20021016Reply Comments AT&T .pdf

LAWYERS
RECEIVED E
FILED O
2002OCT 16 AM 5:55
Davis Wright Tremaine L UC
UTILITíESCOMMISSION
ANCHORAGE BELLEVUE HONOLULU LOS ANGELES NEW YORK POKTLAND SAN FRANCISCO SEATTLE SHANGHAl WASHINGTON,D.C.MARK P.TRINCHERO
Direct(503)778-5318 SUITE 2300 TEL (503)[e-mail] 1300 SW FIFTH AVENUE FAX [phone]
PORTLAND,OR 97201-5682 www.dwt.com
October 15,2002
VIA UPS
Ms.Jean Jewell
Secretary
Idaho Public Utilities Commission
472 W.Washington
Boise,ID 83702-5983
Re:Case No.GNR-T-02-11
Dear Ms.Jewell:
Enclosed for filing are an original and seven (7)copies of the Reply Comments of AT&T for in
the above-referenced proceeding.
Thank you for your assistance.Please call me if you have any questions.
Very truly yours,
k P.Trinchero
MPT/djr
Enclosures
cc:Service List
G:\HOME\TRINM\ATT-CENTURYTEL\JEWELL.LTR4.DOC
Portland
Mark P.Trinchero :59DAVISWRIGHTTREMAINELLP'
Suite 2300
1300 S.W.Fifth Avenue COMMISSION
Portland,Oregon 97201
Telephone:[phone]
Facsimile:503-778-5299
Rebecca DeCook
AT&T Communications ofthe
Mountain States,Inc.
1875 Lawrence Street,Room 1575
Denver,Colorado 80202
Telephone:[phone]
Facsimile:303-298-6301
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )OF CENTURYTEL OF THE GEM STATE,)INC.AND CENTURYTEL OF IDAHO,)Case No.GNR-T-02-11INC.FOR APPROVAL OF A TARIFF )ADVICE CONTAINING DEPOSIT )REQUIREMENTSBY INCUMBENT )REPLY COMMENTS OF AT&TLOCALEXCHANGECARRIERSFOR)INTEREXCHANGE CARRIERS )
REPLY COMMENTS OF AT&T
Dated:October 16,2002
INTRODUCTION
Pursuant to Order No.29122,issued September 25,2002 by the Idaho Public Utilities
Commission ("Commission"),AT&T Communications of the Mountain States,Inc.("AT&T")
submits the following Reply Comments regarding the tariff advices filed by CenturyTel of the
Gemstate,Inc.and CenturyTel of Idaho,Inc.(collectively"CenturyTel")in which CenturyTel
proposes to change conditions under which it is permitted to request security deposits from all
access customers,including Interexchange Carriers ("IXCs").These proposed tariff
modifications would significantly expand the ability of CenturyTel to impose security deposits
on IXCs and have raised numerous legal,policy and implementation issues.The number and
importance of these issues required additional time,which the Commission granted by Order No.
29122,for thorough consideration by the parties,including AT&T.
After such review,AT&T continues to urge the Commission to reject the proposed tariff
revisions in their entirety because they are inconsistent with sound public policy,overbroad and
potentially discriminatory,and more importantly,because they are simply unnecessary-as
demonstrated by the lack of evidence or analysis set forth by CenturyTel to support them.
CenturyTel has failed to prove that the proposed revisions are needed to prevent significant
harm.
Alternatively,AT&T supports Staff's recommendation that the Commission deny
approval of CenturyTel'stariff advices without prejudice and that the Commission defer all
related legal,policy and implementation issues until after the Federal Communications
Commission ("FCC")has addressed such issues.'In either case,AT&T does not believe it is
'The FCC is moving quickly forward with a thorough investigation of many of the same issues raised in
this docket.Indeed,the FCC has recently suspended for investigation,the security deposit tariffs filed byBellSouth,Iowa Telecommunications Services ("Iowa Telecom"),Madison River Telephone Company,Verizon,SBC and NECA.See In the Matter of BellSouth Telecommunications,Inc.,Tariff FCC No.1,Transmittal No.657,Order,DA 02-1886 (Rel.August 2,2002);In the Matter of IowaTelecommunicationsServices,Inc.,Tariff FCC No.1,Transmittal No.22,Order,DA 02-1732 (Rel.July
17,2002);In the Matter of Madison River Telephone Company,LLC,Tariff FCC No.1,Transmittal No.
