20060509Comments.pdf

CECELIA A. GASSNER
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
BARNO. 6977
Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5983
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE INVESTIGATION)
TO DETERMINE WHETHER IT IS
REASONABLE FOR FRONTIER
COMMUNICATIONS OF IDAHO TO
PROVIDE TELECOMMUNICATIONS
SERVICE TO CUSTOMERS LOCATED IN
THE TAMARACK RESORT.
CASE NO. CTC-O5-
COMMENTS OF THE
COMMISSION STAFF
COMES NOW the Staff of the Idaho Public Utilities Commission, by and through its
attorney of record, Cecelia A. Gassner, Deputy Attorney General, and submits the following
comments.
On March 15 2005, Tamarack Telecom filed an Application for a Certificate of Public
Convenience and Necessity ("CPCN") to provide facilities-based local exchange
telecommunications services within the Tamarack Resort, which is located in Adams and V alley
Counties. Tamarack filed an Amended Application on April 15 , 2005. Tamarack Telecom is
wholly owned by Tamarack Resort LLP, offering telecommunications services exclusively to
residential and business customers within the Tamarack Resort ("Resort"). The main service
offered by Tamarack is called Triple Play, which includes Voice over Internet Protocol (VolP) as
well as Internet and video services. This Triple Play service is offered using a technology called
Fiber-to-the-Home (FTTH).
On May 12 2005, the Commission solicited comments regarding the Company
Application. See Order No. 29783. Comments were received from the Commission Staff
STAFF COMMENTS MAY 9 2006
Mr. Matthew Castrigno, and another private citizen. Only Mr. Castrigno ' s comments opposed
granting Tamarack Telecom a CPCN. Mr. Castrigno felt that the cost of the bundles using the
FTTH technology was excessive and that he did not necessarily want the all-inclusive package of
video, VolP and Internet. When Tamarack introduced its Basic Combo Package, it included 32
video channels with two premium channels, VOIP Phone S MBS Internet Access and a fax line.
The installation cost for the Basic Combo Package is $99.00 with a monthly service fee of
$150.00. To be responsive to the concerns voiced in the Comments about the price of the
bundled package, on or about April 27, 2005 Tamarack introduced a telephone service only
package. This package required an installation fee of$75.00 (to install the single IP phone) and
then a $75.00 per month service fee. The $75.00 monthly fee includes the single line IP phone
service as well as all class and custom calling features.
After reviewing the Application and Comments, the Commission approved the
Application, finding that it complied with applicable law Idaho Code ~ 62-622, IDAP A
31.01.01.111 and .112, and Procedural Order No. 26665. Order No. 29808 at 3. In approving
the Application, the Commission noted that "there is no actual facilities-based competition in
local telephone service within the Tamarack Resort" and "while the local service offering
appears to be at very high rates, (the Commission has) no ratemakingjurisdiction over
(Tamarack Telecom), a competitive carrier under federal and state telecommunications law.Id.
On June 24, 2005, the Commission issued Order No. 29808 granting Tamarack Video &
Telecom LLC (Tamarack Telecom) a Certificate of Public Convenience and Necessity (CPCN).
On July 13 , 2005 , Mr. Matthew Castrigno filed a timely Petition for Reconsideration or
in the alternative, Petition for Order Requiring Provision of Telecommunications Services. Staff
filed an Answer to the Alternative Petition on July 20 2005 , arguing that the Petition for
Reconsideration should be denied but that the Commission should open a separate docket to
consider the Alternative Petition for telecommunications services from the incumbent local
exchange carrier (ILEC), Frontier Communications of Idaho (Frontier). On July 29, 2005
Mr. Castrigno filed a Reply to Staff's Answer stating that he had no objection to Staff's
recommendation. Mr. Castrigno s Reply to Staff's Answer stated that
, "
Mr. Castrigno is
satisfied that opening a separate docket would be an appropriate means of proceeding forward
and has no objection to Staff's overall recommendation." Reply at 2. The Commission
STAFF COMMENTS MAY 9 2006
subsequently denied the Petition for Reconsideration and opened a separate docket to consider
the Alternative Petition for telecommunications service from Frontier.
On August 11 2005 , the Commission issued Order No. 29845 opening Case
No. CTC-05-02. The purpose of this case was to determine whether it was reasonable to
require Frontier to provide the requested telecommunications service within the Tamarack
Resort.
