**DA 02-3197**

**Released: November 18, 2002**

**DOMESTIC SECTION 214 APPLICATION FILED FOR TRANSFER OF CONTROL OF XO
COMMUNICATIONS, INC., DEBTOR-IN-POSSESSION, AND ITS SUBSIDIARIES**

**STREAMLINED Pleading Cycle Established**

**WC Docket No. 02-360**

On October 22, 2002, XO Communications, Inc., Debtor-in-Possession ("XO"
or the "Company"), on behalf of itself and its subsidiaries, along with
High River Limited Partnership ("High River") (collectively, the
"Parties") filed an application pursuant to section 63.04 of the
Commission's rules,[^1] for consent to the transfer of control of XO and
its subsidiaries that hold blanket domestic section 214 authorization,
to a newly reorganized XO Communications, Inc. (Reorganized XO")
pursuant to a plan of reorganization.[^2] High River, a limited
partnership ultimately controlled by Carl C. Icahn, will acquire
majority control of Reorganized XO.[^3]

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 Reorganized XO will have a market share in
the interstate, interexchange market of less than 10 percent,
Reorganized XO will provide competitive telephone exchange services or
exchange access services (if at all) exclusively in geographic areas
served by a dominant local exchange carrier (LEC) that is not a party to
the transaction, and neither XO nor Reorganized XO is dominant with
respect to any service.[^4]

XO is a full-service provider of communication and information services
to business customers throughout the U.S.[^5] XO's product portfolio
includes: suites of voice offerings that include inbound and outbound
local and interexchange services, calling card services and
conferencing; private data networking services; integrated voice and
data services; Internet access services; and Web hosting services. XO
delivers these services over its own network of metropolitan fiber rings
and long haul fiber optic facilities, and through the use of facilities
or services leased or purchased from incumbent LECs.[^6] Since 1994, XO
has deployed metropolitan fiber networks in more than 63 markets in the
United States and abroad. XO is a Delaware corporation, as will be
Reorganized XO.

High River is a Delaware limited partnership engaged in the business of
buying, selling, investing, and holding securities and debt obligations.
Carl C. Icahn, a U.S.citizen, ultimately controls and has a majority
ownership interest in High River through his ultimate control and
ownership of its general and limited partners. The general partner of
High River is Barberry Corp. ("Barberry"), a Delaware corporation. Mr.
Icahn owns 100 percent of Barberry's stock. Barberry holds approximately
a 1 percent partnership interest in High River, which has two limited
partners. One limited partner is Chelonian Corp. ("Chelonian"), a New
York corporation. Mr. Icahn controls either directly or indirectly
approximately 99 percent of Chelonian's stock. Chelonian holds
approximately a 91 percent partnership interest in High River. The other
limited partner in High River is Highcrest Investors Corp.
("Highcrest"), a Delaware corporation. Mr. Icahn controls either
directly or indirectly approximately 99.5 percent of Highcrest's stock..
Highcrest holds approximately an 8 percent partnership interest in High
River.

Upon consummation of the proposed transfer of control, High River will
hold no less than an 80 percent equity interest in Reorganized XO.[^7] A
separate rights offering may dilute High River's holdings of XO equity,
but High River will continue to hold a majority of XO's shares and
therefore will be in *de jure* and *de facto* control of Reorganized XO
after the rights offering.[^8] The plan of reorganization will also
result in Meadow Walk, a Delaware limited partnership ultimately
controlled by Mr. Icahn, holding an approximate 1.4 percent equity
interest in Reorganized XO. Shortly after High River and Meadow Walk
acquire the stock of Reorganized XO, they may distribute such stock so
that it will be held by Cardiff Holding LLC ("Cardiff"). Cardiff is a
Delaware limited liability company which is ultimately controlled by Mr.
Icahn.

The transfer of control would occur as a result of a restructuring of XO
pursuant to a plan of reorganization -- the "Stand-Alone Plan."[^9]
Under the Stand-Alone Plan, the outstanding shares of XO stock will be
canceled, and \$500 million of the \$1 billion in existing loans under
XO's secured credit facility will be converted into 95 percent of the
new initial common stock of Reorganized XO, with the remaining \$500
million converted into a \$500 million pay-in-kind junior secured loan.
XO noteholders and general unsecured creditors collectively will receive
the remaining five percent of this initial common equity. As noted,
Reorganized XO may seek to obtain funding through a \$200 million rights
offering. Any shortfall from the rights offering may be covered by up to
\$200 million in new senior secured loans ranking senior to the new
junior secured debt, although no agreements for this financing have been
reached.

Applicants state that the reorganization of XO according to the
Stand-Alone Plan is critical to XO's survival. Applicants further assert
that this application would likely result in public interest benefits,
as it would allow a large competitive LEC to remain as a valuable
competitor and provider of telecommunications services. According to
Applicants, the reorganization of XO pursuant to the Stand-Alone Plan
would place Reorganized XO on firm financial footing and would thereby
preserve and strengthen competition in the telecommunications industry,
to the ultimate benefit of the public.

