S T A T E O F N E W Y O R K
________________________________________________________________________
3385
2009-2010 Regular Sessions
I N S E N A T E
March 18, 2009
___________
Introduced by Sen. NOZZOLIO -- read twice and ordered printed, and when
printed to be committed to the Committee on Energy and Telecommuni-
cations
AN ACT to amend the public service law, in relation to directing the
public service commission to conduct an in-depth public interest anal-
ysis of proposed mergers by telephone corporations and other telecom-
munications services providers over which said commission has juris-
diction
THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
BLY, DO ENACT AS FOLLOWS:
Section 1. Legislative findings and purpose. The legislature finds
the public interest to require closer scrutiny of proposed telecommuni-
cations industry transfers of control, and declares that, except where
the public interest requires a contrary result, a portion of the bene-
fits of such mergers should be returned to the state's ratepayers.
S 2. Subdivision 2 of section 99 of the public service law, as amended
by chapter 383 of the laws of 1996, is amended to read as follows:
2. (A) No franchise nor any right to or under any franchise to own or
operate a telegraph line or telephone line shall be assigned, trans-
ferred, or leased, nor shall any contract or agreement hereafter made
with reference to or affecting any such franchise or right be valid or
of any force or effect whatsoever[,] unless the assignment, transfer,
lease, contract, or agreement shall have been approved by the commis-
sion.
(B) No telephone corporation shall transfer or lease its works or
system or any part of such works or system to any other person or corpo-
ration or contract for the operation of its works or system[,] without
the written consent of the commission. [Notwithstanding the foregoing,
any such transfer or lease between affiliated corporations with an
original cost of (a) less than one hundred thousand dollars proposed by
a telephone corporation having annual gross revenues in excess of two
EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD00883-01-9
S. 3385 2
hundred million dollars, (b) less than twenty-five thousand dollars
proposed by a telephone corporation having annual gross revenues of less
than two hundred million but more than ten million dollars or (c) less
than ten thousand dollars proposed by a telephone corporation having
annual gross revenues of less than ten million dollars and any other
transfer or lease between non-affiliates regardless of cost shall be
effective without the commission's written consent within ninety days
after such corporation notifies the commission that it plans to complete
such transfer or lease and submits a description of the transfer or
lease, unless the commission, or its designee, determines within such
ninety days that the public interest requires the commission's review
and written consent.]
(C) (1) NO CONSENT SHALL BE GIVEN BY THE COMMISSION TO THE ASSIGNMENT,
TRANSFER, OR LEASE OF ANY RIGHT OR FRANCHISE TO OPERATE A TELEGRAPH LINE
OR TELEPHONE LINE UNLESS IT SHALL HAVE BEEN SHOWN THAT SUCH ASSIGNMENT,
TRANSFER, OR LEASE IS IN THE PUBLIC INTEREST.
(2) NO CONSENT SHALL BE GIVEN BY THE COMMISSION TO THE ASSIGNMENT,
TRANSFER, OR LEASE OF ANY RIGHT OR FRANCHISE TO OPERATE ANY PART OF A
TELEPHONE CORPORATION'S WORKS OR SYSTEM, OR TO A CONTRACT FOR THE OPERA-
TION OF SUCH ENTITY'S WORKS OR SYSTEM, UNLESS IT SHALL HAVE BEEN SHOWN
THAT SUCH ASSIGNMENT, TRANSFER, OR LEASE OR CONTRACT IS IN THE PUBLIC
INTEREST.
(D) BEFORE AUTHORIZING THE MERGER, ACQUISITION, ASSIGNMENT, LEASE, OR
TRANSFER OF CONTROL OF ANY TELEPHONE CORPORATION ORGANIZED AND DOING
BUSINESS IN THIS STATE, WHERE ANY OF THE ENTITIES THAT ARE PARTIES TO
THE PROPOSED TRANSACTION HAS GROSS ANNUAL NEW YORK REVENUES EXCEEDING
TWO HUNDRED MILLION DOLLARS, THE COMMISSION SHALL FIND THAT THE PROPOSAL
DOES ALL OF THE FOLLOWING:
(1) PROVIDES SHORT-TERM AND LONG-TERM ECONOMIC BENEFITS TO RATEPAYERS.
