2. Procedural Background
The Joint Application (A.) 05-04-020 of Applicants Verizon and MCI seeks approval of the transfer of control of MCI's California utility subsidiaries that will occur indirectly as a result of a transaction between Verizon and MCI. The transaction will result in Verizon obtaining direct control of MCI, which is not regulated by the Commission as a public utility, and indirect control of MCI's certificated public utility subsidiaries.
The Joint Application was filed on April 21, 2005, and was amended on May 9, 2005.
In Resolution ALJ 176-3152 on May 5, 2005, the Commission preliminarily determined that this is a ratesetting proceeding and that hearings would be needed to resolve this matter.
Protests and responses to the Application were filed on May 25, 2005 by the following parties: the California Association of Competitive Telephone Companies (CALTEL); the Consumer Federation of America; Consumers Union of U.S., Inc.; Disability Rights Advocates (DRA), LIF, Greenlining, and The Utility Reform Network (TURN); Covad Communications Company (Covad); Cox California Telcom, LLC (Cox); Level 3 Communications, LLC (Level 3 ); Navigator Telecommunications, LLC (Navigator); the Office of Ratepayer Advocates (ORA ); Pac-West Telecomm, Inc. (Pac-West); Qwest Communications Corporation (Qwest); and XO Communications Services, Inc. (XO) (collectively, "Intervenors").
Applicants filed a consolidated reply to the protests and responses on June 6, 2005.
Navigator and XO withdrew from the proceedings on June 22 and June 24, 2005, respectively, and Consumer Federation of America and Consumers Union of U.S., Inc. have not been active in the proceeding since joining in TURN's protest.
Following an initial prehearing conference on June 21, 2005, a Scoping Memo and Ruling of Assigned Commissioner (Scoping Memo) was issued on June 30, 2005. The Scoping Memo identified the issues relevant to this proceeding and, while declining to rule immediately on whether §§ 854(b) and (c) applied to the transaction, instructed the Applicants to continue to provide all the information they considered necessary and appropriate to demonstrate compliance with those sections. The Scoping Memo also set forth two alternative procedural schedules, one to apply if evidentiary hearings were deemed necessary and the other to apply if such evidentiary hearings were determined not to be necessary.
On July 13, 2005, a group of Intervenors moved for an amendment to the hearing schedule. In response, on July 26, the Assigned Commissioner issued a ruling granting the moving parties additional time to file reply testimony and making certain other changes in the schedule.
Applicants and Intervenors undertook extensive discovery. To date, Applicants have collectively responded to approximately 900 data requests and have produced over one million pages of documents. The parties filed five motions to compel, three brought by Applicants to compel responses from Intervenors, and two brought by Intervenors to compel responses from Applicants.
On August 15, 16, and 18, 2005, the Commission conducted six Public Participation Hearings, in Whittier, Long Beach and San Bernardino, California, to take comments from the public on the proposed merger. These hearings demonstrated broad consumer and community support for the merger, as further discussed below.
Intervenors filed their reply testimony on August 15, 2005, and Applicants filed rebuttal testimony on September 12, 2005.
On September 8, 2005, TURN, ORA and the LIF filed a Motion3 that sought further modifications4 to the procedural schedule adopted in this proceeding. The Motion explained that these parties desired additional time to prepare motions for evidentiary hearings, opening briefs, and reply briefs.5 On September 8, 2005, the Commission received three responses to the Motion.6 The response of Cox and the response of Qwest supported the Motion. The response of the Applicants opposed the Motion.
On September 12, the Assigned Commissioner denied the September 8 motion, ruling that the motion failed to demonstrate why further modifications to the schedule were in the public interest. The specific considerations that led to the denial are detailed in the ruling.7
Motions regarding the need for evidentiary hearings were filed on September 14. TURN, ORA, Level 3, Qwest and DRA filed motions asking for evidentiary hearings. Replies were filed on September 16 by TURN, ORA, Qwest, Greenlining and the Applicants.
The Attorney General of California issued his opinion on the proposed transaction on September 16, 2005. 8 This opinion concluded that the transaction will not adversely affect competition in any telecommunications market.
On September 19, 2005, the Assigned Commissioner issued a ruling denying motions for evidentiary hearings and finding that §§ 854(b) and (c) do not, by their terms, apply to the transaction. More specifically, the ruling found that there is neither a statutory nor a due process right to evidentiary hearings in this proceeding, and that there is sufficient evidence in the record to permit the Commission to rule on the Application without such evidentiary hearings. The Ruling held that the case would be deemed submitted with the completion of reply briefs. In addition, the ruling noted that the public has already had ample opportunity to participate in these proceedings through the six Public Participation Hearings. Further, the ruling determined that there are few, if any, factual disputes between the parties, and to the extent there are any factual disputes, the record is sufficient to resolve them. The details of this ruling are discussed below.
Also while it determined § 854(a) applies to this transaction, the ruling held that §§ 854(b) and (c) did not apply to the transaction. However it stated that § 854(c) factors still should be considered. The ruling concluded that in order to determine whether the transaction is in the public interest under § 854(a), the Commission would assess the transaction using the seven criteria enumerated in § 854(c) as guidelines, while also taking into account antitrust and environmental considerations.
On September 28, 2005, ORA filed a motion asking that the full Commission, consistent with Rule 6(b), consider the September 19 ACR ruling that determined that there is no need for evidentiary hearings in this matter and also to further consider the legal reasoning pertaining to the applicable law. On October 11, consistent with a ruling shortening time, the Applicants, TURN, and Qwest filed replies to the motion. This decision addresses the matters raised in the ORA motion in separate sections below.
Via a letter dated October 14, 2005, Verizon informed the Commission that MCI stockholders voted on October 6, 2005 to approve the merger.
A draft decision was mailed on October 19, 2005.
3 Motion for Modification of Procedural Schedule, filed September 8, 2005 (Motion)
4 On July 26, 2005, we issued an Assigned Commissioner's Ruling Extending Time for Service of Intervenor Testimony (ACR). Of the three parties to this motion, two - TURN and ORA - were among the group of intervenors filing a motion for additional time filed on July 13, 2005. This ruling modified a schedule adopted in Scoping Memo and Ruling of Assigned Commissioner, June 30, 2005.
5 Motion, page 1.
6 Response of Cox California Telecom, L.L.C., dba Cox Communications (Cox), to Motion for Modification of Procedural Schedule, September 8, 2005; Response of Qwest Communications Corporation (Qwest) to Motion for Modification of Procedural Schedule, September 8, 2005; and Applicants' (Verizon Communications, Inc. and MCI, Inc.) Opposition to Intervenors' Motion for Modification of Procedural Schedule, September 8, 2005.
7 Assigned Commissioner's Ruling Denying Motion Requesting Further Modifications to Procedural Schedule, September 12, 2005.
8 Opinion of the Attorney General on the Proposed Merger of Verizon Communications, Inc., and MCI, Inc., September 16, 2005 (AG Opinion).