Applicants also state that the procompetitive benefits of the
Stand-Alone Plan would not be diminished by any anticompetitive effects.
Applicants state that no competitors would be eliminated as a result of
the transaction, and neither High River, Mr. Icahn, nor their affiliates
control or hold a substantial interest in any other telecommunications
carrier.

**[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.[^10] 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.[^11] 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) 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

(4) Imani Ellis-Cheek, Telecommunications Division, International
    Bureau, 445 12^th^ Street, S.W., Room 6-A739, Washington, D.C.
    20554; email: <iellis@fcc.gov>; and

(5) Zenji Nakazawa, Public Safety and Private Wireless Division,
    Wireless Telecommunications Bureau, 445 12^th^ Street, S.W., Room
    4-C401, Washington, D.C. 20554; email: <znakazaw@fcc.gov>; and

(6) 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
or William Dever, Competition Policy, Wireline Competition Bureau at
(202) 418-1578.

\- **FCC** -

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[^1]: 47 C.F.R. § 63.04.

[^2]: XO filed a voluntary petition for reorganization in the U.S.
    Bankruptcy Court for the Southern District of New York on June 17,
    2002. *See In re XO Communications, Inc.,* Case No. 02-12947 (AJG)
    (Bankr. S.D.N.Y.), filed June 17, 2002. Pursuant to Section
    63.03(d)(2) of the Commission's Rules, XO notified the Commission of
    the *pro forma* transfer of control of entities operating pursuant
    to domestic section 214 authority from XO Communications, Inc. to XO
    Communications, Inc., Debtor-in-Possession by letter dated June 19,
    2002.

[^3]: The applicants have also filed applications to assign or transfer
    control of XO's international section 214 authority, 91 LMDS
    licenses, ten 39 GHz licenses, and one Industrial/Business Pool,
    Conventional license, all of which will be processed separately. Any
    action on this domestic 214 application is without prejudice to
    Commission action on other related pending applications.

[^4]: *See* 47 C.F.R. § 63.03(b)(2)(i).

[^5]: XO has individual subsidiaries serving the District of Columbia
    and the following states: Arizona, California, Colorado,
    Connecticut, Delaware, Florida, Georgia, Idaho, Illinois, Indiana,
    Kansas, Kentucky, Louisiana, Maryland, Massachusetts, Michigan,
    Minnesota, Mississippi, Missouri, Nevada, New Jersey, New Mexico,
    New York, North Carolina, Ohio, Oregon, Pennsylvania, Tennessee,
    Texas, Utah, Virginia, Washington, West Virginia, and Wisconsin.

[^6]: XO states that its network includes the following: more than 2,750
    on-network buildings; access to an additional 63,000 buildings;
    fixed wireless licenses covering 95 percent of the top U.S. business
    markets; five data centers and a 24/7/365 network operations center;
    more than 350 DSL access points; over 70 public and private peering
    arrangements; nationwide OC-192 SONET and IP backbone; and more than
    22,400 route miles of fiber. XO states that it currently offers
    dedicated Internet access in 36 metropolitan POPs in 31 markets, DSL
    in 44 markets, and its intercity and Metro Area Networks span over 1
    million miles throughout 40 major U.S. cities, including the top 30.
    XO also provides resold international long distance services.

[^7]: No other shareholder is expected to hold 10 percent or more of the
    new initial common stock of Reorganized XO.

[^8]: Pursuant to the rights offering, certain of XO's creditors,
    including Meadow Walk Limited Partnership ("Meadow Walk"), and
    certain holders of equity interests will have *pro rata* rights to
    acquire up to 40 million shares of stock of Reorganized XO, after
    which the unexercised rights will be available to the holders of
    senior debt, including High River. However, even if all of these
    shares were issued to other parties, High River's equity interest in
    Reorganized XO would not be diluted below 50 percent.

[^9]: The Company's initial reorganization plan was based on a Stock
    Purchase Agreement ("Purchase Agreement"), dated January 15, 2002,
    by and between affiliates of Forstmann Little & Co. ("Forstmann
    Little") and an affiliate of Telefonos de Mexico, S.A. de C.V.
    ("Telmex") whereby those entities would invest \$800 million in
    exchange for 80 percent of the reorganized company's equity
    ("Forstmann Little/Telmex Plan"). Consummation of that transaction
    would have resulted in a transfer of control of XO from Craig O.
    McCaw and the existing shareholders of XO to the new shareholders of
    Reorganized XO, which would have included, as 10 percent or greater
    shareholders, Forstmann Little and Telmex. However, the Forstmann
    Little/Telmex Plan will not be implemented. XO and Forstmann Little
    have reached an agreement pursuant to which the Purchase Agreement
    will be settled. The termination of the Purchase Agreement is
    subject to Bankruptcy Court approval, for which application was made
    on October 15, 2002.

[^10]: *See* 47 C.F.R. § 63.03(a).

[^11]: Such authorization is conditioned upon receipt of any other
    necessary approvals from the Commission in connection with the
    proposed transaction.