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Govt. OK's Global Crossing–Level 3 Deal

The FCC and Justice Department have approved the $3 billion merger of Global Crossing and Level 3.

Network services provider Level 3 announced last April it had struck a deal to acquire competitor Global Crossing in an all-stock deal valued at $3 billion, including $1.1 billion in net debt. Stockholders of both companies voted to approve the deal Aug. 4

The FCC took 112 days to approve, well within its 180-day informal shot clock. "Commission staff reviewed this transaction thoroughly and expeditiously," said an FCC spokesman. "Finding no significant risk of competitive harm, and finding that the transaction was in the public interest, the merger was approved."

The deal is conditioned on compliance with a security agreement struck between the companies and the Departments of Defense, Homeland Security and Justice because the FCC licenses will have 43.52% indirect foreign ownership. Global Crossing provides network services to government agencies and telecom carriers.

"We find that the merger will not increase concentration significantly in any of the international transport market regions, and is not likely to result in anticompetitive effects," said the FCC. It concluded that the relevant market was transport services, particularly submarine cables, and that eight different cables were currently licensed to land in the U.S. and serve the Atlantic, with two owned by GCL and Level 3 and the other two unaffiliated.

The combined company will provide network transport, content delivery, data center, co-location and voice services, serving customers in more than 50 countries and with connections to more than 70 countries. Level 3 said at the time of the deal's announcement that Global Crossing will bring "important additions" to Level 3's service portfolio, including managed services, collaboration services and intercontinental virtual private networking capability.

As backbone-services providers, Level 3 and Global Crossing are aligned in lobbying the Federal Communications Commission to regulate interconnection pricing of last-mile Internet service providers. Level 3 has accused Comcast of violating the FCC's network neutrality rules by demanding payment to deliver content such as streaming video from Netflix. Global Crossing weighed in with a filing commenting that Comcast's actions show retail ISPs are "distorting" the economics of traditional peering relationships.