28765.doc

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

in the matter of THE APPLICATION OF ALBION TELEPHONE COMPANY, ET AL, FOR AUTHORITY TO GUARANTEE $18,000,000 OF A $30,000,000 LOAN FROM THE RURAL TELEPHONE FINANCE COOPERATIVE TO SYRINGA NETWORKS, LLC. )
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CASE NO. GNR-T-01-09

ORDER NO. 28765

On May 30, 2001, Albion Telephone Company (Albion), Cambridge Telephone Company (Cambridge), Columbine Telephone Company dba Teton Telecom (Teton), Direct Communications Rockland, Inc. (Rockland), Fremont Telcom Co. (Fremont), Midvale Telephone Exchange, Inc. (Midvale), Rural Telephone Co. (Rural), and Silver Star Telephone Company, Inc. (Silver Star), (collectively “Applicants”), filed a Joint Application requesting authority to guarantee $18,000,000 of a $30,000,000 loan from the Rural Telephone Finance Cooperative (RTFC) to Syringa Networks, LLC (Syringa).
Applicants allege that the proceeds of the RTFC loan will be used to pay for Syringa’s construction of a high-speed fiber optic broadband telecommunications network in southern Idaho. The network will incorporate approximately 1,500 miles of fiber optic transport facilities equipped with Dense Wave Division Multiplexer (DWDM) fiber electronics. It will also include one or more ATM/Frame Relay switches and a tandem switch and SS7 facilities in Boise, Idaho.
The total cost of the project is estimated to be approximately $36 million. It will be funded in part by equity contributions from the Applicants and from the RTFC loan of approximately $30 million with loan guarantees from each Applicant. The RTFC loan will be secured by first priorty lean on Syringa’s assets and revenues. The loan guarantees and equity contributions for each of the Applicants are shown in Exhibit A to the Application.
The Applicants anticipate that the loan funds may be issued at various times as components of the project are completed and receive final RTFC approval. The loan funds are available to purchase the required 10% Subordinate Capital Certificates. Syringa will be required to
maintain the greater of $7.5 million in common equity capital or an amount at least equal to 20% of the total capitalization for construction of the fiber network at the time of each advance. The interest rate on the loan will be based upon the single rate pricing option of the RFTC standard monthly variable rate or fixed interest rate plus an additional 150 basis points. The term of the loan is ten (10) years.
STAFF COMMENTS
Staff recommended approval of the RTFC loan guarantees. Staff stated the transaction is a reasonable business endeavor but expressed two concerns regarding the potential impact of the guarantees on Idaho ratepayers. First, ratepayers may be at risk if Syringa defaults on the loan. To reduce this risk, Staff recommended that approval of the guarantees be conditioned that any loan payments made by the Applicants will be the responsibility of the respective shareholders and will not be carried by Idaho ratepayers. Second, Staff also expressed concern that this large network project might adversely affect Applicants’ rates for telecommunications services or their disbursements from the state Universal Service Fund (USF). Idaho Code § 62-610. Although the Applicants have not requested any increases in rates or USF disbursements to fund this project, Staff observed that major portions of the project may be used to benefit the unregulated operations of the Companies involved.
Staff also recommended that the Applicants file with the Commission those documents filed with and received from the RTFC including: (1) documents supporting the draw amounts; (2) documents updating project details; (3) financial covenant measures requirement filings; and (4) lease agreements between Syringa and the Applicants.
DISCUSSION
Based upon our review of the Application and the Staff’s recommendations, we grant authority for the Applicants to guarantee $18 million of the $30 million loan from the RTFC to Syringa Networks. We find that the reporting requirements requested by Staff should be adopted. In addition, we agree with Staff’s recommendation that any loan payments made under this guarantee will be the responsibility of the shareholders, unless the Applicants can demonstrate in subsequent rate proceedings that the broadband network serves their respective ratepayers. We further find that approval of the Application to guarantee the loan shall not be construed as authorizing any revenue recovery or increase from the state USF in connection with this project. The Commission has jurisdiction over this matter pursuant to Idaho Code § 61-901.

O R D E R
IT IS THEREFORE ORDERED that the joint Application for authority to guarantee $18,000,000 of a $30,000,000 loan from the Rural Telephone Finance Cooperative (RTFC) to Syringa Networks, LLC (Syringa) be, and the same is hereby granted in accordance with the terms set out above.
IT IS FURTHER ORDERED that the Applicants and Syringa comply with the reporting requirements set out in the body of this Order.
THIS IS A FINAL ORDER. Any person interested in this Order (or in issues finally decided by this Order) or in interlocutory Orders previously issued in this Case No. GNRT0109 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 or in interlocutory Orders previously issued in this Case No. GNRT0109. Within seven (7) days after any person has petitioned for reconsideration, any other person may cross-petition for reconsideration. See Idaho Code § 61-626.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this _______ day of July 2001.

PAUL KJELLANDER, PRESIDENT

MARSHA H. SMITH, COMMISSIONER

DENNIS S. HANSEN, COMMISSIONER

ATTEST:

Jean D. Jewell
Commission Secretary

vld/O:GNR-T-01-09_dh
Freemont’s portion of the loan guarantee will be covered in some other manner, i.e., additional contributions or guarantees, if necessary, by the telephone companies listed in Exhibit A.

ORDER NO. 28765 1

Office of the Secretary
Service Date
July 5, 2001