20030514Answer to Petition.pdf

RECEIVED (KJ
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Mary S. Hobson (ISB #2142)
Stoe1 Rives LLP
101 South Capitol Boulevard - Suite 1900
Boise, ill 83702
Telephone: [phone]
Facsimile: [phone]
Email: mshobson~stoe1.com
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Adam L. Sherr (WSBA #25291)
Qwest
1600 7th Avenue - Room 3206
Seattle, WA 98191
Telephone: [phone]
Facsimile: [phone]
Email: asherr~qwest.com
Attorneys for Qwest Corporation
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF QWEST CORPORATION FOR PRICE
DEREGULATION OF BASIC LOCAL
EXCHANGE SERVICES
Case. No. QWE-O2-
QWEST CORPORATION'S ANSWER TO
PETITION FOR DECLARATORY RULING
AND CROSS-PETITION
Qwest Corporation ("Qwest"), by and through its undersigned counsel, hereby answers
Staffs April 30, 2003 Petition for a Declaratory Ruling ("Staffs petition ) and cross-petitions
for a declaratory ruling. By its cross-petition, Qwest seeks the Commission s order affirmatively
endorsing Qwest's statutory interpretation ofIdaho Code 99 62-622(3) and 62-603(1).
INTRODUCTION
In its application and direct testimony filed on December 17, 2002, Qwest set forth and
supported its position that its provision of basic local exchange services in the seven exchanges
should be price deregulated pursuant to Idaho Code 9 62-622(3)(b) based on the existence of
effective competition from multiple unaffiliated wireless carriers. Qwest's prefiled testimony
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referred to the fact that data-related services, being excluded from the definition of "basic local
exchange services" under Idaho Code 9 62-603(1), are irrelevant to the evidence Qwest must
offer in this docket. Teitzel Direct, pp. 14-15. To put it another way, since it filed this case
Qwest has openly stated its position that it need not demonstrate that wireless carriers can
provide data-related services on a par with Qwest's wireline offerings to meet the statutory
standard of "functionally equivalent" and "competitively priced" local services.See, e.
Teitzel Direct, pp. 13-14.
In its petition, Staff states that it disagrees with Qwest's interpretation of sections 62-
603(1) and 62-622(3)(b), that it has filed testimony and exhibits supporting an alternative
interpretation of these provisions, and that the disagreement is so fundamental that it has led to
confusion and inconsistency" that requires resolution through this declaratory ruling process.
Staffs petition, p. 1.
The timing of Staff s petition is, to say the least, peculiar. Staff knew of Qwest' s position
on the interpretation of the statutes when the application was filed. But, rather than seeking
clarification from the Commission in the three months between the filing of Qwest's application
and Staff s deadline for submission of its testimony, Staff instead filed testimony offering its
own statutory interpretation on March 19, 2003. Thereafter, fully aware of the competing
statutory interpretations, Staff still did not seek clarification from the Commission until after
Qwest filed its rebuttal testimony, which among other things, provided the Commission more
guidance as to why Staff s interpretation of section 62-622(3)(b) is erroneous. See, e.
g.,
Souba
Rebuttal, pp. 4-13; Teitzel Rebuttal, pp. 2-5. Finally, on April 30, 2003, some four and a half
months after Qwest filed its direct testimony setting forth its position regarding the appropriate
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scope of Commission s analysis in this case, Staff filed its petition for declaratory ruling. Qwest
respectfully suggests that to the extent any "confusion and inconsistency" has accompanied the
presentations of the parties in this case, it has been exacerbated, if not created, by Staffs
decisions to 1) adopt a divergent and unfounded interpretation of statute, and 2) to delay bringing
its petition for declaratory ruling until the eve of the Commission s hearing of the merits of
Qwest's application, and after all parties have submitted their pre filed cases.
In the argument below Qwest will demonstrate that Staffs position is without merit.
Staff would have the Commission interpret key statutory provisions in a manner that eludes
logic, runs afoul of the very canons of statutory interpretation Staff cites and produces results
that are inconsistent with the Commission s own decisions.
II.ISCUSSI 0 N
The Statutes.
Central to Staffs petition is the meaning of the term "local services" as used in section
62-622(3)(b) and the meaning of the term "basic local exchange services " as defined in section
62-603(1). Sections 62-622 and 62-603(1) provide as follows:
62-622. Regulation of basic local exchan2:e rates, services and
price lists. - (1) The commission shall regulate the prices for
basic local exchange services for incumbent telephone
corporations in accordance with the following provisions:
(a) At the request of the incumbent telephone
corporation, the commission shall establish maximum just and
reasonable rates for basic local exchange service. Maximum basic
local exchange rates shall be sufficient to recover the costs
incurred to provide the services. Costs shall include authorized
depreciation, a reasonable portion of shared and common costs
and a reasonable profit. Authorized depreciation lives shall use
forward-looking competitive market lives. Authorized
depreciation lives shall be applied prospectively and to
undepreciated balances.
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(b) At the request of the telephone corporation, the
commission may find that existing rates for local services
constitute the maximum rates.
