BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Joint Application of Frontier Communications Corporation, New Communications Holdings, Inc., New Communications ILEC Holdings, Inc., New Communications of the Southwest Inc., Verizon West Coast Inc., (U 1020 C), Verizon California Inc. (U 1002 C), New Communications Online and Long Distance, Inc., Verizon Long Distance, LLC (U 5732 C) and Verizon Enterprise Solutions, LLC (U 5658 C) For Approval of the Sale of Assets, Transfer of Certificates and Customer Bases, and Issuance of Additional Certificates

Application No. 09-06-___

JOINT APPLICATION OF FRONTIER AND VERIZON

E. Garth Black Elaine M. Duncan Patrick M. Rosvall Vice President and General Counsel Cooper, White & Cooper LLP West Region Verizon 201 California St., 17th Floor 711 Van Ness Avenue, Suite 300 San Francisco, CA 94111 San Francisco, CA 94102 Telephone: (415) 433-1900 Telephone: (415) 474-0468 Facsimile: (415) 433-5530 Facsimile: (415) 474-6546 e-mail: gblack@cwclaw.com Email: elaine.duncan@verizon.com Kevin Saville Attorney for New Communications Associate General Counsel Corporation, New Communications Frontier Communications Corporation ILEC Holdings, Inc., 2378 Wilshire Blvd. New Communications of the Southwest Mound, Minnesota 55364 Inc., Verizon West Coast Inc., Verizon Telephone: (952) 491-5564 California Inc., New Communications Facsimile: (952) 491-5577 Online and Long Distance, Inc., Verizon e-mail: kevin.Saville@frontiercorp.com Long Distance, LLC, and Verizon Enterprise Solutions, LLC Attorneys for Frontier Communications Corporation June 4, 2009

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TABLE OF CONTENTS

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INTRODUCTION ...............................................................................................................1 I. THE PARTIES AND THE TRANSACTION.........................................................2 A. The Parties ...................................................................................................2 B. The Transaction ...........................................................................................4 II. STANDARD OF REVIEW .....................................................................................8 III. THE TRANSACTION IS IN THE PUBLIC INTEREST 1. §854(c)(1) Maintain or improve financial condition of resulting

utility ....................................................................................................10 2. §854(c)(2) Maintain or improve quality of service..............................11

3. §854(c)(3) Maintain or improve quality management.........................12 4. §854(c)(4) Fair and reasonable to employees......................................13 5. §854(c)(5) Fair and reasonable to shareholders...................................14 6. §854(c)(6) Beneficial to state and local economies.............................15 7. §854(c)(7) Preservation of Commission jurisdiction...........................15 8. §854(c)(8) Mitigation of adverse consequences ..................................15 9. Preserve or enhance the environment .................................................15 10. Preserve or enhance competition ........................................................16 IV. PROCEDURAL REQUIREMENTS.....................................................................16 A. Name and Address of Joint Applicants (Rule 2.1(a)) ................................16 B. Correspondence and Communications (Rule 2.1(b)).................................17 C. Proposed Categorization and Schedule (Rule 2.1(c)) ................................17 1. Proposed Categorization: ....................................................................17 2. Need for Hearings:...............................................................................18 3. Issues: ..................................................................................................18 4. Proposed Schedule: .............................................................................18 D. Organization and Qualification to Transact Business (Rule 2.2) .................18 E. California Environmental Quality Act (“CEQA”) Compliance (Rule 2.4) ......................................................................................................18 F. Character of Business (Rule 3.6(a))..............................................................19

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G. Description of the Property Involved (Rule 3.6(b))......................................19 H. Reasons for Entering into the Transaction (Rule 3.6(c)) ..............................19 I. Terms and Condition of the Proposed Transaction (Rule 3.6(d), (f) and (g)) ...............................................................................19 J. Financial Statement (Rules 3.6(e)) ...............................................................20 V. RELIEF REQUESTED..........................................................................................20 CONCLUSION..................................................................................................................22

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LIST OF EXHIBITS

Description Exhibit No. Merger Agreement ...............................................................................................................1 Distribution Agreement .......................................................................................................2 Organizational Structure ......................................................................................................3 Articles of Incorporation......................................................................................................4 Map ..................................................................................................................................5 Financial Information...........................................................................................................6

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This joint application is filed by Frontier Communications Corporation (“Frontier”), New

Communications Holdings, Inc. (“NCH”), New Communications ILEC Holdings, Inc.

(“NCIH”), New Communications of the Southwest Inc. (“NewILEC”), Verizon West Coast Inc.,

(“Verizon West Coast”), Verizon California Inc. (“Verizon California”), New Communications

Online and Long Distance, Inc. (“NewLD”), Verizon Long Distance, LLC (“VLD”) and Verizon

Enterprise Solutions, LLC (“VES”), for approval of the transfer of a portion of Verizon’s local

exchange and long distance business in California to companies to be owned and controlled by

Frontier Communications and for such other approvals as may be deemed necessary to complete

this transaction. This Application is filed pursuant to Public Utilities Code §§ 851-854.

