XI. Comments on Draft Decision

The draft decision of the Administrative Law Judge in this matter was mailed to the parties in accordance with Pub. Util. Code Section 311(g) and Rule 77.7 of the Rules of Practice and Procedure. Public Utilities Code, and our Rules, generally require that proposed decisions be circulated to the public

for comment, and the Commission not issue its decision any sooner than 30 days following the filing and service of the draft decision.29 However, the time period for circulating a proposed decision and issuance of a Commission decision may be reduced or waived by the Commission upon the stipulation of all parties to the proceeding.30

Applicants and ORA, the only parties to this proceeding, stipulated that the comment period be reduced from 20 days to 5 days, that the 5-day reply comment period be waived, and that the 30-day time period from the issuance of a draft decision to the issuance of a Commission decision is waived. The comments filed by the parties to this proceeding have been carefully reviewed and considered. To the extent that such comments required discussion or changes to the proposed decision, the discussion or changes have been incorporated into the body of this order.

Findings of Fact

1. This application was filed pursuant to § 854.

2. Applicants request approval of a change of control in USW-LD and Interprise from U S West, Inc. to Qwest Inc.

3. Applicants have requested that this application be categorized as a ratesetting proceeding.

4. The Commission preliminarily determined that this matter was a ratesetting proceeding and determined that no hearings were expected.

5. Notice of this application appeared in the Commission's Daily Calendar of September 24, 1999.

6. ORA protested the application on the basis that the application did not provide sufficient information to enable the Commission to make the findings required by the Public Utilities Code.

7. ORA did not address the categorization of this proceeding as required by Rule 6(a)(2).

8. Applicants filed a response to ORA's protest on November 4, 1999 pursuant to Rule 44.

9. Pursuant to Rule 44.4, a decision on whether an evidentiary hearing should be held is based on the content of the protest.

10. Qwest Corp. is a California certificated interexchange carrier that offers communications services to interexchange carriers and other communications entities, business and residential, using its own facilities as well as facilities leased from other carriers.

11. LCI has been authorized a CPCN to provide interexchange and CLC telecommunications services.

12. USLD has been authorized to provide interLATA, intraLATA, interexchange, operator, resold local telecommunications, and facilities-based CLC telecommunications services.

13. Phoenix possesses the necessary CPCN to operate as a reseller of interLATA telecommunications services within California.

14. Applicants identified a corporate identification number for Qwest Corp., one for LCI, and one for USLD.

15. USW-LD possesses the necessary CPCN to offer non-facilities based resale of interexchange, intrastate telecommunications service within California.

16. Interprise possesses the necessary CPCN to offer digital private line interLATA and both facilities-based and resold local exchange telecommunications services as a CLC.

17. Applicants reserved their right to withdraw this application at any time or to challenge the Commission's jurisdiction to approve the merger under § 854.

18. Section 854 precludes any person or corporation from transferring control of any public utility organized and doing business in the state without first securing authorization to do so from this Commission.

19. Sections 854(b) and (c) are applicable if the utilities that are parties to the proposed merger have gross annual California revenues of $500 million or more.

20. The parties to the proposed merger do not have gross annual California revenues exceeding $500 million.

21. The primary question to be determined in a transfer of control proceeding under § 854(a) is whether the proposed transfer will be adverse to the public interest.

22. Our decisions over the years have laid out a number of factors that should be considered in making the determination of whether a transaction will be adverse to the public interest.

23. The annual reports and 10-Ks attached to the application show that both entities are healthy financially.

24. Qwest Inc. has implemented a comprehensive set of policies and procedures aimed at reducing slamming incidents.

25. Qwest Inc. provides training to its employees and third-party distributors that explains its policies and procedures for the sale of Qwest Inc.'s long distance services.

26. Qwest Inc. requires third-party distributors to certify that all of their employees have reviewed and acknowledged the existence of Qwest Inc.'s anti-slamming policies.

27. The Agreement is structured to be a seamless transaction transparent to the telephone customers.

28. After the proposed transaction is completed, those subsidiaries offering telecommunications services within California will continue to offer their local exchange service customers a choice of long distance carriers.

29. Sections 853(b) and 854(c)(8) provides us with the necessary authority to require Applicants to implement mitigation measures to improve the subsidiaries' overall reliability of service within California.

30. The proposed transfer of control will have no immediate impact on the management of the subsidiaries offering telecommunications services within California.

31. The Board of Directors following the consummation of the merger will consist of both Qwest Inc. and U S West, Inc. representatives.

32. Financial managers and investment bankers for the principals have determined that the proposed transaction is fair and reasonable.

33. The merger will provide increased competition in the California market for fiber optic telecommunications services.

34. Each of the subsidiaries currently under the Commission's jurisdiction will continue to be under the Commission's jurisdiction.

35. No anti-trust issue has been raised about Qwest Inc.'s acquisition of USW-LD and Interprise.

Conclusions of Law

1. This proceeding is a ratesetting proceeding.

2. The proposed transaction is subject to the scrutiny under Pub. Util. Code § 854(a).

3. The application can be adequately addressed without the holding of an evidentiary hearing.

4. The corporate identification numbers listed in the application should be reconciled to the Commission's certificated carrier list.

5. Section 854 provides us with the authority over the proposed merger as it relates to those subsidiaries offering certificated telecommunications services within California.

6. Informal complaints on Qwest Inc.'s subsidiaries offering telecommunications services within California averaging more than one a day from September 1, 1999 to March 6, 2000 indicate that a service problem existed.

7. A grant of this application should be conditioned upon the imposition of specific mitigation measures to prevent future adverse service consequences.

