D. Discussion

Section 851 provides that no public utility may "sell, lease, assign, mortgage or otherwise dispose of or encumber" its property that is necessary or useful in performing its duties to the public without first having secured the Commission's authorization. The purpose of Section 851 is to enable the Commission, before any transfer of property is consummated, to review the situation and take such action, as a condition of the transfer, as the public interest may require. We have held that the relevant inquiry is whether the proposed transaction is "adverse to the public interest."⁸

Both D.94-05-051 and D.98-07-094 streamlined the Commission's regulatory review under § 851 for transfers of property by NDIECs and CLCs respectively. In those orders, the Commission noted that it has endeavored to simplify regulatory oversight over competitive providers when in so doing it would not compromise the public interest.⁹

Although we are sympathetic to 360networks' plea for regulation of competitive providers to keep pace with current market realities, we are not persuaded to change the status quo and exempt NDIECs and CLCs from review under § 851 for transfers of assets or interests. First, we note that it is not appropriate for 360networks to request relief for an entire class of carriers in an application by a single carrier. Rather, an exemption from § 851 for all NDIECs and CLCs is more appropriately the subject of a rulemaking so that all persons or entities who would be affected by the exemption would receive notice and an opportunity to comment. At this time, we are unwilling to dedicate the resources necessary to address this issue in a rulemaking proceeding, and it would not be appropriate, here, to grant exemptions to all carriers based on this single application that was not served on any other parties.

Second, even when we consider the substance of the relief requested, 360networks does not persuade us to suspend the current advice letter process. While on many occasions we have approved joint use arrangements and noted their public interest benefits, we have granted this approval through our § 851 review authority.¹⁰ The mere fact that some transfers of assets may involve joint use of facilities does not justify a blanket exemption from Commission review under § 851. The application hypothesizes that the Commission will be inundated with advice letters and unable to process them if review is indeed required. Applicant provides no evidence that this has in fact already occurred or is likely to occur. Absent some evidence that the current process is inadequate or overly burdensome, we prefer to keep the status quo. We do not agree that properly filed advice letters will be a drain on resources since they will go into effect automatically after 40 days unless the Commission acts to suspend them. If the advice letters are truly non-controversial, the burden on Commission resources should not be that great.

Third, 360networks' request is too broad in scope because it is not limited to joint use arrangements, but requests exemption for all NDIEC and CLC transfers of assets or control. Under the exemption requested, AT&T (a certificated NDIEC) could theoretically transfer significant portions or even all of its assets to Worldcom (also an NDIEC) without any advance review. Such a transfer would likely raise competitive concerns. The existing process reserves an outlet for the Commission to consider competitive concerns and to at least be aware that the transfer might occur. We do not agree with 360networks that the Commission does not need to regulate these transactions and that an exemption is in the public interest. The current process provides an appropriate balance of notifying the Commission and interested parties of the proposed transaction, allowing the Commission to take action if necessary, while at the same time expediting approval for non-controversial transactions. We will not grant a blanket exemption from § 851 because we find that review is necessary for the public interest.

Fourth, we reject 360networks' exemption request because we do not find it appropriate to relinquish the Commission's discretionary review of asset transfers and transfers of control without further detail about the types of transactions involved. We are concerned that some of those transfers could raise environmental policy concerns and we want to preserve the Commission's ability to address any such concerns, should it choose to, at the time a carrier files an advice letter.¹¹ Thus, for the same reasons articulated above, we prefer to maintain the current review process wherein carriers are required to notify the Commission of proposed transactions so we can determine if any action or review is warranted. Moreover, we note that in our currently pending rulemaking to consider our implementation of the California Environmental Quality Act (CEQA) with respect to telecommunications carriers, we are considering the competitive effects of our current environmental review practices on the various carrier types.¹² We believe the issue of whether to grant certain carriers an exemption from § 851 review could raise competitive equity issues due to differing levels of environmental review and those issues are appropriately addressed in the context of that rulemaking. Again, we deny the exemption request because we find that some level of review is necessary in the public interest.

360networks also questions whether an "IRU" or joint use arrangement with another carrier even meets the threshold for review under § 851. Furthermore, 360networks implies that numerous transactions of this type may not have been filed for Commission approval under the advice letter procedure. We noted the use of IRUs in D.99-05-022 when we considered the environmental impacts of granting resale authority to Williams Communications (Williams). Our statements regarding IRUs in that order were in the context of whether a grant of resale authority to Williams would have environmental effects. We noted the existence of certain IRUs and we allowed the use of the existing arrangements by Williams. But the same order also prohibited construction by Williams and did not make any statements that future IRUs would not require Commission review.

We fail to see any distinction between an IRU or joint use arrangement and any other type of lease or encumbrance listed in § 851. At minimum, an IRU or joint use arrangement is not unlike a lease and it certainly can be considered an "encumbrance" because it involves a claim to real property. Therefore, we find that IRUs and other joint use arrangements require approval under § 851 identical to any other transfer or encumbrance of utility property. We remind carriers that any transactions involving "sale, lease, assignment, mortgage, disposition, encumbrance, merger or consolidation" of utility property are void unless they obtain advance approval under § 851.

Because we are sympathetic to some of the concerns raised by 360networks, we will deny this application without prejudice to allow future consideration of a more narrowly focussed exemption from § 851 should evidence arise that the Commission is inundated with and unable to process advice letters under the current process. Any future application should address whether to limit the exemption to joint use arrangements or IRUs that do not involve construction and have no environmental effects.