(2) EQUITABLY ALLOCATES, WHERE THE COMMISSION HAS RATEMAKING AUTHORI-
TY, THE TOTAL SHORT-TERM AND LONG-TERM FORECASTED ECONOMIC BENEFITS, AS
DETERMINED BY THE COMMISSION, OF THE PROPOSED MERGER, ACQUISITION, OR
CONTROL BETWEEN SHAREHOLDERS AND RATEPAYERS. RATEPAYERS SHALL RECEIVE
NOT LESS THAN FORTY PERCENT OF SUCH BENEFITS.
(3) MAINTAINS OR IMPROVES THE FINANCIAL CONDITION OF THE RESULTING
TELEPHONE CORPORATIONS DOING BUSINESS IN THE STATE AND DOES NOT UNREA-
SONABLY ALLOCATE A TELEPHONE CORPORATION'S DEBT TO A DIVESTITURE ENTITY
CREATED FROM AN EXISTING TELEPHONE CORPORATION. FOR THE PURPOSE OF THIS
SECTION, A DIVESTITURE ENTITY IS A BUSINESS ENTITY CREATED BY THE
ASSIGNMENT, EXCHANGE, SALE, OR OTHER TRANSFER OF SOME OR ALL OF AN
EXISTING TELEPHONE CORPORATION'S LINES, SYSTEM, OR WORKS TO A NEW TELE-
PHONE CORPORATION.
(4) MAINTAINS OR IMPROVES THE QUALITY OF SERVICE TO TELEPHONE CORPO-
RATION RATEPAYERS IN THE STATE.
(5) MAINTAINS OR IMPROVES THE QUALITY OF MANAGEMENT OF THE RESULTING
TELEPHONE CORPORATION DOING BUSINESS IN THE STATE.
(6) IS FAIR AND REASONABLE TO AFFECTED TELEPHONE CORPORATION EMPLOY-
EES, INCLUDING BOTH UNION AND NONUNION EMPLOYEES.
(7) IS FAIR AND REASONABLE TO THE MAJORITY OF ALL AFFECTED TELEPHONE
CORPORATIONS.
(8) IS BENEFICIAL ON AN OVERALL BASIS TO STATE AND LOCAL ECONOMIES AND
TO THE COMMUNITIES IN THE AREA SERVED BY THE RESULTING ENTITY AND DOES
NOT ALLOCATE SUBSTANTIALLY UNFUNDED PENSION OR HEALTH CARE OBLIGATIONS
OR OTHER EMPLOYEE BENEFITS TO A RESULTING TELEPHONE CORPORATION.
S. 3385 3
(9) PRESERVES THE JURISDICTION OF THE COMMISSION AND THE CAPACITY OF
THE COMMISSION TO EFFECTIVELY REGULATE AND AUDIT TELEPHONE CORPORATION
OPERATIONS IN THE STATE.
(10) PROVIDES MITIGATION MEASURES TO PREVENT SIGNIFICANT ADVERSE
CONSEQUENCES WHICH MAY RESULT.
(11) DOES NOT ADVERSELY AFFECT COMPETITION. IN MAKING THIS FINDING,
THE COMMISSION SHALL REQUEST AN ADVISORY OPINION FROM THE ATTORNEY
GENERAL REGARDING WHETHER OR NOT COMPETITION WILL BE ADVERSELY AFFECTED
AND WHAT MITIGATORY MEASURES COULD BE ADOPTED TO AVOID ANY SUCH ADVERSE
EFFECT.
(E) WHEN REVIEWING A MERGER, ACQUISITION, OR TRANSFER OF CONTROL
PROPOSAL, THE COMMISSION SHALL CONSIDER REASONABLE ALTERNATIVES OR
MODIFICATIONS TO THE PROPOSAL RECOMMENDED BY OTHER PARTIES, INCLUDING NO
MERGER, ACQUISITION, OR CONTROL, TO DETERMINE WHETHER OR NOT COMPARABLE
SHORT-TERM AND LONG-TERM ECONOMIC SAVINGS CAN BE ACHIEVED THROUGH OTHER
MEANS WHILE AVOIDING THE POSSIBLE ADVERSE CONSEQUENCES OF THE PROPOSAL.
