PostHrgBrief.doc

WELDON STUTZMAN
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, ID 83720-0074
Tele: (208) 334-
Idaho Bar No. 3283
FAX: [phone]

Street Address for Express Mail:

472 W. Washington
Boise, ID 83702-5983

Attorney for the Idaho Public Utilities Commission

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF THE INVESTIGATION TO DETERMINE AN APPROPRIATE COST MODEL USING FORWARD-LOOKING ECONOMIC COSTS FOR CALCULATING THE COSTS OF BASIC TELECOMMUNICATION SERVICES IN IDAHO )
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CASE NOS. GNR-T-97-22
GNR-T-00-2

STAFF’S POST-HEARING BRIEF

IN THE MATTER OF THE INVESTIGATION TO ESTABLISH THE IDAHO HIGH COST FUND AS REQUIRED BY IDAHO CODE § 62-610A THROUGH F. )
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INTRODUCTION
This docket opened in December 1997 with a goal simple enough to describe – to determine an appropriate cost model using forward-looking economic costs for calculating the costs of basic telecommunication services in Idaho. See Case Caption, Case No. GNR-T-97-22. The Commission ambitiously scheduled hearings in March 1998 to hear the evidence required to complete the case. See Order No. 27310. The initial goal became difficult to achieve, however, as the Commission faced two different truths increasingly revealed during the “long and torturous history” of this case. Tr. p. 1020. The first truth is that the cost models advocated by different parties to determine forward-looking costs of service have almost no relation to reality. Instead, the models are little more than an “academic fantasy” constructed from “whole cloth.” Tr. p. 973. As such, the models and their results are merely a tool for advocacy of a favored position and, conversely, for challenging another’s favored position.
The second truth, not previously stated, frustrated the Commission’s efforts as it attempted to identify costs of service as a basis to establish a new universal service fund for Idaho. A primary purpose for determining costs to provide basic service is to further competition. That is, competition will be encouraged in new ways if costs of service are identified, rates are based on costs, and previously hidden rate subsidies are removed. The premise for a new universal service fund, on the other hand, is that “all consumers in this state, without regard to their location, should have comparable accessibility to basic telecommunication services at just and reasonable rates.” Idaho Code § 62-610A. The attempt to blend these two goals
requires regulators to follow two divergently opposed paths. They are both to encourage the development of competition and to maintain, and even expand, universal service. Regulators have not crafted an approach capable of attaining both of these goals because the basic assumptions underlying these two goals are inherently contradictory. While competition is driven by economic efficiency, universal service is built on principles of social equity. As a result, when regulators adopt policies to encourage the realization of one goal they risk impeding the progress of the other.
Phyllis Bernt, Ph.D., Balancing Competition and Universal Service: The Role of the Regulator Five Years after the Telecommunications Act at iii, National Regulatory Research Institute, Ohio State University (2001).
Given the dichotomy in the goals of this case, the Commission should focus on the universal service goal, since it is recent universal service statutes that are directing the Commission’s efforts. If the primary effort is creation of a structure for implementing a new universal service fund, Staff believes the record thoroughly supports its proposal to accomplish the goal. A short review of the history of this case provides the proper context for considering the proposal submitted by Staff.

