20030422Schmit Rebuttal.pdf

Mary S. Hobson, ISB #2142
Stoel Rives LLP
101 S. Capitol Blvd., Suite 1900
Boise, ID 83702-5958Telephone: [phone]Facsimile: [phone]
Adam L. Sherr , WSBA #25291
Qwest
1600 7 th Avenue, Room 3206Seattle, WA 98191Telephone: [phone]Facsimile: [phone]
Attorneys Representing Qwest Corporation
RECEIVED 0FILED
20ll3 APR 22 AH 8: 21
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UTILITIES CO~lMISSION
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF QWEST CORPORATION FOR PRICE
DEREGULATION OF BASIC LOCAL
EXCHANGE SERVICES
REBUTTAL TESTIMONY OF
James M. Schmi t
on behalf of
QWEST CORPORATION
April 21, 2003
Boise-155946.1 0029164-00087
CASE NO. QWE-T- 02 -
SUBJECT
II.
III.
IV.
TABLE OF CONTENTS
PAGE
INTRODUCTION
CONSUMER INPUT - PUBLIC WORKSHOPS
GOVERNMENT AND INDUSTRY INPUT
QWEST' COMMITMENTS TO THE PUBLIC INTEREST
CONCLUSION AND RECOMMENDATION
Boise-155946.1 0029164-00087
QWEST .
I. INTRODUCTION
PLEASE STATE YOUR NAME, ADDRESS AND POSITION WITH
My name is James (Jim) M.Schmit.My office
located at 999 Main Street, Boise, Idaho. I am the President
of Qwest in Idaho.
DID YOU PREVIOUSLY SUBMIT DIRECT TESTIMONY IN THIS
CASE?
No.
this case.
I am submitting only rebuttal testimony in
WHAT IS THE PURPOSE OF YOUR REBUTTAL TESTIMONY?
Qwest' s representati ve all three the
public workshops,I will provide a review of the workshops
and the comments made the public during those
sessions.I will also describe certain commitments Qwest is
prepared to make in response to various public interest
issues raised by the Staff and customers who commented in
this case.
QWE-T- 02 -SCHMIT, J. (REB)
Qwest CorporationApril 21, 2003
Boise-155946.1 0029164-00087
II. CONSUMER INPUT - PUBLIC WORKSHOPS
WHY DID THE COMMISSION DECIDE TO HOLD THE PUBLIC
WORKSHOPS?
The Commission held the workshops to allow the
public the and to providequestionsabou task case
written electronic stating their opinionscomments
concerning pricing flexibility for basicallowing Qwest
local exchange service.
WHAT WAS THE FORMAT OF THE WORKSHOPS?
The informal in nature.Bothworkshopswere
Commission Staff and Qwest personnel attended.The Staff
provided an overview of Qwest' s application and described
the statutory requirements that must be met in order to
gain flexibility.the Staff providedpricingFurther,
forms that could be used for submitting written comments
to the Commission and explained the process for submitting
letters or e-mail comments.
then opportuni ty address thegiventhewas
workshop attendees.explained the competitivehow
market for wireless services has ~veloped and why Qwest
believes it must gain pricing freedom in order to continue
operating also indicated whysuccessfully in Idaho.
QWE-T- 02 -SCHMIT, J. (REB)
Qwest CorporationApril 21, 2003
Boise-155946.1 0029164-00087
bel ieves have been metQwe s t the statutory requirements
due to the current state of wireless competition in the
exchanges application.included Qwest'seven
concl uded discussion explaining whyeachworkshop
fel t the approval of Qwest' s application was important to
Qwest's future and would benefit Idahoans as well.
WHERE WERE THESE WORKSHOPS HELD?
The workshops were held in pocatello, Twin Falls
and Boise.for the workshops wereThe dates and times
provided Commission publicmediathroughthethe
information Twin forFalls,office.The workshop
example, was held at the Red Lion motel, which advertised
the meeting on its marquee the day of the event.That
day,had prominenttheTwinFallsTimesNewssame
article in the business section reminding consumers of the
meeting and its purpose.
