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DECISION MEMORANDUM TO: COMMISSIONER KJELLANDER COMMISSIONER SMITH COMMISSIONER HANSEN JEAN JEWELL RON LAW LYNN ANDERSON LOU ANN WESTERFIELD DON HOWELL RANDY LOBB JOE CUSICK DOUG COOLEY TONYA CLARK BEV BARKER GENE FADNESS WORKING FILE FROM: LISA NORDSTROM DATE: JUNE 21, 2002 RE: IN THE MATTER OF THE APPLICATION OF ICG TELECOM GROUP, INC. TO AMEND AND EXPAND ITS CERTIFICATE OF PUBLIC CONVENIENCE AND NECESSITY TO PROVIDE FACILITIES-BASED LOCAL EXCHANGE AND INTEREXCHANGE TELECOMMUNICATIONS SERVICES STATEWIDE. CASE NO. ICG-T-02-1. On May 16, 2002, ICG Telecom Group, Inc. ("ICG") filed an Application to amend its current Certificate of Public Convenience and Necessity. In Case No. GNR-T-98-9, the Commission granted ICG authority to provide facilities-based local exchange and interexchange services in the Qwest and Verizon service territories. Order No. 27955. ICG now seeks to expand its authority under the Certificate to provide such services statewide. In the Notice of Application and Modified Procedure issued on May 29, 2002, the Commission solicited comments regarding ICG's Application. Order No. 29038. Commission Staff was the only party to file comments before the June 19, 2002 comment deadline. THE APPLICATION ICG initially intends to expand into the service area of Farmers Mutual Telephone Company. Application at 3. According to its Application, ICG plans to offer service to Internet service providers who currently do not have points of presence in many of Idaho's exchange areas. Id. Furthermore, ICG states that it has established nationwide contractual arrangements with major Internet Service Providers for the deployment of points of presence on the ICG network. Id. The Application contends that customers who currently have to dial long-distance for Internet service will benefit from the establishment of points of presence within their local calling areas. Id. According to its Application, ICG intends to deploy an independent network by either building its own facilities or leasing facilities owned by other carriers. Id. However, ICG has not finalized its construction plans and thus initially plans to rely primarily on the leased facilities or tariffed services of other certificated carriers. Id. at 4. To the extent a small local exchange carrier (LEC) possesses a rural exemption or suspension under Section 251(f) of the Telecommunications Act of 1996, ICG does not seek interconnection under Section 251(c) at this time. Id. at 3-4. Moreover, the Application states that ICG does not currently seek to challenge the exemption from any of the other obligations specified in Section 251(c). Id. To the extent a small local exchange carrier (LEC) possesses an exemption or suspension under Section 251(f) of the Telecommunications Act of 1996, ICG does not seek interconnection under Section 251(c) or to challenge such exemption from any of the other obligations specified in Section 251(c) at this time. Id. at 3-4. To support market entry and the exchange of all kinds of traffic between the small LEC's customers and ICG customers, ICG presently intends to lease the facilities of third-party carriers or purchase the tariffed services of LECs exempt under Section 251(c). Id. at 4. To preserve its right to provide service using a small LEC's unbundled network elements at some future date, ICG requests that the Commission grant ICG full facilities-based authority statewide with the following qualification: ICG may not provide service using unbundled network elements of a LEC that qualifies for an exemption under Section 251(f) unless and until it submits a bona fide request for interconnection and the Commission determines that the request satisfies the requirements of Section 251(f). Id. On December 19, 2001, ICG Communications, Inc., ICG Telecom Group's parent company, filed a Plan of Reorganization with the U.S. Bankruptcy Court for the District of Delaware. ICG's Application states that its parent company won preliminary court approval of its revised Reorganization Plan and that final approval from its creditors and the Bankruptcy Court is expected on May 20, 2002. Id. at 5. If approval is granted, ICG Communications will emerge from bankruptcy as early as two to three weeks later. Id. Since the Chapter 11 filing, ICG Communications expects to exceed all of its financial and operational goals for 2001 as a result of its restructuring efforts. Id. The Application states that during the Chapter 11 filing, ICG Communications was able to retain or expand service agreements with nearly all of its top 100 customers. Id. As of November 30, 2001, ICG Communications had in excess of $150 million in cash available for funding on a going forward basis. Id. Since March 2001, ICG Communications has been cash flow positive and appears to be on target to exceed its stretch goal of $38 million of earnings before interest, taxes, depreciation and amortization (EBITDA). Id. at 5-6. The Application asserts that the bankruptcy of ICG's parent company has not affected ICG's financial ability to provide high quality, reliable service to its customers. Id. at 6. ICG believes that the public interest does not require a hearing to consider the issues presented by this Application. Thus, ICG requests that the Application be processed under Modified Procedure pursuant to Rule 201 of the Idaho Public Utilities Commission's Rule of Procedure. Id. at 7. STAFF COMMENTS ICG is incorporated in the State of Delaware and is headquartered in Englewood, Colorado. The Company obtained a Certificate of Authority from the Idaho Secretary of State on November 17, 1997. ICG does not maintain an office in Idaho but does have a registered in-state agent. Staff found no complaints against ICG registered with this Commission. Comments at 2. ICG has an interconnection agreement with Qwest (Case No. QWE-T-02-3) and has obtained eight prefixes throughout Qwest's southern Idaho service territory. Id. The Company has assured Staff that it will participate in thousand-block number pooling in Idaho when it begins in August 2002. Id. Staff stated that the Company also agrees to continue complying with Commission rules regarding advanced deposits, consumer relations, and all other Commission rules and regulations. Id. Staff reviewed the Application and financials submitted by ICG. Staff also noted that the Reorganization Plan was approved by the U.S. District Bankruptcy Court for the State of Delaware on May 20, 2002 and left ICG's parent company with approximately $100 million in cash, $248 million in debt, and eliminated about $2.5 billion in liabilities. Id. Staff considered requiring a surety bond of ICG but based on the results of its reorganization plan and its operating history in Idaho, concluded a bond would not be necessary in this case. Id. In sum, Staff recommended unconditioned approval of the ICG's Application for an amendment to its existing Certificate of Public Convenience and Necessity. Id. at 3. COMMISSION DECISION Does the Commission approve ICG's Application to amend its current Certificate of Public Convenience and Necessity to allow the Company to provide telecommunications services statewide? Lisa Nordstrom M:ICGT0201_ln