19990727Comments.pdf

DONALD HOWELL,II
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
P0 BOX 83720
BOISE,IDAHO 83 720-0074
[phone]
IDAHO BAR NO.3366
Street Address for Express Mail:
472 W.WASHINGTON
BOISE,IDAHO 83702-5983
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF )
dPi-TELECONNECT,LLC FOR A )CASE NO.GNR-T-99-7
CERTIFICATE OF PUBLIC CONVENIENCE )
AND NECESSITY.)COMMENTS OF THE
)COMMISSION STAFF
_____________________________________________________________________________________)
COMES NOW the Staff of the Idaho Public Utilities Commission,by and through its
attorney of record,Donald L.Howell,II,Deputy Attorney General,and in response to the Notice
of Application and Notice of Modified Procedure,Order No.28090 issued on July 6,1999,
submits the following comments.
BACKGROUND
On April 27,1999,the Commission received an Application from dPi-Teleconnect,LLC
(dPi)for a Certificate of Public Convenience and Necessity (CPCN)to provide local exchange
telecommunications services within Idaho.dPi’s Application stated that it desired to provide
prepaid residential service throughout the State through resale of services provided by the
incumbent local exchange carrier.dPi indicated in its Application it primarily provides “local dial
tone service to individuals who have had their telephone disconnected,often for non-payment of
long distance charges”.The Application stated it will provide “flat rate residential service,
including extended area service,custom calling services,and any other services available on a
STAFF COMMENTS 1 JULY 27,1999
resale basis from the underlying incumbent local exchange carriers.”The Company indicated it
would utilize a network of local agents to provide a local presence,supported by a customer
service center accessed through an 800 telephone number.dPi indicated it had an interconnection
agreement with GTE,and was in negotiations with U S WEST.However,no agreements have
been submitted to the Commission for approval by GTE or U S WEST.
STAFF FINDINGS
Staff has reviewed the information provided by dPi in its Application and the additional
material provided to support that Application and believes it satisfies the requirements of the
Commission’s Rule of Procedure 111,IDAPA 31.01.01.111,and Procedural Order
No.26665 issued November 7,1996,which sets out the necessary information to be included with
an application for a certificate.
dPi,headquartered in Dallas,Texas,is a non-facilities based reseller of
telecommunications services.It is a privately held limited liability corporation,organized under
the laws of the State of Delaware.It is a new company with limited operations.It claimed to be
certificated to provide service in 10 states,with applications pending in 15 states.The Application
included an unaudited balance sheet for February 1,1999,which identified a current cash balance
in a checking account of over $200,000.The only other assets claimed by the Company included
a single Dell computer,software that appears to have been developed by the principals of the
Company,which it valued at $100,000,and a loan to an employee.A total of nearly $18,000 in
accounts payable were the only liabilities identified,with a net equity of over $300,000.The
statement identifies a total of $604,950 in operating balance equity,with a minus $151,069 in
retained earnings and a minus $121,597 in net income.
The Application identified three individuals,two with previous telecommunications
company experience,and the third,with experience in the rental business.The two with
telecommunications experience both were associated with U S Telco,another provider of prepaid
local service that was acquired by a competitor.The Vice President of dPi,David Pikoff,was the
founder and President of U S Telco.U S Telco applied for a CPCN from this Commission in
1998,which was withdrawn before any decision on the Application was reached,because
U S Telco had been sold.
STAFF COMMENTS 2 JULY 27,1999
Staff has been informed of allegations previously filed against U S Telco and/or its
successor before the Colorado Commission.U S Telco was accused by the Colorado Office of
Consumer Counsel of failing to provide the services it provided at the rates for which those
services were authorized.These alleged violations occurred when Mr.Pikoff was President of
U S Telco.That case was dismissed when U S Telco was purchased by Reconnex,and the
company(ies)promised to cease doing business in Colorado.A subsequent proceeding in
Colorado alleges that U S Telco/Reconnex continued to conduct business in Colorado after their
authority to do so had been cancelled.
dPi specifically indicated in its Application it will comply with all Commission rules.It
has provided an illustrative tariff with its Application that demonstrates an understanding of
tariffing requirements and processes.