WHAT CONSUMER INPUT DID THE COMMISSION RECEIVE
FROM THE THREE WORKSHOPS?
The workshops had very little public attendance.
In addition to Qwest employees that I asked to attend to
respond to consumer issues if they arose, there were five
individuals and three representatives of organizations who
attended the workshop in pocatello.One individual,who
QWE - T - 02 - 2 5 SCHMIT, J. (REB)
Qwest CorporationApril 21, 2003
Boise-155946.1 0029164-00087
lives covered Qwest' soutsideexchangesthe
application,expressed a concern that if Qwest raised its
rates too high residents would drop their landlines and
with sentiment actuallycellularservice.That
consistent wireless serviceswithQwest'advocacy that
offer wireline basic localcompetitioneffecti ve
exchange that willserviceanddemonstratescustomers
switch if Qwest unduly increases wireline prices.
The Executive Director of the pocatello Chamber of
questioned regulationwhythereCommercewas
wireless service.Another attendee who identified herself
retiree supported application forQwestQwest'
pricing flexibility.A small business owner indicated he
had four lines,one of which was a landline and three of
which were wireless lines.He also said that two of his
grown children had disconnected their landlines and gone
to using only wireless service.A member of the Bannock
Development urged CommissiontheCorporationCounty
develop policies that encouraged new investment and fair
competition among all providers.The administrator of the
911 system for Bannock County stated that 60% to 70% of
the calls from ~reless phones.Thatthey recei ve are
indi vidual Bannockthatfurtherstated County
QWE-02 -SCHMIT, J. (REB)
4 -
Qwest CorporationApril 21 , 2003
Boise-155946.1 0029164 -00087
experiencing a decline in surcharge revenues assessed on
landline phones.
WHAT OCCURRED AT THE TWIN FALLS WORKSHOP?
organization representati ve and threeOne
attended Executi veworkshop.the Kent Just,consumers
Vice President of the Twin Falls Area Chamber of Commerce,
submi t ted Qwest' sspokefavorletterand
application.Chamber support i vethatthestated
comments also reflected the opinlon Dave McAlindin,
Economi c Development Director for the City Twin Falls.
Another participant,who identified himself Qwe s t
retiree,application for pricingalsosupported Qwest' s
flexibility.
John Gabica, a recently-retired employee of Qwest and
Twin Falls local President of the Communications Workers
of America, was also at the meeting.He recalled that in
prior years Qwest used to be very busy installing phones
for the influx of students coming back to the College of
Southern Idaho every fall.He indicated that type of work
had dried students usedsincetheup"most now
cellular phones.
WHAT CONSUMER INPUT CAME ~OM THE BOISE
WORKSHOP?
QWE-T- 02 -SCHMIT , J. (REB)
Qwest CorporationApril 21 , 2003
Boise-155946.1 0029164-00087
Representati ves Boise Chamber oftheMetro
and Economic CouncilCommercetheBoiseDevelopment
submi t ted spoke favorandlet ter support
Qwest'application.Two businessmen who operate small
businesses heavily cellularrelystatedthatthey
service as a fundamental means of communications.Also, a
third individual who identified himself as a Qwest retiree
expressed support for approval of Qwest' s application.
one spoke against Qwest' s application or expressed concern
about deregulation at the Boise workshop.
DOES THE FACT THAT THE WORKSHOPS WERE LIGHTLY
ATTENDED MEAN THE COMMISSION FAILED IN ITS EFFORT TO GAIN
CONSUMER INPUT FROM THESE MEETINGS?
Quite believe Kent Just,the contrary.
Executive Director of the Twin Falls Area Chamber, said it
best that few peopleindicatedthefactwhen
attended the workshop spoke for itself.He said that,
the attended number publichadoveryears,
workshops for various regulated companies and,typically,
there would be of people saying "don ' t room full
this. "He then looked around the nearly-empty room and
observed that there was no one ex~ressing opposition.
These workshops were well publicized through theagree.
