20040116Post Hearing Brief IAT.pdf

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Conley E. Ward (ISB No. 1683)
GIVENS PURSLEY LLP
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Boise, ID 83701-2720
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Attorneys for Idaho Telephone Association
S:ICLIENTSI12331170IITA Post-Hearing Brief DOC
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE PETITION OF
IAT COMMUNICATIONS, INc., d/b/a
NTCHIDAHO, INC. OR CLEAR TALK, FOR
DESIGNATION AS AN ELIGIBLE
TELECO MMUNICA TI ONS CARRIER.
Case No. GNR-03-
IN THE MATTER OF THE APPLICATION
OF NPCR, INC., d/b/a NEXTEL PARTNERS
SEEKING DESIGNATION AS AN
ELIGIBLE TELECOMMUNICATIONS
CARRIER.
Case No. GNR-03-
IDAHO TELEPHONE
ASSOCIA TI ON'S POST - HEARIN G
BRIEF
STATEMENT OF THE CASE
On February 3 , 2003 , IAT Communications, Inc., d/b/a Clear Talk ("Clear Talk") filed
with the Idaho Public Utilities Commission ("Commission ) a Petition for Designation as an
Eligible Telecommunications Carrier. Clear Talk's petition requested an eligible
telecommunications carrier ("ETC") designation for its wireless telecommunications service
within the service areas of the following incumbent local exchange carriers: Qwest Corporation
Qwest"), Citizens Telecommunications Company of Idaho ("Citizens ), Albion Telephone
ORIGiNAL
IDAHO TELEPHONE ASSOCIATION'S POST-HEARING BRIEF - Page 1 of 18
Company ("Albion ), Filer Mutual Telephone Company ("Filer ), Fremont Telecom Company
Fremont"), and Project Mutual Telephone Cooperative Association, Inc. ("Project Mutual"
On April 28, 2003 , NPCR, Inc. d/b/a Nextel Partners ("Nextel") submitted a similar
Application for Designation as an eligible telecommunications carrier for its Idaho wireless
service territory. Nextel's Application requested an ETC designation for certain selected
exchanges in Citizens' service territory, and for the entirety of the service areas of Albion , Filer
Project Mutual, Mud Lake Telephone Cooperative Association, Inc. ("Mud Lake ), and Farmers
Mutual Telephone Company ("Farmers
In Order No. 29240, the Commission combined the two applications and requested
comments from other parties under its Modified Procedure rules. The Idaho Telephone
Association ("IT A,,)2 and Citizens intervened and filed Comments opposing the applications and
requesting an evidentiary hearing on the applications insofar as they applied to proposed
designations in rural telephone company service areas.3 Clear Talk and Nextel filed Reply
Comments taking issue with the Intervenors' Comments but not opposing the request for
evidentiary proceedings.
In Order No. 29292, the Commission granted the Intervenors' request for evidentiary
hearings, which were held as scheduled on December 9th and 10th 2003. During the hearings
Clear Talk dropped its request for designation in the Albion and Filer service areas. Tr. 379, L.
24-Tr. 380, L. 9.
I During the hearings Clear Talk dropped its request for designation in the Albion and Filer service areas. Tr.379
L. 24-Tr. 380, L. 9.2 The ITA is authorized to represent member companies in regulatory proceedings and in other public policy
matters. ITA member companies include: Albion Telephone Company, Cambridge Telephone Company, Custer
Telephone Cooperative, Inc., Farmers Mutual Telephone Company, Filer Mutual Telephone Company, Inland
Telephone Company, Midvale Telephone Company, Mud Lake Telephone Cooperative Association, Project Mutual
Telephone Cooperative Association, Direct Communications - Rockland, Rural Telephone Company, Silver Star
Telephone Company, Oregon-Idaho Utilities, and Fremont Telecom.3 Project Mutual also intervened but did not actively participate in subsequent hearings.
IDAHO TELEPHONE ASSOCIATION'S POST-HEARING BRIEF - Page 2 of 18
STATEMENT OF FACTS
The Applicants in this case are two very different types of companies. Clear Talk is a
small, closely held regional wireless carrier with a relatively limited service area in Idaho.
Nextel is a publicly traded partnership. It effectively functions as an operating arm of its parent
Nextel Communications, a publicly traded company that owns 32% of its stock. Tr. P. 518, L.
20-25. Nextel is managed under ajoint operating agreement with Nextel Communications, and
both companies offer the same Nextel branded products and services. Id.
