Verizon/MCI Merger
Joint Application 05-04-020

History/Summary

• March 2, 2006 comments of PUC President Peevey regarding more board members for the California Emerging Technology Fund
• PUC appoints four to serve on the governing board of the California Emerging Technology Fund, created to achieve ubiquitous access to broadband services.
• Summary of Merger Requirements 
• PUC approves SBC/AT&T and Verizon/MCI mergers, addresses "digital divide".
• Commissioner Brown's Alternate
• All-Party Meeting on Merger - November 3, 2005
• Proposed Decisions Issued October 19, 2005
• PUC Comments On California Attorney General's Advisory Opinion On Verizon-MCI Merger That Finds Minimal Effects On Competition
• Initially, MCI would merge into ELI Acquisitions, LLC, a wholly-owned subsidiary of Verizon created solely to facilitate the merger transaction. When the transaction is completed, the new company—which will be called MCI, LLC.—will be a subsidiary of Verizon.
• The transaction does not involve any change or assignment of existing licenses or authorizations. As such, MCI and Verizon would continue to provide service to the public under licenses and authorizations held respectively prior to the transaction.
• Applicants are seeking concurrent approval from the FCC, SEC, DOJ and 23 state commissions (including the PUC).
• The merger seeks to enhance the abilities of each company to compete and provide a more comprehensive suite of services to consumers, business and government through the combined company.
• MCI states that its consumer business is in an irreversible decline and that it must focus on its enterprise market and Internet backbone. MCI's substantial Internet backbone, specifically, would complement Verizon's existing local exchange, wireless networks, and consumer market share.
• The new company would deliver broadband to a greater share of the mass market and provide a full array of services using the latest technologies.
• Merger benefits are estimated at $8.6 million in California over four years with a present value of $6.2 million.
• Applicants believe they are exempt from Public Utility Code Sections 854(b) and (c) and that no mitigation measures or distribution of economic benefits to ratepayers are necessary.
• They are nonetheless providing the Commission with full information about the nature and scope of the economic benefits associated with the merger agreement.
• If required, Applicants propose two approaches to share merger benefits with ratepayers.

1. A community project to increase broadband access in low income areas, and
2. A surcredit on Verizon customer bills to distribute any remaining benefits.

• Sixteen parties filed protests or responses May 24-25, 2005: CALTEL, Covad, Cox, "Joint Intervenors" (Consumers Federation, Consumers Union, Disability Rights Advocate, Greenlining, Latino Issues Forum, TURN, and UCAN), Level 3, Navigator, ORA, Pac-West, Qwest, Telscape and XO.
• The protests state that the merger is detrimental to the public interest as the combined entity would have dominant market power in retail local and long distance telecommunications services, wholesale market circuit-switched and broadband access facilities.
• They contend, also, that merged company would have significant market presence in unregulated markets (wireless and advanced services).
• Commenters request merger conditions that will ensure California's pro-competitive telecommunications policies are enforceable after the merger.
• Applicants replied to the comments June 6, 2005.
• Applicants ask the Commission to reject attempts to block the transaction and not hold the transaction subject to a prolonged regulatory inquiry into the imposition of what Verizon claims are onerous, unnecessary and unrelated conditions.
• Instead they request expeditious review and approval of the merger so benefits can be delivered quickly and so the Applicants can keep pace with technological and structural changes which are rapidly transforming the communications industry.

Prehearing Conference (PHC) held June 21, 2005.

• At the PHC, Assigned ALJ Glen Walker and Assigned Commissioner Kennedy heard the parties' views on such procedural matters as the need for Public Participation Hearings, evidentiary hearings, and expedited discovery procedures.
• A scoping memo was issued setting the schedule for the proceeding.