84 35 M S’EP 21 B‘h B& $Et bpj JOSEPH J. STARSICK, JR. Associate General Counsel - Southeast Region u Communications 1500 MacCorkle Ave., S.E. Charleston, West Virginia 25396 (304) 344-7644 Joseph .Star [email protected]

September 21,2012 Via Hand Delivery

Sandra S. Squire Executive Secretary Public Service Commission 201 Brooks Street Charleston, West Virginia 25323

Re: 12-1040-T-PC

CEBRIDGE TELECOM WV, LLC, CEQUEL COMMUNICATIONS HOLDINGS, LLC, and NESPRESSO ACQUISITION CORPORATION Joint Application for authority to complete a Transaction resulting in an indirect change of control.

Dear Ms. Squire:

Please find enclosed for filing in the original plus 12 copies of the Reply to Suddenlink’s Opposition to Frontier’s Petition to Intervene in the above-referenced matter.

Thank you for your attention to this matter.

Sincerely,

(State Bar No. 3576)

JJSirf sc Enclosure cc: David B. Hanna, Esq. Thomas N. Hanna, Esq. PUBLIC SERVICE COMMISSION OF WEST VIRGINIA CHARLESTON

CASE NO. 12-1040-T-PC

CEBFUDGE ACQUISITION, LLC, DBA SUDDENLINK COMMUNICATIONS, Joint Application for authority to complete a transaction resulting in an indirect change of control.

REPLY TO SUDDENLINK’S OPPOSITION TO FRONTIER’S PETITION TO INTERVENE

Frontier West Virginia, Inc. and Citizens Telecommunications Company of West

Virginia d/b/a Frontier Communications of West Virginia (collectively “Frontier”) hereby respond to the Opposition of Cebridge Telecom WV, LLC, (“Cebridge

Telecom”), Cequel Communications Holdings, LLC and Nespresso Acquisition

Corporation (“Nespresso”) (collectively, “Suddenlink”) to Frontier’s Petition to

Intervene.

As explained below, Suddenlink previously waxed philosophical on the benefits of the 90-day early termination fee (“ET,”) waivers by Frontier and FiberNetNtelos.

Now, when Frontier requests that Suddenlink honor the very same waiver when foreign interests are acquiring ownership in Suddenlink, Suddenlink balks at doing so. To put it simply, it appears that Suddenlink can dish it out, but it can’t take it.

It was not Suddenlink alone that benefitted fiom the prior ETF waivers fiom which it now shirks when turnabout is only fair play. It was West Virginia customers

‘ Cebridge Acquisition , LLC d/b/a Suddenlink Communications v. FiberNet, LLC and NTELOS Inc., Case No. 10-188&T-C, “Complaint” (December 17,2010).

1 who benefitted fiom the earlier waivers, and it is West Virginia customers who will benefit fiom an ETF waiver in this case. As explained below, a 90-day ‘‘fiesh look” waiver in the present case is reasonable and fair to competitors and consumers alike.

Suddenlink tries to avoid this result by claiming that Frontier has no legal interest in advocating a fiesh look, by trying to distinguish the prior ETF waivers, by arguing that the Commission has no reason to order a waiver in this case, and by claiming that the new ownership by foreign investors somehow is a red herring. For the reasons explained below, Suddenlink is wrong on all counts.

I. Frontier has a Legal Interest in Advocating an ETF Waiver, for the Same Reasons that Suddenlink Itself Previously Has Advocated.

Suddenlink cannot credibly assert that a competitor, such as Frontier, has no legal interest in seeking an ETF waiver. Suddenlink itself certainly took the position that it had standing to assert its own formal complaint to enforce the ETF waiver by a competitor, namely, FiberNet (now Lumos).2 Ironically, in Suddenlink’s testimony in support of its complaint against FiberNet, Suddenlink pithily captured the very reasons that Frontier has a legal interest here:

Suddenlink is an integrated communications company that provides voice, video and data services to residential and business customers in West Virginia. We compete directly with other providers of voice services in the state, including the incumbent company, Frontier; and several competitive local exchange carriers operating in West Virginia. When our competitors merge, or otherwise engage in significant transactions that can affect our competitive position in the state, we take notices3

See Suddenlink Complaint, supra, footnote 3.

