4. Jurisdiction and Scope of Proceeding

4.1. Background

The scope of this proceeding is governed by Pub. Util. Code §§ 851-856.

4.2. §854(a) Applies to this Transaction

Pub. Util. Code § 854(a) specifies that, "No person or corporation, whether or not organized under the laws of this state, shall merge, acquire, or control either directly or indirectly any public utility organized and doing business in this state without first securing authorization to do so from this Commission. The Commission may establish by order or rule the definitions of what constitute merger, acquisition, or control activities that are subject to this section of the statute."⁸

The March 16, 2005 Assigned Commissioner Ruling directed the Applicants to continue to provide all the information they believed necessary and appropriate to demonstrate compliance with all of the provisions of Pub. Util. Code §§ 854(a), (b) and (c) to ensure that there would be no unnecessary delay in processing of the application. There is no dispute as to the applicability of
§ 854(a) to this transaction.

4.3. Application of §§ 854 (b) and (c) to this Transaction

The plain language of the statute, its legislative history and prior Commission decisions guide our application of this statute to this transaction, specifically the applicability of §§ 854 (b) and (c).

Pub. Util. Code § 854(b) states:

Before authorizing the merger, acquisition, or control of any electric , gas, or telephone utility organized and doing business in this state, where any of the utilities that are parties to the proposed transaction has gross annual California revenues exceeding five hundred million dollars ($500,000,000), the commission shall find that the proposal does all of the following:

(1) Provides short-term and long-term economic benefits to ratepayers.

(2) Equitably allocates, where the commission has ratemaking authority, the total short-term and long-term forecasted economic benefits, as determined by the commission, of the proposed merger, acquisition, or control, between shareholders and ratepayers. Ratepayers shall receive not less than 50 percent of those benefits.

(3) Not adversely affect competition. In making this finding, the commission shall request an advisory opinion from the Attorney General regarding whether competition will be adversely affected and what mitigation measures could be adopted to avoid this result.⁹

4.3.1. It is not reasonable to "pierce the corporate veil" as neither SBC California nor AT&T California is "key to the merger."

In D.97-03-067, the SBC acquisition of Pacific Telesis, the Commission determined that "Although the transaction is technically structured as a merger between SBC and Telesis, the practical result of the proposed transaction...is that it involves Pacific." The Commission found that, since SBC, an out of state corporation, was acquiring California's largest provider of basic local exchange service, it was in the public interest to "pierce the corporate veil" in order to consider the transaction based on "substance rather than form."

The Commission concluded that Pacific was a party to the transaction within the meaning of § 854(b) based on the reasoning that the very large California utility being acquired was "key to the merger." Specifically the Commission reasoned that:

· Pacific represented 90% or more of Telesis' assets.

· The economic benefits to be realized from the transaction were based on the joint and combined operations of Pacific and Southwestern Bell Telephone^.

· One of the principal reasons SBC pursued the transaction was to add the 15.8 million access lines in California to its existing 14.2 million telephone access lines.

Applying the same criterion used in the SBC-Telesis merger to the instant transaction leads to the opposite conclusions:

· SBC California is not the subject of the acquisition in this application.

· SBC California does not account for a majority of the holding company's assets Public information indicates that as of June 30, 2005, approximately one-third of SBC's access lines were located in California. ¹⁰

· The economic benefits to be realized from the transaction are not driven by any savings based on the joint and combined operations of SBC California and AT&T California. Only the indirect control of AT&T California will pass to SBC as a result of AT&T's merger.

· AT&T's California subsidiaries are NDIECs and CLECs. Pacific was the largest ILEC in California at the time of the SBC/Telesis merger.

· The principal reason stated by SBC for pursuing the acquisition of AT&T is the addition of AT&T's global presence in 50 countries, national and global IP-based networks, a portfolio of data and IP services, hosting, security and professional services, technology leadership through AT&T Labs, skilled networking capabilities, and a base of government and large business customers. The number of AT&T access lines in California to be added to SBC's access lines through this transaction is de minimis.

Applying the criteria used in the SBC-Telesis merger, it is clear that because SBC California is neither the subject of the acquisition nor "key to the merger," there is no reason to "pierce the corporate veil".

