29019.doc

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF THE APPLICATION OF VARTEC TELECOM, INC. FOR A CERTIFICATE OF PUBLIC CONVENIENCE AND NECESSITY TO PROVIDE LOCAL EXCHANGE TELECOMMUNICATIONS SERVICES. )
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CASE NO. GNR-T-01-20

ORDER NO. 29019
On August 31, 2001, VarTec Telecom, Inc. (“VarTec”) filed an Application for a Certificate of Public Convenience and Necessity to provide facilities-based and resold local exchange service within the State of Idaho. Headquartered in Texas, VarTec has provided interexchange telecommunications services in Idaho since 1993. In the Notice of Application and Modified Procedure issued on February 20, 2002, the Commission solicited comments regarding VarTec’s Application. Order No. 28952. The only party to file comments, Commission Staff, was reluctant to recommend approval of VarTec’s Application until it reviewed the Company’s response and received assurances that the Company will fully comply with the Commission’s Telephone Customer Relations Rules and other applicable requirements, both as a toll and local service provider. After reviewing additional information provided by VarTec, Staff recommended that VarTec’s Application be approved. Based on the comments, the law and the record, the Commission grants VarTec’s Application.
THE APPLICATION
VarTec initially intends to provide local exchange service primarily to residential customers. Application at 2. VarTec anticipates providing services that will include, but are not limited to: (1) basic residential and business local exchange services (exchange access service, flat rate service, measured rate service, operator access, etc.); (2) residential and business customer and class features (call waiting, Caller ID, call forwarding, etc.); (3) residential and business ancillary services (911, directory assistance, etc.); (4) private line services; and (5) data transmission services. Id. The Application states that VarTec will continue to offer interexchange telecommunications services to Idaho business and residential customers. Id. VarTec also proposes to offer “bundled” telecommunication service packages which include local exchange service, long distance and call management services (e.g., call waiting, caller identification). Id.
VarTec plans to provide service using a combination of facilities-based and resold services. According to its Application, VarTec intends to provide facilities-based services utilizing the unbundled network elements platform (UNE-P) of the incumbent exchange carriers and as such, does not intend to construct any new facilities at this time. Id. at 1-2.
Although VarTec will initially offer service only in areas where Qwest Corporation is the incumbent local exchange carrier, VarTec expects to expand its local exchange service offering to the State of Idaho during the second quarter of 2002. Id. at 1. VarTec does not plan to provide local exchange service in the service areas of Idaho incumbent local exchange carriers that qualify for the rural exemption pursuant to § 251 of the federal Telecommunications Act of 1996. Id. at 6.
STAFF COMMENTS
VarTec Telecom, Inc. is a privately held corporation that was issued a Certificate of Existence by the Idaho Secretary of State on November 10, 1999. Comments at 1. Its majority shareholder (80%) is a Mississippi corporation, CommuniGroup, Inc., which is wholly owned by Telephone Electronics Corporation. Id. According to VarTec, CommuniGroup is not involved in VarTec’s daily operations nor does it provide any type of influence on VarTec’s business planning. Id. at 2.
VarTec claims extensive technical and managerial experience and has submitted biographical information to demonstrate its technical ability to provide local exchange services. Id. It currently provides long distance service in the entire continental United States and Hawaii, and has provided intrastate long distance services in Idaho since 1993. Id. Staff noted that VarTec is authorized to provide local services in eight states and has applications pending in eight more. Id.
According to Staff, VarTec claims to be financially qualified to provide local and long distance services within Idaho, saying that it has access to the necessary financing and capital. Id. Its unaudited financial statements for each of the last three years, which were submitted as proprietary information, show a positive income after taxes and cash flow. Id. VarTec has announced its intention to purchase all of the authorized capital stock of Excel Communications, Inc., giving it indirect control of Excel, eMeritus, and Long Distance Wholesale Club long distance companies. All of these companies have price lists on file with the Commission. Id.
Staff comments noted that the Company stated in its Application and in its illustrative tariff that it will comply with all state and federal rules and regulations, including advance deposits, anti-slamming regulations and marketing practices. Id. at 3. Staff also indicated that VarTec has not yet negotiated its interconnection agreement with Qwest and will not initially require deposits or advance payments. Id. at 2.
Billing Disputes