SUMMARY OF THE CASE HISTORY
This consolidated case was initiated in December 1997 when the Commission opened a proceeding “to select and/or develop an appropriate cost model for intrastate high-cost support.” Order No. 27269, p. 2 issued December 19, 1997, Case No. GNR-T-97-22. The Commission was prompted to act by an earlier order of the Federal Communications Commission (FCC) as well as by Idaho Code § 62-623. The FCC order concluded “that non-rural carriers providing universal services in high cost areas should receive universal service support based on forward-looking costs of providing the supported services.” Order No. 27269, p. 1, citing FCC Universal Service Order, CC Docket No. 96-45, FCC 97-157 (62 Fed. Reg. 32862) issued May 8, 1997. The FCC began its own examination of cost models to ascertain costs of service in high cost areas for interstate purposes, and encouraged the states to do the same for its non-rural local service providers.
In addition to the FCC’s influence, Idaho Code § 62-623 directed the Commission to submit a report to the Governor and the legislature by December 1, 1997, recommending “any necessary or desirable legislation concerning state and federal universal support mechanism.” The Commission’s report included a recommendation that the legislature create a new state universal funding mechanism to operate in conjunction with federal support mechanisms. Consistent with that recommendation the Commission opened Case No. GNR-T-97-22 “to gather information to make an informed choice or to develop a forward-looking economic cost model” for the primary purpose of “determin[ing] the cost of providing support for universal service in high-cost areas of the state of Idaho.” Order No. 27269, p. 3.
Perhaps in response to the Commission’s recommendation, the 1998 Idaho Legislature enacted a new section in Title 62, Idaho Code. The stated purpose of the new law is “to authorize the [Commission] to establish a competitively and technologically neutral funding mechanism which will operate in coordination with federal universal service support mechanisms.” Idaho Code § 62-610A. The “neutral funding mechanism” also had a purpose: to further the universal service goal that “[a]ll consumers in this state, without regard to their location, should have comparable accessibility to basic telecommunication services at just and reasonable rates.” Id. Thus, Case No. GNR-T-00-2 was born to develop a universal service fund (USF), also referred to in this case as the high cost fund, as directed by Idaho Code §§ 62-610A - F. On January 18, 2000, the Commission issued Order No. 28261 to open the case to establish a new USF—Case No. GNR-T-00-2—and also to consolidate it with the cost model case, Case No. GNR-T-9722.
Well before the USF case was opened, the Commission had attempted to bring the cost model case to hearing and resolution. The Commission convened the first hearing in the cost model case on March 9-10, 1998. See Order No. 27310, issued January 12, 1998. One reason the original plan to expeditiously determine an appropriate high cost model failed was the activities of the FCC. In its original notice, the Commission informed parties that it sought information regarding three different cost models—“the Hatfield Model, the Benchmark Cost Proxy Model (BCPM) and the Telcom Economic Cost model developed by Ben Johnson Associates.” Order No. 27310, p. 1. The Hatfield Model was advocated by AT&T and other interLATA carriers, the BCPM was advocated by Qwest, and Staff sponsored the Telcom Economic Cost Model.
As the Commission began its review of cost models, the FCC was on but farther along a parallel track to develop a cost model for predicting costs to provide universal service in non-rural areas. On November 24, 1999, the Commission issued Order No. 28223 noting two FCC orders “outlining its forward-looking cost mechanism for federal high cost support for non-rural local exchange companies (LECs).” Order No. 28223, p. 1. Noting that Idaho Code § 62-610B requires the Idaho USF mechanism to operate in conjunction with federal universal support mechanisms, the Commission provided notice that it sought comments “on adoption of the same [FCC] model for calculating high cost support for non-rural LECs in Idaho.” Order No. 28223, p. 2, footnote omitted. The Commission set forth six specific issues or questions for comments, and stated its goal to establish a new USF by July 1, 2000. Order No. 28223, p. 2. Thus the focus in this case shifted from the three cost models advocated by the parties to the hybrid model adopted by the FCC. Following a pre-hearing conference on January 12, 2000, the Commission issued Order No. 28260, notifying the parties that the Commission
