10. Assignment of Proceeding
Michael Peevey is the assigned Commissioner and Timothy J. Sullivan as the assigned Administrative Law Judge.
1. This application was filed pursuant to § 854.
2. Applicants seek approval of the change in control of CBC that will occur indirectly as a result of the placement of AT&T Broadband Phone and CBC under a new parent, AT&T Comcast.
3. In Resolution ALJ 176-3088 of May 16, 2002, the Commission preliminarily determined that this matter was a ratesetting proceeding and determined that no hearings were expected.
4. TURN and the Consumer Federation of America (CFA) filed a joint protest to these applications, stating that the proposed financial transaction constitutes a major change in the status of the company and raises significant public policy issues.
5. Qwest filed a protest asking that the Commission either deny the application, or grant the application subject to conditions to protect the public interest, including, but not limited to, requiring applicants to provide equal access to competitors to provide cable telephone and cable modem services over applicants' cable network facilities.
6. On June 17, 2002, AT&T Broadband Phone and CBC, filing separately, responded to the protests of Qwest and TURN-CFA and argue that the protests raise issues not pertinent to the applications and that the public interest requires rejection of the protests.
7. Pursuant to Rule 44.4, a decision on whether an evidentiary hearing should be held is based on the content of the protest.
8. On August 8, 2002, the "Scoping Memo and Ruling of Assigned Commissioner and Administrative Law Judge" ordered the applicants to make a supplemental filing that demonstrated how the proposed application met the public interest criteria enumerated in Section 854 and invited comments on the supplemental filing.
9. AT&T Broadband Phone and CBC filed and served a "Joint Supplement to Applications of Comcast Business Communications, Inc. and AT&T Broadband Phone of California, LLC." (Joint Supplement) on August 16, 2002.
10. On August 23, 2002, the Consumer Federation of America and Qwest each filed a response to the Joint Supplement.
11. On August 23, 2002, consistent with Rule 8(d) of the Commission's Rules of Practice and Procedure, Qwest requested final oral argument.
12. On August 29, 2002, Qwest filed a "Motion for Leave to File a Supplemental Response to the Joint Supplemental Filing of Comcast Business Communications, Inc. and AT&T Broadband Phone of California, LLC" (Motion for Leave). Attached to the motion as Exhibit C was the "Supplemental Response of Qwest Communications Corporation to the Joint Supplemental Filing of Comcast Business Communications, Inc. and AT&T Broadband Phone of California, LLC" (Supplemental Response).
13. On September 5, 2002, AT&T Broadband Phone and CBC jointly filed a "Joint Opposition of Comcast Business Communications, Inc. and AT&T Broadband Phone of California, LLC to the Motion of Qwest Communications Corporation to File a Supplemental Response" (Joint Opposition).
14. AT&T Broadband Phone, a California non-dominant interexchange carrier (NDIEC) and non-dominant competitive local exchange carrier (CLC), is the end result of the approved acquisition of TCI Telephony Services of California, Inc., dba People Link (TCI), and MediaOne Group, Inc. (MediaOne) by AT&T Corp and subsequent corporate name changes following each acquisition. AT&T Broadband Phone provides CLC service to approximately 145,000 customers in California.
15. Comcast Business Communications, Inc. (CBC) is a wholly-owned subsidiary of Comcast Business Communications Holdings, Inc. (Holdings), which, in turn, is a wholly-owned, indirect subsidiary of Comcast.
16. CBC also is authorized to provide intrastate interexchange services in California and throughout the continental United States. CBC does not actively market its services in California at this time and has fewer than 75 interexchange toll customers in California.
17. Section 854 precludes any person or corporation from transferring control of any public utility organized and doing business in the state without first securing authorization to do so from this Commission.
18. Sections 854(b) and (c) are explicitly applicable if the utilities that are parties to the proposed merger have gross annual California revenues of $500 million or more.
19. The parties to the proposed merger do not have gross annual California jurisdictional revenues exceeding $500 million.
20. The primary question to be determined in a transfer of control proceeding under § 854(a) is whether the proposed transfer will be adverse to the public interest.
21. Our decisions over the years have laid out a number of factors that should be considered in making the determination of whether a transaction will be adverse to the public interest.
22. The annual reports and 10-Ks attached to the applications show that both entities are healthy financially.
23. In 2001, Comcast had a ratio of debt to operating cash flow of less than 4 to 1.
24. In 2001, AT&T Broadband's ratio of debt to operating cash flow was over 8 to 1.
25. After the merger, the estimated first year combined debt to operating cash flow will be less than 5 to 1.
26. AT&T Broadband Phone, a significant provider of telephony services in California, will emerge from the merger with greater financial strength and a greater ability to meet the financial demands needed to expand its California operations.
27. The promised operating efficiencies and economies of scope and scale will make AT&T Comcast a fitter California operator than AT&T Corp.
28. The erosion of debt ratios in Comcast is less significant than the improvements realized in the parent of AT&T Broadband Phone.
29. CBC, despite its stronger financial ratios, has declined to operate in California's telephony market in a significant way.
30. A beneficial result of this merger is to strengthen the finances of a major California provider of telephony services.
31. A beneficial result of this merger is an increase in telephony choices available to California customers.
32. Since all software systems providing services to AT&T Broadband Telephone's customers will remain in AT&T Broadband Telephone, the merger and change of control should have no impact on the systems that serve customers.
33. The additional financial resources arising from the merger make it possible for AT&T Broadband Telephone to improve telephony services.