INTRODUCTION

This Joint Application concerns a small part of a multi-state transaction in which Verizon

proposes to transfer its operating companies in a number of states to Frontier. Frontier and its

operating companies in those states and nationwide are dedicated to providing high quality

service at reasonable rates, and have significant experience in serving rural areas, including

California. Frontier will enhance its local presence in the communities it serves and will work to

ensure that it provides enhanced services and customer experiences after the transaction occurs.

The proposed transaction will also bolster Frontier’s financial strength and enable it to expand

broadband and other service offerings.

In California, the transaction involves property in thirteen exchanges. Six exchanges

comprise the entire serving territory of Verizon West Coast, a wholly owned subsidiary of

Verizon Northwest Inc., the operating company serving Oregon, Washington and Idaho, which

will also be transferred to Frontier. Another seven Verizon California exchanges are being

transferred to Frontier; these border Arizona and Nevada, and are contiguous to the Verizon

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California properties in those states that are also being transferred. Also, certain long distance

customers in those thirteen exchanges, currently served by Verizon affiliates, will also be

transferred to Frontier entities. Upon closing, Frontier will own and control, and its board of

directors and management will manage, both the Verizon assets transferred to it as part of this

transaction as well as its existing operations in California.

As explained in detail below, the overall transaction has compelling public interest

benefits in all affected states, including California. The Commission, therefore, should conclude

that the transaction as it relates to the Verizon incumbent local exchange and long distance

services in California is in the public interest.

I. THE PARTIES AND THE TRANSACTION

A. The Parties

Frontier is a corporation organized under the laws of the state of Delaware and is a

publicly traded holding company with its stock listed on the New York Stock Exchange under

the symbol “FTR.” Frontier is a full-service communications provider and is one of the largest

rural local telephone exchange companies in the country. Frontier offers telephone, television

and Internet services, as well as bundled offerings, wireless Internet data access, data security

solutions and specialized bundles for small/medium/large businesses and home offices to

customers in 24 states. In 2008, Frontier’s revenue was $2.2 billion, with a net income of

$182.7 million.1 The company has approximately 5,600 employees and serves a total of 2.8

million voice and broadband connections, including 2.3 million access lines.

1 Frontier’s most recent 10-K (filed February 27, 2009 for year ended December 31, 2008) and 10-Q (filed May 07, 2009 for quarter ended March 31, 2009) filings with the Securities and Exchange Commission are available in alternate formats at the SEC as well as the Frontier websites at: http://www.sec.gov/Archives/edgar/data/20520/000002052009000009/form10k4q2008.txt and http://www.sec.gov/Archives/edgar/data/20520/000002052009000023/form10q1q09.txt, respectively, and http://ccbn.10kwizard.com/cgi/convert/pdf/FRONTIERCOMMUNI10K.pdf?ipage=6169294&num=-2&pdf=1&xml=1&cik=20520&odef=8&rid=12&quest=1&xbrl=0&dn=2&dn=3 and

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Frontier does not conduct business directly in California but owns and controls

incumbent local exchange operations in 24 states, including California. Frontier controls a single

incumbent local exchange carrier in California, Citizens Telecommunications Company of

California, Inc. doing business as Frontier Communications of California (U 1024 C) (“Frontier

California”).2 Frontier’s subsidiary, Frontier Communications of America, Inc., is a reseller of

interexchange service in California.

Verizon West Coast holds a Certificate of Convenience and Necessity ("CPCN") to

provide local exchange services in six exchanges3 in the northwest corner of California in Del

Norte and Humboldt Counties. Verizon West Coast has approximately 13,000 access lines in its

territory. Verizon West Coast is a direct, wholly owned subsidiary of Verizon Northwest Inc.

(“Verizon Northwest”) which provides local exchange service in Washington, Oregon and Idaho,

and is an indirect, wholly owned subsidiary of Verizon Communications Inc. (“Verizon”).

Verizon California holds a CPCN to provide local exchange services in California,4

primarily in southern California, and has approximately 3.4 million access lines in its territory,

only a very small portion of which – approximately 11,000 access lines – is being transferred to

Frontier. Verizon California is an indirect, wholly owned subsidiary of Verizon.

http://ccbn.10kwizard.com/cgi/convert/pdf/FRONTIERCOMMUNI10Q.pdf?ipage=6309731&num=-2&pdf=1&xml=1&cik=20520&odef=8&rid=12&quest=1&xbrl=0&dn=2&dn=3, respectively. 2 This structure reflects the merger and consolidation of four previously separate entities into one following approval by the Commission in D.08-10-010. 3 These exchanges are: Crescent City, Klamath, Smith River, Hiouchi, and Gasquet in Del Norte County and Orick in Humboldt County, and are shown in greater detail in Exhibit 5, discussed below. 4 Verizon California is also authorized to provide local exchange service in portions of Arizona and Nevada contiguous to California, and serves approximately 6,000 customers in Arizona and 36,000 customers in Nevada.

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VLD holds a CPCN to provide interLATA/intraLATA resold telecommunications

(excluding local exchange services) in California pursuant to D.97-02-011. VLD is an indirect,

wholly owned subsidiary of Verizon.

VES holds a CPCN to provide interLATA/IntraLATA resold telecommunications

(excluding local exchange services) in California pursuant to D.96-09-004. VES is an indirect,

wholly owned subsidiary of Verizon.

NCH, NCIH, NewILEC and NewLD are Delaware corporations formed for the purposes

of the series of internal reorganizations and transactions described in this Application.

