

eliminate the separate identities of MCI, NewCo and BT. Such

reorganizations may make it difficult for the parties to accurately

report the data required under the transparency provisions or make

the data reported insufficient to detect discriminatory conduct. The

provision further establishes a procedure whereby the United States

can obtain additional information prior to any such reorganization

in order to evaluate the impact of such reorganization on the

modified final judgment and, if required, to seek further

modifications so as to maintain the viability of the modified final

judgment.\11\

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\11\ See Section VII.B of the proposed modified final judgment.

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B. Confidentiality Provisions

Sections II.B, II.C and II.D of the existing Final Judgment

prohibit MCI and NewCo from receiving confidential, competitively

sensitive information that BT receives in the course of its

correspondent relationships with other United States

telecommunications providers and/or in the provision of

interconnection or other telecommunications services within the

United Kingdom. This prohibition made sense in the context of BT's

20% acquisition because MCI remained an independent, fully

accountable company.

[[Page 37598]]

After the complete merger of MCI into BT, concerns abut the

inappropriate use of such confidential information continue to

exist. For a number of reasons, however, the complete merger of MCI

into BT limits the enforceability of the existing provisions. First,

after the merger, Concert plc, not MCI, will be the ultimate

decision-maker. Confidential information could flow from BT to MCI

and the joint venture through the corporate decision-maker, Concert.

Second, after the merger, the defendants have proposed to transfer

the responsibility for maintaining BT's correspondent relationships

with other United States telecommunications carriers to the

subsidiary with responsibility for the merged entity's global

network services business. The threat of misuse of confidential

information is exacerbated when both wholesale and retail functions

are housed in the same subsidiary. Third, as discussed above, there

is no guarantee that either MCI or NewCo will be maintained as

separate subsidiaries from BT post-merger. The merged entity could

thwart the existing confidentiality provisions by reorganizing in

such a way as to combine the functions of, or otherwise eliminate,

the separate identities of BT, MCI and NewCo.

The proposed modified final judgment redresses these problems by

prohibiting the parties from inappropriately using any confidential

information they obtain from competitors. Specifically, the ultimate

parent, Concert, as well as MCI, is prohibited from using any

confidential, competitively sensitive information that BT (or any

entity performing the same functions as BT) receives through its

correspondent relationships and/or as a result of BT's provision of

interconnection or other telecommunications services in the United

Kingdom, for any purpose other than the purpose for which such

information is obtained (or for which BT is otherwise authorized to

use such information by the entity from whom such information is

obtained) or to disclose such information to any person other than

those persons, including supervisory persons, with a need to know

such information.\12\

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\12\ The modified final judgment also requires the parties to

provide the Department with advance notice of any subsequent

reorganization that would combine the functions of, or otherwise

eliminate, the separate identities of BT, MCI and NewCo. The

provision also allows the Department to seek additional information

prior to any such reorganization in order to determine whether it

would impair the effectiveness of any of the confidentiality

provisions and, if so, to seek further modifications of the decree.

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C. Diversion Provision

The complaint recognized that one of the ways BT could

discriminate against MCI's competitors was by diverting some or all

of its international switched traffic over private lines (a practice

known as ``International Simple Resale'' or ``ISR'') to MCI. Because

traffic sent over ISR is outside of the correspondent system, it is

not subject to the FCC's rules regarding non-discrimination and

proportionate return.\13\ If other carriers could not respond to

this diversion by diverting their own traffic, they would be left

with larger net settlement deficits (due to the loss of BT's

offsetting minutes), hence higher costs. BT's ability to divert

``could also give BT an increased incentive to keep international

accounting rates above costs.'' CIS at 13-14. The existing Final

Judgment sought to ameliorate these anticompetitive consequences by

prohibiting BT and MCI from engaging in ISR until, inter alia, a

selected list of other international telecommunications providers

were granted ISR licenses by the UK government. The list of

providers was included in Annex A to the existing Final Judgment.

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\13\ One of the problems with the ISP is that accounting rates

are significantly above-cost. Prior to December 1996, only BT and

Mercury Communications, Ltd. were allowed to provide the

corresponding half-circuit in the UK. Since US carriers had to

correspond with BT or Mercury in order to terminate traffic in the

UK, they had no choice but to accept whatever accounting rate that

BT and Mercury were offering. ISR was devised as a way of bypassing

the ISP and thus, exerting downward pressure on the accounting rate.

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Since the existing Final Judgment was entered, all of the

international telecommunications providers listed in Annex A have

been granted ISR licenses by the UK government. The grant of these

licenses alleviates concerns that BT and MCI could bypass the

correspondent system on the US-UK route by sending traffic to the US

over ISR when other US carriers could not, thereby gaining an unfair

competitive advantage. Because this condition has been fulfilled, it

has no continuing legal effect and therefore, is deleted in the

proposed Modified Final Judgment.

D. Visitorial Provisions

Section V of the final judgment allows the Department of Justice

to monitor defendants' compliance by giving the Department access to

records and documents of the defendants and also access to their

personnel for interviews or to take sworn testimony. Under the

original final judgment only MCI and NewCo were parties to the

decree. In the modified final judgment, Concert has been made a

party thus necessitating access by the Department to all of

Concert's documents and personnel with information related to

compliance issues. Consequently, where applicable, Concert has

replaced NewCo in the visitorial provisions of the modified final

judgment and language limiting the scope of these provisions to

documents and information relating only to NewCo has been deleted.

As modified, the visitorial provisions now grant the United States

access in the United States to Concert's documents, and personnel,

wherever located, for the purposes of determining or securing

compliance with the modified final judgment.

