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COM/GFB/jva ALTERNATE DRAFT Agenda ID #5058

Decision ALTERNATE DRAFT DECISION OF COMMISSIONER BROWN
(Mailed 11/3/2005)

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)

ALTERNATE OPINION APPROVING

APPLICATION TO TRANSFER CONTROL

Table of Contents

Title Pages

Table of Contents

Title Pages

ALTERNATE OPINION APPROVING
APPLICATION TO TRANSFER CONTROL

1. Summary

We approve the application of Verizon Communications Inc. (Verizon) and MCI, Inc. (MCI) (collectively, Applicants) to transfer control of MCI's California utility subsidiaries to Verizon, subject to the conditions set forth in our order.

Contrary to the Assigned Commissioner's Draft Decision in this matter, we find that on the law and on the facts, and as a matter of common sense, Section 854(b) of the Public Utilities Code applies to this extraordinary merger of the state's second largest Incumbent Local Exchange Carrier (ILEC) (Verizon) and one of the country's major Competitive Local Exchange Carrier (CLECs) (MCI). Pursuant to the legislative intent of § 854(b), we calculate net California benefits of the merger of $206 million, half of which ($103 million) must be passed through on behalf of ratepayers of Verizon and MCI.

Like the Assigned Commissioner's Draft Decision, we require as a condition of our approval that the combined company offer stand-alone DSL (digital subscriber line) service to consumers who request such service. We disapprove a proposed settlement between Applicants and certain consumer organizations because terms of that settlement intrude on our ability to set conditions on the merger, but, like the Assigned Commissioner's Decision, we adopt as conditions certain philanthropic terms of that settlement. We impose a number of additional conditions intended to deter anticompetitive effects of the merger.

We find that, subject to Applicants' compliance with the adopted conditions, the merger will produce net benefits for consumers and, because of our mitigating conditions, will not adversely affect competition for telecommunications service in California. Conversely, if the Applicants decline to implement the conditions set forth in our order, we conclude that the merger does not comply with § 854 and cannot in its present form be approved.

2. Background

This application was filed on April 21, 2005, and amended on May 9, 2005. Applicants seek approval of the transfer of control of MCI's California utility subsidiaries that will occur indirectly as a result of a transaction between holding companies for Verizon and MCI. In Resolution ALJ 176-3152 on May 5, 2005, the Commission preliminarily determined that this is a ratesetting proceeding and that hearings would be necessary.

Protests and responses to the Application were filed on May 25, 2005 by the following parties: the California Association of Competitive Telephone Companies (CALTEL); the Consumer Federation of America; Consumers Union of U.S., Inc.; Disability Rights Advocates (DRA); Latino Issues Forum (LIF); The Greenlining Institute (Greenlining); The Utility Reform Network (TURN); Covad Communications Company (Covad); Cox California Telcom, LLC (Cox); Level 3 Communications, LLC (Level 3 ); Navigator Telecommunications, LLC (Navigator); the Office of Ratepayer Advocates (ORA ); Pac-West Telecomm, Inc. (Pac-West); Qwest Communications Corporation (Qwest); and XO Communications Services, Inc. (XO) (collectively, Intervenors).1

Intervenors claim that the merger, in the form proposed by Applicants, will not ensure net benefits to consumers and will adversely affect competition for telecommunications services in California. Certain Intervenors - particularly TURN - categorically oppose the merger under any conditions, claiming that even with mitigating conditions, the merger will still be anticompetitive. They argue that Verizon already has a dominant share of the market in its service area, and that acquisition of MCI will only further expand its market power by eliminating one of its largest competitors. Other Intervenors do not oppose the merger so long as certain conditions are adopted to mitigate perceived adverse impacts. Parties also argue that the proposed merger of SBC Communications Inc. (SBC) and AT&T Corp. (AT&T) must be taken into account in light of the cumulative effect of these two mergers in reducing competition.

Following a prehearing conference on June 21, 2005, a Scoping Memo and Ruling of Assigned Commissioner (Scoping Memo) was issued on June 30, 2005. The Scoping Memo declined to rule immediately on whether §§ 854(b) and (c) applied to the transaction but instructed the Applicants to continue to provide all the information they considered necessary and appropriate to demonstrate compliance with those sections. The Scoping Memo appointed the Assigned Commissioner as the Principal Hearing Officer, with the assigned Administrative Law Judge (ALJ) serving as backup.

