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If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** FCC 96-163 Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 In the Matter of ) ) Application of Entergy Technology ) Company for Determination of Exempt ) Telecommunications Company Status ) File No. ETC-96-2 under Section 34 of the Public Utility ) Holding Company Act of 1935, as amended by ) Section 103 of the Telecommunications Act of 1996 ) ORDER Adopted: April 9, 1996 Released: April 12, 1996 By the Commission: I. Introduction 1. On February 16, 1996, Entergy Technology Company ("Entergy Technology") filed an application with the Commission for a determination of "exempt telecommunication company" ("ETC") status pursuant to section 34(a)(1) of the Public Utility Holding Company Act of 1935 ("PUHCA"), as added by section 103 of the Telecommunications Act of 1996. On February 22, 1996, Entergy Technology filed a certification stating that it complied with section 47 C.F.R.  1.2002, regarding the Anti-Drug Abuse Act of 1988, 21 U.S.C.  862. As explained below, we find that Entergy Technology satisfies the statutory criteria and applicable Commission regulations necessary for a determination of ETC status and, accordingly, grant Entergy Technology's application. II. Background A. Entergy Technology's Application 2. Entergy Technology states that it is a Delaware corporation that intends to become a subsidiary of Entergy Corporation, a registered public utility holding company under PUHCA. 3. Entergy Technology states that it will be engaged, directly or indirectly, through one or more "affiliates" (as defined in PUHCA section 2(a)(11)(B)), and exclusively in the business of providing telecommunications services, information services, other services or products subject to the jurisdiction of the Commission, and/or products or services that are related or incidental to the provision of such products or services within the meaning of PUHCA section 34(a)(1). Entergy Technology states that its covered activities will include, but not be limited to, the provision of long-haul fiber capacity on a wholesale basis to non-associate companies. 4. In a supplemental filing providing further details on its telecommunication activities, Entergy Technology states that such service consists of providing bulk communications capacity to other carriers, who in turn resell such capacity to third parties. According to Entergy Technology, this long-haul capacity would be used for alternative or extended routing for fiber-based or wireless telecommunications, or to create backup or other redundancy for carriers' telecommunications networks. Entergy Technology states that while it may use unused capacity on existing fiber or microwave facilities of the Entergy Operating Companies when it is practical or cost-efficient to do so, Entergy Technology may, in other instances, construct its own facilities for providing contemplated services or may obtain capacity from other service providers in order to enhance its ability to offer services. Finally, Entergy Technology states that while its initial activities will encompass providing long-haul fiber capacity as described, it may also engage in providing other permitted services using both wired and wireless technology, including personal communications services ("PCS"), cable services, and data services. 5. Entergy Technology states that the activities described in its application will be conducted in accordance with the requirements of the Communications Act of 1934, as amended, and applicable rules and regulations of the Commission. Entergy Technology states that, in the future, it may provide other telecommunications services, information services or products as permitted by PUHCA section 34(a)(1), and that such activities will likewise be conducted in a manner consistent with the Communications Act, applicable Commission rules and regulations, and other applicable legal requirements. 6. Entergy Technology states that it intends to become an "associate company" within the meaning of PUHCA section 2(a)(10) of the following electric utility operating companies: Arkansas Power & Light Company, Gulf States Utilities Company, Louisiana Power & Light Company, Mississippi Power & Light Company, New Orleans Public Service Inc., System Energy Resources, Inc., Entergy Operations, Inc., and Entergy Power, Inc. and of the following gas companies: Gulf States Utilities Company and New Orleans Public Service Inc. ("Entergy Operating Companies"). 7. Finally, Entergy Technology states that it will conduct all of the activities described in its application in conformance with PUHCA section 34(b), as amended by section 103 of the Telecommunications Act of 1996, all other applicable provisions of PUHCA, and all other applicable laws and regulations. 