Press Release

PUC Approves Verizon, MCI Merger

Published on 12/15/2005

Filed under: Telecommunications

HARRISBURG – The Pennsylvania Public Utility Commission (PUC) today approved the merger of Verizon Communications Inc. with MCI Inc.

“The Commission carefully considered the proposed merger within the broad context of the telecommunications industry in Pennsylvania,” Commission Chairman Wendell F. Holland. “The financial and technical efficiencies resulting from the merger of these two companies will not only promote economic development and investment in Pennsylvania but also ensure that innovative telecommunications services are available for the benefit of all citizens in all market sectors.  Simply stated, today’s telecommunications’ market is more than local and long distance, our approval of this merger will ensure that Pennsylvania’s customers receive the most advanced and reliable telecommunications services offered.”

Commissioner Bill Shane added “The companies clearly demonstrated that the merger is in the public interest and I do not expect any service quality reductions as a result of this action. In fact, as the Administrative Law Judge found, I expect service quality to get even better.”

The Commission approved a joint motion made by Commissioner Shane and Chairman Holland by a vote of 4-1. A separate statement was issued by Commission Kim Pizzingrilli encouraging Verizon to use merger savings toward accelerating broadband deployment in the state.

The merger transaction involves Verizon, a Regional Bell Operating company providing local exchange services with MCI, a traditional long distance provider.  MCI will become a wholly-owned subsidiary of Verizon. Under the terms of the transaction, the merger will not change the rates, terms or conditions of services offered in Pennsylvania by either of the merging companies or their subsidiaries.

In agreeing to the merger, the Commission determined that the joint applicants met their burden of proof that the merger is in the public interest. According to the Commission’s decision, the merger will affirmatively promote the service, accommodation, convenience or safety of the public in some substantial way. The approval covers both companies and their subsidiaries.

The Federal Communications Commission (FCC) approved the merger with conditions on Oct. 31, 2005. The PUC approval adopts the same conditions outlined in the FCC Order, which also included terms from a U.S. Department of Justice Consent Decree and voluntary commitments by the applicants including:

• The applicants committed to a one-time recalculation to exclude fiber-based collocation arrangements established by MCI in Verizon’s region in identifying wire centers in which SBC or Verizon claims there is no impairment pursuant to the Unbundled Network Elements triggers in the Triennial Review Remand Order so that dedicated transport and/or high-capacity loops need not be unbundled.
• The applicants committed, for 30 months, not to increase the rates paid by existing in-region customers of MCI in Verizon’s region for wholesale DS1 and DS3 local private line services.
• Committing to settlement-free peering arrangements for three years and posting their peering policies on publicly accessible websites for two years. Settlement-free peering is an agreement enabling Internet backbones to exchange traffic with one another at no cost.
• The applicants committed to provide, within 12 months of the Merger Closing Dates, DSL service to in-region customers without requiring them to also purchase circuit-switched voice telephone service.  The companies are to make the offering for two years from the time it is made available in Pennsylvania.

In determining if the merger is in the best public interest, the Commission examined the merger in the broader context of telecommunications industry in Pennsylvania. During the proceedings leading up to the Commission decision, the companies asserted that the merger of the two companies will create a financially and technologically strong company capable of providing advanced telecommunications and information services that will enhance the quality of life of customers in all market sectors.

Vice Chairman James H. Cawley dissented with a written statement. His dissent was based on the majority’s refusal to adopt certain staff recommendations that the Vice Chairman found to be consistent with the Commission’s Code of Conduct regulations. Vice Chairman Cawley also disagreed that the merger would produce “substantive affirmative” benefits for Pennsylvania consumers.

The companies filed a joint petition with the PUC on March 7, 2005, requesting approval of the merger. The PUC solicited comments on the proposal, holding a hearing on the matter Sept. 13-15, 2005. An Administrative Law Judge issued an opinion on Nov. 17, 2005.

Verizon is a Delaware corporation whose telephone operating company subsidiaries provide telecommunications service in 29 states, Puerto Rico and the District of Columbia, serving 53 million access lines. MCI is a Delaware corporation whose subsidiaries provide telecommunications service throughout the United States and in several foreign countries.

The Pennsylvania Public Utility Commission ensures safe, reliable and reasonably priced electric, natural gas, water, telephone and transportation service for Pennsylvania consumers, by regulating public utilities and by serving as stewards of competition. For recent news releases, or more information about the PUC, visit our website at www.puc.state.pa.us

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Docket Nos.    A-310580F0009, A-310752F0006, A-310364F0003, A-312025F0005,      A-310407F0003 and A-310401F0006

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