20020822Qwest Comments.pdf

Mary S.Hobson (ISB#2142)
Stoel Rives LLP cap
101 South Capitol Boulevard -Suite 1900 LL AD 22 PM 4:45
Boise,ID 83702
Telephone:[phone] UTILi,a m a ogs¡QgFacsimile:[phone]
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF CASE NO.GNR-T-02-11CENTURYTELOFTHEGEMSTATE,INC.
AND CENTURYTEL OF IDAHO,INC.FOR
APPROVAL OF A TARIFF ADVICE
CONTAINING DEPOSIT REQUIREMENTS
BY INCUMBENT LOCAL EXCHANGE
CARRIERS FOR INTEREXCHANGE
CARRIERS.
COMMENTS OF QWEST CORPORATION
Qwest Corporation (Qwest),by and through its undersigned attorneys,provides the
followingComments pursuant to Order No.29089.
COMMENTS
The Commission has asked the parties to submit written comments on two aspects of this
issue:whether the deposit requirement is good public policy,and assuming that it is,2)what
implementation issues are associated with use of security deposits.In response to this request,
Qwest believes that,as a general proposition,deposit requirements can be valuable tools for local
exchange companies (LECs)in attempting to limit their risk for nonpayment.However,deposits
should be treated as only one method of providing security.The policy around when deposits
can be required should be carefully considered to avoid unnecessary burdens on interexchange
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carriers (IXCs)and disruption of service to telecommunications consumers.Qwest expands on
these points in it responses to the specific questions proposed in the Commission's order.
1)What is the level of risk that LECs are exposed to absent the requested
deposit policy and how can that risk be quantified?
There is no question that LECs face significant risk from nonpayment of charges
for access services.For example,WorldCom's bankruptcy was filed at a time when that
company owed in excess of $100 million to Qwest for access services and facilities provided
across Qwest's territory.It remains to be seen how that debt will be treated by the bankruptcy
court.There is substantial risk that Qwest will not recover the full amount of its pre-petition debt
and that Qwest may recover only a percentage of what it was owed on the filing date.
It should be noted that WorldCom operates as both an intra-and interstate carrier.
In Qwest's access tariff filed with the Federal Communications Commission (FCC),Qwest
currentlyhas a provision that permits it to require deposits from customers who have a proven
history of late payments or do not have established credit to make a deposit prior to or at any
time after the provision of service to the customer.That provision was not invoked in the case of
WorldCom.Qwest does not believe,however,that its risk,and that of other Idaho LECs,is
limited to companies whose financial problems are unknown or unsuspected.
2)Would it be proper to have state requirements regarding these proposed
security deposits that track those that may be endorsed by the FCC?
From Qwest's view,it may be appropriate to permit LECs to require security
deposits in a manner that is consistent with the FCC requirements reflected in,for example,
Qwest's tariff.However,there is not an exact parallel between the access services rendered
under the FCC tariffs and those that are under discussion here because interstate IXCs that
cannot meet the requirements of one access provider may have competitive alternatives (at least
for the transport portion of their access needs).On the other hand,when considering the service
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provided by the end user's chosen LEC to the IXC to access the end user,the IXC has no
alternative provider.This is one factor that argues for more flexible risk management
alternativesfor the LEC so that access is not totallyblocked for struggling IXCs.
3)If an IXC is providing both intrastate as well as interstate interexchange
services,would having a state standard and an FCC standard beproblematic?
Conflicting standards at the state and federal level could present problems for an
IXC.However,as mentioned in the response immediately above,being the sole provider of
access to the end user puts LECs in a position that requires careful consideration of how a
deposit requirement will be administered.It should also be noted that there is no "FCC
standard"in the form of a rule or generally applicable order at this time.Instead,incumbent
LECs (like Qwest)currently have deposit/discontinuance provisions in their FCC-approved
tariffs.While these tariffs comprise the current "standard",some of the incumbent LECs
(primarily BellSouth,SBC,and Verizon)are proposing to deviate from that.Since the FCC has
this subject under consideration,it would be premature,for the Idaho Commission to attempt to
create a standard in conformance with any particular federal requirement.An IPUC decision
adopting the present federal standard could frustrate rather than further the goal of consistency
between the jurisdictions.
4)Should small LECs be treated the same as large LECs concerning usage of
the terms of this proposed tariff?Commission experience has shown that
access revenues represent a larger portion of overall revenues for small
LECs than for large LECs.With that in mind,are small LECs at greater
risk than large LECs,therebyjustifying different treatment?
Qwest believes that the same standards should be applied to companies that are
regulated by the Commission as to the provision of access services.Qwest is constrained to
point out,however,that in its view,the Commission does not regulate Qwest's provision of
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access services and,therefore,the Commission need not approve any deposit requirement Qwest
may choose to implement.Competitive local exchange providers (CLECs)are similarly situated.
To the extent that the Commission is concerned that the impact on small LECs is
disproportionate to the cost of the provision of access services,it may be appropriate for the
Commission to consider the rate structure of these small companies to see that access services
are not relied upon to heavily subsidize costs of the provision of other services.
5)Does the current WorldCom bankruptcyfiling demonstrate the need for thispolicyorthefutilityofimplementingit?
Qwest hopes and believes that the WorldCom bankruptcy presents a relatively
unique situation in that the true financial condition of that company was not known.Qwest
believes that where payment historyor other relevant factors point to credit risk,LECs should be
permitted to implement appropriate risk prevention measures.These measures however,may
fall short of requiring the payment of large security deposits.
6)Is it appropriateto require a deposit from an IXC that has no history of late
payments regardless of its credit rating?
Although WorldCom may be a striking exception,Qwest believes that late
payments,missed payments,or lack of credit historyare the best indicators of credit risk,and are
therefore appropriate triggers for requiring limited security deposits.However,Qwest will
continue to review its current policies and evaluate whether modifications are necessary to
protect it from bad debt.Please see the discussion under item 8 below.
