7. Assignment of Proceeding
Michael R. Peevey is the assigned Commissioner and Robert Barnett is the assigned Administrative Law Judge in this proceeding.
1. Frontier seeks to acquire from Verizon 13 telephone exchanges in California.
2. Six exchanges comprising the entire serving territory of Verizon West Coast, a wholly owned subsidiary of Verizon Northwest, will be transferred to Frontier. These exchanges are: Crescent City, Klamath, Smith River, Hiouchi, and Gasquet in Del Norte County and Orick in Humboldt County.
3. Seven Verizon California exchanges will be transferred to Frontier; these border Arizona and Nevada. The exchanges to be transferred are:
(1) Adjacent to Nevada: Alpine (Alpine Co.) and Coleville (Mono Co.);
(2) Adjacent to Arizona: Earp Big River, Havasu Landing, and Parker Dam
(San Bernardino Co.), Blythe (Riverside Co.), and Palo Verde (Imperial Co.).
4. Immediately following the completion of the transaction, Verizon's
end-user customers in the 13 transferred exchanges will continue to receive substantially the same services, service rates, and service terms and conditions as immediately prior to the transaction.
5. Frontier currently has approximately 2.3 million access lines in 24 states, and provides telecommunications services to rural and small urban markets across the country. Frontier and its operating companies have a long history in serving rural areas in California and elsewhere.
6. The transaction is expected to accelerate Frontier's growth, creating a much larger company with increased financial strength and flexibility. Frontier will be the fifth-largest ILEC in America, serving predominantly rural communities and smaller cities, and it will have 8.6 million voice and broadband connections, including more than 7 million access lines and $6.5 billion in revenues.
7. After the transaction is completed, Frontier expects to have an even stronger balance sheet and greater cash flow generation capabilities. This transaction will "delever" Frontier, i.e., it will reduce significantly the company's debt-to-EBITDA ratio. The increased financial strength is expected to improve Frontier's access to capital and lower its cost of capital, which will inure to the benefit of the California exchanges and their customers.
8. Customers are expected to receive substantially the same services
post-merger that they received pre-merger, and at the same prices. No existing customer service will be discontinued or interrupted as a result of the transaction, and Frontier will use the same operational systems that Verizon uses today to provide service.
9. The transaction should not have any adverse impacts on wholesale service customers in California. Frontier will retain all obligations under Verizon's current interconnection agreements and other existing arrangements.
10. Frontier will continue to employ Frontier and Verizon company employees that are experienced in providing local services in California. Frontier will honor the union labor agreements in the affected states. Verizon will fund pensions for the pre-closing services of employees moving to Frontier, and Verizon will remain responsible for people who retire from the transferred areas before closing.
1. At the completion of the transaction, Verizon West Coast will continue to operate as a stand-alone company in California (subject to being renamed), and will become a direct, wholly owned subsidiary of NCIH and an indirect,
wholly owned subsidiary of NCH. Verizon West Coast's CPCN should be transferred to NCIH.
2. The seven Verizon California exchanges along the Arizona and Nevada borders will be transferred to NewILEC, a newly-formed corporation which will operate in California as well as Arizona and Nevada. Accordingly, NewILEC should be granted a new CPCN to permit it to operate those California exchanges.
3. NewLD should be granted a CPCN to provide interLATA and intraLATA resold telecommunications services (except local exchange services). This will enable NewLD to conduct the long distance business transferred to it by VLD and VES. VLD and VES will continue to provide some long distance telecommunications services in California, and therefore will maintain their CPCNs. NewLD should adopt the prices, terms, and conditions of VLD and VES.
4. NewILEC should adopt the prices, terms, and conditions of Verizon California with respect to the transferred exchanges. NewILEC should be designated an ETC under 47 U.S.C. Section 214(e). NewILEC's services contain each of the service elements necessary for ETC designation, including each of those in 47 U.S.C. Section 214(e). NewILEC should be granted the same Investment Tax Credit status that Verizon California possessed prior to the transaction.
5. The results of the transaction should be:
(1) Transfer of Verizon West Coast's CPCN to NCIH;
(2) A new CPCN for NewILEC for local exchange service to allow it to operate the seven former Verizon California exchanges along the Arizona and Nevada borders under the same terms;
(3) NewILEC's adoption of the prices, terms, and conditions of Verizon California for the transferred exchanges;
(4) NewILEC's designation as an ETC and transfer of existing Verizon California status as such in the affected exchanges;
(5) A new CPCN for NewLD to provide interLATA and intraLATA resold telecommunications services (except local exchange services); and
(6) Transfer of the long distance customers in the affected exchanges from VLD and VES to NewLD.
