Findings of Fact
1. This application was filed pursuant to § 854(a). A supplemental application was filed to provide information on §§ 854 (b) and (c) requirements.
2. On February 28, 2005, SBC Communications, Inc. and AT&T Corp. filed a joint application to transfer control of AT&T Communications of California, TCG Los Angeles, Inc., TCG San Diego, and TCG San Francisco from subsidiaries of AT&T to subsidiaries of the combined organization. This transfer will occur indirectly as a result of SBC obtaining direct control of AT&T, neither of which is regulated by the Commission as a public utility, and indirect control of AT&T's certified public utility subsidiaries in California.
3. When the transaction is completed, AT&T will become a subsidiary of SBC. The AT&T Subsidiaries in California will become third-tier subsidiaries of SBC, and the authorizations and licenses currently held by the AT&T Subsidiaries will continue to be held by the respective entities. The transaction does not involve the merger of any assets, operations, lines, plants, franchises, or permits of the AT&T Subsidiaries with the assets, operations, lines, plants, franchises, or permits of any SBC entity.
4. The parties to the merger transaction are SBC Communications, Inc. and AT&T Corp. Neither party is a California utility. The California utilities that are subsidiaries of SBC and AT&T are not parties to the transaction. Those California subsidiaries are not being utilized to effectuate the transaction, nor are they using their respective parents to effectuate the transaction.
5. SBC's California subsidiaries account for approximately one-third of the total number of access lines owned by SBC.
6. Fourteen Public Participation Hearings were held. Two Public Participation Hearings were held in each of the following cities: Oakland, Sacramento, Fresno, Culver City, Anaheim, Riverside, and San Diego to take comments from the public on the proposed merger. These hearings were well attended and demonstrated broad consumer and community support for the merger.
7. Hearings were held from August 8-12 and 15-17.
8. The number of AT&T's access lines in California is de minimis.
9. AT&T's California subsidiaries are non-dominant and not traditionally regulated utilities.
10. SBC's California subsidiaries are no longer regulated under traditional cost-of-service rate regulation.
11. The Commission lacks effective ratemaking authority over AT&T and its California subsidiaries.
12. Since divestiture, AT&T has grown and shrunk under competitive conditions without a guaranteed franchise.
13. This transaction will likely produce significant cost savings and other synergies for the combined firm. These transaction-related benefits will be passed through to customers through competition and market forces.
14. On July 22, 2005, the California Attorney General filed an Advisory Opinion on the competitive effects of the proposed merger, in which he found that the proposed merger will not adversely affect competition in any relevant market, other than for DS1 and DS3 private network services.
15. The Attorney General found that the relevant markets at issue in this transaction are the markets for: (1) local exchange services and long distance services for residential and small business customers (part of the mass market ); (2) long distance services for residential and small business customers (part of the mass market); (3) business applications sold to medium- to large-business and government customers (the enterprise market ); (4) special access services; and (5) Internet backbone services.
16. HHI analysis does not provide relevant insight into the dynamics of the mass market, and is not needed to perform a competitive analysis.
17. AT&T's mass market business consists of the provision of local and long distance services. AT&T's provision of local service is primarily through resale (UNE-P) rather than AT&T-owned facilities.
18. AT&T's mass market business is in an irreversible decline, due to marketplace developments, recent changes in regulation, and increasing competition in its core long distance business.
19. AT&T currently serves relatively few mass market customers in SBC California's service area.
20. Due to this decline in its mass market business, AT&T is not and would not be a meaningful competitor to SBC California in the mass market absent the transaction.
21. As a non-facilities-based provider, AT&T's provision of mass market services does not affect industry output.
22. Intermodal competition, principally from cable, wireless, and voice over Internet Protocol (VoIP) is intensifying in the mass market in California. Intermodal alternatives have displaced and are continuing to apply competitive price pressure on and continuing to displace a significant amount of traditional wireline service and usage.
23. Mass market consumers' willingness to purchase intermodal alternatives instead of traditional landline service constrains SBC's wireline service rates for many telecommunications services.
24. Wireless service has displaced a significant amount of long distance and local calling from landlines by consumers with wireless phones. In addition to using wireless phones to complete many long distance and local calls, a significant number of consumers are relying solely on wireless service.
25. Intermodal competition will continue to provide a check on future anticompetitive outcomes in the local exchange market, but for this to remain a viable check in a consolidating and converging industry, consumers must have unfettered access to competitive VoIP services.
