28340.doc

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF THE APPLICATION OF THE JOINT APPLICATION OF CENTURYTEL OF IDAHO, INC. AND CENTURYTEL OF THE GEM STATE, INC. TO REDUCE ACCESS RATES AND REBALANCE OTHER RATES FOR TELECOMMUNICATIONS SERVICE.
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CASE NOS. CEN-T-99-3
CGS-T-99-4

ORDER NO. 28340
On September 27, 1999, the Commission received a Joint Application from CenturyTel of Idaho, Inc. (CT Idaho) and CenturyTel of the Gem State, Inc. (CT Gem State) requesting authority to rebalance their local rates and implement extended area service (EAS) for CT Gem State customers. Both Companies are wholly-owned subsidiaries of CenturyTel, Inc. In this Order the name CenturyTel refers jointly to CT Idaho and CT Gem State as a single entity.
CT Idaho and CT Gem State are fully regulated Title 61 telecommunications companies. CT Idaho provides services to customers in the local exchanges in Salmon, Leadore and North Fork in north central Idaho. CT Gem State is the local telephone provider for customers in the exchanges in Richfield, Grand View, Bruneau and Grasmere/Riddle. Specifically, the Companies proposed to (1) decrease intrastate access rates consistent with the requirements of the federal Telecommunications Act of 1996 and Idaho Code § 62-623, (2) re-price local services to generate additional revenue to partially offset reduced revenues from lower intrastate access charges, (3) implement EAS for CT Gem State customers in Richfield, Grand View, Bruneau and Grasmere/Riddle, and (4) modernize tariff and service offerings by eliminating certain outdated charges. The Companies did not request a change in their authorized revenue requirement.
The Companies requested that the Joint Application be processed by Modified Procedure. On October 20, 1999, the Commission issued a Notice of Application, Notice of Modified Procedure and Order No. 28171 that established a procedural schedule, including public meetings. By that Order the Commission also suspended the proposed tariff revisions filed by the Companies with the Joint Application. Pursuant to the procedural schedule adopted by the Commission, public information meetings were conducted in Grand View, Salmon, and Richfield, Idaho. In addition, the Commission Staff filed written comments on November 5, 1999. U S WEST Communications, Inc. filed a Petition to Intervene, which was granted by the Commission, but U S WEST did not file written comments in the case.
Following receipt of customer input from the public meetings and the written comments, the Commission convened a public deliberation meeting on the issues presented by the Application and subsequent record. The deliberation meeting convened on January 10, 2000, and included representatives from Century Tel, the Commission Staff, and U S WEST. On February 8, 2000, Century Tel submitted revisions to the Joint Application in response to the Commission’s discussion during the deliberation meeting. Based on this record, the Commission issues this Order approving new rates for the Companies and implementing EAS for CT Gem State’s customers.

BACKGROUND
Federal and State Requirements.
As a part of the federal Telecommunications Act of 1996 (“Telecom Act”), Congress encouraged states to identify and reduce implicit subsidies in local exchange rates. Section 254 of the Telecom Act states that the availability of quality services at just, reasonable and affordable rates should be supported by “specific, predictable and sufficient” support mechanisms rather than by implicit subsidies hidden in above-cost rates for other services. 47 U.S.C. Section 254(b)(1), (b)(5). The Federal Communications Commission, recognizing that access charge reductions were necessary to facilitate competition in the telecommunications marketplace, encouraged the states to take steps to remove implicit subsidies that have long supported basic service:
[I]mplicit intrastate universal service support is substantial. States have maintained low residential basic service rates through, among other things, a combination of: geographic rate averaging, high rates for business customers, high intrastate access rates, high rates for intrastate toll service, and high rates for vertical features and services such as call waiting and call forwarding. . . . Congress intended that states . . . must in the first instance be responsible for identifying intrastate implicit service and support.

In the Matter of Access Charge Reform, First Report and Order, FCC 97-158, CC Docket No. 96-262 (May 7, 1997) at ¶11. Consistent with the goals of the Telecom Act, the Idaho Legislature directed the Commission to “determine a mechanism for removal of the subsidies from the rates of incumbent telephone corporations.” Idaho Code  62-623. The legislature specifically identified access charges as one of those implicit subsidies. The Joint Application was filed to address the requirements of Idaho Code § 62-623. In addition, the Application proposed to address Extended Area Service (EAS) issues raised in two pending cases: GNR-T-97-4, initiated in response to petitions for EAS filed by customers in the Richfield exchange, and GNR-T-99-2, initiated in response to petitions for EAS from customers in the Bruneau and Grand View exchanges. In both cases the customers petitioned for EAS to the regional local calling areas that border their local exchanges.