QWE - T - 02 - 2 5 SCHMIT, J. (REB)
Qwest CorporationApril 21, 2003
Boise-155946.1 0029164 -00087
media.I f there was a groundswell of concern over Qwest' s
achieving would havepricingbelieveflexibility,
seen a large number of consumers appearing at the three
separate workshops to express those concerns.We didn ' t
see that.I believe the scant attendance by interested
citizens at the workshops indicates a lack of concern over
Qwest's application and consumer acceptance that wireless
phones are a substitute for Qwest' s landline service.
DID QWEST RECEIVE ANY COMPLAINTS ABOUT THE
QUALITY OF ITS SERVICE DURING THE WORKSHOPS?
Al though I had asked various Qwest serviceNO.
personnel have fewassumingmightattend,
complaints based past experience public meet ings ,
there was not single complaint expressed about the
quality of Qwest' s telecommunicat ions service.
III. GOVERNMENT AND INDUSTRY INPUT
DO YOU HAVE ANY OTHER OBSERVATIONS REGARDING
PARTIES' REACTION TO QWEST'S REQUEST FOR PRICING
FLEXIBILITY?
I think it is worth noting that we do notYes.
other industry telecommunications providers activelysee
QWE - T - 02 - 2 5 SCHMIT , J. (REB)
Qwest CorporationApril 21, 2003
Boise-155946.1 0029164 - 00087
participating case opposingthis Qwest'
application.cellular wireless provider,otherNotone
incumbent compet it i veserviceprovider,Idaho landline
local ( CLEC)nationalexchangecarrier
telecommunications company filed testimony in this case.
virtually telecommunications caseothermajorevery
involving Qwest, we have seen some industry opposition to
Qwest's position.Here, that has not happened.
I believe if the industry in general was concerned
about abou t QwestthevalidityQwest' s request
abusing the anticipated pricing freedom to the detriment
taken activethosefirms,they would havethen
stand.The fact that there is so little opposition for
allowing Qwest pricing flexibility either from the public
or from the industry should provides the Commission with a
deal in its examination of the publiccomfortgreat
interest issue associated with this case.
HAS IDAHO'S LEGISLATURE ALSO EXPRESSED A
PREFERENCE FOR MARKET REGULATION ONCE EFFECTIVE
COMPETITION HAS DEVELOPED?
Way back in 1983, the legislature foundYes.
that the rates,charges and service of mobile telephone
QWE-T- 02 -SCHMIT , J. (REB)
Qwest CorporationApril 21 , 2003
Boise-155946.1 0029164 - 00087
providers,removed from theforexample,should
jurisdiction the Utilities CommissionIdahoPublic
because canmarketplacethecompetitiveforcesthe
provide regulation the legislaturebet ter Thus,
expressed its intent nearly years ago that
compet i t i ve marketplace preferable government
regulation.This was reaffirmed the passage the
Telecommunications economically1988,whichAct
deregulated except basicvirtually localeverything
exchange for residential small businessserviceand
The regulation wasformarketpreferencecustomers.
reaffirmed again in 1997 with legislation that directed
the Commission basiceconomicallyderegulate local
exchange service once effective competition is present.
IV. QWEST'S COMMITMENTS TO THE PUBLIC INTEREST
LEGISLATURE REQUIRE THEDIDN'THE
COMMISSION TO EXAMINE THE IMPACT OF ECONOMIC DEREGULATION
ON THE PUBLIC INTEREST OF THE STATE OF IDAHO?
L 1983, ch. 172 , Section
QWE-T- 02 -SCHMIT, J. (REB)
Qwest CorporationApril 21, 2003
Boise-155946.1 0029164 -00087
its deliberations,Yes.all the
Commission consequencesweighthe its actionsmust
against many factors, including the public interest.
IN THE BURLEY CASE (USW-99-15), DID THE STAFF
PROVIDE A "ROAD MAP" AS TO HOW FUTURE APPLICANTS SHOULD
ADDRESS THE MATTER OF THE PUBLIC INTEREST?