(c) The commission shall issue its order establishing
maximum rates no later than one hundred eighty (180) days after
the filing ofthe request unless the telephone corporation consents
to a longer period.
(d) An incumbent telephone corporation may charge
prices lower than the maximum basic local exchange rates
established by the commission. Provided however, upon the
petition of a non-incumbent telephone corporation, the commission
shall establish a minimum price for the incumbent telephone
corporation basic local exchange service if the commission finds
by a preponderance of the evidence, that the incumbent telephone
corporation s prices for basic local exchange services in the local
exchange area are below the incumbent telephone corporation
average variable cost of providing such services
( e) After the commission has established maximum
basic local exchange rates, an incumbent telephone corporation
may change its tariffs or price lists reflecting the availability, price
terms and conditions for local exchange service effective not less
than ten (10) days after filing with the commission and giving
notice to affected customers. Changes to tariffs or price lists that
are for nomecurring services and that are quoted directly to the
customer when an order for service is placed, or changes that result
in price reductions or new service offerings, shall be effective
immediately upon filing with the commission and no other notice
shall be required.
(2) The commission shall not regulate the prices for basic local
exchange services for telephone corporations that were not
providing such local service on or before February 8, 1996.
Provided however, such telephone corporation providing basic
local exchange services shall file price lists with the commission
that reflect the availability, price, terms and conditions for such
services. Changes to such price lists shall be effective not less than
ten (10) days after filing with the commission and giving notice to
affected customers. Changes to price lists that are for nomecurring
services and that are quoted directly to the customer when an order
for service is placed, or changes that result in price reductions or
new service offerings, shall be effective immediately upon filing
with the commission and no other notice shall be required.
(3) The commission shall cease regulating basic local
exchange rates in a local exchange calling area upon a showing by
an incumbent telephone corporation that effective competition
exists for basic local exchange service throughout the local
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exchange calling area. Effective competition exists throughout a
local exchange calling area when either
(a) Actual competition from a facilities-based
competitor is present for both residential and small business basic
local exchange customers; or
(b) There are functionally equivalent, competitively
priced local services reasonably available to both residential and
small business customers from a telephone corporation unaffiliated
with the incumbent telephone corporation.
(4)Telephone corporations shall not resell
(a) A telecommunications service that is available at
retail only to a category of subscribers to a different category of
subscribers;
(b)A means-tested service to ineligible customers; or
(c) A category of service to circumvent switched or
special access charges.
(5) The commission shall determine the non-economic
regulatory requirements for all telephone corporations providing
basic local exchange service or designated as an eligible
telecommunications carrier pursuant to sections 62-61 OA through
62-61 OF, Idaho Code, including, but not limited to , such matters as
service quality standards, provision of access to carriers providing
message telecommunications service, filing of price lists, customer
notice and customer relation rules. (underlining added)
62-603. Definitions - As used in this chapter (Chapter 6, Title
62):
(1) "Basic local exchange service" means the provision of
access lines to residential and small business customers with the
associated transmission of two-way interactive switched voice
communication within a local exchange calling area (underlining
added).
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The term "local services." as used in section 62-622(3)(b). is simply short-
hand for "basic local exchan2:e services.
Staff's position is wholly illogical and unfounded.
Staffs discussion begins with the provocative statement
, "
drawing upon the definition of
basic local exchange service stated at Idaho Code 9 62-603(1), Qwest contends Section 62-
622(3)(b) severely limits the determination for the Commission when an application is filed
under that section." Staff petition, p. 3 (emphasis added). The statement is provocative but
untrue. Qwest is merely reading section 62-622(3) in context of the statutory scheme in which it
appears.
Section 62-622(3) requires the Commission to cease regulating basic local exchange rates
when "effective competition" for basic local exchange services exists throughout the local
exchange calling area. The legislature has told us that "effective competition exists throughout a
local exchange calling area" when the conditions of either of the statute s two subsections are
met. Subsection (a) focuses on actual competition from facilities-based competitors. Subsection
(b) focuses on the reasonable availability of functionally equivalent and competitively priced
alternative services, i., effective competition exists when "there are functionally equivalent
competitively priced local services reasonably available to both residential and small business
customers from a telephone corporation unaffiliated with the incumbent telephone corporation.
Idaho Code 9 62-622(3)(b) (emphasis added).
The entire dispute presented by Staffs petition is whether the term "local services" is
merely a short-hand reference to the term "basic local exchange services " which appears in
section 62-662(3) (Qwest's position), or whether it means something else (Staffs advocacy).
Significantly, Staff does not actually offer an alternative definition for the term "local services
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In fact Staff admits that the term "local services" is not defined in any Idaho statute. Staff
petition, p. 3. Instead of presenting a viable, or even plausible, alternative definition, Staff
chooses to mischaracterize Qwest'position as an attempt to "severely limit(J" the
Commission s determination in this case. Id.