The applications at issue in this case both seek competitive ETC designations in areas
served by incumbent local exchange carriers ("ILECs ) that are designated as "rural telephone
companies" as that term is defined in 47 U.C. 9 153(37). The primary purpose of the
applications is to qualify the Applicants for the receipt of federal universal service funds
USF"). Tr. 12, L. 9-19; Tr. 340, L. 20-Tr. 341 , L. 4. Neither Applicant has requested state
universal service funding at this time, but neither rules out doing so in the future. Tr. 13, L. 5-
If the Commission grants the Applications, each of the Applicants will qualify for USF
support for each wireless "line" in an amount equal to the affected ILEC's system-wide average
support per line.4 Tr. 43 , L. 3-5. This represents a new demand on the federal USF because the
incumbent's USF support, which is based on its total cost of service throughout its study area
Tr. 38, L. 16-, is not reduced by incremental payments to wireless ETCs. Tr. 242, L. 16-19;
Tr. 270, L. 16-20.
Despite the fact that their USF support would be based on the incumbents' system-wide
average costs, neither of the Applicants claim to offer service throughout the affected ILECs
service areas. Both of the Applicants have chosen to concentrate their service area primarily
4 In the Citizens service area, the Applicants' support will be based on the average support per line within each of
Citizens disaggregated exchanges.
IDAHO TELEPHONE ASSOCIATION'S POST-HEARING BRIEF - Page 3 of 18
along the interstate corridor where population densities are the greatest. See Exhibit 1;
Application ofNextel Partners, Attachment 2. In Clear Talk's case, it concedes that it currently
serves only a portion of Citizens' Aberdeen exchange , and relatively minor portions of Fremont
and Project Mutual's service areas. Ex. 1; Tr. 380, L. 20-24. Similarly, Nextel acknowledges
that it cannot provide service throughout the Citizens, Albion, Filer and Mud Lake service areas.
Tr. 100, L. 1-20. Whether it can serve the entirety of Project Mutual's and Farmers' service
areas is an open question because Nextel admits that it cannot in fact serve all the customers
within the "cloud" delineated in its propagation map without additional buildout. Tr. 147, L. 18-
Tr. 148, L. 5. Furthermore, Nextel's propagation map, which would seem to include the entirety
of both companies' areas , is based on the use of3-watt phones. Tr. 12, L. 2-4; Exhibits 103 and
104. Ifuse of the more common types of wireless phones is assumed, Nextel's claimed coverage
area is necessarily overstated. Tr. 99, L. 10-23.
Both Applicants acknowledge that they unilaterally chose their service areas based on
their individual financial and operational considerations. Tr. 119, L. 10-17; Tr. 386, L. 17-21. In
effect, both are now seeking ETC designations for the entirety of any incumbent's service area in
any portion of which the Applicants have some service:
Isn t it true that like Nextel, essentially you are seeking a designation
based on the service areas in which you have some service?
(By Mr. Ishihara) Yes, that's correct.
Tr. 381 , L. 2-5. In the words ofNextel's witness , Mr. Wood
, "
Nextel Partners is asking that it be
permitted to define a service area in Idaho that it can serve as an ETc." Tr. 181 , L. 20-22.
In fact, as matters now stand, both Applicants are legally barred from serving the entirety
of all the affected ILECs' service areas because oflicense limitations. Tr. 98, L. 21-23; Tr. 427
L. 12-16. Acquiring additional licenses to provide coverage throughout the entirety of the
IDAHO TELEPHONE ASSOCIATION'S POST-HEARING BRIEF - Page 4 of 18
ILECs' service areas would be , as the Applicants acknowledge, an expensive and time
consuming process and, in some cases, a legal impossibility. Tr. 73, L. 19-20; Tr. 125, L. 1-
Tr. 128, L. 12-16. Even if the licensing impediment could be overcome, both Applicants
acknowledged that they would only build out in areas where it was economically attractive to do
so. According to Clear Talk, this would require a minimum of 125-250 customers for any new
cell tower site. Tr. 451 , L. 6-11. In response to a question from Commissioner Smith, Nextel'
witness, Mr. Peabody, conceded that a full Nextel build out throughout all the affected ILECs
service areas would be a matter of "years, rather than months " Tr. 140, L. 8-, but he refused to
provide a firm timetable or buildout plan to support even this vague assurance. According to Mr.
