20040805Qwest Motion to Dismiss.pdf

Mary S. Hobson (ISB #2142)
Stoel Rives LLP
101 South Capitol Boulevard - Suite 1900
Boise, ill 83702
Telephone: [phone]
Facsimile: [phone]
msho b son~stoel. com
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Adam L. Sherr (WSBA #25291)
Qwest
1600 7th Avenue - Room 3206
Seattle, WA98191
Telephone: [phone]
Facsimile: [phone]
adam. sherr~qwest. com
Attorneys for Qwest Corporation
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
CITIZENS OF SOLDIERS MEADOW AREA Case No. GNR- T -04-
Complainants,MOTION TO DISMISS
vs.
QWEST CORPORATION
Respondent.
Qwest Corporation ("Qwest"), pursuant to Rule 56 of the IPUC Rules of Procedure
moves this Commission to enter an order dismissing the Complaint of the Citizens of the
Soldiers Meadow Area on the grounds that it fails to state a claim upon which the Commission
can grant relief. This Motion is based on the following facts and on Qwest's concurrently filed
Memorandum.
MOTION TO DISMISS
Page 1
Boise-173236.1 0029164-00102
FACTS
Complainants have petitioned the Commission for an order requiring Qwest to
extend telephone service to an unincorporated area, largely comprised of vacation homes located
near Soldiers Meadow Reservoir ("Soldiers Meadow
Soldiers Meadow is outside Qwest's service territory.
Qwest does not have any facilities in place that would allow it to serve Soldiers
Meadow. When asked in 2003 to estimate the cost of construction, Qwest provided a very rough
estimate of$180 000. Qwest believes that a more detailed engineering analysis would reveal
that Qwest's 2003 estimate was significantly understated.
Due in part to the initial construction cost, the residents' unwillingness to pay
such line extension costs, and the length of time necessary for Qwest to recover its investment
Qwest is not willing to serve Soldiers Meadow.
When surveyed by Commission Staff, the few (19) residents of Soldiers Meadow
who indicated interest in Qwest service indicated an unwillingness to pay significant amounts for
the construction. More specifically, 7 indicated no willingness to pay, 6 indicated a willingness
to pay no more than $200 and 6 indicated a willingness to pay no more than 000.
Even if Soldiers Meadow were included in Qwest's service territory, based on the
understated $180 000 estimate and 19 customers, the potential customers would be required to
pay all costs of construction in excess of 400 per customer (minus the 600 line extension
credit, if applicable, provided under Qwest's tariff).
Staff s survey reveals that 21 of 22 respondents have wireless service at Soldiers
Meadow.
MOTION TO DISMISS
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Boise-173236.1 0029164-00102
CONCLUSION AND REQUESTED RELIEF
Because Soldiers Meadow is outside Qwest's service territory, Qwest has no obligation
to serve. If the Commission were inclined to order Qwest to change its service boundaries, the
Complainants would not receive service because, even with the Line Extension credit approved
by the Commission for northern Idaho, the service would not be affordable for customers, by
their own admission.
Wherefore, Qwest respectfully requests that the Commission enter its order dismissing
Complainants ' Petition.
Respectfully submitted this y of August, 2004.