seeks comments on the recently adopted FCC model for calculating high cost support for non-rural LECs in Idaho and the FCC inputs. The Commission proposes to use both the FCC model and the FCC input values as a starting place for any discussion and directs the parties to make recommendations as to what input values may be more appropriate for Idaho purposes.
Order No. 28260, p. 3. The Order also scheduled the hearing to assess the FCC model to convene August 1-4, 2000.
Forces again converged to disrupt the Commission’s efforts to schedule a hearing in this case. Legal proceedings in two separate cases prompted Verizon Northwest (formerly GTE Northwest) on August 2, 2000, to file a Motion to Suspend Docket. One case was Verizon’s appeal to the U.S. Supreme Court challenging the FCC’s use of its synthesis model to determine forward looking costs in non-rural areas. See Texas Office of Public Utility Council Et. al v. FCC, 183 Fed 3rd 393 (Fifth Cir. 1999), cert. granted sub nom, GTE Services Corp. v. FCC, 120 S.Ct. 2214 (June 5, 2000). Based on Verizon’s Motion and the responses of the other parties, the Commission suspended the August hearing date and set a pre-hearing conference for August 22, 2000. Order No. 28474. The Commission directed all parties to “attend the prehearing conference and come prepared to discuss the implications of GTE/Verizon’s appeal to the Supreme Court on the use of the FCC Synthesis Model to establish the Idaho High Cost Fund.” Order No. 28474, p. 1.
At the prehearing conference on August 22, 2000, the Commission heard arguments regarding the effects of the litigation surrounding the FCC’s cost model. At one point, counsel for the Idaho Telephone Association summarized the problem with the cost models as “an academic fantasy that has little relationship to the real world, and we’re doubly troubled by the fact that in addition to being a construct out of whole cloth, it is one that people don’t have access to.” Tr. p. 973. In a subsequent Order, the Commission stated that, although the pending litigation might not affect “the legal ability of the Commission to adopt the cost model, using the FCC cost model undoubtedly creates significant practical problems for the Commission and the parties attempting to use it.” Order No. 28503, p. 2. Thus the Commission “determined that it may be appropriate to consider alternatives to adopting any of the forward looking cost models advocated by the parties or adopted by the FCC.” Id. The Commission did not want this change in direction to delay the proceedings:
In fact, the Commission is interested in looking at alternatives as a way to simplify this process and achieve the legislature’s directive sooner rather than later. Accordingly, the Commission is interested in approaches that are simple, accessible and affordable, and satisfy the statutory requirements for a methodology that is specific, predictable and sufficient in conjunction with the federal universal service support, and provides for calculating universal service costs using a forward looking cost methodology. The phrase ‘forward looking cost methodology’ is not defined in the statute, and the Commission believes the phrase excludes only the use solely of embedded costs to determine universal service support costs.
Order No. 28503, p. 2
The Commission set another prehearing conference for September 18, 2000, in order to “establish a schedule for proceeding to hearing in this case and to discuss alternatives to adoption of the FCC cost model, or any of the currently advocated cost models, as a means of complying with the legislature’s directive to establish a high cost universal service fund.” Order No. 28503, p. 3. During the September prehearing conference, the Commission provided its most explicit instructions to the parties, as reflected in the following from the chair:
After our last pre-hearing conference, the Commission was persuaded that we will never be able to accomplish in a timely manner and even in an understandable manner the job that was given to us if we continue to fuss with these [cost] models. Therefore, we will no longer continue to fuss with anyone’s models. You can do all your model fussing on the federal level with the FCC and with whatever federal court you choose to participate in. However, in Idaho, we have been persuaded by the comments of Mr. Ward the last time that probably density is the key to developing something that makes sense and can be implemented in an understandable manner. So—and we are confident that we can use what we all know and what you all know about our state, about telecommunications services in our state, to develop a forward looking cost methodology that will work here.