CENTURY TEL’S PROPOSAL
Following the Commission’s public deliberation on January 10, 2000, Century Tel on February 8, 2000, submitted written modifications to its initial proposal. The modifications were submitted in response to issues identified by Staff and customers as well as requests made by the Commission. Century Tel’s proposal as modified is discussed in this section.
Access Charges.
Access charges are fees paid by long distance companies to local telephone companies for long distance calls that originate and terminate in the local calling area. The Companies initially proposed to lower their composite switched access rates to $.06 per minute. Currently CT Idaho’s access rate is $.1599 cents and CT Gem State’s rate is $.13650 cents per minute. Century Tel stated the access rates reduction will conform to the federal goal of aligning traffic-sensitive and non traffic-sensitive costs and revenues. According to Century Tel, the proposed rate structure provides more flexibility for carriers that will benefit from a choice of dedicated (direct) or switched (common) transport facilities.
CenturyTel initially proposed to implement rate reductions in two steps — a first transitional step followed by full implementation in one year. The initial step would have reduced the composite access rate by one-half of the target amount to a composite rate of $.10934 for both companies. The second step would have been a further reduction of carrier common line rates to bring the composite rate to $.06 per minute. Century Tel asserted the proposed access rates would be much closer to the statewide average access rate in Idaho, and would also be closer to interstate rates, which is consistent with requirements of the federal Telecom Act. Century Tel subsequently modified its proposal regarding access charges to allow recovery of additional revenue to offset costs associated with implementing EAS. As modified, Century Tel’s proposal would reduce its composite access rate to $.06338 rather than $.06, and the rate reduction would be implemented in a single step six months following approval by the Commission. Century Tel also proposed increases in its local service rates in order to offset, at least partially, the reduction in revenues resulting from reduced access rates.
Local Service Rates.
The Companies proposed to increase their basic local business and residential rates in two phases to reach 125% of the statewide average rate in Idaho – rates required for participation in the state Universal Service Fund, although the Companies did not propose to receive draws from the USF. CT Idaho currently charges diverse rates for the Salmon, Leadore and North Fork exchanges, with urban one-party business rates ranging from $29.20 to $36.00 and urban one-party residential rates ranging from $15.20 to $17.20. Century Tel proposed to eliminate the differentials in these rates in the first phase of its plan.
The first proposed rate change would convert all remaining four-party service to single party service and bring residential service to $19.34 and business service to $36.14 for all exchanges. For CT Idaho’s residential customers, this represents an increase of $1.14 for the North Fork exchange, $2.14 for the Leadore exchange and $6.94 for the Salmon exchange. At the end of one year, the proposed second phase would increase all CT Idaho’s residential rates by $3.63 for residential and $1.94 for business exchanges, to reach $21.28 for residential and $39.77 for business customers.
CT Gem State’s residential customers in the Grasmere/Riddle exchange currently pay $4.75 per line, and under CenturyTel’s initial proposal would receive one-party service at $21.28 per month. Residential rates in the three other CT Gem State exchanges would increase from $9.40 per month to $21.28 for customers located in a base rate area. Business rates would increase from the current rate of $17.40 ($7.75 in Grasmere) to $39.77 for businesses located in the base rate area (approximately 40% of the businesses). CT Gem State also proposed to introduce its rate changes in two steps —an initial transitional step in which rates would increase to $12.76 for residential and $23.84 for business services, followed by full implementation in one year.
CenturyTel modified its rate proposal for residential service in the CT Gem State exchanges from the originally proposed amount of $21.28 per month to $24.10 per month, which CenturyTel stated is a standard for local residential rates in areas that receive expanded local calling areas. CenturyTel further proposed to modify the rate for residential service in the CT Idaho exchanges from the original amount of $21.28 per month to $21.75 per month. According to CenturyTel these changes to residential rates would offset a portion ($56,508) of the $108,853 cost to implement the proposed EAS. CenturyTel also modified its proposal to implement the rate changes in one step effective six months following issuance of a final order in this case. Century Tel asserted this will coincide with the proposed EAS conversions, and the single step rate change would be less confusing to customers.
Rural Additive.
The Companies originally proposed to implement rural additive charges to the monthly rates of customers located outside of a base rate area. The proposal was for a monthly charge of $6.00 to business customers and a $3.00 monthly charge to residential customers. CenturyTel modified the proposal to provide for a single common charge of $3.50 applicable to both business and residential customers located outside the base rate area. According to the Companies, a single charge of $3.50 per month achieves a revenue neutral result as compared to the original proposal.
Century Tel’s rural mileage additive would replace CT Idaho’s $1.00 per quarter mile rural mileage charge, which is capped at $12.00 per month, for service outside a base rate area. The current average mileage charge is approximately $9.50 per line. The Companies maintain that the rural additive properly reflects the higher cost of providing service in areas where geographic barriers exist.
Local Measured Service.
Century Tel also proposed to offer a Local Measured Service option for customers who do not make a large number of local calls. The rate for Local Measured Service would be $8.00 less than the fully phased in flat rated service, or $13.75 per month for CT Idaho residential service, $16.10 for CT Gem State residential service, and $31.77 for business measured service, and would include a 90-minute allowance for local calls. Local minutes of use in excess of the monthly 90-minute allowance would be billed at $0.03 per minute. CenturyTel estimated the Local Measured Service option would result in a revenue reduction of approximately $20,000 per year.
Pursuant to suggestions made at the deliberation session CenturyTel made two modifications to its local measured service proposal: to offer optional detailed billing at the rate of one cent per message, and to add a provision providing for a 90-day free change period. This modification would allow customers to change to or from local measured service without incurring change charges during a 90-day evaluation period.
Multi-Line Service and Miscellaneous Charges.
Century Tel also proposed to eliminate its multi-party service. Single party service has been available to customers for several years, but 18 business and 241 residential customers still receive party-line service. The Companies asserted that single-party service will benefit the customers by making features such as Caller ID and Last Call Return available and will also allow high speed data connections for internet and other new services.
The Companies’ original proposal also included reductions in charges for touch-tone service, directory assistance, and other services. The Companies proposed to eliminate the touch-tone additive of $0.70 per month since touch-tone is an integral part of modern telecommunications services and is provided by most switches at no additional cost to telephone companies. To more closely recover its costs to provide directory assistance, CenturyTel proposed to re-price directory assistance calls to $0.50 per call and eliminate the monthly free call allowance. The Company further proposed to re-price custom calling features and other services to be more consistent with statewide rates, and to price access lines for payphone, key and PBX services at regular business rates.
Expanded EAS for Grand View, Bruneau, Grasmere/Riddle and Richfield.
In its Application, Century Tel proposed to expand the local calling area of its CT Gem State customers in Grand View, Bruneau and Grasmere/Riddle by establishing EAS to the Mountain Home and Melba exchanges. Following the Commission’s deliberation session, Century Tel modified its proposal to expand the EAS for these customers to include all of the U S WEST Treasure Valley EAS region (including the Boise exchange but excluding the Payette, Weiser, and New Plymouth exchanges that were subsequently added). CenturyTel originally proposed to expand the local calling area for customers in its Richfield exchange by implementing EAS to the exchanges of the Magic Valley EAS region. The Company also modified its EAS proposal to provide that the EAS conversion take place six months following issuance of a final order in this case rather than twelve months.
The additional costs associated with expanding local calling for Grand View, Bruneau and Grasmere/Riddle to include the entire U S WEST Treasure Valley EAS region were identified by Century Tel to be $108,853 annually. The modifications CenturyTel proposed for its local service rates and access rates would recover these additional EAS costs. Century Tel also identified the net revenue effect of the proposed rates for both Companies as revised. According to the Companies, the net revenue effect of the proposal as modified is zero; that is, the proposal as modified generates the same amount of revenue as the original proposal.
Confirmation of Rate Base Area Boundaries.
As noted above, Century Tel’s restructuring proposal includes a rural additive charge for service provided outside of a base rate area. In response to a discussion at the deliberation session regarding the viability of the base rate area boundaries, CenturyTel agreed to re-evaluate those boundaries to confirm that they currently identify areas of customer clustering. CenturyTel represented that the most recent tariff filings delineating base rate areas were made in 1983 for both companies. Following the January deliberation meeting, CenturyTel stated it dispatched personnel to each of the local exchanges to determine whether there had been any intervening development or changes in customer dispersion to merit a change to the base rate area boundaries. The Company concluded there has been no development in any of the exchanges that would justify a revision to the base rate area boundaries. CenturyTel stated that the current base rate areas identify customer clustering that would normally be expected to correlate to cost of service efficiencies.
Staff Recommendations.
In general, Staff supported the Companies’ proposal. Staff stated the proposal is a reasonable compromise that (1) accomplishes the reduction in access charges required by Idaho Code § 62-623; (2) provides reasonable local telephone access to the services customers need on a regular basis by implementing EAS; (3) provides rates at a reasonable level and minimizes the rate impact on customers; and (4) does not include any request by the Companies for funds from the Idaho Universal Service Fund.
Staff recommended that the proposal submitted by CenturyTel be accepted with a few modifications, some of which were adopted by CenturyTel in the modifications to its proposal: (1) the Company should be required to issue a customer notice at least 30 days before the implementation of the rate changes; (2) customers should be given a 90-day trial period (ending three months after the new rates are implemented) to try the new measured service to determine whether it will work for them; (3) CenturyTel should modify its proposed tariff to restrict customers from mixing measured and flat rate service on the same premises; (4) CenturyTel should include in its tariff an optional item that provides measured service customers with call detail records. Staff also recommended that EAS be implemented for CT Gem State’s customers as proposed by the Company.