B. The Transaction

On May 13, 2009, Frontier, Verizon and NCH entered into an Agreement and Plan of

Merger (the “Merger Agreement”) under which Frontier will acquire approximately 4.8 million

access lines (and certain related assets) currently owned by subsidiaries of Verizon in

Arizona, Idaho, Illinois, Indiana, Michigan, Nevada, North Carolina, Ohio, Oregon, South

Carolina, Washington, Wisconsin and West Virginia as well as portions of California bordering

Arizona, Nevada and Oregon.5 The Merger Agreement filed with the Securities and Exchange

Commission ("SEC") is attached as Exhibit 1 and is also available for review online at

http://www.sec.gov/Archives/edgar/data/20520/000095015709000266/ex2-1.htm. On the same

date, Verizon and NCH entered into a Distribution Agreement. A copy of the Distribution

Agreement filed with the SEC is attached as Exhibit 2 and is also available for review online

at http://www.sec.gov/Archives/edgar/data/20520/000095015709000266/ex10-1.htm.

5 Because Verizon California is only transferring a few border exchanges in California to Frontier, its circumstances differ from those that exist in other states that are part of this transaction. The California portion of the transaction is explained in greater detail below.

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The Merger Agreement and Distribution Agreement are designed to: (a) establish a

separate entity (i.e., NCH) as the holding company for Verizon’s local exchange, long distance

and related business activities in the acquired areas described above; (b) spin-off the stock of that

new entity to Verizon shareholders; and then (c) immediately merge the new entity into Frontier.

More specifically, the transaction will be completed through several steps:

(1) NCH will serve as the holding company for the local exchange, long distance and related businesses in California and the other affected states that are being transferred to Frontier. As noted above, NCH currently is a subsidiary of Verizon; after the transactions described below, it will be merged into Frontier. Frontier will be the surviving entity, and will then own and control the Verizon assets being transferred to it through the transaction at issue here as well as its current properties in the state. (2) NCH has two newly formed subsidiaries: (a) NCIH, which will own the stock of NewILEC, Verizon West Coast, and the other operating ILECs in the affected states; and (b) NewLD, which will hold the accounts receivables and customer relationships related to the long distance operations (and other operations) in California and the other affected states. (3) Through a series of intra-corporate stock transfers, Verizon will transfer (or cause to be transferred) the stock of NewILEC, Verizon West Coast and the other affected ILECs to NCIH.6 Similarly, VLD and VES will transfer their accounts receivables and customer relationships related to their long distance operations in California and the other affected states to NewLD. (4) The stock of NCH will then be distributed to Verizon shareholders – that is, NCH will be “spun off” from Verizon to Verizon’s shareholders so that NCH and Verizon will be separate corporations. Immediately following this spin-off, NCH will be merged into Frontier, and Frontier will be the surviving holding company, operating under its existing name and corporate structure, but also owning all of the stock of NCH’s subsidiaries, NCIH and NewLD. Once the merger is completed, NCH will cease to exist; thus, NCIH and NewLD will be direct subsidiaries of Frontier, and NewILEC will be an indirect subsidiary through NCIH.

6 The assets and business to be transferred to NCIH (as well as the assets and business that are not being transferred) are more fully described in the Distribution Agreement between Verizon and NCH.

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As noted above, Frontier will acquire Verizon West Coast in its entirety, but will acquire

only a small portion of Verizon California’s territory near the Arizona and Nevada borders.7

Accordingly, prior to the spin-off of NCH and its merger into Frontier, Verizon California will

transfer its assets, liabilities, and customer relationships in seven exchanges (five bordering

Arizona and two bordering Nevada) relating to its local exchange, intrastate toll and exchange

access operations along the Arizona and Nevada borders to NewILEC.8 Verizon California also

will transfer the stock of NewILEC to NCIH through a series of intermediate transfers, such that

NewILEC will become a direct, wholly owned subsidiary of NCIH and an indirect, wholly

owned subsidiary of NCH. In this way, after the merger, Frontier Communications will be the

ultimate parent of Verizon West Coast and NewILEC. (Verizon West Coast will be renamed,

because Frontier will not operate under the Verizon name in any state. For purposes of this

application, however, the name “Verizon West Coast” is used in describing the pre- and post-

transaction structures.) The corporate structure and transaction as it relates to California and

the other affected states are illustrated in Exhibit 3, attached to this Application.

Immediately following the completion of the transaction, Verizon’s end-user customers

in the thirteen transferred exchanges will continue to receive substantially the same services,

service rates, and service terms and conditions as immediately prior to the transaction.

NewILEC and NewLD will file new tariffs appropriate to adopt the rates, terms and conditions in

the tariffs under which the Verizon companies have been operating in California.

7 The exchanges to be transferred are: (1) Adjacent to Nevada: Alpine (Alpine Co.) and Coleville (Mono Co.); (2) Adjacent to Arizona: Earp Big River, Havasu Landing, and Parker Dam (San Bernardino Co.), Blythe (Riverside Co), and Palo Verde (Imperial Co.). A map showing these exchanges in greater detail is attached as Exhibit 5. 8 Verizon California also operates in Arizona and Nevada, and will transfer its assets in those states to NewILEC as well, because these operations are included in the transaction.