(F) THE PERSON OR CORPORATION SEEKING ACQUISITION OR CONTROL OF A
TELEPHONE CORPORATION ORGANIZED AND DOING BUSINESS IN THIS STATE SHALL
HAVE BEFORE THE COMMISSION THE BURDEN OF PROVING BY A PREPONDERANCE OF
THE EVIDENCE THAT THE REQUIREMENTS OF PARAGRAPH (D) OF THIS SUBDIVISION
ARE MET.
(G) IN DETERMINING WHETHER OR NOT AN ACQUIRING TELEPHONE CORPORATION
HAS GROSS ANNUAL REVENUES EXCEEDING THE AMOUNT SPECIFIED IN PARAGRAPH
(D) OF THIS SUBDIVISION, THE REVENUES OF THAT TELEPHONE CORPORATION'S
AFFILIATES SHALL NOT BE CONSIDERED, UNLESS THE AFFILIATE IS TO BE
UTILIZED FOR THE PURPOSE OF EFFECTING SUCH MERGER, ACQUISITION, OR
CONTROL.
(H) SUBPARAGRAPHS ONE AND TWO OF PARAGRAPH (D) OF THIS SUBDIVISION
SHALL NOT APPLY TO THE FORMATION OF A HOLDING COMPANY.
(I) SUBPARAGRAPHS ONE AND TWO OF PARAGRAPH (D) OF THIS SUBDIVISION
SHALL NOT APPLY TO ACQUISITIONS OR CHANGES IN CONTROL THAT ARE MANDATED
BY EITHER THE COMMISSION OR THE LEGISLATURE.
S 3. Section 100 of the public service law, as amended by chapter 446
of the laws of 1998, is amended to read as follows:
S 100. Transfer and ownership of stock. 1. No telegraph corporation or
telephone corporation, domestic or foreign, shall hereafter purchase
[or], acquire, take, or hold any part of the capital stock of any tele-
graph corporation or telephone corporation organized or existing under
the laws of this state unless authorized so to do by the commission.
2. Save where stock shall be transferred or held for the purpose of
collateral security, no stock corporation, domestic or foreign, other
than a telegraph corporation or telephone corporation, shall, without
the consent of the commission, purchase [or], acquire, take, or hold
more than ten [per centum] PERCENT of the voting capital stock issued by
any telegraph corporation or telephone corporation organized or existing
under or by virtue of the laws of this state. Any corporation now
lawfully holding a majority of the voting capital stock of any telegraph
corporation or telephone corporation may, without the consent of the
commission, acquire and hold the remainder of the voting capital stock
of such telegraph corporation or telephone corporation[,] or any portion
thereof.
3. (A) No consent shall be given by the commission to the acquisition
of any stock in accordance with this section unless it shall have been
shown that such acquisition is in the public interest [; provided,
however, that any], WHICH THE COMMISSION SHALL DETERMINE BY FINDING THAT
S. 3385 4
THE PROPOSAL DOES ALL OF THE FOLLOWING, TO THE EXTENT DETERMINED TO BE
APPLICABLE:
(I) PROVIDES SHORT-TERM AND LONG-TERM ECONOMIC BENEFITS TO RATEPAYERS.
(II) EQUITABLY ALLOCATES, WHERE APPLICABLE AND WHERE THE COMMISSION
HAS RATEMAKING AUTHORITY, THE TOTAL SHORT-TERM AND LONG-TERM FORECASTED
ECONOMIC BENEFITS, AS DETERMINED BY THE COMMISSION, OF THE PROPOSED
ACQUISITION, PURCHASE, SALE, TRANSFER, OR RETENTION BETWEEN SHAREHOLDERS
AND RATEPAYERS. RATEPAYERS SHALL RECEIVE NOT LESS THAN FORTY PERCENT OF
THOSE BENEFITS.