Peabody, Nextel:
cannot make business commitments about specific buildout until we are
designated an ETC, evaluate funding levels, consider our own capital budgets
and analyze market dynamics.
Tr. 73 , L. 8-11.
Finally, while the Applicants repeatedly insisted that they need USF support to bring the
benefits of competition with the ILECs to Idaho s rural areas, there is absolutely no evidence in
the record to support this bald assertion, and Nextel's witness, Mr. Wood, admits as much. Tr.
276, L. 19-Tr. 278, L. 12. The Applicants presented no cost studies to demonstrate that USF
support is economically necessary, nor did they present any evidence whatsoever that they would
further the ultimate goal of universal service by providing service to customers who currently do
not have access to supported telecommunications services. This is not surprising because all the
meaningful evidence in the record indicates there are already numerous unsubsidized wireless
carriers in the Idaho rural telephone companies ' service areas , and the service they are providing
IDAHO TELEPHONE ASSOCIATION'S POST-HEARING BRIEF - Page 5 of 18
is almost exclusively a complementary service, rather than a competitor for the ILECs' existing
universal service offerings. See infra pp. 14-16.
ARGUMENT
The Applicants would have the Commission believe that this case is about removing
regulatory barriers" to competition, Tr. 91 , L. 14-, and providing a "level playing field" for
wireless service providers. Tr. 52, L. 16, Tr. 83 , L. 16. This is utter nonsense. In Idaho, there
are no "regulatory barriers" to wireless competition because wireless service providers are
completely exempt from regulation under either title 61 or title 62 of the Idaho Code. Idaho
Code 9 62-603(14). The Applicants, and many other wireless providers, have entered rural
telephone company service territories at will, and they will continue to do so in the future. In
addition, it is quite clear that the Applicants don t want the competitive playing field levelized in
those cases where they may have a competitive advantage over the incumbents.
I disagree with any suggestion that a goal of regulation in this context should be
to attempt to equalize the position of the carriers by artificially removing
advantages any carrier may have over others.
Testimony of Don Wood, Tr. 202, 10-14.
The issues in this case have nothing to do with the Applicants' ability to compete with
incumbent rural telephone companies. They are free to do so in a time and place of their
choosing. The real question is whether their service within rural telephone company service
territories should be subsidized by USF support payments. As a matter of law, this question can
only be answered in the affirmative ifthe Applicants show, and the Commission finds, that (1)
they have the capability and commitment to provide service throughout the incumbent rural
telephone companies service territories and (2) the requests for ETC designation and USF
IDAHO TELEPHONE ASSOCIATION'S POST-HEARING BRIEF - Page 6 of 18
support will serve the public interest. Both applications fall woefully short of meeting either
requirement.
The Applicants' requests for ETC designations must be denied because they
do not offer service throughout the entirety of the incumbent rural telephone
companies study areas.
A party seeking a competitive ETC designation in a rural telephone company s service
territory must first meet a minimum threshold statutory test by demonstrating that it offers
service throughout the entirety of incumbent's study area. This requirement stems from Section
214(e)(I) of the Telecommunications Act of 1996, which provides that an applicant for ETC
status:
shall, throughout the service area for which such designation is received-
(A) offer the services that are supported by Federal universal support mechanisms
under section 254 . . . ; and
(B) advertise the availability of such services and the charges therefore using
media of general distribution.
47 U.C. 9214(e)(1). Section 214(e)(5) further provides:
In the case of an area served by a rural telephone company "service area" means
such company s "study area" unless and until the Commission and the States after
taking into account recommendations of a Federal-State Joint Board instituted
under section 41 O( c), establish a different definition of service area for such
company.
Congress enacted this "ubiquitous service" requirement in response to rural telephone
companies' concerns that they would be placed at an unfair competitive disadvantage if their
competitors could target only their most attractive customers while simultaneously receiving
USF support based on the incumbent's system-wide average costs. In rejecting arguments that
rural telephone companies service areas should be redefined to accommodate potential
competitors' preferred service areas , the Joint Board concluded:
We find no persuasive rationale in the record for adopting, at this time, a service
area that differs from a rural telephone company s present study area. We note
IDAHO TELEPHONE ASSOCIATION'S POST-HEARING BRIEF - Page 7 of 18
that some commenters argue that Congress presumptively retained study areas as
the service area for rural telephone companies in order to minimize "cream
skimming" by potential competitors. Potential "cream skimming" is minimized
because competitors, as a condition of eligibility, must provide services
throughout the rural telephone company s study area. Competitors would thus not
be eligible for universal service support if they sought to serve only the lowest
cost portions of a rural telephone company s study area.