SUMMARY OF PUBLIC MEETINGS AND CUSTOMER COMMENTS
A total of 196 written comments were received from the communities of Grand View, Bruneau, Murphy and Oreana during the course of this proceeding. Of those, 185 people requested that their calling region be extended not just to include the cities of Mountain Home and Melba, but the entire Boise Treasure Valley region. Only six of the customers opposed inclusion into the Boise region primarily because of the added cost.
Approximately 350 people attended the public meeting in Grand View, Idaho on November 15, 1999. The majority of customers in attendance made it clear they desired that the entire Boise Treasure Valley calling area be included in their EAS region and that they were willing to pay an additional $8 for that privilege. Five customers at the meeting submitted written comments opposing the expansion of the EAS region to include the Boise Treasure Valley area.
The written comments received by the Commission reflect much of the same information that was received at the Grand View meeting. Many customers stated that expanding the calling area only to Mountain Home and Melba would be of little benefit to them. Several customers commented that the fertilizer companies, equipment dealerships and fuel companies are all located in the Boise area and are not available in Mountain Home. Seventeen of the 196 comments were received from the community of Murphy, whose customers live on the northwest fringe of CT Gem State’s service area. Several letters from Murphy customers reminded the Commission that their community is linked more directly, both geographically and economically, to the Nampa-Caldwell region and that residents have little or no ties to Mountain Home.
Approximately 50 people attended the public meeting held in Salmon on November 16. Much of the focus was directed toward the corporate earnings of CT Idaho or its long-distance services. Several of the comments made at the meeting related that rates are too high already and, because Salmon is an economically depressed area, people could not afford an increase in rates. Six written comments were received from CT Idaho customers in Salmon, Leadore and North Fork. All six opposed any type of rate increase. Staff concluded that the comments received from the public in the Salmon area can be explained by the fact that Century Tel is not proposing any EAS in the Salmon region.
Finally, approximately 50 people attended the Richfield meeting held on November 17, 1999. The most significant customer complaint was that customers did not want to wait a year before being able to call into the Magic Valley toll free. The second most often expressed complaint was that customers viewed the rate re-balancing as initially proposed as a way to pay for the EAS expansion for an entire year prior to implementation of the expanded calling area.

