HomeMy WebLinkAbout20030224Order No 29197.pdfOffice of the Secretary
Service Date
February 24, 2003
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF QWEST'S PROPOSAL TO)
USE REVENUE SHARING FUNDS TO MAKE
NETWORK IMPROVEMENTS IN ITS
SOUTHERN IDAHO SERVICE AREA.
CASE NO. QWE-O3-
ORDER NO. 29197
BACKGROUND
On December 31 , 2002, Qwest Corporation (Qwest) submitted a proposal to the
Commission to use revenue sharing funds to make network improvements in its southern Idaho
servIce area.When Qwest's predecessor U S WEST in 1989 elected regulation of some
telecommunication services under Title 62, Idaho Code, the Commission approved a method for
allocating costs between the fully regulated (Title 61 , Idaho Code) and partially regulated (Title
, Idaho Code) portions of Qwest's southern Idaho operations. The Sharing Plan measured
total Company growth and shared a portion of that growth with Title 61 operations in recognition
that Title 62 services depended on use of the joint network. Because revenue sharing funds were
derived from joint use of the network that provides Title 61 services, the Commission held that
revenue sharing funds must be used to benefit Title 61 customers. In 1989 and 1990, revenue
sharing money was given to Title 61 customers as a one-time credit. In subsequent years, the
Commission approved use of the funds to make network improvements in Qwest's southern
Idaho service area. The revenue sharing program terminated in 1997, and the existing funds
totaling approximately $4 million, are the last revenue sharing funds provided by the program.
QWEST'S PROPOSAL
In its proposal filed with the Commission, Qwest identified specific areas for network
improvement, and committed to match the available sharing funds, thereby proposing
approximately $8 million for the purpose of upgrading outside plant facilities throughout the
southern Idaho area. Qwest proposes to use the funds for four components:
1. Replacement of lead sheath cabling in the local exchange network in
selected wire centers.
2. Replacement or rehabilitation of air core cabling in the local exchange
network in selected wire centers.
ORDER NO. 29197
3. Replacement of control points or access points (i.e. terminal boxes or
enclosures) in selected wire centers.
4. Replacement of Anaconda analog carrier systems across southern Idaho.
According to Qwest, these network components represent areas that experience higher incidents
of trouble reports from customers. The Company proposed to construct the improvements
during a three-year period, and asserted that implementation of its proposal will result in
improved service quality for its Title 61 customers. On January 17, 2003 , Qwest provided
additional information regarding the proposal and the specific improvements it recommends.
On January 24, 2003 , the Commission issued a Notice of Modified Procedure and
established a twenty-one day comment period, ending February 14, 2003, to allow interested
persons or parties an opportunity to file written comments regarding Qwest's proposal.
SUMMARY OF COMMENTS
Written comments were filed by Qwest, the Commission Staff Citizens
Telecommunications Company of Idaho (Citizens), members of the Communications Workers of
America union, and several interested customers. Except for the comments filed by Citizens, all
were supportive of the proposal to make the identified network improvements. In support of its
proposal, Qwest points out that Title 61 customers will realize improved service functionality
and reliability sooner than otherwise as a result of the plant replacements. The Company
believes its proposal will protect Idaho jobs and provide a lasting benefit while maintaining
competitive neutrality.
Staff generally supported Qwest's proposal to use revenue sharing funds to improve
service for Title 61 customers. Staff also expressed concern, however, that some of the projects
will be expensive and may benefit few Title 61 customers. Staff recommended that projects such
as the Anaconda systems replacement be pushed to the end of the project period and that other
projects be reviewed quarterly to allow the Commission to consider cost effectiveness and other
project alternatives. Staff recommended that the quarterly project review be used to evaluate the
level of funding for expenses and all capital items.
Citizens stated Qwest's proposal is not an appropriate use of revenue sharing funds
because the proposal "is comprised of projects most, if not all, other companies in Idaho have
completed without the benefit of special funding.Citizens proposed that the revenue sharing
ORDER NO. 29197
funds be used to build a north-south fiber route between Riggins and Grangeville, a project
previously considered by the Commission in Case No. USW - T -99-25/CTC- T -99-
Comments were received in support of Qwest's proposal from network engIneerIng
directors at Qwest and from Idaho members of the Communications Workers of America union.
Three Qwest customers submitted comments stating, to the extent it would improve their service
support for the proposal.
COMMISSION DECISION
The record supports the finding that the use of the remaining revenue sharing funds
proposed by Qwest is consistent with the public interest and the goals of the Commission.
Qwest proposes to remove and replace old and deteriorating facilities, which will improve the
quality of service to customers.According to Qwest, the improvements are much more than
normal maintenance and repairs, and instead "will involve replacement of a minimum of 300
feet, and more typically 1000 foot sections, of cable plant which is beyond the capacity of
routine repair work." Staff agreed, asserting that
, "
given the high cost per customer (of the
proposed improvements J and general reduction in capital budgets, Qwest would not make the
proposed upgrades in the foreseeable future but would continue to maintain and repair existing
facilities.Facility improvements to the basic telephone service network will benefit not only
the customers in the improved areas, but also those who call them and Qwest competitors that
may use the facilities.
