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Arizona Coqzoralion Commission DOCKETED TQ: THE COMMISSION DEC 21 2017 FROM: Utilities Division

DOCICB DATE: December 21 , 2017

RE: IN THE MATTER OF THE ]OINT APPLICATION OF ELECTRIC LIGHTWAVE, LLC, ESCHELON TELECOM OF ARIZONA, INC. AND MOUNTAIN TELECOMMUNICATIONS OF ARIZONA, INC. FOR APPROVAL TO COMPLETE A PRO FORM.A INTERNAL CONSOLIDATION. (DOCKET NOS. T-03054A-17-0324, T-03406A-17-0324, AND T03432A-17-0324)

INTRODUCTION

Enclosed are the Commission Staffs memorandum and proposed order for IN THE MATTER OF THE .IOINT APPLICATION OF ELECTRIC LIGHTWAVE, LLC, ESCHELON TELECOM OF ARIZONA, INC. AND MOUNTAIN TELECOMMUNICATIONS OF ARIZONA, INC. FOR APPROVAL TO COMPLETE A PRO FORMA INTERNAL CONSOLIDATION. (Docket Nos. T_03054A-17-0324, T03406A-170324, AND T-03432A-17- 0324). This is only a Staff recommendation to the Commission; it has not yet become an order of the Commission. The Commission can decide to accept, amend, or reject Staff's proposed order.

You may file comments to the recommendation(s) of the proposed order by Being an original and thirteen (13) copies of the comments with the Commission's Docket Control Center at 1200 W. Washington St., Phoenix, AZ 85007 by 4:00 p.m. on or before January 5, 2018.

This matter may be scheduled for Commission deliberation at its Open Meetings scheduled January 9, 2018,at 10:00 a.m.and January 10, 2018, at 10:00 a.m.

If you have any questions about this matter, please contact Matt Connolly of our Staff at (602) 542-0856 or Elijah Abinah, Director, at (602) 542-6935.

BACKGROUND

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On Qctober 27, 2017, Electric Lightwave, LLC ("Elect.tic Lightwave"), Eschelon Telecom of Arizona, Inc. ("Eschelon"), and Mountain Telecommunications of Arizona, Inc. ("Mountain") (collectively, "Applicants") filed an application pursuant to Arizona Revised Statutes ("A.R.S.") Tide 40, Article 4 and Arizona Administrative Code ("A.A.C") R142803(A)(1)-(11) of die Affiliated Interest Rules, seeking approval by die Arizona Corporation Commission ("ACC" or "Commission") for the Applicants to complete a pro fofmainternal consolidation ("Consolidation") » tHE commIsslon December 21 201` Page 2 of Eschelon and Mountain into Electric Lightwave. The Applicants further request that the operations of Eschelon and Mountain be consolidated with Electric Lightwave and operate under the Electric Lightwave Certificate of Convenience and Necessity ("CC&N"). Finallv, the Applicants request that upon Commission approval and subsequent notification by the Applicants to the Commission that the Consolidation is complete, the CC&Ns of Eschelon and Mountain be cancelled.

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The Applicants state they are all subsidiaries of Millstream Business US, Inc. ("Millstream"), an Oregon corporation, with its principal offices at 18110 SE 34'1' Street, Building One, Suite 100, Vancouver, \Y/ashington, 98683. All stream functions as a holding company and does not serve customers. Through its wholly owned subsidiaries, Allstream owns and operates entities that provide a variety of telecommunications services to nonresidential customers primarily in Arizona, California, Colorado, Idaho, Minnesota, Montana, Nevada, North Dakota, Oregon, Utah, and Washington. Millstream is a subsidiary of Zayo Group, LLC, which is wholly owned by Zayo Group Holdings, Inc. ("Zayo"). Zayo is a publicly traded Delaware corporation (NYSEZAYO) and has no majority owner.

Electric Lightwave is a Delaware Limited Liability Company authorized to provide competitive local exchange and inttaIATA toll telecommunications services in Arizona pursuant to a CC&N granted by the Commission in Decision No. 59982, dated January 16, 1997. Esc felon is a Minnesota corporation authorized to provide competitive resold and facilities-based local exchange, exchange access, and interexchange telecommunications services in Arizona pursuant to a CC&N granted by the Commission in Decision No. 62751, dated .lily 25, 2000. Mountain is an Arizona corporation authorized to provide competitive local exchange and interexchange telecommunications services in Arizona pursuant to a CC&N granted by the Commission in Decision No. 60668, dated February 9, 1998.