COMMISSION DISCUSSION, FINDINGS OF FACT AND CONCLUSIONS OF LAW
We note initially that the Century Tel proposal does not result in additional revenue or income being received by the Companies, and in fact reduces their revenue and income. It reduces access rates, removing some of the implicit subsidies that have historically been used to supplement local rates.
Richfield EAS.
The Commission previously assigned Case No. GNR-T-97-4 to consider the reasonableness of establishing EAS routes between the communities of Richfield and the communities of the Magic Valley EAS region. Century Tel’s current proposal addresses the same EAS routes identified in Case No. GNR-T-97-4, and would provide extended area service for Richfield customers to all the exchanges currently within the U S WEST Magic Valley calling region. Staff witness Wayne Hart’s testimony was pre-filed in that case on February 19, 1998, but the technical hearing was postponed indefinitely and thus Mr. Hart’s testimony was not officially placed into the record. Staff included Mr. Hart’s testimony in Case No. GNR-T-97-4 as an attachment to its filed comments in this case.
The Commission previously has identified calling volume and calling distribution as among the primary and secondary factors to be used when evaluating EAS calling areas. See Order No. 26311. To determine whether a community of interest exists to support EAS, the primary factors in addition to the calling data are as follows:
1. Geographic proximity (distance between exchanges);
2. The presence of geographic or other physical barriers (mountains,
rivers, valleys) between exchanges;