In essence, Staff is arguing that because the legislature used an undefined term, any
attempt to define that term from context of the remainder of the statute is to defy the legislature
intent and to "severely limit" the Commission s determinations under the statute. This is, of
course, absurd. The statute in question is titled "Regulation of basic local exchange rates
services and price lists . Section (3) focuses upon when the Commission is required to "cease
regulating basic local exchange service. Subsections (a) and (b) of section (3) provide two
alternative means by which the incumbent can demonstrate that effective competition exists for
basic local exchange service.
By arguing that the legislature meant something different than "basic local exchange
services" by its use of "local services" in section 62-622(3)(b), Staff is petitioning the
Commission to require incumbents to prove effective competition (in the form of functionally
equivalent, competitively priced, reasonably available alternatives) for services other than basic
local exchange service in order to prove that there is effective competition for basic local
exchange service. Staff fails to articulate any conceivable reason why the legislature would have
had such a counterintuitive purpose.
In contrast to Staffs tortured interpretation, Qwest's position is simply that the term
local services" in section 62-622(3)(b) is short-hand for the term "basic local exchange
services" used in section 62-622(3). Aside from the fact that rules of statutory interpretation, as
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discussed below, support it, Qwest's position is the only one that passes a common sense test.
is simply not credible that the legislature would require an incumbent to prove effective
competition for an undefined set of services and functionalities as a prereqllisite for price
deregulation of "basic local exchange service " the only service still price regulated by the
Commission and a service that is fully defined under statute.
Basic rules of statutory interpretation support Qwest's position.
Staff attempts to focus the Commission s attention on several fundamental principles of
statutory construction.Staff petition, p. 4.The petition correctly observes that statutory
interpretation begins with the words of the statute and should give the language used its plain
obvious and rational meaning. Staff petition, p. 5. Staff is also correct that the purpose of
statutory construction is to ascertain and give effect to the legislative purpose. Id.
Where Staff has erred is in its application of these principles and its attempt to distort
these rules to fit its narrow purpose of persuading the Commission that "other uses of wireline
service, such as Internet connection and data (facsimile) transmission" must be considered in
determining whether effective competition exists for basic local exchange service. Staff petition
p. 5. For example, Staff cites the Wilson case for the proposition that "the plain, obvious, and
rational meaning is always preferred to any hidden, narrow, or irrational meaning." 1 Yet Staff
cannot point to a single fact or argument to support the allegation that the plain and obvious
meaning of the term "local services" as used in section 62-622(3)(b) is "Internet connection and
data (facsimile) transmission " particularly where the legislature never mentions the internet or
facsimiles in Title 61 or Title 62. Instead of giving effect to the plain, obvious and rational
Wilson v, State 133 Idaho 874, 880, 993 P. 2d 1205 (Ct App 2000)
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meaning of the language used, Staffs interpretation appears to be an example of the kind of
hidden, narrow, or irrational meaning" that Wilson counsels against. Furthermore, Staff makes
no attempt to demonstrate that the legislature intended that to prove the existence of effective
competition for basic local exchange service, an incumbent must prove that customers have
functionally equivalent" and "competitively priced" access to the internet. Hence Staff seems
to ignore, rather than rely on the principles of statutory construction it cites.
Staff also errs by failing to discuss several other key canons of statutory interpretation
that apply here. For example, it is well established that the courts are required to give effect to
every word, clause and sentence of a statute, and the construction of the statute should be
adopted which does not deprive provisions of the statute of meaning.Watkins Family
Messenger 118 Idaho 537, 540, 797 P 2d 1385 (1990). Similarly, a statute must be construed so
that effect is given to its provisions, and no part is rendered superfluous or insignificant. Hoskins
v. Howard 132 Idaho 311 , 315 , 971 P. 2d 1135 (1999). And, wherever possible, the courts are
to construe statutes relating to the same subj ect harmoniously even where they are in apparent
conflict.Edwards v. Industrial Commission 130 Idaho 457 , 461 , 943 P 2d. 47 (1997).
Furthermore, the statute must be construed as a whole. Id.
It is apparent Staffs interpretation of the term "local services" requires that the term be
read in isolation, without attempting to construe the statute as a whole and without attempting to
harmonize the interpretation with the remainder of Title 62. In contrast, there can be no doubt
that the legislature intended "local services" in section 62-622(3)(b) as a short-hand reference to
basic local exchange services" when the terms are read in context and the statute construed as a
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harmonious whole. Section 62-622 is entirely focused (as its title indicates) on basic local
exchange services. .
Staffs attempts to bolster its argument that "local services" means something different
than "basic local exchange service" with the assertion that (tjhe only place the legislature used
a short-hand reference to basic local exchange service occurs in paragraph (2) of the statute (62-
622), where the phrase such services is used to refer to basic local exchange services appearing
earlier in the same sentence.Staff petition, p. 5 (Italics added). Thus, Staff would have the
Commission believe that the legislature used "basic local exchange service exclusively
throughout section 62-622, except for one obvious short-hand reference in section 62-622(2).