E. Term of Decree

The final judgment was entered on September 29, 1994 and by its

terms would have expired on September 29, 1999. The modified final

judgment will expire 10 years after the entry of the existing final

judgment. Although there have been significant changes in the

regulatory scheme in the UK and new entry into some segments of the

UK telecommunications industry, BT still retains a substantial share

of the UK local telecommunications market and is expected to retain

its existing market power for a significant period of time. Given

BT's continued dominance in the UK as well as its increased interest

in MCI, the term of the decree was extended in order to ensure that

US consumers were protected from any anticompetitive consequences of

the merger until the risk of discrimination by the defendants has

been dissipated by the development of competitive markets in the UK.

IV. Other Concerns Related to the US-UK Route

In the course of the investigation of the proposed merger of BT

and MCI, some competitors identified potential new ways in which the

merged entity could discriminate and therefore lessen competition in

the market for international traffic between the US and UK.

Specifically, competitors have argued that the merged entity could

deter or delay new facilities-based competitors on the US-UK route

by refusing to sell requisite facilities to new entrants. These

facilities include capacity on the transatlantic cable as well as

interconnection and backhaul \14\ services at both ends of the

circuit. For the reasons discussed below, the Department has

concluded that it is not necessary at present to modify the Final

Judgment to resolve these issues.\15\

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\14\ Backhaul can be defined as the transport of traffic from

the international cable head-end to a point of interconnection with

a carrier's domestic facilities.

\15\ These concerns were not mentioned in the earlier CIS or

included in the Complaint filed in June 1994, because, at that time,

no one other than BT or Mercury could own facilities on the UK-end

of the US-UK transatlantic route for the purposes of providing US-UK

telecommunications services. On December 19, 1996, the UK government

granted 45 new international facilities licenses (``IFLs'') thus

allowing, for the first time in history, carriers other than BT and

Mercury to become facilities-based providers of international

telecommunications services in the UK. The UK indicated that it

anticipated that these new licenses would put ``further downward

pressure on international rates.'' See Press Notice of the United

Kingdom's Department of Trade and Industry, dated December 19, 1996,

attached hereto as Exhibit A.

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With respect to cable capacity, BT and MCI are major owners of

capacity on transatlantic cables. Presently, BT and MCI are the

first and third largest owners of capacity on the eastern end of TAT

12/13, the main cable used to provide international

telecommunications services between the US and UK.\16\ Indeed, BT

controls approximately 43% of the eastern end capacity of the TAT

12/13 cable and MCI controls approximately 13%. As a result of the

merger, the combined entity will own over 56% of this capacity.

---------------------------------------------------------------------------

\16\ TAT 12/13 is the largest transatlantic cable and utilizes

state-of-the-art self-restoring technology. For these reasons, it is

the most desirable cable for the transmission US-UK international

traffic.

---------------------------------------------------------------------------

The merged entity's increased ownership of TAT 12/13 cable

capacity potentially strengthens its ability to disadvantage

potential competitors by denying them access to needed facilities.

Given the current shortage of capacity on the transatlantic

[[Page 37599]]

cables,\17\ such denials would be especially detrimental to the new

IFLs recently licensed by the UK government who are currently

seeking to enter the US-UK international route. As discussed above,

it is this entry that is expected to create downward pressure on the

US-UK accounting rate.

---------------------------------------------------------------------------

\17\ On December 20, 1996, the day after the international

facilities licenses were granted, MCI put in a demand for 252

circuits on the TAT 12/13 cable. MCI's purchase triggered other co-

owners' standing orders (BT, for instance, received 155 circuits and

AT&T acquired 205), exhausting the TAT 12/13 cable capacity and

foreclosing access to TAT 12/13 cable capacity to all but a few

IFLs.

The transatlantic capacity shortage is expected to be a short-

term problem. A new planned cable, Gemini, is projected to come into

service in March 1998 (the southern leg) and September 1998 (the

northern leg). Moreover, the TAT 12/13 co-owners recently voted to

deploy wave division multiplexing, which will result in a doubling

of the capacity of the existing TAT 12/13 cable. Finally, another

new cable known as Atlantic Crossing #1 is also under development.

The two legs of the Atlantic Crossing #1 are planned to begin

service in May 1998 and November 1998, respectively.

---------------------------------------------------------------------------

Modification of the existing final judgment is not required to

prevent Concert from delaying or deterring IFLs access to the TAT

12/13 cable, however, because on May 14, 1997, the European

Commission (``EC'') required, as a condition of its approval of the

merger, that BT make TAT 12/13 cable capacity available to certain

of these IFLs.\18\ Under this condition, BT is required to divest

all of the capacity it obtained through its merger with MCI. The

Department believes that this divestiture will relieve any potential

problem associated with TAT 12/13 cable capacity shortages, and BT's

and MCI's increased control over existing capacity.

---------------------------------------------------------------------------

\18\ See Statement of the European Commission re: No. IP/97/406,

dated May 14, 1997, attached hereto as Exhibit B.

---------------------------------------------------------------------------

With respect to interconnection and backhaul, concerns have also

been raised both with the Department and with the FCC about the

availability of backhaul in the US.\19\ Entrants seeking to provide

international telecommunications services between the US and the UK

may have difficulty in obtaining US backhaul facilities as

currently, there are only three entities that own backhaul

facilities from the TAT 12/13 cable head-ends located in the US:

AT&T, MCI and Sprint. However, the Department believes that it is

appropriate to allow the FCC to evaluate this issue in the first

instance. As the Department stated in its CIS, if it subsequently

received complaints about potential discrimination, it would not

seek to modify the existing final judgment unless the injured

parties first sought relief from the appropriate regulatory agency.

See CIS at 32-33. This condition was included in order to minimize

the risk that the final judgment would contain provisions that were

inconsistent with regulatory requirements in the US or the UK.

