4. Jurisdiction and Scope of Proceeding

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

4.1. § 854(a) Applies to This Transaction

Pub. Util. Code § 854(a) specifies that "[n]o 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

In the Scoping Memo, the Assigned Commissioner 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.

4.2. Application of §§ 854(b) and (c) to This Transaction

The plain language of § 853(b), prior Commission decisions, and legislative history guide our application of §§ 854(b) and (c) to this transaction.

4.2.1. The plain language of § 853(b) affords the Commission significant discretion in determining whether to apply § 854 (b) and (c).

Pub. Util. Code § 854(b) states:

Pub. Util. Code § 854(c) further instructs the Commission to review eight enumerated factors and to determine if "on balance, that the merger, acquisition, or control proposal is in the public interest."10 The § 854(c) inquiry only applies to transactions where any utility that is a party to the transaction has gross annual California revenues exceeding $500 million.11

The Commission, however, has "the authority to exempt a utility from...[§] 854 if we find the public interest does not require that we apply them."12 Public Util. Code § 853(b) provides that the "commission may from time to time by order or rule...exempt any 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."13 While it is not clear that the plain language of § 854(b) applies to this transaction, the text of § 853(b) establishes that an exemption may apply to transactions of any scale, so long as application of §§ 854(b) and (c) "is not necessary in the public interest."

4.2.2. Prior Commission decisions recognize our broad power to exempt mergers from review under §§ 854(b) and (c).

Many past Commission decisions affirm our ability to exercise substantial discretion in deciding whether to subject a transaction to § 854 scrutiny. In examining the plain language of § 853(b) in the British Telecom / MCI merger, we held that the statute grants us sweeping authority: "the extent of our broad exemptive powers in § 853(b) is clear on the face of that statute."14 Later, in the AT&T-TCI merger, we reiterated that § 853(b) "confer[s] broad discretion upon us to determine whether...§§ 854(b) and (c) should apply to a particular merger."15

Given this broad discretion, we have granted exemption from §§ 854(b) and (c) in many proceedings before the Commission.16 Our review of proposed mergers covers i) specific characteristics of the merger applicants; ii) the state of and the impact on the market as a whole; and iii) the likelihood that competitive pressures and our regulatory regime will cause benefits achieved through the combination to flow through to consumers. In considering these factors, our past decisions have been tailored to the specific transactions before the Commission and consistent with our determination that the waiver statute "give[s] us discretion to decide on a case-by-case basis whether waiver is appropriate."17

One such case where we decided it was not necessary to apply §§ 854(b) and (c) was the British Telecom / MCI merger.18 There we observed that the transaction did not involve putting together two traditionally regulated telephone systems. Also we examined elements that explicitly referred only to the transferred entity. We concluded that we did not exercise the type of ratemaking authority that would facilitate an allocation of the merger benefits as contemplated under § 854(b), and we found that the acquired company grew under competitive forces at the sole risk of it shareholders. For these reasons we decided that "competitive market forces, rather than mandated rate reductions," should distribute merger benefits to ratepayers, and review of the transaction under § 854(b) would be a "futile exercise" that was "not in the public interest."

Likewise we decided it was not necessary to apply §§ 854(b) and (c) to the WorldCom-Intermedia merger.19 In that proceeding we found that the acquired company was not a major provider of telecommunications services in California, so "there would be little benefit to conducting a full Section 854(b) and (c) review." Also we observed that the acquired company primarily served business customers in a market "where there is a great deal of competition," and we held that conditions imposed by a settlement with the Department of Justice mitigated any resulting disruption to consumers.

As established by these and other cases, the Commission consistently has exercised its broad authority under § 853(b) to exempt individual transactions from review under §§ 854(b) and (c), regardless of the presence of gross annual revenues in excess of the $500 million threshold.20 Thus it would not be a significant departure from our prior decisions if we recognized an exemption was warranted due to the specific facts and circumstances presented in the merger before us.

4.2.3. Legislative history reaffirms the Commission's ability to exercise substantial discretion in determining whether to exempt a transaction from § 854 scrutiny.