From this Staff hopes to suggest that the reference to "local services" in section 62-622(3)(b) is a
deliberate choice to interject a new concept rather than a reference to the subject of statute, i.
basic local exchange service.
A simple review of the statute shows, however, that the legislature repeatedly used short
hand references throughout section 62-622. By way of example, in section 62-622(1)(a) the
legislature uses the terms
, "
basic local exchange service" and the short hand term "the service
in section 62-622(1)(b) the legislature uses the term "local services ; and in section 62-622(1)(e)
the legislature uses "basic local exchange service
, "
local exchange service , and "services.
The repeated usage of these other, similar terms throughout section 62-622 is evidence that the
legislature did not intend to introduce a new concept with the use of the term "local services" in
section 62-622(3)(b), but instead used common sense, short hand references throughout the
statute. Staffs assertion that there is only one short-hand reference, at best, reflects Staffs
serious misreading of the statute. A careful review of section 62-622 shows that the legislature
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liberally used short-hand.It in fact used more short-hand references (12) to "basic local
exchange services" than it used the long-hand form of that term (11). Put simply, the entire
section, as its title indicates, concerns "basic local exchange services." Concluding, as it should
that "local services" in section 62-622(3)(b) is simply a short-hand reference to "basic local
exchange services " the Commission would give full effect to the legislature s language and
intent and would reach the only conclusion that harmonizes the various parts of section 62-622.
Staff's parsin2: of section 62-603(1) is equally unsupportable.
The second part of Staffs attempt to persuade the Commission that Qwest is taking some
umeasonable approach to statutory interpretation is to suggest that Qwest "unduly focuses on
only part of the definition" of "basic local exchange service . Staff petition, p. 5. Ironically, it is
Staff s analysis that ignores part of the language of the statutory definition and runs afoul of the
rules of statutory construction Staff itself cited.
The legislature defined "basic local exchange services" as meaning "the provision of
access lines to residential and small business customers with the associated transmission of two-
way interactive switched voice communication within a local exchange calling area.Idaho
Code 9 62-603(1) (emphasis added). To give effect to all the legislature s chosen language, the
Commission must conclude that basic local exchange service includes three central, equally-
critical attributes: (a) the provision of access lines to residential and small business customers;
(b) the associated transmission of two-way interactive switched voice communication; and (c)
within a local exchange calling area.
Staff argues, however
, "
the definition of basic local exchange service is primarily the
provision of access lines " Staff petition p. 5 (emphasis added). Staff explains that since "it is
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the access lines themselves" that make voice and various other forms of communication possible
comparison of the functionality of basic local exchange service. . . must consider all that is
available by 'the provision of access lines,' not merely. . . voice communication." This amounts
to an argument that the Commission eliminate all language from the definition of "basic local
exchange service" after the phrase
, "
the provision of access lines to residential and small
business customers." Staffs reading would render meaningless two of the three major concepts
from the definition -- "the associated transmission of two-way interactive switched voice
communication" and "within a local exchange calling area
The rules of statutory construction prohibit Staffs approach.The Commission is
required to give effect to every word, clause and sentence of a statute. Watkins Family, 118
Idaho at 540, 797 P.2d at 1388 (1990). As cited above, the Idaho courts reject statutory
constructions that render words and phrases superfluous. Hoskins 132 Idaho at 314 971 P 2d at
1138. Rather than "unduly focus(ing) on only part of the definition" as Staff alleges (Staff
petition, p. 5), Qwest's interpretation gives effect to all three central components of the definition
of basic local exchange service. Plainly it is Staff who focuses too closely and who ignores part
of the term s definition. Qwest urges the Commission to disregard Staffs illogical reading
section 62-603 (1).
Internet access is not a local service.
Not only does Staffs interpretation of "basic local exchange service" ignore that it is, by
definition, voice communication, it also appears to overlook that it is service rendered "within a
local exchange calling area." The sole purpose of Staff s statutory interpretation is to try to
persuade the Commission to engraft an additional requirement on the standard contained in
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section 62-622. Thus, when the Commission considers whether Qwest has shown that "effective
competition exists for basic local exchange service " Staff would have it consider the level of
competition for services that are not basic local exchange service, specifically internet access and
data transmission. Neither of these services is defined in statute, nor has the Commission
historically regulated "internet access.
The internet is "an international network of interconnected computers that enables
millions of people to communicate with one another in 'cyberspace ' and to access vast amounts
of information from around the world.Reno v. ACLU 521 U. S. 844, 844, 117 S. Ct. 2329, 138
L. Ed. 2d 874 (1997). The Federal Communications Commission (FCC), when considering the
question of reciprocal compensation for competing local exchange companies, determined that
calls to internet service providers (ISPs) within the caller s local calling area are not local but
rather extend beyond the local ISP to web sites out-of-state and around the world. In the Matter
of Implementation of the Local Competition Provisions in the Telecommunications Act of 1996
Intercarrier Compensation of ISP-Bound Traffic 14 FCC Rcd 3689, 3690 (~1) (1999).