Joint Board Recommended Decision, FCC 96J-3 at ~ 172 (Nov. 8, 1996)
Enforcing this minimum statutory requirement is not, as the Applicants repeatedly insist
either unfair or anticompetitive. As the ITA's witness Dan Trampush explained it is part and
parcel of Congress s definition of fair competition in rural telephone company service territories.
Congress essentially offered wireless carriers a choice when they enter a rural
telephone company s service area. They are free to skim the cream of the
incumbent's customers, but ifthey do so they must forgo USF support.
Alternatively, the competitor can attempt to qualify for USF subsidies equivalent
to the incumbent's. If the competitor chooses the latter alternative it must, as a
minimum threshold requirement, match the incumbent's obligation to serve and
actively solicit customers throughout the entirety of a rural ILEC' s territory. This
requirement is mandatory and non-discretionary, unless the Joint Board
recommends, and the FCC and states adopt, some lesser requirement.
Tr. 501 , L. 1-13.
The Applicants would have the Commission relieve them of this minimum statutory
requirement by relying on an FCC preemption decision entitled In the Matter of the Federal-
State Joint Board on Universal Service; Western Wireless Corporation Petition for Preemption
of an Order of the South Dakota Public Utilities Commission CC Docket No. 96-, 15 FCC
Rcd. At 15175 (Aug. 10 2000) (hereafter Western Wireless). According to Nextel's witness
Don Wood, the Western Wireless decision stands for the proposition that the law does not require
a competitive ETC applicant "to show that it can serve every customer throughout each study
area for which it seeks designation in advance of receiving a grant ofETC status." Tr. 30, L. 13-
IDAHO TELEPHONE ASSOCIA nON'S POST-HEARING BRIEF - Page 8 of 18
16. While this is an apt characterization of the FCC's initial holding, it omits some important
qualifications that make the Applicants reliance on Western Wireless misplaced.
The FCC qualified its decision by stating that a competitive ETC applicant must "make a
reasonable demonstration to the state commission of its capability and commitment" to provide
universal service throughout the proposed ETC serving area. The FCC stressed that this must be
a meaningful demonstration:
We caution that a demonstration of the capability and commitment to provide
service must encompass something more than a vague assertion of intent on the
part of a carrier to provide service. The carrier must reasonably demonstrate to
the state Commission its ability and willingness to provide service upon
designation.
Western Wireless at ~ 24. Furthermore, the FCC affirmed that
, "
A new entrant, once designated
as an ETC is required, as the incumbent is required, to extend its network to serve new
customers upon reasonable request." Western Wireless at ~ 17 (emphasis added).
In a subsequent order In the Matter of Federal-State Joint Board on Universal Service;
Western Wireless Corporation Petition for Designation as an Eligible Telecommunications
Carrier in the State of Wyoming, CC Docket 96-45 (Dec. 26, 2000) (hereafter Wyoming), the
FCC provided an example of the type of "capability and commitment" showing required by law.
In Wyoming, the FCC noted "Western Wireless also commits to provide service to any
requesting customer within the designated service areas, and if necessary, will deploy any
additional facilities to do so.Wyoming at ~9. The FCC characterized this commitment as "
statutory duty,Wyoming at ~ 20, that is required because:
Congress was concerned that consumers in areas served by rural telephone
companies continue to be adequately served should the incumbent telephone
company exercise its option to relinquish its ETC designation under section
214(e)(4).
IDAHO TELEPHONE ASSOCIATION'S POST-HEARING BRIEF - Page 9 of 18
Wyoming at ~19. The FCC granted Western Wireless s application only after finding that it
demonstrated "a financial commitment and ability to provide service to rural customers that
minimizes the risk that it may be unable to satisfy its statutory ETC obligations after
designation.Id.
Taken as a whole, the Western Wireless and Wyoming decisions stand for the proposition
that a competitive ETC need not have facilities throughout the rural incumbent's service area at
the time of designation, but it must show it is "fit, willing and able" to provide carrier of last
resort service, in the same manner as the incumbent, upon reasonable request. The Applicants
cannot, and will not, meet this statutory requirement. Because of license and facility limitations
they lack the capability to provide service throughout the incumbents' service territories , and
they have steadfastly refused to provide any evidence of financial ability or willingness to meet
their statutory obligations in any reasonable timeframe.
