February 16, 2018 Hon. Kathleen H. Burgess Secretary New York State
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140 West Street 6th Floor New York, NY 10007 (212) 519-4717 [email protected] Joseph A. Post Deputy General Counsel – NY February 16, 2018 Hon. Kathleen H. Burgess Secretary New York State Public Service Commission Three Empire State Plaza Albany, NY 12223 Re: Matter 18-_____ — Petition of MCI Communications Services, Inc. and XO Communications Services, LLC for Approval of a Transfer of Ownership Pursuant to § 100 of the Public Service Law Dear Secretary Burgess: Enclosed please find the Petition of MCI Communications Services, Inc. and XO Communications Services, LLC for Approval of a Transfer of Ownership Pursuant to § 100 of the Public Service Law. Petitioners respectfully request that the Commission permit the transaction to close on or about June 30, 2018. Respectfully submitted, Joseph A. Post NEW YORK PUBLIC SERVICE COMMISSION Petition of MCI Communications Services, Inc. and XO Communications Services, LLC for Approval of a Matter 18-______ Transfer of Ownership Pursuant to § 100 of the Public Service Law PETITION FOR APPROVAL JOSEPH A. POST Deputy General Counsel ‒ NY 140 West Street ‒ 6th Floor New York, NY 10007 (212) 519-4717 [email protected] Counsel for Petitioners February 16, 2018 STATE OF NEW YORK PUBLIC SERVICE COMMISSION Petition of MCI Communications Services, Inc. and XO Communications Services, LLC for Matter 18-____ Approval of a Transfer of Ownership Pursuant to § 100 of the Public Service Law PETITION FOR APPROVAL I. INTRODUCTION Petitioners MCI Communications Services, Inc. d/b/a Verizon Business Services (“MCI”) and XO Communications Services, LLC (“XO”), both of which are certified telephone corporations as defined in § 2(17) of the Public Service Law, request approval pursuant to § 100 of the Public Service Law,1 of a transaction in which MCI will acquire a 100% direct ownership interest in XO. XO will continue to exist as a legal entity and a certified telephone corporation after the transaction. Moreover, XO will continue to be — as it is now — an indirect, wholly- owned subsidiary of Verizon Communications Inc. (“VCI”). Therefore, the transaction is simply an internal corporate reshuffling within the Verizon group of companies, and will not result in any meaningful change in the management or control of XO. It is being carried out for purposes of administrative simplicity, particularly in connection with the preparation of tax returns. 1 Publ. Serv. L. § 100(1) provides that “[n]o … telephone corporation, domestic or foreign, shall hereafter purchase or acquire, take or hold any part of the capital stock of any … telephone corporation organized or existing under the laws of this state unless authorized so to do by the commission.” For purposes of this Petition, we will assume, without conceding, that XO, a Delaware limited liability company, can be considered to “exist[] under or by virtue of the laws of” New York as a result of its status as a certified New York telephone corporation, and that the proposed transaction is otherwise subject to § 100 even though it involves LLC membership interests rather than corporate stock, and is a parent-level transaction that will not involve a direct transfer of ownership interests in a regulated corporation. The Petitioners respectfully submit that no aspect of this transaction would trigger review under any provision of the Public Service Law other than § 100. To the extent that the Commission concludes that this transaction does require its authorization or consent under any statute other than § 100, this Petition should be deemed to request such authorization or consent. Because it will help reduce the costs of a regulated company, the proposed transaction meets the public interest test under § 100. The Petitioners anticipate closing the transaction on or about June 30, 2018, and respectfully requests approval before that date.2 II. PARTICIPANTS IN THE TRANSACTION XO is a Delaware limited liability company that has been certified by the Commission to provide certain types of regulated communication services in New York.3 By order dated January 25, 2017, the Commission approved a transaction in which XO’s parent corporation, XO Communications, LLC (“XOC”), was acquired by VCI, and then became a direct subsidiary of Verizon Business Network Services Inc. (“VBNSI”), a Delaware corporation that is an indirect 4 wholly-owned subsidiary of VCI. 2 An explicit approval order is not required by the statute. Pursuant to Publ. Serv. L. § 100(3), “[n]o consent shall be given by the commission to the acquisition of any stock in accordance with this section unless it shall have been shown that such acquisition is in the public interest; provided, however, that any such consent shall be deemed to be granted by the commission ninety days after such corporation applies to the commission for its consent, unless the commission, or its designee, determines and informs the applicant in writing within such ninety day period that the public interest requires the commission’s review and its written consent.” (Emphasis supplied.) 