4.3.2. Exemption under §853(b) makes consideration of affiliate revenues irrelevant

As the law makes clear, this Commission has broad authority under
§ 853(b) and § 854(a) to exempt transactions from review under §§ 854(b) and (c) regardless of the $500 million threshold. Pub. Util. Code § 853(b) states:

"The commission may from time to time by order or rule, and subject to those terms and conditions as may be prescribed therein, exempt any public utility or class of public utility from this article if it finds that the application thereof with respect to the public utility or class of public utility is not necessary in the public interest."¹¹

As established by D. 97-052-092, D.97-07-060 and D. 98-05-022, the Commission has consistently exercised its broad authority under § 853(b) to exempt transactions from review under §§ 854(b) and (c) regardless of the presence of gross annual revenues in excess of the $500 million threshold when a very large ILEC is not the subject of an acquisition or when the subject of an acquisition is an NDIEC or CLEC.

In the MCI-BT case (D.97-07-060) the Commission recognized the sweeping authority granted to the Commission by the Legislature in this regard: "...the extent of our broad exemptive powers in § 853(b) is clear on the face of that statute..." The Commission further concluded that "We think this evinces a legislative intent to permit us to use our powers under both §853(b) and § 854(a) to exempt transactions from review under §§ 854(b) and (c), regardless of the presence of gross annual California revenues in excess of $500 million."¹²

Thus, based on the unambiguous authority granted to the Commission under § 853(b), the Commission has clearly and consistently exercised its authority to exempt transactions involving the acquisition of NDIECs and CLECs, regardless of whether the $500 million revenue threshold has been met.

4.3.3. Prior applications of §854(b) to transactions involved the acquisitions of ILECs, not NDIECs or CLECs

In prior decisions, the Commission has distinguished between the application of § 854(b) to transactions involving the acquisition of California's largest incumbent local exchange carriers (ILECs) and transactions involving competitive carriers (CLECs) or non-dominant inter-exchange carriers (NDIECs), choosing not to apply this section of the Public Utilities Code to the latter. Each of AT&T's California subsidiaries is a CLEC or an NDIEC.

A review of past decisions demonstrates that this Commission has clearly and consistently exercised its authority to exempt transactions not involving the acquisition of a California ILEC from application of § 854(b). In all cases over the past 15 years this Commission has exempted transactions involving the acquisition of NDIECs, CLECs, and other non-ILECs. ¹³

In D. 98-08-068 the Commission clearly articulated the historic application of § 853(b) authority when acquisition of a large California ILEC is not involved: "As in the BT/MCIC and AT&T/TCG mergers, the acquisition of a heavily-regulated local exchange carrier is not the reason for the instant merger."¹⁴ In the footnote to the above citation, the Commission noted: "While AT&T was once more heavily regulated as a dominant carrier, by the time of the TCG merger we had accorded it nondominant status."¹⁵

Accordingly, and for the same reasons, we conclude that because all California subsidiaries of AT&T are CLECs or NDIECs, it is not necessary in the public interest to apply § 854(b) to this transaction.

4.3.4. Legislative history demonstrates that the Legislature intended to give the Commission flexibility in the application of §854(b) where traditional cost-of-service utilities are not involved in the transaction.

Prior to 1995, Pub. Util. Code § 854(b) required the Commission to review acquisitions, mergers and changes of control in instances where "the acquiring or to be acquired utility has gross annual California revenues exceeding five hundred millions dollars."¹⁶ Both subsections (b) and (c), known as the "Edison Amendments," were added to § 854 in 1989 following a series of proposed mergers in the electric industry.

At the time, the applicability of § 854(b)(1) rested on the assumption that a regulated utility subject to an acquisition or merger operated under a traditional cost-of-service ratemaking scheme and that any savings resulting from a merger that were not anticipated at the time the utility's rates were set would not flow through to ratepayers without regulatory action by the Commission.

The pre-1995 statute was historically interpreted by this Commission to require all transactions, regardless of whether a utility was a party to the transaction, to be analyzed according to the provisions in §§ 854 (b) and (c), unless exempted pursuant to the Commission's authority under § 853(b) or
§ 854(a), with 100 percent of quantified economic benefits allocated to ratepayers.