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So our challenge to you, to all the participants, is to help us devise a simple, practical, understandable scheme for Idaho’s non-rural USF using readily available data and information so that we can quickly resolve these issues and complete this process.

Tr. p. 1020-22. Commissioner Kjellander suggested a limited purpose for the FCC synthesis model:
I concur with Commissioner Smith that the model has very little value to us as we move forward trying to determine a methodology as is outlined in state code, but I would say one thing about the model: that if it does have any value, it is that it can be useful possibly in establishing areas or zones for support, but in terms of using that to establish cost components related to this proceeding, it clearly, I think…will be primarily unuseful for establishing a fund in Idaho.
Tr. p. 1022-23.
Commissioner Hansen summed his thoughts as follows:
I think we need a more friendly people type model or system in place that can be understood and explained, and I guess I just think we need to develop something a little more simple and not so complex, and I think we can do it.
Tr. p. 1023.
With this history and instructions in mind, Staff set out to find a simpler, more accessible framework for the non-rural, high-cost universal service fund.

THE STAFF STIPULATION
The Commission’s challenge to the parties was to “devise a simple, practical, understandable scheme for Idaho’s non-rural USF using readily available data and information.” Tr. p. 1022. The parties first discussed possible solutions during the September 18, 2000 pre-hearing conference and then convened a workshop on October 13, 2000. In an effort to develop a consensus, Staff circulated a draft stipulation prior to the workshop, and requested written comments from the parties. These efforts culminated in a Stipulation for the Non-Rural High-Cost Fund (Staff Stipulation) filed on December 12, 2000.
The Staff Stipulation originally was signed by Qwest, Idaho Telephone Association, Citizens Telecommunications of Idaho, Inc., Century Telephone of Idaho and TDS Telecom. The Stipulation does not attempt to provide every detail to implement the high-cost fund, but instead “provides a structure for the Commission to establish the non-rural high-cost fund.” Stipulation p. 3, paragraph 9. The Stipulation’s substantive terms for a new USF are contained in six relatively short paragraphs numbered 2 through 7. The structural components set forth in those paragraphs can be summarized as follows:
Paragraph 2: the FCC Synthesis Model is used solely to identify and rank the relative high-cost areas into five groups;

Paragraph 3: two zones are created in a few high-cost wire centers. Zone 1, the higher density area, is not eligible for support while Zone 2, the lower density area, is eligible for support.

Paragraph 4: an eligible telecommunications carrier (ETC) must file a formal Application to receive USF funds and must propose a dollar-for-dollar reduction in its Title 61 rates to match the level of support it requests:

Paragraph 5: in two-zone wire centers, it may be necessary to map customer locations, which will be the responsibility of the Fund Administrator;

Paragraph 6: a 650 line per square mile density factor will be used to establish the base rate;

Paragraph 7: the parties recommend an initial fund size of $2 to $6 million.

An attachment to the Staff Stipulation, Attachment A, lists the high-cost wire centers and illustrates the support per line to achieve a fund size of approximately $6 million.
Attachment A to the Stipulation apparently was misunderstood by Qwest, at least in one respect. When direct testimony was filed by the parties on December 15, 2000, Staff included testimony to illustrate different levels of support per line to achieve a fund size between $2 million and $6 million, consistent with paragraph 7 of the Stipulation. Qwest subsequently filed on January 8, 2001, a Notice of Withdrawal from the Stipulation because “it realized that it might not have reached a meeting of minds with Staff regarding a critical issue: specific IHCF per line support for wire centers served by Qwest and Verizon.” Qwest Motion, p. 2. Qwest’s misunderstanding occurred because it believed “that page 1 of Attachment A to the Stipulation reflected the parties’ agreement to specific per-line funding levels for each of the five [wire center] ‘levels’ identified by Attachment A.” Qwest Motion, p. 2. In other words, Qwest withdrew from the Stipulation not because it had any objection to the terms of the Stipulation itself, but solely because it had placed unwarranted significance on the funding level example contained in Attachment A.