8. Entergy Technology's application was placed on public notice for comment on the adequacy and accuracy of the application on February 27, 1996. Entergy Technology Company, Public Notice (OGC released February 23, 1996). B. Responsive Pleadings 9. On March 11, 1996, BellSouth Corporation and BellSouth Telecommunications, Inc. (collectively "BellSouth"), filed comments on Entergy Technology's application. BellSouth states that it takes no position on whether or not the Commission should grant Entergy Technology ETC status. However, BellSouth argues that because section 34(a)(1) permits persons to file for ETC determination before the Commission promulgates rules to implement this section, it is appropriate and necessary that all applicants, including those who apply for ETC status prior to the enactment of the Commission's implementing rules, be subject to the same conditions in undertaking the activities permitted to be undertaken by any such entity. Thus, argues BellSouth, any determination by the Commission that an applicant is an ETC should be conditioned on that applicant's compliance with the requirements of the implementing rules, even if the determination is made prior to the enactment of the implementing rules. 10. BellSouth also argues that the plain language of PUHCA section 34 requires that an entity "be engaged" in one or more of the subject businesses in order to be designated as an ETC. According to BellSouth, such a requirement encourages actual competition, the desire for which underlies the policies given effect in the recently enacted Telecommunications Act of 1996. BellSouth therefore argues that ETC status should also be conditioned on the applicant actually engaging in one or more businesses set forth in PUHCA section 34(a)(1). 11. On March 11, 1996, AT&T Corporation ("AT&T") filed comments on Entergy Technology's application. AT&T also takes no position on the adequacy or accuracy of Entergy Technology's application, but argues that, as a general proposition, the Commission should look favorably upon entry by public utility holding companies into telecommunications markets, as these companies can bring significant new competition to entrenched monopolists. However, AT&T also argues that the Commission should only grant ETC applications on the condition that applicants fully comply with any rules that the Commission issues pursuant to PUHCA section 34, as well as all other applicable Commission rules and regulations, and other legal requirements. 12. On March 11, 1996, the City of New Orleans, Louisiana ("New Orleans"), filed comments on Entergy Technology's application. New Orleans argues that Entergy Technology's application fails to provide sufficient information to permit the Commission to make an informed determination. According to New Orleans, Entergy simply repeats the statutory definition for ETC status without providing any detail about the actual activities of the company. New Orleans claims that the level of detail in Entergy Technology's application stands in direct contrast to the information about its activities provided by Entergy Technology that was filed with the Securities and Exchange Commission ("SEC") prior to the enactment of the 1996 Act. 13. New Orleans also argues that because the Commission's authority to grant ETC status under PUHCA section 34 is analogous to the Federal Energy Regulatory Commission's ("FERC") authority to grant "exempt wholesale generator" ("EWG") status under PUHCA section 32, the Commission should require Entergy Technology to file similar information as that required by FERC's final rules. For example, New Orleans argues that because FERC's final rules require a "sworn statement" attesting that an applicant meets the specific statutory criteria and a "brief description" of the company's activities, this Commission should require Entergy Technology to file this information as well. Similarly, New Orleans argues that because FERC's rules permit interested parties to submit comments on the adequacy and accuracy of information contained in EWG applications, this Commission should provide for the same opportunity for ETC applications. Finally, New Orleans argues that this Commission, like FERC, should require applicants seeking ETC status to file a "specific determination from every [jurisdictional] State commission" showing that required state approval for certain proposed transactions has been received. 14. On March 18, 1996, Entergy Technology filed a reply to the comments filed on its application. First, Entergy Technology argues that New Orleans' assertion that the application does not contain sufficient information and representations to warrant a determination of ETC status is incorrect. According to Entergy Technologies, section 34(a)(1) requires that applicants participate in only one of the activities enumerated in the statute to qualify as an ETC; thus, because Entergy Technologies stated that it intends to engage in long-haul fiber activities, Entergy Technology satisfies the criteria of section 34(a)(1). Moreover, Entergy Technology argues that because it requires a determination of ETC status prior to actually engaging in any of the subject activities, it can only state in its application its intention to be engaged, directly or indirectly, through one or more affiliates, and exclusively in the business of providing one or more of the subject activities. Entergy Technology argues that this affirmation of present intentions, coupled with its representations that this and any other such activities will be conducted in accordance with the requirements of all applicable laws, rules and regulations, constitutes sufficient grounds upon which to base a determination that Entergy Technology meets the criteria for ETC status. 