On this record, there is simply no conceivable basis for a Commission finding that the
Applicants stand ready to serve as a carrier of last resort in the same manner as the incumbents.
On cross examination, Citizens' witness , Lance Tade provided a not atypical example of the
daunting economics involved in fulfilling a carrier of last resort obligation:
(T)here s a small community in our Elk City exchange called Orogrande and in
our 2004 budget, there s approximately 12 customers up there that want service
and we currently do not have facilities going into that area and there s an
obligation on our part to spend about $350 000 to provide service to those 12
customers.
Tr. 613, 20- Tr. 614, L.1. Neither of the Applicants is capable or willing to undertake similar
obligations.
In fact, both parties have openly repudiated any intention of complying with their
statutory duty by testifying they would only provide service when and where it is profitable. In
IDAHO TELEPHONE ASSOCIATION'S POST-HEARING BRIEF - Page 10 of 18
Clear Talk's case, it will not consider installing a new cell site unless there are at least 125
potential customers even if it receives USF support, and even then the company is unwilling to
commit to providing service in all such cases. Tr. 473, L. 2-23. Nextel's position is even more
restrictive, as Mr. Peabody s exchange with Commissioner Hansen vividly illustrates:
Just a follow-up with what Mr. Richards was asking you on guidelines to
provide service. Really, when a customer asks for service, isn t really
your guideline dollars and cents? If to provide service to that customer
you re not going to be able to recover your cost through the rate you
charge, isn t it more likely you re going to deny that customer service?
Yes. We are an investor-owned company. We have to show profitability
on our investments. There s no guaranteed return for us.
So really, that's basically your major guideline, is it not?
That's correct.
Tr. 137, L. 4-15.
In short, both companies intend to engage in systematic cream skimming by focusing
only on profitable customers and rejecting service to those who can t make an immediate
contribution to the bottom line. This is hardly surprising given the fact that this is the very
essence ofNextel's well-documented business plan. Morningstar, a respected independent stock
research firm, summarized the company s strategy as follows:
Unlike rivals obsessed with subscriber growth, Nextel doesn t wave a cell phone
at every Tom, Dick, and Harry. Instead. it skims the cream of the crop; lucrative
business customers who tend to be heavy cell phone users and who are more
concerned with quality and features than price.
Tr. 517, L. 7-10; Exhibit 304 (emphasis added). There can be little doubt that Nextel is in fact
following this cream skimming strategy in its rural Idaho service areas. While multi-line
business customers provide on average only 8.4% of Idaho incumbent rural telephone
companies' total access lines , they constitute more than 50% ofNextel's access lines in the four
rural telephone company service areas where Nextel has a significant presence.
IDAHO TELEPHONE ASSOCIATION'S POST-HEARING BRIEF - Page 11 of
Under these circumstances, the Commission must find that the Applicants clearly
do not intend to meet their obligations to provide ubiquitous service throughout the
incumbent rural telephone companies ' study areas , and the applications must therefore be
denied.
Granting the Applicants' request for ETC status would be contrary to the
public interest.
Even if an applicant is fit, willing and able to provide service throughout a rural
incumbent's service area , it must additionally prove that its request for ETC status is in the
public interest. Section 214(e)(2) of the Telecommunications Act of 1996 states:
(T)he State commission may, in the case of an area served by a rural telephone
company, and shall, in the case of all other areas, designate more than one
common carrier as an eligible telecommunications carrier. . . Before designating
an additional eligible telecommunications carrier for an area served by a rural
telephone company, the State commission shall find that the designation is in the
public interest.
47 U.C. 8 214(e)(2) (emphasis added).
The Applicants urge the Commission to accept the presumed benefits of competition as
conclusive evidence that their request is in the public interest.5 But as the ITA's witness, Dan
Trampush, points out, the Applicants' position is clearly at odds with Congressional intent.
If the presumptive benefits of competition were sufficient to satisfy the public
interest test, the public interest test would be a non sequiter because Congress
would have had no reason to include it in the law. It would have made multiple
ETC designations mandatory, as it did in RBOC service areas, on the grounds that
competition is always in the public interest.
5 Designating Clear Talk as an ETC in Idaho will bring competition to rural, high cost areas, and
competition is in the public interest. . . The failure to designate Clear Talk as an ETC would deprive
consumers of the benefits of competition, including increased choices, higher quality service, and lower
rates. Glenn Ishihara, P. 23 , L-6- 7 17-19.