Adam L. Sherr
Qwest
Attorneys for Qwest Corporation
MOTION TO DISMISS
Page 3
Boise-173236.1 0029164-00102
CERTIFICATE OF SERVICE
I hereby certify that on this day of &-L?~ , 2004, I served the
foregoing MOTION TO DISMISS upon all parties of record in this matter as follows:
Jean Jewell, Secretary
Idaho Public Utilities Commission
472 West Washington Street
O. Box 83720
Boise, Idaho 83720-0074
11 ewe1l~puc.state.id. us
Hand Delivery
U. S. Mail
Overnight Delivery
Facsimile
Email
Vlado Maras
Vivian Maras
O. Box 280
25314 Soldiers Meadow Road
Winchester, ill 83555
Hand Delivery
U. S. Mail
Overnight Delivery
Facsimile
Email
Herb Weed
Trudy Weed
O. Box 467
43529 Yellow Pine Avenue
Winchester, ill 83555
Hand Delivery
U. S. Mail
Overnight Delivery
Facsimile
Email
Brandi L. Gearhart, PLS
Legal Secretary to Mary S. Hobson
Stoel Rives LLP
MOTION TO DISMISS
Page 4
Boise-173236.1 0029164-00102
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Mary S. Hobson (ISB #2142)
Stoel Rives LLP
101 South Capitol Boulevard - Suite 1900
Boise, ill 83702
Telephone: [phone]
Facsimile: [phone]
mshobson~stoel.com
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Adam L. Sherr (WSBA #25291)
Qwest
1600 7th Avenue - Room 3206
Seattle, W A 98191
Telephone: [phone]
Facsimile: [phone]
adam.sherr~qwest.com
Attorneys for Qwest Corporation
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
CITIZENS OF SOLDIERS MEADOW AREA,Case No. GNR-04-
Complainants MEMORANDUM IN SUPPORT
OF MOTION TO DISMISS
VS.
QWEST CORPORATION,
Respondent.
Qwest Corporation ("Qwest") files the following Memorandum in Support of its Motion
to Dismiss.
BACKGROUND
On February 18, 2004, Vlado and Vivian Maras and Herb and Trudy Weed
Complainants ) asked that the Commission consider a formal complaint in which they seek to
have Qwest install facilities to serve their homes and those of other residents of an
unincorporated vacation home area near the Soldiers Meadow Reservoir known as "Soldiers
MEMORANDUM IN SUPPORT OF MOTION TO DISMISS
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Boise-173251.1 0029164-00102
Meadow." Complainants state that the provision of telephone service to their homes would
increase their safety as well as their convenience.
The record is not clear as to exactly how many residents of Soldier Meadow would
subscribe to telephone service if it were offered. That number would, no doubt, be affected by
how much customers would be required to pay for installation. In a recent survey conducted by
the Commission Staff, 19 of 2~ respondents indicated that they were interested in service from
Qwest. Of those 19, seven are unwilling to pay any amount for the construction, six are willing
to pay up to $200, and six are willing to spend up to 000.
Soldiers Meadow is outside Qwest's service territory and several miles from the nearest
wire center located at Craigmont, Idaho. It is roughly four miles from the nearest Qwest
facilities, located in Forest, Idaho. Qwest also provides service to an area west of Soldiers
Meadow known as Waha. Waha is serviced out of the Lewiston, Idaho switch. The nearest
facilities in the Waha area, however, are estimated to be 53 780 feet away from Soldiers
Meadow.
Qwest has made it clear that it will not voluntarily extend service to the Complainants
because they are not in the service area and because the cost of the construction is prohibitive.
The exact level of construction costs can, of course, be debated. In 2003 , Qwest provided a very
broad estimate that construction would cost $180 000. Qwest believes that a more specific
engineering analysis would reveal that $180 000 is significantly understated. Even using the
understated $180 000 for purposes of this motion, allocating these costs to the tiny potential
customer base yields per-customer installation costs that are prohibitive. Based on 19 interested
customer locations and $180 000, the per location cost would be in excess of 400.
It is interesting that 21 of the 22 Soldiers Meadow residents who responded to the Commission s Staff
survey indicated having wireless service in Soldiers Meadow.
MEMORANDUM IN SUPPORT OF MOTION TO DISMISS
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Boise-173251.1 0029164-00102
ARGUMENT
Qwest is not obligated to serve Soldiers Meadow.
It is undisputed that Soldiers Meadow is outside Qwest's service territory. As Staff s
July 26 2004 Survey Summary in this matter acknowledges, Qwest's tariff , which has been
reviewed and approved by this Commission, explicitly limits Qwest's service obligation to its
service territory.
A. Territory Served, Services Rendered, Rates and Rules and
Regulations
The Company renders exchange telephone service, toll telephone
service and private line services and channels throughout the
territory served by it and its connecting companies as shown in its
schedules, which include a description of the services furnished,
and maps filed.