Legislative history confirms that the Legislature intended to grant the Commission significant flexibility in deciding whether to apply §§ 854(b) and (c) to telecommunications transactions. Subsections (b) and (c) were added to § 854 in 1989, following a series of proposed mergers in the electric industry. Specifically Senate Bill 52, which revised § 854, responded to the change in control of San Diego Gas & Electric (SDG&E). After being subject to two different takeover attempts, SDG&E ultimately reached an agreement to merge with Southern California Edison (Edison). The combination of the two companies would have formed the largest energy utility in the United States, and legislators knew that subsections (b) and (c), which became known as the "Edison conditions," could block the transaction.21

Legislative history indicates that the Legislature did not specifically intend for § 854 to apply to other transactions in other markets. Indeed, the Assembly Committee on Utilities and Commerce maintained that "[w]hether the Edison conditions will apply to any transaction other than the pending Southern California Edison/San Diego Gas & Electric merger proposal may depend to a large extent on the definitions of control activities that the PUC adopts pursuant to the bill's directive."22 This statement evinces a legislative intent to allow the Commission to use its powers under both § 853(b) and § 854(a) to exempt transactions from §§ 854(b) and (c) review, regardless of the presence of gross annual California revenues in excess of $500 million.23

We thus conclude that the legislative history reaffirms 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 find 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.

4.2.4. The specific facts and circumstances surrounding the SBC/AT&T merger indicate that we should not subject the transaction to §§ 854(b) and (c) review.

In determining whether an § 853(b) exemption is warranted in the case of the SBC/AT&T merger, i) specific characteristics of the merger applicants; ii) the state of and the impact on the market as a whole; and iii) the likelihood that competitive pressures and our regulatory regime will cause benefits achieved through the combination to flow through to consumers. This approach is consistent with the plain meaning of § 853(b), prior Commission decisions, and the legislative history reviewed above.

First, we look to the specific characteristics of both the acquired and the acquiring company. Here, like the British Telecom / MCI merger,24 the proposed transaction does not involve the acquisition of an ILEC. Instead all of AT&T's California subsidiaries are or non-dominant inter-exchange carriers (NDIECs) and competitive carriers (CLECS). Commission treatment of similar cases involving acquisition of NDIECs and CLECs has been clear and consistent. We have exempted multiple AT&T mergers from §§ 854(b) and (c) review.25 Also this pattern extends beyond just AT&T. 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, § 854(c). 26

Furthermore AT&T is a global company that derives only a small percentage of its operations to California intrastate services, and post-merger, the acquired company's California operations will comprise a very small proportion of the combined company's total operations. AT&T's California intrastate revenues are a small percentage of AT&T's total revenues. Additionally SBC California's access lines account for only approximately one-third of SBC's total access lines.27 Hence, we are looking at only a small portion of a much bigger transaction, and one in which California's interests are not uniquely affected.28

Also none of the parties to the merger is subject to traditional rate regulation. AT&T and its California subsidiaries never have been subject to traditional cost-of-service regulation. Moreover SBC California, while an incumbent local exchange carrier (ILEC), is no longer subject to traditional cost-of-service rate regulation. In 1998 the Commission took steps to remove the last vestiges of traditional rate of return regulation when it suspended the sharing mechanisms for both Verizon and SBC. Instead SBC now is governed by the "New Regulatory Framework" (NRF), which provides significant or complete pricing flexibility for all services other than basic local exchange service.

Second, we assess the state of and impact on the market as a whole. Here we find the telecommunications market is more competitive now than ever before. As we recognized earlier this year in our Order Instituting Rulemaking for the Purpose of Assessing and Revising the Regulation of Telecommunications Utilities, recent years have witnessed a dramatic increase in number of telecommunications service providers and offerings:

In particular the long distance market, where AT&T primarily operates, is competitive and rapidly declining. AT&T has no guaranteed franchise territory to buffer risk and reward. Post-divestiture, the company has grown (and shrunk) under competitive market forces at the sole risk of its shareholders; it has no captive ratepayer base.

The Attorney General of California reviewed the California conditions specific to the proposed merger and issued an Advisory Opinion stating that no significant adverse consequences would arise from this transaction, with the limited exception of DS1 and DS3 service. The Advisory Opinion reported that AT&T's "absence will have inconsequential effects on price and output levels" in both the mass market (facilities-based) long distance and enterprise services.30 This report and supporting evidence in the record are discussed at length below.

Moreover SBC has agreed to abide by additional conditions that will ensure that the general benefits of this merger stretch to all California consumers participating in the telecommunications marketplace. § 853(b) provides that the "commission may...impose requirements deemed necessary to protect the interest of the customers or subscribers of the public utility... exempted under this subsection."31 And pursuant to this authority, we require Applicants to contribute a total of $45 million over five years to the California Emerging Technology Fund (CETF). CETF is a non-profit organization tasked with ensuring that all California residents have ubiquitous access to broadband and advanced services by 2010. A significant portion of CETF's efforts will be targeted to underserved communities.