As the incumbent local exchange carrier (ILEC), Frontier is obligated to provide
telecommunications services to any potential customer requesting such service within Frontier
certificated area. Idaho Code ~ 61-526. The Commission sought Staff analysis so as to decide
whether it should require Frontier to make any additions, extensions, or improvements to its
facilities that "ought reasonably to be made" or to require new facilities "to promote the security
or convenience of its employees or the public.Idaho Code ~ 61-508. The Idaho Supreme
Court has concluded that this requirement applies to areas within a utility s established service
area, and it also requires evidence showing that the utility will be insured a fair return on its
investment. Murray v. Public Utilities Commission 27 Idaho 603, 150 P. 47 (1915).
Moreover, as an eligible telecommunications carrier (ETC), Frontier has additional
service obligations it must meet in order to be eligible for federal universal service funding. This
Commission recently determined that these obligations include the obligation to provide service
upon reasonable request. See Order No. 29841 at 8-
The Commission, in Order No. 29845, directed the Staffto "conduct an investigation to
determine whether it is reasonable for Frontier to provide service to the Tamarack Resort." The
Commission also ordered that the investigation include "investment required to enable Frontier
to provide service and the effect such investment will have on the rates paid by its customers.
Finally, the Commission directed Frontier to address questions regarding the feasibility of
providing service to the customers in Tamarack Resort. See Order No. 29845 at page 2.
STAFF INVESTIGATION
On August 22, 2005 , Frontier Communications responded to Order No. 29845 regarding
the Company s willingness, and ability, to provide telephone service to Tamarack Resort
customers. In its response Frontier stated that it "is willing to serve customers within it's (sic)
certificated areas including Tamarack Resort, to the extent that it can acquire access to the
STAFF COMMENTS MAY 9 , 2006
customers and be compensated for all costs to serve the area." The Company provided two
possible scenarios under which it may be able to provide telecommunication service to the
Tamarack Resort customers.
In its first scenario, Frontier explained that it could provide service within the resort by
overbuilding Tamarack facilities. The Company stated that this would be cost prohibitive
because of the right-of-way issues within the privately owned resort as well as the extremely
high construction costs necessary to install facilities. Some of the costs discussed included
roads, sidewalks, curbs, gutters and landscaping replacement in addition to "utility lines, cables
pipes, etc., which have already been placed and would have to be identified, marked, worked
around, or possibly moved.
In its second scenario, Frontier explained that it could serve customers of the Resort by
interconnecting with the existing facilities of Tamarack. For this to occur, Tamarack would need
to allow Frontier access to its network at "reasonable rates." Another requirement would be that
Tamarack make personnel available to perform troubleshooting and be responsible for its part of
the circuits on a "timely basis." Frontier also explained that it would need to purchase and install
network equipment "to enable Tamarack's fiber-to-the-home facilities to interface with
Frontier s existing network." Frontier pointed out that this scenario would be a workable
solution if, as in scenario one, the Company were allowed to recover all its costs incurred to
serve those customers who live within the Resort area.
Finally, in its August 22, 2005 response to Commission Order No. 29845 , Frontier
cautioned that its costs to provide services might be prohibitive because of the lack of facilities
right-of-way access and that the expense of bringing facilities to customers could be excessive.
The Company also indicated that it has no agreement with Tamarack Resort to interconnect with
the resorts facilities and that it hasn t received expressed interest from enough customers to
justify the investments necessary to warrant the expenditures necessary for the electronic
equipment to collocate.
On August 26 2005 , Staff's First Production Request was issued to Frontier. In its
request, Staff asked the Company to provide "detailed cost analysis" showing how much the
Company anticipated it would cost to provide telecommunications services to customers within
the Resort. Specifically, Staff requested engineering diagrams showing plant facilities (conduit
fiber, copper, manhole covers and any other plant) the Company anticipated it would need to
STAFF COMMENTS MAY 9, 2006
provide facilities based telecommunications services to the customers within the Tamarack
Resort. Staff also asked the Company to provide another detailed cost analysis for collocating
and interconnecting with Tamarack's PBX and/or other necessary facilities.
On September 16 2005 , Frontier timely responded to Staffs First Production Request.
In its response, the Company indicated that it no longer had engineering diagrams of the facilities
installed within the Resort and that the engineers (with their best estimates) put together their
analysis to provide service within the Resort. The Company concluded that it would be very
costly and time consuming to overbuild Tamarack's facilities. Their initial analysis is provided
below:
FACILITIES BASED TELECOMMUNICATIONS SERVICES WITHIN THE RESORT
Using existing conduit within the resort:
Calix C7 equipment in Donnelly office
Calix C7 equipment at Tamarack
Spares for equipment
Site prep Engineering and installation
Copper cable to feed within Tamarack using their conduit
Labor to place in conduit
Splice points
Placement of splice points
$23 000.
000.
000.
000.
200 000.
100 000.
500.
45,000.
TOT AL COSTS $456,500.
