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DECISION MEMORANDUM TO: COMMISSIONER KJELLANDER COMMISSIONER SMITH COMMISSIONER HANSEN JEAN JEWELL RANDY LOBB DON HOWELL JOE CUSICK WAYNE HART CAROLEE HALL DOUG COOLEY LYNN ANDERSON BEVERLY BARKER RON LAW GENE FADNESS TONYA CLARK WORKING FILE FROM: BIRDELLE BROWN DATE: JUNE 13, 2002 RE: FREMONT TELCOM ADVICE 02-04 TO INCREASE THE RATE FOR TROUBLE ISOLATION WHERE CUSTOMER PREMISES EQUIPMENT IS INVOLVED; EFFECTIVE JULY 1, 2002. GVNW filed Tariff Advice 02-04 on behalf of Fremont Telcom proposing to increase its rate for service calls where trouble is found to be in customer-provided equipment from $10 per service call to $30 per service call. In its cover letter, GVNW suggests that this is a "non-regulated service" and the Company has filed this in its local tariff for "informational purposes." A trouble isolation charge may be imposed when, after a customer has placed a trouble call, the Company makes a visit to the customer premises to find the cause of the problem. If the problem is found to be between the Company's serving office and the customer's point of interface, the Company fixes the problem at no charge as part of its basic local service provision. If the problem is on the customer's side of the point of interface, a trouble isolation charge is applied. Fremont currently charges $10.00 per visit where the problem has been found to be related to the customer-owned equipment. Fremont has filed cost support data showing that the Company averages 19 miles and 33 minutes travel time and 38 service minutes per trouble call and says the cost for these elements exceeds the $30 rate the Company has requested. Further, the Company suggests that its costs for providing this service (wages, benefits, overhead costs and vehicle expenses) have increased and that the higher costs were not reflected in the Company's revenue requirement when determining its current local rates. Fremont also advises the Commission that ATC Telecom currently tariffs trouble isolation fees at $30 per occurrence and suggests that this is a justified rate. STAFF COMMENTS AND RECOMMENDATION Staff believes Fremont errs in concluding that this is a non-regulated service and therefore not under this Commission's jurisdiction. In 1984 the Commission approved U S WEST's proposal to include trouble isolation revenues in basic local service revenues and they have stayed there to this date. Staff believes that trouble isolation is a basic local exchange service and that this tariff advice requires Commission approval. While Fremont reports that the high costs of trouble isolation were not included in the Company's revenue requirement, Staff notes that a $10.00 per call rate was tariffed at that time. Staff did not verify the accuracy of Fremont's statement. Staff would caution Fremont that it should not expect to file for a rate increase on every service it believes does not recover its costs. Fremont has not indicated that it is not earning a sufficient rate of return. If Fremont is, in fact, underearning, it should request a rate case. While Fremont's justifications for this rate increase are arguable, Staff notes that the net revenue effect is negligible. Fremont estimates a quantity of 40 calls per year and an annual revenue increase of $800. There is some value to setting the rates for trouble isolation calls at a level that will discourage frivolous calls to the Company. Staff recommends approval. Does the Commission agree? ________________ ___________ Birdelle Brown corresp/dmemos/2002/adv0204.fre