White House Clears Verio Acquisition

One day after Nippon Communications Corp. extended the expiration date of its $5.5 billion bid to acquire Verio Inc., President Bill Clinton said he would allow the Japanese telco to buy the U.S. Internet Service Provider.

A press statement released by the White House Wednesday afternoon echoed the
sentiments of the Committee on Foreign Investment in the United States
(CFIUS), which ruled last week that the deal poses no security risk to U.S.

“As a result of the investigation and negotiations with NTT Communications
and Verio, any national security issues that may have been presented by this
transaction have been resolved,” the statement concluded.

The gesture comes amid concerns that the play would pose a foreign espionage
risk by giving Japan’s state-controlled NTT access to U.S. wiretapping
activities. Federal authorities also had thought foreign control over the
Colorado-based ISP would hamper the U.S.’s capability of monitoring

The statement in the landmark finding highlighted the fact that the
investigation was the first one involving the foreign acquisition of a U.S.
ISP conducted under the Exon-Florio provision of the Defense Production Act
of 1950. The provision, which became law in 1988, authorizes the President
to investigate and possibly suspend or prohibit a foreign acquisition of a
U.S. company engaged in U.S. interstate commerce.

The provision specifies that the President must feel the nation’s security
could be at stake if such a merger were to come to fruition.

The Nippon Telegraph and Telephone Corp. subsidiary’s offer
had been scheduled to expire at midnight on
Monday; with the extension, the firm has until Aug. 30 to complete the

NTT agreed to create a “firewall” — a separate division of Verio — staffed
and managed only by U.S. citizens to handle any government requests for
electronic surveillance.

Following the progress of the deal, analysts have said concern over such
international telco and ISP plays will be the norm in the future.

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