On August 15, 16 and 18, 2005, the Commission conducted six public participation hearings in Southern California. On September 19, 2005, the Assigned Commissioner issued a ruling denying motions for evidentiary hearings and finding that §§ 854(b) and (c) do not apply to the proposed merger. In place of hearings, parties were invited to submit verified opening and reply testimony of their witnesses. Testimony of 25 witnesses was received into the record, as were 91 exhibits.

3. The Applicants; the Financial Transaction

The primary corporate entities involved in this transaction are Verizon and MCI.

3.1. Verizon

Verizon is a Delaware corporation.2 Verizon directly or indirectly owns telephone operating companies that provide telecommunications services on a regulated and unregulated basis in 29 states, Puerto Rico and the District of Columbia, serving 53 million access lines. Although Verizon as a holding company provides no services and is not a regulated telephone company, its local telephone subsidiaries are subject to state public utility regulation. They are subject to regulation by the Federal Communications Commission (FCC) for the services they provide pursuant to federal tariffs and the Federal Communications Act of 1934.

The major California subsidiary, Verizon California Inc., provides regulated telecommunications services, primarily in southern California. Another entity, Verizon West Coast Inc., provides regulated telecommunications services to a small number of customers near the Oregon border. Other Verizon corporate entities provide long distance service throughout California, as well as local private line and other competitive services to customers, including multi-dwelling unit customers. Verizon Wireless provides wireless voice and data services in California, across the United States and internationally. Verizon has a national workforce of 210,000 employees, including approximately 18,000 employees in California. Verizon has a strong balance sheet and investment-grade credit rating and is a stable, viable enterprise.

3.2. MCI

MCI also is a Delaware corporation.3 MCI's subsidiaries provide telecommunications services on a regulated and unregulated basis throughout the United States and in several foreign countries. They provide services to business and government customers, including 75 federal government agencies. MCI is also a significant provider of services to the State of California. Among the enterprise (government and large business) services MCI provides through its subsidiaries are local-to-global business, Internet, and voice services, including Internet Protocol (IP) network technology, Virtual Private Networking, synchronous optical network (SONET) private line, frame relay, ATM and a full range of dedicated, dial and value-added Internet services. MCI's subsidiaries also provide mass market services, including interstate long distance services, intrastate toll services, competitive local exchange services, and other communications services. Some of MCI's subsidiaries are deemed public utilities in the jurisdictions in which they operate. MCI's subsidiaries are also subject to regulation by the FCC with respect to interstate services.

Several of MCI's operating subsidiaries are certificated to provide services in California. MCIMetro Access Transmission Services LLC (MCIMetro) provides local and long distance services in the state. MCI WorldCom Communications, Inc. (MWC) and MCI WorldCom Network Services, Inc. (MWNS) both provide long-distance services. Teleconnect Long Distance Services and Systems Co. (Telecom*USA) and TTI National, Inc. (TTI) also provide interexchange services. Another subsidiary, SkyTel Corp. d/b/a SkyTel Communications, Inc. (SkyTel) provides wireless messaging services. Collectively, these certificated entities operating in California are referred to as the MCI "California Subsidiaries."4

3.3. The Financial Transaction

The proposed transaction involves a merger of Verizon and MCI, the parent holding companies, as a result of which MCI will become a subsidiary of Verizon. The MCI California Subsidiaries will remain subsidiaries of MCI, and the authorizations and licenses currently held by those MCI California Subsidiaries will continue to be held by the respective entities.

The terms of the transaction are set forth in the Agreement and Plan of Merger between Verizon and MCI as approved by the boards of directors of both companies on February 14, 2005 (Agreement) as amended on March 29, 2005.5 Under the Agreement as amended, MCI's shareholders will receive for each share of MCI common stock (i) Verizon common stock equal to the greater of 0.5743 shares or the quotient obtained by dividing $20.40 by the Average Parent Stock Price (as defined in the Agreement); and (ii) a special dividend in the amount of $5.60 per share, less the per share amount of any dividends declared by MCI between February 14, 2005 and the consummation of the transaction.

The Agreement does not call for the merger of any assets, operations, lines, plants, franchises, or permits of the MCI California Subsidiaries with the assets, operations, lines, plants, franchises, or permits of any Verizon entity.6 To the extent that any such reorganization might be made at a later date, it will be made in the normal course of business and subject to such regulatory approvals as may be required. Similarly, the Agreement does not call for any change in the rates, terms, or conditions for the provision of any communications services provided in California. Applicants acknowledge that to the extent any such changes might be made at a later date, they too will be subject to such regulatory approvals as may be required.