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Upon completion of the transaction, the Commission will retain the same regulatory

authority over Verizon West Coast, NewILEC and NewLD that offer service in California that

the Commission possesses prior to the consummation of the transaction. In order to provide

service to existing customers and new customers, NewILEC and NewLD are required to obtain

CPCNs from this Commission pursuant to §1001 of the Public Utilities Code. In most cases, an

applicant for a CPCN must file a separate application that, among other things, conforms to the

requirements of applicable sections of Rule 3.1 (construction or extension of facilities) of the

Commission's Rules of Practice and Procedure. In this case, however, NewILEC and NewLD

seek the required CPCNs as part of this transfer application because NewILEC will be acquiring

operating telephone exchanges and NewLD will likewise be acquiring existing customers and

operations. Therefore, the requirements of Rule 3.1 are not applicable to this proceeding and the

parties hereby request a waiver of the requirements of Rule 3.1, as its substance is satisfied by

information provided in this joint application.9

NewILEC will assume any existing Verizon California wholesale obligations, including

contracts, to California wholesale customers and to other carriers to the extent applicable, and

Verizon West Coast will retain its existing obligations, if any.

Verizon West Coast, NewILEC and NewLD will conduct business in California in

accordance with all applicable laws, rules and Commission orders. Upon completion of the

transaction, Frontier may elect to change the names of these entities; if so, it will make all

necessary filings to accomplish the name changes. 9 This Commission has granted collateral relief in connection with transfer of control applications, including CPCNs. In Winterhaven Telephone Company, D. 88-06-023, 1998 CPUC LEXIS 307, 28 CPUC 2d 231 (1998) the Commission authorized the transfer of control of an exchange owned and operated by Pacific Bell to a new ILEC, Winterhaven Telephone Company, and granted Winterhaven a CPCN in the same decision. See also Application of First Communications LLC et. al., D. 07-03-030, 2007 Cal. PUC LEXIS 405 (2007) (CPCN and transfer of assets approved in one decision) and Joint Application of Wild Goose Storage et. al., D. 06-11-019, 2006 Cal. PUC LEXIS 499 (2006 ( transfer of control and financing approved in single order). In this case, a single application is the ideal vehicle for the Commission's consideration and resolution of all issues raised by the proposed transaction.

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No change of control will occur with respect to Frontier’s existing operating entities in

California, including Frontier California and Frontier Communications of America, Inc., or with

respect to any entity holding a controlling interest in them, because the control of these

companies will remain with Frontier as today. These companies will not be affected by the

transaction and will continue to operate as separate entities under their existing tariffs and

Commission regulatory requirements immediately following the transaction.

At the completion of the transaction, Frontier will own and control, and its board of

directors and management will manage, both the Verizon assets being transferred to it through

the transaction at issue here, as well as its existing operations in the state. Specifically, Frontier

will own and control three incumbent local exchange companies in California: Frontier

California, Verizon West Coast, and NewILEC. In addition, Frontier will own and control two

long distance companies: Frontier Communications of America, Inc. and NewLD. Frontier’s

pre- and post-transaction corporate structure as it relates to California is illustrated in Exhibit 3,

attached to this Application.

II. STANDARD OF REVIEW

The parties request approval to transfer the Verizon California exchanges along the

Arizona and Nevada borders under Public Utilities Code § 851, which provides in pertinent part

that “No public utility … shall sell, lease, assign, mortgage or otherwise dispose of or encumber

the whole or any part of its . . . system, . . . nor . . . merge or consolidate its . . . system . . . or

franchises or permits or any part thereof, with any other public utility, without first having

secured from the commission an order authorizing it so to do.”

In addition, when the sale of an entire company is proposed, as is the case with Verizon

West Coast, the Commission also applies § 854(a), which provides that no person “shall acquire

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or control . . . any public utility” without Commission authorization.10 The primary standard for

review under both of these sections is whether the transaction is “adverse to the public

interest.”11

Sections 854(b) and (c) of the Public Utilities Code do not apply to the transaction

because it does not involve the merger, acquisition or control of a utility with gross annual

California revenues in excess of $500 million.12 However, in assessing whether the public

interest standard is met under § 854(a), the Commission often considers some or all of the factors

from § 854(c) on a discretionary basis to provide “context for a public interest assessment.”13

Therefore, the joint applicants include below an analysis of the criteria enumerated in that

section to assist the Commission in the prompt consideration of this application, should the

Commission choose to review those criteria.

Finally, the Commission has noted in a number of recent decisions approving transfers of

control that, because California “reaps enormous benefits” from public utility services, it is “in

the public interest to foster a business climate in California that is hospitable to utilities.”

Accordingly, the Commission has ruled that §854(a) transactions “should be approved absent a

10 The § 854(c) criteria plainly do not apply to the transfer of Verizon California exchanges involved here. See, e.g., D.07-10-030 (Citizens/Global Valley Networks) at 6, note 9. 11 D.07-05-061 (CalNev Pipeline) at 24. 12 See Exhibit 6 (Verizon West Coast annual report). Likewise, neither Frontier nor Frontier California is an “acquiring utility” under §854(b), nor does Frontier California meet the $500 million revenue threshold required by §854(b) as demonstrated in its most recent PUC Annual Report (CPUC Form M) filed with the Commission in April 2009. Accordingly, neither the requirements of § 854(b) or (c) apply to this transaction. See, e.g., D.07-10-030 (Citizens/Global Valley Networks) at 6, footnote 9. 13 D.07-05-061 (CalNev Pipeline) at 24.