8. The efficiencies and strengthened competitive position of the merged companies have the potential to foster better employment opportunities.

9. The proposed merger does not have any antitrust or anticompetitive issues needing our intervention.

10. Because the application involves only a proposed change in the underlying ownership of facilities it can be seen with certainty that the merger between Qwest Inc. and U S West, Inc. will not have a significant effect on the environment.

11. To permit prompt consummation of the proposed change of control, the approval of the application should become effective immediately.

12. The application should be granted to the extent provided in the following order.

ORDER

IT IS ORDERED that:

1. Qwest Communications Inc. (Qwest Inc.) is authorized to acquire control of U S West Long Distance, Inc. and U S West Interprise America, Inc. in accordance with the terms of the merger agreement discussed in the body of this order. This authority is conditioned upon Qwest Inc. complying with the mitigation measures set forth in Ordering Paragraph 2 of this order.

2. Qwest Inc. shall:

a. Categorize each complaint against itself or any of its affiliates as either a slamming, cramming, or other complaint.

1. Complaints identified as slamming, which involves the switching of a customer's long distance carrier without the customer's knowledge or consent, shall be identified and tracked by the number of Personal Identification Code (PIC) disputes involving California consumers made with all local exchange carriers (LECs) and ultimately attributable to Qwest Inc. or its affiliates. Qwest Inc. shall take all necessary action to obtain this information including those PIC disputes reported by the ILEC as a dispute against the underlying carrier but determined by the underlying carrier to be a dispute involving Qwest Inc. or its affiliates. Qwest Inc. shall also work with the underlying carriers to track this information if it is not currently tracked.

2. Complaints identified as cramming shall be identified and tracked by the product or service that was billed but not ordered by Qwest Inc. or its affiliates' California customers.

3. Complainants involving California customers and identified as other shall be identified and tracked by a general description that briefly explains what each complaint in this category is about.

b. Provide to the Commission's Consumer Services Division (CSD) a contact person or persons accessible by a toll free 800 number to research and resolve informal complaints lodged with CSD within 30 days upon being notified of the informal complaint.

c. Track all California complaints submitted to its subsidiaries that offer telecommunications services within California, including any forwarded by CSD.

d. Submit to CSD and ORA copies of all California customers' complaints which are received at the Federal Communications Commission and which are served on the merged company or otherwise are made known to the merged company.

e. Submit quarterly reports to CSD and ORA summarizing the number of California complaints. The quarterly report shall identify by subsidiary, the date of each complaint, brief description of actual complaint, action taken to resolve the complaint, and the date the complaint was resolved, if resolved, and status of complaint if not resolved. For slamming complaints, the quarterly complaint report shall identify the PIC disputes by month, the Automatic Number Identification (ANI) associated with each PIC dispute, the Carrier Identification Code (CIC) that the dispute was recorded against, and by the Local Exchange Company (LEC).

f. Submit additional information relating to complaints upon request by CSD or the Office of Ratepayer Advocates (ORA).

g. Report to ORA and the Commission, subject to confidential treatment under General Order No. 66-Cl, on an annual basis, the number of customers it has in California for both residential and business services.

h. Submit quarterly complaint reports to CSD and ORA within 60 days after the end of each quarter (May 30th, August 29th, November 29th, and March 1st). These quarterly complaint reports shall be submitted to CSD for five years following the effective date of this order.

i. If it becomes necessary in connection with any proceeding before the Commission, make any officer, director, or other employee of the merged company available for deposition at the Commission's office in San Francisco, regardless of where that person lives or works.

3. CSD shall review each of the quarterly compliance reports and recommend to the Commission further action, if deemed necessary, to resolve complaints related to Qwest Inc. subsidiaries offering telecommunications services within California.

4. The Executive Director shall cause a copy of this order to be served on the Commission's CSD.

5. Qwest Inc. shall reconcile with the Commission's Telecommunications Division Director (TDD) Qwest Inc.'s subsidiaries' corporate identification numbers listed in the applications to the Commission's certificated carrier list within 30 days after the effective date of this order. If the corporate identification number discrepancies cannot be resolved on an informal basis, then the TDD shall recommend to the Commission an appropriate proceeding to resolve the discrepancies.

6. Within 30 days after the change of control authorized herein has taken place, Qwest Inc. shall file with the Commission's Docket Office, for inclusion in the formal file of Application (A.) 99-09-039, written notice that said change of control has taken place.

7. In the event that the books of the Applicants or any subsidiaries are required for inspection by the Commission or its staff, Applicants shall either produce such records at the Commission's offices, or reimburse the Commission for the reasonable costs incurred in having Commission staff travel to any of Applicants' offices.

8. The application is granted as set forth above and the authority granted shall expire if not exercised within one year of the effective date of this order.

9. Application 99-09-039 is closed.

This order is effective today.

Dated June 22, 2000, at San Francisco, California.

President Loretta M. Lynch, being necessarily

I dissent.

/s/ CARL WOOD

Commissioner

We will file a concurrence.

/s/ HENRY M. DUQUE

Commissioner

/s/ JOSIAH L. NEEPER

Commissioner

APPENDIX A

TABLE OF ACRONYMS AND ABBREVIATIONS

(END OF APPENDIX A)

TABLE OF CONTENTS

TITLE PAGE

OPINION 2

Findings of Fact 27

Conclusions of Law 30

ORDER 32

APPENDIX A

29 See Pub. Util. Code § 311(g), and Rule 77. 30 Pub. Util. Code § 311(d) and Rule 77.7(g).

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