S T A T E   O F   N E W   Y O R K
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                                  6450

                       2011-2012 Regular Sessions

                          I N  A S S E M B L Y

                             March 17, 2011
                               ___________

Introduced by M. of A. BRENNAN, PRETLOW -- read once and referred to the
  Committee on Corporations, Authorities and Commissions

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
hundred  million  dollars,  (b)  less  than twenty-five thousand dollars

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD00605-02-1
              

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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, AND ONLY 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;  PROVIDED,  HOWEVER  THAT
REINVESTMENT  OF  SUCH  BENEFITS  IN  A TELEPHONE CORPORATION'S IN-STATE
INFRASTRUCTURE MAY BE DEEMED TO SATISFY SUCH REQUIREMENT.
  (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.

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  (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.
  (J) THIS SUBDIVISION SHALL ONLY APPLY  TO  ASSIGNMENTS,  TRANSFERS  OR
LEASES  OF WORKS OR SYSTEMS OR OTHER TELECOMMUNICATIONS SERVICES PROVID-
ERS IF THE PROPOSED MERGER, ACQUISITION, ASSIGNMENT, LEASE, OR  TRANSFER
INVOLVES A TELEPHONE COMPANY OR TELECOMMUNICATIONS SERVICE PROVIDER THAT
PROVIDES,  AND ONLY TO THE EXTENT THE TRANSACTION INVOLVES, NON-COMPETI-
TIVE BASIC RATE RESIDENTIAL OR LIFELINE TELECOMMUNICATIONS SERVICE TO AT
LEAST ONE RESIDENTIAL CUSTOMER.
  S 3. Section 100 of the public service law, as amended by chapter  226
of the laws of 2009, 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, company,
including, but not limited to, a limited liability company, association,
including  a  joint  stock association, partnership, including a limited
liability partnership, or person, 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 tele-
phone corporation organized or existing under or by virtue of  the  laws
of  this  state.  Any corporation now lawfully holding a majority of the

A. 6450                             4

voting capital stock of any telegraph corporation  or  telephone  corpo-
ration  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, howev-
er,  that any], WHICH THE COMMISSION SHALL DETERMINE BY FINDING THAT 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; PROVIDED, HOWEVER THAT REINVESTMENT OF SUCH BENEFITS IN
A TELEPHONE CORPORATION'S  IN-STATE  INFRASTRUCTURE  MAY  BE  DEEMED  TO
SATISFY SUCH REQUIREMENT.
  (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] contained IN THIS SECTION shall be  construed

A. 6450                             5

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, company, association, partnership or person and acquired by
it  by  any  such  surrender  or exchange of stock shall not without the
consent of the commission exceed the proportion of  the  voting  capital
stock held by it in the former corporation.
  (C)  THIS  SUBDIVISION  SHALL  ONLY  APPLY  TO  MERGERS, ACQUISITIONS,
ASSIGNMENTS, LEASES, OR TRANSFERS OF CONTROL OF  TELEPHONE  CORPORATIONS
OR  OTHER  TELECOMMUNICATIONS SERVICES PROVIDERS IF THE PROPOSED MERGER,
ACQUISITION, ASSIGNMENT, LEASE, OR TRANSFER INVOLVES A TELEPHONE COMPANY
OR TELECOMMUNICATIONS SERVICE PROVIDER THAT PROVIDES, AND  ONLY  TO  THE
EXTENT  THE TRANSACTION INVOLVES, NON-COMPETITIVE BASIC RATE RESIDENTIAL
OR LIFELINE TELECOMMUNICATIONS  SERVICE  TO  AT  LEAST  ONE  RESIDENTIAL
CUSTOMER.
  4.  Every contract, assignment, transfer, or agreement for transfer of
any stock by or through any person or corporation  to  any  corporation,
company,  association,  partnership  or  person,  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 tele-
graph corporation or telephone corporation[,] or shall be recognized  as
effective for any purpose.
  5.  THE  PROVISIONS  OF THIS SECTION SHALL ONLY APPLY TO THE OWNERSHIP
TRANSFER OF STOCKS WHERE ANY PARTY TO SUCH TRANSFER HAS ANNUAL NEW  YORK
GROSS REVENUES EXCEEDING TWO HUNDRED MILLION DOLLARS.
  S 4. This act shall take effect on the one hundred twentieth day after
it  shall  have become a law. Effective immediately, 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.