In 1995 the Legislature amended §§ 854(b) and (c) to limit the application of § 854(b) to transactions to which a large, traditionally-regulated California utility is a party.¹⁷ These amendments were proposed by the CPUC and enacted by the Legislature in response to the Commission's adoption of the "New Regulatory Framework" ("NRF") in which the Commission moved away from traditional cost-of-service ratemaking for telephone service providers and toward a regulatory framework that recognizes the benefits to consumers of increased competition in the telecommunications industry.

Assembly Bill 119 amended § 854(b) (1) in order to "provide the CPUC with the flexibility needed in the current regulatory environment, where, increasingly, rates are set through a price cap or incentive based mechanism, rather than through traditional command and control method."¹⁸ The Commission's analysis in support of the bill indicates the reason the CPUC sponsored the legislation:

"This amendment modernizes' sec. 854 in light of changes in the regulatory environment since 1989. It recognizes that, increasingly, large utilities are being regulated under `price cap' mechanism or a `performance based' system rather than the `command and control' system of traditional, `cost-of-service' regulation. In this new regulatory environment utility cost recovery is not guaranteed to the same extent but innovative, cost-cutting behavior is better rewarded. The idea is to better balance utility risk and reward and to bring lower costs to ratepayers (without decreasing service), by moving toward a `carrot' approach to regulation and away from a `stick' approach. Under these so-called `incentive-based' regulatory systems, ratepayers and shareholders share costs, savings and profits in varying degrees."

The Commission-sponsored amendments to § 854(b): (i) remove the requirement that the Commission find that the proposal provides net benefits to ratepayers, and instead require the Commission to find that the proposal provides short-term and long-term economic benefits to ratepayers; and (ii) equitably allocate the short-term and long-term forecasted economic benefits of the proposed transaction as determined by the Commission between shareholders and ratepayers where the Commission has ratemaking authority (emphasis added). In those cases where merger benefits are allocated by the Commission through its ratemaking authority, ratepayers must receive not less than 50 percent of the benefits.

The Legislature's intent to provide the Commission with the flexibility to determine which transactions are subject to these requirements and to determine how best to allocate their benefits is clear in the statements that were made at the time the amendments were added: "If rates are not regulated because the industry is competitive, it may not be appropriate to require any sharing of benefits."¹⁹

We conclude that even if this transaction were not exempt from § 854(b) and § 854(c) pursuant to § 854(f), legislative history confirms that the Commission is well within its discretionary authority under § 853(b), to exempt the transaction from the allocation of economic benefits vis-à-vis a traditional ratemaking mechanism contemplated under § 854(b). We also conclude that these amendments were not intended to countermand the statutory obligation that any such transaction be approved only if it is in the public interest.

4.3.5. Exempting this transaction from § 854(b) is in the public interest pursuant to the authority granted in § 853(b) and consistent with Commission precedent.

After passage of the 1996 Telecommunications Act²⁰ and adoption of the New Regulatory Framework in California²¹, the Commission consistently relied on a three-part test for telecommunications mergers and acquisitions to guide the determination as to whether a transaction warranted exemption from § 854(b) pursuant to § 853(b) or § 854(a).

Beginning with the British Telecom-MCI merger in 1997,²² the Commission applied three principal questions to transactions involving telecommunications companies where the application of § 854(b) was considered:

· Does the transaction involve putting together two traditionally or incentive regulated telephone systems?

· Does the Commission exercise the type of ratemaking authority that would facilitate an allocation of the merger benefits as contemplated under § 854(b)?

· Has the acquired company grown under competitive forces at the sole risk of its shareholders?

In the MCI-BT case the Commission concluded:

"The instant application does not involve putting together two traditionally regulated telephone systems, nor are contiguous or nearby service territories involved....The acquisition does not involve merging any BT operations into MCIC operations. No consolidation of MCIC subsidiary management with BT management is contemplated....We do not have traditional ratemaking authority over MCIC's operations. Competitive market forces will distribute any benefits of this merger to ratepayers, therefore, to review this transaction under PU Code § 854(b) would be a futile exercise. MCIC has grown under competitive forces at the sole risk of its shareholders without a captive ratepayer base and guaranteed franchise territory to buffer risk and reward. Review of this particular transaction under §§ 854(b) and (c) will stifle competition and discourage the operation of market forces and is contrary to the main thrust of our telecommunications policy and the Telecommunications Act of 1996."²³

Asking these three questions of the instant application leads to similar answers.