The Application includes a request for a certificate that includes all of Idaho,and states it
intends to provide services in the territories of U S WEST,GTE and “any other relevant
incumbent facilities-based LEC’s”.In the map section of the Application,it only identifies the
service areas ofU S WEST and GTE.In reponse to a request for clarification from Staff,the
Company indicated that while,at the current time,it only intended to operate in the service areas
of U S WEST and GTE,it desired the authority to operate statewide,so that it would not need to
amend its certificate when the other areas of the state were opened to resale.
Written comments filed by TDS Telecom and Century Telephone Company addressed this
issue,and asked the Commission to take the restrictions imposed upon competition in the rural
exchanges into account if a certificate is issued to dPi.
STAFF RECOMMENDATION
Title 61,Section 528 of the Idaho Code states:
The commission shall have power,after hearing involving thefinancial
ability and goodfaith ofthe applicant and necessity ofadditional service
in the community to issue said certificate as prayedfor,or to refuse to
issue the same,or to issue itfor the construction ofany portion only of
the contemplated street railroad,line,plant or system or extension thereof
orfor the partial exercise only ofsaid right or privilege,and may attach to
the exercise of the rights granted by said certflcate,such terms and conditions
as in itsjudgment the public convenience and necessity may require.
STAFF COMMENTS 3 JULY 27,1999
This company proposes to provide toll restricted basic service at a price that is nearly three
times the cost of that service from U S WEST,and even greater for GTE.The Application
indicates the Company’s target audience is customers who have had their local service terminated,
“often for non-payment of long distance charges”,a practice that is in violation of the rules of this
Commission and the FCC.This raises questions about how well this company understands the
rules of either this Commission or the FCC,and also raises questions about their intent to comply
with those rules.
The evidence of financial ability provided by the Company in its Application is marginal at
best.It is a new company with no real history.The statements provided were unaudited,and are
now nearly 6 months old.With the high costs experienced by any company attempting to start up
in this field,especially in as many states as indicated by the Company’s Application,any financial
cushion the Company may have had at the time the Application was filed,could easily have
disappeared.
The targeted customers identified by this company have alternatives to the service
provided by this company.The Commission’s rules regarding payment arrangements and deposits
would allow most of those who have been disconnected for non-payment of local service to obtain
service at a lower initial cost than those proposed by this company.
When the benefits of competition are enumerated,this is not the type of company
envisioned.Staff does not believe it is in the public interest to provide a certificate to such a
company.For these reasons,Staff recommends the Application of dPi -Teleconnect for a
Certificate of Public Convenience and Necessity to provide local exchange telecommunications
services within the service territories of U S WEST and GTE be denied.
Alternatively,Staffrecommends that if the Commission decides to grant this company a
certificate,it include the following conditions:
1.Financial security,similar to that required of Max-Tel Communications Inc.,in
Order No.27122.
a.dPi provide a bond or appropriate surety in the initial amount of $5,000.00
as a condition precedent to receiving its certificate.
b.dPi must maintain a bond level at no less than $50 per customer.The
Company will report to the Commission on or before the 10th day of each
month identifying the number of customers it had on the first day of that
STAFF COMMENTS 4 JULY 27,1999
month,and providing evidence of any increase in bond level,if required.
Failure to provide the report in a timely manner shall be grounds for
revocation of the certificate or penalties as specified in Idaho Code 61-
706 and -707.
c.The Company may petition for a review and reconsideration of the
foregoing conditions after one full year of operation in the state of Idaho with
the submittal ofrevised financial information including current detailed
balance sheets and a detailed income statement reflecting current year and
prior year results of operations for the twelve months ended as of the date of
the balance sheet.
2.The certificate be provisional,and revocable upon the first violation of any of the
Commission’s rules.
RESPECTFULLY submitted this day of July 1999.
Donald L.Howell,II
Deputy Attorney General
Technical Staff:Wayne Hart
DH:WH:gdk:i:word/umisc/cornnients/gnrt997.dhw
STAFF COMMENTS 5 JULY 27,1999