Discussion

Pursuant to Pub. Util. Code § 852,¹ no public utility, and no subsidiary, affiliate of, or corporation holding a controlling interest in a public utility, shall purchase or acquire, take or hold, any part of the capital stock of any other public utility organized or existing under the laws of this state, without prior Commission authorization. In addition, § 854 requires Commission authorization before a company may "merge, acquire, or control any public utility organized and doing business in this state." The purpose of these and related sections is to enable the Commission, before any transfer of a public utility is consummated, to review the situation and to take such action, as a condition of the transfer, as the public interest may require. (San Jose Water Co. (1916) 10 CRC 56.)

Where a company that does not possess a Certificate of Public Convenience and Necessity (CPCN) desires to acquire control of a company or companies that do possess a CPCN, the Commission will apply the same requirements to the acquiring company as would be applied to an initial applicant seeking a CPCN. The Commission has established two major criteria for determining whether a CPCN should be granted, or transferred. An applicant who desires to operate as a provider of facilities-based local exchange and interexchange services must demonstrate that it has a minimum of $100,000 in cash or cash equivalent for operations of the company plus the costs of deposits to be paid to other carriers. In addition, the applicant is required to make a reasonable showing of technical expertise in telecommunications or a related business. In this case, Windstream, which holds four CPCNs in California, is acquiring PAETEC and all of its subsidiaries, including the four PAETEC Regulated Entities that hold CPCNs in California. Windstream and PAETEC have each demonstrated, through their ownership and operation of these subsidiaries, that they possess the level of technical expertise necessary to qualify for a CPCN in California.

Joint applicants assert that the transaction will join together two companies that have successfully competed in the telecommunications sector, and the resulting integration of their operations will bring together the respective strengths of each organization. They further assert that, by operating as an integrated company, each of the operating companies will deliver greater value and variety of services to their customers than they do individually. Joint applicants also assert that the transaction "will not result in a change of carrier for customers or any assignment of authorizations, and in no event will it result in the discontinuance, reduction, loss, or impairment of service to customers," and "without immediate change in rates, terms or conditions."

There is no evidence that the merger sought in this application will reduce competition and harm consumers. The Commission notes, however, that this merger may result in an increase in rates for Joint Applicants' current customers, although Joint Applicants have asserted such will not happen "immediately."

The instant application includes a copy of Windstream's most recent financial statements from its SEC Form 10-K filing for the year ended
December 31, 2010 which demonstrates that Windstream has sufficient resources to meet the Commission's financial requirements.

For the above reasons, the transaction is in the public interest and we will grant the application pursuant to §§ 852 and 854.

¹ All code references are to the Public Utilities Code, unless otherwise stated.