III. The Proposed Transaction

Applicants state that FCI has been formed in order to facilitate a transaction whereby First Communications and Xtension will become an integrated telecommunications company that, while continuing to operate pursuant to their existing certificates and tariffs, will be able to benefit from the combined expertise of each of the companies' respective management and operational personnel and achieve additional economies of scope and scale that will enable them to compete more effectively.

According to Applicants, other than the insertion of a publicly traded holding company as the ultimate parent of First Communications and Xtension, the proposed transaction will not have any significant impact on the Commission's regulatory oversight of Applicants. Applicants expect that there will not be any new controlling individual or entity for the Commission to review and approve since the ownership of the FCI holding company will be widely held at the time of the transfer.

Further, Applicants state that the transaction will not result in any assignment or transfer of certificates, assets or customers of First Communications and Xtension. Both operating companies will continue to provide service to their existing customers in California pursuant to their existing authorizations and at the same rates, terms and conditions such that the transaction will be transparent to their customers, and the integrated company will continue to be run by a combination of highly experienced, well qualified management, operational and technical personnel that operate the companies today.