The Greenlining Agreement imposes further California-specific conditions on the Applicants. It provides that the Applicants will boost corporate philanthropy over the next five years by an additional $47 million above current levels, participate in a statewide Broadband Task Force, and increase its supplier diversity goal for minority business enterprises from its current level of 23% to a minimum of 27% by 2010.32

Also we recognize that SBC accepted additional merger conditions imposed by the FCC. The FCC conditions require the Applicants to freeze special access rates for thirty months, refrain from seeking an increase in rates for unbundled network elements (UNEs) for two years, maintain the same number of peering partners for the next three years, and enforce the FCC's net neutrality principles for two years.33

Third, we assess the likelihood that competitive pressures and our regulatory regime will cause benefits achieved through the combination to flow through to California consumers. To begin this analysis we observe that the regulatory regime has changed markedly in recent years. Five years have passed since the Commission last distributed merger benefits via a sur-credit.34 In those years we have worked to develop a new regulatory regime that depends more on market forces, rather than the artificial distribution of merger benefits through formula and other traditional ratemaking mechanisms contemplated by § 854(b). Any attempt to use traditional cost-based rate of return mechanisms to mandate distribution of merger benefits would be detrimental to the operation of market forces and contrary to the main thrust of the 1996 Telecommunications Act, state telecommunications policy, and this Commission's stated policies under NRF.

The impact of this modern regulatory regime has been to spur competition in all areas of telecommunications services. No present-day telecommunications provider is able to escape competition. Under our current price-cap based regulatory structure, SBC must achieve efficiency gains to offset inflation, because prices are not indexed to inflation. Merger synergies are simply efficiencies gained from the combination of the two companies, and in this context competitive pressures will no doubt push the Applicants to distribute significant benefits to their consumers.

In contrast any regulatory attempt to enumerate merger benefits would result in a deadweight loss. The difficulty of adjudicating the benefit amount is indicated by the wide disparity of estimates provided by the parties in this proceeding.35 Any such Commission calculation of merger benefits would be time-consuming, costly, and highly speculative. Attempting to enumerate an exact dollar amount for the merger benefits is complicated by the international scope and scale of these entities. SBC and AT&T engage in many activities beyond our jurisdiction. Both have international operations. The companies also offer services not subject to state regulation, such as interstate telecommunications and information services. One could scarcely think of firms more different in their operations than SDG&E and Edison, the cost-of-service and rate-of-return franchise monopolies that led to the passage of § 854 (b). Thus we conclude that it is preferable to rely on the market to distribute California-based merger benefits to California consumers.

In sum, our consideration of i) specific characteristics of the merger applicants; ii) the state of and the impact on the market as a whole; and iii) the likelihood that competitive pressures and our regulatory regime will cause the merger benefits to flow through to consumers convinces us that granting an exemption under § 853(b) in this case is consistent with past Commission practice and is in the public interest. The market and SBC's acceptance of additional merger-related conditions will ensure that benefits from the transaction reach all segments of California ratepayers. Thus, subjecting such a transaction to § 854(b) "is not necessary in the public interest," and pursuant to the authority granted us in PU Code § 853(b) and § 854(a), we find that this transaction is exempt from §§ 854(b) and (c).

8 § 854(a).

9 § 854(b).

10 § 854(c).

11 Id.

12 In re Application of WorldCom, Inc. Pursuant to Public Utilities Code Section 853(b) for Exemption from the Requirements of Section 851 and 854 of the Public Utilities Code With Respect to its Bankruptcy Reorganizations, Decision 03-11-015, 2003 Cal. PUC LEXIS 554, *10 (Aug. 20, 2003).

13 §853(b).

14 In the Matter of the Joint Application of MCI Communications Corporation (MCIC) and British Telecommunications plc (BT) for All Approvals Required for the Change in Control of MCIC's California Certified Subsidiaries That Will Occur Indirectly as a Result of the Merger of MCIC and BT, Decision 97-05-092, 1997 Cal. PUC LEXIS 340, *24 (May 21, 1997) (emphasis added).

