BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

In re Request of MCI WORLDCOM, INC, AND SPRINT CORPORATION For Approval to Transfer Control of Sprint Corporation's California Operating Subsidiaries to MCI WORLDCOM, Inc.

Application 99-12-012 (Filed December 10, 1999)

ADMINISTRATIVE LAW JUDGE'S RULING

DENYING MOTION OF MCI WORLDCOM AND SPRINT

FOR EARLY DETERMINATION OF EXEMPTION FROM

PUBLIC UTILITIES CODE SECTIONS 854(b) AND (c)

Summary

MCI WorldCom (WorldCom) and Sprint Corporation (Sprint) have filed an application seeking approval by this Commission of a merger between the two companies. In a separate motion (Motion), WorldCom and Sprint (collectively, WorldCom) seek to have their merger application exempted from the merger criteria contained in Public Utilities Code §§ 854(b) and (c) and considered only under § 854(a). The Motion is denied for several reasons.

First, WorldCom's Motion is based entirely on the argument that because it is a non-dominant interexchange carrier (NDIEC), §§ 854(b) and (c) do not apply. This Commission has never established a hard and fast rule that the merger criteria do not apply to NDIECs. Indeed, the Commission has taken pains not to set precedent when it has exempted some mergers from § 854(b) and (c) review.

Second, this case is distinguishable from other mergers in which the Commission has waived §§ 854(b) and (c). If WorldCom completes the merger, two large carriers will dominate the long distance telecommunications market - the merged entity and AT&T. This result warrants the in-depth review of the merger application contemplated by §§ 854(b) and (c).

Third, by focusing on its status as a NDIEC, WorldCom only addresses one criterion in § 854 - the § 854(b)(2) requirement that ratepayers be allocated at least 50% of the economic benefits from the merger. While I reserve judgment on whether § 854(b)(2) applies to this proceeding, nothing in WorldCom's argument addresses the rest of § 854. Among other things, the remaining provisions require that the merger maintain or improve the financial condition, quality of service, and quality of management of the merged entity; be fair and reasonable to employees and shareholders; benefit state and local economies; and not adversely affect competition.

Finally, WorldCom will not be prejudiced by this outcome; it concedes that most of the factors relevant to a § 854(b) and (c) analysis are also relevant under § 854(a). This Ruling simply ensures that evidence pertaining to the §§ 854(b) and (c) factors will be in the record when the Commission renders a decision on the merger application. The Commission may decide at that time that not every criterion in §§ 854(b) and (c) applies, but this Ruling ensures the development of an adequate evidentiary record.