9,Order,DA 02-2583 (Rel.October 8,2002);In the Matter of Verizon Telephone Companies,TariffFCCNos.1,11,14,and 16,Transmittal No.226,Order,DA 02-2055 (Rel.Aug.22,2002);In the Matter
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necessary or appropriate to address the numerous implementation issues raised by the proposed
tariff revisions at this time.
COMMENTS
A.CenturyTel's Proposed Tariff Revisions Should Be Rejected Because
CenturyTelHas Made No Showing That TheyAre Necessary.
CenturyTel presented the proposed tariff revisions to the Commission with the bare
justification that greater security deposit requirements were needed because CenturyTel faced
"greater risks for uncollectibles"due to the current financial environment,particularly in the
telecommunications industry.July 12,2002 Cover Letter To Tariff Advice No.2002-9.
Consequently,the Commission asked CenturyTel to identify the level of risk that CenturyTel
faced absent the requested deposit requirements.CenturyTelreplied only that the level of risk is
unknown.CenturyTel Comments at 2.In Reply Comments,CenturyTel repeated the limited
of Ameritech Operating Companies,Tariff FCC No.2,Transmittal No.1312,Nevada Bell Telephone
Companies,Tariff FCC No.1,Transmittal No.20,Pacific Bell Telephone Company,FCC Tariff No.1,Transmittal No.77,Southern New England Telephone Companies,Tariff FCC No.39,Transmittal 772,
SouthwesternBell Telephone Company,FCC Tariff,No.73,Transmittal No.2906,WC Docket No.02-
319,Order,DA 02-2039 (Rel.August 16,2002);In the Matter of National Exchange Carrier Association,
Inc.,Tariff FCC No.5,Transmittal No.961,Order,DA 02-2141 (Rel.September4,2002).The FCC
determined that the tariff filings raised substantial questions regarding the lawfulness of the tariffs andwhetherthelanguageintheproposedtariffsisvague,ambiguous and is unjust and unreasonablein
violation of section 201(b)of the 1996 Telecommunications Act.Id.In the BellSouth and Iowa
Telecommunications Services proceedings,the FCC has issued orders outlining detailed issues forinvestigationthatwillbefurtherdiscussedherein.In the Matter of BellSouth Telecommunications,Inc.,Tariff FCC No.1,Transmittal No.657,WC Docket No.02-304,Order,DA 02-2318 (Rel.September18,2002)("Order DA 02-2318);In the Matter of Iowa Telecommunications Services,Inc.,Tariff FCC No.1,Transmittal No.22,WC Docket No.02-303,Order,DA 02-2317 (Rel.September 18,2002)("Order DA
02-2317).In the Verizon and SBC proceedings,the FCC issued orders just last week outlining nearly the
same detailed issues for investigation.In the Matter of Verizon Telephone CompaniesTariff FCC Nos.1,
11,14,and 16,Transmittal No.226,WC Docket No.02-317,Order,DA 02-2522 (Rel.Oct.7,2002)
("Order DA 02-2522);In the Matter of Ameritech Operating Companies,Tariff FCC No.2,Transmittal
No.1312,Nevada Bell Telephone Companies,Tariff FCC No.1,Transmittal No.20,Pacific BellTelephoneCompany,FCC Tariff No.1,Transmittal No.77,Southern New England Telephone
Companies,Tariff FCC No.39,Transmittal 772,Southwestern Bell Telephone Company,FCC Tariff,No.73,Transmittal No.2906,WC Docket No.02-319,Order,DA 02-2577 (Rel.Oct.10,2002)("Order
DA 02-2577").