VarTec has been providing toll service in Idaho for over eight years. From January 1, 2000 to March 11, 2002, the Commission’s Consumer Assistance Staff received 17 complaints regarding VarTec, the majority of which were billing disputes. Id. at 3. Staff’s review of customer complaints revealed allegations that VarTec bills customers for unanswered phone calls. Id. One customer indicated that VarTec was reluctant to provide credit for unanswered calls. Id.
Prior to filing comments, Staff discussed this issue with the Company and was awaiting a written response. Id. Both billing for unanswered phone calls and failure to give credit for disputed calls are violations of the Commission’s Telephone Customer Relations Rule 205. Id. Although billing for unanswered calls would not be an issue for customers with flat rate service, Staff noted that it could become an issue for measured service customers. Id.
Staff was reluctant to recommend approval of VarTec’s Application in this case until it reviewed the Company’s response and received assurances that the Company will fully comply with the Commission’s Telephone Customer Relations Rules and other applicable requirements, both as a toll and local service provider. Id. On March 28, 2002, VarTec timely responded to Staff’s production requests.
VarTec assures Staff that “it is not VarTec’s policy or intent to bill any customer for uncompleted or unanswered telephone calls.” Answer to Staff’s First Production Request at 1. VarTec admitted the possibility that a customer could be billed if a call was connected by some type of automatic answering or call forwarding device programming, e.g., answering machines, voice mail systems, fax machines, modems, or PBX switchboard facilities. For example, the failure of two modems to communicate may lead the customer to terminate a call before completing an electronic transaction; however, the two telephone lines involved did connect prior to the attempted modem communication, and that connection would register as a completed call. In some circumstances, a customer may be billed for what appears to be an unanswered call due to simultaneous or near simultaneous connection and disconnection.
Finally, VarTec stated that telephone companies with antiquated telephone equipment have the potential to send “false answering responses” to long distance carriers due to incompatibility with modern telephone equipment such as that used by VarTec. To minimize the chance that excessive ringing or busy signals will signal a connection, VarTec stated that it often instructs customers to hang up quickly. This instruction may have been misinterpreted by some customers as indicative of a technical problem in VarTec’s facilities and undermined the customers’ trust in VarTec’s billing system. However, VarTec maintained that its overall accuracy rate for billed calls using its “Hardware Supervision” technology is “greater than 99.999%.” Response to Staff’s First Production Request at 2. In the event that a customer unintentionally is billed for an unanswered call, VarTec stated that it would issue an adjustment for that call. Staff intends to monitor closely VarTec’s performance with respect to customer relations. As required by the Commission’s rules, any customer complaints must be resolved in a timely and satisfactory manner. With these assurances, Staff recommended that VarTec’s Application be approved.
COMMISSION FINDINGS
Based on the comments, the law and the record, the Commission grants the Application. When considering an application for a Certificate, the Commission must determine if the applicant has the necessary qualifications to provide service while still fostering competition in the local telecommunications market. Based upon our review of the filing and record in this case, the Commission finds that VarTec’s filing satisfies the requirements of the Commission’s Rules and Procedural Order No. 26665. Id. Thus, we approve VarTec’s Application for a Certificate of Public Convenience and Necessity to allow the Company to provide telecommunications services statewide. This is consistent with our previous Orders granting statewide authority to provide telecommunications services to carriers meeting the established requirements.

O R D E R
IT IS HEREBY ORDERED that VarTec Telecom, Inc. is granted a Certificate of Public Convenience and Necessity to provide basic local exchange services.
THIS IS A FINAL ORDER. Any person interested in this Order or in interlocutory Orders previously issued in this case 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. Within seven (7) days after any person has petitioned for reconsideration, any other person may cross-petition for reconsideration. See Idaho Code § 61626.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho, this
day of May 2002.

PAUL KJELLANDER, PRESIDENT

MARSHA H. SMITH, COMMISSIONER

DENNIS S. HANSEN, COMMISSIONER

ATTEST:

Jean D. Jewell
Commission Secretary

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Rule 205 states in part, “No person shall bill or cause another person to bill for unanswered or unaccepted telephone calls, telephone calls placed to a toll-free number, or telephone service or other service(s) or merchandise not ordered or otherwise authorized by the customer of record. Any charges for these services that appear on a customer’s bill shall be removed from the customer’s bill no later than two (2) billing cycles following notice to the telephone company…” IDAPA 31.41.01.205.

ORDER NO. 29019 1

Office of the Secretary
Service Date
May 15, 2002