---------------------------------------------------------------------------

\19\ During the course of its investigation, the Department also

examined interconnection in the US as well as interconnection and

backhaul from the TAT 12/13 cable head-end located in the UK in

order to determine whether any of these facilities constitute

bottlenecks through which the merged entity could exert its market

power to deter or delay new entry. After conducting numerous

interviews with the industry as well as US and UK regulators, the

Department is satisfied at this time that the reporting requirements

of the decree, along with regulations currently or soon to be put

into place in the US and the UK, are sufficient to alleviate any

competitive concerns raised with respect to the merged entity's

control over any of these facilities. Accordingly, the Department

proposes taking no further relief in this proposed Modified Final

Judgment with respect to interconnection in the US or the UK or

backhaul from the TAT 12/13 cable head-end located in the UK.

---------------------------------------------------------------------------

Accordingly, the Department is not seeking to modify the decree

at this time in order to redress potential concerns associated with

backhaul facilities in the US. Rather, the Department will continue

its investigation of the extent and nature of the problem, if any,

raised by the merged entity's control of backhaul facilities in the

U.S. If the Department later concludes that the merged entity could

discriminate against new entrants by denying or delaying IFLs access

to backhaul facilities in the U.S. and that these concerns are not

alleviated by regulatory conditions placed on the parties by the

FCC, the Department will seek a further modification of the Final

Judgment.\20\ The parties have agreed that they will not contest a

modification that requires MCI to sell backhaul capacity, equivalent

in quantity to the transatlantic capacity which the parties are

required to offer pursuant to the EC's order, on reasonable terms

and conditions, to certain IFLs or to those corresponding

therewith.\21\

---------------------------------------------------------------------------

\20\ Again, as with the transatlantic cable, any problem with

backhaul capacity is expected to be short-term. New entry into the

U.S. backhaul market could occur in 2-3 years.

\21\ See Letter from Anthony C. Epstein To Yvette Benguerel,

dated July 1, 1997, and Letter from David J. Saylor and Anthony C.

Epstein to Yvette Benguerel, dated July 2, 1997, attached hereto as

Exhibits C and D, respectively.

---------------------------------------------------------------------------

V. Modification Is In The Public Interest

Pursuant to Section VII of the Final Judgment, an uncontested

motion to modify the final judgment ``shall be granted if the

proposed modification is within the reaches of the public

interest.'' See, e.g., United States versus Western Electric Co.,

993 F.2d 1572, 1576 (D.D.C. 1993) (citing United States versus

Western Electric Co., 900 F.2d 283, 307 (D.D.C. 1990) (hereinafter

Triennial Review)). In the context of an uncontested motion to

modify an existing consent decree, the ``public interest'' standard

``directs the district court to approve an uncontested modification

so long as the resulting array of rights and obligations is within

the zone of settlements consonant with the public interest today.'''

United States versus Western Electric Co., 993 F.2d at 1576 (quoting

Triennial Review, 900 F.2d at 307) (emphasis in original). Thus,

``it is not up to the court to reject an agreed-on change simply

because the proposed diverged from its view of the public interest.

Rather, the court [is] bound to accept any modification that the

Department (with the consent of the other parties, we repeat)

reasonably regarded as advancing the public interest.'' United

States versus Western Electric Co., 993 F.2d at 1576. See also

United States versus Microsoft Corp., 56 F.3d 1448, 1461-62 (D.C.

Cir. 1995); United States versus Bechtel Corp., 648 F.2d 660, 666

(9th Cir.), cert. denied, 454 U.S. 1083 (1981); United States versus

BNS, Inc., 858 F.2d 456, 462 (9th Cir. 1988). Precedent requires

that

the balancing of competing social and political interests affected

by a proposed antitrust consent decree must be left, in the first

instance, to the discretion of the Attorney General. The court's

role in protecting the public interest is one of insuring that the

government has not breached its duty to the public in consenting to

the decree. The court is required to determine not whether a

particular decree is one that will best serve society, but whether

the settlement is `within the reaches of the public interest.' More

elaborate requirements might undermine the effectiveness of

antitrust enforcement by consent decree.

Bechtel, 648 F.2d at 666 (emphasis added); see BNS, 858 F.2d at 463;

United States versus National Broadcasting Co., 449 F. Supp. 1127,

1143 (C.D. Cal. 1978). See also Microsoft, 56 F.3d at 1461.

V. Conclusion

For all of the foregoing reasons, the proposed modification is

in the public interest, and the United States' motion for

modification of the final judgment should be granted.

Respectfully submitted,

Joel I. Klein,

Acting Assistant Attorney General.

Lawrence R. Fullerton,

Deputy Assistant Attorney General.

Charles E. Biggio,

Senior Counsel.

Constance K. Robinson,

Director of Operations.

Dated: July 7, 1997.

Donald J. Russell,

Chief, Telecommunications Task Force.

Nancy M. Goodman,

Assistant Chief, Telecommunications Task Force.

Yvette Benguerel,

DC Bar # 442452,

David Myers,

Attorneys.

United States Department of Justice, Antitrust Division, 555 4th

Street, N.W., Washington, D.C. 20001, (202) 514-5808.

Exhibits A through C have not been reprinted here, however they

may be inspected in Room 215, Department of Justice, 325 7th Street,

N.W., Washington, D.C. and at the Office of the Clerk of the United

States District Court for the District of Columbia.

July 2, 1997.

By Messenger

Ms. Yvette Benguerel,

Attorney, Telecommunications Task Force, Antitrust Division, U.S.

Department of Justice, 555 Fourth Street, NW., Washington, DC. 20001

[[Page 37600]]

Re. United States v. MCI Communications Corporation and Concert

Communications Company, Civil Action No. 94-1317-TFH (D.D.C)

Dear Ms. Benguerel: MCI Communications Corporation (``MCI'') and

British Telecommunications plc (``BT''), through their undersigned

counsel, submit this letter with respect to their proposed merger to

form Concert plc (``Concert'').

As set forth in the attached letter that MCI will send to the

Federal Communications Commission (``FCC'') on the date the proposed

Modified Final Judgment is filed with the Court, MCI and BT do not

object to the inclusion of certain conditions concerning the

provision of backhaul facilities to the western TAT 12/13 cable

head-ends in any FCC order approving the transfer of control of

various licenses in connection with the proposed merger.

