19991022Final_Order_No_28185.pdf

Office ofthe Secretary
Service Date
October 22,1999
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF )
dPi-TELECONNECT,LLC FOR A CERTIFI-)CASE NO.GNR-T-99-7
CATE OF PUBLIC CONVENIENCE AND )
NECESSITY.)ORDER NO.28185
_______________________________________________________________________________)
On April 22,1999,dPi-Teleconnect,LLC filed an Application for a Certificate of
Public Convenience and Necessity to provide resold local exchange services within Idaho.The
Company proposed to furnish prepaid local exchange service to individuals who have had their
telephone service terminated.On July 6,1999,the Commission issued a Notice of Application
and Notice of Modified Procedure soliciting comments regarding dPi’s Application.Timely
comments were filed by the Commission Staff and TDS Telecom/Century Telephone Company.
On September 7,1999,dPi filed a response to the Staff comments.Having reviewed dPi’s
Application and the written comments,we grant the Application as conditioned below.
dPi’s APPLICATION
dPi-Teleconnect is a Delaware corporation owned by dPi Holdings,Inc.(a Texas
corporation)and Koch Ventures,Inc.(a Delaware corporation).In its Application,the Company
stated its desire to “provide local exchange service in those areas currently served by U S WEST
Communications and GTE Northwest and any other relevant incumbent-facilities-based LECs.”
Application at 4.The Company seeks to provide,on a resell basis,prepaid monthly recurring,
flat-rate residential local exchange service including extended area service,customer calling
services,and other services available on a resell basis from the underlying incumbent LEC.dPi
indicated that it has an interconnection agreement with GTE and is currently in the process of
negotiating an interconnection agreement with U S WEST.It indicated that it is certified to offer
such services in 10 states and has Applications pending in 15 other states.The Company stated
that it currently does not own any of its own telecommunications facilities.The Company also
maintained that it will comply with all applicable customer service rules of the Commission but
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does not accept deposits for service given the prepaid nature of its intended local exchange
service.
THE COMMENTS
In response to the Notice of Modified Procedure,comments were filed by TDS
TelecomlCentury Telephone and the Commission Staff.These comments are set out below.
1.TDS Telecom and Century Telephone noted that they are incumbent LECs
providing services in rural exchanges in Idaho.They insisted the federal Telecommunications
Act of 1996 and Idaho Code §62-615 restricts competitors desiring to operate within their
certificated service areas.Consequently,they requested that the Commission “take those
restrictions into account if a certificate is issued to dPi-Teleconnect in relation to its request to
serve areas in ‘other relevant incumbent facilities-based LECs.”TDS/Century Comments at 2.
2.The Commission Staff questioned how well dPi understands the rules of the
Commission when the Company stated that its target audience is customers who have had their
local service terminated “often for non-payment of long-distance charges.”Staff Comments at 4.
Staff asserted that LECs in Idaho may not terminate local service for non-payment of long-
distance charges.The Staff noted that dPi indicated that it will comply with all Commission
rules and that the Company provided an illustrative tariff demonstrating an understanding of
Idaho tariffing requirements.Id.at 3.
The Staff also expressed concern regarding the Company’s financial ability.The
Staff was concerned that dPi’s financial statements were unaudited and the Company may not
have the necessary financial cushion to operate in Idaho.Although the Company indicated it had
an interconnection agreement with GTE,the Staff stated there was no evidence of any such
interconnection agreement submitted by GTE or dPi.
The Staff also noted that the Application identifies three principal individuals as
operating the business.Two of the individuals have prior telecommunications experience and
both were associated with US Telco,another provider of prepaid local service that was
previously acquired by a competitor.The vice president of dPi,Dave Pikoff,was the founder
and president of US Telco.Although US Telco applied for a Certificate of Public Convenience
and Necessity from this Commission,it was withdrawn because the Company was sold to a
competitor.
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Given the relationship between dPi principals and the former US Telco,the Staff
also disclosed allegations previously filed against US Telco and/or its successor before the
Colorado Commission.US Telco was accused by the Colorado Office of Consumer Counsel of
failing to provide services at authorized rates.The case before the Colorado Commission was
dismissed when US Telco was purchased by Reconnex,and US Telco promised to cease doing
business in Colorado.A subsequent proceeding in Colorado alleged that US Telco/Reconnex
continued to conduct business in Colorado after their authority had been cancelled.Id.at 3.
Based upon these concerns,Staff recommended that the Commission deny dPi
Teleconnect a Certificate of Public Convenience and Necessity.In the alternative,Staff
recommended that if a Certificate is granted,that two conditions be imposed similar to the
conditions imposed upon Max-Tel Communications,Inc.in Order No.27122.
The first condition is that dPi provide a bond or appropriate surety in the initial
amount of $5,000 as a condition precedent to receiving its Certificate.Staff recommended dPi
maintain the bond or surety in an amount no less than $5,000 and at least equal to $50 per
customer.Second,the Company should report to the Commission on the 10th day of each month
identifying the number of customers that it has on the first day of the month and provide
evidence of the appropriate bonding or surety amount.Failure to provide the report in a timely
manner would be grounds for revocation of the Certificate or other penalty as provided by Idaho
Code §61-706 and —707.
The Staff recommended that the Company be allowed to petition the Commission
for a review of these conditions after one full year of operation and after submitting revised
financial information including current detailed balance sheets and a detailed income statement
reflecting results of operations for the 12 months ending as of the date of the balance sheet.