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The Applicants state the Consolidation is part of a series of multistate, intracompany transactions that will simplify. the corporate structure of Allstream. Under the proposed consolidation the assets, liabilities, and operations of the Applicants will merge, with the surviving entity being Electric Lightwave. There will be no change in die ultimate ownership and control of the assets, liabilities, and operations of the consolidated companies. All stream is and will remain the holding company of Electric Lightwave, and will retain complete indirect ownership and control of the assets and operations used to provide regulated services in Arizona. The Applicants propose to complete the Consolidation as soon as possible, subject to the applicable regulatory approvals.

The Applicants further state the Consolidation will be seamless to Arizona customers. There will be no change in the rates, terms, and conditions under which customers are currently served, either under tariff or contract, as a result of the Consolidation. In addition, there will be no change in the providers' financial, technical, or managerial capabilities as the Applicants are owned I

THE COMMISSION December 21 , 2017 Page 3

and operated by the same company and Offlccls. Customers are currently served under the Allstream brand, making die Consolidation transparent and notification unnecessary.

STAFF ANALYSIS AND RECOMMENDATIONS

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The Applicants submitted the information required by A.A.C. R14-2803(A)(1)-(11). Staff does not believe the proposed Consolidation will negatively impact the operations of the Applicants.

A.R.S. § 40285 requires public service corporations to obtain Commission authorization to assign or dispose of a utility's assets as proposed by the merger in this transaction. The stature serves to protect captive customers from a utility's act to dispose of any of its assets that are necessary for the provision of service, thus, it serves to preempt any service impairment due to disposal of assets essential for providing service. The proposed reorganization will not change the indirect or ultimate ownership of the Applicants by Allstream. As such, Staff does not believe the proposed reorganization wil.l negatively impact the operations of the Applicants.

In anticipation that the Commission may agree wider StafFs recommendation that the CC&N's of Eschelon and Mountain be cancelled, Staff checked on the current bond status for Eschelon and Mountain. Neither Eschelon nor Mountain currently have performance bonds on File with the Commission. Decision No. 62751 initially required Eschelon to procure a performance bond while Decision No. 67674, dated March 9, 2005, amended the required performance bond amount to $235,000. The bond requirement was subsequently rescinded in Decision No. 74555, dated.lune 20, 2014, and the bond documents were released back to Esc felon.

Comp/ia/we

Per information received from the Corporations Division of the Arizona Corporation l Commission on November 7, 2017, all Applicants corporate statuses are in Good Standing. All l i Applicants filed their 2016 Utilities Annual Reports on April 27, 2017. Finally, a review of l Consumer Services database from januarv 1, 2014 to November 7, 2017 revealed no complaints or l opinions were filed for Electric Lightwave, Eschelon, or Mountain. The Compliance Section of the l l Utilities Division reports all Applicants are currency in compliance.

4 I THE commIssIon December 2l 2017 Page 4

.lfa['.r Revote/n/euda/[ani

Staff recommends approval of die proposed Consolidation. Specifically, Staff recommends the Applicants' request for the operations of Eschclon and Mountain to be consolidated wide Electric Lightwave and operate under the Electric Lightwave CC&N be granted. Additionally, Staff recommends dirt upon Commission approval and subsequent notification by die Applicants to the Commission that the Consolidation is complete, the CC&Ns of Eschelon and Mountain be cancelled. Finally, Staff recommends that Electric Lightwave make any subsequent name changes or updates to its tariffs as may be Il€C€SS21I8.

