20020718BasicPhone's Petition for Reconsideration.pdf

Jamie S.Osbome
Jonathan T.Williams
OSBORNE|CRAIG,P.L.C.
9625 Surveyor Court
Second Floor o i iL 8 0Manassas,Virginia 20110
Telephone:[phone]
Facsimile:[phone]
Email:jwilmrmaig m
ATTORNEYS FOR BASICPHONE,INC.
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )CASE NO.GNR-T-02-08
OF BASICPHONE,INC.FOR A )CERTIFICATE OF PUBLIC CONVENIENCE )BASICPHONE,INC.'S
AND NECESSITY TO PROVIDE LOCAL )PETITION FOR
EXCHANGE SERVICES IN IDAHO )RECONSIDERATION
BASICPHONE,INC.(hereafter "BasicPhone"or "the Company"),the Petitioner herein,
by and through the undersigned counsel,respectfully petitions the Idaho Public Utility
Commission (hereafter "Commission")pursuant to Rule 331 of the Commission's Rules of
Procedure,IDAPA 31.10.01.331,for reconsideration of Commission Order No.29067,served on
July 3,2002.As grounds therefore,BasicPhone states as follows:
EXECUTIVE SUMMARY
The Commission's refusal to accept BasicPhone's request for a waiver of Idaho's bond
requirement should be reconsidered because it is unreasonable,anticompetitive,contrary to
Idaho and federal laws,and erroneous.The Commission's waiver refusal is unreasonable
because there is ample evidence to support BasicPhone's financial wherewithal and engender the
BasicPhone,Inc.'s Petition for Reconsideration-GNR-T-02-08
Page 1
level of trust in the Company's financial stability necessary to forgo the bond requirement.The
waiver refusal is anticompetitive because it effectivelycreates a barrier to entry for BasicPhone
in Idaho.In creating this barrier,the Commission has acted contrary to the legislative intent of
the Idaho Telecommunications Act of 1988 (hereafter "1988 Act")and the provisions of the
1934 Communications Act,as amended by the Telecommunications Act of 1996 (hereafter
"1996 Act")which mandate the promotion of affordable telecommunications services for all
consumers through effective competition.The decision to refuse BasicPhone's waiver request is
erroneous in light of the recommendations of the Commission Staff (hereafter "Staff")to the
contrary based on the Staff's thorough evaluations of Petitioner's financial and other
qualifications.The waiver refusal is also erroneous given BasicPhone's statement that it does
not require advance deposits from its customers.For these reasons,the Commission should
reconsider its decision and grant BasicPhone's request for waiver of the bond requirement.
BACKGROUND
On May 2,2002,BasicPhone filed an Application for a Certificate of Public Convenience
and Necessity to Provide Local Exchange Services in Idaho (hereafter "Application")with the
Commission whereby it proposed to provide local residential,business dial tone and long
distance service on a prepaid basis.1 BasicPhone stated that it would operate as a non-facilities
based reseller of services of incumbent telecommunications carriers.2 BasicPhone requested a
certificate to provide service to the entire state of Idaho and indicated no plan to build facilities
in the future."BasicPhone represented that it was in good standing under the laws of Texas,
1 Application of BasicPhone,Inc.for a Certificate of Public Convenience and Necessity to Provide Basic Local
Exchange Service in Idaho at 1 (filed May 2,2002)("Application").
2
Id.
BasicPhone,Inc.'s Petition for Reconsideration -GNR-T-02-08
Page 2
where it is incorporated and located.4 lŠnSicPhone provided proof that it is authorized to do
business as a foreign corporation in the State of Idaho."Finally,BasicPhone stated that it does
not require advance deposits from its customers,making it cligible for a waiver of the
Commission's bond requirement for advance deposits.6
On May 30,2002,after reviewing BasicPhone's Application,the Staff issued its
Comments.'The Staff found BasicPhone's Application and Illustrative Tariff to be in
compliance with the Commission's Rules of Procedure and Order No.26665."As such,the Staff
recommended approval of BasicPhone's Application and Tariff along with its request for waiver
of the bond requirement.
