20001115_jh.doc

DECISION MEMORANDUM

TO: COMMISSIONER HANSEN
COMMISSIONER SMITH
COMMISSIONER KJELLANDER
JEAN JEWELL
RON LAW
LOU ANN WESTERFIELD
TONYA CLARK
DON HOWELL
LYNN ANDERSON
RANDY LOBB
JOE CUSICK
WAYNE HART
BEVERLY BARKER
WORKING FILE

FROM: JOHN R. HAMMOND
DATE: NOVEMBER 15, 2000
RE: CASE NO. GNR-T-00-15, APPLICATION OF INTEGRA TELECOM OF IDAHO, INC., FOR A CERTIFICATE OF PUBLIC CONVENIENCE AND NECESSITY.

On May 2, 2000, Integra Telecom of Idaho, Inc. (“Integra”) filed an Application for a Certificate of Public Convenience and Necessity to operate as a provider of facilities-based basic local exchange and interexchange telecommunications services within the state of Idaho. Integra also intends to provide resold intrastate interexchange services. On October 18, 2000, the Commission issued a Notice of Application, Notice of Modified Procedure which required all written comments to be filed by the parties on or before November 8, 2000. Order No. 28545. The Commission Staff was the only party to file written comments.
BACKGROUND
Integra has applied for authority to provide facilities-based local exchange service, including, but not limited to local dial tone services, extended area service, high speed Internet access including DSL, dedicated and switched access long distance services and enhanced features such as voice mail and Caller ID. Integra asserts that it is amply qualified legally, financially and technically to provide telecommunications service in Idaho.
Staff reviewed the Application submitted by Integra and found that it included all of the items identified by the Commission in Order No. 26665. Integra Telecom of Idaho, Inc. is an Oregon corporation and a newly created affiliate of Integra Telecom, Inc., formerly known as OGIT Communications, Inc. (OGIT), also an Oregon Corporation. OGIT began in 1984 as a “shared tenant” service provider and is now the parent company of an ILEC operation in Minnesota, and CLEC operations in eight states serving approximately 50,000 access line equivalents.
The Application indicated that the Company intends to provide a broad range of telecommunications services, primarily to business customers, but also residential customers, including local exchange service, long distance services, data services and vertical and advanced features. The Company would provide service in the Qwest, Citizens and Verizon service areas, and indicated it was not seeking the authority to compete in the areas of rural telephone companies with exemptions. Services would be provided through the Company’s own switching facilities, along with leased facilities, UNEs and resale.
The officers of both the parent company and Integra have extensive experience in the telecommunications field as well as expertise in business management, marketing and capital development. Staff believes this expertise to be sufficient for the range of services the Company proposes to offer.
The Application included audited financial statements for the parent company for 1998 and unaudited statements for 1999, as well as financial projections for Integra. The Company requested this information be maintained as confidential. The Application highlighted the strong financial position of the parent company and included a request that the Commission not impose a requirement for an escrow account because of this fact.
Staff's review of the financial information in the Application found a number of indicators that supported the Company’s claim of the strong financial position of the parent company, especially in comparison to other competitive local exchange companies. However, expenses currently exceed revenues by significant amounts, and the amount is growing. In addition, a significant percentage of the parent company’s assets were identified as intangible, and primarily consisting of “the excess of purchase price over fair value of the net assets” the Company acquired when it purchased ILEC operations in Minnesota and CLEC operations in Minnesota, North Dakota and Wisconsin.
STAFF ANALYSIS
Based upon the information in the Application, Staff finds the financial information provided by the Company demonstrates that Idaho consumers choosing Integra as a service provider will be at some risk of the ability of the Company to continue to provide that service. Staff recommends the Company be required to post a bond or other form of financial security of sufficient size to protect Idaho customers in the event that it ceases operations in Idaho. Staff recommends an initial bond or other financial security amount of no less than $50,000, based upon an estimated average exposure of $50 per customer, and a maximum of 1,000 customers recruited in the first year. Staff recommends the Company be required to maintain the bond or other financial security at a level equivalent to no less than $50 per customer, and provide the Commission with quarterly reports identifying the number of customers. If the number of customers increases to a level that would bring the bond amount to less than $50 per customer, the Company would be required to provide the Commission with evidence that the bond or financial security amount had been increased to exceed the $50 per customer level.

COMMISSION DECISION
Does the Commission wish to approve the Application of Integra Telecom of Idaho, Inc. for a Certificate of Public Convenience and Necessity, subject to Integra providing the Commission with a bond or other form of financial security in accordance with the terms described above?

John R. Hammond
Deputy Attorney General

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DECISION MEMORANDUM 1