The Company pointed out in its response that it would still need to obtain permission
from Tamarack to access existing conduit from Tamarack Resort in order to place Frontier
facilities within the conduit.
lithe permission to utilize Tamarack's existing conduit WERE NOT granted, Frontier
would then incur the following costs to place facilities directly in the ground:
Copper cable within Tamarack Resort based on:
Trenching within the complex
Asphalt Restoration
$1.2 - $2.0 MILLION
$61 000.
In order to place facilities directly in the ground, Frontier would also need to obtain right-
of-way within the Tamarack Resort, which could be another substantial expense that is not
included in this response. Frontier feels that these costs are substantial and may not be prudent
STAFF COMMENTS MAY 9, 2006
for the minimal number of customers requesting service from Frontier within the Tamarack
Resort.
Costs relating to interfacing with the Tamarack Resort facilities, interconnection
expenses and other incidental costs that Frontier believes it will incur are as follows:
GR 303 bay in Donnelly office
NTI Engineering and Installation
Company Engineering and labor
TOTAL COSTS
$66 900.
000.
000.
$80,900.
It is important to remember that currently, Tamarack Telecom and Frontier do not have
any interconnection agreements between them, and that estimates provided by Frontier do not
reflect charges that Tamarack may impose upon Frontier to interconnect facilities. Until such
time as the companies negotiate an agreement, these numbers are only estimates.
On August 26 2005 , Staff contacted Tamarack Resort's IT Director and informally
requested some cost estimates to determine what the Resort would charge Frontier for the use of
its network. On September 15 2005, Tamarack responded to Staff's informal inquiry. In its
response, Tamarack indicated that it had "invested almost $500 000 in infrastructure" to provide
its triple play services to the homes within the resort. Therefore, the Resort determined that they
would ask "about $1 OO/mo/home for someone to use our network." The Resort went on to
explain that this amount would be negotiated "based on the amount of bandwidth they would
require and the number of homes they would service.
SECOND PRODUCTION REQUESTS FROM STAFF TO FRONTIER
On November 4 2005, Staff issued its second set of production requests to Frontier. In
its request Staff was looking to see if any progress had been achieved between the companies
with respect to interconnection negotiations. Staff was also inquiring as to what costs Frontier
customers would be assessed to recover interconnection expenses and provision of services to
the Tamarack Resort customers. Additionally Staff asked if Frontier and Tamarack had further
discussed any feasibility factors for interconnecting the two companies and what costs would be
incurred in that situation.
On December 1 2005 , Frontier responded to Staff's Second Production Request in a
timely manner. In its response Frontier explained that it had held preliminary discussions with
STAFF COMMENTS MAY 9, 2006
Tamarack regarding interconnecting the two companies' facilities. Tamarack Resort had
indicated that it would require Frontier to "pay approximately $100.00 per line per month to
utilize Tamarack's outside plant facilities." Frontier determined that this cost, along with better-
understood interconnection expenses that the Company must spend to interconnect with
Tamarack Resort, resulted in expenses considerably higher than originally anticipated.
Frontier had done further research and analysis of the overall costs of investment that
would be necessary to interconnect with Tamarack's unique network. Frontier s new analysis
showed that, in addition to the previous estimates, the Company would also need the following
equipment in order to interconnect and "interface for voice services and co-locate a router for
data services at the Tamarack switching center.
GR-303 Software and hardware added to Frontier s Donnelly Central Office
Budgetary quotes from the vendor are as follows:
$66 120 Hardware and Software loaded costs650 Northern Telecom Engineering and Installation
000 Frontier engineering and labor
$77,770 TOTAL
Cisco 7206 Router placed at the Tamarack switch location to provide high-speed
Internet service
$32 130 Loaded Material
000 Frontier engineering and labor
$33,130 TOTAL
These costs, along with the estimates discussed above and the monthly fee that Tamarack
had determined it would charge for the use of its network, led Frontier to determine that it could
not provide affordably priced service to Tamarack's residents through this method. The
Company also explained to Staff that further discussions (with Tamarack) were considered
unlikely to change this determination, so no further discussions regarding interconnection were
scheduled to take place.
Staff had asked Frontier how it intended to recover its costs associated with providing
telecommunications services to the Tamarack Resort customers should this event occur. The
Company replied that it intended to implement its line extension allowance of $2 560.00 and
then "all non-recurring facilities charges in excess of this allowance would be due from the
connecting customers within the resort.
STAFF COMMENTS MAY 9, 2006
On December 6, 2005 , Mr. Castrigno , through his attorney, requested further information
regarding the line extension charge and the possibility of refunds. Mr. Castrigno also asked why
the Commission "doesn t require Tamarack to lower the rate it wants to charge Frontier.