THE COMMISSION SHOULD APPROVE THE STAFF STIPULATION
The Commission should approve the Staff Stipulation for two significant reasons: (1) it is the only proposal in the record that is a realistic attempt to achieve the Commission’s goal of a “simple, practical, understandable scheme for Idaho’s non-rural USF” without having to “fuss” with cost models, and (2) its significant components are either supported or are not seriously challenged by the parties in this case.
When the Commission instructed the parties to work to find an understandable, accessible mechanism for the new USF, the Commission optimistically hoped for “a plethora of wonderful proposals from which to choose.” Tr. p. 1028. The plethora was not forthcoming, despite steady efforts and on-going discussions by the parties. Nonetheless, when the proposal contained in the Staff stipulation was filed, there was little or no opposition to its significant components.
The only active parties that did not sign the Stipulation are Verizon (collectively Verizon Northwest, Inc. and Verizon Wireless) and AT&T. However, as is clear in their direct testimony, the reason Verizon and AT&T declined to join was not based on any objection to the substantive components of the Stipulation. For example, Verizon did not join the Stipulation because “there is no evidence that a fund is needed at this time,” Tr. p. __ (Beauvais direct testimony p. 3) and because the Stipulation “does not go far enough in requiring ILECs to pursue rate re-balancing.” Tr. p. __ (Beauvais p. 7). Verizon and AT&T subsequently filed their own Stipulation, which became Exhibit ___, that would require the potential high cost fund recipients, currently only Verizon and Qwest, to rebalance their rates before the Commission takes any step to establish the high cost fund.
In prefiled direct testimony, AT&T’s witnesses did opine that the proposed limited use of the synthesis model, that is, “only for the purpose of calculating relative costs, fails to employ the model in a proper manner and makes no determination of forward looking costs.” Tr. p. ___ (England Supp. p. 1). This opinion is thoroughly refuted by other witnesses, and in any event, AT&T’s witness did not appear at the hearing to defend its generalized criticism. Another AT&T witness criticized the Staff Stipulation because it “attempts to describe some of the duties of the Administrator without regard to exactly how these duties will be carried out, and most importantly, how the Administrator will be held accountable to the Commission and the public.” Tr. p. __ (Cowen direct p. 4). To remedy this defect perceived by AT&T, its witness recommended the Commission “allow for the details of the administration of the fund to be carried out the rulemaking [sic] case GNR-1-00-1. For it is in the rulemaking case where the details and description of all fund Administrator duties will be able to be properly discussed and defined on a comprehensive basis.” Tr. p. ___ (Cowan Dir. p. 4).
This criticism of the Stipulation by AT&T amounts to little more than recommending what the parties to the Stipulation contemplated. The Stipulation in many respects provides a framework, the finishing details for which will be determined in other proceedings such as the pending rules docket. The most obvious example is the very limited description in the Stipulation of the Administrator’s duties. Many details of the Administrator’s duties will be resolved in the rulemaking docket, just as AT&T suggests.
Even Qwest’s post-withdrawal criticism of the Stipulation is limited. Remember that Qwest withdrew from the Stipulation only when “it became clear that Staff was not prepared to Stipulate to per line support amounts.” Tr. p. __ (Eslinger Direct p. 4). Qwest continued to voice support for many provisions of the Stipulation, and its criticism was limited, despite unduly lengthy cross-examination by Qwest at the hearing.
In its testimony, Qwest supported much of the Staff Stipulation, calling its simplified approach to implementing a fund “the best way to benefit rural Idahoans at this time.” Tr. ___ (Watson Direct p. 2). Qwest also is satisfied the Stipulation “meets the guidelines of establishing ‘a competitive and technologically neutral funding mechanism’ as set out in the Idaho Code 62-610A.” Tr. p. __ (Eslinger p. 3). Qwest also supports the Staff proposal because it “clearly identifies geographic support areas and, by using the FCC’s synthesis model (SM) to identify the high cost areas, is consistent with the legislative intent to calculate support using ‘a forward looking methodology.’ Idaho Code 61-610(f)(2).” Tr. p. ____ (Eslinger Direct p. 3).