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compelling reason to the contrary.”14 As demonstrated in this joint application, the proposed

transaction should be approved as requested.15

III. THE TRANSACTION IS IN THE PUBLIC INTEREST

As demonstrated in detail in the following section, this transaction is clearly in the public

interest regardless of the specific standard the Commission chooses to apply. As explained

above, §§ 854(b) and (c) of the Public Utilities Code do not apply to this transaction.

Nevertheless, the joint applicants include the following analysis of the criteria enumerated in that

section, as well as related factors16 often examined in conjunction with the § 854(c) criteria, to

assist the Commission in the prompt consideration of this application, should the Commission

choose to review those criteria.

1. §854(c)(1) Maintain or improve financial condition of resulting utility

Frontier currently has approximately 2.3 million access lines in 24 states, and is a leading

and respected provider of telecommunications services to rural and small urban markets across

the country. Frontier and its operating companies are dedicated to providing their customers high

quality service at reasonable rates, and have a rich history in serving rural areas in California and

14 See D.04-08-018 (SureWest reincorporation); D.04-09-023 (Comm South/Arbros); D.05-05-014 (Cal-Ore Telephone/Lynch Interactive); D.05-06-012 (Supra Telecommunications);D.05-08-006 (Highspeed Communications/Northwest Telephone); D.05-06-012 (Supra Telecommunications); D.06-02-033 (PacifiCorp). 15 In 2000, the Commission approved a proposed transaction between Verizon California (then GTE California), Verizon West Coast (then GTE West Coast), Citizens Utilities and Citizens Golden State. In 1999, the parties filed a joint application for the transfer of GTE West Coast’s assets and CPCN to Citizens Golden State, and 26 GTE California exchanges to Citizens Utilities. The Commission, in D.01-06-007 and D.01-10-072, approved the application as in the public interest subject to extensive financial requirements and restrictions, among other conditions. The transaction was never consummated. As is evident from the public interest discussion contained in this joint application, the scope and circumstances of this transaction are markedly different from the earlier one. Frontier has grown substantially in the last ten years, not only in California but nationwide, and has over time demonstrated the management capability and financial strength needed to successfully close this transaction and operate the California properties at issue. 16 These consist of environmental and competitive concerns. See, e.g., D.02-11-025 (Comcast/AT&T Broadband) at 13-14.

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elsewhere.17 To ensure that it places the customer first, Frontier has pursued a strategy of

focusing on and enhancing its local presence in the communities in which it operates. With the

proposed transaction, the residential and business consumers in the service areas it is acquiring

from Verizon will become a key strategic focus for Frontier.

The transaction will accelerate Frontier’s growth, creating a much larger company with

increased financial strength and flexibility. Frontier will be the fifth-largest ILEC in America,

serving predominantly rural communities and smaller cities, and it will have 8.6 million voice

and broadband connections, including more than 7 million access lines and $6.5 billion in

revenues. It will be the largest provider of voice, broadband and video services focused on rural

to smaller city markets in the United States.

In addition, Frontier will have an even stronger balance sheet and greater cash flow

generation capabilities. Most notably, this transaction will “delever” Frontier, i.e., it will reduce

significantly the company’s debt-to-EBITDA ratio.18 The increased financial strength is

expected to improve Frontier’s access to capital and lower its cost of capital, which will inure to

the benefit of the California exchanges and their customers.

2. §854(c)(2) Maintain or improve quality of service

The transaction will be transparent to the current customers of Verizon West Coast,

Verizon California, VLD and VES in California. Customers will receive substantially the same

services post-merger that they received pre-merger, and at the same prices. No existing customer

service will be discontinued or interrupted as a result of the transaction, and Frontier will use the

same operational systems that Verizon uses today to provide service. At closing, Frontier will

17 In addition to serving rural areas, Frontier also has experience serving mid-size communities including Elk Grove, California, the South Metro of Minneapolis/St. Paul, Minnesota, and Rochester, New York. 18 Currently, Frontier Communication’s leverage is approximately 3.8 x EBITDA; after the transaction, its leverage will be reduced to 2.6 x EBITDA. (EBITDA is earnings before interest, taxes, depreciation, and amortization.)

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have full control over these systems. To further ensure the transition is seamless to customers,

Verizon and Frontier representatives will work together so that Frontier can ensure customer

continuity including billing, customer account systems, and plant record systems.

In addition, the transaction will not have any adverse impacts on wholesale service

customers in California. Frontier will retain all obligations under Verizon’s current

interconnection agreements and other existing arrangements, in addition to the statutory

obligations applicable to all incumbent LECs.