Staff witness Joe Cusick testified2 thatYes.
the should thoroughly . specify how the publicappl icant
interest would be served by economic deregulation.
also said any pricing commitments should be time-bound.
IS QWEST PREPARED TO MAKE SPECIFIC COMMITMENTS
ALONG THE LINES SUGGESTED BY STAFF IN THE BURLEY CASE?
Yes.
PLEASE DESCRIBE THOSE COMMITMENTS.
First,Qwest will continue its responsibilities
the foreligibletelecommunications(ETC)carrier
sevenprovidinguni versal service thepurposes
exchanges unless otherwise authorized by the Commission.
Second, Qwest will continue providing service pursuant to
Direct testimony of Joe Cusick, p. 17.
QWE-T-02 -SCHMIT, J. (REB)
10-
Qwest CorporationApril 21, 2003
Boise-155946.1 0029164-00087
the Idaho Telephone Service Assistance Plan (ITSAP), which
currently provides a $13.monthly credit to qualified
low-income customers.Third,in response to Staff and to
those customers who expressed a concern that Qwest would
no longer offer stand-alone dial tone service (but instead
would only offer packaged services), Qwest commits that it
will continue to provide both local measured and flat -
rated residence and business services on an a la carte
basis,authori zed the Commissionunless
otherwise.
STAFF SUGGESTED THIS CASE WAS REALLY ALL ABOUT
QWEST'S ABILITY TO RAISE ITS RATES.IS QWEST WILLING TO
COMMITMENTS ADDRESS THIS CONCERN ITSMAKEANY
APPLICATION IS GRANTED?
In order to address Staff's concern thatYes.
this ability raiseallQwest' saboutcase
rates" , (Hart, page 37, line 11), Qwest will commit to cap
basic residence and business recurringlocalexchange
rates for both flat-rated and measured service, at current
levels through the end of 2004.Qwest'At that point,
3 The current monthly recurring rate for flat-rated service is $17.
for residence and $32.51 for business. The current monthly recurring
rate for measured service is $10.51 for residence and $17.51 for
business.
QWE - T - 02 - 2 5 SCHMIT, J. (REB)
11-
Qwest CorporationApril 21, 2003
Boise-155946.1 0029164-00087
regulated will beenhavebasiclocalexchangerates
essentially unchanged for approximately seven years.
ADDITIONALQWESTWILLINGMAKEANY
ASSUMING THECOMMI TMENT S MEASURED SERVICEREGARDING
COMMISSION GRANTS PRICE DEREGULATION?
Qwest is willing to agree to increase byYes.
one-third the block of time included in the monthly price
fourresidenceservicefrom three hoursmeasured
hours.could placeThisthatwouldcustomersmean
outbound local calls,including calls within the expanded
extended area service areas, with a usage allowance(EAS)
of 240 minutes per month.It should also be noted that
inbound local and long-distance calls, as well as outbound
long-distance measuredcalls,are not counted against
service expanded four-time including theblocks,usage
hour block I propose here.
In addition to capping the monthly recurring rate,
Qwest will cap the per-minute usage rate associated with
measured service through 2004 as well.
4 The current per-minute rate for residence and business measured
service is $0.02. Residence customers only pay the per-minute rate if
they exceed the block of time included in the monthly rate.
QWE - T - 02 - 2 5 SCHMIT, J. (REB)
12 -
Qwest CorporationApril 21 , 2003
Boise-155946.1 0029164 -00087
WILLING OFFER THESE PRICINGQWESTWHY
COMMITMENTS?
Although Qwest firmly believes has met all
the requirements gain pricingstatutorynecessary
flexibili ty, we appreciate the concerns expressed by Staff
and some customers that Qwest' s immediate goal would be to
raise prices.wi th these commitments,Qwest has assured
the Commission and those customers that this case is not
all about raising prices.Also,in the Burley case,the
Staff suggested specific,time-bound pricing commi,tments
of this nature would assist the Commission in evaluating
the future application.public interest aspect any
While Qwest does not view these pricing commitments as a
pre-requisite Commission approval Qwest' sthis
application , Qwest is nevertheless trying to be responsive
to both the direction provided by the Staff in the Burley
and expressed this Finally,case concerns case.
believe demonstrate desirethesecommitmentsQwest
continue to provide a broad range of services to address
the broad ranging needs of our customers even after Qwest
gains pricing flexibility under Section 62-622 (3) .