Exhibit D

MCI and BT understand and agree that, if for any reason any FCC

order approving the transfer of control does not incorporate the

conditions set forth in the attached letter, the Department, in its

sole discretion, may seek a further modification of the final

judgment in the above-captioned case that incorporates any or all of

these requirements. MCI and BT, on behalf of their successor

Concert, further agree not to contest any such motion under Section

VII of the decree. MCI and BT understand that the Department has

concluded that the Tunney Act, 15 U.S.C. Sec. 16(b-h), does not

apply to modifications of existing consent decrees, but that the

Department would follow Tunney Act-like procedures with respect to

any such motion for further modification under Section VII.

The parties make these commitments in order to achieve a prompt

resolution of this matter and without agreeing that they are

necessary to comply with any legal duty.

Respectfully submitted,

David J. Saylor,

Counsel for BT.

Anthony C. Epstein,

Counsel for MCI.

July 7, 1997.

Peter F. Cowhey,

Chief, International Bureau, Federal Communications Commission, 2000

M St. NW--Room 800, Washington, D.C. 20554.

Re: EX PARTE in Merger of British Telecommunications plc and MCI

Communications Corporation, General Docket No. 96-245

Dear Mr. Cowhey: On behalf of MCI Communications Corporation

(``MCI'') and British Telecommunications plc (``BT''), we are by

this letter stating a commitment to offer a backhaul service, as

described below, as a condition of transferring the licenses and

authorizations at issue in this docket, subject to the Commission's

determination that the commitments are consistent with the

Communications Act. MCI and BT (``the parties'') make these

commitments in order to achieve a prompt resolution of this matter

and without agreeing that these commitments are necessary to comply

with any legal duty.

MCI and BT have no objection to the following requirements in

any Commission order approving the above-captioned merger:

a. MCI and Concert will make available backhaul capacity

equivalent to a total of 147E-1 circuits, pursuant to the schedule

described below, between the TAT 12/13 cable head-ends located in

the United States and a point or points served by MCI's existing

backhaul facilities.

b. MCI and Concert will make these circuits available in four

phases: capacity equivalent to a total of 63E-1 circuits available

on the date that the Commission releases its order approving the

merger; capacity equivalent to a total of 42 additional ET-1

circuits available within 30 days after release of the order;

capacity equivalent to 21 additional E-1 circuits available within

60 days after release of the order; and capacity equivalent to 21

additional E-1 circuits available within 90 days after release of

the order.

c. This backhaul capacity will be offered on a first-come,

first-served basis to any carrier (directly or through its

authorized representative), which is not a U.S. cable head-end owner

or collocated at a U.S. cable head-end, that purchased from MCI, BT,

or Concert the indefeasible right to use the U.S. end of the 147

whole circuits on TAT 12/13 that the parties offered pursuant to the

terms of the decision of the European Union dated May 11, 1997,

relating to the proposed merger between MCI and BT. Each such

carrier shall be eligible to purchase an amount of backhaul capacity

equivalent to the capacity it purchased on TAT 12/13 pursuant to the

terms of this decision, and for use in connection with the capacity

that it purchased on TAT 12/13 pursuant to this decision.

d. These circuits will be offered in each phase as a priority as

DS-3 circuits and then as E-1 circuits. If more DS-3 or E-1 circuits

are ordered simultaneously than are available in the next phase, MCI

will select on a random basis the order or orders to be filled in

that phase and will fill the remaining orders in the following

phase. No later than the day following the release of the Commission

order approving the merger, MCI will send to eligible carriers a

written offer for backhaul service that includes all the terms and

conditions described in this letter, including specific recurring

and nonrecurring charges. Any order will be deemed received on the

business day it is physically received by MCI, unless it is received

less than fourteen days after the date of MCI's written offer, in

which case it will be deemed received on the date fourteen days

after the date of that letter.

e. The obligation to make these circuits available shall end two

years after the date of the release of the order.

f. MCI and Concert will make these backhaul circuits available

by carrier-to-carrier contract for terms of one, two, three, four,

and five years pursuant to terms and conditions, including prices

for the interoffice channel component, that are substantially the

same as those reflected in MCI's then-effective interstate tariff

for TDS 45 service for DS-3 backhaul circuits and in MCI's then-

effective interstate tariff for TDS 1.5 service for E-1 backhaul

circuits, adjusted to recover different costs related to the

provision of backhaul services. MCI will make circuits ready for use

by the requesting carrier within a reasonable period of time. The

contracts will not unreasonably restrict the ability of any carrier

to resell these circuits.

Sincerely,

Mary L. Brown.

United States District Court for the District of Columbia

[Civil Action No. 94-1317 (TFH)]

United States of America, Plaintiff, v. Concert PLC and MCI

Communications Corporation, Defendants

Modified Final Judgment

Whereas, plaintiff, United States of America, filed its

Complaint in this action on June 15, 1994 and a Final Judgment was

entered on September 29, 1994,

And whereas, plaintiff and defendants, by their respective

attorneys, have consented to the entry and modification of this

Final Judgment without trail or adjudication of any issue of fact or

law,

And whereas, defendants have further consented to be bound by

one provision of this modified final judgment pending its approval

by the Court and to be bound by all the provisions of this modified

final judgment if the Merger Agreement is consummated before this

modified final judgment is approved by the Court,

And whereas, plaintiff the United States believes that entry of

this modified final judgment is in the public interest,

Therefore, it is hereby Ordered, Adjudged, and Decreed that this

modified final judgment shall replace the existing final judgment,

dated September 29, 1994, in all respects:

And it is further Ordered, Adjudged, and Decreed that:

I. Jurisdiction

This Court has jurisdiction of the subject matter of this action

and of each of the parties consenting to this modified final

judgment. The Complaint states a claim upon which relief may be

granted against the defendants under Section 7 of the Clayton Act,

15 U.S.C. Sec. 18, as amended.

II. Substantive Restrictions and Obligations

A. Concert and MCI shall not offer, supply, distribute, or

otherwise provide in the United States any telecommunications or

enhanced telecommunications service that makes use of

telecommunications services provided by BT in the United Kingdom or

between the United States and the United Kingdom, unless the

following information is disclosed in the United States by Concert

and MCI or such disclosure is expressly waived, in whole or in part,

by plaintiff through written notice to defendants and the Court:

1. Within 30 days following any agreement or change to an

agreement--The prices, terms, and conditions, including any

applicable discounts, on which telecommunications services are

provided by BT to NewCo in the United Kingdom

[[Page 37601]]

pursuant to interconnection arrangements, whether formal or

informal;

2. Within 30 days following any agreement or change to an

agreement, or the provision of service absent any specific

agreement--The prices, terms, and conditions, including any

applicable discounts, on which telecommunications services, other

than those provided pursuant to interconnection arrangements as

described in Section II.A.1 hereinabove, are provided by BT to NewCo

in the United Kingdom for use by NewCo in the supply of

telecommunications or enhanced telecommunications services between

the United States and the United Kingdom, or are provided by BT in

the United Kingdom in conjunction with such NewCo services where BT

is acting as the distributor for NewCo;

3. With respect to international switched telecommunications or

enhanced telecommunications service jointly provided by BT and MCI

on a correspondent basis between the United States and the United

Kingdom, and to the extent not already disclosed publicly pursuant

to the rule and regulations of the Federal Communications

Commission,

(i) Within 30 days following any agreement or change to an

agreement, or the provision of service absent any specific

agreement, the accounting and settlement rates and other terms and

conditions for the provision of each such service; and

(ii) On a semiannual basis, and within 60 days of the end of the

six month period, for any international direct dial or integrated

services digital network (``ISDN'') service (except for ISDN traffic

that is not subject to a proportionate return requirement),

separately for each accounting rate, MCI's minutes of traffic to and

from BT and, separately, BT's minutes of traffic to MCI and to each

United States international telecommunications providers by time of

day (e.g., traffic originating in six-hour periods beginning at

midnight), by point of termination (e.g., traffic to each area code

in the United States in the North American Numbering Plan), and by

type of transatlantic transmission facility (e.g., satellite versus

submarine cable).

4. On a semiannual basis--A list of telecommunications services

provided by BT to NewCo in the United Kingdom for use by NewCo in

the supply of telecommunications or enhanced telecommunications

services between the United States and the United Kingdom, or

provided by BT in the United Kingdom in conjunction with such NewCo

services where BT is acting as the distributor for NewCo, showing:

(i) The types of circuits (including capacity) and

telecommunications services provided;

(ii) The actual average time intervals between order and

delivery of circuits (separately indicating average intervals for

analog circuits, digital circuits up to 2 megabits, and digital

circuits 2 megabits and larger) and telecommunications services; and

(iii) The number of outages and actual average time intervals

between fault report and restoration of service for circuits

(separately indicating average intervals for analog and for digital

circuits) and telecommunications services;

but excluding the identities of individual customers of BT, MCI, or

NewCo or the location of circuits or telecommunications services

dedicated to the use of such customers;

5. A list showing:

(i) On a semiannual basis, separately for analog international

private line circuits (IPLCs) and for digital IPLCs jointly provided

by BT and MCI between the United States and the United Kingdom, the

actual average time intervals between order and delivery by BT;

(ii) On an annual basis, separately for analog IPLCs and for

digital IPLCs jointly provided by BT and MCI between the United

States and the United Kingdom, the number of outages and actual

average time intervals between fault report and restoration of

service, for any outages that occurred in the international

facility, in the cablehead or earth station outside the United

States, or the network of a telecommunications provider outside the

United States, indicating separately the number of outages and

actual average time intervals to restoration of service in each such

area; and

(iii) On a semiannual basis, for circuits used to provide

international switched telecommunications services or enhanced

telecommunications services on a correspondent basis between the

United States and the United Kingdom, the average number of circuit

equivalents to MCI during the busy hour;

6. Within 30 days of receipt of any information described

herein--Information provided by BT to MCI or NewCo about planned

telecommunications system operated pursuant to its license that

would affect interconnection arrangements, whether formal or

informal, between BT and NewCo or interconnection arrangements

between BT and other licensed operators, provided that if MCI

receives any such information from BT separately from NewCo, MCI

shall similarly be required to disclose such information in the same

manner as NewCo.

The obligations of this Section II.A shall not extend to the

disclosure of intellectual property or other proprietary information

of the defendants or BT that has been maintained as confidential by

its owner, except to the extent that it is of a type expressly

required to be disclosed herein, or is necessary for licensed

operators to interconnect with Concert's United Kingdom public

telecommunications system operated pursuant to its license or for

United States international telecommunications providers to use

Concert's international telecommunications or enhanced

telecommunications correspondent services.

B. Neither Concert nor MCI shall use any information that is

identified as proprietary by United States telecommunications or

enhanced telecommunications service providers (and maintained as

confidential by them) and is obtained by BT from such providers as

the result of BT's provision of interconnection or other

telecommunications services in the United Kingdom, for any purpose

other than BT's provision of interconnection or other

telecommunications services in the United Kingdom, and any such

information shall not be disclosed to any person other than those

persons within BT who need such information in order for BT to

provide interconnection or other telecommunications services in the

United Kingdom, except that any United States telecommunications or

enhanced telecommunications service providers may authorize BT to

use such providers' proprietary information for some other purpose

if such authorization is in writing and specifically sets forth the

purpose for which such information is to be used. Such written

authorizations shall be appended to any reports required to be filed

with the Department of Justice pursuant to Section V herein. Nothing

in this Section II.B shall prevent Concert or BT from disclosing any

information to any governmental authority as required by law or

regulation.