With respect to the issue of line extension charges and the possibility of refunds, Staff
explained that Frontier s tariff language explains the process for applying the credit and provided
Mr. Castrigno with instructions on how to find the tariff for the parties to review. To address
Mr. Castrigno and his attorney s final inquiry as to why to the Commission does not require
Tamarack Resort to lower the rate it charges Frontier, Staff explained that it is a matter of
jurisdiction and that interconnection between companies is governed by Section 251 of the
federal Telecommunications Act of 1996. Specifically, Sections 251 (a), (b), and (c) spell out the
requirements of local exchange carrier. As a Competitive Local Exchange Carrier (CLEC),
Tamarack is subject to Sections 25l(a) and (b) but is not subject to (c) which applies only to
incumbent LECs. Because Tamarack is not subject to (c), the loops that it is offering to lease to
Frontier are not subject to the Commission s pricing authority and are market-based. An
invitation was offered to Mr. Castrigno and his attorney to meet with Staff to further discuss this
jurisdictional issue ifit was deemed necessary for them. Staffhas not heard from the parties
since that discussion regarding this offer.
Staff's counsel has spoken with Mr. Castrigno ' s counsel and conveyed that it is Staff's
belief that the Commission does not possess the authority to order Tamarack to lower its rates.
Counsel for Mr. Castrigno conveyed the Complainant's desire is to maintain the docket in the
hopes for bringing the resolution he sought.
CONCLUSION
Staff, Frontier and Tamarack have been diligent in responding to the issues raised by
Mr. Castrigno and his attorney. Staff appreciates the opportunity to resolve the issues the parties
have raised with respect to alternative telecommunications services within the Tamarack Resort.
However, Staff believes that this case should be closed.
As set out in Staff's investigation , and noted in the Commission s Order granting a
CPCN to Tamarack, this Commission has no ratemaking authority over Tamarack. See Order
No. 29808. See also Telecommunications Act of 1996, ~ 251. Moreover, the costs associated
with the provision of such services would be excessive and imprudent for Frontier to incur in
STAFF COMMENTS MAY 9, 2006
order to provide service to Mr. Castrigno and perhaps a very small number of customers within
Tamarack Resort.
Staff believes that Tamarack was responsive to the needs of the customers who did not
wish to subscribe to the Basic Combo Package when it offered the alternative Telephone (Single
IP Phone) package at a considerably reduced rate. Staff has had further discussions regarding
alternative telephone service offerings within the Resort. According to the Resort, there is a
cellular tower across the valley from the Resort where Nextel and Verizon offer cellular services
with a reliable signal. This cellular service allows residents and visitors yet another alternative
telecommunication service.
Staff is satisfied that the companies have been cooperative and worked very hard to find
an amicable resolution with this case. However, it is Staff's belief that it is neither reasonable
nor prudent for Frontier to provide service to Tamarack Resort. The investment requirement that
would enable Frontier to provide the service would be substantial and would result in excessive
rates paid by only a few customers at Tamarack Resort. Staff further believes that the companies
as well as the Commission have thoroughly investigated service alternatives to the Tamarack
Resort and that the resolution Mr. Castrigno is seeking cannot be ordered by the Commission on
the facts of this case. Therefore, Staff does not recommend that the Commission order Frontier
to provide service to the Tamarack Resort.
JA-
Dated at Boise, Idaho, this fZj day of May 2006.
Deputy Attorney General
Technical Staff: Carolee Hall
i :umise/eomments:etetO5 .2eeeh
STAFF COMMENTS MAY 9, 2006
CERTIFICATE OF SERVICE
HEREBY CERTIFY THAT I HAVE THIS 9TH DAY OF MAY 2006 SERVED
THE FOREGOING COMMENTS OF THE COMMISSION STAFF IN CASE
NO. CTC-05-, BY MAILING A COpy THEREOF, POSTAGE PREPAID, TO THE
FOLLOWING:
INGO HENNINGSEN MANAGER MARY S HOBSON
STATE GOVERNMENT AFFAIRS STOELRIVES LLP
CITIZENS COMMUNICATIONS OF IDAHO 101 S CAPITOL BLVD, SUITE 1900
3 TRIAD CENTER SUITE 160 BOISE, ID 83702-5958
SALT LAKE CITY UT 84180
SHELBY WEIMER
TAMARACK VIDEO & TELECOM
960 BROADWAY AVE
SUITE 100
BOISE ID 83706
BRAD M PURDY
ATTORNEY AT LAW
2019 N 17TH STREET
BOISE ID 83702
~~.
SECRETARY
CERTIFICATE OF SERVICE