On July 3,2002,the Commission issued its Order No.29067 (hereafter "the Order")
granting BasicPhone's application.However,the Commission did not grant BasicPhone's
waiver request and thus conditioned the issuance of BasicPhone's certificate upon the posting of
a bond by the Company.'°It is this failure to accept BasicPhone's request for waiver of the bond
requirement from which the instant Petition for Reconsideration comes.
[This space was intentionallyleft blank.]
4 Application at 1;see also Exhibit A to the Application.
s Id.at Exhibit B.
6 Id.at 4.
7 IDPUCStaff Comments,Case No.GNR-T-02-08(submitted May 30,2002)("Comments").
*Id.at 2.
Id.io IDPUC Order No.29067,Case No.GNR-T-02-08at 1 (served July 3,2002)("Order").
BasicPhone,Inc.'s Petition for Reconsideration -GNR-T-02-08
Page 3
PETITIONER'S GROUNDS FOR RECONSIDERATION
1.The Commission's waiver refusal is unreasonable because the burden it will place on
BasicPhone is unnecessary in light of the ample evidence supporting the Company'sfinancialwherewithalandindustryreputation.
It is clear from Section X of the Commission's Application"and from the text of the
Order that one of the Commission's main reasons for requiring an applicant to post a bond is "to
protect consumers in the event that the Company does not provide the services that its customers
have paid for."12 BasicPhone believes that this is a legitimate concern and agrees that the
posting of a bond may be necessary in cases where the Commission has a reasonable doubt as to
the financial stability of an applicant.However,BasicPhone respectfully disagrees that such a
doubt is reasonable regarding its own financial viability.
BasicPhone has worked diligently throughout its existence as a leading prepaid telephony
provider to build a solid industry reputation and an impeccable credit history.As Exhibits C and
D to its Application demonstrated,BasicPhone's financial standing is strong and in line with
what is expected for bond waivers.This is not simply BasicPhone's self-serving opinion.The
Staff,in its recommendation for granting BasicPhone's waiver request,"and Commissioner
Smith,in her dissent to the Order,both concurred with the argument that BasicPhone had met its
financial burden and should therefore have the bond requirement waived.14 Specifically,
Commissioner Smith stated:
"In its review of the Company's Application and accompanying materials Staff
found that the posting of a bond was unnecessary in this case as BasicPhone's
11 Section X of the Application for Certificate of Public Convenience and Necessity to Provide Basic Local
Exchange Service in Idaho states that,"If a company requires advance deposits by its customers,the company must
submit a signed copy of an escrow account with a bonded escrow agent or a security bond.The escrow or bond
shall be sufficient to meet customer deposit refunds in case of company default.""Order at 2.
13 Comments at 2
14 Order at 4.
BasicPhone,Inc.'s Petition for Reconsideration -GNR-T-02-08
Page 4
financial position was sound and it did not require advance deposits from its
customers.I agree with the Staff's recommendation..."
Therefore,given the financial data provided in BasicPhone's Application and the opinions of
Cornmissioner Smith and the Staff as to the soundness of this data,it was unreasonable for the
Commission to refuse BasicPhone's waiver request.
The Commission also argues that BasicPhone be required to post a bond "because it has
no history in the State."16 BasicPhone contends that if the Application is truly a precursor to
providing service in Idaho,it is inequitable to expect that a Company would have a history of
service in Idaho at the time the Company files its application.In fact,a lack of history would in
most cases be a prerequisite of the application.It is therefore unreasonable for the Commission
to single out BasicPhone's lack of history as a reason for refusing its waiver request.