C. Neither Concert nor MCI shall use any confidential, non-

public information obtained as a result of BT's correspondent

relationships with other United States international

telecommunications or enhanced telecommunications service providers,

for any purpose other than conducting BT's correspondent

relationships with such providers, and such information shall not be

disclosed to any person other than those persons within BT who need

such information in order to conduct BT's correspondent

relationships with other United States international

telecommunications and enhanced telecommunications service

providers, except to the extent that such disclosure is necessary

for Concert or MCI to comply with their obligations under Section

IIA.3(ii) concerning disclosure of the total volume of traffic (but

not the individual traffic volumes for other providers) received by

BT from the United States and sent by BT to the United States that

is subject to proportionate return, or under Section II.A.5 (but not

including individual information on other providers), and except

further than any United States telecommunications or enhanced

telecommunications service providers may authorize BT to use such

providers' proprietary information for some other purpose if such

authorization is in writing and specifically sets forth the purpose

for which such information is to be used. Such written authorization

shall be appended to any reports required to be filed with the

Department of Justice pursuant to Section V herein. Nothing in this

Section II.C shall prevent Concert, MCI or BT from disclosing any

information to any governmental authority as required by law or

regulation.

D. Neither Concert nor MCI shall use any non-public information

about the future prices or pricing plans of any provider of

international telecommunications services between the United States

and the United Kingdom obtained through BT's correspondent

relationships with other United States international

telecommunications providers, for any purpose other than accounting

rate negotiations between BT and such providers, and such

information shall not be disclosed to any person other than those

persons within BT who need such information in order to negotiate

BT's accounting rates with other United States international

[[Page 37602]]

telecommunications providers. Nothing in Section II.D shall prevent

Concert or BT from disclosing any information to any governmental

authority as required by law or regulation.

III. Applicability and Effect

The provisions of this modified final judgment shall be binding

upon defendants, their affiliates, subsidiaries, successors, and

assigns, officers, agents, servants, employees, and attorneys, and

upon these persons in active concert or participation with them who

receive actual notice of this modified final judgment by personal

service or otherwise. Defendants shall cooperate with the United

States Department of Justice in ensuring that the provisions of this

Modified Final Judgment are carried out. Neither this modified final

judgment nor any of its terms or provisions shall constitute any

evidence against, an admission by, or an estoppel against the

defendants. The effective date of this modified final judgment shall

be the date upon which it is entered.

IV. Definitions

For the purposes of this Final Judgment:

A. ``BT'', prior to the consummation of the Merger Agreement and

the creation of Concert, means British Telecommunications plc, and

any subsidiary, affiliate, predecessor, successor, or assign of

British Telecommunications plc, and following the consummation of

the Merger Agreement and the creation of Concert, BT means any other

entity or entities partially (20% or more) or wholly owned or

controlled by Concert and providing interconnection or other

telecommunications services within the United Kingdom or from the

United Kingdom to the United States, but does not include MCI or

NewCo.

B. ``Concert'' means Concert plc, and any subsidiary, affiliate,

predecessor, successor, or assign of Concert plc, or any other

entity that is partially (20% or more) or wholly owned or controlled

by Concert plc, including without limitation, BT, MCI and NewCo.

C. ``Correspondent'' means a bilaterally negotiated arrangement

between a provider of telecommunications services in the US or the

UK and a provider of telecommunications services in the other of the

US or the UK for provision of an international telecommunications or

enhanced telecommunications service, by which each party undertakes

to terminate in its country traffic originated by the other party. A

service managed by NewCo, and provided without correspondent

relationships with any other provider, shall not be deemed to

constitute a correspondent service.

D. ``Defendant'' or ``defendants'' means Concert and MCI.

E. ``Disclose,'' for purposes of Paras. II.A.1-6, means

disclosure to the United States Department of Justice Antitrust

Division, which may further disclose such information to any United

States corporation that directly or through a subsidiary or

affiliate holds or has applied for a license from either the United

States Federal Communications Commission or the United Kingdom

Department of Trade and Industry to provide international

telecommunications services between the United States and the United

Kingdom. Disclosure by the Department of Justice to any corporation

described above shall be made only upon agreement by such

corporation, containing the terms prescribed in the Stipulation

entered into by BT, defendant MCI and the United States on July 2,

1997, not to disclose any non-public information to any other

person, apart from governmental authorities in the United States or

United Kingdom and not to use such information for any purpose other

than to obtain relief from said governmental authorities. Where

Concert or MCI is required to disclose, in Section II.A, particular

telecommunications services provided, this shall include disclosure

of the identity of each of the services, and reasonable detail about

each of the services to the extent not already published elsewhere,

but shall not require disclosure of underlying facilities used to

provide a particular service that is offered on a unitary basis,

except to the extent necessary to identify the service and the means

of interconnection with the service.

F. ``Enhanced telecommunications service'' means any

telecommunications service that involves as an integral part of the

service the provision of features or capabilities that are

additional to the conveyance (including switching) of the

information transmitted. Although enhanced telecommunications

services use telecommunications services for conveyance, their

additional features or capabilities do not lose their enhanced

status as a result.

G. ``Facility'' means: (i) Any line, trunk, wire, cable, tube,

pipe, satellite, earth station, antenna or other means that is

directly used or designed or adapted for use in the conveyance,

transmission, origination or reception of a telecommunications or

enhanced telecommunications service; (ii) any switch, multiplexer,

or other equipment or apparatus that is directly used or designed or

adapted for use in connection with the conveyance, transmission,

origination, reception, switching, signaling, modulation,

amplification, routing, collection, storage, forwarding,

transformation, translation, conversion, delivery or other provision

of any telecommunications or enhanced telecommunications service,

and (iii) any structure, conduit, pole, or other thing in, on, by,

or from which any facility as described in (i) or (ii) is or may be

installed, supported, carried or suspended.

