20030310Decision Memo.pdf

DECISION MEMORANDUM
TO:CO MMISSI 0 NER KJELLAND ER
COMMISSIONER SMITH
COMMISSIONER HANSEN
COMMISSION SECRETARY
LEGAL
COMMISSION STAFF
WORKING FILE
FROM:DOUG COOLEY
DATE:MARCH 13, 2003
RE:VELOCITUS, INc.'S APPLICATION FOR BROADBAND EQUIPMENT
TAX CREDIT. GNR-03-10.
BACKGROUND
On March 6, 2003 , the Commission received an Application from VELOCITUS, Inc. to
receive an investment tax credit for eligible broadband equipment pursuant to Order No. 28784
and Idaho Code 9 63-30291(4). To be eligible for the tax credit, the taxpayer must obtain from
the Commission an Order confirming that installed equipment qualifies for the tax credit.
DISCUSSION
VELOCITUS stated that, during calendar year 2002, it installed various components as
part of its wireline and wireless broadband network for the provision of high-speed Internet
access and other point-to-point data services to customers in Idaho s Treasure Valley and other
communities ofldaho. Such components include transmitting/receiving antennae, data traffic
concentrators, and routers. VELOCITUS also included in its Application such items as
installation and labor as part of its investment cost. The Application for calendar year 2002 is for
approximately $160 000 of broadband investment. VELOCITUS indicated that it began offering
high-speed access to customers in 2001 at transmission rates from 256 kilobits per second (kbps)
up to 45 megabits per second (Mbps).
DECISION MEMORANDUM MARCH 13 2003
STAFF REVIEW
Staff has reviewed the list of proposed broadband equipment submitted by VELOCITUS
and believes the equipment is "necessary to the provision of broadband services and an integral
part of a broadband network" according to Idaho Code 9 63-30291 (3)(b )(i). From previous
discussions with VELOCITUS , Staff learned that in some instances subscribers encounter
multiple routers or concentrators before they reach VELOCITUS' s access point to the Internet at
the Boise Airport. In these cases, customers who do not have a line-of-sight to the Boise Airport
may have their data traffic relayed through the equipment and antennae of those customers who
are able to establish a wireless connection to the Internet at the Boise Airport. Staff has reviewed
the network with VELOCITUS, and the Company has expressed that its Application meets the
requirements of Idaho Code 9 63-30291 (3)(b)(iv-vii). Staffhas also been assured that the
installation and labor costs included in the VELOCITUS Application are being capitalized, not
expensed, and are directly related to offering broadband in Idaho.
STAFF RECOMMENDATION
Staff recommends approval of the Company s Application and further recommends that
the Commission forward the approving Order and a copy of the Application to the Idaho Tax
Commission.
COMMISSION DECISION
Should the Commission approve VELOCITUS, Inc.' s Application for the broadband
investment tax credit?
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DECISION MEMORANDUM MARCH 13 2003