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revenue information set forth by other local exchange companies ("LECs")in their comments,
but did not indicate that CenturyTel's uncollectibles had increased by any percentage.
CenturyTel Reply Comments at 2.
CenturyTel has presented absolutelyno evidence in this proceeding that it faces financial
harm that would justify the approval of new security deposit requirements.Comments that
financial difficulties and bankruptcies are increasing among telecommunications companies in
general are simply not responsive to the Commission's inquiry.Nor are they persuasive.
CenturyTel and the other LECs completely failed to counter comments by AT&T,Staff and
other parties indicating that,while CenturyTel'sproposed tariff revisions may create more IXC
bankruptcies,CenturyTelwill not be protected in any significant way by the security deposit
requirements.&_e.g.,Staff Comments at 2;AT&T Comments at 7-8.
The appropriateness of CenturyTel's proposed tariff revisions must be assessed with
regard to CenturyTel'sfinancial situation.It is the responsibility of the LEC requesting tariff
changes to demonstrate,in a quantifiable manner,the need for the changes in its security deposit
requirements.This is particularly true when the changes proposed would fundamentallyand
detrimentally change Commission policy,as discussed above.
The FCC has recentlyindicated that it will require detailed quantifiable evidence from
carriers trying to impose more stringent security deposit requirements in interstate tariffs.K,
Order DA 02-2318,pp.5-7;Order DA 02-2317,pp.4-6.Indeed,with regard to the
proposed security deposit requirements of both BellSouth and Iowa Telecom,the Commission
has issued an order in each proceeding announcing numerous issues for investigation.Id.
Among those issues,the FCC called for BellSouth and Iowa Telecom to each explain why it is
not currently protected against the risk of uncollectibles and directed BellSouth and Iowa
Telecom to each submit a daunting list of data and analysis:
Indicate level of uncollectible debts from interstate access services for the years
1990 to the present.
Address whether the variation in uncollectible levels for 2000 and 2001 is merely
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a normal fluctuationin uncollectibles or whether it reflects some long term trend
that warrants expanded security deposits.
Provide the totals of each of the individual defaults grouped into the following
ranges:less than $250,000;$250,001-$500,000;$500,001-$1,000,000;
$1,000,0001-$5,000,000;and more than $5,000,000.For each range,indicate the
number of defaulting entities.
Indicate the total dollar amount of security deposits it holds that are attributable to
interstate access services and the percentage relationship of that amount to
average monthly interstate access billings.
Indicate the level of uncollectibles that was included in its initial price cap rates
and indicate what modifications to each company's price cap ratemaking would
need to be made.
Describe its billing and collection procedures and explain any changes in its
billing and collection procedures or the accounting treatment of disputed amounts
on bills within the past two years that could have affected the levels of
uncollectibles.
Indicate the average length of time from the bill date until the bill is sent to the
carrier customer and what percentage of those bills,by number of entities and by
billed amount,is sent electronically.
Provide the number of customers that have been sent non-payment,
discontinuance of service,or refusal of new orders letters in the past year and the
average length of time from a bill's being delinquent until the letter was sent.
Provide the percent of carrier bills disputed,the percent of carrier-billed revenues
disputed,and the percentage of the disputed amounts that were successfully
disputed by the carrier for billing periods beginning with January 2000 to the
present.Each company should also indicate if it deducts disputed amounts from
amounts billed for purposes of determining whether a carrier has complied with a
REPLYCOMMENTSOF AT&T 5
deadline.
Indicate which services are billed in advance and how the percentage of advance
billings has changed over the past five years and how such change has affected
the risk each company changes.Each company should also discuss whether
different security deposit or advance payment provisions should apply depending
upon whether the service is billed in advance or in arrears.
