5.1. The Application Should be Approved on a Prospective Basis Only

In this application, Applicants request authority under Section 854 for Blackbird to acquire control of Yak America through the purchase of 100% of its capital stock. However, advance Commission approval of this transaction is required under Section 854.

Section 854 (a) states, in pertinent part:

No person or corporation, whether or not organized under the laws of this state, shall merge, acquire, or control...any public utility organized and doing business in this state without first securing authorization to do so from the commission...Any merger, acquisition, or control without that prior authorization shall be void and of no effect.

The Commission has broad discretion to determine if it is in the public interest to authorize a transaction pursuant to Section 854(a).⁷ The primary standard used by the Commission to determine if a transaction should be authorized under Section 854(a) is whether the transaction will adversely affect the public interest.⁸ The Commission may also consider if the transaction will serve the public interest.⁹ Where necessary and appropriate, the Commission may attach conditions to a transaction in order to protect and promote the public interest.¹⁰

For the following reasons, we conclude that it is reasonable to grant this application to the extent it requests prospective authority under Section 854(a) for Blackbird to acquire control of Yak America. First, there will be no change to the rates, services, or operations of Yak America as a result of the transaction. Therefore, Yak America's customers and the public will not be harmed by the change in control of Yak America. Second, since the transaction has reinstated Yak America's former management, we find that Blackbird's management has the telecommunications experience and technical and managerial qualifications necessary to exercise control over Yak America. Third, the transfer will give Yak America access to the financial resources of Blackbird. Fourth, there is no opposition to this application. For these reasons, we see no reason to withhold authority for the transfer of control on a prospective basis, because the transaction is not adverse to the public interest.

We deny this application to the extent it requests retroactive authority under Section 854(a) for Blackbird to acquire control of Yak America. The purpose of Section 854(a) is to enable the Commission to review a proposed acquisition, before it takes place, in order to take such action as the public interest may require.¹¹ Granting this application on a retroactive basis would thwart the purpose of Section 854(a). The Commission has enacted careful guidelines for scrutiny of the owners of telecommunications utilities, and we cannot condone the transfer of control of a telecommunications utility to an owner that has not passed through our approval process in advance.

Since we will not grant retroactive authority, Blackbird's acquisition of control over Yak America is void under Section 854(a) for the period of time before the effective date of this decision. Applicants are at risk for any adverse consequences that may result from their having completed the transfer of control without Commission authority.

5.2. Applicants Should be Fined for Their Failure to Comply with Pub. Util. Code Section 854(a)

Applicants failed to comply with Section 854(a) by transferring control of Yak America to Blackbird without Commission authorization. Violations of Section 854(a) are subject to monetary penalties under Section 2107, which states as follows:

Any public utility which violates or fails to comply with any provision of the Constitution of this state or of this part, or which fails or neglects to comply with any part or provision of any order, decision, decree, rule, direction, demand, or requirement of the commission, in a case in which a penalty has not otherwise been provided, is subject to a penalty of not less than five hundred dollars ($500), nor more than twenty thousand dollars ($20,000) for each offense.

Under Section 2108, each date on which a continuing violation remains in effect constitutes a separate offense.

For the following reasons, we conclude that the Applicants should be fined for their failure to comply with § 854(a). First, any violation of Section 854(a), regardless of the circumstances, is a serious offense that should be subject to fines. Second, the imposition of a fine will help to deter future violations of Section 854(a) by the Applicants and others.

To determine the size of the fine, we shall rely on the criteria adopted by the Commission in D.98-12-075. We address these criteria below.

Criterion 1: Severity of the Offense

In D.98-12-075, the Commission held that the size of a fine should be proportionate to the severity of the offense. To determine the severity of the offense, the Commission stated that it would consider the following factors:¹²

⁷ D.95-10-045, 1995 Cal. PUC LEXIS 901, *18-19; and D.91-05-026, 40 CPUC 2d 159, 171.

⁸ D.00-06-079, p. 13; D.00-06-057, p. 7; D.00-05-047, p. 11 and Conclusion of Law (COL) 2; D.00-05-023, p. 18; D.99-03-019, p. 14; D.98-08-068, p. 22; D.98-05-022, p. 17; D.97-07-060, 73 CPUC 2d 601, 609; D.70829, 65 CPUC 637, 637; and D.65634, 61 CPUC 160, 161.

⁹ D.00-06-005, 2000 Cal. PUC LEXIS 281, *4; D.99-04-066, p. 5; D.99-02-036, p. 9; D.97-06-066, 72 CPUC 2d 851, 861; D.95-10-045, 62 CPUC 2d 160, 167; D.94-01-041, 53 CPUC 2d 116, 119; D.93-04-019, 48 CPUC 2d 601, 603; D.86-03-090, 1986 Cal. PUC LEXIS 198 *28 and COL 3; and D.8491, 19 CRC 199, 200.

¹⁰ D.95-10-045, 62 CPUC 2d 160, 167-68; D.94-01-041, 53 CPUC 2d 116, 119; D.90-07-030, 1990 Cal. PUC LEXIS 612 *5; D.89-07-016, 32 CPUC 2d 233, 242; D.86-03-090, 1986 Cal. PUC LEXIS 198 *84-85 and COL 16; and D.3320, 10 CRC 56, 63.

¹¹ D.99-02-061, 1999 Cal. PUC LEXIS 56 *12; D.98-07-015, 1998 Cal. PUC LEXIS 526 *7; D.98-02-005, 1998 Cal. PUC LEXIS 320 *8; D.97-12-086, 1997 Cal. PUC LEXIS 1168 *8; and San Jose Water Co. (1916) 10 CRC 56, 63.

¹² 1998 Cal. PUC LEXIS 1016, *71 - *73.