15. Second, Entergy Technology argues that section 34 does not require this Commission to pre-condition ETC status on an applicant obtaining applicable state approvals. According to Entergy Technology, PUHCA section 32(c), upon which New Orleans relies, expressly provides that for utility assets in rate base prior to October 24, 1992 to be considered "eligible facilities" (a statutory criteria required for a determination of EWG status by FERC), every state Commission having jurisdiction over any such rate or charge must make a specific determination. Entergy Technology points out that such language is specifically absent from section 34, which requires no pre-approvals from any state commission for the sole purpose of obtaining a determination of ETC status. 16. Finally, Entergy Technology argues that adjudication of its application should not be subject to the rules required by the Act to implement section 34(a)(1). According to Entergy Technology, commenters' argument is directly contrary to the explicit language of section 34(a)(1), which states that while the Commission must promulgate rules that implement section 34(a)(1) within one year of enactment, those rules "shall be applicable to applications filed under [section 34(a)(1)] after the effective date of such rules." Thus, argues Entergy Technology, since applications may be filed before the Commission promulgates its rules and since section 34 requires the Commission to act upon applications within 60 days of filing, Congress intended the Commission to process applications before any agency rules are in place. 17. On March 22, 1996, New Orleans filed supplementary comments in response to the reply of Entergy Technology. New Orleans raises no issues in its supplementary comments not raised in its initial comments on Entergy Technology's application. 18. On March 25, 1995, the Mississippi Public Service Commission ("Mississippi") filed a motion for leave to file comments out-of-time on Entergy Technology's application. Mississippi states that it is the regulatory agency empowered to regulate utilities operating within Mississippi, including, in particular, the retail rates of Mississippi Power & Light (MP&L), an operating subsidiary of Entergy Corporation. Mississippi argues that Entergy Technology cannot function and exist as a business without utilizing certain microwave and fiber-optic facilities and associated equipment that were (and are) planned, specified, constructed, installed, operated, maintained and owned by the Entergy Operating Companies, including MP&L. Mississippi argues that under the terms of MP&L's original certificate of public convenience and necessity to construct the telecommunications system, the system is to be for internal use only and MP&L therefore is prohibited from providing telecommunications services to the public without modification to the certificate. According to Mississippi, MP&L filed a petition on July 19, 1995, to amend the certificate to remove the restricted use. That filing is currently pending. III. Discussion A. Adequacy and Accuracy of the Record 19. New Orleans argues that Entergy Technology has failed to provide sufficient information to allow the Commission to make a determination of ETC status. In particular, New Orleans argues that this Commission should require Entergy Technology to file "a sworn statement" and a "brief description" of its activities in support of the application. We disagree. While ultimately the Commission may want to consider the imposition of such filing requirements in the context of the ETC rules, such rules have yet to be proposed or adopted. We decline to impose filing requirements of the type New Orleans suggests before the Commission has adopted rules in the rulemaking proceeding. Imposition of such specific procedural requirements is better reserved for consideration in the rulemaking implementing section 34(a)(1), where interested parties may have the opportunity to comment or to propose alternatives. 20. We also believe, in the absence of the guidance such rules will provide, that Entergy Technology has provided sufficient information for the Commission to determine ETC status. Entergy Technology states that it will be engaged, directly or indirectly, through one or more "affiliates" (as defined in PUHCA section 2(a)(11)(B)), and exclusively in the business of providing telecommunications services, information services, other services or products subject to the jurisdiction of the Commission, and/or products or services that are related or incidental to the provision of such products or services within the meaning of PUHCA section 34(a)(1). Entergy Technology also states that its covered activities will include, but not be limited to, the provision of long-haul fiber capacity on a wholesale basis to non-associate companies. Moreover, in a supplemental filing, Entergy Technology states that such service consists of providing bulk communications capacity to other carriers, who in turn resell such capacity to third parties. According to Entergy Technology, this long haul capacity would be used for alternative or extended routing for fiber-based or wireless telecommunications, or to create backup or other redundancy for carriers' telecommunications networks. Finally, Entergy Technology states that while its initial activities will encompass providing long-haul fiber capacity as described, it may also engage in providing other permitted services using both wired and wireless technology, including personal communications services ("PCS"), cable services, and data services. B. Prior State Approval 21. New Orleans and Mississippi argue that PUHCA requires Entergy Technology to obtain prior state approval before it may file for a determination of ETC status. Entergy Technology responds that commenters' claim is incorrect, based on a plain reading of section 34(a)(1). We believe that Entergy Technology presents the correct interpretation of the statute, and therefore reject commenters' arguments. 