15 In the Matter of the Joint Application of AT&T Corp., Italy Merger Corp. and Tele-Communications, Inc. for Approval Required for the Change in Control of TCI Telephony Services of California, Inc. (U-5698-C) That Will Occur Indirectly as a Result of the Merger of AT&T Corp. and Tele-Communications, Inc., Decision 99-03-019, 1999 Cal. PUC LEXIS 382, *21 (March 4, 1999) (emphasis added) (citing Decisions
97-05-092, 98-05-022, and 98-08-068 in support of this assessment). See also In re Application of WorldCom, Inc. Pursuant to Public Utilities Code Section 853(b) for Exemption from the Requirements of Section 851 and 854 of the Public Utilities Code With Respect to its Bankruptcy Reorganizations, Decision 03-11-015, 2003 Cal. PUC LEXIS 554, *10 (Aug. 20, 2003) ("[T]here is no question that §853(b) grants the full Commission the power to exempt a transaction from the requirements of...[§] 854."). In rebuttal, ORA points to other Commission decisions that maintain that § 853(b) should only be applied in "extraordinary" situations. ORA Opening Brief, p. 14 (citing, for example, Application of Pacific Gas and Electric Company for an Order Under Section 853 of the California Public Utilities Code for an Exemption from the Requirements of PUC Section 851, or Alternatively for an Order Under PUC Section 851 Approving 6 Sales Transactions for Certain Public Utilities Properties, Decision 02-01-055, 2002 Cal. PUC LEXIS 3, *7 (Jan. 23, 2002) (declaring "the Commission does not grant exemptions except in extraordinary situations"); Application of Pacific Gas and Electric Company (U 39 E) for an Order under Section 853 of the California Public Utilities Code for an Exemption from the Requirements of PUC Section 851, or Alternatively for an Order Under PUC Section 851 Approving 73 Sales Transaction for Certain Public Utility Properties, Decision 99-04-047, 1999 Cal. PUC LEXIS 194, *10 (stating "this seldom-used procedure is invoked in extraordinary cases.")). But unlike the holdings of the merger decisions discussed above, the assertion cited by the ORA originated in an altogether different context then the one at issue here: The "extraordinary" language originated in decisions considering whether a company should be granted an exemption from § 851 requirements after it failed to abide by the statute and sold utility assets without Commission approval. Id. Indeed, ORA does not cite a single Commission decision that involves a merger and references this "extraordinary" language.

16 See, e.g., 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); In the Matter of the Joint Application of AT&T Corp., Meteor Acquisition Inc., and MediaOne Group, Inc. for Approval of the Change in Control of MediaOne Telecommunications of California, Inc., (U-5549-C) That Will Occur Indirectly as a Result of the Merger of AT&T Corp. and MediaOne Group, Inc., Decision 00-05-023, 2000 Cal. PUC LEXIS 355 (May 4, 2000); In the Matter of the Joint Application of AT&T Corp., Italy Merger Corp. and Tele-Communications, Inc. for Approval Required for the Change in Control of TCI Telephony Services of California, Inc. (U-5698-C) That Will Occur Indirectly as a Result of the Merger of AT&T Corp. and Tele-Communications, Inc., Decision 99-03-019, 1999 Cal. PUC LEXIS 382 (Mar. 4, 1999); In re Application of WorldCom, Inc. and MCI Communications Corporation for Approval to Transfer Control of MCI Communications Corporation to WorldCom, Inc., Decision 98-08-068, 1998 Cal. PUC LEXIS 912 (Aug. 31, 1998); In the Matter of the 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, 1998 Cal. PUC LEXIS 533 (May 7, 1998); In the Matter of the Joint Application of MCI Communications Corporation (MCIC) and British Telecommunications plc (BT) for All Approvals Required for the Change in Control of MCIC's California Certified Subsidiaries That Will Occur Indirectly as a Result of the Merger of MCIC and BT, Decision 97-05-092, 1997 Cal. PUC LEXIS 340 (May 21, 1997).

17 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, *8 (Mar. 27, 2001).