Northern Idaho Exchange and Network Services Tariff, Section
A (emphasis added).
Rather than accepting the policy expressed by Qwest's tariff, Complainants demand to
know why the Commission has not changed Qwest's boundaries to accommodate their request.
The fact is that they seek extraordinary relief that should not be granted on the facts of this case.
Idaho Code ~ 61-508 does not support the Complainants' position.
Complainants rely on Idaho Code 9 61-508 in requesting that the Commission order a
boundary change to accommodate Soldiers Meadow. That reliance is not well placed. Although
the statute grants the Commission the power to order "additions, extensions, repairs or
improvements to or changes in the existing physical plant. . ." of a public utility, the
Commission can do so under the statute only when it finds that such extensions "ought
reasonably to be made.Idaho Code 61-508. When the Idaho Supreme Court had occasion to
interpret this language it stated:
MEMORANDUM IN SUPPORT OF MOTION TO DISMISS
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Boise-173251.l 0029164-00102
The use of the word "reasonably" is to be noted. Here again, in
determining what is reasonable, the rights of both consumer and
proprietor must be considered. In this connection the commission
and court must bear in mind the provisions of our state
Constitution that no person shall be deprived of his property
without due process of law, and that private property may not be
taken for public use until a just compensation shall be paid
therefor, as well as the similar provisions in the federal
Constitution. Sections 13 and 14, art. 1 , Idaho Constitution. To
compel the proprietor of a utility to make enlargements or
extensions under such circumstances that he could not make a
fair return upon his whole investment would certainly be
depriving him of his property without due process of law. In
order to justify the commission in ordering enlargements, the
commission should be satisfied from the evidence: First that the
existing plant is not reasonably sufficient to render adequate
service (Washington ex reI. O. R. & N. Co. v. Fairchild, 224 U. S.
510, 32 Sup. Ct. 535 , 56 L. Ed. 863); second, that the extension
or enlargement is within the scope of the original professed
undertaking of the proprietor of the utility (N. P. R. Co. v. N.
Dak., 236 U. S. 585 , 35 Sup. Ct. 429, at page 433 , 59 L. Ed. 735);
third, that after the making of the enlargements or extensions the
owner will be insured a fair return upon his whole investment
(Smyth v. Ames, 169 U. S. 466-546, 18 Sup. Ct. 418, 42 L. Ed.
819); fourth, that the particular enlargements or extensions are
reasonably necessary to insure reasonably adequate service (N. P.
R. Co. v. N. Dak., supra, and Washington ex reI. O. R. & N. Co. v.
Fairchild, supra).
Murray v. Pub. Uti!. Com '27 Idaho 603, 150 P. 47 52 (1915).
(emphasis added).
Thus, the Commission s powers under section 61-508 are limited by what is reasonable
in light of whether, among other things, the ordered extension is "within the scope of the original
professed undertaking of the utility 2 and whether the utility "will be insured a fair return on (its)
whole investment." fd. The record here is clear that these requirements are not met by the
proposed expansion to Soldiers Meadow. Not only is Soldiers Meadow outside Qwest's service
Whether section 61-508 actually grants the Commission the authority to change a public utility's boundary
over its objection need not be debated here because, from Qwest's perspective , the practical arguments against doing
so are overwhelming. Should the Commission disagree, Qwest reserves the right to brief the scope of the
Commission s jurisdiction to enter an order requiring the service boundary be changed.
MEMORANDUM IN SUPPORT OF MOTION TO DISMISS
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Boise-l 73251.1 0029164-00102
territory, but Qwest could not expect to receive recovery of the investment (assuming the
interested residents took basic residential service from Qwest in perpetuity) in less than 49 years
unless, of course, the potential customers each pay large line extension charges. Given the
realities of to day s telecommunications industry, deployment of capital where it will not be
recovered within a reasonable time cannot be justified.
Additional practical concerns stand in the way of changing Qwest's exchange
boundary.