22. Commenters base their arguments on section 32 of PUHCA, which permits holding companies to obtain "exempt wholesale generator" ("EWG") status. Unlike the provision at issue here, however, section 32 expressly makes state approval a prerequisite to the findings necessary for an EWG determination. Under PUHCA section 32(a)(1), the term "exempt wholesale generator" means: any person determined by [FERC] to be engaged directly, or indirectly through one or more affiliates . . . , and exclusively in the business of owning or operating, or both owning and operating, all or part of one or more eligible facilities and selling electricity at wholesale. (Emphasis supplied.) 23. PUHCA section 32(a)(2), in turn, defines "eligible facility" as a facility, wherever located, which is either (A) used for the generation of electric energy exclusively for sale at wholesale; or (B) used for the generation of electric energy and leased to one or more public utility companies so long as such lease is treated as a sale of electric energy at wholesale for purposes of the Federal Power Act. Section 32(a)(2) explicitly provides that the term "eligible facility" shall not include any facility for which state consent is specifically required under 32(c) "if such consent has not been obtained." Section 32(c), in turn, states that: if a rate or charge for, or in connection with, the construction of a facility . . . was in effect under the laws of any State as of October 24, 1992, in order for the facility to be considered an eligible facility, every State commission having jurisdiction over any such rate or charge must make a specific determination that allowing such facility to be an eligible facility (1) will benefit consumers, (2) is in the public interest, and (3) does not violate State law; Provided, That in the case of such a rate or charge which is a rate or charge of an affiliate of a registered holding company: (A) such determination with respect to the facility in question shall be required from every State commission having jurisdiction over the retail rates and charges of the affiliates of such registered holding company . . . . (Emphasis supplied and in original.) Thus, under the plain language of PUHCA section 32, if an EWG seeks to utilize assets that are already in rate base, Congress required state approval as a condition precedent to a determination of EWG status. 24. PUHCA section 34 differs from section 32 in a number of material respects, which lead us to conclude that state approval is not a prerequisite to a determination of ETC status. Most significantly, under section 32, the state approval process is an integral part of whether a firm can be accorded EWG status. EWGs are firms that operate one or more eligible facilities. The statute specifically provides that in order for a facility to be considered as an eligible facility, every state Commission with jurisdiction over the facility must make the three- part determination outlined above. 25. In contrast, under PUHCA section 34, states must approve the sale of jurisdictional assets to an ETC, but such approval is not a prerequisite to a person's ability to file for a determination of ETC status: If a rate or charge for the sale of electric energy or natural gas . . . for, or in connection with, assets of a public utility company that is an associate company or affiliate of a registered holding company was in effect under the laws of any State as of December 19, 1995, the public utility company owning such assets may not sell such assets to an [ETC] that is an associate company or affiliate unless State commissions having jurisdiction over such public utility company approve such sale. Nothing in this subsection shall pre- empt the otherwise applicable authority of any State to approve or disapprove the sale of such assets. Thus, under the plain language of the statute, PUHCA section 34 does not condition the grant of ETC status on the receipt of state approval in this circumstance. Indeed, unlike the EWG provision, where EWG status is directly linked to state-approved eligible facilities, there is no similar link, explicit or otherwise, between the grant of ETC status and state approval of asset sales to an ETC. Rather, our inquiry under the statute is limited to the four enumerated criteria set forth in section 34(a)(1). 26. Moreover, interpreting the statute to require or permit the Commission to require prior state approval would not further, and indeed would be inconsistent with, the purposes of section 34. In this regard, we note that assets that were previously in rate base may not be the only assets by which Entergy Technology might enter the telecommunications business. There are undoubtedly alternative means of entry, whether by the use of or acquisition of assets that are outside Mississippi's jurisdiction, that do not require that state's approval. For example, in its supplemental filing, Entergy Technology states that while it may use unused capacity on existing fiber or microwave facilities of the Entergy Operating Companies when it is practical or cost- efficient to do so, Entergy Technology may, in other instances, construct its own facilities for providing contemplated services or may obtain capacity from other service providers in order to enhance its ability to offer services. 