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 PUBLIC  NOTICE  Federal  Communications  Commission  445  12  th  Street,  S.  W.  Washington,  D.  C.  20554  News  Media  Information  202  /  418-  0500  Fax-  On-  Demand  202  /  418-  2830  TTY  202  /  418-  2555  Internet:  http://  www.  fcc.  gov  ftp.  fcc.  gov 
 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  Commissions  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  Commissions  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 
 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  Commissions  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  XOs  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). 
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 XO  is  a  full-  service  provider  of  communication  and  information  services  to  business  customers  throughout  the  U.  S.  5  XOs  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  Barberrys  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 
 Chelonians  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  Highcrests  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  Rivers  holdings  of  XO  equity,  but  High  River  will  continue  to  hold  a  majority  of  XOs  shares  and  therefore  will  be  in  de  jure  and  de  facto  control  of  Reorganized  XO  after  the  rights 


 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. 
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 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  XOs  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  XOs  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 


 8  Pursuant  to  the  rights  offering,  certain  of  XOs  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  Rivers  equity  interest  in  Reorganized  XO  would  not  be  diluted  below  50  percent. 


 9  The  Companys  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  companys  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. 
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 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 
 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  Commissions  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 


 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. 
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 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  Commissions  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,  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;  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. 


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