With respect to broadband deployment, the proposed transaction is occurring at a critical

time, as the National Telecommunications and Information Administration and Rural Utility

Service are both working to implement the broadband provisions of the American Reinvestment

and Recovery Act of 2009. Obviously, Frontier, like all private telecommunications providers,

must await the final rules for those programs in order to determine whether it can seek

“stimulus” funding, however, it would benefit the consumers in the acquired territory for this

transfer to be approved as soon as possible to provide Frontier with the opportunity to participate

in that program with respect to the acquired properties on the same basis as its other properties

and those of other providers. Frontier is also committed to broadband deployment in California

as evidenced by its participation in the California Advanced Services Fund (CASF). In late 2008

and early 2009 Frontier received Commission approval for three grant applications that will

provide broadband to rural areas. Frontier will examine the Verizon exchanges being acquired

for possible CASF grant opportunities. For this reason, the parties request that the Commission

grant the approvals requested on an expedited basis.

3. §854(c)(3) Maintain or improve quality of management

In California, Frontier California and its predecessor operating companies have been

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serving customers for decades. Rapid changes in technology and customer preferences require

equally rapid responses and execution strategies. To help it respond effectively to local rural

markets, Frontier maintains a regional headquarters in Elk Grove, California, which will

continue to be a hub for engineering, technical and operational personnel. Frontier’s Senior Vice

President and General Manager that has overall operational and customer service responsibility

for Frontier’s Western Region, including California, is also based in Elk Grove, as are several

additional local general managers that have customer and service responsibilities in more

concentrated local areas of California.

Frontier California operates in the California territory generally east of Verizon West

Coast and north of the exchanges it is acquiring from Verizon California, and Frontier anticipates

implementing the same local general manager system to manage the operational and customer

service responsibilities in the areas Frontier is acquiring in California.

Frontier also has a highly successful track record of acquiring, operating, and investing in

telecommunications properties nationally, including over 750,000 access lines it purchased from

Verizon’s predecessor between 1993 and 2000. And in more recent years, Frontier has

successfully integrated other telecommunications companies, including Rochester Telephone in

New York, Commonwealth Telephone Company in Pennsylvania and Global Valley Networks

in California. In these transactions Frontier Communications successfully integrated its

operations.

4. §854(c)(4) Fair and reasonable to employees

Frontier also will continue to be managed by employees with extensive knowledge of the

local telephone business and with a commitment to needs of the local community. Frontier will

continue to employ Frontier and Verizon company employees that are experienced and dedicated

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to the provision of local services in California. The customer service, network and operations

functions that are critical to Frontier’s success will continue after the transaction is complete.

Frontier will honor the union labor agreements in the affected states and will work constructively

with union leaders. Verizon will fund pensions for the pre-closing services of employees

moving to Frontier, and Verizon will remain responsible for people who retire from the

transferred areas before closing. As noted above, Frontier will also strengthen the local

management and will assign local managers located in California with day-to-day responsibility

for working with and responding to local customer needs. Frontier employees in California will

have enhanced career opportunities because they will be a part of a much larger company with

greater access to promotions, lateral career changes, training and geographic work locations

available to them.

5. §854(c)(5) Fair and reasonable to shareholders

The proposed transaction is structured to achieve Frontier’s broadband investment and

growth strategy while enhancing Frontier’s ability to serve customers in all 27 states in which it

will operate after the merger. As noted, this transaction will improve Frontier’s overall financial

flexibility and stability by reducing its relative leverage. After the transaction, Frontier’s

leverage will be decreased from 3.8 times EBITDA to 2.6 times combined 2008 pro forma

EBITDA, even without considering operating efficiencies. In addition, Frontier shareholders

must approve the transaction before it can be consummated, and their approval will satisfy this

showing.

From Verizon’s perspective, shareholders will benefit as a result of this transaction. This

is part of a multi-year effort to transform the company’s growth profile and asset base to focus

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greater attention on wireless, FiOS fiber-optic services and other broadband development, and

global IP.

6. §854(c)(6) Beneficial to state and local economies

The proposed transaction will benefit the local economies served by Frontier California

and the affected Verizon exchanges because it will continue and enhance Frontier’s history of

providing excellent service. These areas will continue to benefit from Frontier’s increased

financial strength and demonstrated focus on providing high quality service in rural areas and

expanding the availability of broadband.

7. §854(c)(7) Preservation of Commission jurisdiction

The propose transaction will preserve the Commission’s jurisdiction. The Verizon

California exchanges are currently operated under the Uniform Regulatory Framework (“URF”)

and will continue to be operated as such. Verizon West Coast is currently a rate-of-return

company and will continue as such until such time as Frontier chooses to seek modification of

that status.

8. §854(c)(8) Mitigation of adverse consequences

Because the transaction will result in no adverse consequences to customers, employees,

shareholders, or the public in California, no mitigation measures are needed.

9. Preserve or enhance the environment

Because the proposed transaction involves only an indirect change in ownership of stock

and exchanges, it does not constitute a “project” under the California Environmental Quality

Act.19 The application does not request authority for new construction, nor will it result in any

19 See, e.g., D.08-10-010 at 8, note 2 (citing CEQA Guideline §1506(b)(3)); D.05-06-012 (transfer of control has no significant impact on environment); D.03-12-033 (same).

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changes to the current use of the assets. Accordingly, there is no possibility of any significant

environmental impact associated with the Joint Application, and no CEQA review is necessary.