Qwest’s criticism of the Staff’s Stipulation is in regard to establishing the size of the fund, since “[t]he primary difference between Qwest’s approach and that outlined in the Stipulation is the approach to sizing the fund….” Tr. p. ___ (Eslinger Dir. P. 14). Qwest’s witness stated that “an appropriate high cost fund must be predictable,” and criticized the Stipulation’s recommended range for the fund size as providing “no indication of what future support may be available.” Tr. p. ___ (Watson Direct p. 4). This is problematic, according to Qwest, because “without a clear rationale for why the fund is set at a particular size, ETCs are deprived of important information used to make economic decisions.” Tr. p. ___ (Watson p. 5). Qwest’s proposal to cure this defect, however, provides less certainty in the fund size, and apparently requires a complicated rate case or cost study case to determine the fund size.
Once Qwest withdrew from the Stipulation and withdrew much of its testimony, the Commission directed Qwest to file new direct testimony. To fill the void it now faced, Qwest conjured an alternative proposal for the Commission’s consideration, at least in regard to determining the fund size amount. On closer examination, it is clear that Qwest’s proposal is not realistic at all—it is short on detail, is apparently unexplainable at hearing, and is absurd in application.
Under Qwest’s proposal, the Commission would “retain flexibility in determining the size of the fund as it processes applications for funding.” Tr. p. ___ (Eslinger p. 7). An eligible telecommunications carrier (ETC) would file an application “based on the individual ETC’s claim that certain aspects of its rates contain implicit subsidies that the ETC proposes to remove and replace with IHCF support.” Qwest proposes the Commission “then assess these claims and determine how much, if any, IHCF support is appropriate under that application.” Tr. p. ___ (Eslinger p. 7)
Given Qwest’s recommendation that the high cost fund provide a predictable level of support, Qwest’s proposal for sizing the fund is nonsense. Out one side of its mouth, Qwest criticizes the Staff Stipulation for its recommendation of an initial fund size range of $2 to $6 million as too unpredictable, and out the other side it recommends the Commission “retain flexibility” by not establishing a fund size at all. In fact, Qwest proposes the Commission determine an initial fund based on its own claims of the level of implicit subsidies it proposes to remove from its rates. Qwest recognizes the Commission would need to “assess these claims” to determine the amount of implicit subsidies it would replace with USF funds, thereby establishing the fund size, at least to meet Qwest’s claims. Qwest’s witness was not able to explain how the Commission would assess its claims of implicit rate subsidies, perhaps being unwilling to state out-loud that any assessment would require a complicated cost and rate review case. Tr. p. 284-86.
Qwest’s proposal to establish the fund size is simply unworkable. It provides less predictability than the initial fund range recommended in the Staff Stipulation, it would provide no funding to a CLEC in a high cost area where Qwest has not established the funding level through its own application, it would require the Commission to open a cost docket each time an initial application was filed for a high cost area, its funding would be based solely on the embedded costs of the incumbent provider rather than on the forward looking costs of service.
The Commission, perhaps unfortunately, is not blessed with a “plethora of wonderful proposals from which to choose to establish the new USF.” The record contains only one feasible proposal to establish the framework for the new USF called for in Idaho Code § 62-610A through F. Verizon and AT&T recommend the Commission do nothing, despite the legislation requiring the Commission to act and the considerable efforts of the parties and Commission during the last three years. The remaining parties support the substantive components of the Stipulation, with significant opposition from Qwest only regarding the Stipulation’s recommendation of a fund size range.
To establish at least some parameters and predictability for the fund size, Staff believes the Stipulation’s recommendation of a $2 to $6 million range is appropriate. Staff agrees with Qwest that “an appropriate high cost fund must be predictable.” In order to maximize predictability for potential applicants, Staff recommends the Commission simply establish the initial fund level. The Commission clearly has the authority to make such a determination, based on its own expertise and knowledge of telecommunications services in the state. See Idaho Power v. Idaho Public Utilities Commission, 1 P.3d 786 (Idaho 2000) (IPUC can rely on its own expertise to select 12-year amortization period for program’s cost recovery where evidence was presented only on five, seven, and twenty-four year amortization periods). If the Commission is uncomfortable with a range for an initial fund size, Staff recommends the Commission establish the initial fund size at $1 million or $2 million. A modest fund level would be consistent with the many statements by most of the witnesses in this case that a new USF for non-rural companies is not needed at this time, and would also clearly signal to the non-rural providers that the Commission will not allow the new USF to be a means to shift significant theoretical rate subsidies to a surcharge paid by all Idahoans.