Direct Testimony of Dave Bach on behalf of Suddenlink Communications, Case No. 10-1886-T-C (August 1,201l), p. 2.

2 Suddenlink is engaging in a significant transaction under which it will have new and foreign ownership that will affect Frontier’s competitive position in the state, and as outlined below, West Virginia customers have a number of other reasons justifLing granting them an opportunity to select a new provider. As a competitor previously subject to an ETF waiver, and as one of the state’s largest employers and taxpayers,

Frontier, too, has every legitimate right and reason to be heard to ask for competitive equity and customer choice.

11. The Very Rationale that Suddenlink Itself Has Offered for an ETF Waiver Applies Here.

Suddenlink itself well explained the underlying reasons for an ETF waiver in

Suddenlink’s complaint against FiberNet (now Lumos) in Case No. 10-1886-T-C:

West Virginia consumers have become increasingly sophisticated in their understanding and selection of the provision of telephone, cable, internet, and other telecommunications services. As such, they have specific expectations with respect to the services that they receive. This includes receiving local and long-distance voice services as a bundled package. FiberNet’s violation of the Commission’s order and egregious actions in continuing to charge customers these termination fees damage the competitive nature of communication services that has been upheld and supported on both the federal and state levels by severely restricting the rights to freely select and change providers of these important telecommunications service^.^

In Suddenlink’s testimony in the same case, it more pointedly applauded the

Commission’s imposition of ETF waivers:

Cebridge Acquisition , LLC d/b/a Suddenlink Communications v. FiberNet, LLC and NTELOS Inc., Case No. 10-1886-T-C, “Complaint” (December 17, 2010), 7 7.e. Any questions of interpretation of the waiver easily can be resolved by adopting Suddenlink’s own interpretations proposed in that case.

3 Based upon Suddenlink’s experience, I believe that condition helped West Virginia consumers that were interested in purchasing new competitive service offerings provided by Suddenlink, and other competitive providers, without fear of incurring ETFs fiom Frontier (after they acquired Verizon’s customers in West Virginia). During the period after Frontier’s notices were issued, we received a significant amount of interest in our services from former Verizon / Frontier customers. Indeed, Frontier recognized that during the last ten days of the 90 day waiver period a number of customers wished to terminate their relationship with Frontier without incurring any ETFs so they could move to Suddenlink’s service. To Frontier’s credit, the company continued to honor those requests all the way up to the 90th and final, day of the Commission-mandated waiver period. Frontier’s actions complied with both the spirit, and the letter, of the law. Thus, it seems clear to me that the PSC’s decision to impose that condition was the right one because it increased competitive choices for a significant number of West Virginians.’

Suddenlink’s rebuttal testimony in Case No. 10-1886-T-C even more concisely stated that ‘?he purpose of the initial ETF waiver was to provide West Virginians an opportunity to exercise their right to take a ‘fiesh look’ and seek competitive alternatives.”6 West Virginians should have that same opportunity for a &esh look here,

The reasons for an ETF waiver go beyond competitive equity. They include customer choice.

The Commission has sound reasons for imposing an ETF waiver on Suddenlink.

First, foreign interests will be major new owners of Suddenlink, and many customers are adherents to “Buy American” and oppose company profits being shipped outside the

United state^.^ Second, questions about Suddenlink’s financial viability and its need for

Direct Testimony of Dave Bach on behalf of Suddenlink Communications, Case No. 10-1886-T-C (August 1,201l), p. 3. (Emphasis added.)

Rebuttal Testimony of Dave Bach on behalf of Suddenlink Communications, Case No. 10-1886-T-C (August 12,201I), p. 8. (Emphasis added.)