Furthermore,the "lack of history"argument implies that BasicPhone is new to the local
exchange business and should therefore be looked at skeptically with regard to its ability to
provide such service to customers in Idaho.What this argument fails to take into account is that
BasicPhone is a nationallyrespected prepaid telephony provider that has spent a considerable
amount of time and resources establishing the exemplary service record it currently enjoys
around the country.In fact,BasicPhone is certified and operating without complaint in
Arkansas,Florida,Kansas,Louisiana,Mississippi,Missouri,Nevada,Oklahoma,Oregon and
Texas.This "national history"is further evidence of the unreasonableness of the Commission's
requirement that BasicPhone post a bond simply because it has never turned up a line in Idaho.
BasicPhone believes that the Commission would not grant waivers of the bond
requirement unless it believed this requirement imposed a burden on those forced to meet it.As
enforced on BasicPhone,this requirement will inflict an unnecessary and unwarranted financial
"Id.*Id.at 2.
BasicPhone,Inc.'s Petition for Reconsideration-GNR-T-02-08
Page 5
burden on the Company,both in terms of the bond itself and the lost productivity from the
Company's delayed market entry.The Commission should therefore avoid placing this burden
unnecessarily.It should be reserved for applicants possessing questionable financial data or
lacking an industry reputation.In the instant case,the Commission has refused BasicPhone's
waiver request despite evidence that the Company's financial wherewithal and industry
reputation is sufficient to engender the level of trust in its stability necessary to forgo the bond
requirement.Therefore,the Commission has placed this burden on BasicPhone unnecessarily,
and in doing so the Commission has acted unreasonably.
2.The waiver refusal creates a barrier to entry for Petitioner in Idaho,and as such is
anticompetitive and contraryto the legislative intent of the 1988 Act and theprovisions of
the 1996 Act that mandate the promotion of affordable telecommunications services for
all consumers through effective competition.
When they passed the 1988 Act,Idaho legislators made clear that there was a need to
protect and maintain "telecommunications at just and reasonable rates for all classes of
customers.""Similar to the 1988 Act,the hallmark of the 1996 Act was the promotion of
competition.In fact,Title I of the 1996 Act states that one of its purposes is "to make available,
so far as possible,to all the people of the United States,without discrimination...a rapid,
efficient,Nationwide...wire and radio communication service with adequate facilities at
reasonable charges."
To realize the pro-competitive goals of these laws,the legislators understood the inherent
need for multiple entrants in the various telecommunications markets.In fact,the Idaho
lawmakers stated that the very definition of effective competition in a given local exchange is
17 Idaho Code §62-602(1).
18 47 U.S.C.§15L
BasicPhone,Inc.'s Petition for Reconsideration-GNR-T-02-08
Page 6
having a significant number of customers with "scrvice provider choices.""Furthermore,the
1988 Act specifically sought to encourage "the development of open competition."20 With its
decision not to grant BasicPhone's waiver request,the Commission,in the words of
Commissioner Smith,has created a "barrier to competition"21 by hindering BasicPhone's entry
into the Idaho market.We concur with Commissioner Smith and believe this serves to limit the
potential for competition in Idaho and subvert the goals of the 1988 and 1996 Acts.
Given the recent state of telecommunications in the United States,where the bigger
companies are increasingly squeezing the smaller companies out of markets and out of business,
there is a need for renewed vigor on the part of state and federal regulators to uphold the
competitive ideals of these laws and continue to carry the torch for local competition.As the
industry rapidly re-concentrates,one group that stands to be hurt the most is prepaid customers.
Such customers are often overlooked or refused service by the bigger companies despite clear
legislative intent that all Americans are entitled to telephony service.BasicPhone is a company
that does not avoid such customers,but rather has established a solid business reputation
working to ensure that this class of customers has ample telecommunications services available
to it.
While the Commission reasons that the bond requirement is meant to "protect
consumers,"22 BasicPhone questions whether such a requirement will have the intended effect.
What the bond requirement will accomplish is the delayed entry of a competitor into the Idaho
market,a competitor that desires to serve an often-ignored segment of the market.The result
may be that the consumers the Commission is claiming to protect not only will continue to be
IdahoCode §62-602(2).
