Verizon/XO Reviews Chug Along in Last 2 States

New York and Pennsylvania are the last state approvals needed by the companies, but neither state regulator has set a date for decision. The Pennsylvania PUC hasn’t set dates for an administrative law judge to issue a recommended decision or for the commission to consider an order at a public meeting, a PUC spokesman told us. First, the ALJ must rule on a pending Aug. 16 motion by Verizon and XO to strike a brief by Windstream (see 1608170034), he said. The New York Department of Public Service "is still analyzing the transaction and doing its due diligence," a DPS spokesman said Thursday. "When DPS has completed its analysis it will make a recommendation to the Commission, date still to be decided."

The FCC restarted its shot clock after pressing pause July 7 to wait for more data from the companies (see 1607200079). The applicants indicated Wednesday they have completed their response to the FCC data request, Wireline Bureau Chief Matthew DelNero said in a letter in docket 16-70. The FCC counted Wednesday as Day 86 of the FCC review, he said. "Verizon and XO Communications will continue to work together with the FCC and other regulatory agencies to provide all requested information,” a Verizon spokesman said. “We’re confident the approval process will continue to proceed in a timely manner.”

The combining companies this week clashed with the Pennsylvania Office of Small Business Advocate (OSBA) over the appropriate standard to approve the deal. OSBA said the deal “cannot be approved because it will not produce substantial benefits for the XO's small business ratepayers in Pennsylvania.” A “substantial benefits” approval standard was supported by a 2007 Pennsylvania Supreme Court ruling on Verizon/MCI, OSBA said in a reply brief in docket A-2016-2535279.

Verizon and XO countered that the deal’s public benefits "are precisely the types of benefits that this Commission has repeatedly confirmed are sufficient to meet the approval standard.” The deal meets the Pennsylvania PUC’s approval standard by providing an enhanced and expanded network, $1.5 billion in synergy savings, increased financial stability and extending new products to XO customers, the companies said in a joint reply. "OSBA’s complaint that the benefits are not ‘substantial’ enough to merit approval makes no sense,” they said. “The Commission has found not only that cost savings constitute affirmative public benefits, but that approval is appropriate even where the level of savings is much lower than what Joint Applicants have demonstrated here.”

The Hawaii PUC chose to apply a "no detriment" standard to the transaction rather than one based on "substantial net benefits” in an Aug. 15 order in docket 2016-0076 waiving all applicable regulatory requirements related to the indirect transfer of control. The commission decided “competition will serve the same purpose as public interest regulation.” The PUC said the deal "will not result in an undue concentration of market power." And it rejected conditions proposed by the Hawaii consumer advocate to require the combined company to notify customers about any changes to rates, terms or conditions, and to exempt existing XO customers from any mandate to switch to an inferior plan. Those aren’t necessary in Hawaii, the PUC said, because XO has only business customers who either buy nonregulated web hosting services or negotiate nationwide terms of service, it said.

The Pennsylvania PUC shouldn’t add conditions either, Verizon and XO said in their reply brief. The companies rejected conditions sought by OSBA and others related to unbundling, interconnection and business data services (see 1608170034). The companies said that the PUC "has routinely rejected attempts by other parties to obtain 'conditions' that have little or no actual nexus with the merger, but instead are nothing more than opportunistic attempts to obtain policy results that these parties are fully able to litigate on substance in other proceedings or in other jurisdictions.”