First, the instant application does not involve putting together two traditionally regulated telephone systems. The subject of the acquisition, AT&T, is an NDIEC and a CLEC that operates primarily in the heavily competitive and rapidly declining long distance market. The Commission did not exercise traditional ratemaking authority over AT&T California post-divestiture which occurred in 1984.

Moreover, SBC California is an ILEC no longer subject to traditional cost-of-service rate regulation. It is subject to regulation under the Commission's New Regulatory Framework, designed for transition to a competitive market, with significant or complete pricing flexibility for all services other than basic local exchange service.

Post-divestiture, neither AT&T nor its California subsidiaries have ever been subject to traditional cost-of-service regulation that would facilitate an allocation of the merger benefits as contemplated under § 854(b). Further, although the Commission last distributed merger benefits via a sur-credit following the acquisition of GTE by Bell Atlantic, five years have passed since that action, and NRF ratemaking and the new regulatory environment do not facilitate an equitable distribution of merger benefits through a traditional ratemaking mechanism as contemplated under § 854(b).

Indeed, as contemplated under NRF and the federal Telecommunications Act, the telecommunications industry has become more competitive since 1996. Attempting to mandate the distribution of economic benefits of a merger or acquisition of this type using traditional rate regulation mechanisms today would be detrimental to the operation of market forces and is contrary to the main thrust of the 1996 Telecommunications Act, state telecommunications policy, and this Commission's stated policies under NRF.

Post-divestiture, AT&T has grown (and shrunk) under competitive market forces at the sole risk of its shareholders without a captive ratepayer base and guaranteed franchise territory to buffer risk and reward.

As a result, even if § 854(b) applied to this transaction, granting an exemption would be consistent with past Commission practice and in the public interest. Thus, subjecting such a transaction to §854(b) "is not necessary in the public interest" pursuant to the authority granted us in PU Code § 853(b), as well as §854(a).

4.3.6. Commission precedent and § 854(c) provide the appropriate guidelines for determining whether this transaction is in the public interest.

Over time, the Commission has used its discretion in different ways in reviewing mergers. In D.97-08-29 the Commission approved a transfer of control after determining that the transaction "would not be adverse to the public interest."²⁴ Historically, the Commission has sought more broadly to determine whether a change in control is in the public interest:

"The Commission is primarily concerned with the question of whether or not the transfer of this property from one ownership to another...will serve the best interests of the public. To determine this, consideration must be given to whether or not the proposed transfer will better service conditions, effect economies in expenditures and efficiencies in operation."²⁵

D.97-07-060 notes that over the years, our decisions have identified a number of factors that should be considered in making the determination of whether a transaction is in the public interest.²⁶ More recently, D.00-06-079 provides an overview of these factors:

"Antitrust considerations are also relevant to our consideration of the public interest.²⁷ In transfer applications we require an applicant to demonstrate that the proposed utility operation will be economically and financially feasible.²⁸ Part of this analysis is a consideration of the price to be paid considering the value to both the seller and buyer.²⁹ We have also considered efficiencies and operating costs savings that should result from the proposed merger.³⁰ Another factor is whether a merger will produce a broader base for financing with more resultant flexibility."³¹

"We have also ascertained whether the new owner is experienced, financially responsible, and adequately equipped to continue the business sought to be acquired. ³² We also look to the technical and managerial competence of the acquiring entity to assure customers of the continuance of the kind and quality of service they have experienced in the past.³³"³⁴

Subsequently, D.00-06-079 assessed the proposed transaction against the seven criteria identified in § 854(c),³⁵ and included a broad discussion of antitrust and environmental considerations.³⁶ Thus, even though § 854(c) does not apply to this transaction, it is reasonable to consider these factors in helping us determine if this transaction is in the public interest. Therefore, a review of this transaction in terms of § 854(c), as well as a consideration of environmental and competitive issues, constitutes the appropriate scope of this proceeding.