H. ``MCI'', prior to the consummation of the Merger Agreement,

means MCI Communications Corporation, and any subsidiary, affiliate,

predecessor, successor, or assign of MCI Communications Corporation,

and following the consummation of the Merger Agreement, MCI means

any other entity or entities partially (20% or more) or wholly owned

or controlled by Concert and providing telecommunications services

within the United States or from the United States to the United

Kingdom, but does not include BT or NewCo.

I. ``Merger Agreement'' means the Agreement and Plan of Merger,

dated November 3, 1996 (including any subsequent modifications or

amendments to such agreement), entered into by and among British

Telecommunications plc, MCI Communications Corporation and Tadworth

Corporation.

J. ``NewCo'' means Concert Communications Company, the joint

venture of MCI and BT created pursuant to the terms of the Joint

Venture Agreement entered into by MCI and BT as of August 4, 1993

(including any subsequent modifications or amendments to such

agreement), and any subsidiary, affiliate, predecessor (whether the

predecessor is jointly owned by MCI and BT or separately owned by

either of them), successor, or assign of such joint venture, or any

other entity or entities partially (20% or more) or wholly owned or

controlled by Concert and having among its purposes substantially

the same purposes as described for NewCo in the Joint Venture

Agreement, but does not include MCI or BT.

K. ``Telecommunications service'' means the conveyance, by

electrical, magnetic, electromagnetic, electromechanical or

electrochemical means (including fiber-optics, as well as satellite,

microwave and other wireless transmission), of information

consisting of:

--Speech, music and other sounds;

--Visual images;

--Signals serving for the impartation (whether as between persons

and persons, things and things or persons and things) of any matter,

including but not limited to data otherwise than in the form of

sounds or visual images;

--Signals serving for the actuation or control of machinery or

apparatus; or

--Translation or conversion that does not alter the form or content

of information as received from that which is originally sent.

``Convey'' and ``conveyance'' include transmission, switching, and

receiving, and cognate expressions shall be construed accordingly. A

telecommunications service includes all facilities used in providing

such service, and the installation, maintenance, repair, adjustment,

replacement and removal of any such facilities. A service that is

considered a ``telecommunications service'' under this definition

retains that status when it is used to provide an enhanced

telecommunications service, or when used in combination with

equipment, facilities or other services.

L. ``United Kingdom'' and ``UK'' mean England, Wales, Scotland,

Northern Ireland and all territories, dependencies or possessions of

the United Kingdom (excluding the Isle of Man) for which

international telecommunications traffic is not normally separately

reported to the United States Federal Communications Commission by

United States telecommunications carriers.

M. ``United States'' and ``US'' mean the fifty states, the

District of Columbia, and all territories, dependencies, or

possessions of the United States.

N. ``United States international telecommunications provider''

means any person or entity actually providing international

telecommunications services or enhanced telecommunications services

to users in the United States, and that is

[[Page 37603]]

incorporated in the United States, or that is ultimately controlled

by United States persons within the meaning of 16 CFR Sec. 801.1.

V. Visitorial and Compliance Provisions

A. Concert agrees to maintain sufficient records and documents

to demonstrate compliance with the requirements of this modified

final judgment.

B. For the purposes of determining or securing compliance of

defendants with this modified final judgment, duly authorized

representatives of the plaintiff, upon written request of the

Attorney General or the Assistant Attorney General in charge of the

Antitrust Division, and on reasonable notice to the relevant

defendant, shall have access without restraint or interference to

Concert and MCI in the United States:

1. During their office hours to inspect and copy all records and

documents in their possession or control relating to matters

contained in this modified final judgment; and

2. To interview or take sworn testimony from their officers,

directors, employees, trustees, or agents, who may have counsel

present, relating to any matter contained in this modified final

judgment.

C. Concert consents to make available to duly authorized

representatives of the plaintiff, for the purposes of determining

whether defendants have complied with the requirements of this final

judgment and to secure their compliance:

1. At the premises of the Antitrust Division in Washington, DC.,

within sixty days of receipt of written request by the Attorney

General or Assistant Attorney General in charge of the Antitrust

Division, records and documents in the possession or control of

Concert, wherever located; and

2. For interviews or sworn testimony, in the United States if

requested by plaintiff but subject to their reasonable convenience,

officers, directors, employees, trustees or agents, who may have

counsel present.

D. Upon written request of the Attorney General or the Assistant

Attorney General in charge of the Antitrust Division, a defendant

shall submit written reports, under oath if requested, relating to

any of the matters contained in this decree.

E. No information or documents obtained by the means provided in

this Section V shall be divulged by the plaintiff to any person

other than the United States Department of Justice, the Federal

Communications Commission (``FCC''), and their employees, agents and

contractors, except in the course of legal proceedings to which the

United States is a party, or for the purpose of securing compliance

with this decree, or for identifying to the United Kingdom Office of

Telecommunications (``OFTEL''), the European Commission (``EC''), or

other appropriate United Kingdom or EC regulatory agencies, conduct

by defendants that may violate United Kingdom or EC law or

regulations or Concert's license to operate its United Kingdom

public telecommunications system (but no documents received from

defendants pursuant to this Section V shall be disclosed to United

Kingdom or EC authorities by the Department of Justice), or as

otherwise required by law. Prior to divulging any documents,

interviews or sworn testimony obtained pursuant to this Section V to

the Federal Communications Commission or prior to divulging any

interviews or sworn testimony obtained pursuant to this Section V to

the EC, plaintiff will obtain assurances that such materials are

protected from disclosure to third parties to the extent permitted

by law.

F. If at the time information or documents are furnished by a

defendant to plaintiff pursuant to this Section V, such defendant

represents and identifies in writing the material in any such

information or documents to which a claim of protection may be

asserted under Rule 26(c)(7) of the Federal Rules of Civil

Procedure, and said defendant marks each pertinent page of such

material, ``Subject to a claim of protection under Rule 26(c)(7) of

the Federal Rules of Civil Procedure,'' then 10 days notice shall be

given by plaintiff to such defendant prior to divulging such

material in any legal proceeding (other than a grand jury

proceeding) to which that defendant is not a party.

