HomeMy WebLinkAbout20030711Post Hearing Reply Memorandum.pdf, ':-'" "'-
\lr!\l:.t,c vl:.
:- :1 L: fJ
1'"
WELDON B. STUTZMAN
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
(208) 334-0318
IDAHO BAR NO. 3283
2003 JUL I I PM I: 38
" '
. l-f'
uTILI TiES COi1hl S 51 ON
Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5983
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF
QWEST CORPORATION FOR DEREGULATION OF BASIC LOCAL
EXCHANGE RATES IN ITS BOISE, NAMPA
CALDWELL, MERIDIAN, TWIN FALLS, IDAHO FALLS, AND POCATELLO EXCHANGES.
CASE NO. QWE- T -02-
STAFF'S POST -HEARING
REPLY MEMORANDUM
Throughout this case Qwest has misstated or mischaracterized Staff's arguments or
evidence, and then explained why the misstated issue is not applicable to its case. For the most
part Staff has ignored Qwest's incorrect statements ofthe issues presented by Staff, believing the
record is clear and speaks for itself and that the record will be fully reviewed by the Commission.
Nonetheless because Qwest's post-hearing memorandum contains several such
mischaracterizations, some of which are repeated from earlier Qwest arguments, Staff feels
compelled in this Reply Memorandum to address two incorrect assertions made by Qwest.
At page 2 of Qwest's Opening Post-Hearing Brief, Qwest makes the following
statement:Staff insists that because there is no evidence that large numbers of Qwest
customers have disconnected their wirelines . . . then wireless service must not be 'functionally
equivalent' or 'competitively priced' with Qwest basic local exchange service " (italics added).
Similarly, Qwest states as follows at page 13 of its brief: "Meanwhile, to require as Staff would
STAFF'S POST-HEARING
REPL Y MEMORANDUM
insist the Commission do, that Qwest show that it has already lost substantial market share to its
wireless competitors is contrary to the statute (italics added). Qwest accuses Staff of
attempting to apply a market loss standard that is not present in statute.Qwest's Opening
Post-Hearing Brief, p. 13.
Notably, Qwest provides no citations to the record for its statements that Staff insists
Qwest must show loss of a significant market share to successfully prove its case. There can be
no reference to the record because Staff never insisted, or even mildly asserted, that Qwest is
required to prove loss of a significant market share to wireless providers. What Staff did assert
and on what Staff believes the Commission must insist, is that Qwest meet its burden to prove
the requirements of the statute are met before price de-regulation is ordered.
One of those statutory requirements is that wireless service provide a genuine, actual
competitive alternative to Qwest's basic local service. Information about whether customers are
switching from Qwest's local service to wireless service would be relevant to that inquiry. Staff
pointed out that Qwest offered no evidence to show whether or to what degree it has lost basic
local customers to wireless service in each of the seven local exchanges. See, e., Tr. p. 112
(Q. "Do you know how many of the 350 lines (dropped) in the Nampa exchange were due to
people dropping wireline service and going only with wireless service?" A. "I do not.); and Tr.
p. 94 ("Qwest never attempted to prove a precise loss of lines attributable to wireless
competition.Pointing out that Qwest failed to provide meaningful evidence on whether
cellular service actually competes with Qwest's basic local service, and that Qwest utterly failed
to meet its burden of proof on that point, is very different from insisting that Qwest must prove
loss of a "substantial market share." Qwest avoids addressing the real issue, i., the lack of
evidence that cellular service is a competitive alternative to wireline service in the seven
exchanges, by claiming Staff would require an unwarranted or unreasonable element of proof
that Qwest reasonably did not attempt to meet.
The second mischaracterization Staff will address Qwest previously made and is
repeated in Qwest's post-hearing brief. At page 8 of its brief, Qwest quotes testimony of Staff
witness Wayne Hart regarding the language of Idaho Code ~ 62-622(3)(b), the statute under
which Qwest filed its application. Qwest notes Mr. Hart's testimony that "the very idea of
subparagraph (b) is to make a comparison of two services that are not identical. The legislature
apparently contemplated that services that are not technically the same as those provided by a
STAFF'S POST-HEARING
REPL Y MEMORANDUM
facilities based competitor nonetheless could be enough like it that it might serve as a reasonable
substitute.Tr. p. 635 , quoted at Qwest post-hearing brief, p. 8. From that Qwest implies Mr.
Hart was testifying to a definition of "functionally equivalent." Qwest then asserts that "Staff
consultant Ben Johnson, however, took an extreme position at odds with Mr. Hart, that
functionally equivalent' means identical or virtually identical." Qwest post-hearing brief, p. 8.
Using hyperbole not unusual for Qwest in this case, the Company claims Dr. Johnson "used this
exceedingly stringent definition as a tool by which to exploit every difference between wireless
and wireline services as a basis for denying Qwest's application.According to Qwest, Dr.
Johnson reaches a "peak of absurdity" by testifying that wireless service has attributes, such as
mobility, that are superior to wireline service attributes. Qwest post-hearing brief, pp. 8-
There is nothing "at odds" or inconsistent between the testimony of Mr. Hart and Dr.
Johnson on the issue of functional equivalence. Mr. Hart's testimony was in response to Qwest'
assertion that Section 62-622(3)(b) limits the functionally equivalent standard to only voice
communication, as is clear from the complete question and answer in Mr. Hart's testimony:
Q. Is it appropriate under this statute for the Commission to limit its
review to a comparison of two-way, switched voice communication services, and
not consider what other features may be a part of the "local services" claimed to
be providing "effective competition?"