3. County seat relationship (are both exchanges in the same county);
4. The relationship to school districts (do both exchanges share the same school district);

5. The proximity to medical facilities and services;
6. The willingness of customers to pay increased rates.
The record shows that a strong community of interest exists between the community of Richfield and the other communities in U S WEST’s Magic Valley calling area. Strong ties exist with the hub of the region, Twin Falls, and also with the communities of Shoshone and Gooding, with significant ties into the community of Jerome. Staff in its comments recommended EAS for the Richfield customers to the entire Magic Valley region. The calling patterns of Richfield customers are spread relatively evenly among Shoshone, Twin Falls, Gooding and Jerome, indicating a significant community of interest between Richfield and each of these communities. We find that nearly all of the community of interest factors set forth in Commission Order No. 26311, which established guidelines and factors to be followed when evaluating EAS petitions in addition to the calling data, support extending the calling area.

Bruneau/Grand View/Riddle EAS.
CenturyTel in this case initially proposed expanding the local calling area of CT Gem State’s Bruneau, Grand View and Grasmere/Riddle exchanges to the exchanges of Mountain Home and Melba, but not the entire Treasure Valley EAS Region.
In response to signatures submitted on November 17, 1998 from approximately 250 customers in the Bruneau and Grand View area requesting EAS to Mountain Home, Boise, and the Treasure Valley calling region, the Commission opened Case No. GNR-T-99-2. However, because discussions regarding the Company’s rate restructuring proposal were initiated about the same time, no proceedings were scheduled and no testimony was filed in Case No. GNR-T-99-2. Staff’s comments in this case evaluated the calling data and community of interest standards presented in the request to approve EAS for the Bruneau, Grand View/Riddle customers.
In general, the calling data indicates that customers from the Bruneau, Grand View and Grasmere/Riddle exchanges place approximately one third of their calls into the region to the Mountain Home exchange, one third to the Boise Exchange, and the rest to the remaining communities in the U S WEST region. The average number of calls to the region per line per month exceeds 16 for residential users and nearly 22 for businesses, for a combined average of 17.5 calls per line. Residential callers from all three exchanges make an average of more than seven calls per line to Mountain Home, while business lines average almost eight calls per month. The average residential customer makes over four calls per month to Boise, with business lines averaging more than 6.5 calls per month, for a combined average of just under five calls to Boise per line per month. More than 52% of the customers in these three exchanges make two or more calls each month to the Mountain Home exchange, and more than 42% make an average of two or more calls to the Boise exchange. The calling data indicates that the majority of customers are likely to benefit from an EAS route to Mountain Home. In addition, because more than 40% of customers make two or more calls to Boise per month, customers will benefit from an EAS route to Boise.
The geographic and other community of interest factors also support implementation of EAS. The Grand View and Bruneau exchanges both share part of their border with the Mountain Home exchange. The community of Bruneau is approximately 16 miles from Mountain Home, while the Grand View community is about 23 miles from Mountain Home. The Grand View exchange also shares part of its northern border with the Melba exchange. The Grasmere/Riddle exchange borders the Bruneau exchange on the south. All three of these exchanges are located for the most part south of the Snake River, while the other exchanges in the Treasure Valley calling area are located north of the Snake River. Bridges to the north are located at the towns of Bruneau and Grand View with a third bridge located east of the Grand View exchange, south of the town of Melba. The highway access to the Treasure Valley exchanges for most customers is through Mountain Home, with the customers on the west end of the Grand View exchange using the highway through Melba.
Most of the customers in these three exchanges live in Owyhee County, with Murphy as the County seat. Murphy is located in the Melba exchange. Both the Bruneau and Grand View exchanges extend into Elmore County, and the County seat for those customers is Mountain Home. The Grand View exchange also extends into the southern end of Ada County. According to Staff, the Bruneau-Grand View School District reported a significant number of its students and teachers reside in the Mountain Home exchange.
Proximity to medical facilities and services is one of the reasons for EAS specifically identified on the petitions, and one of the most frequently mentioned reasons cited by individuals providing comments to the Commission. The only medical facility in these three exchanges is the Grand View Clinic, which is staffed by mid-level providers. Staff determined there are no doctors or dentists in these exchanges. The nearest hospital for most residents is in Mountain Home, which also has a number of general practice doctors, as well as dentists. Most medical specialists are only available in Boise, Nampa or Caldwell. For those residents on the west end of the Grand View exchange, the nearest hospital is in Nampa.
The record shows that only a few other businesses and services are available with a local call. There is one local bank, a couple of farm/ranch supply stores, a few grocery/mercantile stores and a few convenience stores. Accordingly, many of the services a household or business uses during its normal daily activities require a long distance call. These are farming and ranching communities and most of the parts and services that farmers may need to keep their equipment in good operating condition require a long distance call. Most of these services are available in Mountain Home.
We conclude that customers in these exchanges have a strong community of interest with Mountain Home, which provides most of the basic services customers use on a day-to-day basis but are not currently available without a toll call. Toll free calling to the Melba exchange will provide customers with greater access to their county seat. Additionally, although the community ties with Boise are not as strong, these communities are part of the greater Treasure Valley economy and thus customers must call Boise for many of the medical specialists or other specialty needs that are only available from metropolitan sources.
The Commission received the signatures of more than 240 customers who signed the petitions requesting EAS to the entire U S WEST Treasure Valley region. More than 220 indicated a willingness to pay increased monthly rates in order to call toll free to the Treasure Valley EAS region. Twenty percent indicated a willingness to pay more than $10 extra per month, 41% indicated they would pay between $5 and $10 more per month, 29% indicated between $3 and $5, with the remainder favoring less than $3 per month. These responses indicate a greater willingness to pay than the Commission has seen in other EAS cases.
Following the Companies’ and the Commission’s review during the deliberation session, CenturyTel modified its EAS proposal to expand the local calling area for its customers in Grand View, Bruneau and Grasmere/Riddle. Rather than adding only the Mountain Home and Melba exchanges, CT Gem State’s customers will be able to place local calls to the Boise EAS region (excluding Payette, Weiser and New Plymouth). The Commission finds it reasonable and appropriate to approve the proposed EAS for CT Gem State customers. The Commission Staff did a thorough job analyzing the calling data and community of interest standards for the requested EAS. The calling data and community of interest analysis support expanding the local calling area to the Treasure Valley EAS region.
Likewise, the calling data and the community of interest data supports approving EAS to the Magic Valley calling region for the Richfield customers, and the Commission therefore finds it just, reasonable and appropriate to provide EAS for the Richfield exchange customers. We also find that the proposed access charge reductions significantly reduce the revenue impact of EAS over these routes. In addition, as the Company’s overall proposal is not revenue neutral and EAS will be provided at less than full recovery of lost revenues, the actual cost to the customer for EAS is reasonable. We find that including these EAS routes as proposed by CenturyTel provides the customers with a valuable service at a reasonable price.