(III) MAINTAINS OR IMPROVES THE FINANCIAL CONDITION OF THE RESULTING
TELEPHONE CORPORATIONS DOING BUSINESS IN THE STATE AND DOES NOT UNREA-
SONABLY ALLOCATE A TELEPHONE CORPORATION'S DEBT TO A DIVESTITURE ENTITY
CREATED FROM AN EXISTING TELEPHONE CORPORATION. FOR THE PURPOSE OF THIS
SECTION, A DIVESTITURE ENTITY IS A BUSINESS ENTITY CREATED BY THE
ASSIGNMENT, EXCHANGE, SALE, OR OTHER TRANSFER OF SOME OR ALL OF AN
EXISTING TELEPHONE CORPORATION'S LINES, SYSTEM, OR WORKS TO A NEW TELE-
PHONE CORPORATION.
(IV) MAINTAINS OR IMPROVES THE QUALITY OF SERVICE TO TELEPHONE CORPO-
RATION RATEPAYERS IN THE STATE.
(V) MAINTAINS OR IMPROVES THE QUALITY OF MANAGEMENT OF THE RESULTING
TELEPHONE CORPORATION DOING BUSINESS IN THE STATE.
(VI) IS FAIR AND REASONABLE TO AFFECTED TELEPHONE CORPORATION EMPLOY-
EES, INCLUDING BOTH UNION AND NONUNION EMPLOYEES.
(VII) IS FAIR AND REASONABLE TO THE MAJORITY OF ALL AFFECTED TELEPHONE
CORPORATIONS.
(VIII) IS BENEFICIAL, ON AN OVERALL BASIS, TO STATE AND LOCAL ECONO-
MIES, AND TO THE COMMUNITIES IN THE AREA SERVED BY THE RESULTING ENTITY
AND DOES NOT ALLOCATE SUBSTANTIALLY UNFUNDED PENSION OR HEALTH CARE
OBLIGATIONS OR OTHER EMPLOYEE BENEFITS TO A RESULTING TELEPHONE CORPO-
RATION.
(IX) PRESERVES THE JURISDICTION OF THE COMMISSION AND THE CAPACITY OF
THE COMMISSION TO EFFECTIVELY REGULATE AND AUDIT TELEPHONE CORPORATION
OPERATIONS IN THE STATE.
(X) PROVIDES MITIGATION MEASURES TO PREVENT SIGNIFICANT ADVERSE CONSE-
QUENCES WHICH MAY RESULT FROM SUCH ACQUISITION.
(XI) DOES NOT ADVERSELY AFFECT COMPETITION. IN MAKING THIS FINDING,
THE COMMISSION SHALL REQUEST AN ADVISORY OPINION FROM THE ATTORNEY
GENERAL REGARDING WHETHER OR NOT COMPETITION WILL BE ADVERSELY AFFECTED
AND WHAT MITIGATORY MEASURES COULD BE ADOPTED TO AVOID ANY SUCH ADVERSE
EFFECT.
(B) ANY such consent, HOWEVER, shall be deemed to be granted by the
commission ninety days after such corporation applies to the commission
for its consent, unless the commission, or its designee, determines and
informs the applicant in writing within such ninety day period that the
public interest requires the commission's review and its written
consent. Nothing [herein] IN THIS SECTION contained shall be construed
to prevent the holding of any stock heretofore lawfully acquired, nor to
prevent, upon the surrender or exchange of such stock pursuant to a
reorganization plan, the purchase, acquisition, taking, or holding of a
proportionate amount of stock of any new corporation organized to take
over, at foreclosure or other sale, the property of any corporation
whose stock has been thus surrendered or exchanged[;], but the propor-
tion of the voting capital stock of the new corporation held by a stock
corporation and acquired by it by any such surrender or exchange of
stock shall not without the consent of the commission exceed the propor-
tion of the voting capital stock held by it in the former corporation.
S. 3385 5
Every contract, assignment, transfer, or agreement for transfer of any
stock by or through any person or corporation to any corporation in
violation of any provision of this chapter shall be void and of no
effect, and no such transfer or assignment shall be made upon the books
of any such telegraph corporation or telephone corporation[,] or shall
be recognized as effective for any purpose.
S 4. This act shall take effect on the one hundred twentieth day after
it shall have become a law; provided that any and all rules and regu-
lations and any other measures necessary to implement any provision of
this act on its effective date may be promulgated and taken, respective-
ly, on or before the effective date of such provision.