QWE-T- 02 -SCHMIT J. (REB)
13-
Qwest CorporationApril 21, 2003
Boise-155946.1 0029164-00087
THE STAFF EXPRESSED A CONCERN ABOUT PRICING IN
REMAINING QWEST PRI CE - REGULATED EXCHANGES SHOULD THE
COMMI S S ION APPROVE ECONOMIC DEREGULATION THE SEVEN
WILL PRICES FOR BASIC LOCAL EXCHANGE SERVICEEXCHANGES.
IN QWEST' S REMAINING REGULATED EXCHANGES BE AFFECTED BY
PRICE DEREGULATION IN THE SEVEN EXCHANGES?
These prices will continue to be regulated by
the Commisslon just they are today.Any price
adj ustments for basic local exchange service the
remainlng exchanges will have approved the
Commission following a full review of the circumstances.
As always,the Commission will take the public interest
well in mindintereststhetheCompany
setting rates.
CUSICK SUGGESTED THEIN THE BURLEY CASE,MR.
REGARD ING ADVANCED SERVICESAPPLICANTSPECIFICANY
CUSTOMERS COULD EXPECT TO RECEIVE (USW-T- 99-15,CUSICK,
DI, PAGE 17).IS QWEST PREPARED TO MAKE A COMMITMENT TO
THE COMMI S S ION APPROVESDEPLOYADVANCEDSERVICES
QWEST'S APPLICATION?
QWE-T- 02 -SCHMIT , J. (REB)
14-
Qwest CorporationApril 21, 2003
Boise-155946.1 0029164-00087
Today indi vidual wellcustomers,Yes.
business,deve 1 opmen t leaders,government and economi c
often broadband service.Communi t Yrequesthigh-speed,
leaders want this service as an economic development tool
and advanced services to homes andforthedelivery of
businesses.both Staff'Therefore,response
suggestion and requests customers,Qwest' s
application granted,Qwest will commi t the
deploYment Digital Subscriber Line (DSL)service
minimum of 10 additional communities in Idaho during the
following application.SinceapprovalQwest'years
DSL is already available in the seven exchanges,this DSL
deploYment outside the price deregulatedwilloccur
exchanges additional benefit the remaining
regulated exchanges.is wi 11 ing to work wi th theQwest
Commission,and local business andwellstate
leaders,to assist Qwest in determining whichgovernment
communities positioned recei ve thisbestQwestare
investment.
V. CONCLUSION AND RECOJIMENDATION
QWE - T - 02 - 2 5 SCHMIT, J. (REB)
15-
Qwest CorporationApril 21, 2003
Boise-155946.1 0029164-00087
DO YOU HA~E ANY FINAL COMMENTS FOR THE
COMMISSION'S CONSIDERATION?
Qwest has provided compelling testimony inYes.
this the test forhasdemonstratingthatmetcase
establishing the presence of effective competi tion for
its exchange service in the seven southernbasiclocal
Idaho interventionmeaningfulexchanges.With
opposition by other industry members;with virtually no
opposition expressed by the public during the workshops
held in three of Qwest's biggest exchanges; with only a
small number of customer comments filed in opposition to
application;filedand wi fewQwest'comments
support of Qwest' s application,seems clear that the
public for pricingis unconcerned about Qwest' s request
flexibility.Members of various Chambers of Commerce and
Economic support Qwest' sorganizationsDeve 1 opmen t
application.even though Qwest is not requiredMoreover
take establish itsadditionalaffirmati ve steps
right to the pricing freedom offered by section 62 -622 (3) ,
Qwest has made a number of commitments about how it will
exercise that freedom
issues raised the Staff
Burl ey case.