Approval of these EAS requests in this case addresses all the issues raised in the two cases previously opened to consider the customers’ EAS petitions. Accordingly, Case No. GNRT-97-4 and Case No. GNR-T-99-2 will be closed.
Access Charge Reform.
We next turn to what was the impetus for this case, the directive from the legislature to identify subsidies in the rates of incumbent telephone companies. The legislature specifically identified “access charges paid by intrastate interexchange carriers to incumbent telephone corporations” as rates kept artificially high by an implicit subsidy component. Idaho Code § 62-623. The Commission’s effort in recent years to lower access rates by reducing or removing this subsidy has resulted in the lowering of the state average for access rates from $.072 in 1994 to $.053 in 1999. The current access rates for CT Idaho and CT Gem State are $.1599 per minute and $.1365 per minute. The Companies propose to lower the rate to $0.06338.
Staff noted that the Companies’ access charges currently are among the highest in the state and are clearly priced above actual cost, and thus could be viewed as a form of subsidy. By bringing the composite rate for its access charges down to levels approaching the statewide average, the Companies’ proposal accomplishes much of what is required by Idaho Code § 62-623.
Based on the record in this case and the expressly stated intent of the legislature, we find the reduction in the Companies’ access rates to be fair, just and reasonable, and consistent with state and federal legal requirements. The current Century Tel access rates are well in excess of the state average for access charges. The new rates are closer to the actual costs involved in providing access for intraLATA carriers, and thus the reduced rates remove much of the implicit subsidy in the current rates.
Elimination or Reduction of Other Charges.
We also find just and reasonable the elimination or reduction of the other charges proposed by CenturyTel. The existing rural mileage charge of $1.00 per quarter mile creates unreasonable variations in individual customers rates and can add as much as $12.00 to a residential bill. The existing Touch Tone charge of $.70 should be eliminated as outdated and completely unrelated to any cost of service for Touch Tone dialing. The Commission also finds the Company’s proposal to re-price directory assistance, coin, key system and PBX services to be reasonable and compatible with the pricing goals of the Commission and the legislature.
Basic Local Rates, Measured Service Rates, and Rates for Custom Calling and Advanced Features.
Unfortunately, rate reductions in any service results in revenue reductions that must be recovered from other sources, so long as the Company’s revenues do not exceed its revenue requirement. The elimination or reduction in access charges, the rural mileage charge and other services will significantly reduce the revenue currently earned by Century Tel. The Company has proposed to recover the lost revenues from increases in basic residential and business rates. In its modified proposal, CT Idaho proposes to move residential rates to $21.75 per month and business rates to $39.77 per month. The proposed basic service rates for CT Gem State are $24.10 per month for residential and $39.77 per month for business services.
The proposed increases in basic service rates may be significant for some customers, but there are ways for many customers to mitigate the rate impact. The measured rate option proposed by CenturyTel provides some customers with a reasonable alternative to the higher cost for flat rate service, especially when viewed in light of the much larger local calling area for the CT Gem State customers. Measured service will provide a savings of $8 per month over flat rate service and includes 90 minutes of outgoing local calling per month without additional charge, with additional minutes over the 90-minute allotment priced at three cents each. These rates are very similar to those implemented by other independent telephone companies with basic service rates at or above the levels in this proposal. Century Tel projected less than 10% of the customers would choose the measured service option, which is well within the range expected with an increase in basic service rates. To facilitate customers moving from flat rate to measured local service, and to provide them with time to try the measured service option without a penalty, Staff recommended the Company be directed to waive any nonrecurring charges associated with such moves for a period of no less than 90 days.
In addition to the measured service option, recent revisions to the Idaho Telephone Service Assistance Program (ITSAP) have increased the amount of assistance provided and the number of customers who are eligible for assistance. Eligible ITSAP customers may receive credits to their monthly charges for local service that can total up to $10.50 per month. Customers qualifying for ITSAP and who also use measured rate services can obtain local service for less than $7.00 a month plus, after using more than 90 minutes of calling time, local calls at $0.03 per minute. ITSAP can provide real relief to low-income customers. Staff recommended that CenturyTel provide specific notice to customers regarding the measured rate option and the availability of the ITSAP program.
Although the proposed rate increases for basic service will be significant for some customers, we find them to be fair, reasonable and necessary for several reasons. First, the proposed rates eliminate wide variations in the current basic rate structures for CenturyTel customers. Second, all individual service will be upgraded to single-party service, and thus eliminate the inconvenience of multi-party service for many customers and allow provision of advanced services that require single-party line. This improvement is consistent with a provision of the federal Telecom Act that requires state commissions to “encourage the deployment on a reasonable and timely basis of advanced telecommunications capability to all Americans . . . by utilizing, in a manner consistent with the public interest, convenience and necessity . . . regulating methods that remove barriers to infrastructure investment.” 47 U.S.C. 706. Third, the increased rates more closely reflect the actual costs involved in providing service, which is the purpose behind removing implicit subsidies in existing rate structures. According to stated goals of the Telecom Act and recent state legislation, cost-based rates are necessary to encourage the opening of local markets to competition. As a corollary, the new rates are at or near the level necessary for CenturyTel to request state USF funds in the future, if necessary. The USF provides an explicit subsidy to help meet a company’s revenue requirement and thereby relieve upward pressure on rates in rural, high cost areas. Fourth, many customers, at least in the CT Gem State service area, will benefit from the implementation of EAS we also approve in this Order. Finally, the existence of other options will help mitigate the effect of the new, higher rates. Many customers may benefit from the relatively low rate for local measured service, and the greater benefits provided by ITSAP should significantly assist many customers. To ensure that the maximum number of customers benefit from these options, we approve Staff’s recommendation for notification to customers.
Rural Rate Additive.
CenturyTel modified its proposal to include a rural additive charge of $3.50 per month per line for both rural residential customers and business customers. Staff noted that averaging the costs of providing service in rural or high cost areas with the costs in urban areas has historically been considered an acceptable method of keeping rates reasonable for all customers and encouraging universal service. Although the Commission has eliminated rural charges in the rate structures of other companies, there is little question that rural lines cost the Company more to provide than urban lines. In addition, the proposed charges can be viewed as being consistent with the requirements of Idaho Code § 62-623, which calls for the removal of implicit subsidies from rates. We find the rural additive to be reasonable and just and therefore approve CenturyTel’s modified proposal for a single rural zone charge of $3.50 per month for residents and businesses located outside a base rate area. It is undisputed that costs of service are higher in more remote, less populated areas, and rural zone charges may establish rates more closely aligned with the costs of providing service.

