2. Background
In Decision (D.) 94-05-051, D.97-06-096, D.98-07-094, and D.07-09-019, the Commission adopted and modified the advice letter process for NDIECs and CLECs seeking authority to transfer assets or control pursuant to § 851. In D.04-10-038 and D.07-09-019, the Commission imposed conditions on § 851 procedures for NDIECs and CLECs. The advice letter procedure for NDIECs and CLECs is the Tier 2 advice letter. Tier 2 advice letters may be deemed approved in 30 days if not protested.
The advice letter must advise the Commission if the NDIEC or CLEC is a party to a pending transaction for which Commission authority is required, provide the general terms of the transaction and identify any decided or pending legal complaints against the entities in either California or other states. Customer notification requirements must be followed if authority is requested to transfer customers. The advice letter must describe the terms of the transaction and indicate how any surviving Commission certified entities would modify their tariffs. The advice letter must attest that the transaction does not have the potential for resulting in either a direct physical change in the environment or a reasonably foreseeable indirect physical change in the environment pursuant to the California Environmental Quality Act (CEQA) Guideline 15378. The advice letter procedure cannot be used (1) where an entity acquiring assets or control is not either an already certificated entity or the parent or subsidiary of a presently certified entity; (2) where the transaction involves a CLEC owned or affiliated with a California ILEC; (3) where transactions are subject to the requirements of §§ 854(b) and (c); or (4) where the transaction has environmental implications under CEQA Guideline 15378.9
In D.07-11-048, the Commission adopted the advice letter process for URF ILECs seeking authority to transfer assets pursuant to § 851, consistent with the procedures and conditions previously adopted for NDIECs and CLECs in D.94-05-051, D.97-06-096, D.98-07-094, D.04-10-038, and D.07-09-019. 10 The advice letter procedure does not apply to withdrawals from basic service.
In D.07-11-048, the Commission deferred to a rulemaking consideration of a full exemption from § 851 for URF carriers. The Commission has exempted two classes of telecommunications carriers from § 851 review, wireless carriers and broadband over power line (BPL) carriers (under certain circumstances). The Commission has relied on encouraging competition as a rationale for exempting wireless and BPL carriers from § 851. For wireless carriers, the Commission found it retained jurisdiction over § 851 approvals, but determined it was no longer in the public interest to exercise that authority since the benefit of requiring § 851 approval was outweighed by the amount of resources involved and the potential to inhibit competition from § 851. (D.95-10-032, 62 CPUC2d 3, 12-13.) In 2006, the Commission granted an exemption to BPL carriers, because to do so would encourage a new broadband provider for consumers, promote broadband competition, and reduce the level of scrutiny for routine transactions. (D.06-04-070, 2006 Cal. PUC LEXIS 147 *59.)11
The Commission is conducting a pilot program for utilities' eligible transactions subject to § 851. Pursuant to Resolution (Res.) ALJ-202 (August 23, 2007) eligible transactions for URF carriers include transactions (1) not subject to environmental review by the Commission as a lead agency or responsible agency under CEQA; (2) that will not have an adverse effect on the public interest or on the ability of the utility to provide safe and reliable service to customers at reasonable rates; (3) where the property in the transaction generally does not have a fair market value in excess of $5,000,000; (4) where transfers or changes in ownership of facilities currently used in regulated utility operations do not result in a physical or operational change in the facility other than in the normal course of business; and (5) do not warrant a more comprehensive review that would be provided through a formal application. Eligible § 851 filings are submitted to the appropriate Industry Division as Tier 3 advice letters in accordance with GO 96-B. The Industry Division reviews and processes the advice letter in accordance with the GO 96-B 30-day review period. The Industry Division may reject the advice letter if it is inappropriate, because (1) the proposed transaction does not satisfy the criteria for the pilot program; (2) the proposed transaction presents unusual issues of fact or law that require more complete fact-finding and informed decisionmaking; or (3) the proposed transaction is inappropriate for advice letter consideration because it involves the exercise of discretion or is otherwise barred by GO 96-B; (4) the transactioin involves the division of a single asset into smaller parts valued at less than $5,000,000 in order to avoid a formal application; (5) the transaction warrants a more comprehensive review or may require an evidentiary hearing; and (6) the utility has failed to respond in a timely manner to a request by the Industry Divison for additional information or documentation.
9 The advice letter must be served on the Director of the Consumer Protection and Safety Division. Financial statements must accompany the advice letter for any applicant that will continue operations after the transaction has been completed. Financial statements may be filed under seal but doing so is subject to protest.
10 The following conditions were imposed on URF ILEC's use of the advice letter process in D.07-11-048. The advice letters shall disclose pending complaints and shall be served on the Commission's Consumer Protection and Safety Division. The advice letter process may not be used for market entry; thus, it does not apply where an entity acquiring telephone plant is not either an already certificated entity or the parent or subsidiary of a presently certificated entity. The advice letter process may not be used where the activity proposed in the transaction will require environmental review by the Commission as a lead agency or responsible agency under CEQA, either because no statutory or categorical exemption applies (the applicant must provide a notice of exemption from the lead agency or explain why an exemption applies in its advice letter), or because the transaction is a project under CEQA (the applicant must explain the reasons why it believes that the transaction is not a project in its advice letter). The Commission clarified that where a valid protest is filed and the issue requires the exercise of discretion, staff shall prepare a resolution for Commission consideration under General Order (GO) 96-B. As a condition of the exemption provided under § 853(b), URF ILEC advice letters were classified as Tier 2 advice letters under GO 96-B. As provided in D.07-11-048, the retirement of copper loops is governed by the procedures adopted in D.08-11-033 in the Copper Loop Rulemaking, Rulemaking 08-01-005. The § 853(b) conditional exemption granted for the retirement of individual copper loops in D.08-11-033 will not be revisited in this proceeding.
11 BPL transactions are not exempt when CEQA categorical exemptions do not apply and when utility assets are sold.