address the public interest
both in thi s case and in the
QWE - T - 02 - 2 5 SCHMIT, J. (REB)
16-
Qwest CorporationApril 21 , 2003
Boise-155946.1 0029164 - 00087
reached point Idaho competitive
telecommunications market where wireless subscription has
reached traditional andl i nethatnearly80%
subscribership.And al though a few years ago,some may
have would materialize fromfirstthoughtcompet it ion
another mode of entry,effective competition nevertheless
has arrived in full bloom via wireless providers.This
form of competition meets the criteria adopted when the
legislature crafted the "functionally equivalent II language
found in Section 62 - 622 (3) (b) .
conclusion this Commission toQwestencourages
find effecti vely withthatwirelessservicecompetes
Qwest'landline service.By approving this application
under here,Commi s s ion willthetermsofferedthe
encourage greater competition while providing a degree of
price stability and .investment in advanced services that
under theguaranteed presentcannot scope
regulation.the CommissionTherefore,encourage
approve Qwest' s application for pricing flexibility in the
seven southern Idaho exchanges.
DOES THIS CONCLUDE YOUR T~TIMONY?
Yes, it does.
QWE - T - 02 - 2 5 SCHMIT, J. (REB)
17-
Qwest CorporationApril 21, 2003
Boise-155946.1 0029164 - 00087
CERTIFICATE OF SERVICE
I hereby certify that on this 21 st day of April, 2003, I served the foregoing REBUTTAL
TESTIMONY OF JAMES M. SCHMIT upon all parties of record in this matter as follows:
Jean Jewell, Secretary
Idaho Public Utilities Commission
472 West Washington Street
Boise, ill 83720-0074
Phone: [phone]
Fax: [phone]
i i ewell~puc.state.id. us
Weldon Stutzman, Deputy Attorney General
Idaho Public Utilities Commission
472 West Washington Street
- P.O. Box 83720
Boise, ill 83702
Telephone: [phone]
Facsimile: [phone]
W stutzm~puc.state.id.
Marlin D. Ard
Willard L. Forsyth
Hershner, Hunter, Andrews, Neill & Smith LLP
180 East 11 th Avenue
O. Box 1475
Eugene OR 97440-1475
Attorneys for Verizon
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John Gannon, Esq.
1101 West River-Suite 110
Boise, ill 83702
Telephone: [phone]
Attorney for Meierotto, Padget, Herrick Neal
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Dean J. Miller
McDevitt & Miller LLP
420 West Bannock Street
O. Box 2565
Boise, ill 83701
Telephone: [phone]
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i oe~mcdevitt -miller. com
Attorneys for WorldCom, Inc.
Attorneys for AT&T
Attorneys for Time Warner Telecom
Executed protective agreement
Dean Randall
Verizon Northwest Inc.
17933 NW Evergreen Parkway
Beaverton, OR 97006-7438
dean. randall ~v erizon. com
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Mary Jane Rasher
10005 South Gwendelyn Lane
Highlands Ranch, CO 80129-6217
Telephone: [phone]
mirasher~msn.com
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Adam Sherr
Qwest
1600 ih Avenue - Room 3206
Seattle, W A 98191
Telephone: [phone]
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asherr~Qwest.com
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Clay R. Sturgis
Moss Adams LLP
601 West Riverside - Suite 1800
Spokane, WA 99201-0663
Brian Thomas
TimeWarner Telecom
223 Taylor A venue North
Seattle, W A 98109
Brian. Thomas~twtelecom.com
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Susan Travis
WorldCom, Inc.
707 1 ih Street - Suite 4200
Denver, CO 80202
Telephone: [phone]
Susan.a. Travis~worldcom.com
Conley E. Ward, Jr.
Givens Pursley LLP
277 North 6th Street - Suite 200
O. Box 2720
Boise, ID 83701-2720
Telephone: [phone]
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cew~givenspursley.com
Attorneys for Idaho Telephone Association
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6~~~
Brandi L. Gearhart, PLS
Legal Secretary to Mary S. Hobson
Stoe1 Rives LLP
All