26. If consumers have unfettered access to competitive VoIP services, then the merger will have no anticompetitive impacts in the mass market for local exchange services.
27. Without unfettered access to competitive VoIP services, the anticipated benefits of this transaction to consumers and the Commission's statutory obligation to promote access to advanced telecommunications services will be frustrated.
28. SBC does not have a long-haul backbone of its own or significant long distance facilities.
29. AT&T has elected to exit the mass market for long distance services.
30. Significant intermodal competition from wireless services is already present in the mass market for long distance services.
31. The merger will have minimal effects on the levels of concentration in this market.
32. The proposed merger will have no anti-competitive effects in the mass market for long distance telecommunication services.
33. The market for enterprise services includes the full array of highly differentiated advanced information services, including voice and data services that large businesses and governmental users demand.
34. The enterprise market is highly competitive and includes IXCs (such as AT&T, MCI and Sprint), global network service providers (such as Deutsche Telekom and BT), system integrators, CLECs and DLECs, cable companies and equipment vendors.
35. The enterprise market has been competitive for some time and is not highly concentrated.
36. SBC and AT&T focus their marketing efforts on different sectors of the enterprise market.
37. AT&T is a leading provider of enterprise services to large national customers. SBC has had difficulty attracting the type of large enterprise customers AT&T serves, particularly those based or with communications needs outside of SBC's traditional service area.
38. The Federal Communications Commission has repeatedly deemed this market competitive.
39. The merger will not produce anticompetitive effects in the enterprise market.
40. The market for special access involves dedicated point-to-point facilities that are primarily high capacity (e.g. DS1 or greater) connections that can be used to connect an end user to an IXC's point of presence, to connect two end user locations, and to connect end users to CLEC, ISP, wireless or other competitive networks.
41. In certain locations, AT&T is the only competitor against SBC providing special access services in SBC California's service areas.
42. The Attorney General finds that the proposed merger may enhance SBC's existing market power over DS1 and DS3 services and that entry barriers in the market for these services are long-lasting. Therefore, the Attorney General recommends a one-year freeze on rates paid by current AT&T customers receiving DS1 or DS3 private network services.
43. The Internet backbone and ISP markets are highly unconcentrated and will remain so after the merger.
44. The Attorney General's Advisory Opinion states that the FCC has exclusive jurisdiction over Internet backbone services. Therefore, Internet-peering is outside of the CPUC's jurisdiction.
45. The merger will maintain or improve the financial condition of the affected California utility subsidiaries.
46. There is no rational basis for imposing new quality control conditions because of the proposed merger.
47. The transaction will maintain or improve the quality of management of the affected California utility subsidiaries.
48. The transaction will be fair and reasonable to affected California utility employees, both union and non-union.
49. The transaction will be fair and reasonable to the majority of all affected shareholders.
50. The transaction will be beneficial on an overall basis to state and local economies, and the communities in the areas served by the resulting public utility. Specifically, the merger will produce cost savings and other synergies that will be passed through to California customers through competition and market forces. The transaction will also result in the combined company's ability to offer a broader range of services, and more advanced services, to California consumers. The transaction will promote competition in communications in California, resulting in improved quality of service, more competitive prices, and greater technological innovation that will inure to the benefit of customers.
51. The Greenlining Agreement ensures that the transaction will be beneficial to the local communities in California.
52. This transaction will not affect the structure of AT&T's California subsidiaries and the Commission's ability to regulate those subsidiaries will not be diminished. The AT&T subsidiaries will continue to be subject to all the terms and conditions that the Commission has previously required. The transaction will therefore not adversely affect the Commission's jurisdiction, nor its ability effectively to regulate the combined company's public utility operations in California.
53. The transfer of AT&T's California subsidiaries takes place at the holding company level and will not result in any incremental impact on the environment.
54. No mitigation measures other than those imposed on the merger in response to the Attorney General's Advisory Opinion, and the requirement that SBC not force customers to separately purchase traditional voice service as a condition of obtaining DSL are reasonable or in the public interest.
55. The material presented by the Applicants and parties to this proceeding has enabled us to reach findings on all issues discussed in § 854
56. The Department of Justice and the Federal Communications Commission has issued mandates as part of their approval of the SBC/AT&T merger which may require the transfer of utility property.