According to Suddenlink’s FCC filing, Nepresso’s foreign interests will acquire control of Suddenlink, in part, as follows:

4 an equity infusion may have customers worried about Suddenlink’s ability to continue to provide adequate service, or to continue to provide service with the same terms, conditions and pricingq8For example, Suddenlink’s own financial statements show that it has produced net income losses every year of its existence, that its debt currently exceeds the total assets of the company, and that the book value of Suddenlink’s equity has steadily shrunk.9 Third, many telecommunications customers in West Virginia, having lived through Suddenlink’s service outages following the derecho on June 29, 2012, may want to opt for a provider that can supply service even when commercial power is interrupted for an extended period. According to a Suddenlink official quoted in the

Charleston Gazette, 150,000 of Suddenlink’s 180,000 West Virginia customers had

A to-be-formed Delaware limited partnership (“CPP LP”) will hold approximately 48% of the equity of Nespresso. Substantially all of the equity of CPP LP will be held by CPP Investment Board (USRE 11) Inc., a corporation formed under the laws of Canada. CPP Investment Board (USRE 11) Inc. is wholly owned by CPP Investment Board, which was incorporated as a Canadian federal Crown corporation by an Act of Parliament in December 1997. CPP Investment Board is a professional investment management organization that invests the assets of the Canada Pension Plan. The address for both CPP Investment Board (USRE 11) Inc. and CPP Investment Board is One Queen Street East, Suite 2600, P.O. Box 101, Toronto, Ontario M5C 2W5 Canada. ...

A group of limited partnerships formed under the laws of England and associated with BC Partners (collectively, the “BCP Funds”) will hold, in the aggregate, approximately 48% of the equity of Nespresso. None of such entities will hold 10% or more of such stock. The general partner and manager of each of such entities is CIE Management IX Limited, an entity formed under the laws of the Bailiwick of Guernsey. CIE Management IX Limited will not have an economic stake in those limited partnerships other than being their general partner. * See “Suddenlink Gets $2 Billion Infusion,” Wall Street Journal, July 18,2012, http:i:oniine.wsj.cornlarticle/SB100008723963~04~097904~77~3 5393277695420,html.

~~PulmalP~lint’.t‘~~~~~~lYi~~~~sh~we~~~~~~s~~€~~r~e~ui~y~~~~~e~~~~~~ is actually negative. See Suddenlink Second Quarter and Year to Date 2012 Financial Operating Results (Aug. 1, 2012), http://phx.corporate-ir .net/phoenix.zhtml’?c=21355 1 &p=irol- iiewsArticle&ID= 172 1250&hiahlighht=;Suddenlink Fourth Quarter and 201 1 Full Year Financial Operating Results (March 9, 20 12), ht~~ilphxcorporate-ir.netiphoen Lx .zhhn l?c-2 1355 1&p=irol- news&nvo=O.

5 outages in Suddenlink services after the storms.” Any of these reasons is a more than adequate basis for this Commission to grant West Virginia customers a “fiesh look.”

Suddenlink nonetheless tries to distinguish the Commission’s prior 90-day ETF waivers and to argue that no reason exists here to impose such a waiver. However, not only does the Commission already have a sound basis for imposing such a waiver in this case, as outlined above, but Suddenlink’s efforts are unavailing in any event.

Notably, Suddenlink argues that its new foreign ownership is a “red herring” and an issue to be left to the FCC.“ Ironically, it is Federal Communications Commission

(“FCC”) proceeding cited by Suddenlink that is the red herring. As this Commission well knows, virtually all communications company changes of control must be approved not only by this Commission, but also by the FCC. For example, Frontier’s transaction was subject to the same FCC approval. The FCC’s parallel proceeding is no reason for the

Commission not to impose reasonable conditions here to protect West Virginia customers. To the contrary, Suddenlink’s new foreign ownership is a reason for the

Commission to give customers the chance to choose a new provider. Many West

Virginia customers consider “Buy American” to be an important factor in their purchasing decisions. The Commission should give them the opportunity for a eesh look at their decision to choose Suddenlink.

Suddenlink makes several other arguments, trying to distinguish the prior 90-day waivers. For example, Suddenlink asserts that a reason for the Commission to grant an

IO http:i:w\iaazette.comiNews:20 1207 100168. See also http::/suddenlitikfvi.cotn/stateslwvi (number of Suddenlink West Virginia customers).

” Suddenlink’s Response in Opposition to Frontier Petition to Intervene (“Suddenlink Opposition”), pp. 11-12.

