III. Discussion

We concur with staff of the Telecommunications Division that Applicant is not entitled to registration under § 1013 and that the Application should be treated as an application for a CPCN. In reaching this conclusion, we have considered the statutory requirements and Applicant's responses to items in the registration form.

Section 1013 was adopted as an exception to Pub. Util. Code §§ 1000 et seq. for the benefit of existing telecommunications companies that would otherwise certainly qualify for a CPCN and whose intended operations within California do not involve activities that would require environmental review. The purpose of this section was to make it easier and quicker for competitors to enter the California telecommunications market. Section 1013 was not intended as a way to avoid Commission review of an applicant's qualifications, especially if there are questions about those qualifications.

In order to qualify for registration as a telecommunications company under § 1013, an applicant must demonstrate, among other things, that none of its officers and directors has held a similar position with an interexchange carrier that filed for bankruptcy. If an applicant is unable to make these demonstrations, the application for registration must be treated as an application for a CPCN.

A. Officer of Bankrupt Telecommunications Company

In its response to Item 7 on the Registration Application, Applicant checked "Not True" and wrote as follows:

"Richard Lumpkin, a director of the applicant, was Vice Chair of the Board and a director of McLeodUSA, Inc., a telecommunications company which filed for bankruptcy protection in January 2002 and emerged from bankruptcy in April 2002. Mr. Lumpkin resigned his position at McLeodUSA, Inc. on April 6, 2002."

Applicant indicates that it was formed in part to acquire certain assets and businesses of McLeodUSA Telecommunications Services, Inc., an affiliate of McLeodUSA, Inc., including assets used for the provision of operator services for which a CPCN is being sought.

Applicant is a wholly owned indirect subsidiary of Consolidated Holdings, inc., a holding company with various telecommunications subsidiaries, including Illinois Consolidated Telephone Company (ICTC), a local exchange carrier located in Mattoon, Illinois. ICTC has been providing service, including operator services, in central Illinois for over 108 years. In 1988, Consolidated formed Applicant as an operator services subsidiary. In 1997, Applicant was acquired by McLeodUSA, Inc. In December 2002, following the conclusion of the McLeodUSA bankruptcy discussed above, Applicant was re-acquired by Consolidated Holdings, Inc.

Mr. Lumpkin's involvement with McLeodUSA, Inc. makes it impossible to process the Application as an application for registration under § 1013. Instead, we consider whether Applicant meets the requirements for a CPCN as an interexchange carrier. We have already noted that Applicant meets the financial viability standard, which is the same for registrants as it is for applicants.² Other requirements for issuance of a CPCN are as set out in the following sections.

B. Financial Qualifications

To be granted a CPCN, an application for authority to provide facilities-based interexchange services must demonstrate that it has a minimum of $100,000 cash or cash equivalent to meet the firm's start-up expenses. An applicant must also demonstrate that it has sufficient additional resources to cover all deposits required by local exchange carriers or interexchange carriers in order to provide the proposed service.³ As noted above, Applicant has provided financial statements of its parent, CCI, dated as of March 31, 2003. Applicant is a newly formed, wholly owned direct subsidiary of CCI, a solvent, well-capitalized company. The financial statements of CCI and its relationship to Applicant together satisfy the financial requirements, including any required deposits.

C. Technical Qualifications

Applicants for a CPCN are required to make a reasonable showing of technical expertise in telecommunications or a related business. Applicant is a sister corporation of ICTC, a local exchange carrier located in Mattoon, Illinois. ICTC has been providing phone service, including operator service, in central Illinois for more than 100 years. Applicant has provided biographical data on its officers that demonstrate that it possesses sufficient experience and knowledge to operate as an interexchange carrier and provider of operator services.

D. Tariffs

Commission staff reviewed Applicant's draft tariffs for compliance with Commission rules and regulations. The deficiencies are noted in Attachment A to this decision. Applicant shall correct these deficiencies in its tariff compliance filing as a condition of our approval of its tariffs.

E. California Environmental Quality Act (CEQA)

CEQA requires the Commission as the designated lead agency to assess the potential environmental impact of a project in order that the adverse effects are avoided, alternatives are investigated, and environmental quality is restored or enhanced to the fullest extent possible. Applicant represents that it will not be constructing any switches or other telecommunications facilities in the State of California and will provide operator services through existing facilities located in Mattoon, Illinois. Therefore it can be seen with certainty that there is no possibility that granting this application will have an adverse effect upon the environment. Applicant must file for additional authority, and submit to any required CEQA review, before it can construct facilities other than equipment to be installed in existing buildings or structures.

F. Categorization and Need for Hearings

In Resolution ALJ 176-3107 dated February 13, 2003, the Commission preliminarily categorized this application as ratesetting, and preliminarily determined that hearings were not necessary. No protests have been received. There is no apparent reason why the Application should not be granted. Given these developments, a public hearing is not necessary, and it is not necessary to disturb the preliminary determinations.