/ ./ / . Elijah o. ASiaah Director Utilities Division

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QRIGINATOR: Matt Connolly THE commission December 21, 2017 Page 5 1 1 On this 21" Dav of December, 7017 the foregoing document was filed with Docket Control as a Utilities Division Memorandum & Proposed Order,and copies of the foregoing were mailed on 1 behalf of the Utilities Division to the following who have not consented to email service. On this 1 1 date or as soon as possible thereafter, the Commission's eDocket program will automatically email a 1 link to the foregoing to the following who have consented to email service.

l l Mr. Andy Kvesic Director/Chief Counsel, Legal Division 1 Arizona Corporation Commission 1 1 1200 West Washington Street Phoenix, Arizona 85007

Mr. Elijah o. Abinah

Director, Utilities Division 1 Arizona Corporation Commission 1200 West \Vasllington Street 1 1 Phoenix, Arizona 85007 1 1 Mr. Douglas Denney VicePresident, Costs & Policy 1 1 Millstream Business US, Inc. 1 1 18110 SE3-1th Street Building one, Suite 100 Vancouver, Washington 96383 Doug.<1ennu(¢1 allstream.com Sr>nh1e.fr1r7@i*:1llsfrenm.c<>m Consented to Service by Email

\ f r r. 1i '1m, By: 1 I Renee de la Fuente 1 1 Administrative Support Specialist 1 BEFORE THE A.RIZONA CORPORATION COMMISSION

2 TOM FORESE Chainman 3 BOB BURNS Commissioner 4 ANDY TOBIN Cormnissioner 5 BOYD DUNN 6 Commissioner ]USTIN OLSON 7 Commissioner

8 IN THE MATTER OF THEJOINT DOCKET no. T_03054A-17-0-24 APPLICATION OF ELECTRIC 9 LIGHTWAVE, LLC, ESCHELON T-03406A-17-0324 10 TELECOM OF ARIZONA, INC. AND T-03432A-17-0324 MOUNTAIN TELECOMMUNICATIONS 11 OF ARIZONA, INC. FOR APPROVAL TO DECISION NO. COMPLETE A PRO FORMA INTERNAL ORDER 12 CONSOLIDATION

13 Open Meeting 14 January 9 and 10, 2018 15 Phoenix, Arizona

16 BY THE COMMISSION:

17 FINDINGS OF FACT

18 1 . On October 27, 2017, Electric Lightwave, LLC ("Electric Lightwave"), Eschelon

19 Telecom of Arizona, Inc. ("Eschelon"), and Mountain Telecommunications of Arizona, Inc.

20 ("Mountain") (collectively, "Applicants") filed an application pursuant to Arizona Revised Statutes

21 ("A.R.S.") Tide 40, Article 4 and Arizona Administrative Code ("A.A.C") R14-2-803(A)(1)-(11) of the

22 Affiliated Interest Rules, seeking approval by the Arizona Corporation Commission ("ACC" o r

23 "Commission") for the Applicants to completea pro fofma internal consolidation ("Consolidation") of

24 Eschelon and Mountain into Electric Lightwave.

25 2. The Applicants further request that the operations of Eschelon and Mountain be

26 consolidated with Electric Lightwave and operate under the Electric Lightwave Certificate of

27 Convenience and Necessity ("CC&N").

28 I

Page 2 Docket Nos. T-03054A-17-0324 et al.

1 3. Finally, die Applicants request that upon Commission approval and subsequent

2 notification by the Applicants to the Commission that the 0onsolidadon is complete, the CC&Ns of

3 Eschelon and Mountain be cancelled.

4 Background of Applicants

5 4. The Applicants state died are all subsidiaries of Allstream Business US, Inc.

6 ("Allst.ream"), an Oregon corporation, with its principal offices at 18110 SE 34th Street, Building One,

7 Suite 100, Vancouver, Washington, 98683. Allstream functions as a holding company and does not

8 serve customers. Through its wholly owned subsidiaries, Allstream owns and operates entities that

9 provide a variety of telecommunications services to nonresidential customers primarily in Arizona,

10 California, Colorado, Idaho, Minnesota, Montana, Nevada, North Dakota, Oregon, Utah, and

11 Washington. Millstream is a subsidiary of Zayo Group, LLC, which is wholly owned by Zayo Group

12 Holdings, Inc. ("Zayo"). Zayo is a publicly traded Delaware corporation (NYSE:ZAYO) and has no

13 majority owner.