Although a federal court has now vacated and remanded the FCC's decision on the merits of the
reciprocal compensation issue, it stated that the FCC's use of the so called "end-to-end" analysis
is justified in determining whether a particular communication is jurisdictionally interstate. Bell
Atlantic Tel. Coso v. FCC 206 F. 3d 1 340 U. S. App. D.C. 328 (DC Cir 2000). Jurisdictionally,
therefore, calls to an ISP are interstate calls; not local.
Thus, regardless of whether the Commission focuses on the term "basic local exchange service
or even the term "local services" in section 62-622(3)(b), dial-up internet access does not meet
the definition because the communication is not local. Staff s position that the Commission must
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consider whether Qwest has proved "effective competition" not only for voice communications
but also for dial-up access to the internet is contrary to Idaho statute.
Staff's interpretation is inconsistent with the Commission s prior rulin2:s.
In the Burlel case, Qwest's predecessor, U S WEST Communications, Inc. (U S
WEST), sought price deregulation under section 62-622(3)(a) based on the facilities-based
competition presented by Project Mutual Telephone Cooperative Association ("PMT"
).
PMT's
facilities reached approximately 30% of the Burley exchange.The Commission held that
approving US WEST's application would be contrary to the public interest based on the limited
nature ofPMT's coverage.3 In its order the Commission stated:
Our concern regarding the public interest is the same as that which
prompted the legislature to require substantive, meaningful
competition throughout the local calling area before basic rates are
deregulated. It is the concern "that U S WEST could cover its
competitive losses by raising its rates for those customers within
the local calling area who have no choice of service providers." Tr.
260. That amounts to more than 70% of the Burley exchange
customers. The economic incentive to ignore those areas where no
competition or regulation exists could also jeopardize the
availability of high quality universal service at just and reasonable
rates.
Order No. 28369, p. 10 (emphasis added)
This reference to the availability of "high quality universal service" demonstrates the
Commission s awareness of the connection between "basic local exchange service" and the
concept of universal service. Idaho Code 9 62-610C (1) provides that "universal service is an
In the Matter of the Application of U WEST Communications, Inc. for Deregulation of Basic Local
Exchange Rates in Its Burley, Idaho, Exchange Case No. USW-99-15.
Staff s attempt at pages 7-8 of its petition to turn the decision in the Burley case into some kind of
precedent for its umeasonable interpretations of sections 62-66(3)(b) and 62-603(1) is unfounded. The Commission
denied US WEST's application because it found , after hearing on the merits, that US WEST's evidence showed the
presence of a competitor but not the existence of "effective, substantive, and meaningful competition" involving a
significant number of customers. Although U S WEST disagreed with that conclusion, it was, nonetheless a
conclusion reached on the basis of the evidence as to how many customers had a competitive choice.
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evolving level of telecommunications services to which consumers in all regions of the state
should have access." The statute further provides:
The commission shall review the level of telecommunications
services within the state on a periodic basis and designate those
service(s) which should be made available to consumers by
eligible telecommunications carriers to meet their obligation to
provide universal service. The commission shall, if services in
addition to basic local exchange service are to be designated
consider the extent to which such other telecommunications
servIces:
(a) Have, through the operation of market choices by
customers, been subscribed to by a substantial majority of
residential customers;
(b) Are being deployed in public telecommunications networks
by telecommunications carriers; and
(c) Are consistent with the public interest, convenience and
necessity.
(d) The commission shall also consider definitions of universal
service adopted by the federal communications commission
pursuant to the telecommunications act of 1996.
Idaho Code 9 62-610C(2).
Thus, the Commission has the authority to designate services "in addition to basic local
exchange service" that are so crucial to the public interest, convenience and necessity that they
are to be included in what every carrier that attains "eligible telecommunications carrier" (ETC)
status must provide.
The Commission exercised its authority granted under section 62-610C in Order No.
27715 . The first item on the Commission s list was "voice grade access to the public switched
network". Id., p. 1. The Commission did not designate "data transmission" or "access to the
In the Matter of Designating Telecommunications Services, in Addition to Basic Local Exchange Service
As Universal Services for the Purposes of Receiving 1998 Telecommunications Universal Service Funds order
entered, September 8, 1998.
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internet". This is significant because the statute, section 62-610C, provides that the Commission
designate services "in addition" to basic local exchange service. Under a strict reading of the
statute the Commission could have left voice service off the list since, as even Staff would have
to admit, voice grade access to the public switched network is included within the definition of
basic local exchange service." Having decided to list it, however, the Commission certainly
would have listed "data transmission" and "internet access" had the Commission shared Staffs
view that these capabilities are part of the definition of basic local exchange service.
Staffs position in this case comes to this: although data transmission and internet access
have not been deemed by the Commission to have the attributes of wide subscribership and
consistency with the public interest, convenience and necessity such that they are designated as
part of the definition of "universal service nevertheless Qwest must prove "effective
competition" for these services in order that it sustain its burden of showing an adequate level of
competition to justify deregulation of services that are part of the definition of universal service.