3.dPi Reply.In its reply comments,dPi urged the Commission to grant dPi a
Certificate without the Staffs suggested conditions.dPi asserted that its proposed service is in
the public interest.The Company maintained that its proposed services and the manner in which
these services are delivered are unique.“Customers are sold a single ‘flat-rate’service that
relieves them from concern over incurring any usage sensitive charges.”dPi Reply at 1.The
Company also noted that it enters into relationships with local businesses to provide a means for
its customers to pay for service within a few miles of their residence.These local businesses or
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agents give dPi a local presence not only for the delivery of service but also from the customer
service standpoint.
dPi also disputed the Staffs allegation that it is not adequately financed.The
Company noted that its management has extensive experience in the telecommunications
industry.It also attached updated financial information indicating the strength of the Company.
dPi stated that it initially received an equity investment of $1.5 million and it currently serves
over 5,000 customers.Id.at 2.Consequently,dPi argued that its financial strength “does not
warrant the posting of a bond.If the Commission believes that a bond is appropriate,dPi
believes that the bond should be capped at $5,000.00 as opposed to $50.00 per customer.dPi is
committed to providing services pursuant to the rules and regulations of the state of Idaho as well
as that of the FCC.”Id.
dPi insisted that granting it a Certificate of Public Convenience and Necessity to
provide its prepaid flat-rate service will offer consumers a choice.The Company maintained that
although ILECs could offer identical services as dPi intends to offer,ILECs choose not to market
such services.“Furthermore,dPi’s provisioning of service advances the goals of universal
service,makes more efficient use of the existing ILEC network and to the extent that any of its
customers are off the existing public switched network for toll fraud,dPi places them in a
position where they can get basic service without perpetrating additional fraud on the
telecommunications industry.”Id.
COMMISSION FINDINGS
Having fully reviewed dPi’s Application,the written comments and dPi’s Reply,we
find it is appropriate to grant the Company a Certificate of Public Convenience and Necessity to
provide resold local exchange service within Idaho as conditioned below.dPi-Telecorinect’s
Certificate will be granted for the entire state of Idaho.As TDS and Century Telephone urged us
to do,we have considered the interconnection restrictions contained in Idaho Code §62-615(2)
and the federal Telecommunications Act of 1996 before issuing a statewide certificate.The state
statute and the federal Act excuse rural carriers like TDS and Century from adherence to certain
interconnect obligations.For example,rural LECs that are members of the Idaho Telephone
Association were granted suspensions of their obligations under Section 251(c)of the federal Act
until January 1,2001.See Order No.27255.However,a rural carrier’s Section 251(b)
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obligation not to prohibit the resale of its telecommunications services is left to this
Commission’s sound discretion.Idaho Code §62-615(2);47 U.S.C.§251(b)(1)and
251 (f(1 )(A)and (2).The Commission has yet to receive a petition requesting suspension of a
LEC’s Section 251(b)(1)duty not to prohibit the resale of its telecommunications services.
We find it appropriate and reasonable to adopt the Staffs two recommended
conditions.First,dPi shall post a bond or provide appropriate surety in an amount no less than
$5,000.This amount represents the minimum amount of a bond or surety.When dPi acquires
more than 100 Idaho customers,then it shall increase the amount of the bond or surety in an
amount equal to no less than $50 per customer.Second,once the Company begins operations,it
will file a report with the Commission Secretary on the 10th1 day of each month identifying the
number of customers that it had on the first day of the month and provide evidence that it has
obtained the appropriate bond or surety amount.The Company may petition the Commission to
remove these two conditions after one full year of operation by submitting revised financial
information including a current detailed balance sheet and a detailed income statement showing
the last 12 months of operation.We find that these conditions appropriately balance the needs of
the Company while protecting customers.
ORDER
IT IS HEREBY ORDERED that the Application of dPi-Teleconnect,LLC for a
Certificate of Public Convenience and Necessity to resell prepaid local exchange service
throughout Idaho is granted as conditioned in the body of this Order.
IT IS FURTHER ORDERED that dPi maintain a minimum bonding or surety level in
the amount no less than $5,000.At such time as the Company has more than 100 Idaho
customers,it will increase the minimum amount of the bond or surety equal to no less than $50
per customer.
IT IS FURTHER ORDERED that the Company report the number of customers and
provide evidence of its bonding or surety amount on the 10th day of each month following the
commencement of its operations in Idaho as outlined in the body of this Order.
THIS IS A FTNAL ORDER.Any person interested in this Order (or in issues finally
decided by this Order)or in interlocutory Orders previously issued in this Case No.GNR-T-99-7
may petition for reconsideration within twenty-one (21)days of the service date of this Order
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with regard to any matter decided in this order or in interlocutory Orders previously issued in this
Case No.GNR-T-99-7.Within seven (7)days after any person has petitioned for
reconsideration,any other person may cross-petition for reconsideration.See Idaho Code §61-
626.
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this —‘‘-?L_
day of October 1999.
ENNIS S.HANSEN,PRESIDENT
Commissioner Smith dissents
without opinion.
MARSHA H.SMITH,COMMISSIONER
/
Jf if
PAUL KJELfANDER,COMMISSIONER
ATTEST:
Myrna J.Wal ers
Commission Secretary
vIcI/O:GNR-T-99-7dh2
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