Discuss the extent to which it has a debtor relationship with its customers and
how that may affect each company's credit risk.
Indicate the amount of unpaid bills of defaulting customers that have gone into
bankruptcy since January 2000 and the percentage of that amount that it has
recovered through bankruptcy proceedings.
Address whether each company's proposed tariff requiring a security deposit or
advance payment is consistent with the U.S.Bankruptcy Code and precedents
given that bankruptcy law contains provisions addressing payments to utilities by
debtors.
If either company believes that the risk of uncollectible debts has increased
permanently,it should explain what accounts for this change,e.g.,the general
economic climate or some structural change in the market.If the change is
structural,each company should discuss whether there are other methods to
address the risk.
Explain how newly proposed tariff terms are each valid predictors of the
likelihood of a customer paying its access bills.
Provide data on the payment characteristics of defaulting interstate access
customers during the year prior to the time the account was 90 days overdue.
Provide data,to the extent available,on the level of uncollectibles of other
regulated utilities,or in the broader marketplace.Discuss the means those
businesses use to address the risks of default,especially how they manage bad
REPLYCOMMENTSOF AT&T 6
credit risks while continuingto provide goods or services to the customers.&
Order DA 02-2318;pp.5-7;Order DA 02-2317,pp.4-6.
The FCC is clearly requiring BellSouth and Iowa Telecom to make a comprehensive and
detailed showing of potential harm.It is also requiring these carriers to demonstrate with hard
evidence that there is a nexus between the potential financial harm and the current security
deposit requirements that would justify the requested tariff modifications.This Commission
should expect no less of a showing from CenturyTel.CenturyTel'sbald assertions that its
increased security deposit requirements are justified on the sole basis that there are general
concerns about the current financial environment in the telecommunications industry and that
"IXC bankruptcies are stacking up"is completely lacking in foundation.CenturyTel has not
even begun to present sufficient evidence to support its proposed tariff revisions and the
Commission should reject such changes outright.
B.CenturyTel'sProposed Tariff Revisions Are Inconsistent With Sound Public
Policy and Should Be Rejected
Not only are CenturyTel'sproposed tariff revisions unnecessary,they are overbroad,
vague,potentiallyand inconsistent with sound public policy.Historically,the Commission has
only permitted CenturyTel to require a security deposit from customers who have a history of
late payments or missed payments or who,at installation,have no payment historyat all (at least
until a sufficient history of on-time payment has been established).Under current tariffs,
CenturyTel may request a security deposit from an established customer only when there has
been direct evidence that the carrier has been unable to meet its financial obligations to
CenturyTel itself.Thus,the general policy is that security deposits are only necessary when
there is a demonstrated risk that a carrier may miss or make late payments to CenturyTel.The
result of this policy has been that the group of carriers subject to CenturyTel'ssecurity deposit
requirements has been very small.This narrow scope of applicability strikes an appropriate
balance between protecting CenturyTelfrom foreseeable financial risk and limitingthe ability of
REPLYCOMMENTSOF AT&T 7
CenturyTel to impose unfair standards that might have anticompetitive effects in the market.
CenturyTel's proposed security deposit requirements would fundamentally change the
current policy,however,and would significantly expand the number of carriers potentially
subject to the security deposit requirements.One of CenturyTel'sproposed tariff revisions
would permit CenturyTel to require,at any time,that an IXC pay a security deposit if CenturyTel
"becomes aware that the customer's credit worthiness has fallen below commercially acceptable
levels."If implemented,this provision would turn current security deposit policy on its head by
imposing requirements based on factors unrelated to the financial relationship between
CenturyTel and its access customers.Under the proposed tariff revision,a security deposit
would no longer be imposed only on an IXC that had demonstrated its financial unreliabilityas
to CenturyTel;rather,a responsible IXC that had never missed a payment and had never made a
late payment to CenturyTel could be required to submit a security deposit to CenturyTel based
solely on an assessment of general creditworthiness.The proposed tariff indicates onlythat such
an assessment would be made by an independentthird party.