IT IS ORDERED that:
1. The Certificate of Public Convenience and Necessity of Verizon West Coast Inc. is transferred to New Communications ILEC Holdings, Inc.
2a. A Certificate of Public Convenience and Necessity is granted to New Communications of the Southwest Inc. to allow it to operate under the same terms the seven Verizon California Inc. exchanges being transferred to it:
(1) Adjacent to Nevada: Alpine (Alpine Co.) and Coleville (Mono Co.);
(2) Adjacent to Arizona: Earp Big River, Havasu Landing, and Parker Dam (San Bernardino Co.), Blythe (Riverside Co.), and Palo Verde (Imperial Co.).
2b. The corporate identification number assigned to New Communications of the Southwest Inc., U1026C, shall be included in the caption of all original filings with this Commission, and in the titles of other pleadings filed in existing cases.
2c. New Communications of the Southwest Inc. shall comply with the requirements applicable to Uniform Regulatory Framework Local Exchange Carriers in Attachment A to this decision.
3. New Communications of the Southwest Inc. shall adopt the prices, terms, and conditions of Verizon California Inc. for the transferred exchanges.
4. New Communications of the Southwest Inc. shall file an advice letter in compliance with Resolution T-17002 to be designated as an Eligible Telecommunications Carrier in California under 47 U.S.C. Section 214.
5a. A Certificate of Public Convenience and Necessity is granted to New Communications Online and Long Distance, Inc. to provide interLocal Access and Transport Area and intraLocal Access and Transport Area resold telecommunications services (except local exchange services).
5b. The corporate identification number assigned to New Communications Online and Long Distance, Inc., U7167C, shall be included in the caption of all original filings with this Commission, and in the titles of other pleadings filed in existing cases.
5c. New Communications Online and Long Distance, Inc. shall comply with the requirements applicable to Non-Dominant Interexchange Carriers in Attachment D to this decision.
6. The accounts receivables and customer relationships related to the long distance operations in California of Verizon Long Distance, LLC (U5732C) and Verizon Enterprise Solutions, LLC (U5658C) shall be transferred to New Communications Online and Long Distance, Inc.
7. The Settlement Agreement is approved and adopted:
(1) Basic Residential Service Rate Caps. For one year following closing of the proposed transaction, the basic primary residential rate for each of the Verizon California Transferred Exchanges will be capped at their current levels as of the date of the closing of this transaction. Thereafter, the parties agree that those exchanges will be subject to applicable Commission orders governing services for Uniform Regulatory Framework ("URF") companies.
(2) Rates for Other Services. For one year following closing of the proposed transaction, the rate for the following services for the Verizon California Transferred Exchanges will be capped at their current levels as of the date of the closing of the proposed transaction: Caller ID, Call Waiting, Single Line Business Service, Directory Assistance, Non-Published Service and Inside Wire Maintenance. Thereafter, the parties agree that those exchanges will be subject to applicable Commission orders governing services for URF companies.
(3) Exogenous Events. Notwithstanding the limitations included in paragraphs one and two, Frontier Communications of the Southwest will be permitted to request reasonable recovery for the impact of exogenous events that materially impact the operations of the Verizon California Transferred Exchanges, including but not limited to, orders of the Federal Communications Commission and this Commission. Nothing herein shall prevent a party from opposing such a request on the grounds of reasonableness. Frontier Communications of the Southwest may apply to the Commission to modify the rates of the exchanges to which paragraphs one and two are applicable. Nothing herein shall be construed to prevent any party from taking a position with respect to the appropriate service rates, if any, which should apply to the affected exchanges, after the dates specified in paragraph one or two above.
(4) Service Quality Reporting. For a period of 12 months after the closing of the proposed Transaction, or until December 31, 2011, whichever date is later, Citizens Telecommunications Company of California d/b/a Frontier Communications of California, with respect to existing exchanges and Frontier Communications of the Southwest with respect to the Verizon California Transferred Exchanges will file separate reports with the Commission concerning installation intervals for their respective exchanges, notwithstanding any exemption from reporting contained in General Order 133-C for URF companies.
8. Application 09-06-005 is closed.
This order is effective today.
Dated October 29, 2009, at San Francisco, California.
MICHAEL R. PEEVEY
President
DIAN M. GRUENEICH
JOHN A. BOHN
RACHELLE B. CHONG
TIMOTHY ALAN SIMON
Commissioners
