Attachment DA-15-320A1.pdf

DA-15-320A1.pdf

PUBLIC NOTICE

Public Notice

2015-03-12

This document pretains to ITC-T/C-20150224-00057 for Transfer of Control on a International Telecommunications filing.

IBFS_ITCTC2015022400057_1081315

Federal Communications Commission DA 15-987 Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of ) ) Applications Filed by Frontier Communications ) WC Docket No. 15-44 Corporation and Verizon Communications Inc. for ) the Partial Assignment or Transfer of Control of ) Certain Assets in California, Florida, and Texas ) MEMORANDUM OPINION AND ORDER Adopted: September 2, 2015 Released: September 2, 2015 By the Chief, Wireline Competition Bureau; Chief, International Bureau; and Chief, Wireless Telecommunications Bureau: I. INTRODUCTION 1. Frontier Communications Corporation (Frontier) and Verizon Communications Inc. (Verizon) (together, Applicants) filed a series of applications 1 pursuant to sections 214 and 310(d) of the Communications Act of 1934, as amended (Act), seeking consent to various assignments and the transfer of control of licenses and authorizations held by Verizon’s wholly-owned subsidiaries in California, Florida, and Texas to Frontier. 2. On March 12, 2015, the Wireline Competition Bureau (WCB), the International Bureau (IB), and the Wireless Telecommunications Bureau (WTB) released a Public Notice seeking comment on the proposed transaction. 2 In response to the Public Notice, we received a total of ten filings: five comments expressing concern about the transaction, 3 two petitions to deny the transaction, 4 and three 1 See Verizon Communications Inc. and Frontier Communications Corporation Application for Consent to Partially Assign and Transfer Control of Authority to Provide Global Facilities-Based and Global Resale International Telecommunications Services and Transfer Control of Domestic Common Carrier Transmission Lines, Pursuant to Section 214 of the Communications Act of 1934, as Amended, WC Docket No. 15-44 (filed Feb. 24, 2015) (Application). Applicants filed a supplement to the Application on March 6, 2015. Letter from Jennifer L. Kostyu, Counsel to Frontier, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 15-44 (filed Mar. 6, 2015). 2 Applications Filed by Frontier Communications Corporation and Verizon Communications Inc. for the Partial Assignment or Transfer of Control of Certain Assets in California, Florida, and Texas, WC Docket No. 15-44, Public Notice, 30 FCC Rcd 2234 (WCB/IB/WTB 2015). 3 See Comments of California Association of Competitive Telecommunications Companies, WC Docket No. 15-44 (filed Apr. 13, 2015) (CALTEL Comments); Comments of COMPTEL, WC Docket No. 15-44 (filed Apr. 13, 2015) (COMPTEL Comments); Comments of Communications Workers of America, WC Docket No. 15-44 (filed Apr. 13, 2015) (CWA Comments); Comments of TEXALTEL, WC Docket No. 15-44 (filed Apr. 13, 2015) (TEXALTEL Comments); Joint Comments of The Utility Reform Network, The National Association of State Utility Consumer Advocates (NASUCA), and the Center for Accessible Technology, WC Docket No.15-44 (filed Apr. 13, 2015) (jointly, Consumer Advocates Comments). 4 The Greenlining Institute Petition to Deny, WC Docket No. 15-44 (filed Apr. 13, 2015) (Greenlining Petition); Petition to Deny of Florida Power & Light Company, WC Docket No. 15-44 (filed Apr. 17, 2015) (Florida Power & Light Petition). Florida Power & Light requests acceptance of its late-filed petition, explaining that it attempted to file its petition on time on April 13, 2015, but experienced an electronic filing error. It states that the delay did not (continued …)