Under this scenario, Qwest could face robust, even crippling, competition from one or more
ETCs in its service territory and still not meet Staffs standard. This result is not consistent with
the Commission s order in the Burley case in which the Commission focused on the Company
potential to raise basic local exchange service prices and thereby potentially threaten universal
servIce.
In entering the order on universal service the Commission stated
, "
the Commission finds
that universal services are not necessarily all those services the Commission would like
customers throughout Idaho to have." Order No. 27715, p. 6. Similarly, a correct reading of
sections 62-622(3)(b) and 62-603(1) may not result in a standard of proof concerning
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competition for all the servIces the Staff might wish to see included.However, as the
Commission observed
The Commission must balance its designation with the effect the
designation may have on competition. It is the provision of
different services that may distinguish among competitive local
exchange carriers and foster a competitive atmosphere.
Id., pp. 6-
The focus of section 62-622 is on "effective competition" for "basic local exchange
service . 1)pon a showing of such competition, the legislature has provided that the Commission
must cease price regulation. The rationale for this is that when effective competition is shown
the marketplace and not the Commission, will constrain prices. The fact that wireless and
wireline services may have differing strengths does not mean that they do not pose effective
competition for each other, indeed, as the Commission noted, it may be these very differences
that foster competition and provide customer options.
Staff's assertion that Qwest is puttin2: undue emphasis on subsection (b). tothe exclusion of other statutory requirements is both untrue and
inappropriate for consideration under a petition for declaratory rulin2:.
Staff alleges that "Qwest focuses on the means by which competition might appear, set
forth in subparagraph (b), to the exclusion of the requirement that effective competition might
actually exist." Staff petition, p. 6. In this way, Staff suggests, Qwest hopes to dissuade the
Commission from "even inquir(ing), whether wireless service is actually competing for
customers with Qwest for basic local exchange service." Id. at 4. Nothing could be further from
the truth.
Qwest understands that section 62-622(3) eliminates price regulation only when
sufficient competition for basic local exchange service has developed such that the marketplace
QWEST CORPORATION'S ANSWER TO PETITION
FOR DECLARATORY RULING AND CROSS-PETITION - Page 17
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and not the Commission, should regulate Qwest's prices. Viewed on a more granular level
marketplace regulation is required if alternative services from one or more unaffiliated providers
are providing functionally equivalent, competitively priced and reasonably available basit local
exchange service such that, if Qwest were to significantly increase its rates, customers would
vote with their feet" and migrate to the alternative service.
Qwest demonstrates in its extensive pre filed testimony that the six wireless providers
covering the seven exchanges provide exactly the type of effective competition intended by the
legislature when it enacted section 62-622(3 )(b).Qwest believes that the evidence once
presented on the record will overwhelmingly show that, if Qwest were to significantly increase
its basic local exchange rates in the seven exchanges after obtaining pricing deregulation, a large
percentage of its customers would or could (if they were so inclined) migrate to a wireless
service. Even Dr. Johnson, who filed extensive direct testimony opposing Qwest's application at
every level, made the following astonishing admission that Qwest's advocacy is precisely
correct.
Likewise, I could get rid of my wireline service but I'm not willing
to - unless someone forces me to (e.g. by drastically raising the
price).
Johnson Direct, pp. 19-20. (emphasis added).
The substitutable nature of wireless services combined with the vast popularity of such
services in Idaho5 and the fact that wireless companies are specifically marketing their products
as wireline substitutes 6 make it clear that wireless service is actual, substantive, meaningful, and
effective competition for Qwest's wireline basic local exchange services.
Mr. Souba s rebuttal testimony states that presently there are 577 000 active wireless phones in Idaho.
See, e.Lincoln Rebuttal, pp. 36-37; Appendices 1 & 2.
QWEST CORPORATION'S ANSWER TO PETITION
FOR DECLARATORY RULING AND CROSS-PETITION - Page 18
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Qwest looks forward to the opportunity to present its case on these and other issues at
hearing. Staff s suggestion that Qwest's straightforward reading of the statutes is some attempt
to avoid demonstrating actual and effective competition is a wholesale mischaracterization of
Qwest's position. To the extent Staff is attempting to comment at this time on the amount or
credibility of evidence presented by Qwest, it is entirely inappropriate that it do so with this
petition for declaratory ruling, which was allegedly brought to obtain a "legal construction of
Idaho Code 9 62-622(3)" in order that the evidentiary hearing might be "more efficient and
useful." Staffs petition
, pp.
Staff's analo2:Y to bottled water vs. tap water is off base and unhelpful.
In its last effort to discredit Qwest's case before it is presented , Staff offers an "analogy
that is truly inapt. Staff petition, pp. 9-10. Staff refers to the "explosion" in the sale of bottled
water and states that, under Qwest's interpretation, application of section 62-622(3)(b) to a water
utility would require the Commission to cease regulating water rates by virtue of the competition
presented by bottled water companies.
That this analogy is presented in the context of debate over statutory interpretation and
raised by petition for declaratory ruling is most strange. Obviously, section 62-622(3)(b) does
not apply to water companies and to attempt to extend by analogy requires that a critical question
be answered: Does the hypothetical statute relate to deregulation of something analogous to
basic local exchange service, e.