7)Would this requirementbecome a self-fulfilling prophecy if a financiallystrugglingcompanywererequiredtopayatwo-month deposit?
Aggressive enforcement of a deposit requirement against struggling companies
could indeed become a self-fulfillingprophecy.Within reason the Commission should create an
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environment that permits the Serving Carrier to work out of financial trouble with the Purchasing
Carrier.
8)If the Commission were to find that the proposed deposit policy was in the
public interest,what is the proper triggerfor determining credit worthiness?
As stated above,Qwest believes that missed or late payments are key indicators of
credit risk for access charge payments.In addition,a total lack of credit historycould be a factor
that justifies some form of security to LECs.However,in light of the Commission's question
immediately above,Qwest submits that the Commission should allow the Serving and
Purchasing carriers to develop alternatives that minimize the risk to the Serving Carrier.Such
measures could include shortening the payment cycle (i.e.requiring smaller payments more
frequently)and prepayment.
9)Under the second proposed condition in the tariff,where a carrier's billing
increases beyond the amount initially used to estimate a deposit,what size
increase will trigger a deposit?How big of an increase should trigger a
deposit?Also,over what period will this increase be determined:should it be
a one-month increase or a longer term,such as a three-month average?
Although the proposed provision has a some parallel in the Commission's
Customer Relations Rules,it does not appear to be entirely appropriate in this context.Where
retail residence or business customers greatly increase the amount of service they consume,such
increase could be evidence that the customer's service is being used without permission or that
the customer's use may exceed his ability to pay.These are grounds for concern that payment
may not be forthcoming.
In the case of consumption of access services,however,it is unlikely that
misappropriation of service underlies increased use.In addition,because an increase in IXC
traffic should translate into an increase in IXC revenue,there is no reason to assume mere
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increases,without more,signal greater credit risk.Of course,sudden extreme changes in usage
level of any service should probably be grounds for LEC inquiry.
Assuming that credit risk is already present such that deposits are appropriate in
the first place,the deposit should cover the reasonable risk to which the LEC is subjected.
Deposits should,therefore,be reviewed at regular intervals to assure that they continue to be
required and that they are maintained at an appropriate level.Qwest's federal tariff provides that
deposits will be refunded or credited to the account when the customer has established a one year
prompt payment record at any time prior to the termination of the provision of the service to the
customer.
10)If a required deposit is not paid,how will disconnection be accomplished?
How will end users be transitioned to a new provider and how will thatproviderbedetermined?Should customers be polled to see what their
preferences are or should they be allocated based on the current distribution
of carriers?What will be done to ensure that the transition is done in
accordance with the Commission's Customer Relations Rules?
This question gets to the very complex questions that surround enforcement of
security requirement provisions,although it sets out only part of the problem.Presumably if
security deposits are required and not paid,the LEC will be entitled to withhold service from the
IXC.In the case of IXCs that have pre-subscribed Idaho customers,the Commission's questions
point out some of the difficulties.These include replacement of a presubscribed IXC that the
LEC blocks as a credit risk without a deposit.In this situation,Qwest favors a plan under which
customers are given notice that they can no longer place calls using their presubscribed IXC.
Ideally,the IXC should provide this notice,but if that is not done,the IXC should,at a
minimum,provide a list of its subscribers so that the LEC can notify affected customers.
Customers should also be informed that they must contact the alternative IXC of their choice or
their LEC to establish another IXC.Customers who contact their LEC for help should be treated
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as new customers and given competitively neutral information about available IXC options.
Qwest,and presumably other LECs,have developed internal policies for handling customers
whose IXCs are no longer available since it is a situation that does arise from time to time.All
LECs and IXCs operating in Idaho remain responsible for complying with the Commission's
Customer Relations Rules.
However,the other side of the problem is where IXCs are blocked from
terminating traffic to a LEC's end users because of failure to provide appropriate security.In
this scenario Idaho customers are affected because they potentially do not receive calls,while
other customers in and outside Idaho are also affected since their call(s)will not be completed to
end users served by the Idaho LEC that has blocked the IXC.In the case of this latter group of
customers they may still be permitted to presubscribe to the IXC,but certain of their calls will
not be completed.This creates a tremendous opportunity for customer confusion.These
scenarios also create tremendous technical difficulties as LECs attempt to intercept and block
IXC traffic,or worse,try to force transiting carriers like Qwest to block traffic for them.There
are no easy answers to how to address this side of the problem.
Because of these difficulties,Qwest urges the Commission to consider
alternatives to the deposit requirement as discussed in response to question.
11)Are there possible alternatives to requiring a deposit from IXCs?Is a surety
bond a reasonable alternative?
Yes,Qwest supports the use of alternatives as discussed in response to question 8.
A surety bond is also a possible alternative.
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Respectfully submitted this 22nd day of August,2002.
Qwest Corporation
Mary S.son
Stoel Rives LLP,Attorneys for Qwest
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CERTIFICATE OF SERVICE
I hereby certify that on this 22nd day of August,2002,I served the foregoing COMMENTS OF
QWEST CORPORATION upon all parties of record in this matter as follows:
Ms.Jean Jewell,Secretary X Hand Delivery
Idaho Public Utilities Commission U.S.Mail
472 West Washington Street Overnight Delivery
Boise,Idaho 83720-0074 Facsimile
Pamela Donovan Hand Delivery
Centurytel of the Gem State,Inc.X U.S.Mail
P.O.Box 9901 Overnight Delivery
Vancouver,WA 98668-8701 Facsimile
Brandi L.Gearhart,PLS
Legal Secretary to Mary S.Hobson
Stoel Rives LLP
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