X. Discussion of § 852

Applicants seek a determination that the TWT transaction is not subject to § 852.² Alternatively, Applicants seek an exemption from § 852 for the indirect ownership change in MediaOne TWE's minority (19%) interest in TWT, whose subsidiary TWT-California provides facilities-based telecommunications services in California as a competitive local carrier (CLC).

Applicants recognize that AT&T is subject to § 852 for this segment of the transaction because the statue describes the acquiring entity expansively to include not only a "public utility" but also a subsidiary, affiliate or corporation holding a controlling interest in a public utility. However, Applicants contend that § 852 is restricted to the stock acquisition of a public utility "organized or existing under or by virtue of the laws of this state." Because the transaction does not involve the direct purchase of TWT-California stock, Applicants conclude that this segment of the transaction is not subject to § 852.

Alternatively, to avoid unnecessary controversy, Applicants request that if § 852 is for any reason deemed to apply to the proposed MediaOne Group merger, that the Commission exempt it from review because the review is not necessary in the public interest under § 853.

Although the transaction does not involve the direct purchase of TWT-California stock, the transaction does meet the criteria set forth in § 852. Specifically, the transaction would provide for AT&T to "acquire, take or hold, [any] part of the capital stock of any other public utility, organized or existing under or by virtue of the laws of this state." Hence, the indirect acquisition of TWT-California through the acquisition of a minority interest in TWT is subject to § 852.

We now address Applicants' § 852 exemption request. Applicants contend that a § 852 exemption is appropriate because the indirect transfer of a minority interest in TWT, whose subsidiary TWT-California, a small CLC with California operations limited to serving businesses in San Diego, will have no meaningful effect on the CLC's control or operations. Applicants further contend that there is no legitimate § 852 issue because the key question in a § 852 transfer proceeding is whether the acquiring party is financially capable of the acquisition and satisfactory operation thereafter. Applicants conclude that an exemption should be granted because AT&T will not gain control of TWT-California given that this portion of the transaction involves only a minority interest.

Pursuant to § 852, an exemption is available if the proposed transaction falls within categories of stock acquisitions that are determined by the Commission not to be harmful to the public interest. Although this particular segment of the transaction may not be harmful to the public interest, the Applicants have not identified this segment as falling within a category of stock acquisitions that have been determined by the Commission not to be harmful to the public interest. We are not inclined to identify in this proceeding those categories of stock acquisitions which are not harmful to the public interest. That determination should be made on a case-by-case basis as each situation arises.

However, § 853(b) does provide us with the authority to exempt any public utility or class of public utility from § 852 if we find that the "application

with respect to the public utility...is not necessary in the public interest." ³ In this regard, we find that Applicants have substantiated that the indirect transfer of a minority interest in TWT, whose subsidiary TWT-California, serves businesses in San Diego, will have no meaningful effect on TWT-California's control or operations. Hence, the indirect ownership change resulting from MediaOne TWE's minority interest in TWT should be exempted from § 852 pursuant to § 853.

"No public utility, and no subsidiary or affiliate of, or corporation holding a controlling interest in, a public utility, shall purchase or acquire, take or hold, any part of the capital stock of any other public utility, organized or existing under or by virtue of the laws of this state, without having been first authorized to do so by the commission; provided, however, that the commission may establish by order or rule categories of stock acquisitions which it determines will not be harmful to the public interest, and purchases within those categories are exempt from this section...."

"The commission may from time to time by order or rule, and subject to those terms and conditions as may be prescribed therein, exempt any public utility or class of 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. The commission may establish rules or impose requirements deemed necessary to protect the interest of the customers or subscribers of the public utility or class of public utility exempted under this subdivision. These rules or requirements may include, but are not limited to, notification of a proposed sale or transfer of assets or stock and provision for refunds or credits to customers or subscribers."