A. I don t believe it is. First, the very idea of subparagraph (b) is to make
a comparison of two services that are not identical. The legislature apparently
contemplated that services that are not technically the same as those provided by a
facilities based competitor nonetheless could be enough like it that it might serve
as a reasonable substitute. The term used in the statute is "functionally
equivalent." In comparing the different functions of two different services,
although it is important to review their similarities to determine if one is a
substitute for the other, it is also necessary to compare their differences. It seems
to me a comparison to determine whether two different services are "functionally
equivalent" would be incomplete and seriously flawed if all that was compared
was their identical functions and uses.
Second, the structure of the statute supports a review of different functions
when the Commission is comparing services to determine if they are "functionally
equivalent." The legislature used the term "basic local exchange services" nine
times in Section 62-622, and once in paragraph (3) of the section. Yet in
subparagraph (b), the legislature used the term "local services" when defining the
services that must be functionally equivalent and competitively priced. I believe
the legislature s selection of terms was deliberate and directs a review of the full
STAFF'S POST-HEARING
REPL Y MEMORANDUM
functions of the two services to determine whether one is "functionally
equivalent" to the other. If the legislature wanted to limit the Commission
comparison to whether they both provide two-way switched voice communication
services, it could have said that in subparagraph (b).
Tr. pp. 634-36 (italics added).
In his testimony, Dr. Johnson made the comparison of functions and attributes Mr.
Hart testified is invited by subparagraph (b). As noted by Qwest, Dr. Johnson at pages 771-
of the transcript identifies ten key attributes of wireline service that distinguish it from wireless
service. As is clear from the questions preceding and following Dr. Johnson s discussion of the
wireline attributes, Dr. Johnson is explaining that
, "
Because of these functional differences
wireline and wireless services are often used for different purposes. As a result, most consumers
who choose to purchase wireless service also continue to purchase wireline service." Tr. p. 775.
In what Qwest describes as a "peak of absurdity," Dr. Johnson testified that "The primary
advantage of wireless services is mobility; certainly this is its strongest advantage over
traditional wireline service." Tr. p. 771.
The testimonies of Mr. Hart and Dr. Johnson are consistent and complementary. Mr.
Hart explains, consistent with the purpose of Section 62-622(3)(b), that it is necessary to review
both the similarities and differences between two products in determining whether one is a
reasonable substitute for, and thus is competitive with, the other. Dr. Johnson provides a detailed
discussion of the differences between wireless and wireline services to "help the Commission to
gain a better understanding of why so many consumers choose to pay for both services." Tr.
770. In other words, Dr. Johnson explains why, due to the different functions of wireline and
wireless services, one is not used by customers as a substitute for the other. That is exactly the
discussion Mr. Hart testified is appropriate when considering the "functionally equivalent"
standard in paragraph (b). The position stated by Dr. Johnson is not extreme, nor is it "at odds
with Mr. Hart's testimony.
These two mischaracterizations of Staff s testimony addressed in this memorandum
are representative of the approach Qwest brought to this case. It would not be productive for
Staff to address each mischaracterization of the evidence or arguments identifiable in Qwest'
post-hearing brief; the resulting memorandum would be lengthy and not particularly helpful to
the merits of the case. Staff discusses two examples of Qwest's mischaracterizations here in
STAFF'S POST-HEARING
REPL Y MEMORANDUM
order to caution the Commission to review carefully the positions stated by Qwest "in (its J zeal
to advance (itsJ argument." Borrowed from Qwest's Post-Hearing Brief, p. 9.
Respectfully submitted this 11 th day of July, 2003.
Weldon B. Stutzman
Deputy Attorney General
B :QWETO225 - ws ""psthmgreplymem
STAFF'S POST-HEARING
REPL Y MEMORANDUM
CERTIFICA TE OF SERVICE
HEREBY CERTIFY THAT I HAVE THIS 11TH DAY OF JULY 2003
SERVED THE FOREGOING STAFF'S POST-HEARING REPLY MEMORANDUM, IN
CASE NO. QWE-02-, BY MAILING A COpy THEREOF, POSTAGE PREPAID
TO THE FOLLOWING:
MARY S HOBSON
STOEL RNES LLP
SUITE 1900
101 S CAPITOL BLVD
BOISE, ill 83702
ADAM L SHERR
QWEST
1600 7TH AVE, ROOM 3206
SEATTLE, WA 98191
CONLEY WARD
GNENS PURSLEY LLP
277 N 6TH ST, SUITE 200
PO BOX 2720
BOISE, ill 83701-2720
CLAY R STURGIS
MOSS ADAMS LLP
601 WRNERSIDE, SUITE 1800
SPOKANE, WA 99201-0663
DEAN J MILLER
McDEVITT & MILLER LLP
PO BOX 2564
BOISE, ill 83701
BRIAN THOMAS
TIME WARNER TELECOM
223 TAYLOR AVE NORTH
SEATTLE, WA 98109
SUSAN TRAVIS
WORLDCOM INC.
707 17TH STREET, SUITE 4200
DENVER, CO 80202
MARY JANE RASHER
AT&T COMMUNICA nONS OF THE
MOUNTAIN STATES INC.
10005 S GWENDELYN LANE
HIGHLANDS RANCH, CO 80129-6217
MARL IN D ARD
WILLARD L FORSYTH
HERSHNER, HUNTER, ET AL
180 E 11 TH AVE PO BOX 1475
EUGENE, OR 97440-1475
DEAN RANDALL
VERIZON NORTHWEST INC.
17933 NW EVERGREEN PKWY
BEAVERTON, OR 97006-7438
JOHN GANNON
ATTORNEY AT LAW
1101 WRNER, SUITE 110
BOISE, ID 83702
BEN JOHNSON
BEN JOHNSON ASSOCIATES INC.
2252 KILLEARN CENTER BLVD
TALLAHASSEE, FL 32308
iifSH"
-#?J::
j)
",/1" .b ECRETARY
CERTIFICATE OF SERVICE