980116.docx

DECISION MEMORANDUM
TO:COMMISSIONER HANSEN
COMMISSIONER NELSON
COMMISSIONER SMITH
MYRNA WALTERS
TONYA CLARK
STEPHANIE MILLER
DAVE SCHUNKE
JOE CUSICK
BEV BARKER
WELDON STUTZMAN
CHERI COPSEY
DAVID SCOTT
KAREN SNYDER
WORKING FILE
FROM:DON HOWELL
DATE:JANUARY 16, 1998
RE:McLEODUSA ACQUISITION AND CONSOLIDATION WITH CONSOLI­DATED COMMUNICATIONS TELECOM SERVICES
On January 13, 1998, McLeodUSA filed a “notification letter” advising the Commission that it intends to finalize its merger with Consolidated Communications Telecom Services (CCTS).  As part of this restructuring, McLeod will incorporate CCTS current customer base in Idaho with its existing McLeodUSA customers.  At such time as the consolidation is completed, then CCTS will “abandon” service in Idaho.  McLeod holds a Title 61 Certificate to provide local service in addition to offering Title 62 services.  CCTS has a Title 62 pricelist on file.
THE NOTIFICATION
In the notification letter (attached), McLeodUSA states that it understands that “prior Commission approval is not required for the transactions described herein.”  Notification Letter at 1.  McLeodUSA is a publicly traded Delaware corporation offering long distance services throughout the United States and local services in a number of states.  McLeodUSA serves over 200,000 customers and has consolidated operating revenues in excess of $130 million.  Id. at 3.  McLeodUSA concludes that absent notification from the Commission to the contrary, it will proceed “on the understanding that no approval or formal action with respect to the proposed transactions is required by [this] Commission.”  Id. at 1.
CUSTOMER MIGRATION
Prior to transitioning customers from CCTS to McLeodUSA Telecom, McLeod will notify the CCTS customers of the planned restructuring.  This notification will also advise customers that they have the option to either switch services to another provider or remain with McLeodUSA.
Customers choosing to remain with McLeodUSA will have the option to choose between the CCTS rate plan to which they currently subscribe or to move to a McLeodUSA Telecom rate plan.  McLeodUSA Telecom will incorporate the CCTS rate plans in its tariff [/pricelist] and continue to offer such rates for a 12-month period.  McLeodUSA Telecom will consider the migrating CCTS customers as continuing customers with regard to existing payment arrangements and deposits.
Notification at 4.
STAFF ANALYSIS
Given the nature of this transaction, Staff believes that no formal proceedings are necessary in this particular case.  Traditionally, the acquisition or merger of Title 62 carriers merely requires a notification to the Commission.  In this instance, a Title 61/62 company is acquiring a Title 62 carrier.  As previously mentioned, McLeodUSA Telecom has been issued a Certificate of Public Convenience and Necessity to provide Title 61 basic local exchange services in Idaho.  In addition, Staff believes that the customer notification and continuation of rate plan is sufficient to protect customers and meet the requirements of Idaho Code § 62-606 (requiring at least a ten-day notice of price changes).
Staff believes that it is appropriate to advise McLeodUSA that no additional Idaho proceedings are contemplated.  At such time as the transaction is consummated, then McLeodUSA can advise the Commission to withdraw the CCTS price list.  The Staff will ask McLeodUSA for copies of the customer notifications.
Staff recommends that this item be approved via consent.
Commission Decision
Does the Commission agree with the Staff’s recommendation that no further proceedings are necessary regarding the merger consolidation of McLeodUSA and CCTS?

Don Howell
vld/M:McLeod.dh