This standard is inherently vague.The FCC has expressed the same concern about
similar language in security deposit requirements proposed by BellSouth.Order DA 02-2318,p.
4-5.With regard to proposed BellSouth language that would allow security deposit requirements
to be imposed if a customer's credit worthiness "decreases to a commercially significant extent,"
the FCC questioned whether the revised security deposit provisions "are reasonable and no so
vague as to permit BellSouth to discriminate unreasonably."Id.
Given the vagueness of CenturyTel'sproposed standard,a likely result of implementing
the proposed security deposit requirements would be that nearly all IXCs taking service from
CenturyTel could be required to make a security deposit.If other LECs file revised tariffs
imposing more stringent security deposit mirroring CenturyTel's proposed tariff revisions,
almost all IXCs operating in Idaho would be required to make security deposits to all LECs in
Idaho.See Staff's Comments at 2.Neither CenturyTel,nor any other LEC,has denied that this
is the likelyeffect of CenturyTel'sproposed tariff revisions.Indeed,they seem to suggest that
REPLYCOMMENTSOF AT&T S
this is the case by emphasizing the financial turmoil of telecommunications carriers.K,eJ.,
CenturyTel Reply Comments at 2.
A security deposit policy that would allow CenturyTel to sweep virtuallyany IXC under
its coverage,regardless of the actual credit risk posed by the IXC to CenturyTel,is inherently
overbroad.It also is inconsistent with sound public policy because it upsets the delicate balance
between protecting LECs from bad debt and giving LECs unfettered discretion to create
anticompetitive effects in the marketplace.
This is particularlytrue since the potential for anticompetitive effects is greatly enhanced
by the ability of CenturyTel to discriminatorilyapply the proposed security deposit requirements.
Not only is the proposed tariff language vague enough to allow discriminatory application,it also
explicitlygives CenturyTel full discretion to apply the greater security deposits to some carriers
that meet the conditions but not to others.A requirement is inherentlydiscretionary to the extent
that the entity is not obligated to impose such requirement.CenturyTel's proposed tariff
language only includes optional phrases such as "the Telephone Company reserves the right to
require"and that "[a]security deposit may be required."
With regard to similarly discretionary language in Verizon's proposed tariff,the FCC
comments:
The terms 'may'and 'elects'give Verizon considerable discretion
to enforce these provisions.Without definitive criteria in the tariff,
what would prevent Verizon from collecting a security deposit or
advance payment from one customer and nothing from another
customer when both meet one of the criteria for security deposits
or advance payment?Order DA 02-2522,p.8.
Consequently,the FCC has called for Verizon to explain how its proposed tariff provisions can
be applied in a non-discriminatory manner.M.CenturyTelshould also be required to explain
how its proposed tariff revisions could be applied in a non-discriminatory manner such that,for
example,its IXC affiliates would not be spared the security deposit requirements imposed on
other IXCs having the same level of commercially unacceptable credit.CenturyTel's proposed
REPLYCOMMENTSOF AT&T 9
tariff revisions should be rejected in the absence of such explanation.
Discriminatory concerns were explicitly raised by parties in comments,giving
CenturyTel an opportunity to respond.AT&T Comments at 3-4.In its Reply Comments,
CenturyTel did not even acknowledge such concerns.Verizon responded to the concerns but
only to assert that such concerns were "unsupported."Verizon Reply Comments at 2.Verizon
also states that,since its current security deposit requirements are applied on a nondiscriminatory
basis,any changes would also be applied on a nondiscriminatory basis.Id.This is a large
assumption to ask parties to accept,however,particularly when the proposed tariff language is
far more vague than current language.
C.At a Minimum,CenturyTel's Proposed Tariff Revisions Should Be
Suspended for Investigation Until After the FCC Has Completed Its
Investigations.