Consistent with the Act, the "public interest" is served where designating a competitive ETC will benefit
consumers in rural areas of the state. The Commission should make this determination from the
presumption that competition benefits consumers, and that citizens throughout the state are entitled to the
benefits of competitive universal service. Scott Peabody, Tr. 50, L. 20- Tr. 51 , L. 2.
IDAHO TELEPHONE ASSOCIATION'S POST-HEARING BRIEF - Page 12 of
But that is not what Congress did. Instead it made multiple ETC designations
permissive in rural telephone company service areas and further provided that
these designations must first be determined to be "in the public interest." Thus
the only logical reading of the statute is that a company seeking ETC status in a
rural telephone company service area must show some public interest benefit
beyond the presumptive benefits of competition.
Tr. 525, L. 12-Tr. 526. L.3 (footnote omitted). Accord Comments ofthe National Association
of State Utility Consumer Advocates at 9, CC Docket No. 96-45.
The Applicants' implausible interpretation of the "public interest" test is not only
irrational, it is also inconsistent with the manner in which lawmakers have historically employed
the term. When used in public utility statutes, a reference to the "public interest" normally
invites the Commission to weigh competing social and economic considerations. See generally
Charles F. Phillips, Jr., THE REGLATION OF PUBLIC UTILITIES at 183 (1993). This is
precisely the approach suggested by FCC Commissioner Adelstein, who argues that regulators
should consider the following issues in administering the public interest test:
Whether granting ETC status to a competitor will bring benefits to a community
that it does not already have and what effect it will have on the overall size of the
fund, and thus on consumers' bills. So , a threshold question is, does the benefit to
consumers outweigh the ultimate burden on consumers.
Remarks of Commissioner Johnathan S. Adelstein before the National Association of
Regulatory Utility Commissioners on February 2003 quoted in NTCA Reply Comments
, CC Docket No. 96-45. Mr. Trampush proposed a similar approach in his testimony:
I suggest, therefore, that we must first consider what we are trying to accomplish
with USF payments, what is the likelihood that we will achieve our goals, and
whether the expected results justify the costs.
Tr. 529, L. 16-Tr. 530, L.2.
Whether the Commission adopts Commissioner Adelstein s test or Mr. Trampush'
proposed approach, the result is the same. There is precious little evidence that designating the
IDAHO TELEPHONE ASSOCIATION'S POST-HEARING BRIEF - Page 13 of
Applicants as ETCs would produce significant benefits. The Applicants argue that USF funding
will enable them to introduce new services to potential customer and force the ILECs to operate
more efficiently in response to their competitive pressure. See e.
g.,
Tr. 85, L. 4-22. The facts
simply don t support either argument.
According to a recent Legg Mason report, there are now approximately 156 million
wireless subscribers nationwide, amounting to a penetration rate of 54% of the nation
households. Legg Mason, 3Q 2003 Wireless Scorecard: Subscriber Growth is Accelerating at 1
(Jan. 7 2004). Rural Idaho has also seen explosive growth in both the number of cellular
customers and the number of providers. In a survey undertaken prior to this proceeding, the IT
found that all member companies reported the presence of cellular providers in their service
areas, with an overall average of 5 cellular providers per incumbent territory. Tr. 531 , L. 19-23.
Many of these wireless companies have been providing service for 5-10 years without subsidies.
Tr. 532, L. 2-5. Thus, wireless service is not a "new" service in the rural telephone companies
service territories, and there is no evidence in the record that the Applicants will fill a need or
provide services that are not already available without subsidization.
Similarly, the facts do not support the Applicants' argument that their competitive
presence will force the incumbents to improve their operational efficiency. Since there are
already numerous wireless carriers in their territories, the incumbents are already faced with the
threat of potential competition and the need to operate efficiently. But whether or not the
Applicants are designated as ETCs, that competitive threat is more potential than actual. The
available evidence suggests that Citizens and ITA customers are not substituting wireless for
wireline service to any significant degree. Tr. 533 , L. 5-22. Instead customers seem to view the
two types of service as complementary services, each prized for their own unique attributes. Tr.