34. There will be no adverse impacts on service quality arising from the proposed financial transaction.
35. The structure of the merger has incorporated safeguards to provide a stable environment for managers.
36. The proposed transfer of control will have no immediate impact on the management of the subsidiaries offering telecommunications services within California.
37. The new company will maintain the quality of its management.
38. The likely impacts on utility employees will be small since the changes resulting from the merger take place at the holding company level, not at the operating level of the telecommunications utilities.
39. Since there are almost no CBC employees in California, there will be almost no changes affecting the AT&T Broadband Telephone employees who provide services in California.
40. The Communications Workers of America has withdrawn its protests of advice letters related to the proposed merger and has not participated in this proceeding.
41. No party protesting this merger raised any charges that the merger would be unfair to employees.
42. The merger and change of control will be fair to utility employees.
43. The Securities and Exchange Commission supervises this transaction and the information disclosures by the applicants.
44. Financial managers and investment bankers for the principals have determined that the proposed transaction is fair and reasonable.
45. The shareholders of both companies have overwhelmingly supported this transaction.
46. No party has alleged that this transaction runs counter to the interests of shareholders.
47. The transaction is fair to shareholders.
48. AT&T Comcast will have an increased ability to finance network construction.
49. Executives of the new company have declared a continuing commitment to the rollout of cable telephony.
50. There is no indication that CBC, absent this merger, would become significantly involved in broadband telephony in California.
51. Since Comcast and AT&T have non-overlapping cable franchises, and since CBC does not offer local telephony services, this merger will not reduce telecommunications competition in California.
52. A financially strengthened AT&T Broadband Telephone can better compete to provide telephony services to California customers.
53. Each of the subsidiaries currently under the Commission's jurisdiction will continue to be under the Commission's jurisdiction.
54. The merger of the parent companies and change of control of CBC and AT&T Broadband Telephone have raised no anti-trust issues.
55. The proposed transaction will not diminish the jurisdiction of this Commission.
56. The proposed transaction will not diminish the capacity of this Commission to regulate and audit utility operations in California.
57. A Limited Liability Company form of organization is a lawful form of corporate organization.
58. The application involves only a proposed change in the underlying ownership of facilities themselves.
59. No party raised any environmental issues concerning this proposed financial transaction.
60. The material presented by the applicants has enabled us to reach findings on all issues discussed in § 854.
61. Qwests "Motion for Leave to File a Supplemental Response to the Joint Supplemental Filing of Comcast Business Communications, Inc. and AT&T Broadband Phone of California, LLC" raises issues that lack a nexus with the issues in this proceeding.
1. This proceeding is a ratesetting proceeding.
2. The proposed transaction is subject to scrutiny under Pub. Util. Code § 854(a).
3. The application can be adequately addressed without the holding of an evidentiary hearing.
4. Section 854 provides us with the authority over the proposed merger as it relates to those subsidiaries offering certificated telecommunications services within California.
5. Should the shareholders so elect, it is reasonable for this Commission to approve a Limited Liability Company form of organization for AT&T Comcast.
6. The efficiencies and strengthened competitive position of the merged companies have the potential to foster better employment opportunities.
7. The proposed merger does not have any antitrust or anticompetitive issues needing our intervention.
8. Because the application involves only a proposed change in the underlying ownership of facilities, it can be seen with certainty that the merger in AT&T Comcast will not have a significant effect on the environment.
9. Since the proposed merger and change of control promotes the public interest as defined in § 854, it is reasonable to approve this transaction.
10. To permit prompt consummation of the proposed change of control, the approval of the application should become effective immediately.
11. The application should be granted to the extent provided in the following order.
IT IS ORDERED that:
1. Comcast Business Communications (CBC) and AT&T Broadband Phone Company of California (AT&T Broadband Phone) are authorized to undertake the changes in control of CBC and AT&T Broadband Phone in accordance with the terms of the merger agreement discussed in the body of this order.
2. AT&T Comcast Corporation may form a wholly-owned limited liability company to hold the stock of AT&T Broadband Corp. AT&T Comcast Corporation (AT&T Comcast) shall notify the Commission upon doing so.
3. Qwest Communications Corporation (Qwest)'s "Motion for Leave to File a Supplemental Response to the Joint Supplemental Filing of Comcast Business Communications, Inc. and AT&T Broadband Phone of California, LLC" shall be denied.
4. Within 30 days after the change of control authorized herein has taken place, AT&T Comcast shall file with the Commission's Docket Office, for inclusion in the formal file of Application (A.) 99-09-039, written notice that said change of control has taken place.
5. In the event that the books of the Applicants or any subsidiaries are required for inspection by the Commission or its staff, Applicants shall either produce such records at the Commission's offices, or reimburse the Commission for the reasonable costs incurred in having Commission staff travel to any of Applicants' offices.
6. The application is granted as set forth above and the authority granted shall expire if not exercised within one year of the effective date of this order.
This order is effective today.
Dated November 7, 2002, at San Francisco, California.
LORETTA M. LYNCH
President
HENRY M. DUQUE
CARL W. WOOD
GEOFFREY F. BROWN
MICHAEL R. PEEVEY
Commissioners
I will file a concurrence.
/s/ LORETTA M. LYNCH
President
ATTACHMENT A
************ APPEARANCES ************ |
Chris J. Melcher |
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************ APPEARANCES ************ Timothy J. Sullivan |
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