20 Id.at 62-602(4).
21 Order at 4.
22 Order at 2.
BasicPhone,Inc.'s Petition for Reconsideration-GNR-T-02-08
Page 7
ignored,but also will effectivelybe denied the price,service and other benefits inherent with the
inclusion of an additional competitor in the market.Therefore,in light of contrary legislative
intent and the risk of limiting BasicPhone's ability to reach an underserved segment of the
market,the Commission should reevaluate its failure to grant BasicPhone's waiver request.
3.The denial ofBasicPhone's waiver request is erroneous in light of the recommendationsofCommissionStafftothecontraryandBasicPhone's statement in its Application that it
does not require advance deposits.
BasicPhone understands that an important aspect of the Commission's Application
review process entails receiving a recommendation for or against approval by the Staff.The
Commission utilizes the Staffs'recommendations presumably because the Staff is thought to be
well equipped and experienced such that it may accurately evaluate and assess a company's
viabilityas a potential competitive provider in Idaho.In the instant case,the Staff concluded not
only that BasicPhone's Application should be accepted,but that the waiver request be granted as
well.23 Commissioner Smith believed the Staff undertook an adequate review of BasicPhone's
application and relied on the Staff's Comments in concluding that the Company's waiver request
be granted.24 BasicPhone therefore contends that the Commission made an erroneous decision in
choosing to contradict the findings of the Staff.
While the Staff agreed with BasicPhone that the waiver request should be granted,the
reason the Staff presented to the Commission as to why the Company was requesting the waiver
differed slightly from what BasicPhone actually stated in its Application.BasicPhone is
concerned that this may have impacted the Commission's decision to refuse the waiver request.
BasicPhone is aware that in Section X of the Application,the Commission mandates that a
23 Comments at 2.
24 Order at 4.
BasicPhone,Inc.'s Petition for Reconsideration -GNR-T-02-08
Page 8
company which "requires advance deposits by its customers...must submit a signed copy of an
escrow account with a bonded escrow agent or a security bond."2s While BasicPhone does ask
that its customers "prepay"for service one month ahead of time,the Company does not require
"advance deposits"from which service charges beyond that initial month would be drawn.In
other words,if the customer pays,the customer receives service,and any funds given to
BasicPhone by a customer are immediately applied to the upcoming month's service charges.
Consequently,customers are not required to,and the Company does not,maintain a reserve of
funds as envisioned by Section X of the Application.
In keeping with this business model,BasicPhone responded to Section X of the
Application by stating that it does not require advance deposits by its customers.26 Presumably,
this would obviate the need for the bond requirement as envisioned by Section X.However,
when the Staff presented its Comments to the Commission,it did not state that BasicPhone was
requesting the waiver because it does not require advance deposits.Rather,the Staff's
Comments asserted that BasicPhone requested the waiver because "[the Company]is a pre-paid
provider."27 By fOCUSing on the fact that BasicPhone is a prepaid provider,rather than the fact
that it does not require advanced deposits,the Staff mischaracterized the Company's eligibility
for the waiver.This may have prejudiced the Commission's decision.Therefore,BasicPhone
believes the Commission reached an erroneous conclusion in refusing the waiver request to the
extent that the Commission relied on this mischaracterization.
[This space was intentionallyleft blank.]
2s See infra note 5.
26 Application at 4."Comments at 2.
BasicPhone,Inc.'s Petition for Reconsideration -GNR-T-02-08
Page 9
CONCLUSION
Due to the demonstration of its financial viability,its exemplary industry reputation,the
lack of a requirement for advance deposits,the recommendations of the Staff,and in keeping
with the pro-competitive goals of the 1988 and 1996 Acts,BasicPhone hereby respectfully
requests that this Commission grant its Petition for Reconsideration,thereby reversing its
decision in Order No.29067 and granting BasicPhone's request for a waiver of the-
Commission's bond requirement.
Respectfully submitted this 16th day of July 2002.
OSBORNE CRAIG,P.L.C.
By /
J nathan T.illiams
torney for BasicPhone,Inc.
BasicPhone,Inc.'s Petition for Reconsideration--GNR-T-02-08
Page 10