Discussion
The issue before us is whether CVB should be authorized to acquire control of CTC pursuant to Pub. Util. Code §§ 851 and 854(a)6 which state, in relevant part, as follows:
§ 851: No public utility...shall...sell...any part of its...property necessary or useful in the performance of its duties to the public...without first having secured from the commission an order authorizing it to do so.
§ 854(a): No person or corporation...shall...acquire... any public utility...doing business in this state without first securing authorization to do so from the commission....
The Commission has broad discretion to determine if a transaction should be authorized pursuant to §§ 851 and 854(a). The primary standard used by the Commission is whether the transaction will adversely affect the public interest. The Commission may also consider if the transaction will serve the public interest. Where necessary and appropriate, the Commission may attach conditions to a transaction in order to protect and promote the public interest.7
In general, the Commission uses the following criteria to decide if an entity without a certificate of public convenience and necessity should be authorized to acquire control of a certificated, nondominant telecommunications carrier8:
_ Whether the acquirer has sufficient financial resources to operate the acquired carrier.
_ Whether the acquirer has sufficient managerial and technical expertise to operate the acquired carrier.
_ Whether any officer, director, partner, or owner of more than 10% of the acquirer or acquired carrier was: (1) previously associated with a carrier that or was sanctioned by the Federal Communications Commission (FCC) or any state agency for failure to comply with any regulatory statute, rule, or order; (2) found criminally or civilly liable for a violation of California Business and Professions Code § 17000 et seq., or for any actions that involved misrepresentations to consumers, or is currently under investigation for such violations; or (3) previously associated with a carrier that filed for bankruptcy or went out of business.
We find that the proposed acquisition of CTC by CVB satisfies all of the above criteria. In particular, CVB is financially qualified to acquire CTC as demonstrated by (1) the substantial reduction in the debt of CTC' parent company, CTC Group, that will occur if the acquisition is consummated, and (2) CVB's infusion of $32 million of equity capital into CTC Group. Moreover, Applicants represent that CTC and its operating subsidiaries, including CTC, are presently cash flow positive. Applicants also provided projected financial statements for CTC Group and its subsidiaries that indicate these companies will have positive net income and cash flow in 2004 and 2005.
CVB also possesses sufficient managerial and technical expertise to operate CTC. The owner and manager of CVB, Kenneth Peterson, has extensive experience in managing telecommunications companies and other business enterprises. CVB will also retain many of the CTC's senior executives who have extensive experience in providing telecommunications services.
The Applicants state that to the best of their knowledge no affiliate, officer, director, partner, or owner of more than 10% of CVB or CTC has been (1) sanctioned by the FCC or any state agency for failure to comply with any regulatory statute, rule or order, or (2) been found criminally or civilly liable for a violation of California Business and Professions Code § 17000 et seq., or for any actions that involved misrepresentations to consumers, or is currently under investigation for such violations.9
Although much of CTC's senior management was associated with the bankruptcy of CTC and will remain in place after CVB's acquisition of CTC is complete, there is no evidence in this proceeding that the bankruptcy of CTC was caused by the incompetence or malfeasance of its current management. Rather, the record indicates that CTC's management has strived to revive CTC financially while continuing to provide service to its customers. These circumstances lead us to conclude that CVB's acquisition of CTC should not be rejected just because CTC's senior management was associated with the bankruptcy of CTC.
In conclusion, we find that CVB should be authorized to acquire CTC pursuant to §§ 851 and 854(a) for the following reasons. First, there will be no changes to rates, services, or operations of CTC as a result of the transaction. Thus, CTC's customers and the public will not be harmed by the transaction. Second, Applicants have demonstrated that CVB is qualified to assume control of CTC. Third, the public may benefit from the transaction to the extent it enhances CTC's ability to compete and to maintain its services and operations in California. Finally, there was no opposition to A.03-09-011.
6 Pursuant to D.98-07-094, nondominant carriers providing interexchange and/or local exchange service may file an advice letter to obtain authority to transfer assets and/or control pursuant to § 851 et seq., except in instances where, as is the case here, the acquiring entity is not authorized to provide service in California. Thus, the advice letter process cannot be used for the purpose of market entry. (D.98-07-094, 81 CPUC 2d 378, 393.) 7 D.01-06-007, mimeo., p. 15. 8 D.03-06-079, mimeo., pp. 7-8. 9 Supplement to A.03-09-011 filed at the Commission's Docket Office on October 15, 2003.
