BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA
In the Matter of the Joint Application of Verizon Communications Inc. ("Verizon") and MCI, Inc. ("MCI") to Transfer Control of MCI's California Utility Subsidiaries to Verizon, Which Will Occur Indirectly as a Result of Verizon's Acquisition of MCI.
Application 05-04-020
(Filed April 21, 2005)
ASSIGNED COMMISSIONER'S RULING DENYING
MOTIONS FOR HEARINGS AND
DETERMINING THE APPLICABILITY
OF §854 TO THE PROPOSED TRANSACTION
I. Introduction
Application (A.) 05-04-020 was filed on April 21, 2005, and amended on May 9, 2005, by Verizon Communications Inc. (Verizon) and MCI Inc. (MCI) (collectively, the Applicants). The Applicants seek authorization to transfer control of MCI's California utility subsidiaries to Verizon, which will occur indirectly as a result of Verizon's acquisition of MCI.
A prehearing conference was held on June 21, 2005 and a Scoping Memo and Ruling of Assigned Commissioner was issued on June 30, 2005. On July 13, 2005, a group of Intervenors filed a motion asking that the hearing schedule set out in the Scoping Memo be amended1. On July 26,
2005 the Assigned ALJ issued a ruling granting the moving parties additional time to file reply testimony and making certain other changes in the schedule of the proceeding.
The Commission conducted six Public Participation Hearings on August 15, 16 and 18, 2005, in Whittier, Long Beach and San Bernardino to take comments from consumers on the proposed merger.
Motions regarding the need for hearings were filed on September 14. TURN, ORA, Level 3, Qwest and Disability Rights Advocates (DRA) filed motions asking for hearings. Replies were filed on September 16 by TURN, ORA, Qwest, Greenlining and the Applicants.
Pursuant to the Scoping Memo issued on June 30, 2005, this Assigned Commissioner's Ruling determines the procedural treatment of this application and, in light of this ruling, the necessity of holding evidentiary hearings. This ruling on the applicable law for this application and procedural path foreward should serve as a guide in the preparation of briefs.
In summary, this ruling finds that under a plain reading of Pub. Util. Code §854, this application is subject to review under §854(a); Pub. Util. Code §§854(b) and (c) do not apply to this transaction. Moreover, based on the specific circumstances of the instant application, this transaction would clearly qualify for exemption from review under §854(b) and (c) pursuant to the Commission's authority under §853(b)2.
In particular, this ruling finds that, based on the specific circumstances of this case, subjecting this transaction to a lengthy review under §854(b) "is not necessary in the public interest."3 The Commission has ample authority under §853(b) and §854(a) to impose any requirements deemed necessary to protect consumers and the public interest. This ruling also concludes that regardless of whether the $500 million threshold of Pub. Util. Code §854(b) has been triggered, it would be appropriate to grant this transaction an exemption pursuant to the Commission's authority under §853(b). Accordingly, we will review the proposed transaction under the "public interest" standard of § 854(a).
Pub. Util. Code § 854(c) sets forth eight factors that this Commission must consider in making its public interest determination in cases where any entity that is a party to the transaction has gross annual California revenues exceeding five hundred million dollars ($500,000,000). Pub. Util. Code § 854(f) precludes consideration of the revenues of Verizon's California affiliate (`Verizon California") because the affiliate was not formed to effectuate the transaction. Thus even if Verizon California has annual California revenues in excess of five hundred million dollars, § 854(c) does not apply to the instant application. However, the Commission in prior decisions has used the criteria set forth in §854 (c) as a guide in determining whether a transaction meets the public interest test under §854(a) and we conclude that it is appropriate to do so here. Accordingly, this ruling concludes that, although §854(c) is not applicable to the instant application as a matter of law or pursuant to a Commission exemption under §853(b), we will consider each of the criteria listed in §854(c), to determine, on balance, whether the transaction is in the public interest.
Finally, there is no need to hold evidentiary hearings in this proceeding, and rule that the case will be deemed submitted upon the submission of briefs.
1 Motion for Partial Reconsideration of Scoping Memo and Ruling of Assigned Commissioner, filed July 13, 2005, by the Office of Ratepayer Advocates (ORA), Telscape Communications, Qwest Communications Corporation (Qwest), the Utility Reform Network (TURN), Level 3 Communications, LLC (Level 3), Cox California Telcom, LLC, Pac-West Telecomm, Inc., and Covad Communications Company.
2 Until 1985, § 853(b) permitted us to grant an exemption only from PU Code §§ 851 and 852. In 1985, our exemptive authority was extended to cover the entire Article 6, including § 854.
3 §853(b)
