Before the Public Utilities Commission of the State Of
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BEFORE THE PUBLIC UTILITIES COMMISSION FILED 3-18-15 OF THE STATE OF CALIFORNIA 04:59 PM In the Matter of the Joint Application of Frontier ) Communications Corporation, Frontier ) A1503005 Communications of America, Inc. (U 5429 C) ) Verizon California Inc. (U 1002 C), Verizon ) Application No. 15-03-_____ Long Distance, LLC (U 5732 C), and Newco ) West Holdings LLC for Approval of Transfer ) of Control Over Verizon California Inc. and ) Related Approval of Transfer of Assets and ) Certifications ) JOINT APPLICATION FOR APPROVAL OF TRANSFER OF CONTROL OVER VERIZON CALIFORNIA INC. AND RELATED APPROVAL OF TRANSFER OF ASSETS AND CERTIFICATIONS Kevin Saville Charles Carrathers Frontier Communications Corporation Verizon 2378 Wilshire Blvd. Registered In-House Counsel, State Bar of Mound, Minnesota 55364 California Telephone: 952-491-5564 2535 West Hillcrest Drive Facsimile: 952-491-5577 Mail Code CAM21LB Email: [email protected] Newbury Park, CA 91320 Telephone: 805-375-4374 Facsímile: 805-498-5617 Email: [email protected] Mark P. Schreiber Henry Weissmann Patrick M. Rosvall John Muller Cooper, White & Cooper LLP Munger, Tolles & Olson LLP 201 California St., 17th Floor 365 South Grand Ave., 35th Floor San Francisco, CA 94111 Los Angeles, CA 90071 Telephone: 415-433-1900 Telephone: 213-683-9100 Facsimile: 415-433-5530 Facsimile: 213-683-5150 Email: [email protected] Email: [email protected] Attorneys for Frontier Communications Attorneys for Verizon California Inc., Corporation and Frontier Communications of Verizon Long Distance, LLC and Newco West America, Inc. Holdings LLC Date: March 18, 2015 TABLE OF CONTENTS I. INTRODUCTION ................................................................................................................... 1 II. THE PARTIES ........................................................................................................................ 5 A. Frontier and Frontier Communications of America, Inc. ....................................... 5 B. Verizon California and Verizon LD ....................................................................... 8 C. Newco ..................................................................................................................... 9 III. THE TRANSACTION ............................................................................................................ 9 IV. THE PARTIES’ REASONS FOR THE TRANSACTION: RULE 3.6(c) ............................ 12 V. STANDARD OF REVIEW ................................................................................................... 12 VI. ECONOMIC BENEFITS OF THE TRANSACTION: SECTION 854(b)(1) ....................... 14 A. The Transaction Will Significantly Enhance the Operational Efficiency and Financial Strength of Frontier ............................................................................... 15 B. The Transaction Will Have Immediate and Enduring Benefits for Broadband Deployment in California ..................................................................................... 16 C. Frontier’s “Local Engagement” Model Will Materially Benefit Current Verizon Subscribers Through Enhanced and Community-Focused Service Quality ........ 18 D. The Transaction Will Ensure Rate Stability for Current Verizon Ratepayers ...... 19 VII. ALLOCATION OF ECONOMIC BENEFITS: SECTION 854(b)(2) .................................. 20 VIII. THE TRANSACTION’S EFFECT ON COMPETITION: SECTION 854(b)(3) ............ 23 IX. PUBLIC INTEREST FACTORS: SECTION 854(c) ........................................................... 25 A. Financial Condition ............................................................................................... 26 B. Service Quality...................................................................................................... 29 C. Quality of Management ........................................................................................ 31 D. Employee Impact .................................................................................................. 33 E. Shareholder Impact ............................................................................................... 34 F. Impact on State and Local Economies .................................................................. 35 G. Commission Jurisdiction ....................................................................................... 35 H. No Mitigation Measures Are Necessary ............................................................... 36 X. PROCEDURAL REQUIREMENTS .................................................................................... 36 A. Name and Address of Joint Applicants: Rule 2.1(a) ............................................. 36 B. Correspondence and Communications: Rule 2.1(b) ............................................. 36 C. Proposed Categorization and Schedule: Rule 2.1(c) ............................................. 37 D. Organization and Qualification to Transact Business: Rule 2.2 ........................... 39 E. California Environmental Quality Act (“CEQA”) Compliance: Rule 2.4 ............ 39 F. Character of Business: Rule 3.6(a) ....................................................................... 40 i G. Description of the Property Involved: Rule 3.6(b) ............................................... 40 H. Terms and Condition of the Proposed Transaction: Rule 3.6(d), (f) and (g) ........ 40 I. Financial Statement: Rule 3.6(e) ........................................................................... 40 XI. CONSUMMATION OF THE TRANSACTION AND COMPLIANCE ISSUES. .............. 40 XII. RELIEF REQUESTED ......................................................................................................... 41 XIII. CONCLUSION ................................................................................................................. 42 ii TABLE OF AUTHORITIES Page(s) CALIFORNIA PUBLIC UTILITIES COMMISSION DECISIONS D.95-12-057 ...............................................................................................................................8, 10 D.97-02-011 .....................................................................................................................................8 D.97-03-067 ...................................................................................................................................20 D.00-03-021 ........................................................................................................................... passim D.04-08-018 ...................................................................................................................................13 D.04-09-023 ...................................................................................................................................13 D.05-02-027 ...................................................................................................................................38 D.05-05-014 ...................................................................................................................................13 D.05-06-012 ...................................................................................................................................13 D.05-08-006 ...................................................................................................................................13 D.05-11-028 ...................................................................................................................................22 D.05-11-029 .............................................................................................................................22, 38 D.06-02-033 ...................................................................................................................................13 D.06-08-030 ...................................................................................................................................22 D.07-05-061 ...................................................................................................................................12 D.09-10-056 .......................................................................................................................... passim R.05-04-005 ..................................................................................................................................23 FCC DECISIONS Applications Filed by Frontier Communications Corp. and AT&T Inc. for the Assignment or Transfer of Control of the Southern New England Telephone Co. and SNET America, Inc., Memorandum Opinion and Order, 29 FCC Rcd 9203,9208 ¶ 14 (WCB, IB, WTB 2014) ............................................................................................................24 iii Applications Filed by Frontier Communications Corp. and Verizon Communications Inc. for Assignment or Transfer of Control, Memorandum Opinion and Order, 25 FCC Rcd 5972 (2010) ...................................................6 STATE STATUTES Pub. Util. Code § 851-854 ...............................................................................................1, 2, 38, 42 Pub. Util. Code § 854(a) ..........................................................................................................12, 13 Pub. Util. Code § 854(b) ....................................................................................................13, 14, 21 Pub. Util. Code § 854(b)(1) .....................................................................................................13,