**DA 03-66**

**Released: January 10, 2003**

**DOMESTIC SECTION 214 APPLICATION FILED FOR ACQUISITION OF ASSETS OF
YIPES TRANSMISSION, INC. AS PART OF BANKRUPTCY REORGANIZATION**

**STREAMLINED Pleading Cycle Established**

**WC Docket No. 03-01**

On December 16, 2002, Yipes Enterprise Services, Inc. ("New Yipes") and
Yipes Transmission, Inc. (Debtor-in-Possession) ("Old Yipes") (together
"Applicants"), filed an application pursuant to section 63.03 of the
Commission's rules,[^1] for consent to enable New Yipes to acquire the
assets of Old Yipes. Since April 19, 2002, Old Yipes has been operating
under the protection of the Bankruptcy Court for the Northern District
of California (San Francisco Division) pursuant to Chapter 11 of the
Bankruptcy Code.[^2] New Yipes has agreed to acquire the operations,
authorizations and assets of Old Yipes, subject to necessary approvals.
The proposed transaction will be accomplished by implementation of the
Plan of Reorganization ("Plan"), jointly sponsored by Applicants and
approved by the Bankruptcy Court on November 8, 2002.

Applicants assert that this transaction is entitled to presumptive
streamlined treatment pursuant to section 63.03(b)(2)(i) of the
Commission's rules because immediately following the transaction, (1)
New Yipes an its affiliates will hold less than a ten percent (10%)
share of the interstate, interexchange market; (2) neither Applicant
currently provides presubscribed local exchange service and immediately
following the transaction, New Yipes will provide local exchange
service, if at all, only in areas served by dominant local exchange
carriers (none of which are parties to the transaction) and; (3) none of
the Applicants or their affiliates are dominant with respect to any
service.[^3]

New Yipes is a Delaware corporation with principal offices located at
114 Sansome Street, San Francisco, California. At the time that the Plan
is implemented, New Yipes will be a wholly owned subsidiary of Yipes
Holdings, Inc. ("Yipes Holdings"), a Delaware corporation. Yipes
Holdings will, in turn, be owned by a number of institutional investors,
the largest of which include affiliates of Norwest Investing Funds, New
Enterprise Investing Funds, Sprout Investing Funds and J.P. Morgan
Partners Investing Funds ("Investors"). None of the Investors holds a
controlling interest in Yipes Holdings or, therefore, in New Yipes and,
as a result, ultimate corporate control of New Yipes will remain with
Yipes Holdings.[^4]

New Yipes states that it has the financial resources required to acquire
the assets of Old Yipes and provide service and assume responsibility
for the interstate operations of Old Yipes. In particular, Yipes
obtained commitment on a round of funding from its Investors in the
amount of approximately \$57 million. New Yipes has already received
more than \$40 million of this funding and New Yipes expects that it
will receive the balance of the funds after a second closing scheduled
to occur later this year. New Yipes expects that the most recent funding
round should suffice to allow the company to operate until New Yipes
turns cash flow positive, which is expected to occur near the end of
next year.

New Yipes also asserts that it has the managerial and technical
resources necessary to operate the interstate operations of Old Yipes
that New Yipes proposes to acquire. Because certain key members of Old
Yipes's former senior management team hold comparable management
positions with New Yipes, upon closing of the Plan, New Yipes will have
managerial qualifications similar to those of Old Yipes.

Old Yipes is a California corporation with principal offices at 114
Sansome Street, San Francisco, California. Old Yipes is authorized to
provide facilities-based competitive local exchange services in more
than ten states, and Old Yipes provides interstate services on a
deregulated basis.

Through implementation of the Plan, New Yipes will acquire the
interstate operations of Old Yipes. Thereafter, New Yipes will continue
to provide services to existing customers under the same rates, terms
and conditions of services as that service is currently provided. New
Yipes will continue to provide service under the "Yipes" brand name. As
a result, Applicants state that implementation of the Plan will be
virtually transparent to customers because they will experience no
change in the services they receive. In order to avoid customer
confusion, Applicants will provide pre-consummation notice of the Plan
to customers.

Applicants state that this application will serve the public interest.
In particular, Applicants assert that consummation of the Plan will
increase competition in the interstate telecommunications market by
reinforcing Applicants' status as a viable competitor. Applicants state
that the proposed transaction will allow New Yipes to build on the
foundation provided by Old Yipes and position New Yipes to compete
effectively as a leading provider of services using Gigabit Ethernet and
Internet Protocol. Furthermore, Applicants state that this transaction
will facilitate the ability of New Yipes to offer alternative
high-quality, competitively priced services to a substantial number of
potential customers in its operating areas under a refocused business
plan and with an ability to compete effectively with the incumbents and
other providers of telecommunications services.

Applicants state that existing Yipes customers, in particular, will
realize significant public interest benefits from consummation of the
Plan. In light of the precarious financial position of Old Yipes, the
proposed Plan will provide greater stability to customers who receive
services from New Yipes and ensure that those customers can continue to
enjoy high quality, affordable service without interruption. Moreover,
given that the Plan will not cause a change in the rates, terms and
conditions of services that Yipes customers currently receive,
Applicants expect that implementation of the Plan will be virtually
transparent to customers.

**[GENERAL INFORMATION]{.underline}**

The transfer of control application identified herein has been found,
upon initial review, to be acceptable for filing as a streamlined
application. The Commission reserves the right to return any transfer of
control application if, upon further examination, it is determined to be
defective and not in conformance with the Commission's rules and
policies. Interested parties may file **comments within 14 days** and
**reply comments within 21 days** of this notice.[^5] Unless otherwise
notified by the Commission, an applicant is permitted to transfer
control of the domestic lines or authorization to operate on the 31^st^
day after the date of this notice.[^6] Comments may be filed using the
Commission\'s Electronic Comment Filing System (ECFS) or by filing paper
copies. *See Electronic Filing of Documents in Rulemaking Proceedings*,
63 Fed. Reg. 24121 (1998).

