11. Comments to Alternate Decision

The proposed alternate decision of Commissioner Peevey and Commissioner Kennedy, the assigned Commissioner in this matter was provided to parties for comment in accordance with Pub. Util. Code Sec. 311(d) and Rule 77.6 of the Rules of Practice and Procedure.

Opening Comments were filed on November 8, 2005, by the following parties: Applicants, ORA, TURN, CTFC, Greenlining, LIF, Public Advocate, DRA, PacWest, Qwest, Cox, CALTEL, Earthlink, and CA ISP.

Reply comments were filed on November 14, 2005, by the following parties: Applicants, ORA, TURN, CTFC, Greenlining, LIF, DRA, Qwest, Earthlink, and CA ISP.

A very brief summary of each party's filings is provided.

Applicants again argue for no conditions. In addition, Applicants do provide more useful comments such as changing the wording from DSL to Broadband Internet Access in reference to the goal of reaching 95% of all homes in its footprint. We have made this change on the condition that this does not change the requirement to have naked DSL made available. Applicants also comment on the topic of naked DSL (or stand-alone DSL) by indicating that it is their opinion that the FCC has occupied the field on this matter. This Commission has no desire to engage in a jurisdictional battle over this crucial issue. We note that the FCC has a one-year requirement for Applicants to provide stand-alone DSL. We also note that the Applicants have stated in their Opening Comments that they are committed to implementing the FCC requirement by June 30, 2006. We have modified our deadline to have stand-alone DSL available consistent with the Applicants' commitment.

ORA restates its position that § 854 (b) applies. ORA also disagrees with the reliance on the Attorney General's Opinion.

TURN also reargues that § 854 (b) should apply. Additionally, TURN claims that a net benefit calculation must still be performed as part of § 853 (b). TURN also raises opposition to a number of other issues including the Greenlining Settlement, the Attorney General's analysis, and attainment of § 854 (c) criteria.

CTFC proposes a $100 million fund be created for underserved communities as opposed to the $60 million that the CETF establishes. On a related note, CTFC comments that it should manage that fund instead of creating a new entity.

Greenlining is supportive of the draft Alternate decision especially with regards to the efforts towards supplier diversity, increased philanthropy, and increased access to technology by underserved groups.

LIF comments that § 854 (b) should apply. LIF also stresses a need for a community voice on the CETF. Lastly, LIF believes that more direction should be provided for the increased philanthropy.

Public Advocates is generally supportive of the draft Alternate decision noting the public benefit provided by the Greenlining Agreement and the increased philanthropy.

DRA believes that § 854 (b) should apply. DRA makes a variety of claims that the disabled will not be helped and may be hurt by this transaction. DRA states that there should be three basic mitigation measures of accessible websites for consumers with visual disabilities, the ability to unbundle services if any are inaccessible, and a commitment to Universal Design Principles.

PacWest comments that there needs to be a requirement for packet-switched interconnection. PacWest also disagrees with the reliance upon the Attorney General's Opinion.

Qwest argues that the reliance upon the Attorney General's Opinion is legal error. Qwest also seeks four "meaningful conditions" that Qwest has proposed in the proceeding.

Cox disagrees on the reliance on the Attorney General's Opinion. Additionally, Cox believes that the exemption provided in § 853 (b) should not be used and that § 854 (b) and (c) should apply. Cox restates the four conditions that it believes are needed to ensure the transaction is in the public interest.

CALTEL contrasts the ALJ Proposed Decision against the draft Alternate decision and states its preference for the Proposed Decision. Separately, it recommends that an Order Instituting Rulemaking be created to determine if wholesale price caps should be required.

Earthlink and CA ISP filed similar comments which indicates their support of the stand-alone DSL (also known as naked DSL). However, they believe that further steps should be taken such as placing limits on the price of the stand-alone DSL offering and the creation of a monitoring program.

We have considered all the comments and made changes where necessary. No major changes were made in response to comments although certain areas were clarified, most notably the discussion on the standard of review. We find no legal or factual error on the issues seeking changes or additional conditions that were filed in comments. We will briefly discuss the two issues that were commonly raised in comments, specifically the applicability of § 854 (b) and the reliance upon the Attorney General.

The applicability of § 854 (b) was discussed in detail throughout this proceeding. There were no legal arguments presented in the comments that were not already presented throughout the proceeding, including the briefs. We have considered these issues and find that § 853 (b) provides the Commission with the authority to grant an exemption from § 854 (b) and as a matter of policy we do grant such an exemption because we find that the exemption is in the public interest.

Regarding our grant of the Section 853 (b) exemption, we rebut TURN's claim that a net benefit calculation must still be performed. § 853 (b) only requires that we determine that a proposed transaction is in the public interest, not a dollar-by-dollar assessment and enumeration of total benefits. We have not performed a net benefit calculation in the many previous Decisions in which we have exercised a § 853 (b) exemption.

The comments which seek to disrepute the Attorney General's Opinion are misguided. The Attorney General is charged with reviewing for anticompetitive effects of a transaction from a California perspective. We take note of the fact that the United States Department of Justice has recently approved this proposed merger and its results are similar to the Attorney General's Opinion. Indeed, according to the Department of Justice's press release, it only found cause for concern with Special Access services. The Attorney General had exactly the same area of concern. Additionally, the action taken by the Department of Justice, which was to order a limited divestiture, is entirely appropriate at the federal level.

Also at the federal level, the Federal Communications Commission also approved this proposed merger. SBC's letter agreeing to a list of conditions is in the public record. These conditions will additionally ensure that the merger is in the public interest.