In addition to the standards set out in Murray for consideration of the reasonableness of a
particular extension, the Commission should also consider the policy reasons that support
maintaining the boundaries of telephone corporations in fixed locations. If the Commission were
to grant the request of the Complainants in this case to alter Qwest's exchange boundaries, it will
set precedent that could impact all exchange boundaries and render them meaningless with
respect to how each company designs its network.
The telephone network is currently designed by each company based on its defined
service area. In the present case, the boundaries have been in place since prior to 1913. If the
Commission were to order a change to Qwest's boundary, it would affect Qwest's ability to plan
for future network demands. This is a critical concern because, although customers are
ordinarily expected to pay for the extension of new facilities to locations that have not previously
been served, telephone companies have been held responsible to plan their networks to meet the
reasonable demands of their customer base. Thus as a general rule, new line extensions are the
customers' responsibility while the company has been expected to install sufficient facilities to
serve the populated areas within its territory. Reinforcements of existing facilities to meet
Even this estimate is significantly understated. It is based on 19 customers paying $16 per month.
However, this overly-simplified calculation does not account for the cost of providing and maintaining service to the
customers.
MEMORANDUM IN SUPPORT OF MOTION TO DISMISS
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Boise-l 73251.1 0029164-00102
growth or increased service demands are, in most cases, the companies' responsibility.
However, if companies cannot be sure where their service territory ends, this balance between
customer-driven growth and reasonable company management of its network is destroyed.
A network is designed from a serving central office out to the far end of the exchange.
The design is based on the concept that it is efficient and economical to place larger size cables
closer to the central office where customer density tends to be highest, then taper the cables
down as customer density decreases farther away from the central office. At the outermost end
of the network design, small cables serving only a discreet number of customers are placed. This
results in limited capacity at exchange boundaries. If Qwest has to unexpectedly extend into an
area outside the exchange boundaries, in most cases there will not be a cable of sufficient size
nearby to serve the unforecasted customer demand. When this happens, cable reinforcement is
required farther back in the network to provide sufficient capacity and cable size to handle the
expanded customer base.
The Forest, Idaho scenario to which Complainants point is a good example of the
practical problem that is presented when boundary changes are contemplated after the telephone
company has built its network. Forest is remote in the sense that it is many miles from the
serving wire center in Craigmont, Idaho. When some of the potential customers located in
Forest requested service, Qwest eventually agreed with Staff to extend facilities in order to avoid
litigation over an ambiguity concerning its former line extension tariff. Qwest installed facilities
sufficient to meet the customer needs of that sparsely populated, remote area. Now, should the
Commission extend the boundary to include Soldiers Meadow, the facilities that were installed to
serve Forest will require reinforcement. It would be grossly unfair to require Qwest to bear the
MEMORANDUM IN SUPPORT OF MOTION TO DISMISS
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Boise-173251.l 0029164-00102
burdensome costs of reinforcing its network where its facilities are inadequate only because the
Commission changed the boundary.
If telephone companies cannot rely on their service area boundaries, they cannot
reasonably and efficiently manage their networks. This could have a markedly adverse affect on
the costs of serving a rural state like Idaho. In addition, ordering Qwest to change its service
boundary would restrict the company s control over its costs, thereby impairing its ability to
efficiently conduct its business. The reality is that construction dollars and personnel are finite
resources, especially in these times of increased competition and industry and financial turmoil.
If telephone companies cannot determine what their boundaries are, carriers cannot efficiently
plan and allocate resources to customers that are within their boundaries.
Changing the boundary to include Soldiers Meadow will not bring service to
the Complainants.
Qwest asks that the Commission consider one more practical reality in connection with
this case, i., that it is the cost of construction and not the Qwest boundary that is the barrier
here. Even if the Commission were inclined to change Qwest's service boundary to include
Soldiers Meadow, the Complainants will not receive service because the costs of installation are
simply too great to make service affordable.
Complainants appear to believe that a service area boundary change is the answer to their
concerns. It is not. If these customers were within the service boundary, they would be subject
to Qwest's tariff provisions. These provide that customers who seek to have service installed
where facilities do not and have not existed are responsible for all installation costs, subject to a
per customer credit of$1600.00. See No. Idaho Exchange and Network Services Tariff, sec.