SUMMARY
Based on the record in this case and our analysis, the Commission approves CenturyTel’s proposal to decrease its intrastate access rates, re-price and modernize its local telecommunications services, and implement EAS for its CT Gem State customers. Specifically, the Commission finds it reasonable, just and prudent for CT Gem State and CT Idaho to reduce their composite access rate to $.06338, effective six months from the date of this Order. The Commission also finds fair, just and reasonable the proposed local service rates of $21.75 for CT Idaho’s and $39.77 for business rates, as well as CT Gem States’ monthly rates of $24.10 for residential and $39.77 for business customers. CenturyTel must provide single-party service to all customers, an upgrade necessary for the deployment of advanced telecommunications services and furtherance of the stated goal of Section 706 of the Telecom Act. CenturyTel can implement the new rates six months from the date of this Order.
The Commission also finds it reasonable, prudent and just the rural additive of $3.50 per month for customers located outside the base-rate area. The Commission approves the base-rate area boundaries proposed by CenturyTel.
We also approve the local measured service proposed by CenturyTel. Local measured service rates for residential customers shall be $13.75 per month for CT Idaho customers and $16.10 per month for CT Gem State customers. Business local measured service rates in all CenturyTel’s exchanges shall be $31.77 per month. Customers selecting local measured shall receive 90 minutes of outgoing calls at no additional charge, and will be billed $.03 for each minute in excess of 90 minutes. Customers may switch to or away from local measured service without incurring switch charges during the 90-day period following implementation of the local measured service option. CenturyTel must notify customers of the local measured service option, as well as the availability of ITSAP assistance, and shall work with Staff in preparing the customer notice.
The Commission also finds it just, reasonable and prudent the changes CenturyTel proposes for Touch Tone service, Directory Assistance, Single-Party service, access lines for payphone, key and PBX services.
Finally, the Commission finds that the calling data and community-of-interest standards support implementing EAS for CT Gem State customers. Effective six months from the date of this Order, CenturyTel shall implement EAS for its Richfield customers to the Magic Valley EAS region, and implement EAS for its Grandview, Bruneau and Grasmere/Riddle customers to the Treasure Valley EAS region (excluding Payette, Weiser and New Plymouth).

