20060821final_order_no_30116.pdf

Office of the Secretary
Service Date
August 21, 2006
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF
DIRECT COMMUNICATIONS STAR WEST,
INC. FOR A CERTIFICATE OF PUBLIC
CONVENIENCE AND NECESSITY TO
PROVIDE LOCAL EXCHANGE SERVICES
WITHIN THE STATE OF IDAHO
ORDER NO. 30116
CASE NO. DCS-05-
On August 9 2005 , Direct Communications Star West, Inc. ("Direct" or "Company
filed an Application for a Certificate of Public Convenience and Necessity (CPCN) with the
Commission. On July 7, 2006, the Commission issued a Notice of Application and Modified
Procedure requesting comments from interested parties. Order No. 30094. Comments were
submitted by Commission Staff and Qwest Corporation.
THE APPLICATION
In its Application, Direct stated that it currently provides broadband and dial-up
Internet access to over 3 000 residents and businesses in southeastern Idaho. Direct intends to
provide Voice over Internet Protocol (VoIP) telecommunications services to its current
customers and to potential customers in areas currently serviced by Qwest and Direct
Communications Rockland, Inc. ("Rockland"). The Company and Rockland, a Title 61 wireline
carrier in southeastern Idaho, are affiliated companies and share certain identical directors and
officers.
Direct is an Idaho corporation with corporate headquarters in Rockland, Idaho. The
Company has a Certificate of Incorporation dated February 23, 1993, and also a Certificate of
Good Standing issued by the Idaho Secretary of State on June 3, 2005. The Company has
provided financial information and the appropriate contact information for its registered agent for
service of process within Idaho. The Company also filed a revised illustrative tariff on June 29
2006.
COMMENTS
Staff Comments
Staff reviews all requests for a CPCN pursuant to Idaho Code ~ 62-604(b ),
Procedural Rules 111 and 112, and Procedural Order No. 26665. Through its review of the
ORDER NO. 30116
Application and numerous discussions with the Company, Staff determined that the Company
filing complies with the requirements of the Commission. However, Staff noted that the
Company indicated in its Application that Direct will compete with Rockland and Qwest.
Rockland is the Incumbent Local Exchange Carrier (ILEC) within the service territory and
receives federal and state universal service funding. Idaho Code ~~ 62-603(6) and 62-610.
While this competitive arrangement is "highly unusual " Staff did not believe it to be cause for
denial of the Company s Application. Staff Comments at 2. Staff, however, did believe that
some monitoring may be warranted to avoid any possible conflict between the companies. In its
Application the Company stated that it understands and agrees to comply with all Commission
rules (or request waivers for those believed to be inapplicable). Application at 6. Staff
maintained that the Company possesses the requisite financial , managerial and technical
qualifications necessary to operate as a provider of telecommunications services.
Based on its review of the Application, Staff recommended approval of the
Application with a waiver of the escrow account requirement until such time as the Company
decides to collect deposits. In the future, should the Company decide to collect deposits, Staff
recommended that the Company be ordered to comply with the escrow requirement as well as
the Commission s Rules for paying interest on deposits.
Qwest Comments
Qwest expressed concern regarding the effect of granting Direct's Application on
rural telecommunications competition in general, and in particular on customers of Direct
Communications Rockland and Idaho customers who pay into the Idaho Universal Service Fund
(USF).Qwest commented that rural telephone companies are currently afforded certain
protections against competition.Idaho Code ~~ 62-602(6).If rural companies such as
Rockland are now open to competition from non-regulated affiliates, Qwest submits that the time
has come to withdraw all special competitive protections that have sheltered these companies.
Qwest Comments at 3. Qwest acknowledged that the Idaho Legislature maintains authority to
enact or repeal statutes relevant to such protections, but recognized that the Commission plays an
important role in implementing competition in rural areas. Id.
Qwest also commented on the Company stated intention to compete with
Rockland. Qwest believes that Rockland customers may abandon Rockland service if they elect
to take service from Direct. If Direct replaces Rockland as a service provider, Rockland will
ORDER NO. 30116
likely need to seek additional sources of revenue. These additional sources could be a rate
increase from remaining customers or an increased draw from the Idaho USF. Id. at 4.
Qwest stated that it may be appropriate for the Commission to "impose additional
financial reporting and cost accounting requirements" on Rockland and the Company. Id. at 2.
It suggested that the Commission monitor the effects of competition between Rockland and the
Company.
COMMISSION FINDINGS
Based upon our review of the Application and the comments in this case, the
Commission finds that the information contained in Direct's Application satisfies the
requirements of the Commission s Rules and Procedural Order No. 26665. Thus, we approve
Direct's Application for a Certificate of Public Convenience and Necessity to allow the
Company to provide VoIP telecommunications services throughout Qwest's and Rockland'
respective service territories within the State ofIdaho. We further find it reasonable to waive the
requirement for Direct to possess an escrow account until such time as it begins to collect
deposits from its customers.
We also recognize that Qwest raised interesting issues in this case. In particular
Direct will compete with a sister company, Rockland, a rate-regulated Title 61 ILEc. While the
two companies employ different technologies, they will both offer dial-up services. Qwest
asserted that competition between Direct and Rockland may adversely affect Rockland'
revenues, and might result in Rockland seeking a rate increase or additional USF support.
Although these events might occur in the future, we do not need to address these issues now.
Our decision today is whether to issue a Certificate to Direct. The Commission will watch the
situation with interest to see how it develops. At this time, the Commission does not deem it
necessary to impose additional financial reporting and cost accounting requirements on Direct;
however, nothing in this Order waives our authority to impose such requirements in the future.
CONCLUSIONS OF LAW
604.
This Commission has jurisdiction over the Company pursuant to Idaho Code ~ 62-
This Commission has jurisdiction to issue a Certificate of Public Convenience and
Necessity pursuant to Idaho Code ~ 62-604(b).
ORDER NO. 30116
ORDER
IT IS HEREBY ORDERED that the Application of Direct Communications Star
West, Inc. is granted and the Company is issued a Certificate of Public Convenience and
Necessity to provide broadband and dial-up Internet access to residents and businesses in the
service territories of Qwest Corporation and Direct Communications Rockland, Inc.
IT IS FURTHER ORDERED that the requirement to possess an escrow account is
waived until such time as Direct begins to collect deposits from its customers.
THIS IS A FINAL ORDER. Any person interested in this Order 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. Within seven (7) days after any person has petitioned for
reconsideration, any other person may cross-petition for reconsideration. See Idaho Code ~~ 61-
626 and 62-619.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this ,;1./
day of August 2006.
MARSHA H. SMITH, COMMISSIONER
ATTEST:
Commission Secretary
O:DCS-05-cg2
ORDER NO. 30116