6 ETF waiver in Frontier’s transaction was to prevent the possibility of financial loss to any existing customers as the result of the possibility of changes.I2 Although Frontier has honored its promise to keep customer service and pricing the same, Suddenlink has imposed prices increases and broadband usage limits on West Virginia customers in the past year.13 Under these circumstances, and given Suddenlink’s financial condition outlined above, customers should be given a window in which to re-consider whether

Suddenlink will be able meet its commitments made in this filing as a factor in selecting their providers,

Suddenlink also asserts that the Commission granted customers an ETF waiver in

Frontier’s transaction because Frontier was changing its back-office systems and might possibly change its product mix.I4 However, just as Suddenlink commits here to make its transaction “~eamless,”’~Frontier made the same very commitment, pledging to make its transaction seamless to customers. l6 Nevertheless, the Commission saw fit to impose an

ETF waiver requirement on Frontier. Frontier made good on its commitment, and in addition has invested hundreds of millions of dollars in West Virginia. It remains to be seen if Suddenlink will meet its own commitments.

”See, e.g., id., p. 3. l3 “Suddenlink Announces Price Increases,” Charleston Daily Mail (Dec. 6, 201 l), http://www.dai1ymai1.com/~usiness/201112050209;“Suddenlink Usage Caps Official,” DSL Reports (Oct. 7, 20 1l), ht~://~~w.dslrepnrts.c~mjshnwnewsiSuddenlink-Usage-Caps-Official-1 16475.

14

Suddenlink Opposition, pp. 5, 8. ~~

Id., p. 6. l6 Joint Application of Frontier Communications Corporation, et al., Case No. 09-0871-T-PC (May 29, 2009), pp. 3, 15, 16.

7 Further, Suddenlink incorrectly claims that in Frontier’s transaction, “Frontier was not acquiring control of Verizon or control of Verizon corporate entities, but rather

Verizon assets and customers were assigned and transferred to Fr~ntier.”’~This is untrue. To the contrary, Frontier acquired Verizon’s West Virginia incumbent local exchange carrier, Verizon West Virginia Inc., and changed its name to Frontier West

Virginia Inc.’*

Suddenlink similarly argues that its own transaction is distinguishable “[blecause this Transaction [involving Cebridge Telecom] is merely a transaction of to be completed at the holding company level, resulting only in an indirect change of control, it does not require the merger or integration of two separate operating companies.”” However,

Frontier’s acquisition of Verizon West Virginia was a similarly complex transaction, resulting in Frontier’s holding company acquiring indirect control of Verizon’s West

Virginia subsidiary.20 The Commission should not concern itself with the form of the transaction, but rather the substance - here the proposed new ownership of Suddenlink and its West Virginia operations.

Likewise, Suddenlink distinguishes the FiberNetNtelos merger on the grounds that it involved a significant merger of two different entities.*l However, Suddenlink’s

l7 Suddenlink Opposition, p. 5.

Joint Application of Frontier Communications Corporation, et al., Case No. 09-0871-T-PC (May 29, 2009), pp. 1, 11, 16 & Exhibit 3.

“Suddenlink Opposition, p. 6.

2o Frontier Communications Corporation, et al., Case No. 09-0871-T-PC, Commission Order (May 13, 2010, p. 1; Joint Application of Frontier Communications Corporation, et al., Case No. 09-0871-T-PC (May 29, 2009), pp. 1, 11, 16 & Exhibit 3.

21 Suddenlink Opposition, p. 6.

8 new foreign ownership alone is a similar, if not better, reason for imposing the same 90- day ETF waiver. Not only do both cases involve a change in ownership, but in this case the change is one about which many West Virginians passionately care: Foreign vs.

American ownership.

Finally, Suddenlink cites the Commission decision in the formerly proposed

AT&T/T-Mobile transaction.22 In that case, the Commission found that the reasons for the waivers in the Frontier and FiberNetNtelos cases did not apply, including the

Commission’s finding that it did not perceive a risk to T-Mobile consumers from unexpected charges or bundled service changes.23 Although these worries about the

Frontier transaction never materialized, Suddenlink’s customers have every reason to be concerned about possible changes with Suddenlink’s new owners - not to mention its fmancial condition that led to the foreign investment. Customers likewise simply may not wish to do business with a company whose profits, or a substantial portion of its profits, will be paid to foreign interests, to risk the commitments of a company whose financial condition is at least questionable, or to stay with a company whose quality of service during extended commercial power outages recently has been shown to be inferior.

