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DECISION MEMORANDUM TO: COMMISSIONER KJELLANDER COMMISSIONER SMITH COMMISSIONER HANSEN JEAN JEWELL RANDY LOBB DON HOWELL LYNN ANDERSON JOE CUSICK CAROLEE HALL WAYNE HART BIRDELLE BROWN BEVERLY BARKER RON LAW TONYA CLARK GENE FADNESS WELDON STUTZMAN WORKING FILE FROM: DOUG COOLEY DATE: MAY 16, 2002 RE: VELOCITUS, INC.'S APPLICATION FOR BROADBAND EQUIPMENT TAX CREDIT. BACKGROUND On February 21, 2002, the Commission received an Application from VELOCITUS, Inc. to receive an investment tax credit for eligible broadband equipment pursuant to Order No. 28784 and Idaho Code § 63-3029I(4). To be eligible for the tax credit, the taxpayer must obtain from the Commission an order confirming that installed equipment qualifies for the tax credit. DISCUSSION Velocitus stated that, during calendar year 2001, it installed various components as part of its wireline and wireless broadband network for the provision of high-speed Internet access and other point-to-point data services to customers in Idaho's Treasure Valley and other communities of Idaho. Such components include transmitting/receiving antennae, data traffic concentrators, and routers. Velocitus also included in its Application such items as a crane rental, testing software and installation labor as part of its investment cost. Velocitus indicated that it began offering high-speed access to customers in 2001 at transmission rates from 256 kilobits per second (kbps) up to 45 megabits per second (Mbps). STAFF REVIEW Staff has reviewed the list of proposed broadband equipment submitted by Velocitus and believes the equipment is "necessary to the provision of broadband services and an integral part of a broadband network" according to Idaho Code § 63-3029I (3)(b)(i). From discussions with Velocitus, Staff learned that in some instances subscribers encounter multiple routers or concentrators before they reach Velocitus' access point to the Internet at the Boise Airport. In these cases, customers who do not have a line-of-sight to the Boise Airport may have their data traffic relayed through the equipment and antennae of those customers who are able to establish a wireless connection to the Internet at the Boise Airport. Staff has reviewed the network with Velocitus and the Company has expressed that its Application meets the requirements of Idaho Code § 63-3029I (3)(b)(iv-vii). Staff has also been assured that the installation labor and testing software included in the Velocitus Application are being depreciated and are directly related to offering broadband in Idaho. STAFF RECOMMENDATION Staff recommends approval of the Company's Application and further recommends that the Commission forward the approving Order and a copy of the Application to the Idaho Tax Commission. COMMISSION DECISION Should the Commission approve Velocitus, Inc.'s Application for the broadband investment tax credit? __________________________________ Doug Cooley udmemos/VELOCITUS memo