ISSUES NOT RESOLVED BY THE STIPULATION
Even if the Commission were to approve the Stipulation in its entirety, at least one issue remains for resolution—whether USF funds should be used to support all basic service lines, or instead should be used to support only one line at a residence or business. Staff strongly believes USF funds should be available only on one line, for the straightforward reason that support for one line is consistent with the purpose of the fund. As Staff witness Johnson testified,
the universal service goal, as that term has traditionally been used in the telephone industry, is achieved when all households and businesses are connected to the public switched telephone network. It isn’t necessary to encourage customers to install multiple lines into their homes or business in order to maintain universal service. If every household or business has at least one line capable of placing and receiving calls, everyone else can reach them, and thus, the universal service goal is met.

Tr. p. __) Johnson Rebuttal p. 64. Verizon’s witness also testified that support of only one line is consistent with the goals of universal service:
a key public interest policy is assuring that all citizens have access to telephone service for public safety and basic needs purposes, such as calling emergency medical personnel or the police. On the other hand, I do not believe that the state has any particular compelling interest in having its citizens be able to conduct multiple simultaneous conversations with Aunt Millie and the Home Shopping channel. This, of course, would argue for having only the primary line eligible for universal support, much as the Staff has suggested in its testimony. This also leads to a smaller fund size … and also to a smaller assessment rate.
Tr. p. __ (Beauvais Reply p. 8.)
On the other hand, Qwest’s reasons for urging USF support for all lines has less to do with universal service objectives than with administrative convenience. For example, Qwest’s witness testified that the new USF “should support all lines because it will be the most simple and cost-effective fund mechanism.… A fund that supports all lines is much easier to administer.” Tr. p. ___ (Watson Direct p. 13).
In addition to furthering the goals of universal service, Staff believes limiting USF support to one line is prudent. If support is available to only one line,
the fund will be relatively small and stable, with little risk that it will grow rapidly over time. In contrast, if the fund supports an unlimited number of lines per customer, it will tend to grow much more rapidly, due to explosive growth in the use of lines dedicated to fax machines, internet connections, childrens’ lines, and so forth.
Tr. p. __ (Johnson Direct p. 11).
Qwest attempted to minimize the impact support for all lines would have on the growth of the fund by focusing on the current number of multiple-line customers, but that misses the point. If the Commission were to approve a program that made available to customers support for an unlimited number of lines, customers and telephone providers would have a significant incentive to maximize the benefits. Creative steps undoubtedly would be taken to make adding lines attractive, leading to the potential for “explosive growth” in the use of additional lines for other purposes, none of which are related to universal service.
Qwest also exaggerates the administrative challenge resulting from support for only one line, claiming “the Commission and participating providers will have to devise expensive, manual methods to track primary business lines in order to assure that providers are receiving only the level of support designated by the Commission.” Tr. p. ___ (Eslinger, p. 23). Qwest did not refute, however, Staff’s testimony that Qwest “must already track additional lines for federal purposes such as the subscriber line charge (SLC) and the former primary interexchange carrier charge (PICC).” Tr. p. ___ (Hall Reb. p. 15). Nor did Qwest contest Staff’s testimony that administration of USF support on only one line would merely be “an extension of an already in-place mechanism.” To illustrate, Exhibit 107 is a Qwest customer bill showing Qwest’s current ability to differentiate services on a customer’s primary and secondary line.
Staff believes money provided to the new USF by Idaho’s citizens should actually be used for universal service purposes. Thus, Staff supports limiting USF dollars to one line per address. In addition to advancing the proper goals, limiting the use of USF funds will prevent incentives to increase support from the fund for improper purposes, thereby diluting the amount available to support universal service. Clearly, if USF support is available for all lines, less money will be available to support the universal service objective of ensuring connection by everyone to the public switched telephone network.
Another issue that appears to be unresolved is whether customer locations must be geo-located. That debate results from paragraph 5 of the Stipulation, which provides in pertinent part that “identifying physical locations for customers may require geo coding and mapping for those customers in a two-zone area.” Exh. 105, paragraph 5. The purpose for locating customers is “to ensure that the funding is portable for competitors and to safeguard against over or under collection from the fund.” Under the Stipulation, it is the fund Administrator who “will be responsible for identifying specific customer locations if necessary.” The Company requesting USF funds would be required to “provide whatever information is within its control and its cooperation to the Administrator to assist the Administrator in locating customers.” Exh. 105, paragraph 5.
This is language Qwest agreed to when it signed the Stipulation, but then attacked once it filed its revised testimony. Qwest recognized that identifying customer locations is necessary to ensure that USF support is portable, testifying that “customer locations must be accurate and precise within a few feet to determine support eligibility and whether a CETC is to receive support for a particular customer.” Tr. p. ___ (Watson Dir. p. 8). Nonetheless, Qwest complained that it “can provide a complete and accurate list of its customers within each support wire center, but a significant minority of those customers cannot be automatically geo coded and will not be identified as high or low density locations without an expensive manual effort.” Tr. p. ___ (Watson, p. 9).
First, Qwest overstates the potential problem. If the Staff Stipulation is approved, only three Qwest wire centers are divided into two density zones where support is available just in the high-density area. It is only in those bifurcated wire centers where geo locating may be necessary to ensure fund portability. Second, locating customers would be the responsibility of the fund Administrator, not Qwest. Although the Stipulation does require the carriers to provide to the Administrator whatever information is available to them, Qwest would not be required to geo locate customers. Third, Qwest apparently already is able to identify customer locations with a high degree of accuracy. Qwest witness Watson testified that Qwest currently “generates a roof top geo coding accuracy that identifies an individual building.” Tr. p. ___ (Watson Reb., p. 3). Finally, the Stipulation’s language, if approved, does not amount to a Commission determination that geo coding is required. It merely recognizes that locating customers in some wire centers may be necessary to ensure that USF support is portable, an objective Qwest recognizes is appropriate. If the Commission approves the Stipulation, the fund Administrator, with the assistance of the fund-supported carriers, will determine how and when to locate customers.