The Applicants state that the transaction will not affect the regulatory authority of the Commission over any of Verizon's regulated subsidiaries or over the MCI California Subsidiaries. Applicants state that Verizon's subsidiaries and the MCI California Subsidiaries will continue to meet all of their obligations and commitments under the Commission's rules, regulations, and orders.

3.4. Reasons for the Proposed Merger

This Application seeks approval of the California portion of a larger national and international merger. This merger comes at a time when the entire telecommunications industry is facing major competitive challenges and new technological options.

For generations, telecommunications services in the U.S. were provided by monopolies subject to traditional state and federal price regulation. This arrangement ended in 1984 with the divestiture of American Telephone and Telegraph Company (AT&T, also known as the "Bell System") through an antitrust consent decree between the United States Department of Justice (DOJ) and AT&T. The consent decree divested AT&T of its local telephone operations from which several independent "Regional Bell Operating Companies" (RBOCs) were created. The 1984 divestiture was required to address various ways in which the former Bell System impeded competition, particularly through its exercise of bottleneck monopoly control over the critical "last mile" linking individual customer premises to the public switched network.

Concurrent with the divestiture, state and federal regulators began initiatives to open the telecommunications marketplace to competition. Competitive barriers to entry were first lifted in the long distance market for carriers other than the incumbent local exchange carriers. With the passage of the 1996 Telecommunications Act, further progress was made toward opening local exchange markets to competition. More recently the long distance market has been opened to the Incumbent Local Exchange Carriers (ILECs).

With opening of more markets to competition, there has been continuing evolution in the industry structure, including the introduction of new technologies to compete with the traditional telephone service. In response to these regulatory, technological, and economic challenges, various carriers, including the traditional RBOCs, have progressively consolidated their operations through mergers and acquisitions in recent years.

The proposed Verizon/MCI merger marks a significant crossroads in the trend toward consolidation within the industry. We fully recognize that the regulatory, economic, and technological climate in which this merger arises is very different from that of the 1984 divestiture. Nonetheless, fundamental concerns over this transaction's effects on competition and the public interest remain paramount today. Given the far-reaching scope and implications of this merger and the concurrent SBC/AT&T merger for the industry and the public, we approach our review of this merger with great care.

Verizon's stated purpose in the acquisition of MCI is to combine the complementary strengths of the two companies to enable the merged company to compete more effectively. MCI has a significant base of enterprise customers and an Internet Protocol-based national and international network, while Verzion lacks a substantial Internet backbone or interLATA transmission facilities. On the other hand, Verizon's strength is in the provision of services to residential and small business customers and its substantial investment in the provision of wireless services, which MCI does not provide. Applicants state that the combined company will be in a strong financial position to invest in the existing IP network at a lower cost of capital than MCI could obtain on its own, in order to increase network capacity, extend network reach, and add new capabilities.

By combining their respective strengths, Applicants claim that the merger will enable the combined company to become a stronger competitor and to serve a wider range of customers across all segments of the telecommunications marketplace beyond just the traditional Verizon California territory.

MCI likewise views the merger as an appropriate response to developments that have challenged its competitive stance in certain markets. In the mass market, MCI provides local and long distance services, using leased facilities to provide the local components rather than through its own facilities. The evidence is uncontroverted that MCI's mass market business is in decline, due to increasing competition in its core long distance business as well as recent changes in regulation affecting both the price at which it leases local facilities and its marketing efforts. MCI's bundled service offering has faced increasing competition, both from wireless providers' "all distance" packages, the entry of RBOCs into the long distance market, and competition from non-traditional providers. Federal regulatory decisions in the last two years have removed the availability of the unbundled network element UNE-P platform at regulated TELRIC-based rates, leading MCI to enter into commercial agreements with ILECs at higher rates. MCI's recent commercial contracts with SBC and Verizon raise commercial end-to-end local service substantially above TELRIC rates and provide for rate increases each year.

With the elimination of UNE-P as a competitive resource, MCI has sharply curtailed marketing local service to new mass market customers. MCI chose to consider new options, leading ultimately to the merger that is the subject of the application before us.