Federal Communications Commission DA 15-987 replies. 5 Three of the commenters are competitive local exchange carrier (LEC) trade associations (CALTEL, COMPTEL, TEXALTEL) that request continuing access to interconnection agreements, wholesale inputs, and more detail on the customer transition process. 6 Communications Workers of America (CWA) and a joint group of Consumer Advocates express concerns about broadband deployment, service quality, Frontier’s financial qualifications, and job retention. 7 Florida Power & Light petitioned the Commission to deny the transaction based on existing pole attachment disputes with Verizon. 8 The Greenlining Institute expresses concern about the effect of the transaction on supplier diversity and employment, among other points. 9 We also received replies from the Applicants as well as the Competitive Carriers Association (CCA), which support the competitive LECs’ arguments about wholesale inputs and interconnection, 10 and from Lumos Networks, a competitive LEC that raises concerns about existing pole attachment disputes with Frontier in West Virginia. 11 We discuss the issues raised by commenters and petitioners as part of our analysis below. 12 3. In addition to our review, the States of California and Texas are also conducting reviews to ensure that the transaction is in the public interest. 13 We emphasize that our review of applications (Continued from previous page) cause prejudice to any party because it had already provided a timely copy of its petition via electronic mail to all of the relevant parties in the proceeding, including Commission staff. Florida Power & Light Motion to Accept Late Filed Petition, WC Docket No. 15-44, at 1-2 (filed Apr. 17, 2015). We agree that acceptance of Florida Power & Light’s petition does not adversely affect our consideration of any party’s comments in this proceeding. We therefore grant Florida Power & Light’s request. 5 Reply Comments of Competitive Carriers Association, WC Docket No. 15-44 (Apr. 13, 2015) (CCA Reply); Reply Comments of Lumos Networks, LLC and Lumos Networks of West Virginia, Inc., WC Docket No. 15-44 (filed Apr. 18, 2015) (Lumos Reply). On April 28, 2015, Applicants filed an opposition and reply to the commenters and petitioners. Joint Opposition to Petitions to Deny and Reply to Comments by Frontier Communications Corporation and Verizon Communications Inc., WC Docket No. 15-44 (filed Apr. 28, 2015) (Applicant Reply). 6 CALTEL Comments at 5-12; COMPTEL Comments at 5-13; TEXALTEL Comments at 5-7. 7 Consumer Advocates Comments at 3-19; CWA Comments at 5-8. On August 4, 2015, CWA filed a letter stating that it had reached an agreement with Frontier and now supports Commission consent to the transaction. Letter from Debbie Goldman, Telecommunications Policy Director to Communications Workers of America, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 14-22 (filed Aug. 4, 2015) (CWA Aug. 4, 2015 Ex Parte Letter). 8 Florida Power & Light Petition at 4-22. 9 Greenlining Petition at 1-9. Greenlining states in its April 13, 2015 petition to deny that its filing is based on “information that is currently available” and that its “current position may not be its ultimate position.” Id. at 1. 10 CCA Reply at 3-8. 11 Lumos Reply at 2-5. 12 See infra at paras. 14-30. 13 Joint Application of Frontier Communications Corporation, Frontier Communications of America, Inc. (U5429C), Verizon California, Inc. (U1002C), Verizon Long Distance LLC (U5732C), and Newco West Holdings LLC for Approval of Transfer of Control Over Verizon California, Inc. and Related Approval of Transfer of Assets and Certifications, 15-03-005 (Cal. Pub. Util. Comm., filed Mar. 18, 2015); Application of GTE Southwest Incorporated dba Verizon Southwest and Frontier Communications Corporation for an Amendment to a Certificate of Operating Authority, Proposed Order, Docket No. 44630 (Tex. Pub. Util. Comm., rel. Aug. 21, 2015). Applicants state that there was no required approval process in Florida. Letter from William F. Maher, Jr., Counsel to Frontier Communications Corporation, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 15-44 (filed Aug. 25, 2015) (Frontier Aug. 25, 2015 Ex Parte Letter). On May 8, 2015, the U.S. Department of Justice (DOJ) granted early termination of its pre-merger review under the Hart-Scott-Rodino Antitrust Improvements Act of 1975. Early Termination Notices, https://www.ftc.gov/enforcement/premerger-notification-program/early-termination- notices/20150937. 2