CONCLUSION
By shifting the focus in this case away from cost models and cost model inputs, the Commission properly directed the parties’ attention away from an endless and meaningless debate. The focus should be on universal service and its goals, as Idaho Code § 62-610A directs. The Commission in this case is responding to the legislature’s directive to “establish a competitively and technologically neutral funding mechanism” to further the universal service goal of “accessibility to basic telecommunication services at just and reasonable rates,” no matter where customers are located in the state. Idaho Code § 62-610A. This case is not principally about identifying hidden rate subsidies or assisting the competitive efforts of rival telecommunications providers. When the latter was the focus, the debate over cost models ground on, resulting in the “long and torturous history” of this case.

This Commission now has before it only one realistic proposal to establish at least the framework for a new USF. The Staff Stipulation sets forth terms for a non-rural high cost fund that is understandable and accessible. By strictly limiting the use of a cost model, the proposal meets the statutory requirements for a new USF that is competitively and technologically neutral, and still satisfies the requirement that universal service costs be determined by a forward looking cost methodology. The only alternatives available to the Commission are to do nothing, which entails disregard for explicit statutory directives, or to return to the disfavored squabble over cost models. The Commission should approve the Staff Stipulation and conclude that USF funds will be used only to support one line per address, thereby ensuring that universal support funds will be used to further proper universal service objectives.
Respectfully submitted this day of May 2001.

Deputy Attorney General

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