In any event, the crucial question for the Commission is whether sound reasons exist to allow customers a “fi-esh look” at service commitments they may have made with a Company that is changing ownership. As explained above, they do here.

22 AT&T Znc. and T-Mobile USA, Znc., Case No. ll-0563-T-PC, Commission Order (July 29, 2011). Suddenlink’s Opposition, citing Case No. 11-0563-T-PC contains a typographical error and instead transposes two digits to cite the case as Case No. 11-0653-T-PC. Suddenlink Opposition, at 9.

23 AT&TZnc. and T-Mobile USA, Inc., Case No. 11-0563-T-PC, Commission Order (July 29,201 1).

9 111. The Commission Is Not Precluded from Imposing Conditions that It Finds to be In the Public Interest.

Suddenlink claims that “[slo long as consumers are not going to be made worse

0% the Commission is obligated to grant its appro~al.’’~~This claim first begs the question of whether customers might be worse off A “Buy-American” adherent, a customer worried about the financial viability of the company apparently needing a $2 billion equity infusion, or a customer who totally lost service during extended power outages, very well might - and probably will - feel worse off without a brief (90-day) opportunity to choose to switch to a new provider.

But it is brazen of Suddenlink to suggest implicitly that the Commission may not impose conditions as a part of its public interest approval under West Virginia Code

Section 24-2-12. The Commission’s history is so full of approvals of transactions with conditions - including the Frontier and the FiberNetNtelos transactions - that no citation need be made here. The Commission certainly is not obligated to approve Suddenlink’s transaction without conditions and without considering the interests of all members of the public, including Frontier, one of the state’s largest employers and taxpayers, and the interests of customers who may want a competitive choice through a 90-day waiver of

ETFs.

IV. The Commission Should Impose Other Conditions that It Finds to be in the Public Interest.

In addition to the ETF waiver discussed above, the Commission should consider imposing other conditions to which other major bundled phone, video and Internet providers have been subject as a result of a transfer of control. For example, the

24 Suddenlink Opposition, pp. 12- 14. (Emphasisadded.)

10 Commission should consider a one-year moratorium on price increases by Suddenlink.

The Commission imposed a very similar condition on Frontier.25 Suddenlink already has increased prices for certain of its services in the past year?6 The Commission thus should order that no more price increases by Suddenlink for a period of one year following the close of the change of control transaction.

Conclusion and Prayer for Relief

For the above reasons, the Commission should grant Frontier’s petition to intervene in this proceeding. In addition, the Commission should adopt a 90-day waiver of early termination fees, adopting the definitions proposed by Suddenlink itself in Case

No. 10-1 886-T-C. Finally, the Commissions should establish a reasonable procedural schedule regarding further conditions that the Commission may consider imposing under state law.

26 “Suddenlink Announces Price Increases,” Charleston Daily Mail (Dec. 6, 201 l), http://www,dailymail.com/Business/201 1 12050209; “Suddenlink Usage Caps Official,” DSL Reports (Oct. 7,20 1 l), lit~::l~~w.dslreports.com/shownews/Su~~enlink-Usa.~e-Caps-Official-1 1647.5.

11 FRONTIER WEST VIRGINIA INC. AND CITIZENS TELECOMMLTNICATIONS COMPANY OF WEST VIRGINIA

By Counsel:

- Joseph J. Starsick, Jr. (WV State Bar #3576) Associate General Counsel - East Frontier Communications 1500 MacCorkle Avenue, S.E. Charleston, West Virginia 25396 (304) 344-7644 Joseph. [email protected]

12 CERTIFICATE OF SERVICE

I, Joseph J. Starsick, Jr., Counsel for Frontier West Virginia Inc. and Citizens

Telecommunications Company of West Virginia, do hereby certify that I have served the foregoing Reply to Suddenlink's Opposition to Frontier's Petition to Intervene and Request for

Immediate Relief upon the parties of record by depositing a true copy thereof in an envelope in the United States mail, return receipt requested, this 21" day September 2012, addressed as

follows:

David B. Hanna, Esq. Thomas N. Hanna, Esq. Counsel, Applicants Hanna & Hanna PLLC PO Box 3967 Charleston, WV 25339