4.4. Summary of Applicable Law

In summary, we find that §§ 854(b) and (c) do not apply to this transaction.

To determine whether this transaction is in the public interest, the proposed transaction will be assessed against the seven criteria identified in

§ 854(c), and will include a broad discussion of antitrust and environmental considerations, as has been done in previous cases.

⁸ § 854(a)

⁹ § 854(b)

¹⁰ SBC Investor Relations "Fact Sheet" at http://www.sbc.com/gen/investor-relations?pid=1130

¹¹ §853(b)

¹² D. 97-07-060 (at *24)

¹³ In the past decade, the Commission has authorized scores of transactions involving NDIECs and CLECs, but uniformly has exempted them from the detailed requirements of § 854(b), and, with limited exception, has exempted them from § 854(c). The decisions reaching this result include: Re Application of Resurgens Communications Group, Inc. to Acquire Control of Comm Sys. Network Servs., Inc., TMC Communications, Inc. and TMC Communications, L.P., Decision 91-09-095, 41 Cal. P.U.C. 2d 429, 1991 Cal. PUC LEXIS 607 (Sept. 30, 1991); Re Joint Application of AT&T Corp., Italy Merger Corp. and Tele-Communications, Inc. for Approval Required for the Change in Control of TCI Telephony Servs. of California, Inc. That Will Occur Indirectly as a Result of the Merger of AT&T Corp. and Tele-Communications, Inc., Decision 99-03-019, 85 Cal. P.U.C. 2d 249, 1999 Cal. PUC LEXIS 382 (Mar. 4, 1999); Re Joint Application of AT&T Corp. ("AT&T"), Teleport Communications Group Inc. ("TCG") and TA Merger Corp. for Approval Required for the Change in Control of TCG's California Subsidiaries That Will Occur Indirectly as a Result of the Merger of AT&T and TCG, Decision 98-05-022, 80 Cal. P.U.C. 2d 273, 1998 Cal. PUC LEXIS 533 (May 7, 1998); Application of MidAmerican Communications Corp. to Transfer, and of LDDS Communications, Inc., to Acquire, Certain Shares and Control of MidAmerican Communications Corp., and for Permission and Approval For MidAmerican Communications Corp. to Borrow, Guaranty, and Grant a Security Interest in Collateral, Decision 91-06-061, 40 Cal. P.U.C. 2d 637, 1991 Cal. PUC LEXIS 388 (June 24, 1991); In re Request of WorldCom, Inc. and Intermedia Communications Inc., for Approval to Transfer Control of Intermedia Communications Inc. and its Wholly-owned Subsidiary to WorldCom, Inc., Decision 01-03-079, 2001 Cal. PUC LEXIS 219 (Mar. 27, 2001); Joint Application of Access One Communications Corp., Formerly Known as CLEC Holding Corp., OmniCall Acquisition Corp., and OmniCall, Inc. for Approval of Transfer of Control, Decision 00-01-059, 2000 Cal. PUC LEXIS 85 (Jan. 28, 2000); Application of American Network Exch., Inc. and its Subsidiary, Amnex (California), Inc., to Transfer, and of Nycom Info. Servs., Inc., to Acquire Control of a Certificate by Merging American Network Exch., Inc. into Amnex Acquisition Corp., a Subsidiary of Nycom Info. Servs., Inc., Decision 90-03-047, 35 Cal. P.U.C. 2d 664, 1990 Cal. PUC LEXIS 154 (Mar. 19, 1990); Application of State Communications, Inc., TriVergent Communications, Inc., Gabriel Communications, Inc., and Triangle Acquisition, Inc. for Approval of a Transfer of Control, Decision 01-02-005, 2001 Cal. PUC LEXIS 139 (Feb. 8, 2001); Re Joint Application of NetMoves Corp., Certain Shareholders of NetMoves Corp., and Mail.com Inc., for Approval of an Agreement and Plan of Merger and Related Transactions, Decision 00-12-053, 2000 Cal. PUC LEXIS 1055 (Dec. 21, 2000); Application for Auth. for AppliedTheory Corp. to Acquire Control of CRL Network Servs., Inc., a California Corp., Pursuant to Article 6 of Chapter 4 of the California Pub. Util. Code, Decision 00-09-033, 2000 Cal. PUC LEXIS 693 (Sept. 7, 2000); Re Application for Auth. to Transfer Control of StormTel, Inc., F/K/A Z-Tel, Inc., to CCC Merger