18 Decision 97-05-092, 1997 Cal. PUC LEXIS 340, *27-31 (May 21, 1997).

19 Decision 01-03-079, 2001 Cal. PUC LEXIS 219 (Mar. 27, 2001).

20 See, e.g., 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); In the Matter of the Joint Application of AT&T Corp., Meteor Acquisition Inc., and MediaOne Group, Inc. for Approval of the Change in Control of MediaOne Telecommunications of California, Inc., (U-5549-C) That Will Occur Indirectly as a Result of the Merger of AT&T Corp. and MediaOne Group, Inc., Decision 00-05-023, 2000 Cal. PUC LEXIS 355 (May 4, 2000); In the Matter of the Joint Application of AT&T Corp., Italy Merger Corp. and Tele-Communications, Inc. for Approval Required for the Change in Control of TCI Telephony Services of California, Inc. (U-5698-C) That Will Occur Indirectly as a Result of the Merger of AT&T Corp. and Tele-Communications, Inc., Decision 99-03-019, 1999 Cal. PUC LEXIS 382 (Mar. 4, 1999); In re Application of WorldCom, Inc. and MCI Communications Corporation for Approval to Transfer Control of MCI Communications Corporation to WorldCom, Inc., Decision 98-08-068, 1998 Cal. PUC LEXIS 912 (Aug. 31, 1998); In the Matter of the 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, 1998 Cal. PUC LEXIS 533 (May 7, 1998); In the Matter of the Joint Application of MCI Communications Corporation (MCIC) and British Telecommunications plc (BT) for All Approvals Required for the Change in Control of MCIC's California Certified Subsidiaries That Will Occur Indirectly as a Result of the Merger of MCIC and BT, Decision 97-05-092, 1997 Cal. PUC LEXIS 340 (May 21, 1997).

21 In the Matter of the Joint Application of MCI Communications Corporation (MCIC) and British Telecommunications plc (BT) for All Approvals Required for the Change in Control of MCIC's California Certified Subsidiaries That Will Occur Indirectly as a Result of the Merger of MCIC and BT, Decision 97-05-092, 1997 Cal. PUC LEXIS 340, *24-26 (May 21, 1997) (reviewing the early legislative history of §§ 854(b) and (c)).

22 Id. (citing the analysis published by the Assembly Committee on Utilities and Commerce).

23 In the Matter of the Joint Application of MCI Communications Corporation (MCIC) and British Telecommunications plc (BT) for All Approvals Required for the Change in Control of MCIC's California Certificated Subsidiaries That Will Occur Indirectly as a Result of the Merger of MCIC and BT, Decision 97-05-092, 1997 Cal. PUC LEXIS 340, *25-26 (May 21, 1997).

24 In the Matter of the Joint Application of MCI Communications Corporation (MCIC) and British Telecommunications plc (BT) for All Approvals Required for the Change in Control of MCIC's California Certified Subsidiaries That Will Occur Indirectly as a Result of the Merger of MCIC and BT, Decision 97-05-092, 1997 Cal. PUC LEXIS 340 (May 21, 1997). While we discuss additional grounds for exemption, we observe that all three of the British Telecom-MCI factors are fulfilled in the SBC-AT&T merger as well. First, the transaction does not involve two traditionally regulated telephone systems. Post-divestiture, AT&T has not been subject to traditional utility regulation. Second, the Commission lacks affective ratemaking authority over AT&T's California subsidiaries. Third, post-divestiture, AT&T grew under competitive forces without a guaranteed franchise authority.

25 See In the Matter of the Joint Application of AT&T Corp., Meteor Acquisition Inc., and MediaOne Group, Inc. for Approval of the Change in Control of MediaOne Telecommunications of California, Inc., (U-5549-C) That Will Occur Indirectly as a Result of the Merger of AT&T Corp. and MediaOne Group, Inc., Decision 00-05-023, 2000 Cal. PUC LEXIS 355 (May 4, 2000); In the Matter of the Joint Application of AT&T Corp., Italy Merger Corp. and Tele-Communications, Inc. for Approval Required for the Change in Control of TCI Telephony Services of California, Inc. (U-5698-C) That Will Occur Indirectly as a Result of the Merger of AT&T Corp. and Tele-Communications, Inc., Decision 99-03-019, 1999 Cal. PUC LEXIS 382 (Mar. 4, 1999); In the Matter of the 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, 1998 Cal. PUC LEXIS 533 (May 7, 1998).

26 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).

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

28

29 Decision 05-04-005 (Apr. 7, 2005).

30 Advisory Opinion, p. 16.

31 § 853(b).

32 Greenlining Opening Brief, Exhibit A.

33 Joint Applicants Opening Brief, pp. 3-5.

34 In the Matter of the Joint Application of GTE Corporation ("GTE") and Bell Atlantic Corporation ("Bell Atlantic") to Transfer Control of GTE's California Utility Subsidiaries to Bell Atlantic, Which Will Occur Indirectly as a Result of GTE's Merger with Bell Atlantic, Decision 00-03-021, 2000 Cal. PUC LEXIS 398 (Mar. 2, 2000).

35 Applicants' synergy estimate ($27 million in net present value) is significantly smaller than the estimates of TURN ($1.983 billion) and ORA ($1.84 billion).

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