gnrt0040.reply commentswsjwc.doc

WELDON B. STUTZMAN
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 3283

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 COMMISSION STAFF'S PROPOSAL FOR INSTALLATION OF A FIBER ROUTE BETWEEN RIGGINS AND GRANGEVILLE, IDAHO. )
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CASE NO. GNR-T-00-40

REPLY COMMENTS OF
THE COMMISSION STAFF

COMES NOW the Staff of the Idaho Public Utilities Commission, by and through its Attorney of record, Weldon B. Stutzman, Deputy Attorney General, in response to Order No. 28640, the Notice of Opportunity to File Reply Comments in Case No. GNR-T-00-40 issued on February 7, 2001, and submits the following reply comments.
On January 3, 2001, the Commission solicited comments on a proposal to use funds from the gain on the sale of Qwest northern Idaho exchanges to build a fiber route between Riggins and Lewiston, Idaho.
Staff continues to support this proposal and believes that installation of this route will bring many long-term benefits to the customers in this region as well as all of Idaho. Idaho can only benefit from having a continuous fiber route connecting the southern and northern parts of our state. Although installation of this route will not complete such a north-south connection, it will eliminate the longest and by far most costly gap. Written comments received from customers in this case reflect the same sentiments and are unanimous in their endorsement of this proposal.

Comments were received from Qwest, Avista Communications of Idaho, Citizens Telecommunications Company of Idaho, Verizon Northwest, as well as the Commission Staff. The comments raised concerns in four primary areas: the benefits to be derived from installation of the fiber route, concern that the result be competitively neutral, the accounting involved, and the need for an additional fiber route north of Lewiston. Staff would like to take this opportunity to address the questions and concerns raised in some of these comments.
In its comments, Qwest raised questions about the benefits that might come from this project and whether these benefits would accrue to the proper customers. In so far as benefits are concerned, Staff must reiterate its opinion that this gain money belongs to the ratepayers of these sold exchanges. As such, these customers should be significant if not primary beneficiaries of any proposed use of the funds. That said, it is difficult to guarantee specific benefits to the northern Idaho customers, however, some things do seem clear. There is currently no direct connection between these eight exchanges and the southern part of the state. Currently, all traffic is carried through Spokane and then down to Boise. The Staff Telecommunications Supervisor recently traveled these exchanges and talked to many customers who were unhappy with the quality of their Internet connectivity. Many of these customers wanted the opportunity for more competition in the area and believed that being connected to Boise would afford such an opportunity.
Certainly having a diversity of routes can help in this situation. While the Commission cannot guarantee immediate benefits, it can promote the infrastructure needed to encourage increased competition. This is an opportunity for the Commission to oversee infrastructure development that the marketplace has not addressed and probably will not address for some time. In the long term the northern Idaho customers can only benefit from being connected into Boise and the rest of southern Idaho.
Concerning the question of competition, Staff must reiterate the concerns it expressed in its initial comments. It is important that sufficient facilities, including a spare duct, are available to other carriers on this route and those other carriers be treated equitably. Competitors will certainly be better off with the installation of this route. They will have the ability to carry traffic north and south through the state on fiber optic cable, a capability that does not currently exist. The fiber cable will mean increased capacity, reduced route-mile requirements for leasing or installing facilities, and more reliable service because of the redundancy it provides. This increased capacity, decreased distance and improved connectivity between the northern Idaho exchanges should result in better service for customers by all providers in this area because of improved communications with Treasure Valley and the rest of southern Idaho.
One note of caution should be injected here, however. The Commission is considering only the placement of a 45-mile stretch of fiber cable between Grangeville and Riggins. While this is an important stretch it only connects these two points. Installation of a high number of fiber strands or spare ducts only helps a company to the extent it has other fiber with which to connect to this fiber. While the capacity of this route will be limited by the number of fiber strands that exist in the remainder of the north-south fiber route, this route will become an important link in Idaho's telecommunications infrastructure.
Staff has previously addressed the benefits to the communities of improved 911 service as a result of this installation. Concerning Qwest's comments, however, Staff believes that use of these funds solely for the purpose of 911 would be of marginal value. However, there can be no doubt that this is a significant ancillary benefit of this installation that cannot be overstated in its importance to the people of Riggins and Whitebird.
Staff anticipates that the accounting treatment for this transaction would be similar to that of the switch replacement in Lewiston. The money could be transferred into an Idaho intrastate regulatory liability account and then used to offset the intrastate cost of the fiber route when it is actually completed. However it is actually done, the ultimate effect will be to have a fully depreciated intrastate asset for the fiber route so that there will be no increase in intrastate rate base or depreciation expense as a result of this installation. Citizens' initial estimate for the total cost of the project is $3.8 million. Of that total, the intrastate amount will be somewhat less. To avoid uncertainty as to the offsetting amount, the Commission may want to cap the intrastate cost of this project at $4.0 million, which is over Citizens' total estimate. To the extent the intrastate cost of the project is greater than that, those costs would go into rate base. To the extent the intrastate cost of the project is less than that, the use of all remaining funds should be evaluated in a future proceeding before the Commission. When the project is complete, Citizens will file the final accounting entries and work order documentation with Staff for audit.
Staff, Verizon, and Qwest all mentioned that an additional fiber leg may be necessary to establish a continuous route going from Bonners Ferry to Boise and then on to eastern Idaho. Currently, there is no direct route between Lewiston and Genesee. Installation of fiber on this route would complete the fiber continuity from Bonners Ferry to Montpelier. On its face, this appears to be a project worth further examination. At this point, however, Staff has no information on the costs of this project but encourages the Commission to investigate the possibility. This, of course, is especially true if the Commission chooses to fund the fiber route between Grangeville and Riggins.
In summary, Staff believes that this project will have many positive effects on the customers in the eight sold exchanges as well as all of the state. The ability to transport increased amounts of data on a more reliable route addresses the goals of broadband deployment in rural areas spelled out by the Governor in this year's budget address. To ensure maximum benefit, the Commission must provide that this fiber is available to competitors on a competitively neutral, nondiscriminatory basis. Staff believes that all of the concerns raised in the comments have been addressed and that the Commission should approve installation of this fiber route upon completion of Qwest's sale of the northern Idaho exchanges to Citizens.

Respectfully submitted this day of February 2001.

_____________________________
Weldon B. Stutzman
Deputy Attorney General
Technical Staff: Joe Cusick

WS.JWC.gdk:uumisc/comments/gnrt0040.reply commentswsjwc

STAFF REPLY COMMENTS 4 FEBRUARY 28, 2001