COPUC Decision
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Decision No. R17-0499 BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF COLORADO PROCEEDING NO. 17A-0056T IN THE MATTER OF THE JOINT APPLICATION OF LEVEL 3 COMMUNICATIONS, INC. AND CENTURYLINK, INC. FOR APPROVAL OF INDIRECT TRANSFER OF CONTROL OF ALL CERTIFICATED OR REGISTERED LEVEL 3 OPERATING ENTITIES IN COLORADO. RECOMMENDED DECISION OF ADMINISTRATIVE LAW JUDGE CONOR F. FARLEY GRANTING (1) JOINT MOTION REQUESTING APPROVAL OF APPLICATION BASED ON STIPULATION AND SETTLEMENT AGREEMENT; AND (2) APPLICATION FOR EXPEDITED APPROVAL OF MERGER TRANSACTION, AND CLOSING PROCEEDING Mailed Date: June 15, 2017 TABLE OF CONTENTS I. STATEMENT...........................................................................................................................2 A. Summary............................................................................................................................2 B. Merger Agreement and Joint Application .........................................................................3 C. Prehearing Conference on April 7, 2017...........................................................................5 D. Continued Prehearing Conference on April 24, 2017 .......................................................5 E. Settlement Documents.......................................................................................................6 F. Statutory Deadline.............................................................................................................6 II. UNDISPUTED FACTS............................................................................................................7 A. The Applicants...................................................................................................................7 1. CenturyLink ...............................................................................................................7 2. Level 3........................................................................................................................8 B. The Transaction.................................................................................................................9 C. The Joint Application ......................................................................................................11 D. Staff’s Concerns Regarding the Transaction...................................................................13 Before the Public Utilities Commission of the State of Colorado Decision No. R17-0499 PROCEEDING NO. 17A-0056T E. The Settlement.................................................................................................................13 1. HCSM.......................................................................................................................14 2. Basic Emergency Services .......................................................................................18 3. Wholesale Matters....................................................................................................19 a. Wholesale Service Quality................................................................................20 b. Reduced Market Competition for Wholesale Offerings ...................................21 c. Switched Access Arbitrage ...............................................................................21 4. General Competition for Telecommunications Services..........................................22 III. CONCLUSIONS OF LAW ....................................................................................................23 A. Hearing ............................................................................................................................23 B. Legal Standard.................................................................................................................24 C. Analysis ...........................................................................................................................27 D. Request to Shorten Time Within Which to File Exceptions ...........................................30 IV. ORDER...................................................................................................................................31 A. It Is Ordered That: ...........................................................................................................31 I. STATEMENT A. Summary 1. This Recommended Decision addresses (a) the Application for Expedited Approval of Merger Transaction (Joint Application) filed by CenturyLink, Inc. (CenturyLink), Level 3 Communications, Inc. (Level 3) (collectively, Joint Applicants) on January 20, 2017; and (b) the Joint Motion Requesting Approval of Application Based on Stipulation and Settlement Agreement (Joint Motion) filed on May 4, 2017 by Joint Applicants and Trial Staff of the Commission (Staff), which is the only intervening party in this proceeding. For the reasons stated below, consideration of the Joint Motion and Joint Application is limited to the request to approve the transfer of the Certificates of Public Convenience and Necessity (CPCNs) for 2 Before the Public Utilities Commission of the State of Colorado Decision No. R17-0499 PROCEEDING NO. 17A-0056T switched access services over which the Commission has jurisdiction. Based on that limitation, the Joint Motion and Joint Application are granted. B. Merger Agreement and Joint Application 2. On October 31, 2016, CenturyLink, Level 3, Wildcat Merger Sub 1 LLC (Merger Sub 1), and WWG Merger Sub LLC (Merger Sub 2) entered into “An Agreement and Plan of Merger” pursuant to which CenturyLink will acquire Level 3.1 Almost three months later, CenturyLink and Level 3 filed the Joint Application on January 20, 2017 requesting “Commission approval of the indirect transfer of control of all Level 3 operating entities certificated by the Commission to CenturyLink.”2 In the Joint Application, CenturyLink and Level 3 state that “the Transaction is expected to close by September 30, 2017” and, for this reason, they request expedited consideration of the Joint Application by the Commission “to enable the parties to complete the arrangements necessary for closing by the September deadline.”3 The Joint Applicants specifically request that “[s]hould a hearing be required, to accommodate prompt review and a decision within the statutory timeframes, Applicants further request that the Commissioners conduct the hearing on this matter, rather than assign the case to an Administrative Law Judge.”4 3. On March 1, 2017, the Commission deemed the Joint Application complete. Because Applicants filed their Joint Application with their testimony and exhibits, the deadline for the Commission to issue a decision is 120 days after March 1, 2017, or June 29, 2017. 1 Joint Application at 1, 5-6 (filed on January 20, 2017). 2 Id. at 1. 3 Id. at 1-2. 4 Id. at 21. 3 Before the Public Utilities Commission of the State of Colorado Decision No. R17-0499 PROCEEDING NO. 17A-0056T 4. Also on March 1, 2017, Staff filed a Notice of Intervention as of Right, Entry of Appearance, Notice Pursuant to Rule 1007(a) and Rule 1401, and Request for Hearing (Intervention). In its Intervention, Staff did not identify with specificity its concerns with the proposed transaction between CenturyLink and Level 3. 5. On March 15, 2017, the Commission referred the Joint Application to an Administrative Law Judge (ALJ) for disposition. The matter was subsequently assigned to the undersigned ALJ. 6. On March 24, 2017, the undersigned ALJ issued Interim Decision No. R17-0235-I that scheduled a prehearing conference for April 7, 2017 at 9:00 a.m. The purpose of the conference was to establish a schedule for the proceeding. Interim Decision No. R17-0235-I also directed Staff to be “prepared to state its position with respect to the Application, or explain why it cannot so state its position at the time of the prehearing conference coupled with an estimate of when it will be able to identify its positon.”5 7. On April 3, 2017, Staff filed an Unopposed Motion to Adopt Procedural Schedule, Vacate Prehearing Conference, Allow Telephone Appearance at Hearing, and For a Waiver of Response Time (Motion). In the Motion, the parties proposed a schedule that required a Commission Decision on exceptions to be issued by August 15, 2017. CenturyLink also stated that, even though § 40-6-109.5(1), C.R.S. allows the Commission to extend the statutory deadline until September 27, 2017, CenturyLink would only agree to an extension until August 15, 2017. 5 Interim Decision No. R17-0235-I issued on March 24, 2017 at 2-3. 4 Before the Public Utilities Commission of the State of Colorado Decision No. R17-0499 PROCEEDING NO. 17A-0056T C. Prehearing Conference on April 7, 2017 8. On April 7, 2017, the undersigned ALJ held the prehearing conference scheduled in Interim Decision No. R17-0235-I. At that prehearing conference, the undersigned ALJ discussed Staff’s continued inability to state its position on the Joint Application, the schedule proposed by the parties, and the need to extend the deadline for a Commission decision pursuant to § 40-6-109.5(1), C.R.S. As to the last point, CenturyLink stated that if the undersigned ALJ extended the deadline by 90 days, it would be “under pressure” to file a document requesting the Commission to rescind its referral of this proceeding to an ALJ. After a recess requested by the parties, the parties jointly requested the undersigned ALJ: (a) to continue the prehearing conference until April 24, 2017; and (b) to defer decisions on the foregoing issues until