27. As we recently noted in the order granting CSW Communications, Inc. ETC status, Section 34 was intended to foster holding company entry into telecommunication markets, recognizing that such entry could "'significantly promote and accelerate competition in telecommunications services and deployment of advanced networks'" and could also result in lower prices and greater choice for consumers. Requiring an applicant to obtain all state approvals -- including those that might only hypothetically be required -- notwithstanding that entry as an ETC might be accomplished independently of assets over which the states have jurisdiction, would obviously slow down holding company entry into telecommunications markets, and would frustrate the central purpose of Section 34 -- to remove PUHCA as a barrier to holding company entry into telecommunications markets. 28. Finally, under the plain language of the statute, our interpretation does not diminish any state's (including Mississippi's) ability to protect its citizens. Indeed, because the record in this proceeding reveals that: (a) Entergy has explicitly represented that it will conduct all of the activities described in its application in conformance with PUHCA section 34(b), all other applicable provisions of PUHCA, and all other applicable laws and regulations; (b) MP&L's application to amend its certificate of public convenience and necessity to permit the facilities to be used to provide telecommunication service to the public is currently pending before the Mississippi Commission; (c) Mississippi has yet to rule on this petition; and (d) Mississippi also has the authority to approve the sale of assets within its jurisdiction under PUHCA section 34(b), states' rights -- including Mississippi's -- are well preserved. Adding the Commission's ETC approval process would appear to be unnecessary, redundant, and contrary to the explicit de-regulatory thrust of the Telecommunications Act of 1996. C. Proposed Conditions 29. As noted above, both BellSouth and AT&T took no position on the merits of Entergy Technology's application. Both parties, however, filed proposed generic conditions for all ETC determinations the Commission might make prior to the promulgation of the final rules required by the Act to implement section 34(a)(1). 30. BellSouth argues that under section 34(a)(1), applicants must actually be currently engaged in the telecommunications or information business before they may apply for ETC status. We reject this interpretation, however. We believe, based on the language, structure and purpose of section 34, that an entity is "engaged in the business of providing" telecommunications or other covered activities if the entity is established for the exclusive purpose of providing such services at the time it files its application with this Commission. Following BellSouth's interpretation would run contrary to the very reason Congress promulgated section 34 as part of Part II of the Telecommunications Act of 1996, entitled "Development of Competitive Markets." Prior to the Telecommunications Act of 1996, the provisions of PUHCA strongly deterred entry by registered public utility holding companies into the telecommunications industry by requiring stringent regulatory oversight by the Securities and Exchange Commission. By obtaining ETC status, holding companies can avoid prior SEC approval and quickly become vigorous competitors in the telecommunications industry, and, with such competition, bring more benefits to consumers. Adoption of BellSouth's interpretation, therefore, would defeat the core purpose of section 34, as such an interpretation would force registered holding companies to begin operations before they could file for ETC status. Under that approach, SEC pre-operations review would be required before seeking ETC status, which would effectively moot in major respects the purpose of the ETC provisions in the statute. We do not believe that such an interpretation is intended by the language, structure or purpose of the statute and, as such, it will be rejected. 31. Finally, BellSouth and AT&T argue that the Commission should condition any proposed ETC determination on that applicant's compliance with the requirements of the implementing rules, even if the determination is made prior to the enactment of those rules. This we cannot do. The terms of section 34(a)(1) are explicit on its face: the rules implementing section 34(a)(1) "shall be applicable to applications filed under this paragraph after the effective date of such rules." Accordingly, BellSouth's and AT&T's proposed condition must be rejected. IV. Conclusion 32. Based upon the representations contained in Entergy Technology's application and its supplemental filings, the Commission determines that Entergy Technology is an exempt telecommunications company as that term is defined in PUHCA section 34(a)(1), as amended. 33. Accordingly, IT IS ORDERED that the application of Entergy Technology IS GRANTED. IT IS FURTHER ORDERED that the Secretary notify the Securities and Exchange Commission of this determination. 34. IT IS FURTHER ORDERED that all motions to file the above-referenced supplementary or out-of-time comments or additional information are hereby GRANTED. FEDERAL COMMUNICATIONS COMMISSION William F. Caton Acting Secretary