20071214Decision memo.pdf

DECISION MEMORANDUM
TO:CO MMISSI 0 NER RED FO RD
COMMISSIONER SMITH
COMMISSIONER KEMPTON
COMMISSION SECRETARY
LEG AL
WORKING FILE
FROM:GRACE SEAMAN
DATE:DECEMBER 14 2007
RE:STAFF REVIEW OF BROADBAND TAX CREDIT APPLICATIONS;
CASE NOS. QWE-07-10 AND CEN-07-
BACKGROUND
In November 2007, the Commission received two Applications asking for approval
of equipment for the broadband tax credit pursuant to Order No. 28784 and Idaho Code
~ 63-30291(4). To be eligible for the tax credit, the taxpayer must obtain from the Commission
an Order confirming that installed equipment qualifies for the tax credit. The broadband
equipment must be capable of transmitting signals at a rate of at least two hundred thousand
(200 000) bits per second to a subscriber and at least one hundred twenty-five thousand
(125 000) bits per second from a subscriber. Idaho Code ~ 63-30291(3)(b). In addition, for a
telecommunications carrier, such equipment must "be necessary to the provision of broadband
service and an integral part of a broadband network.Idaho Code ~ 63-30291(3)(b )(i).
STAFF ANALYSIS
The broadband tax credit Applications received by the Commission are discussed in
greater details below.
1. Qwest Corporation (Qwest); Case No. QWE-07-10.Qwest's Application identifies
the Company s broadband iiwestments for the year 2006. In the Application, Qwest stated that it
installed Digital Subscriber Line (DSL), Asynchronous Transfer Mode (ATM) and Frame Relay
equipment. These services are capable of offering high-speed network access to the customers at
transmission rates from 256 kilo bits per second (kbps) to more than 100 megabits per second
DECISION MEMORANDUM - 1 -DECEMBER 14, 2007
(Mbps). The Company itemized the broadband investments under General Broadband Services
and Dedicated Line Services installed in Qwest communities throughout the service territory in
southern Idaho. Qwest also included interoffice facilities to deliver the broadband services to the
customers. Consistent with Part 32 of Federal Communications Commission Rules and
Regulations, Qwest also capitalized such items as labor, engineering, transportation and other
overhead costs associated with the installation of the equipment amounting to a net total
investment of approximately $8 000 000 for 2006.
2. CenturyTel ofldaho, Inc. (CenturyTel); Case No. CEN-07-. CenturyTel'
Application lists the Company s broadband investment installed during the years 2004 through
2006. In the Application, the Company states that Asymmetrical Digital Subscriber Line
(ADSL) equipment was installed in Salmon, North Fork, and Leadore and will provide
transmission rates from 1 Mbps to a subscriber and 129 Mbps from a subscriber. CenturyTel
further states that as a result of the installed equipment, the percentage and number of potential
broadband subscribers were 480 or 62% in 2004, 774 or 83% in 2005, and 1434 or 72% in 2006.
The Company s total investment was approximately $592 000 for the three-year period.
ST AFF REVIEW
Staff has reviewed the lists of proposed broadband equipment submitted by the
companies and believes that the equipment identified qualifies for the investment tax credit
pursuant to Idaho Code ~ 63-30291(3)(b)(i). Staffrecommends approval of the Applications and
further recommends that the Commission forward the approving Orders along with a copy of the
original Applications to the Idaho Tax Commission.
CO MMISSI 0 N D ECISI 0 N
Should the Commission approve the Applications for the broadband investment tax
credits?
;A"-u
race Seaman
i:udmemos/qwe-O7-10 & cen-O7-
DECISION MEMORANDUM - 2 -DECEMBER 14 2007