VI. Retention of Jurisdiction

Jurisdiction is retained by this Court for the purposes of

enabling any of the parties to this modified final judgment to apply

to this Court at any time for such further orders or directions as

may be necessary or appropriate to carry out or construe this

decree, to modify or terminate any of its provisions, to enforce

compliance, and to punish any violations of its provisions.

VII. Modification

A. Any party to this modified final judgment may seek

modification of its substant ive terms and obligations, and other

parties to the modified final judgment shall have an opportunity to

respond to such a motion. If the motion is contested by another

party, it shall only be granted if the movant makes a clear showing

that (i) a significant change in circumstances or significant new

event subsequent to the entry of the modified final judgment

requires modification of the modified final judgment to avoid

substantial harm to competition or consumers in the United States,

or to avoid substantial hardship to defendants, and (ii) the

proposed modification is (a) in the public interest, (b) suitably

tailored to the changed circumstances or new events and would not

result in serious hardship to any defendant, and (c) consistent with

the purposes of the antitrust laws of the United States and with the

telecommunications regulatory regime of the United Kingdom. Neither

the absence of specific reference to a particular event in the

modified final judgment nor the foresee-ability of such an event at

the time this modified final judgment was entered, shall preclude

this Court's consideration of any modification request. This

standard for obtaining contested modifications shall not require the

United States to initiate a separate antitrust action before seeking

modifications. The same standard shall apply to any party seeking

modification of this modified final judgment. If a motion to modify

this modified final judgment is not contested by any party, it shall

be granted if the proposed modification is within the reaches of the

public interest. Where modifications of the modified final judgment

are sought, the provisions of Section V of this modified final

judgment may be invoked to obtain any information or documents

needed to evaluate the proposed modification prior to decision by

the Court.

B. Concert agrees to notify the plaintiff in writing if MCI or

Concert hereafter files with the FCC or OFTEL an application to

assign (or transfer control of) any license or authorization held by

MCI or BT relating to telecommunications services between the United

States and the United Kingdom, or if Concert seeks to reorganize its

corporate structure so as to combine NewCo and BT in the same

corporate entity. Within five (5) days of receipt by plaintiff of

such notice, plaintiff may request form defendants additional

information concerning the proposed assignment, transfer or

reorganization. Defendants shall furnish any additional information

requested within ten (10) days of receipt of the request. Such

assignment, transfer or reorganization shall not take effect until

thirty (30) days after receipt of the notice or, if additional

information is requested by plaintiff, until twenty (20) days after

receipt of the additional information. If the plaintiff determines,

in its sole discretion, that such an assignment, transfer or

reorganization would impair the effectiveness of any of the

provisions of this modified final judgment, then the plaintiff, in

the exercise of its discretion and without waiving its right to

obtain any other remedy, may seek further modification of this

modified final judgment, which modification will be reviewed as set

forth in Section VII.A hereinabove. Concert and MCI agree that they

will not oppose any request by the plaintiff for expedited

consideration by the Court of any such request for further

modification.

VIII. Sanctions

Nothing in this modified final judgment shall prevent the United

States from seeking, or this Court from imposing, against defendants

or any other person, any relief available under any applicable

provision of law.

IX. Further Provisions

A. The entry of this modified final judgment is in the public

interest.

B. The substantive restrictions and obligations of this modified

final judgment shall be removed after ten years have passed from

September 29, 1994, the date of entry of the final judgment, unless

this modified final judgment has been previously terminated.

United States District Judge.

United States District Court for the District of Columbia

[Civil Action No. 94-1317 (TFH]

United States of America, Plaintiff, v. MCI Communications Corporation

and BT Forty-Eight Company (``NewCo''), Defendants

United States' Explanation of Procedures

The United States submits this short memorandum summarizing the

procedures

[[Page 37604]]

regarding the Court's entry of the proposed modified final judgment.

Although the United States does not believe that this modified final

judgment is subject to the Antitrust Procedures and Penalties Act,

15 U.S.C. Secs. 16(b)-(h), it intends to follow procedures similar

to those set out in this Act in order to allow for interested

parties to submit comments to the Court prior to the Court's

determination of whether the entry of the modified judgment is in

the public interest.

1. Today, the United States has filed a modified final judgment,

a Stipulation pursuant to which the parties have consented to entry

of the modified final judgment and a Memorandum In Support Of

Modification explaining the proposed modifications and the reasons

therefor.

2. The United States intends to publish the proposed modified

final judgment and its Memorandum In Support Of Modification in the

Federal Register and in certain newspapers at least 60 days prior to

the time that the United States files a motion for the entry of the

proposed modified final judgment. The notice will inform members of

the public that they may submit comments concerning the modified

final judgment to the United States Department of Justice, Antitrust

Division.

3. During the sixty-day period, the United States will consider,

and at the close of that period respond to, any comments received.

4. After the expiration of the sixty-day period, the United

States will file with the Court the comments, the United States'

response and a Motion for Entry of the Modified Final Judgment

(unless the United States has decided to withdraw its consent to

entry of the Modified Final Judgment, as permitted by Paragraph 2 of

the Stipulation).

5. At that time, or any time thereafter, the Court may enter the

modified final judgment without a hearing, if it finds that the

modified final judgment is in the public interest.

Dated: July 7, 1997.

Respectfully submitted,

Yvette Benguerel,

D.C. Bar #442452.

U.S. Department of Justice, Antitrust Division, Telecommunications Task

Force, 555 4th Street, N.W., Washington, D.C. 20001, (202) 514-5808.

[FR Doc. 97-18289 Filed 7-11-97; 8:45 am]

BILLING CODE 4410-11-M