Federal Communications Commission DA 15-987 filed with the Commission does not impact the states’ independent proceedings on the proposed transaction, nor do we intend any finding in this Memorandum Opinion and Order to pre-judge the states’ independent consideration of matters before them under applicable state law or precedent, which may differ from our standard of review. 4. We have carefully reviewed the record, and requested and analyzed additional information from the Applicants. 14 Based on our analysis, we find that approval of the transaction is unlikely to result in any potential public interest harms outweighing any potential public interest benefits. Accordingly, we find that the transaction, on balance, serves the public interest, and we consent to the proposed assignments and transfers. II. BACKGROUND A. Description of the Applicants 1. Frontier Communications Corp. 5. Frontier is the fourth largest incumbent LEC in the United States and serves primarily rural areas and smaller cities. 15 Through its wholly-owned operating companies, Frontier provides residential and business customers with telecommunications and other services, including local and long distance voice services, broadband Internet access service, and multichannel video service. 16 Frontier currently has approximately four million customers, including 2.3 million broadband customers in 28 states. 17 Applicants state that Frontier, a publicly traded Delaware corporation, has no entities or individuals that own 10 percent or more of its stock. 18 14 Letter from Randy Clarke, Chief, Competition Policy Division, FCC, to William F. Maher and Patrick R. Halley, Counsel to Frontier Communications Corporation, and Kathleen M. Grillo, Senior Vice President, Federal Regulatory and Legal Affairs, Verizon, WC Docket No. 15-44 (filed June 17, 2015) (Supplemental Information Request Letter); Letter from William F. Maher, Jr., Counsel to Frontier Communications Corporation, to Marlene H. Dortch, Secretary, FCC WC Docket No. 15-44 (filed July 1, 2015) (Response to Information Request); Letter from William F. Maher, Jr., Counsel to Frontier Communications Corporation, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 15-44 (filed June 10, 2015) (Frontier June 10, 2015 Ex Parte Letter). 15 Frontier Communications Corp., Form 10-Q for the Quarterly Period Ended March 31, 2015 at 21 (May 7, 2015), available at http://investor.frontier.com/secfiling.cfm?filingID=20520-15-33&CIK=20520. 16 Application, Exh. 1, Description of the Parties, Description of the Transaction, Public Interest Statement and Administrative Matters (Public Interest Statement) at 4-5. 17 Id. at n.6. Frontier currently serves customers in Alabama, Arizona, California, Florida, Georgia, Idaho, Illinois, Indiana, Iowa, Michigan, Minnesota, Mississippi, Montana, Nebraska, Nevada, New Mexico, New York, North Carolina, Ohio, Oregon, Pennsylvania, South Carolina, Tennessee, Utah, Washington, West Virginia, and Wisconsin. Frontier states that, as of August 1, 2015, the approximate numbers of customers broken down by the services the customers purchase are as follows: approximately [Begin Confidential Information] [End Confidential Information] customers purchase broadband service on a standalone basis; approximately [Begin Confidential Information] [End Confidential Information] customers purchase voice service on a standalone basis; and approximately [Begin Confidential Information] [End Confidential Information] customers purchase bundled broadband and voice services. As of August 1, 2015, Frontier further states that it provides FiOS broadband service to approximately [Begin Confidential Information] [End Confidential Information] customers, DSL broadband service to approximately [Begin Confidential Information] [End Confidential Information] customers, and U-Verse (a video service) to approximately [Begin Confidential Information] [End Confidential Information] customers. Frontier Aug. 25, 2015 Ex Parte Letter at 1-2. 18 Application at 6. 3

Federal Communications Commission DA 15-987 2. Verizon Communications Inc. 6. Verizon’s operating subsidiaries, Verizon California Inc., Verizon Florida LLC, and GTE Southwest Incorporated d/b/a Verizon Southwest (together, the Transferring Companies) provide local and long distance retail and wholesale voice and data services, retail broadband services, and video services in portions of their respective states. 19 Applicants state that these operations include approximately 3.7 million voice connections, 2.2 million broadband (DSL and FiOS) connections, and 1.2 million FiOS video connections. 20 B. Description of the Transaction 7. On February 5, 2015, Frontier and Verizon entered into a Securities Purchase Agreement 21 (Agreement). Applicants describe the terms of the Agreement in their Application. According to their Application, prior to closing, Verizon will create “Newco” as a wholly-owned subsidiary and the ownership interests of the Transferring Companies will be moved to Newco so that they will become wholly-owned, direct subsidiaries of Newco. 22 Applicants state that Frontier will then purchase all of the ownership interests of Newco. 23 Upon completion of the proposed transaction, Newco will become a wholly-owned, direct subsidiary of Frontier and, accordingly, the Transferring Companies will become wholly-owned, indirect subsidiaries of Frontier. 24 In addition, Applicants state that certain voice long distance customers of Verizon Long Distance LLC will be assigned to Frontier Communications of America, Inc., an affiliate of Frontier. 25 Applicants further state that these customers primarily originate switched long distance traffic initiating from the local exchanges in California, Florida, and Texas that are a part of the proposed transaction. 26 III. DISCUSSION A. Standard of Review 8. Pursuant to sections 214(a) and 310(d) of the Act, the Commission must determine whether the proposed assignments and transfer of control of certain licenses and authorizations held and controlled by Verizon to Frontier will serve the public interest, convenience, and necessity. 27 In making this determination, the Commission first assesses whether the proposed transaction complies with the specific provisions of the Act, other applicable statutes, and the Commission’s rules. 28 If the proposed transaction does not violate a statute or rule, the Commission considers whether the transaction could result in public 19 Public Interest Statement at 1. 20 Id. at 9. 21 Id. at 8. 22 Id. 23 Id. 24 Id. at 9. See supra para. 6 (listing Transferring Companies). 25 Id. 26 Id. 27 47 U.S.C. §§ 214(a), 310(d). Section 310(d) of the Act requires that we consider applications for transfer of Title III licenses under the same standard as if the proposed transferee were applying for licenses directly under section 308 of the Act, 47 U.S.C. § 308. See, e.g., AT&T Inc. and BellSouth Corporation Application for Transfer of Control, WC Docket No. 06-74, Memorandum Opinion and Order, 22 FCC Rcd 5662, 5672, para. 19 (2007) (AT&T/BellSouth Order). 28 Applications filed by Qwest Communications International Inc. and CenturyTel, Inc. d/b/a CenturyLink for Consent to Transfer Control, WC Docket No. 10-110, Memorandum Opinion and Order, 26 FCC Rcd 4194, 4199, para. 7 (2011) (Qwest/CenturyLink Order); AT&T/BellSouth Order, 22 FCC Rcd at 5671-72, para. 19. 4

