XI. Discusion of §§ 854(b)(3) and (c)
We must first determine whether §§ 854(b) and (c) are applicable to this proceeding before we discuss whether the proposed change of control satisfies these requirements. In prior change of control proceedings, we have granted an exemption from § 854(b) and (c) on a case-by-case basis, pursuant to § 853(b) and § 854(a) 4 if the three basic principles developed in D.97-05-092 are met.5
The first principle for exemption was that the application did not involve putting together two traditionally regulated telephone systems. Both AT&T and the MediaOne Group subsidiaries operate in the local and long distance markets as CLECs and NDIECs. Hence, the first principle for exemption is satisfied.
The second principle for exemption was that the Commission has the ratemaking authority that is contemplated in § 854(b) to jurisdictionally permit the allocation of benefits from the merger to the ratepayers. Section 854 (b)(2) requires the Commission to equitably allocate, where the Commission has ratemaking authority, the total short-term and long-term forecasted economic benefits of the proposed merger between shareholders and ratepayers, with ratepayers receiving not less than 50% of those benefits.
Not only are AT&T and MediaOne Group both operating NDIECs, they also operate CLECs which are not subject to the same degree of rate regulation as are incumbent local exchange carriers. The Internet services at issue in this application are offered in an arena generally unregulated by this Commission or any other State or Federal regulatory body. Therefore, in the application before us, the Commission does not exercise the ratemaking authority referenced in § 854(b) to jurisdictionally permit the Commission to allocate the benefits from the merger to the ratepayers. The second principle for exemption is satisfied.
The third and final principle for exemption was recognition that the requirements in § 854(b)(1) and (2) for a finding of merger benefits and an allocation of benefits to ratepayers did not fit because each of the exempted entities had grown under competitive forces at the sole risk of shareholders. Applicants do not have a captive ratepayer base or monopoly franchise to buffer risk and reward.6 Hence, the third principle for exemption is satisfied.
We conclude that the unique facts and circumstances of this application meet the Commission's criteria for an exemption from the requirements of § 854(b) and (c) pursuant to the Commission's authority under §§ 853(b)
and 854(a). Hence, this application is exempt from the requirements of § 854(b) and (c).