, "
drinking water , or does it instead apply to something more
analogous to telecommunications services in general, e.
, "
water ? Without knowing what the
supposed water deregulation statute actually provides, it is not possible to determine whether
there is any similarity between Staffs proposed analogy and the present case. That question in
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the context of the telecommunications industry is, of course, the very question at issue by virtue
of Staffs petition, i., is Qwest required to demonstrate that "effective competition exists for
basic local exchange service" (I.c. 9 62-622(3)), or is Qwest required to show that there is
effective competition for some more broadly defined concept that includes services that, by
definition, are not basic local exchange service? Staffs analogy begs the question rather than
answers it.
There are numerous other flaws in the analogy. Even if there were an analogous statute
for water companies and even if that statute applied to "drinking water " the incumbent water
corporation would have a very difficult time showing competitive pricing. Whereas an Idaho
water utility may deliver 100 gallons to one s residence for approximately 17 cents, the same 100
gallons of bottled water, which is typically not delivered, would cost approximately $413.
based on the assumption that a one liter bottle costs $1.09. The 242 952% differential in pricing
would, it is safe to assume, make the competitively-priced requirement difficult to satisfy.
Moreover, if one assumes the hypothetical statute applies to water in general, as opposed
to just drinking water, there are numerous other flaws with the analogy. For example, bottled
water is not packaged, priced or marketed as a substitute for home water uses such as bathing,
toilets, sinks, lawn care, cooking, watering plants, operating dishwashers, laundry, washing cars
and so on. Indeed, it is difficult to imagine how bottled water could be used for some the
common purposes for which tap water is used - showers and dishwasher operations, for example
As an aside, Qwest finds it curious, given Staffs advocacy in this case that the Commission must apply the narrowest
possible interpretation of functional equivalence and competitive pricing that Staff states (at page 10) that bottled water and tap
water are functionally equivalent and competitively priced. Further, for Staff to even imply that the pricing differentials that exist
between tap and bottled water also exist between wireless and wireline telephony service is unconscionable. Mr. Teitzel'
rebuttal Exhibit No. 19 details, for each wireless carrier, for each class of Qwest wireline service, and for several different
prototypical wireline usages levels that the pricing of wire line and wireless services are truly competitive.
QWEST CORPORATION'S ANSWER TO PETITION
FOR DECLARATORY RULING AND CROSS-PETITION - Page 20
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- without major changes to home plumbing and appliances that would permit bottled water to be
stored, heated and pressurized for those applications. No one would suggest that if the water
utility dramatically raised its rates, large numbers of consumers could readily switch to bottled
water for all their home water needs.
For Staff to suggest that bottled water s effect on water utilities is in any way analogous
to the competition wireline telephone providers face from wireless competitors is to ignore the
detailed and comprehensive evidence that Qwest has presented in its prefiled case. For Staff to
ignore Qwest's evidence while it advocates its contrary position is one thing, for Staff to
encourage the Commission to ignore it before Qwest is even allowed to present it is
irresponsible.
In summary, Staff s analogy is inapt and. unhelpful because it rests on a comparison of
products that are plainly not competitively priced and not functionally equivalent for most
purposes. The only way to save the analogy on the question of functional equivalence is to
assume that the scope of the hypothetical water deregulation statute is so narrow that bottled
water in fact presents a competitive alternative. Of course, doing so assumes away the very
question that the analogy is allegedly offered to answer, i., how is the statute to be interpreted?
Fortunately for the Commission, answering that question in the context of Staffs petition
for declaratory ruling does not require that the Commission guess, or seek out obscure analogies
it simply requires that the Commission consult the plain meaning of the words chosen by the
legislature, just as Staff itself suggested. Doing so results in the common sense conclusion that
section 62-622(3)(b) requires that to obtain pricing deregulation Qwest must demonstrate that
there is "effective competition for basic local exchange service" by demonstrating that there are
QWEST CORPORATION'S ANSWER TO PETITION
FOR DECLARATORY RULING AND CROSS-PETITION - Page
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functionally equivalent, competitively priced" alternatives reasonably available to customers for
basic local exchange service throughout the local exchange calling area.
III.CONCLUSION
For the reasons stated above, Qwest respectfully requests the Commission deny Staffs
petition and grant Qwest's cross-petition for declaratory ruling. In so doing, Qwest requests that
the Commission enter an order declaring the following:
The term "local services" as used in Idaho Code 9 62-622(3)(b) is a short-hand
reference to "basic local exchange services " as that term is used in Idaho Code 9 62-622(3) and
defined in Idaho Code 9 62-603(1);
While the facilities providing "basic local exchange service " as defined in Idaho
Code 9 62-603(1), may permit data-related functionality, data applications (such as dial-up
internet access and facsimile capability) are outside the statutory definition of "basic local
exchange services ; and
In evaluating whether "effective competition" from unaffiliated providers exists
pursuant to Idaho Code 9 62-622(3)(b), the Commission shall consider whether "functionally
equivalent, competitively priced" alternatives to "basic local exchange services" as defined in
Idaho Code 9 62-603(1) are present, and shall not require the incumbent telephone corporation to
demonstrate effective competition for additional services that may also be available over wireline
facilities.