4. Standard for Review

The Applicants must obtain authorization from this Commission for approval of the proposed acquisition of MCI by Verizon in accordance with the requirements of Pub. Util. Code § 854, which sets forth the standard for review of the transaction. While all parties agree on the general statutory applicability of § 854, they disagree on which subsections of the statute apply, and how extensive the scope of review should be. Section 854(a) provides that no person or corporation shall merge, acquire, or control either directly or indirectly, any public utility organized and doing business in this state without first obtaining authorization from this Commission. Sections 854(b) and (c) establish more comprehensive requirements for the merger of very large entities, including a requirement that financial benefits of the merger in California be shared on at least a 50-50 basis with customers. As discussed below, we conclude that the standard of review in this Application must take into account all provisions of § 854.

Applicants bear the burden of proof and are required to prove by a preponderance of evidence that the proposed merger meets the requirements warranting approval pursuant to § 854.

In particular, we must find the proposed merger provides short-term and long-term economic benefits to ratepayers, does not adversely affect competition, and is in the public interest. (§§ 854(b) and (c).) To the extent that we find Applicants have not met this burden, we consider mitigating measures that are warranted in order to reduce anticompetitive effects.

4.1. Applicability of §§ 854(b) and (c)

4.1.1. Parties' Positions

Applicants acknowledge that the Commission has authority over approval of the transaction pursuant to § 854(a), but deny that § 854(b) applies. Applicants argue that § 854(b) only applies to "transactions in which a regulated utility is itself a direct party to the transaction." (Application, at 14.) This transaction, however, is designed as a merger between corporate holding companies. Because the merger agreement does not define any California utility entity as a party, Applicants claim that § 854(b) by its own terms does not apply.

Section § 854(b) requires as a condition for Commission approval that a transaction:

1. Provides short-term and long-term economic benefits to ratepayers.

2. Equitably allocates, where the commission has ratemaking authority, the total short-term and long-term forecasted economic benefits, as determined by the commission, of the proposed merger, acquisition, or control, between shareholders and ratepayers. Ratepayers shall receive not less than 50 percent of those benefits.

3. Not adversely affect competition.7

Section 854(b) applies where any utility that is a party to the transaction has gross annual California revenues exceeding $500 million. Verizon California and the various MCI subsidiaries have gross annual California revenues well in excess of $500 million.

In support of the claim that § 854(b) does not apply, Applicants argue that the term "utilities" referenced in § 854 (b) differs from the term "entities" that is used in § 854 (c).8 Applicants construe the use of different terms (i.e.,"utility" in § 854(b) versus "entity" in § 854(c)) as a distinction made by the Legislature to indicate different categories of applicability. Applicants thus would have us infer that § 854(b) only applies to transactions in which a utility (rather than a holding company of utilities) is named as a direct party to the transaction.

By contrast, Applicants construe § 854(c) as applying to a broader category of transactions. Yet, even though Applicants acknowledge that § 854(c) technically applies here, they argue that the Commission should exercise its discretion to exempt this transaction from the requirements of that subsection. Whether that is done or not, Applicants claim that this transaction satisfies the public interest requirements of § 854(c).

All active parties in the proceeding other than Applicants take the position that both § 854(b) and § 854(c) apply to this transaction, and that the Commission must make findings consistent with those code sections in order to approve the merger. They argue that Applicants' legal interpretation seeking to limit the applicability of the statute is invalid and fails to acknowledge the importance of this transaction. Intervenors challenge Applicants' attempts to justify an exemption from §§ 854(b) and (c) based on comparison with other merger cases, claiming that such cases did not involve a dominant carrier and are not comparable to this proceeding.

4.1.2. Discussion

We conclude that §§ 854(b) and (c) apply to this transaction. Sections 854(b) and (c) together form "the primary statute governing mergers involving California's large energy and telecommunication utilities."9 This transaction involves both the second largest ILEC in California and one of the largest CLEC/NonDominant Interexchange Carriers in California. The two major transactions creating what is now Verizon were also reviewed under §§ 854(b) and (c).10 Likewise, SBC's acquisition of Pacific Telesis was reviewed under §§ 854(b) and (c). Indeed, if § 854(b) does not apply to a merger transaction the size of this one, it is difficult to imagine under what circumstances this legislative mandate could ever apply.