Corp., Decision 00-09-035, 2000 Cal. PUC LEXIS 695 (Sept. 7, 2000); Joint Application for Auth. for LDDS Communications, Inc. to Merge with Metromedia Communications Corp. and Resurgens Communications Group, Inc., Decision 93-08-039, 50 Cal. P.U.C. 2d 611, 1993 Cal. PUC LEXIS 586 (Aug. 18, 1993); Joint Application for Auth. for LDDS Communications, Inc. to Acquire Control of Dial-Net, Inc., Decision 93-03-029, 48 Cal. P.U.C. 2d 420, 1993 Cal. PUC LEXIS 169 (Mar. 11, 1993); Joint Application of Evercom Sys., Inc. and H.I.G. Capital Partners III, LP for Approval of Acquisition by H.I.G. Capital Partners III, LP of Indirect Control Over Evercom Sys., Inc., Decision 04-11-010, 2004 Cal. PUC LEXIS 534 (Nov. 10, 2004); Joint Application of T-NETIX Telecommunications Servs., Inc. and H.I.G. Capital Partners III, LP for Approval of Acquisition by H.I.G. Capital Partners III, LP of Indirect Control Over T-NETIX Telecommunications Servs., Inc., Decision 04-11-004, 2004 Cal. PUC LEXIS 505 (Nov. 9, 2004); Re Application of MCCC ICG Holdings LLC and, ICG Communications, Inc. to Complete a Transfer of Control of ICG Telecom Group, Inc. an Authorized Carrier, Decision 04-10-005, 2004 Cal. PUC LEXIS 483 (Oct. 7, 2004); Joint Application for Approval of Agreement and Plan of Merger By and Among World Access, Inc., WorldxChange Communications, Inc. and Communication Telesystems Int'l D/B/A WorldxChange, and Request for Expedited Ex Parte Relief, Decision 00-10-064, 2000 Cal. PUC LEXIS 752 (Oct. 19, 2000); Joint Application for Approval of Agreement and Plan of Merger by and Among World Access, Inc. and Star Telecommunications, Inc. d/b/a CEO Telecommunications and for the Change in Control of California Certificated Subsidiaries, Decision 00-10-013, 2000 Cal. PUC LEXIS 812 (Oct. 5, 2000); Joint Application and Request for Expedited Ex Parte Treatment of KDD America, Inc. and DDI Corp. for Approval of Transfer of Control, Decision 03-08-058, 2000 Cal. PUC LEXIS 1134 (Aug. 21, 2003); Joint Application of Telscape Int'l, Inc., Telscape USA, Inc., MSN Communications, Inc., Pointe Communications Corp., and Pointe Local Exch. Co. for Approval of Transfers of Control and Related Transactions, Decision 00-09-031, 2000 Cal. PUC LEXIS 681 (Sept. 7, 2000); Joint Application of Zenex Long Distance, Inc., Prestige Invs., Inc., Shareholders of Prestige Invs., Inc., and Lone Wolf Energy, Inc. for Approval of a Merger and Acquisition of Prestige Invs., Inc., Decision 00-07-033, 2000 Cal. PUC LEXIS 586, (July 18, 2000); Re Time Warner Inc. and AOL Time Warner Inc. for Approval of the Change in Control of Time Warner Connect That Will Occur Indirectly as a Result of the Merger of Time Warner Inc. and America Online, Inc., Decision 00-04-045, 2000 Cal. PUC LEXIS 180 (Apr. 13, 2000); Re Time Warner Inc. and AOL Time Warner Inc. for Approval of the Change in Control of Time Warner Telecom of California, L.P. That Will Occur Indirectly as a Result of the Merger of Time Warner Inc. and America Online, Inc., Decision 00-04-044, 2000 Cal. PUC LEXIS 179 (Apr. 13, 2000); Joint Application Under Pub. Util. Code § 854 for Approval of the Merger of ACN Communications, Inc. and Arrival Communications of California, Inc., Decision 00-04-043, 2000 Cal. PUC LEXIS 178 (Apr. 12, 2000); Application of HTC Communications, LLC for Approval Nunc Pro Tunc to Transfer Control to Pointe Communications Corp. and for Other Related Transactions, Decision 00-04-014, 2000 Cal. PUC LEXIS 192 (Apr. 6, 2000); Joint Application of Empire One Telecommunications, Inc. and EOT Acquisition Corp. for Approval of the Transfer of Empire One's Assets and Assignment of Empire One's Certificates of Pub. Convenience and Necessity to EOT, Decision 00-02-029, 2000 Cal. PUC LEXIS 73 (Feb. 8, 2000); Joint Application for Approval of Acquisition