20020822Comments.pdf

CEIVED U
JOHN R.HAMMOND
DEPUTY ATTORNEY GENERAL .cIDAHOPUBLICUTILITIESCOMMISSION
PO BOX 83720
BOISE,IDAHO 83720-0074 gL 5 COMMISSION
[phone]
IDAHO BAR NO.5470
Street Address for Express Mail:
472 W WASHINGTON
BOISE ID 83702-5983
Attorneyfor the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF )CENTURYTEL OF THE GEM STATE,INC.AND )CASE NO.GNR-T-02-11
CENTURYTEL OF IDAHO,INC.FOR APPROVAL )
OF A TARIFF ADVICE CONTAINING DEPOSIT )REQUIREMENTSBY INCUMBENT LOCAL )COMMENTS OF THE
EXCHANGE CARRIERS FOR INTEREXCHANGE )COMMISSION STAFF
CARRIERS.)
COMES NOW the Staff of the Idaho Public Utilities Commission,by and through its
Attorneyof record,John R.Hammond,Deputy AttorneyGeneral,in response to Order No.
29089,the Notice of Application and Notice of Modified Procedure in Case No.GNR-T-02-11
issued on August 7,2002,submits the followingcomments.
BACKGROUND
On July 12,2002,CenturyTel of the Gem State,Inc.and CenturyTel of Idaho,Inc.
(CenturyTel)filed tariffs for its Idaho properties requesting change in its deposit policy as it is
applied to interexchangecarriers.Currently,CenturyTelrequires a deposit from carriers that
have a history of late payment.With this filing,CenturyTel would like to add the requirements
that additional deposits can also be requested when a carriers billing exceeds the amount upon
STAFF COMMENTS 1 AUGUST 22,2002
which its current deposit has been calculated.In addition,the Company wants to be able to
require deposits from carriers whose "credit worthiness has fallen below commercially
acceptable levels as determinedby an independentcredit rating or reporting service."Proposed
Tariff pages 2-19 and 2.4.1.
As Order No.29089 demonstrates,this is a complex issue and the Company's filing
raises far more questions than it answers.Initially,however,Staff would like to make its
ultimate recommendationbefore addressing the questions posed in this Order.
In Order No.29089,the Commission seeks comments on whether the deposit
requirement is good public policy.This issue is being examined both at the national level as well
as on an individual state basis.Staff's understandingis that CenturyTel has filed this same tariff
in most,if not all,of the twenty-twostates in which the company does business.CenturyTel of
Oregon filed the same tariff in that state on July 12,2002.The Staff of the Oregon Public
Utilities Commission recommended approval of the tariff with several modifications.In
addition,Bell South,SBC,and Verizon,and others have made similar filings at the Federal
Communications Commission "FCC".See Verizon's Petition for Emergency Declaratory and
Other Relief,WC Docket No.02-202,July 24,2002.On July 31,2002,the FCC issued a Public
Notice seeking comments on Verizon's Petition.While Staff does not believe that there must be
a uniform policy for both interstate and intrastate purposes,many questions still remain about
this policy that would be applicable in both situations.Furthermore,these types of tariffs have
been a great source of controversy at the Federal level.Numerous interexchangecarriers have
filed their objection to them at the FCC.
To the extent such deposit requirements are approved it is reasonable to assume that
virtuallyall independentcompanies will file similar intrastate tariffs.On the interstate side,
NECA has filed a tariff,which all participating companies would use.If a carrier were deemed
to not be credit worthy by an appropriaterating service,Staff envisions a scenario where all
LECs in the countrywith similar credit standards would be seeking deposits at approximately
the same time.The financial burden and administrative burdens of such an event would be
enough to cause a strain on even a healthy company and could become a self fulfilling prophecy
that causes a carrier to be forced into a bankruptcy it might otherwise have been able to avoid.
For this reason alone,Staff believes that the Commission should not establish any policy
on this issue until the questions surrounding it have been more fully vetted at the FCC.
STAFF COMMENTS 2 AUGUST 22,2002
That stated,Staff would like to address the implementation questions put forth by the
Commission in its Order.Staff is not opposed to the idea of LECs trying to protect their ability
to obtain payment for services from financiallytroubled companies by requiring them to post
security deposits or advanced payments.However,Staff believes the implementation of such a
policy is problematic.Initially,Staff is concerned how a LEC will determine when a company is
not credit worthy.Staff believes that requiring a company that has never made a late payment to
provide a deposit because of a change in its credit rating may be unfair.However,if that is what
is deemed proper than a consistent and objective rating should be used.For this purpose,Staff
would recommend a bond rating from any of the major bond rating services.