Federal Communications Commission DA 15-987 interest harms by substantially frustrating or impairing the objectives or implementation of the Act or related statutes. 29 The Commission then employs a balancing test, weighing any potential public interest harms of the proposed transaction against the potential public interest benefits. 30 Applicants bear the burden of proving, by a preponderance of the evidence, that the proposed transaction, on balance, serves the public interest. 31 9. The public interest evaluation necessarily encompasses the “broad aims of the Communications Act,” which include, among other things, a deeply rooted preference to protect and promote competition in relevant markets, accelerate private-sector deployment of advanced services, ensure a diversity of license holdings, and generally manage spectrum in the public interest. 32 The public interest analysis may also entail assessing whether the transaction will affect the quality of communications services or will result in the provision of new or additional services to consumers. 33 In conducting this analysis, the Commission may consider technological and market changes, as well as trends within the communications industry, including the nature and rate of change. 34 10. The Commission’s competitive analysis, which forms an important part of the public interest evaluation, is informed by, but not limited to, traditional antitrust principles. 35 The U.S. Department of Justice (DOJ) reviews telecommunications mergers pursuant to section 7 of the Clayton Act, and if it wishes to block a merger, it must demonstrate that the merger may substantially lessen competition or tend to create a monopoly. 36 DOJ’s review is also limited solely to an examination of the competitive effects of the acquisition, without reference to other public interest considerations. 37 The Commission’s competitive analysis under the public interest standard is somewhat broader. For example, it considers whether a transaction will enhance, rather than merely preserve, existing competition, and it takes a more extensive view of potential and future competition and its impact on the relevant market. 38 11. The Commission’s analysis with respect to the claimed benefits of any proposed transaction considers a number of factors. 39 First, the benefit must be transaction-specific. 40 That is, the 29 See, e.g., AT&T/BellSouth Order, 22 FCC Rcd at 5672, para. 19. 30 See, e.g., id. 31 See, e.g., id. 32 See, e.g., Applications of Softbank Corp., Starburst II, Inc., Sprint Nextel Corporation, and Clearwire Corporation for Consent to Transfer Control of Licenses and Authorizations; Petitions for Reconsideration of Applications of Clearwire Corporation for Pro Forma Transfer of Control, IB Docket No. 12-343, Memorandum Opinion and Order, Declaratory Ruling, and Order on Reconsideration, 28 FCC Rcd 9642, 9651, para. 24 (2013) (Softbank/Sprint Order); Application of AT&T Inc. and Qualcomm Incorporated for Consent to Assign Licenses and Authorizations, WT Docket No. 11-18, Order, 26 FCC Rcd 17589, 17603, para. 32 (2011) (AT&T/Qualcomm Order). 33 See, e.g., Softbank/Sprint Order, 28 FCC Rcd at 9651, para. 24; AT&T/BellSouth Order, 22 FCC Rcd at 5673, para. 20. 34 See, e.g., Softbank/Sprint Order, 28 FCC Rcd at 9651, para. 24; AT&T/Qualcomm Order, 26 FCC Rcd at 17599, para. 24. 35 See, e.g., Softbank/Sprint Order, 28 FCC Rcd at 9651, para. 25 (2013); AT&T/BellSouth Order, 22 FCC Rcd at 5673, para. 21. 36 15 U.S.C. § 18. 37 Id. 38 See, e.g., Softbank/Sprint Order, 28 FCC Rcd at 9651-52, para. 25; AT&T/BellSouth Order, 22 FCC Rcd at 5673, para. 21. 39 See, e.g., Softbank/Sprint Order, 28 FCC Rcd at 9677-78, para. 91; AT&T/BellSouth Order, 22 FCC Rcd at 5760, para. 200. 5


Document Created: 2015-03-26 11:37:37
Document Modified: 2015-03-26 11:37:37
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