VI. Public Interest

Applicants state that approval of this proposed transaction is in the public interest, because applicants will continue to operate under their same names and operating authorities as at present after consummation of the transaction. If XO cannot obtain new investment and restructure its balance sheet, XO's financial stability could be significantly compromised and services to California customers would be adversely affected. The proposed transaction will enable XO to continue to invest in the expansion of its network and to provide high quality local, long distance, and broadband services to its customer base in California and other states.

This is an uncontested matter in which the decision grants the relief requested. Accordingly, pursuant to Section 311(g)(2) of the Public Utilities Code, the otherwise applicable 30-day period for public review and comment is being waived.

Findings of Fact

1. Resolution ALJ 176-3088 determined that this was a ratesetting proceeding and that no hearings were expected.

2. Notice of this application appeared in the Commission's May 13, 2002 Daily Calendar.

3. No protests were filed.

4. This application has been filed pursuant to Pub. Util. Code § 854.

5. Pub. Util. Code § 854(b) and (c) are not applicable in this instance because none of the applicants has more than $500 million in gross annual California revenues.

6. XO California and XO Long Distance will continue to operate as XO California and XO Long Distance.

7. No new construction is being proposed.

8. XO California and XO Long Distance are nondominant telecommunications carriers.

9. Forstmann Little and Telmex have sufficient financial resources to meet the Commission's requirements to provide facilities-based and resold local exchange and interexchange telecommunications services.

10. Forstmann Little and Telmex possess the necessary technical expertise required by the Commission.

Conclusions of Law

1. The proposed transfer of ownership and control of XO California and XO Long Distance from Craig O. McCaw and existing shareholders to Forstmann Little, Telmex, XO management and others is not adverse to the public interest.

2. It can be seen with certainty that the proposed transfer will not have any adverse impact on the environment.

3. Forstmann Little and Telmex meet the Commission's requirements for the issuance of a CPCN to provide facilities-based and resold local exchange and interexchange telecommunications services.

4. Public convenience and necessity require the granting of this application to be effective on the date signed.

ORDER

IT IS ORDERED that:

1. Applicants XO California, Inc. (XO California) and XO Long Distance Services, Inc. (XO Long Distance) are authorized to indirectly transfer ownership and control through their parent company, XO Communications, Inc., (XO) from Craig O. McCaw and the existing shareholders of XO to Forstmann Little & Co Equity Partnership-VII, L.P., Forstmann Little & Co. Subordinated Debt and Equity Management Buyout Partnership-VIII, L. P., an indirect, wholly owned subsidiary of Telefonos de Mexico, S.A. de C.V. and 20% common stock divided between XO management (2%) and other holders (18%), as set forth in the application.

2. XO California and XO Long Distance shall notify the Director of the Commission's Telecommunications Division in writing of the transfer of authority, as authorized herein, within 10 days of the date of consummation of such transfer.

3. The corporate identification numbers U-5553-C and U-6272-C assigned to XO California and XO Long Distance, respectively, shall continue to be used by XO California and XO Long Distance, which shall be included in all original filings with this Commission and in the titles of other pleadings filed in existing cases.

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

5. Application 02-05-018 is closed.

This order is effective today.

Dated August 22, 2002, at San Francisco, California.

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