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HomeMy WebLinkAbout19981021.docxDECISION MEMORANDUM TO:COMMISSIONER HANSEN COMMISSIONER NELSON COMMISSIONER SMITH MYRNA WALTERS TONYA CLARK RITA SCOTT STEPHANIE MILLER DAVE SCHUNKE JOE CUSICK BEV BARKER CHERI COPSEY BRAD PURDY WELDON STUTZMAN DAVID SCOTT KAREN SNYDER FROM:DON HOWELL DATE:OCTOBER 21, 1998 RE:NOTIFICATION OF THE MERGER BETWEEN GTE CORPORATION AND BELL ATLANTIC CORPORATION On October 2, 1998, Fred Logan provided a “letter” notification of the GTE/Bell Atlantic  merger.  In its letter (attached), GTE asserts that the Commission’s prior approval of the merger is not required because neither GTE nor Bell Atlantic is subject to the Commission’s jurisdiction.  More specifically, GTE maintains that it is not a “public utility” or a “telephone corporation” as those terms are used in Title 61 of the Idaho Code.  Although GTE regulates “incumbent local telephone subsidiaries providing service in 28 states, including Idaho. . . .  GTEoperates as a parent company and as such is not a regulated telephone utility in Idaho.”  Notification at 1.   THE MERGER TRANSACTION As described in greater detail in the notification, the outcome of the merger will result in GTE becoming the surviving operating subsidiary with Bell Atlantic the surviving parent corporation.  GTE’s CEO will become chairman of the merged company and Bell Atlantic’s CEO becomes president and co-chief executive officer of the merged company. Upon completion of the merger, GTE’s regulated subsidiaries in Idaho will remain subsidiaries of GTE Corporation.  It appears that the merger transaction will be “transparent” as it pertains to Idaho.  More specifically, the notice states that The authorizations and licenses currently held by GTE regulated subsidiaries will continue to be held by the respective entities.  Bell Atlantic, as the parent of GTE, will have indirectly acquired control of GTE’s regulated subsidi­­aries.  This will not change the regulated subsidiaries’ relationship with the Commission.  The Commission’s authority and jurisdiction over the regulated subsidiaries will not be affected.  Thus, the merger will not interfere with the Commission’s jurisdiction or impede the satisfaction of its public policy goals.  GTE’s local exchange operating company in Idaho, GTE Northwest Incorporated, will continue to meet all of its obligations and commitments under the Commission’s rules, regulations and decisions.  The regulated subsidiaries will continue to provide services in Idaho as they did prior to the merger under the established tariff rates, terms and conditions, and GTE Northwest Incorporated will remain as one of the certificated providers of telecommunications services in Idaho.   Notification at 2-3. Once the merger is consummated, the entity will be a financially sound company with management capable of maintaining a high-quality of customer service.  Both companies had combined 1997 revenues of $53 Billion.  The merger will retain a management team with extensive background in telecommunications. The notification further states that the merger will not have an anticompetitive effect upon regulated telephone service in Idaho.  GTE and Bell Atlantic both have subsidiaries that provide long distance services in Idaho.  GTE’s toll revenue in Idaho exceeded $7 million while Bell Atlantic Long Distance’s long-distance revenue was less than $1,000.  GTE states that the merged entity “will not significantly impact competition for long distance services.  Combined, GTECC and [Bell Atlantic] serve only a fraction of the total long distance market in Idaho.”  Notification at 5. StaffAnalysis and Recommendation Based upon our review of the notification and the structure of the transaction, Staff believes that it is not necessary to exert any jurisdiction over the merger itself.  Although the Staff does not necessarily agree with the legal assertion that GTE is not subject to the Commission’s jurisdiction, Staff does not foresee any changes in GTE’s Title 61 operations.(footnote: 1) As GTE concedes above, the Commission will continue to exercise regulatory jurisdiction over GTE Northwest.  The parties do not envision any need to transfer or amend any Certificates of Public Convenience and Necessity  since GTE will be the surviving subsidiary.  The Staff also agrees that the transaction will not concentrate market power if the companies merge their toll services.  The Staff recommends that the Commission does not need to approve or exert jurisdiction over the proposed merger. Commission Decision Does the Commission agree that it need not exert authority over or approve the GTE-Bell Atlantic merger?                                                               Don Howell vld/M:gtebell.dh FOOTNOTES 1: Idaho Code § 61-121 defines telephone corporations as any corporation providing telecommunication services for compensation within this state.  A telephone corporation is declared to be a “public utility” and subject to the jurisdiction, control and regulation of the Commission.  Idaho Code § 61-129.  The term “public utility” also includes instances where the “service is performed and the commodity delivered to any corporation. . .who in turn, either directly or indirectly. . .performs the services or delivers such commodity to or for the public. . . .”  Idaho Code § 61-129.