QWEST CORPORATION'S ANSWER TO PETITION
FOR DECLARATORY RULING AND CROSS-PETITION - Page 22
Boise-156715.3 0029164-00087
Submitted this 13th day of May, 2003.
Qwest Corporation
Mary S. H .' son
Stoel Riv LLP
Adam L. Sherr
Qwest
Attorneys for Qwest Corporation
QWEST CORPORATION'S ANSWER TO PETITION
FOR DECLARATORY RULING AND CROSS-PETITION - Page 23
Boise-1567 15.3 0029164-00087
CERTIFICATE OF SERVICE
I hereby certify that on this 13th day of May, 2003, I served the foregoing QWEST
CORPORATION'S ANSWER TO PETITION FOR DECLARATORY RULING AND
CROSS-PETITION upon all parties of record in this matter as follows:
Marlin D. Ard
Willard L. Forsyth
Hershner, Hunter, Andrews, Neill & Smith LLPth 180 East 11 Avenue
O. Box 1475
Eugene, OR 97440-1475
Attorneys for Verizon
Executed protective agreement
Jean Jewell, Secretary
Idaho Public Utilities Commission
472 West Washington Street
Boise, ill 83720-0074
Phone: [phone]
Fax: [phone]
iiewell~puc.state.id.
Weldon Stutzman, Deputy Attorney General
Idaho Public Utilities Commission
472 West Washington Street
O. Box 83720
Boise, ill 83702
Telephone: [phone]
Facsimile: [phone]
W stutzm~puc. state.id. us
Executed protective agreement
Hand Delivery
U. S. Mail
Overnight Delivery
Facsimile
Email
Hand Delivery
U. S. Mail
Overnight Delivery
Facsimile
Email
Hand Delivery
U. S. Mail
Overnight Delivery
Facsimile
Email
John Gannon, Esq.
1101 West River-Suite 110
Boise, ill 83702
Telephone: [phone]
Attorney for Meierotto, Padget, Herrick Neal
Hand Delivery
U. S. Mail
Overnight Delivery
Facsimile
Email
QWEST CORPORATION'S ANSWER TO PETITION
FOR DECLARATORY RULING AND CROSS-PETITION - Page 24
Boise-156715.3 0029164-00087
Dean J. Miller
McDevitt & Miller LLP
420 West Bannock Street
O. Box 2565
Boise, ill 83701
Telephone: [phone]
Facsimile: [phone]
i oe~mcdevitt -miller. com
Attorneys for WorldCom, Inc.
Attorneys for AT&T
Attorneys for Time Warner Telecom
Executed protective agreement
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Dean Randall
Verizon Northwest Inc.
17933 NW Evergreen Parkway
Beaverton, OR 97006-7438
dean. ran dall ~v erizon. com
Executed protective agreement
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Mary Jane Rasher
10005 South Gwendelyn Lane
Highlands Ranch, CO 80129-6217
Telephone: [phone]
mirasher~msn.com
Hand Delivery
U. S. Mail
Overnight Delivery
Facsimile
Email
Adam Sherr
Qwest1600 ih Avenue - Room 3206
Seattle, W A 98191
Telephone: [phone]
Facsimile: [phone]
asherr~qwest.com
Hand Delivery
U. S. Mail
Overnight Delivery
Facsimile
Email
Clay R. Sturgis
Moss Adams LLP
601 West Riverside - Suite 1800
Spokane, WA 99201-0663
Hand Delivery
U. S. Mail
Overnight Delivery
Facsimile
Email
Brian Thomas
TimeWarner Telecom
223 Taylor Avenue North
Seattle, W A 98109
Brian. Thomas~twtelecom.com
Hand Delivery
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Facsimile
Email
Susan Travis
WorldCom, Inc.
707 1 ih Street - Suite 4200
Denver, CO 80202
Telephone: [phone]
Susan.a. Travis~worldcom.com
Hand Delivery
U. S. Mail
Overnight Delivery
Facsimile
Email
QWEST CORPORATION'S ANSWER TO PETITION
FOR DECLARATORY RULING AND CROSS-PETITION - Page
Boise-156715.3 0029164-00087
Conley E. Ward, Jr.
Givens Pursley LLP
277 North 6th Street - Suite 200
O. Box 2720
Boise, ill 83701-2720
Telephone: [phone]
Facsimile: [phone]
cew~givenspursley.com
Attorneys for Idaho Telephone Association
Executed protective agreement
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t1M/1t
Brandi L. Gearhart, PLS
Legal Secretary to Mary S. Hobson
Stoel Rives LLP
QWEST CORPORATION'S ANSWER TO PETITION
FOR DECLARATORY RULING AND CROSS-PETITION - Page 26
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