The Commission also finds that customers will benefit by the matching funds to be
provided by Qwest. First, the matching funds will double the resources committed to facility
improvements, significantly increasing the commitment for improvements to benefit customers.
Second, the improvements provided by revenue sharing funds cannot be added to rate base
which means significant improvements will be made without adding to the capital costs of the
Company recovered in rates from customers. Even the matching funds provided by Qwest will
not be included in rates unless and until such time as Qwest files a rate case. At the least
, "
Title
61 customers would realize $8 million of improvements for essentially half the price.Staff
comments, p. 3.
Finally, it is true, as Qwest and Staff point out, that the Commission has considered
other options for use of the remaining revenue sharing funds. None were sufficiently beneficial
to Qwest's Title 61 customers, or they suffered from other weaknesses, that precluded the
ORDER NO. 29197
Commission s approval. For example, one proposal previously considered was construction of a
fiber optic route between Riggins and Grangeville, Idaho. Citizens in its comments
recommended the Commission use the revenue sharing funds for that purpose rather than the one
proposed by Qwest. The Commission previously approved construction of the fiber route
funds were available from the planned sale of Qwest's north Idaho exchanges , but that sale fell
through. Although a north-south fiber route has merit and would provide benefits to the state
telecommunications system, constructing it with revenue sharing funds that were generated from
Qwest's southern Idaho customers would not be appropriate because it would not provide a
direct benefit to those customers.
The Commission finds the proposal to use the revenue sharing funds, matched dollar-
for-dollar by Qwest, for capital improvements to the telecommunication facilities in southern
Idaho to be reasonable, prudent, beneficial to Qwest's Title 61 customers, and in the public
interest.The Commission is also mindful, however, that proper accounting and reporting
safeguards must be in place to insure best use of the funds. Accordingly, Qwest is directed to
provide to the Commission ongoing detailed proposals for projects planned in each quarter
including the anticipated costs with capital and expenses separately identified. Qwest shall also
provide the proposed accounting entries.
Staff will review the proposed projects, in part to determine that the improvements
are not merely maintenance projects, and notify the Commission of its concerns, if any,
regarding the identified projects. Qwest may proceed with the work identified for the quarter if
Staff does not file an objection with the Commission. No later than 10 days after close of the
quarter, Qwest must file a report showing all related expenses and capital costs for the quarter by
project with the actual accounting entries for each project in that quarter. Unless Staff notifies
the Commission of an objection, the fund administrator will be instructed to release the
appropriate amount of revenue sharing funds to Qwest. This process will enable Qwest to
receive the funds in a timely manner, allow the fund administrator to match investments with
expected withdrawals, and assure proper evaluation of program expenditures.
ORDER
IT IS HEREBY ORDERED that Qwest's proposal to use remaining revenue sharing
funds, along with a dollar-for-dollar match provided by the Company, for capital improvements
to its Title 61 facilities in south Idaho is approved. Qwest is directed to provide quarterly
ORDER NO. 29197
proposals in advance of commencing work and reports at the end of each quarter, as set forth in
this Order.
THIS IS A FINAL ORDER. Any person interested in this Order (or in issues finally
decided by this Order) or in interlocutory Orders previously issued in this Case No. QWE- T -03-
may petition for reconsideration within twenty-one (21) days of the service date of this Order
with regard to any matter decided in this Order or in interlocutory Orders previously issued in
this Case No. QWE- T -03-Within seven (7) days after any person has petitioned for
reconsideration, any other person may cross-petition for reconsideration. See Idaho Code ~ 61-
626.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this
day of February 2003.
tf &J-J
Commissioner Hansen Dissenting Opinion Attached
DENNIS S. HANSEN, COMMISSIONER
ATTEST:
~JO
D. Jewell
Commission Secretary
vldlO:QWET0304- ws
ORDER NO. 29197
DISSENT OF
COMMISSIONER DENNIS S. HANSEN
CASE NO. QWE-O3-
ORDER NO. 29197
Because I am concerned that the network improvements proposed by Qwest may
properly fall within normal maintenance obligations, I dissent from the Commission s Order. As
suggested by Citizens in its comments, the network improvements could amount to little more
than "basic maintenance and network improvements that should rightfully be funded 100% by
Qwest in the normal course of business." Although it is true that money for capital projects may
be difficult to obtain in these lean economic times, the fact that Qwest is willing to commit to
match the revenue sharing funds with its own money implies the Company could make funds
available to complete necessary maintenance projects. Aside from Qwest's assertion , how is the
Commission to know the network improvements approved by the Commission would not
otherwise have been completed by the Company?
The other problem I see with the proposal is that some projects may be expensive to
complete while benefiting a relatively small number of customers. An example is replacement
of the old Anaconda Carrier Systems, which Qwest estimates will cost over $600 000, but will
directly benefit only 61 customers. When compared to previous network improvements funded
by revenue sharing dollars approved by the Commission, this proposal is disappointing in the
scope of benefits identifiable for Title 61 customers. Because revenue sharing funds were
provided by all of Qwest's Title 61 customers, that means all customers will be paying for
improvements to benefit a few, at least to the extent sharing funds pay the costs. I think a better
use of the revenue sharing funds would be to refund it to the customers, who contributed it to
these funds in the first place.