by U.S. TelePacific Holdings Corp. of U.S. TelePacific Corp., Decision 99-11-066, 1999 Cal. PUC LEXIS 796 (Nov. 30, 1999); Joint Application and Request for Expedited Ex Parte Treatment by Econophone Servs., Inc. and Viatel, Inc. for Approval of Agreement and Plan of Merger, Decision 99-11-035, 1999 Cal. PUC LEXIS 848 (Nov. 4, 1999); Application of MVX Communications, LLC for Auth. to Transfer Control to MVX.Com Communications, Inc., Decision 99-10-044, 1999 Cal. PUC LEXIS 706 (Oct. 19, 1999); In re Application of Global Crossing Ltd. and Frontier Corp. for Approval to Transfer Control of Frontier Corp.'s California Operating Subsidiaries to Global Crossing Ltd., Decision 99-06-099, 1999 Cal. PUC LEXIS 470 (June 30, 1999); Re Claricom Networks, Inc., Application for Approval of an Indirect Change in Control from Claricom Holdings, Inc. to Sigma Acquisition Corp., Decision 99-02-093, 85 Cal. P.U.C. 2d 210, 1999 Cal. PUC LEXIS 69 (Feb. 19, 1999); Application of Teleglobe Inc. and Excel Communications, Inc. for Approval of Agreement and Plan of Merger, Decision 98-09-084, 1998 Cal. PUC LEXIS 990 (Sept. 24, 1998); Application of PWT Acquisition Corp. and Pac-West Telecomm, Inc. for Approval to Transfer Control of Pac-West Telecomm, Inc., Decision 98-09-050, 1998 Cal. PUC LEXIS 961 (Sept. 11, 1998); Application of Qwest Communications Int'l, Inc., LCI Int'l, Inc., LCI Int'l Telecom, Corp., and USLD Communications, Inc. for Approval of a Transfer of Control, Decision 98-06-001, 1998 Cal. PUC LEXIS 385 (June 1, 1998); Re Application of WorldCom, Inc. and Brooks Fiber Props., Inc. for Approval of Agreement and Plan of Merger, Decision 97-11-091, 1997 Cal. PUC LEXIS 1071 (Nov. 21, 1997); Re Joint Application of SmarTalk TeleServices, Inc. and ConQuest Operator Servs. Corp. for an Order Authorizing the Acquisition by Merger of ConQuest Operator Servs. Corp. Pursuant to Cal. Pub. Util. Code §§ 851-854, Decision 97-11-046, 76 Cal. P.U.C. 2d 547, 1997 Cal. PUC LEXIS 1055 (Nov. 13, 1997); Application for Auth. for Avery Communications, Inc., to Acquire Control of Home Owners Long Distance, Inc., Decision 96-09-049, 1996 Cal. PUC LEXIS 924 (Sept. 11, 1996); Joint Application of Continental Telecommunications of California, Inc., Continental Cablevision, Inc. and U S West, Inc. for Auth. to Transfer Control of Continental Telecommunications of California, Inc. from Continental Cablevision, Inc. to U S West, Inc., Decision 96-08-015, 67 Cal. P.U.C. 2d 214, 1996 Cal. PUC LEXIS 836 (Aug. 2, 1996); Application for Auth. to Transfer Control of Western Union Communications, Inc. to First Data Corp., Decision 95-10-051, 1995 Cal. PUC LEXIS 907 (Oct. 23, 1995); Re Donyda, Inc. d/b/a/ Call America of Palm Desert and Call America of San Diego, Transferor, and California Acquisition Corp. d/b/a/ Valley Acquisition Corp., Transferee, Application for Consent to Transfer Control of a Resale Common Carrier; Re Application of Inland Call America, Inc., Transferor, and Telecom Acquisition Corp., Transferee, Application for Consent to Transfer Control of a Resale Common Carrier, Decision 95-07-051, 60 Cal. P.U.C. 2d 590, 1995 Cal. PUC LEXIS 601 (July 19, 1995); Joint Application for Auth. for MfsGaAqCo No. 1 to Merge with RealCom Office Communications, Inc., Decision 94-07-078, 55 Cal. P.U.C. 2d 505, 1994 Cal. PUC LEXIS 964 (July 28, 1994); Joint Application for Auth. for LDDS Communications, Inc. to Acquire Control of Advanced Telecommunications Corp., Decision 92-09-097, 45 Cal. P.U.C. 2d 658, 1992 Cal. PUC LEXIS 805 (Sept. 29, 1992); Re Application of American Network, Inc. and ATE, Inc. for Authorization to Merge Amnet Subsidiary, Inc., a Wholly Owned Subsidiary of American Network, Inc., into ATE, Inc., Decision 86-11-011, 22 Cal. P.U.C. 2d 304,1986 Cal. PUC LEXIS 676 (Nov. 5, 1986).