Comments filed through the ECFS can be sent as an electronic file via
the Internet to \<http://www.fcc.gov/e-file/ecfs.html\>. Generally, only
one copy of an electronic submission must be filed. If multiple docket
or rulemaking numbers appear in the caption of this proceeding, however,
commenters must transmit one electronic copy of the comments to each
docket or rulemaking number referenced in the caption. In completing the
transmittal screen, commenters should include their full name, U.S.
Postal Service mailing address, and the applicable docket or rulemaking
number. Parties may also submit an electronic comment by Internet
e-mail. To get filing instructions for e-mail comments, commenters
should send an e-mail to ecfs@fcc.gov, and should include the following
words in the body of the message, \"get form \<your e-mail address\>.\"
A sample form and directions will be sent in reply.

Parties who choose to file by paper must file an original and four
copies of each filing. If more than one docket or rulemaking number
appear in the caption of this proceeding, commenters must submit two
additional copies for each additional docket or rulemaking number.
Filings can be sent by hand or messenger delivery, by commercial
overnight courier, or by first-class or overnight U.S. Postal Service
mail (although we continue to experience delays in receiving U.S. Postal
Service mail). The Commission\'s contractor, Vistronix, Inc., will
receive hand-delivered or messenger-delivered paper filings for the
Commission\'s Secretary at 236 Massachusetts Avenue, N.E., Suite 110,
Washington, D.C. 20002. The filing hours at this location are 8:00 a.m.
to 7:00 p.m. All hand deliveries must be held together with rubber bands
or fasteners. Any envelopes must be disposed of before entering the
building. Commercial overnight mail (other than U.S. Postal Service
Express Mail and Priority Mail) must be sent to

9300 East Hampton Drive, Capitol Heights, MD 20743. U.S. Postal Service
first-class mail, Express Mail, and Priority Mail should be addressed to
445 12th Street, SW, Washington, D.C. 20554. All filings must be
addressed to the Commission\'s Secretary, Office of the Secretary,
Federal Communications Commission.

**In addition, one copy of each pleading must be sent to each of the
following:**

(1) the Commission's duplicating contractor, Qualex International, 445
    12^th^ Street, S.W., Room CY-B402, Washington, D.C. 20554; e-mail:
    <qualexint@aol.com;> facsimile: (202) 863-2898; phone: (202)
    863-2893.

(2) Tracey Wilson, Competition Policy Division, Wireline Competition
    Bureau, 445 12^th^ Street, S.W., Room 5-C437, Washington, D.C.
    20554; e-mail: [twilson@fcc.gov](mailto:jmyles@fcc.gov), and

(3) Dennis Johnson, Competition Policy Division, Wireline Competition
    Bureau, 445 12^th^ Street, S.W., Room 6-A461, Washington, D.C.
    20554; e-mail: <dcjohnso@fcc.gov>, and

(4) William Dever, Competition Policy Division, Wireline Competition
    Bureau, 445 12^th^ Street, S.W., Room , 5-C266, Washington, D.C.
    20554; e-mail: [wdever@fcc.gov](mailto:dcjohnso@fcc.gov); and

(5) Nandan Joshi, Office of General Counsel, 445 12^th^ Street, S.W.,
    Room 8-A820, Washington, D.C. 20554; e-mail: <njoshi@fcc.gov>.

Filings and comments are also available for public inspection and
copying during regular business hours at the FCC Reference Information
Center, Portals II, 445 12th Street, SW, Room CY-A257, Washington, DC,
20554. They may also be purchased from the Commission\'s duplicating
contractor, Qualex International, Portals II, 445 12th Street, SW, Room
CY-B402, Washington, DC, 20554, telephone 202-863-2893, facsimile
202-863-2898, or via e-mail <qualexint@aol.com>.

For further information, please contact Tracey Wilson, at (202)
418-1394, Dennis Johnson (202) 418-0809, or William Dever, Competition
Policy, Wireline Competition Bureau at (202) 418-1578.

\- **FCC** -

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height="6.944444444444445e-4in"}

[^1]: 47 C.F.R § 63.03; *see* 47 U.S.C. § 214.

[^2]: *See* In re Yipes Transmission, Inc. and Yipes Transmission
    Virginia, Inc., Case No. 02-30750-DM (Bankr. N.D. Cal. (San
    Francisco)). Pursuant to section 63.03(d) of the Commission's rules,
    47 C.F.R. § 63.03(d), Old Yipes advised the Commission of the status
    of Old Yipes as Debtor-in-Possession by letter dated December 12,
    2002.

[^3]: 47 C.F.R. § 63.03(b)(2)(i).

[^4]: Although a number of investment companies have made investments in
    Yipes Holdings, only four entities hold interests greater than ten
    percent (10%) of Yipes Holdings. Those entities are Norwest Venture
    Partners IX, L.P., Sprout Capital VIII, L.P., J.P. Morgan Partners
    (BHCA), L.P. and New Enterprise Associates 10, L.P. Although
    collectively these entities own nearly eight percent (80%) of Yipes
    Holdings, the shares are distributed such that no entity owns or
    controls more than thirty percent (30%) of Yipes Holdings.
    Applicants assert that the four investors do not act in concert and
    none of these entities will exercise control over the day to day
    operations of New Yipes.

[^5]: *See* 47 C.F.R. § 63.03(a).

[^6]: Such authorization is conditioned upon receipt of any other
    necessary approvals from the Commission in connection with the
    proposed transaction.