We reject Applicants' argument that special significance attaches to the use of the words "utilities" versus "entities" in assessing the applicability of §§ 854(b) and (c).11 In the SBC/Telesis merger proceeding, we rejected the argument that § 854(b) does not apply merely because the transaction was defined as a transfer of control between holding companies as the "parties." As explained in D.97-03-067, the word "party" as used in § 854(b) must be read to include those California entities that are "involve[d]" in the transaction even if the deal is "technically structured" so only the parent-level holding companies participate in the merger transaction.12 Even though the SBC/Telesis merger nominally involved two holding companies, we still held that the California operating company, "Pacific[,] is a party within the meaning of § 854." We refused to base our decision on a mere technical interpretation of the words "utility" and "entity" because such an approach looked too much to the mere form of the statute and the transaction.13

The SBC/Telesis decision followed California Supreme Court precedent that a utility cannot "through corporate instrumentalities obtain" a result that is different from the result "the utility would be entitled to absent the separate corporate enterprises." (Pacific Telesis Group, supra, 71 CPUC2d at 365.)

It would be equally improper to elevate form over substance here by exempting the Verizon/MCI transaction from §854(b) review. Even though the transaction is defined as involving only holding companies, the substance of the transaction will have a significant impact on California public utilities and their customers. The Commission has broad statutory powers to ensure that ratepayers are not deprived of the benefit of transactions where the utility would have been directly involved, but for the holding company structure. We view the utility enterprise as a whole without regard to the separate corporate entities that in effect are different departments of one business enterprise (General Telephone Company v. Public Utilities Commission (1983) 34 Cal.3d 817, 826).

Designing the transaction around a holding company structure provides no reason to reduce the review that the Commission gives to this transaction. Ratepayers can be exposed to even more risk under a holding company structure, as we have previously noted:

The regulator has no choice but to view costs assigned to utility subsidiaries by holding companies very skeptically, especially where the corporate family is in diversified lines of business, because there is always the motive and temptation to have as many costs as possible born by the utility's monopoly operation. (Re Pacific Bell (1986) 20 CPUC2d 237, 274-275; D.86-01-026.)

We reject Applicants' argument that the reasoning applied in the SBC/Telesis merger concerning the applicability of §§ 854(b) and (c) does not apply to this transaction because the firm being acquired here is not a dominant carrier. We recognize that the SBC/Telesis merger involved the acquisition of an ILEC. The fact remains that this transaction involves an acquisition by Verizon that will have an impact on the operations of Verizon California, as well as the competitive environment in which the ILEC operates.

Applicants are incorrect in claiming that the Commission does not look to the status of an acquiring firm in assessing the applicability of § 854(b). One of the main considerations in MCI Communications Corp. and British Telecom (1997) 72 CPUC2d 656 (D.97-05-092) was the nature of the acquiring firm's business. The Commission relied heavily on the fact that British Telecom (BT), the acquiring firm, "operates exclusively in the United Kingdom and does not propose physically to enter California markets."14 In addition, the analysis called for in § 854(b) looks to the combined effect of the transaction participants. Transaction benefits are often derived from the combination of two firms. Anti-competitive effects also arise from the combination of two firms. We reject Applicants' argument that the Commission should only focus on the acquired firm.

Thus, the common element in both the Telesis merger and this transaction is a business combination in which the operations of one of the largest California ILECs are implicated. While the specific form of business combination is different, the principle remains relevant that form should not be placed over substance in assessing the applicability of §§ 854(b) or (c).

Even though Applicants claim that the Verizon California local network is not impacted, their testimony nonetheless indicates that customers of the ILEC will be affected by the merger. For example, Applicants claim that MCI services will be delivered to Verizon customers or will use MCI facilities to deliver services (e.g., MCI Internet backbone). MCI's role in the enterprise market is emphasized by Applicants as a primary motivation for entering into the merger. Applicants acknowledge that some of the services provided to enterprise customers in California will be subject to the Commission's ratemaking authority. Applicants claim that the combined company will have enhanced resources, expertise and incentive to adapt the sophisticated products that MCI has developed for its enterprise customers to the needs of Verizon California's small and medium businesses and consumers.

Both the SBC/Telesis merger and this transaction involve significant changes to the competitive environment within California that warrant review under §§ 854(b) and (c). Moreover, in the SBC/Telesis merger, the two merging parties did not compete against each other in California. By contrast, Verizon and MCI compete against each other within California. The competitive significance of two major competitors merging should be reviewed at least as carefully as the SBC/Telesis merger where only one California competitor was involved.

4.2. Exemption Under § 853(b)

4.2.1. Parties' Positions

Applicants argue that even if the Commission were to determine that §§ 854(b) and (c) may be applied here, it is within the Commission's discretion to grant an exemption from those requirements. The Commission has discretion to grant an exemption pursuant to § 853(b), which provides in relevant part:

The commission may. . . exempt any public utility. . . from this article [including Sections 854(b) and (c)] if it finds that the application thereof with respect to the public utility . . . is not necessary in the public interest."

