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Home My WebLink About20020719Decision Memo.pdfCGS-T-o2-l DECISION MEMORANDUM TO:COMMISSIONER KJELLANDER COMMISSIONER SMITH COMMISSIONER HANSEN JEAN JEWELL RANDY LOBB DON HOWELL BIRDELLE BROWN WAYNE HART CAROLEE HALL DOUG COOLEY BEVERLY BARKER GENE FADNESS RON LAW TONYA CLARK WORKING FILE FROM:JOE CUSICK DATE:JULY 19,2002 SUBJECT:PROPOSED DEPOSIT REQUIREMENTSBY ILECs FOR INTEREXCHANGE CARRIERS. On July 12,2002,CenturyTel of the Gem State and CenturyTelof Idaho filed identical tariffs proposing changes in their Access Service Tariffs for deposit requirements for IXCs.The proposed tariffs require that a carrier provide additional security deposits at any time following installation of service when:1)the customer has established a historyof late payments to the ILEC;2)the customer's gross monthlybillinghas increased beyond the amount initiallyused to estimate a security deposit;or 3)the carrier's credit worthiness has fallen below commercially acceptable levels as determinedby an independentcredit rating or reporting service. CenturyTel states that the security deposit will not exceed an amount equal to the total rates and charges for two months of the customer's actual billingfor the services.If an existing customer fails to remit a deposit required under this tariff,services to that customer may be discontinued in accordance with the terms specified in the company's tariff. Staff believes these filings raise important policy issues and that LECs and interexchange carriers should have an opportunityto file comments.Staff also believes that other LECs will certainly want to file similar tariffs.This issue is currentlybefore the FCC by virtue of filings by DECISION MEMORANDUM 1 JULY 19,2002 NECA,Bell South and Iowa Telecommunications Services.Staff's understanding is that Bell South has currentlywithdrawn its filing and Iowa Telecommunications Services'tariff was suspended by the FCC in Order No.DA 02-1732.Therefore,Staff recommends that these tariff advices be suspended and be treated as an Application(s).Rule 31.01.01.134.02.Furthermore, Staff recommends that these matters be processed by Modified Procedure with comments due in twenty-one days after the Order. Staff also believes the Commission Order should direct commenters to address the followingquestions along with any other concerns they might have: Is the requiring of deposits under these circumstances good public policy? Is this deposit requirement a good policy for small LECs but not for large LECs? Do large LECs have the ability to absorb more risk than small LECs? Does the large LECs dominant market position allow this policy to be used in anticompetitive ways? What is the level of risk to which LECs are exposed?How can this be quantified? Is it a legitimate response to require a deposit from a carrier that has never had a payment problem? Does it become a self-fulfillingprophecy if we require a deposit from a company that is already cash strapped? Is the amount of deposit requested the right amount:too high,too low? Under the second proposed condition,that is,where a customer's billing increases beyond the amount initiallyused to estimate a deposit,what size increase will trigger an additional deposit?Should it be 1%,10%?Will it be for a one-month increase or a longer term,e.g.,a three-month average? What is the proper trigger for a possible deposit because of credit worthiness? Is it sufficient for one rating agency to rate a company's credit as "junk"status to trigger a deposit requirement?Is it any level of junk status?Should it be just one rating agency or more than one?Which agencies qualify:Moodys,Standard and Poor's,Fitch,others? What are the implementation procedures if a required deposit is not paid? What happens to end users?Are they polled to see what carrier they want to be shifted to?What about those who don't respond?Should an allocation be made based on the current distribution of customers? DECISION MEMORANDUM 2 JULY 19,2002 Are there alternatives to deposits that might work,for example,a bonding requirement? How will the LECs handle terminating access from these carriers? Are there factors in this filing that would lead the Commission to treat intrastate regulations differently from interstate regulations as may be determinedby the FCC? While Staff does not consider this list of questions to be exhaustive,it should give respondents a good idea of the information the Commission will need to make an informed decision on this issue.Certainlyrespondents are free to address other relevant issues that may not have been brought up here. Finally,because these proposed tariffs raise issues in which all LECs and IXCs may have interest,Staff recommends changing the case number (CGS-T-02-1)to a generic number. COMMISSION DECISION Does the Commission wish to process these filings under Modified Procedure? Joe ick i:udmemos/DMCenturyDep DECISION MEMORANDUM 3 JULY 19,2002