10. Preserve or enhance competition

The proposed transaction will not reduce retail or wholesale competition and, indeed, will

expand it. First, the transaction will enable Frontier to provide other public interest benefits in

fourteen states, without countervailing harms. Second, in California as in other states, none of the

local exchanges being acquired by Frontier from Verizon overlap with any of the local exchanges

already served by Frontier. Frontier and Verizon do not currently compete for customers in any

of the affected exchanges as Frontier operates neither local exchange nor mobile facilities in

these areas; therefore, the transaction will not reduce the number of competitors in any region.

Third, once the transfer is complete, Verizon will continue competing in the affected areas by

providing wireless services, enterprise services, and long distance services.

IV. PROCEDURAL REQUIREMENTS

A. Name and Address of Joint Applicants (Rule 2.1(a))20

Frontier Communications is a Delaware corporation with its principal place of business

at 3 High Ridge Park, Stamford, Connecticut 06905. Verizon West Coast and Verizon

California are California corporations with their principal place of business at 112 Lakeview

Canyon Road, Thousand Oaks, CA 91362. VLD and VES are Delaware corporations with their

principal places of business at 1320 North Court House Road, Arlington, VA 22201. NCH,

NCIH, NewILEC and NewLD are Delaware corporations formed for the purposes of the series

of internal reorganizations and transactions described in this Application. The exact legal names

of each of these entities are as specified above.

20 All references to “Rules” refer to the Rule of Practice and Procedure of the California Public Utilities Commission.

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B. Correspondence and Communications (Rule 2.1(b))

All correspondence and communications concerning this Joint Application should be

directed to counsel for Verizon and Frontier, as indicated below:

For the Verizon entities and newly-formed corporations:

Elaine M. Duncan Verizon 711 Van Ness Avenue, Suite 300 San Francisco, CA 94102 Tel. 415-474-0468 Fax 415-474-6546 elaine.duncan@verizon.com

For the Frontier entities and newly-formed corporations: Kevin Saville Associate General Counsel Frontier Communications 2378 Wilshire Blvd. Mound, MN 55364 Tel. 952-491-5564 Fax 952-491-5577 ksaville@frontier.com and E. Garth Black Patrick M. Rosvall COOPER, WHITE & COOPER LLP 201 California Street, 17th Floor San Francisco, CA 94111 Telephone: (415) 433-1900 Fax: (415) 433-5530 e-mail:gblack@cwclaw.com

C. Proposed Categorization and Schedule (Rule 2.1(c))

1. Proposed Categorization: Ratesetting. The matters raised in this Joint

Application do not fit clearly into any of the procedural categories identified in Rule 1.3,

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i.e., adjudicatory, ratesetting, or quasi-legislative. Therefore, pursuant to Rule 7.1(e)(2)

and 1.3(e), this Joint Application should be categorized as ratesetting.

2. Need for Hearings: Hearings are not necessary. This is a straightforward

transfer of a limited group of exchanges and certain long distance customers to another

experienced carrier in good standing.

3. Issues: The issue to be decided in this proceeding is whether the

proposed transfers in California are adverse to the public interest and whether the

transfers should be authorized

4. Proposed Schedule: Consistent with the handling of prior similar

transactions, the applicants propose the following procedural schedule:

June 4, 2008: Application filed.

June 8, 2008 Appearance in Daily Calendar

July 8, 2009: Approximate deadline for any protest or response pursuant to Rule 2.6(a).21

July 20, 2009: Approximate deadline for reply to any protest.22

September 2009 Proposed Decision

October 2009 Final decision

D. Organization and Qualification to Transact Business (Rule 2.2)

Articles of incorporation for each applicant are attached collectively as Exhibit 4.

E. California Environmental Quality Act (“CEQA”) Compliance (Rule 2.4)

Because the proposed transaction involves only an indirect change in ownership of stock

and exchanges, it does not involve a “project” under California Code of Regulations 15378. See 21 Protests or responses are due 30 days after the date the notice of the filing of the application is published in the Daily Calendar. Rule 2.6(a). 22 Rule 2.6(e) allows but does not require replies. Where the ALJ so permits, replies are due within 10 days of a protest or response, unless the Administrative Law Judge orders otherwise.

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14 Cal. Code Regs § 15378(a). The proposed transaction does not have any potential for

effectuating a “physical change in the environment,” so there are no negative environmental

impacts associated with the Joint Application, and no CEQA review is necessary.

F. Character of Business (Rule 3.6(a))

The character of business performed and the territory served by each applicant are

described in Section I.A .

G. Description of the Property Involved. (Rule 3.6(b))

The property involved consists of the six exchanges that comprise Verizon West Coast as

well as seven additional Verizon California exchanges along the Nevada and Arizona borders

adjacent to Verizon California properties in those states that are also included in the proposed

transfer to Frontier Communications. A map of these exchanges is shown in Exhibit 5.

H. Reasons for Entering into the Transaction (Rule 3.6(c))

The reasons for entering into the transaction are described at length in Sections I.B and

III.

I. Terms and Condition of the Proposed Transaction (Rule 3.6(d), (f) and (g))

The terms and conditions of the proposed transaction are described at length in Section

I.B. The Merger Agreement and related Distribution Agreement dated as of May 13, 2009 and

filed with the Securities and Exchange Commission are attached to this joint application as

Exhibits 1 and 2, and are also available for review online at

http://www.sec.gov/Archives/edgar/data/20520/000095015709000266/ex2-1.htm

and http://www.sec.gov/Archives/edgar/data/20520/000095015709000266/ex10-1.htm,

respectively.

