20020614Decision Memo.pdf

DECISION MEMORANDUM
TO:COMMISSIONERKJELLANDER
COMMISSIONER SMITH
COMMISSIONER HANSEN
JEAN JEWELL
RANDY LOBB
DON HOWELL
LYNN ANDERSON
JOE CUSICK
CAROLEE HALL
WAYNE HART
BIRDELLE BROWN
BEVERLY BARKER
RON LAW
TONYA CLARK
GENE FADNESS
WELDON STUTZMAN
WORKING FILE
FROM:DOUG COOLEY
DATE:JUNE 14,2002
RE:APPLICATIONS FOR BROADBAND EQUIPMENTTAX CREDIT.
BACKGROUND
In March 2002,the Commission received Applications from Custer Telephone
Cooperative,Inc.,Citizens Telecommunications Company of Idaho,Albion Telephone
Company,Filer Mutual TelephoneCompany,Cambridge Telephone Company,Inc.,Columbine
Telephone Company,Silver Star TelephoneCompany,Inc.,Midvale Telephone Exchange,Inc.,
Project Mutual TelephoneAssociation,and Direct Communications Rockland,Inc.to receive an
investment tax credit for eligible broadband equipment pursuant to Order No.28784 and Idaho
Code §63-3029I(4).To be eligible for the tax credit,the taxpayer must obtain from the
Commission an Order confirming that installed equipment qualifies for the tax credit.
DISCUSSION
Each of the companies stated that,during calendar year 2001,it installed various
components as part of its wireline broadbandnetwork for the provision of high-speed Internet
DECISION MEMORANDUM l JUNE 14,2002
access to customers in each company's respective Idaho service area.The companies also
indicated that high-speed access to customers began in 2001 at transmission rates from 128
kilobits per second (kbps)up to 1.54 megabits per second (Mbps).The followingparagraphs
summarize the equipment and expenses listed in each Application.
Custer TelephoneCooperative,Inc.Custer states that it has installed an Asynchronous
Transfer Mode (ATM)Switch,a router,a Digital Subscriber Line Access Multiplexer(DSLAM)
and Digital Loop Carrier (DLC)systems with supporting line cards and software,14 miles of
fiber optic cable and 15 miles of copper distribution cable in providingAsymetric Digital
Subscriber Line (ADSL)and High Bit Rate Digital Subscriber Line (HDSL)to customers in
Challis and Clayton,Idaho.Custer also capitalized the labor and overhead costs associated with
the installation of this equipment.Some examples of overhead costs include engineering,power
supply,and cabinet or vaults for field placement of the electronics.
Citizens Telecommunications Companv of Idaho.Citizens indicates that it has installed
an ATM switch,a router,a broadband access server,a Digital Subscriber Line (DSL)local
exchange terminal,line cards with supporting ports and cables,and supporting authentication
and testing software in providing ADSL broadband service to customers in McCall,New
Meadows and Cascade,Idaho.Citizens also capitalized the labor and overhead costs associated
with the installation of this equipment.
Albion TelephoneCompany.Albion indicates that it has installed a DLC system with
supporting line cards,ports,transceivers and a fiber terminal.Albion also states that it has
installed a DLSAM,routers that also include ATM functions,and supporting software in
providing xDSL broadband services to customers in Custer,Butte,and Oneida counties.
Albion also capitalized the labor and overhead costs associated with the installation of this
equipment.
Filer Mutual Telephone Company.Filer indicates that it has installed an ATM-based
access platform and several DSLAM's in providing ADSL broadband service to customers in
Twin Falls County,Idaho.Filer also capitalized the labor and overhead costs associated with the
installation of this equipment.
Cambridge Telephone Company,Inc.Cambridge states that it has installed fiber optic
cable and a DSLAM in providing ADSL broadband service to customers in Adams and
DECISION MEMORANDUM 2 JUNE 14,2002
Washington counties.Cambridge capitalized the labor and overhead costs associated with the
installation of this equipment.
Columbine Telephone Company.Columbine indicates that it installed fiber optic and
copper distribution cable,DSL-capable line cards and supporting equipment in providing ADSL
and HDSL broadbandservices to customers in Teton County.Columbine also capitalized the
labor and overhead costs associated with the installation of this equipment.
Silver Star Telephone Company,Inc.Silver Star states that it has installed over 230
miles of fiber optic cable and DLC equipment that facilitates the provision of ADSL and
Synchronous Digital Subscriber Line (SDSL)service to customers in Caribou,Bonneville,
Bingham and Bannock counties.Silver Star capitalized the labor and overhead costs associated
with the installation of this equipment
Midvale TelephoneExchange,Inc.Midvale represents that it has installed ATM-
supported DLCs,a router,fiber optic transceivers,and supporting ports and cables for providing
ADSL broadband service to customers in Midvale and Stanley,Idaho.Midvale capitalized the
labor and overhead costs associated with the installation of this equipment.
Direct Corununications Rockland,Inc.Direct indicates that it has installed fiber optic
cable,an ATM switch,a router,a DSLAM,,and line cards with supporting ports and cables in
providing ADSL broadband service to customers in Bannock,Power,and Caribou counties.
Direct capitalized the labor and overhead costs associated with the installation of this equipment
Proiect Mutual TelephoneAssociation.Project Mutual indicates that it has installed fiber
optic cable,fiber optic transceivers,a router,DSLAM's,and line cards with supporting ports and
cables in providing ADSL and HDSL broadband service to customers in Minidoka and Cassia
counties.Project Mutual also capitalized the labor and overhead costs associated with the
installation of this equipment
STAFF REVIEW
Staff has reviewed the list of proposed broadband equipment submitted by the companies
and believes the equipment is "necessary to the provision of broadbandservices and an integral
part of a broadbandnetwork"according to Idaho Code §63-3029I (3)(b)(i).Staff has had
discussions with several of the companies to clarify the nature of various pieces of equipment
DECISION MEMORANDUM 3 JUNE 14,2002
and has also been assured that the installation labor,overhead,and supporting equipment is
directly related to offeringbroadbandin Idaho.
STAFF RECOMMENDATION
Staff recommends approval of the Applications from Custer Telephone Cooperative,Inc.
Citizens Telecommunications Company of Idaho,Albion Telephone Company,Filer Mutual
TelephoneCompany,Cambridge Telephone Company,Inc.,Columbine Telephone Company,
Silver Star TelephoneCompany,Inc.,Midvale Telephone Exchange,Inc.,Project Mutual
TelephoneAssociation,and Direct Communications Rockland and further recommends that the
Commission forward the approving Order and copies of the Applications to the Idaho Tax
Commission.
COMMISSION DECISION
Does the Commission wish to confirm that the equipment in the Applications qualifies as
broadband equipment and forward the Applications to the Tax Commission?
g Cdoley
i:udmemos/Group Broadband memo
DECISION MEMORANDUM 4 JUNE 14,2002