14 5. Electric Lightwave is a Delaware Limited Liability Company authorized to provide

15 competitive local exchange and intraLATA toll telecommunications services in Arizona pursuant to a

16 CC&N granted by the Commission in Decision No. 59982, dated January 16, 1997. Eschelon is a

17 Minnesota corporation authorized to provide competitive resold and facilities-based local exchange, 1

18 exchange access, and interexchange telecommunications services in Arizona pursuant to a CC&N

19 granted by the Commission in Decision No. 62751, dated Judy 25, 2000. Mountain is an Arizona

20 corporation authorized to provide competitive local exchange and interexchange telecommunications

21 services in Arizona pursuant to a CC&N granted by the Commission in Decision No. 60668, dated

22 February 9, 1998.

23 The Ttgnygpfjon

24 6. The Applicants state the Consolidation is part of a series of multistate, intracompany

25 transactions that will simplify the corporate structure of Allstxeam. Under the proposed consolidation

26 the assets, liabilities, and operations of the Applicants will merge, with the surviving entity being

27 Electric Lightwave. There will be no change in die ultimate ownership and control of the assets,

28 liabilities, and operations of the consolidated companies. Allstream is and will remain the holding

Decision No. \ Page 3 Docket Nos. T_03054A_17-0324 et al.

1 company of Electric Lightwave, and will retain complete indirect ownership and control of the assets

2 and operations used to provide regulated services in Arizona. The Applicants propose to complete

3 die Consolidation as soon as possible, subject to the applicable regulatory approvals.

4 7. The Applicants further state the Consolidation will be seamless to Arizona customers.

5 There will be no change in the rates, terms, and conditions under which customers are currency

6 served, either under tariff or contract, as a result of the Consolidation. In addition, there will be no

7 change in the providers' financial, technical, or managerial capabilities as the Applicants are owned

8 and operated by the same company and of8cers. Customers are currently served under the Allstream

9 brand making the Consolidation transparent and notification unnecessary.

10 XI A m M

11 8. The Applicants submitted the information required by A.A.C. R14-2-803(A)(1)-(11).

12 Staff does not believe the proposed Consolidation will negatively impact the operations of the

13 Applicants.

14 9. A.R.S. § 40-285 requires public service corporations to obtain Commission

15 authorization to assign or dispose of a utility's assets as proposed by the merger in this ttansacdon.

16 The statute serves to protect captive customers from a ad]ity's act to dispose of any of its assets that

17 are necessary for the provision of service; thus, it serves to preempt any service impairment due to

18 disposal of assets essential for providing service. The proposed reorganization will not change the

19 indirect or ultimate ownership of the Applicants by Allstream. As such, Staff does not believe the

20 proposed reorganization will negatively impact the operations of the Applicants.

21 10. In anticipation that the Commission may agree with Staffs recommendation that the

22 CC&N's of Eschelon and Mountain be cancelled, Staff checked on die current bond status for

23 Eschelon and Mountain. Neither Eschelon nor Mountain currency have performance bonds on file

24 with the Commission. Decision No. 62751 initially required Eschelon to procure a performance bond

25 while Decision No. 67674, dated March 9, 2005, amended the required performance bond amount to

26 $235,000. The bond requirement was subsequently rescinded in Decision No. 74555, dated ]ume 20,

27 2014, and die bond documents were released back to Eschelon.

Decision No. |

Page 4 Docket Nos. T-03054A-17-0324 et al.

1 Comp/ianae

2 11. Per information received from the Corporations Division of die Arizona Corporation

3 Commission on November 7, 2017, all Applicants corporate statuses are in Good Standing. AH

4 Applicants Bled their 2016 Utilities Annual Reports on April 27, 2017. Finally, a review of Consumer

5 Services database from January 1, 2014 to November 7, 2017 revealed no complaints or opinions were

6 Bled for Electric Lightwave, Eschelon, or Mountain. The Compliance Section of the Utilities Division

7 reports all Applicants are currently in compliance.

8 Staffs Recommendations

9 12. Staff recommends approval of the proposed Consolidation. Specifically, Staff

10 recommends the Applicants' request for the operations of Eschelon and Mountain to be consolidated

11 with Electric Lightwave and operate under the Electric Lightwave CC&N be granted. Additionally,

12 Staff recommends that upon Commission approval and subsequent notification by die Applicants to

13 die Commission that the Consolidation is complete, the CC&Ns of Eschelon and Mountain be

14 cancelled. Finally, Staff recommends that Electric Lightwave make any subsequent name changes or

15 updates to its tariffs as may be necessary.

