PROPOSED DECISION Agenda ID #16139 Ratesetting Decision
Total Page:16
File Type:pdf, Size:1020Kb
ALJ/RWH/dc3 PROPOSED DECISION Agenda ID #16139 Ratesetting Decision BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA Joint Application of Astound Broadband, LLC (U6184C), Wave Holdco, LLC and Radiate Holdings, L.P. for Expedite Approval Application 17-06-018 of Indirect Transfer of Control of Astound Broadband, LLC (U6184C), Pursuant to Public Utilities Code Section 854(a) DECISION APPROVING TRANSFER OF CONTROL OF ASTOUND BROADBAND, LLC (U6184C) Summary Pursuant to Public Utilities Code Section 854,1 this decision grants the unopposed joint application of Astound Broadband, LLC, Wave Holdco, LLC and Radiate Holdings, LP (i.e., Applicants) for authority to transfer control of Astound Broadband, LLC, as described below. We also grant the motion of Applicants for authorization to file certain confidential information under seal. We conclude that approval of the proposed transfer of control is in conformance with applicable statutory law and Commission rules, and is in the public interest. Application 17-06-018 is closed. 1 Subsequent statutory references, unless otherwise noted, are to the California Public Utilities Code. 198457788 - 1 - A.17-06-018 ALJ/RWH/dc3 PROPOSED DECISION 1. Factual Background 1.1. Entities Involved in the Transaction Astound Broadband, LLC Astound is a limited liability company formed under the laws of Washington, with principal offices in Kirkland, Washington. Astound owns and operates a multi-service communications business which provides cable television, broadband Internet access, and voice over Internet Protocol (VoIP) services to residential and commercial subscribers in California, Washington and Oregon. Pursuant to Decision (D.) 05-10-039, Astound has authority to offer local, intra-LATA toll and interexchange telecommunications services in California. Astound also holds a video franchise under the Digital Infrastructure and Video Competition Act of 2006 (DIVCA).2 Wave Holdco, LLC Wave Holdco is a limited liability company, formed under the laws of Delaware with principal offices in Kirkland, Washington. Wave Holdco wholly owns, directly or indirectly, subsidiaries that operate distribution networks in California, Oregon, and Washington (collectively “Wave”), which provide high-speed Internet access, dark fiber, cable television and telephone services to residential, business, and municipal customers, pursuant to federal, state, and local authorizations. Wave gives residential and commercial consumers a competitive alternative to larger companies such as AT&T/DirecTV, Comcast, Charter, Frontier, Dish, CenturyLink, Consolidated Communications, Zayo, 2 The DIVCA franchise will be separately transferred pursuant to the process established in the California Public Utilities Code and General Order (GO) 169. See Pub. Util. Code § 5800, et seq.; G.O. 169. - 2 - A.17-06-018 ALJ/RWH/dc3 PROPOSED DECISION Integra, and Level 3 in the markets where it operates. Astound is a wholly owned indirect subsidiary of Wave Holdco. Radiate Holdings, L.P. Radiate, a Delaware limited partnership, is a holding company that is majority owned and controlled by certain investment funds ultimately controlled by the principals of TPG Global, LLC (“TPG Global” and, together with its affiliates, “TPG”). The principals of TPG Global are each United States citizens. TPG currently has $72 billion of assets under management, and has extensive experience with global public and private investments.3 Radiate Holdings GP, LLC (“Radiate GP”), a Delaware limited liability company, serves as Radiate’s general partner and has responsibility for the management, operation, and control of Radiate’s business and affairs. The Board of Directors of Radiate GP is, and will continue to be, controlled by TPG. At post-closing, Wave Holdco’s properties will be managed by the management team from Patriot Media (which currently manages Radiate’s RCN and Grande operating subsidiaries pursuant to a management agreement with Radiate) and members of Wave Holdco’s existing management team. 1.2. Terms of the Transaction Pursuant to a Securities Purchase Agreement dated May 18, 2017 (Purchase Agreement), the proposed transfer of control (Transaction) is subject to the following terms and conditions. Wave Holdco will become a wholly-owned 3 At the closing of the Transaction, the following entities will have direct or indirect equity interests in Radiate of ten percent or greater: TPG VII DE AIV Holdings, L.P., TPG VII DE AIV I, L.P., TPG VII Radiate Holdings I, L.P.; TPG VII Wakeboard Holdings, L.P.; TPG VII DE AIV II, L.P.; and TPG VII Wakeboard Coinvest II, L.P. Each of these entities is, or will be, a Delaware partnership controlled by TPG, with Messrs. Bonderman and Coulter having