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J. Financial Statement (Rules 3.6(e))

Balance sheets and income statements for Verizon West Coast and Frontier are shown in

Exhibit 6.23 Additional financial information supporting the proposed transaction is discussed

above in Section III, and in Frontier’s most recent 10-K (filed February 27, 2009 for year ended

December 31, 2008) and 10-Q (filed May 07, 2009 for quarter ended March 31, 2009), filed with

the Securities and Exchange Commission. These are available at:

http://www.sec.gov/Archives/edgar/data/20520/000002052009000009/form10k4q2008.txt and

http://www.sec.gov/Archives/edgar/data/20520/000002052009000023/form10q1q09.txt,

respectively.24

V. RELIEF REQUESTED

At the completion of the transaction, Verizon West Coast will continue to operate as a

stand-alone company in California (subject to being renamed), and will become a direct, wholly-

owned subsidiary of NCIH and an indirect, wholly-owned subsidiary of NCH. Verizon West

Coast therefore requests that its CPCN be transferred accordingly.

The seven Verizon California exchanges along the Arizona and Nevada borders will no

longer be operated as part of Verizon California but will be transferred to NewILEC, a newly-

formed corporation which will operate in California as well as Arizona and Nevada (just as

Verizon California does today). Accordingly, NewILEC requests a new CPCN from the

Commission to permit it to operate those California exchanges transferred from Verizon

23 Verizon does not maintain or report financial information (balance sheets and income statements) on an exchange basis in the ordinary course of business, and therefore this information is not readily available for the seven Verizon California exchanges to be transferred to Frontier. 24 Links to pdf versions of these documents are also available at http://ccbn.10kwizard.com/cgi/convert/pdf/FRONTIERCOMMUNI10K.pdf?ipage=6169294&num=-2&pdf=1&xml=1&cik=20520&odef=8&rid=12&quest=1&xbrl=0&dn=2&dn=3 and http://ccbn.10kwizard.com/cgi/convert/pdf/FRONTIERCOMMUNI10Q.pdf?ipage=6309731&num=-2&pdf=1&xml=1&cik=20520&odef=8&rid=12&quest=1&xbrl=0&dn=2&dn=3.

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California on the same terms. Verizon California will continue to operate in California, minus

the seven exchanges adjacent to the Arizona and Nevada borders that it has transferred to

NewILEC.

NewLD requests a CPCN to provide interLATA/intraLATA resold telecommunications

(except local exchange services). This will enable NewLD to conduct the long distance business

transferred to it by VLD and VES.25 VLD and VES will continue to provide some long distance

telecommunications services in California, and therefore will maintain their CPCNs. In

accordance with applicable Commission precedent as set forth in D.06-10-021 and prior

decisions, slamming requirements do not apply to customer base transfers such as this. The

parties will comply with all applicable customer notice requirements set forth in 47 C.F.R.

§64.1120(e), Public Utilities Code § 2889.3, and D.06-10-021.

NewILEC requests that the Commission allow it to adopt the prices, terms and conditions

of Verizon California with respect to the transferred exchanges, and NewLD requests that the

Commission allow it to adopt the prices, terms and conditions of VLD and VES. NewILEC also

requests that it be designated an Eligible Telecommunications Carrier (“ETC”) under 47 U.S.C.

Section 214. Verizon California is currently an ETC with respect to the wire centers being

acquired by NewILEC, and this ETC status should be transferred to NewILEC when it assumes

control of the facilities. NewILEC will provide the same services as Verizon California after the

proposed transaction closes. Like Verizon's current services, NewILEC's services contain each

of the service elements necessary for ETC designation, including each of those in 47 U.S.C.

Section 214(e). Like Verizon, NewILEC will comply with each of the ongoing compliance

25 If such approval can be granted as part of this application, subject to satisfaction of certain compliance requirements, then applicants request such approval. If necessary, however, NewLD or its designee will file a separate application for registration as an NDIEC pursuant to the procedures set forth in D.97-06-107, and will do so, if necessary, at an appropriate time closer to consummation of the transaction as a whole.

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requirements for ETCs under CPUC Resolution T-17002. NewILEC requests the Commission

grant it the same ETC status that Verizon California possessed prior to the acquisition.

CONCLUSION

Joint Applicants request that this Application be approved, without hearings, in

accordance with the schedule set forth above. Specifically, as part of the transaction, Joint

Applicants request: (1) transfer of Verizon West Coast’s CPCN to NCIH; (2) a new CPCN for

NewILEC for local exchange service to allow it to operate the seven former Verizon California

exchanges along the Arizona and Nevada borders (as well as its territories in Arizona and

Nevada) under the same terms; (3) NewILEC adoption of the prices, terms and conditions of

Verizon California for the transferred exchanges; (4) NewILEC designation as an ETC and

transfer of existing Verizon California status as such in the affected exchanges; (5) a new CPCN

for NewLD to provide interLATA/intraLATA resold telecommunications (except local exchange

services); (6) transfer of the long distance customers in the affected exchanges from VLD and

VES to NewLD.