3 The Commission issued a Certificate of Public Convenience and Necessity (“CPCN”) to NEXTLINK New York, LLC on September 10, 1997. Case 97-C-0993, “Order Issuing Certificate of Public Convenience and Necessity” (issued and effective September 10, 1997). NEXTLINK New York, LLC was subsequently converted from a limited liability company to a corporation named NEXTLINK New York, Inc. The conversion was approved in Case 98-C-0864, Memorandum to the Commission from the Communications Division (July 6, 1998), approved as recommended and so ordered by the Commission (issued and effective July 27, 1998). By letter dated September 25, 2000, submitted in Case 97-C-0993, NEXTLINK New York, Inc. notified the Commission that it was changing its name to XO New York, Inc. The Commission subsequently issued an order authorizing the merger of Allegiance Telecom of New York, Inc. and XO New York, Inc. into XO Communications Services, Inc. Case 04-C-0871, Memorandum to the Commission from the Office of Telecommunications (August 3, 2004), approved as recommended and so-ordered by the Commission (issued and effective August 25, 2004). By letter dated August 31, 2012, XO Communications Services, Inc. notified the Commission that it had converted to an LLC and that its name had been changed accordingly. 4 Case 16-C-0288, “Order Granting Joint Petition Subject to Conditions” (issued and effective January 25, 2017). 2 MCI is a Delaware corporation that, like XO, is indirectly owned and controlled by VCI. It operates in New York State as a regulated telephone corporation pursuant to CPCNs that were issued to predecessor companies in 1983 and 1993, and that were thereafter transferred to MCI.5 Pursuant to 16 NYCRR § 17.2, MCI’s and XO’s certificates of incorporation are provided as Exhibits A and B to this Petition. III. DESCRIPTION OF THE PROPOSED TRANSACTION Currently, XO is wholly owned by XOC, which, as noted previously, is in turn wholly owned by VBNSI. In the proposed transaction, VBNSI will contribute its ownership interest in XOC to MCI International Inc., a Delaware corporation and wholly-owned indirect subsidiary of VCI, and from there it will be passed down a chain of corporations, ending with MCI.6 XOC will then be merged into MCI, leaving XO as a wholly-owned subsidiary of MCI. 5 See Case 28412, “Certificate of Public Convenience and Necessity” (issued April 25, 1983) (approving operation of telephone lines by MCI Telecommunications Corp. in the State of New York to offer intercity communications common carrier services through the use of microwave and other means, including, but not limited to, the resale of message toll services and wide area telephone service); Case 92-C-0803, “Order Issuing Certificate of Public Convenience and Necessity” (issued and effective March 2, 1993) (granting CPCN to MFS Intelenet of New York, Inc. to operate as a reseller of all forms of telephone services within New York State); id., “Order Issuing Certificate of Public Convenience and Necessity and Approving Expedited Proceeding and Related Waivers” (issued and effective March 17, 1993) (granting CPCN to MFS Intelenet to enable it to offer point-to-point, intercity and intracity, switched and non-switched telecommunications services in the State); Case 97-C-1201, Memorandum to the Commission from the Communications Division (August 11, 1997), approved as recommended and so-ordered by the Commission (issued and effective September 18, 1997) (approving a corporate reorganization in which, inter alia, MFS Intelenet of New York, Inc. was merged into, and transferred its CPCN to, its corporate parent, WorldCom Technologies, Inc.); Case 99-C-0772, Memorandum to the Commission from the Communications Division (July 30, 1999), approved as recommended and so-ordered by the Commission (issued and effective August 26, 1999) (approving a corporate reorganization in which, inter alia, the retail operations of MCI Telecommunications Corp. were transferred to WorldCom Technologies, Inc., which was renamed MCI WorldCom Communications, Inc.); Case 05-C-0917, Letter to Hon. Jaclyn A. Brilling from Leigh Ann Cox (dated July 20, 2005) (notifying Commission of a change in the name of MCI WorldCom Communications, Inc. to MCI Communications Services, Inc.). 6 Specifically, the ownership interest in XOC will be handed off by MCI International Inc. to (in order) MCI International Services Inc., MCI International Telecommunications Corporation, Terremark Worldwide, Inc., MCI Broadband Solutions, Inc., and, finally, MCI. Each of these entities is a Delaware corporation, and a wholly- owned subsidiary of the entity preceding it in the chain. 3 Throughout the course of this transaction, and at its end, XO will remain an indirect, wholly-owned subsidiary of VCI. As a result, there will be no meaningful change in its management or control. Corporate organization charts showing the ownership of the participating entities both before and after the transaction are provided as Exhibits C and D to this Petition.7 IV.