Staff makes a strong case for the value of waiting for the FCC to complete its review of
the issue of increasing security deposit requirements.Staff Comments at p.2.The FCC has
since strengthened the case for waiting by demonstrating the extent to which it will thoroughly
consider the issue of whether security deposit requirements should be modified,as discussed
above.K,g,Order DA 02-2318;Order DA 02-2317.
CenturyTel can only respond "why wait?"without providing any reasons not to wait.
CenturyTel Reply Comments at 3.CenturyTel'sclaims of "urgency"ring hollow,particularly
when CenturyTel has failed to demonstrate any existing financial harm.In the absence of such a
showing of harm,it is unreasonable to subject access customers to the administrative burden of
potentiallydisparate intrastate and interstate security deposit requirements.
Should the Commission consider the issue of increased security deposits,its review will
only be aided and enhanced,in all respects,by the FCC's review.CenturyTel tries to counter the
reasonableness of position by positing that the FCC's analysis may be biased to protect IXCs.
CenturyTel Reply Comments at 3.The suggestion is ridiculous.The FCC has a mission to
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ensure that telecommunications services,in general,are provided at reasonable cost and without
discrimination.Federal Communications Commission Strategic Plan FY 2003 to FY 2008,p.4.
There is no reason to believe that the FCC will be biased in this regard.
Should the Commission decide not to reject CenturyTel's proposed security deposit
requirements outright,the Commission should deny approval of CenturyTel's tariffs advices
without prejudice and defer consideration of all related legal,policy and implementation issues
pending the FCC's disposition of such issues.
CONCLUSION
For the foregoing reasons,AT&T urges the Commission to reject CenturyTel's proposed
tariff revisions.In the alternative,the Commission should deny approval of the tariff revisions
without prejudice.
DATED this 15th day of October,2002.
DAVIS WRIGHT TREMAINE LLP
By
P.TRINCHERO
Of ttorneys for AT&T
REPLYCOMMENTSOF AT&T I Î
CERTIFICATE OF SERVICE
I hereby certify that I served a copy of the foregoing "REPLY COMMENTS OF
AT&T"upon the parties named on the attachment.
I further certify that said copies were placed in sealed envelopes addressed to said
partys'/attorneys'last known addresses as shown and deposited in the United States Mail at
Portland,Oregon,and that the postage thereon was prepaid.
DATED this /day of October,2002.
DAVIS WRIGHT TREMAINE LLP
By:
Mark rinchero
Atto y for AT&T
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SERVICE LIST
CASE NO.GNR-T-02-11
Pamela Donovan Rebecca DeCook
CenturyTel of the Gem State AT&T Comm.Of the Mountain States,Inc.
P.O.Box 9901 1875 Lawrence Street,Room 1575
Vancouver,WA 98668-8701 Denver,CO 80202
Conley E.Ward Dean J.Miller
Givens Pursley LLP McDevitt &Miller LLP
277 North Sixth Street,Suite 200 420 West Bannock Street
P.O.Box 2720 P.O.Box 2564-83701
Boise,ID 83701-2720 Boise,ID 83702
Morgan W.Richards Mary S.Hobson
Moffatt,Thomas,Barrett,Rock &Fields,Stoel Rives LLP
Chartered 101 South Capitol Boulevard,Suite 1900
101 S.Capitol Boulevard,10th Floor Boise,ID 83702
P.O.Box 829
Boise,ID 83701
Brian Thomas John R.Hammond
Time Warner Telecom Deputy AttorneyGeneral
520 SW Sixth Avenue,Suite 300 Idaho Public Utilities Commission
Portland,OR 97204 P.O.Box 83720
Boise,ID 83720-0074
Gregory Rogers Allan T.Thoms
Level 3 Communications Inc.Vice President-PublicPolicy
1025 Eldorado Boulevard &External Affairs
Broomfield,CO 80021 Verizon
17933 NW Evergreen Parkway
P.O.Box 1100
Beaverton,OR 97075
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