IDAHO TELEPHONE ASSOCIATION'S POST-HEARING BRIEF - Page 14 of
535 , L. 1-Tr. 536, L. 2. This is entirely consistent with the Commission s recent findings in the
Qwest deregulation case, which also reached the conclusion that the two types of service are
largely complementary rather than competitive. See In the Matter of the Application of Qwest
for Deregulation of Basic Local Exchange Rates In Its Boise, Nampa, Caldwell, Meridian, Twin
Falls, Idaho Falls, and Pocatello Exchanges Order No. 29360 at 19-20 Oct. 20, 2003).
The field in which the wireless carriers are in fact having significant competitive impacts
is interexchange service. In this arena, customers are using their bundled minutes of use to
displace access charges and wireline long distance charges. Tr. 533, L.23- Tr. 534, L. 5. As Mr.
Trampush notes, this situation raises two compelling public policy questions:
First, how can the presumed benefits of competition occur when there appears to
be little direct wireless competition with the incumbents for the provision of
universal service? Second, does it make sense to devote scarce federal universal
service funds to promote wireless competition in rural areas when that
competition is largely directed against interexchange carriers who do not qualify
for similar subsidies?
Tr. 536, L. 3-Tr. 537, L. 7. This issue is all the more interesting in view of the fact that wireless
carriers generally do not provide equal access to their interexchange competitors.
Against this slim evidence of benefits stemming from wireless ETC designations, the
Commission must weigh the potential cost of providing multiple providers with USF support for
potentially any number of phones per household. As Mr. Trampush pointed out, granting the
Applicants' requests is likely to open the floodgates for further designation requests.
If the Commission grants these insupportable Applications, it is difficult for me to
imagine any grounds that will suffice to deny subsequent applications. In that
event, we can assume that virtually all of the wireless carriers operating in Idaho
will apply for, and be granted, ETC status and federal USF support. Furthermore
I would expect that these carriers will ultimately seek funding from the state
universal service fund as well.
The result will be the creation of a whole new industry subset, founded not on
competitive business principles, but rather on the desire to maximize regulatory
IDAHO TELEPHONE ASSOCIATION'S POST-HEARING BRIEF - Page 15 of 18
subsidies that have little or nothing to do with universal service. The ultimate
irony is that this will distort, rather than advance, competition, and place
legitimate universal service funding at risk.
Tr. 541 , L. 12-Tr. 542, L. 2.
Under these circumstances, the public interest weighing process tilts decidedly against
the Applicants. The benefits are questionable and the countervailing costs are potentially
enormous.
CONCLUSION
For the above and foregoing reasons, the IT A submits that the Commission has no choice
but to reject the Applications on the grounds that they are contrary to law and not in the public
interest.
RESPECTFULLY SUBMITTED this 16th day of January 2004.
IDAHO TELEPHONE ASSOCIATION'S POST-HEARING BRIEF - Page 16 of
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on this 16th day of January 2004, I caused to be served a true
and correct copy of the foregoing document by the method indicated below, and addressed to the
following:
Jean Jewell
Idaho Public Utilities Commission
472 W. Washington Street
O. Box 83720
Boise, ID 83720-0074
( ) U.S. Mail
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Molly O'Leary
RICHARDSON & O'LEARY
99 E. State Street, Ste. 200
Eagle, ID 83616
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Sean P. Farrell
IA T Communications, Inc.
NTCH-Idaho Inc., d/b/a Clear Talk
703 Pier Avenue, Suite B
PMB 813
Hermosa Beach, CA 90254
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Dean J. Miller
MCDEVITT & MILLER
420 W. Bannock Street
O. Box 2564
Boise, ID 83701-2564
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Philip R. Schenkenberg
2200 First National Bank Building
332 Minnesota Street
Saint Paul, MN 55101
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Morgan W. Richards
Moffatt, Thomas, Barrett, Rock & Fields
101 S. Capitol Blvd., 10th Floor
O. Box 829
Boise, ID 83701-0829
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IDAHO TELEI.'HONE ASSOCIATION'S POST-HEARING BRIEF - Page 17 of 18
Lance A. Tade, Manager
State Government Affairs
Citizens Telecommunications Company of Idaho
4 Triad Center, Ste. 200
Salt Lake City, UT 84180
Robert M. Nielsen
548 E Street
O. Box 706
Rupert, ID 83350
Charles H. Creason, Jr.
President and General Manager
Project Mutual Telephone Cooperative Association
507 G Street
O. Box 366
Rupert, ID 83350
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IDAHO TELEPHONE ASSOCIA nON'S POST-HEARING BRIEF - Page 18 of