¹⁴ D. 98-08-068 Section VI par. 5

¹⁵ Ibid, footnote n4

¹⁶ § 854(b) as amended by SB 52 in 1989

¹⁷ Amended Statutes 1995 Chapter 622 Section 1 (AB 119).

¹⁸ Report of Assembly Committee on Utilities and Commerce, April 3, 1995 at 1

¹⁹ Senate Committee on Energy, Utilities, and Communications, July 11, 1995 at 3

²⁰ U.S. 47

²¹ D.89-10-031

²² Re MCI Communications Corporation, D. 97-05-092, 72 CPUC 2s 656 at 664-665

²³ In the matter of the Joint Application of MCI Communications Corporation and British Telecommunications, D. 97-07-060 1997 Cal. PUC LEXIS 557, Finding of Fact 15

²⁴ Ibid., Finding of Fact 3, 645.

²⁵ Union Water Co. of California, 19 CRRC 199, 202 (1920) at 200.

²⁶ 1997 Cal PUC LEXIS 557 *22-25.

²⁷ 65 CPUC at 637, n.1.

²⁸ R. L. Mohr (Advanced Electronics), 69 CPUC 275, 277 (1969). See also, Santa Barbara Cellular, Inc. 32 CPUC2d 478 (1989).

²⁹ Union Water Co. of California, 19 CRRC 199, 202 (1920).

³⁰ Southern Counties Gas Co. of California, 70 CPUC 836, 837 (1970).

³¹ Southern California Gas Co. of California, 74 CPUC 30, 50, modified on other grounds, 74 CPUC 259 (1972).

³² City Transfer and Storage Co., 46 CRRC 5, 7 (1945).

³³ Communications Industries, Inc. 13 CPUC2d 595, 598 (1993).

³⁴ D.00-06-079 (2000 Cal PUC LEXIS 645, *17-*20), footnotes included but renumbered into the current sequence.

³⁵ Public interest factors enumerated under this code section are whether the merger will" (1) maintain or improve the financial condition of the resulting public utility doing business in California; (2) maintain or improve the quality of service to California ratepayers; (3) maintain or improve the quality of management of the resulting utility doing business in California; (4) be fair and reasonable to the affected utility employees; (5) be fair and reasonable to a majority of the utility shareholders; (6) be beneficial on an overall basis to state and local economies and communities in the area served by the resulting public utility; and (7) preserve the jurisdiction of the Commission and our capacity to effectively regulate and audit public utility operations in California."

³⁶ D.00-06-079 (2000 Cal. PUC LEXIS 645, *17-*38); see also D.01-06-007 (2001 Cal. PUC LEXIS 390 *25-*26) for a similar list of factors.