20001215_jh.doc

DECISION MEMORANDUM

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

FROM: JOHN R. HAMMOND

DATE: DECEMBER 15, 2000

RE: IN THE MATTER OF THE APPLICATION OF IPVOICE COMMUNICATIONS, INC. FOR A CERTIFICATE OF PUBLIC CONVENIENCE AND NECESSITY TO PROVIDE LOCAL EXCHANGE TELECOMMUNICATIONS SERVICES CASE NO. GNR-T-00-20.

On July 5, 2000, IPVoice Communications, Inc. (“IPVoice”) filed an Application for a Certificate of Public Convenience and Necessity to provide local exchange service within the state of Idaho. Notice of Application and Notice of Modified Procedure was issued on October 11, 2000. Staff was the only party to file comments.
BACKGROUND
The Company’s Application states that IPVoice was organized to provide resold and facilities-based local exchange and interexchange services throughout the service areas of U S WEST North, U S WEST South and GTE. To accomplish this initially IPVoice will utilize the facilities of incumbent LECs in Idaho. The Company also desires to provide facilities-based services but at this time has not determined the nature and extent of the facilities to be used.
Staff reviewed the Application submitted by IPVoice and found that it included all of the items identified by the Commission in Order No. 26665. IPVoice Communications, Inc. is a wholly owned subsidiary of IPVoice.com, Inc., a Nevada chartered development stage corporation begun in February of 1997.
The Application indicated the Company intended to provide a broad range of telecommunications services to both residential and business customers, including local exchange service, long distance services, data services and vertical and advanced features. The Company would provide service in the Qwest and Verizon service areas, and indicated it would not compete in the areas of rural telephone companies with exemptions. Services would initially be provided through resale of the incumbent's facilities, but the Company indicated it intended to use its own facilities in the future.
The parent company is principally involved in the area of Internet telephony. The parent company's primary source of income in 1998 and 1999 was from prepaid telephone cards and the sale of “gateways,” which are located in seven major metropolitan areas throughout the nation. The officers of both the parent company and IPVoice 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, IPVoice.com, Inc. for 1998 and 1999. The parent company is a “development stage enterprise,” and as is common for start-up companies, expenses currently exceed revenues by significant amounts. The parent company's accumulated deficit at the end of 1999 exceeds $2.5 million dollars. The auditor indicates in its Report that “the Company's financial position and operating results raise substantial doubt about its ability to continue as a going concern.”
STAFF RECOMMENDATION
Based upon the information in the Application, Staff maintains that the Company has failed to demonstrate it has the financial resources that may be necessary for the scope of the national and worldwide operations it proposes. Staff recommends the Company be required to post a bond or other form of financial security that is of a sufficient size that it would protect Idaho customers in the event of the cessation of Idaho operations by the Company. As the Company's illustrative tariff does not identify prices, and the Application does not provide significant information about the proposed extent of Idaho operations, Staff does not have reliable information upon which it can develop a recommendation for the amount of security that is necessary.
In the absence of such information, 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/customer level.
SUMMARY
Staff recommends the Commission approve the Application of IPVoice for a Certificate of Public Convenience and Necessity, subject to IPVoice providing the Commission with a bond or other form of financial security in accordance with the terms described above.
Commission Decision:
Should IPVoice Communications, Inc.’s Application for a Certificate of Public Convenience and Necessity by granted subject to the posting of a bond?

John R. Hammond

Staff: Wayne Hart

The services will be both switched and dedicated.
U S WEST has changed its name to Qwest Corporation and GTE has changed its name to Verizon Northwest.

DECISION MEMORANDUM 3