ULTIMATE FINDINGS OF FACT AND CONCLUSIONS OF LAW
The Commission has jurisdiction to determine the rates for CT Gem State and CT Idaho, as well as the other issues in this proceeding pursuant to Idaho Code Title 61. The Commission finds the rates, charges and fees it approves in this Order to be fair, just and reasonable, and concludes that they should be adopted.
The Commission also finds as fair, just and consistent with the public interest the implementation of EAS for CT Gem State’s customers as discussed in this Order.

O R D E R
IT IS THEREFORE ORDERED that the proposal of CT Idaho and CT Gem State to decrease interstate access rates, re-price local services, implement EAS for CT Gem State customers, and modernize its tariff and service offerings by eliminating certain charges, all as discussed by the Commission in this Order, is approved. The changes shall be implemented six-months from the date of this Order.
IT IS FURTHER ORDERED that Case No. GNR-T-97-4 and Case No. GNR-T-99-2 are closed.
THIS IS A FINAL ORDER. Any person interested in this Order (or in issues finally decided by this Order) or in interlocutory Orders previously issued in Case Nos. CENT993 and CGS-T-99-4 may petition for reconsideration within twenty-one (21) days of the service date of this Order with regard to any matter decided in this order or in interlocutory Orders previously issued in Case Nos. CENT993 and CGS-T-99-4. Within seven (7) days after any person has petitioned for reconsideration, any other person may cross-petition for reconsideration. See Idaho Code § 61-626.

DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho, this
day of April 2000.

DENNIS S. HANSEN, PRESIDENT

MARSHA H. SMITH, COMMISSIONER

PAUL KJELLANDER, COMMISSIONER

ATTEST:

Myrna J. Walters
Commission Secretary

O:cent993_cgst994_ws

ORDER NO. 28340 19

Office of the Secretary
Service Date
April 12, 2000