For example,if one of the major rating services (Fitch,Moodys,S&P)rates a company at
a certain level,such as two levels about junk status,this could trigger a deposit requirement.
While Staff realizes that bond ratings are in themselves subjective,for purposes of applying the
deposit policy,they are objective for the LEC.Staff has looked at toll traffic from the annual
USF report and estimates that carriers that have a bond rating handle at least 80%of
interexchange toll traffic.That figure is probably between 90%and 100%because even for toll
minutes from smaller companies the underlyingcarrier that is paying the access charges is a
larger,bond rated,carrier.
For those carriers not having a bond rating,the amount of traffic they might carry is not
great enough to materiallyaffect the LEC and should not drive the policy decision on this matter.
For those smaller carriers,payment history or a significant increase in the billings over the
present amount of deposit calculation should be all that is necessary.
Concerning the question of whether or not there should be a difference in policy between
large and small companies or between interstate and intrastate,the Staff believes that ultimately
there may be.Again,Staff believes that nothing should be done prior to this process being
examined at the FCC.However,Staff recognizes that there is a significant difference between
interstate and intrastate access charges.The FCC,through the CALLS and MAG plans,has
significantlyreduced the amount of NTS loop support in interstate access charges,in some cases
eliminating it all together with increase in the subscriber line charge (SLC).Therefore,when a
LEC is not paid for interstate access charges,while it loses valuable revenue which pay for its
switching costs,it still get its loop support through the SLC.On the intrastate side however,
access charge are generally higher and still contain common line charges that are used to offset
STAFF COMMENTS 3 AUGUST 22,2002
intrastate loop costs.Therefore,when those charges are not paid a LEC is losing part of its loop
costs as well as switching costs.While recommending no action at this time,Staff believes that,
dependingon the FCC's action,this issue may have to be eventuallyexamined on an intrastate
basis and may require different treatment.
The Commission also asks about the WorldCom bankruptcy and the lessons to be learned
from it.Certainly,if nothing else,the WorldCom saga shows justhow difficult it is to
implement a policy that can truly protect companies from harm.For the most part,WorldCom
did not have a history of late payments with most companies;however,WorldCom's fall was so
fast that it is doubtful that the proposed tariff would have been effective.There was not enough
time between WorldCom's bond woes and its declaration of bankruptcy for a company to obtain
a deposit from the company.If the many carriers throughout the countryhad tried it probably
would have forced WorldCom to declare bankruptcy even sooner,thereby making the deposit
requirement moot.
If the Commission decides on a deposit requirement,the procedures for transitioning
customers in case of a disconnection should be examined in a workshop.Staff realizes that even
if customers are polled on their preference of carriers,many will not respond.For those who do
not,is the proper method to allocate them among existing carrier (this is difficult,time
consuming,and expensive)or should those customers be left without a carrier and forced to
make a choice when they realize that.This choice is much more difficult if the carrier is
providing local service as well as toll.Staff would like to see more discussion on this issue
among the affected parties.
STAFF RECOMMENDATION
In conclusion then,Staff,although sympathetic to the needs of the LECs,believes that a
cautious approach is best at this time.Staff believes that the Commission should closely monitor
this issue at the FCC.Once this issue has been fully examined at the federal level staff believes
that the Commission will have a clearer picture of what the proper policy for Idaho will be.
Accordingly,Staff recommends that the Commission deny approval of the tariffs without
prejudice.
STAFF COMMENTS 4 AUGUST 22,2002
Respectively submitted this 29 of August 2002.
R.Hammond
De uty AttorneyGeneral
Technical Staff:Joe Cusick
JH:JWC:i:umisc/comments/gnrt02.1ljhjwe
STAFF COMMENTS 5 AUGUST 22,2002
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 22ND DAY OF AUGUST 2002,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF,IN
CASE NO.GNR-T-02-11,BY MAILING A COPY THEREOF,POSTAGE PREPAID,
TO THE FOLLOWING:
PAMELA DONOVAN
CENTURYTEL OF THE GEM STATE
PO BOX 9901
VANCOUVER,WA 98668-8701
SECRETARY
CERTIFICATE OF SERVICE