2. Given the level of the costs discussed above, there is simply no way these potential
customers can or are willing to shoulder the financial burden of installing service in the Soldiers
MEMORANDUM IN SUPPORT OF MOTION TO DISMISS
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Boise-173251.1 0029164-00102
Meadow area. Even if the projected maximum number of 19 customers were to subscribe, and
assuming the use of Qwest's 2003 ballpark estimate, each customer is facing a line extension
charge of over $7 800.
Complainants have voiced frustration that customers in Forest were not required to pay
line extension charges. It must be remembered, however, that the Forest customers were always
located within the exchange boundary and were subject to the prior Qwest tariff that used a
different formula for line extension cost recovery. Even so, Qwest and the Commission Staff
reached an accord concerning the interpretation of that tariff as applied to the Forest customers.
Had the Commission been required to construe the tariff in light of the actual costs of
construction and the actual subscriber level achieved in Forest, it is not known whether the
resulting precedent would have been favorable to Complainants in this case.
Thus, Complainants ' belief that they would have received service without charge had the
Commission acted to change the boundary at the time the Forest matter was resolved, is based on
gross speculation. Certainly, Qwest would have opposed the boundary change then as it does
now. And, Qwest would not have agreed with the Staff to serve the customers in Forest had the
agreement also involved an additional four miles of facilities to reach Soldiers Meadow.
It is pointless, however, to speculate how differing results could be achieved if the facts
were other than those presented. This Commission must apply the tariff and follow the
precedent in place today. The clear conclusion from that process is that changing the Qwest
boundary will not benefit the Complainants but will establish a bad precedent for the orderly and
efficient development of the network.
As noted above, the $180 000 estimate is believed by Qwest to be significantly understated. Qwest
reserves the right to recalculate this amount (and to charge customers accordingly) based on a thorough engineering
analysis of providing service to Soldiers Meadow.
MEMORANDUM IN SUPPORT OF MOTION TO DISMISS
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Boise-173251.l 0029164-00102
CONCLUSION
The Complainants and their neighbors are not located within Qwest's service territory
boundary. As a result, Qwest has no obligation to serve them. While these facts would appear to
make this a case about a service boundary change, the truth is that such a change will not benefit
Complainants. The magnitude of the construction costs block any realistic possibility that the
potential customers in Soldiers Meadow will receive service; they simply cannot or are unwilling
to afford the line extension charges that will flow to them under Qwest's Commission approved
tariff. As a result, it is not necessary for the Commission to consider whether a boundary change
is legally or economically justified.
Respectfully submitted this S--r\.- day of August, 2004,
Adam L. Sherr
Qwest
Attorneys for Qwest Corporation
MEMORANDUM IN SUPPORT OF MOTION TO DISMISS
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Boise-173251.1 0029164-00102
CERTIFICATE OF SERVICE
I hereby certify that on this day of , 2004, I served the
foregoing MEMORANDUM IN SUPPORT OF MOTION TO DISMISS upon all parties of
record in this matter as follows:
Jean Jewell, Secretary
Idaho Public Utilities Commission
472 West Washington Street
O. Box 83720
Boise, Idaho 83720-0074
11 ewell~puc.state.id. us
Hand Delivery
U. S. Mail
Overnight Delivery
Facsimile
Email
Vlado Maras
Vivian Maras
O. Box 280
25314 Soldiers Meadow Road
Winchester, ill 83555
Hand Delivery
U. S. Mail
Overnight Delivery
Facsimile
Email
Herb Weed
Trudy Weed
O. Box 467
43529 Yellow Pine Avenue
Winchester, ill 83555
Hand Delivery
U. S. Mail
Overnight Delivery
Facsimile
Email
~/f!kW
Brandi L. Gearhart, PLS
Legal Secretary to Mary S. Hobson
Stoel Rives LLP
MEMORANDUM IN SUPPORT OF MOTION TO DISMISS
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Boise-173251.1 0029164-00102