Intervenors argue that, in view of the record on the impacts of this merger, there cannot logically be a finding that applying §§ 854(b) and (c) is "not necessary in the public interest." Applicants respond that the Commission has exempted other merger transactions involving NDIEC and CLEC assets. Applicants state that this merger is similar to previous mergers involving the acquisition of a nondominant carrier. Opposing parties disagree, arguing that such a characterization overlooks the major competitive significance of this merger and ignores critical differences that distinguish this merger from others in which §§ 854(b) and (c) exemptions were granted. Opposing parties note that in past merger cases where §§ 854(b) and (c) were not applied, the transactions exclusively involved NDIEC and CLEC assets where the surviving utility was nondominant. By contrast, this merger involves the assets and operations of the second largest ILEC in California. Intervenors argue that, given the involvement of ILEC operations, the need for the safeguards provided by §§ 854(b) and (c) figures more significantly here.

4.2.1.1. Discussion

Given the distinctive historic proportions and long-term implications for competition in this matter, we conclude that this merger is not analogous to previous mergers that were routine in nature, or that exclusively involved NDIEC and CLEC assets. The exemptions granted in those past mergers provide no comparable basis for §§ 854(b) and (c) exemptions here.

This merger has greater long-term implications than nondominant carrier mergers in view of the concurrent merger contemplated between SBC and AT&T. The post-merger environment anticipates elimination of not just one but both of the two largest competitors of Verizon in California. None of the merger precedents cited by Applicants contemplated such a fundamental and historic shift in the competitive make-up of the industry.

Past telecommunications transactions involving utilities exempted from review by virtue of § 853(b) presented factors that are not present here. They did not involve an ILEC, they often did not involve more than one California operating utility. For example, the proposed BT/MCI transaction was a foreign takeover where MCI would have become the U.S. operating arm of BT. The WorldCom case was a bankruptcy reorganization where MCI succeeded to the business of the discredited WorldCom. The most comparable precedents are the SBC/Telesis and GTE/Bell Atlantic mergers, both of which received scrutiny under §§ 854(b) and (c). We find that precedent supports the application of §§ 854(b) and (c) to the proposed Verizon/MCI merger.

1 Navigator and XO withdrew from the proceeding in June 2005, and Consumer Federation of America and Consumers Union of U.S., Inc., have not been active in the proceeding since joining in TURN's protest.

2 See Exhibit Verizon/MCI 3 for description.

3 The description of MCI and its business and subsidiaries in based on Ex. Verizon/MCI 4.

4 Four other subsidiaries were recently decertified in California. These includes: Teleconnect Company; Nationwide Cellular Service, Inc.; Choice Communications, Inc. d/b/a WorldCom Wireless, Inc.' and Nationwide Cellular Services, Inc. d/b/a MCI Wireless, Inc.

5 The Agreement is identified as Ex. Verizon/MCI 1 and the Amendment as Ex. Verizon/MCI 2.

6 Ex. Verizon/MCI 3, ¶¶ 14-15.

7 In making this finding, the Commission shall request an advisory opinion from the Attorney General regarding whether competition will be adversely affected and what mitigation measures could be adopted to avoid this result. While the Assigned Commissioner in this proceeding found that § 854(b) did not apply, an advisory opinion from the Attorney General was nevertheless requested.

8 The requirements of § 854(c) apply to any entity that is a party to the transaction with gross annual California revenues exceeding $500 million, and require the Commission to consider each of the criteria listed in paragraphs (1) through (8) of that subsection, and to find, on balance, that the proposal is in the public interest..

9 SCEcorp,, 40 CPUC2d at 171.

10 In GTE Corporation (1991) 39 CPUC2d 480 (D. 91-03-022), the Commission reviewed the GTE/Contel merger under Sections 854 (b) and (c). Also, in GTE and Bell Atlantic (2000) Cal. PUC LEXIS 398 (D.00-03-021), the Commission reviewed the merger leading to the formation of Verizon under §§ 854(b) and (c).

11 Pacific Telesis Group (1997) 71 CPUC2d 351 (D.97-03-067).

12 Id., at 365.

13 Id., at 364.

14 MCI Communications Corp. and British Telecom (1997) 72 CPUC2d. 656, 664.

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