indirect 100 percent control. - 3 - A.17-06-018 ALJ/RWH/dc3 PROPOSED DECISION subsidiary of Radiate. As a result of the transaction, Radiate will acquire indirect control of Astound. The Transaction, however, will not cause any change in the direct ownership or legal structure of Astound, nor will it affect the daily management or operations of Astound. Because the Transaction will be completed at the holding company level, its effects will be seamless to customers of Astound. There are no existing plans to discontinue any service or to implement changes in rates, terms, or conditions in connection with the Transaction. Astound will continue to hold its existing Certificate of Public Convenience and Necessity (CPCN) and will continue provide communications services to its customers without interruption. The Purchase Agreement provides for Radiate HoldCo’s acquisition of all the outstanding membership interests of Wave Holdco. The acquisition will be consummated directly, through the purchase of membership interests in Wave Holdco from the holders thereof, and indirectly through the purchase of all the outstanding capital stock of OH Wave Blocker I. Inc., OH Wave Blocker II, Inc. and GI Wave UBTI-ECI Blocker, Inc., the sole assets of which, as of the closing of the Transaction, will be membership interests in Wave Holdco. At closing, Wave Holdco will become a wholly-owned subsidiary of Radiate HoldCo and an indirect subsidiary of Radiate.4 Pursuant to Rule 2.2 of the Commission’s Rules, Applicants provided a copy of the Certificates of Formation each for Astound and Wave Holdco.5 4 The pre-closing ownership structure of Wave is depicted on the structure charts attached to the Application. The post-Transaction ownership structure of Radiate is depicted on the structure charts as Exhibit I of the application. 5 See Joint Application Exhibit A. - 4 - A.17-06-018 ALJ/RWH/dc3 PROPOSED DECISION Certificates of Status issued by the California Secretary of State on June 2, 2017, showing that Astound and Wave Holdco are both in good standing were also provided, along with Astound’s year-end 2016 financial statements, portions of which were filed under seal, as confidential, trade secret and not for public disclosure.6 A copy of Radiate’s Certificate of Formation was provided as Exhibit D. Radiate transacts no business in California and, as a result, does not require a Certificate of Good Standing from the California Secretary of State. Radiate HoldCo’s first quarter 2017 balance sheet and income statements, along with 2016 balance sheets and income statements from Radiate’s subsidiaries, Grande and Yankee Cable Partners, LLC (the indirect parent of RCN), was attached to the Application as Exhibit E, under seal, as confidential, trade secret and not for public disclosure. Information about the management team for Patriot Media, which currently manages Radiate’s RCN and Grande operating subsidiaries pursuant to a management agreement with Radiate and which will assume managerial control of Astound, was provided in Exhibit F of the Application. The Wave, RCN and Grande systems are providers of video, voice, and Internet services, dedicated to broad deployment in the communities served. Applicants argue that bringing these smaller, independent operations under one roof, and combining their experience, expertise, and innovation, will benefit consumers by offering stronger competition to the existing larger, well-established providers in the marketplace. 6 Id., Exhibits B and C. - 5 - A.17-06-018 ALJ/RWH/dc3 PROPOSED DECISION 1.3. Procedural Background The application was filed on May 22, 2017, and duly noticed in the Commission’s Daily Calendar on June 19, 2017. A telephonic prehearing conference was held on October 24, 2017. The Assigned Commissioner issued a scoping memo on November 9, 2017. Commission in Resolution ALJ 176-3396 preliminarily determined that hearings were required. The Assigned Commissioner’s Scoping Memo changed this preliminary determination and found that hearings were not needed. This application is uncontested. The instant decision has been prepared based upon the record submitted in this proceeding. 2. Jurisdiction Public Utilities Code § 851 provides broad Commission authority to approve transfers of control which involve public utilities operating within California, as is requested in this proceeding. More specifically, § 854(a) specifies that “[n]o person or corporation, whether or not organized under the laws of this state, shall merge, acquire, or control either directly or indirectly any public utility organized and doing business in this state without first securing authorization to do so from this Commission. The Commission may establish by order or rule the definitions of what constitute merger, acquisition, or control activities that