16 CONCLUSIONS OF LAW

17 1. Electric Lightwave, LLC, Eschelon Telecom of Arizona, Inc., and Mountain

18 Telecommunications of Arizona, Inc. are public service corporations within the meaning of Article

19 XV of the Arizona Constitution.

20 2. The Commission has jurisdiction over Electric Lightwave, LLC, Eschelon Telecom of

21 Arizona, Inc., Mountain Telecommunications of Arizona, Inc., and the subject matter in this Blind.

22 3. The Commission, having reviewed the filing of Electric Lightwave, LLC, Eschelon

23 Telecom of Arizona, Inc., and Mountain Telecommunications of Arizona, Inc. and StafFs

24 Memorandum dated December 21, 2017, concludes that it is in the public interest to grant approval as

25 proposed and discussed herein.

26 ORDER

27 IT IS THEREFORE ORDERED that the application of Electric Lightwave, LLC, Eschelon

28 Telecom of Arizona, Inc., and Mountain Telecommunications of Arizona, Inc. seeking approval for

Decision No. \

Page 5 Docket Nos. T-03054A-17-0324 et al.

1 the proposed consolidation of Eschelon Telecom of Arizona, Inc. and Mountain Telecommunications

2 of Arizona, Inc. into Electric Lightwave, LLC pursuant to A.A.C. R14~2-801-R14-2-806 and A.R.S. § 3 40-285 be and hereby is approved as discussed herein.

4 IT IS FURTHER ORDERED that the operations of Eschelon Telecom of Arizona, Inc. and 5 Mountain Telecommunications of Arizona, Inc. be consolidated with Electric Lightwave, LLC and 6 operate under the Electric Lightwave, LLC CC&N. 7 IT IS FURTHER ORDERED that upon completion of the Consolidation, Electric 8 Lightwave, LLC, Eschelon Telecom of Arizona, Inc., and Mountain Telecommunications of Arizona, 9 Inc. shall notify the Commission of such by a written filing in this docket. 10 IT IS FURTHER ORDERED that upon receipt of the aforementioned written notification, l l the CC&N of Eschelon Telecom of Arizona, Inc. and Mountain Telecommunications of Arizona, Inc. 12 be cancelled. 13 ..

14 ... 15 ... 16 ... 17 . 18 ... 19 .. 20 ..

21 ... 22 . 23 ..

24 ... 25 .. 26 . 27 ...

Decision No. I

Page 6 Docket Nos. T-03054A-17-0324 et al.

1 IT IS FURTHER ORDERED that Electric Lightwave, LLC make any subsequent name

2 changes or updates to its tariffs as may be necessary.

3 IT IS FURTHER ORDERED Mat this Decision shall become effective immediately.

5 BY THE ORDER OF THE ARIZONA CORPORATION COMMISSION

7 CHAIRMAN FORESE COMMISSIONER DUNN 8

10 COMMISSIONER TOBIN COMMISSIONER OLSON COMMISSIONER BURNS 11 IN WITNESS WHEREOF, 1, TED VOGT, Executive 12 Director of the Arizona Corporation Commission, have hereunto, set my hand and caused the official seal of dies 13 Commission to be affixed at the Capitol, in Me City of 14 Phoenix, this day of , 2018.

16 TED VOGT 17 EXECUTIVE DIRECTOR 18

19 DISSENT:

20 21 DISSENT:

22 EOA:MAC:red/SJE

Decision No. I Page 7 Docket Nos. T-03054A-17-0324 et al.

1 Electric Lightwave, LLC, et al. Docket Nos. T-03054A-17-0324 et al. 2

3 Mr. Douglas Denney Vice President, Costs & Policy 4 Allstream Business US, Inc. 5 18110 SE 34d1 Street Building One, Suite 100 6 Vancouver, Washington 96383 I )ou3».dcnncv(¢1>al1snc:\m.com 7 [email protected] Consented to Service by Email 8

9 Mr. Andy Kvesic Director, Legal Division 10 Arizona Corporation Commission 1200 West Washington Street 11 Phoenix, Arizona 85007 i .e;ra1.Div@;azcc.9ov 12 Consented to Service by Email

13 Mr. Elijah o. Abinah 14 Director, Utilities Division Arizona Corporation Commission 15 1200 West Washington Street Phoenix, Arizona 85007 16 [email protected] Consented to Service by Email 17

Decision No.