20030627Intervenors Post Hearing Memorandum.pdf

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JOHN GANNON (ISB #1975)
Attorney at Law
1101 West River, Suite 110
Boise, Idaho 83702
Telephone No.[phone]
Attorney for Intervener Meierotto et al
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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-02-
INTERVENERS POST HEARING
MEMORANDUM
INTERVENERS POSITION
Interveners contend cell phone technology does not offer competition for local land lines
because it won t work. In particular it will not operate a small business phone system of any
kind. Cell phone technology will not operate most home phone extension phone systems and will
not conveniently serve as a home phone for Idaho households and larger homes. Regardless
whether "local service" or "basic local exchange service" is the term used in Idaho Code
62-622(3)(b), the failure to operate phone systems means cell phone technology is not the
functional equivalent" and is not "reasonably available . Further in considering the term
competitively priced", all characteristics of the product must be considered, not just a few
selected ones.
Interveners believe deregulation will result in a majority of small business customers
having no choice because there is no technology, and that the vast majority of residential
INTERVENER POST HEARING MEMORANDUM Page 1
customers will not have effective competition, especially because cell phones cannot normally
operate home extension phone systems.
If any deregulation is to occur, the public interest requires that there be safeguards for
those customers who will have no choice, and one safeguard intervener recommend is a
mandatory, very informal arbitration program to resolve billing and service disputes because of
Qwests poor history in these areas.
Further, instead of deregulation, the land line system should be strengthened and preserved
by charging the same fees and taxes on cell phones as land lines. Since intervening, the
Legislature has taken one step in this direction by extending the 911 charge to cell phones. This
trend should continue and interveners hope the Commission will support implementation of this
philosophy by legislative and other policy making bodies.
BURDEN OF PROOF
Regardless of Intervener s position, the first and most important aspect of this case is
that Qwest has the burden of proof for each element of its claim. This burden is met by presenting
real evidence. Intervener s don t have to disprove claims, statements or unsubstantiated
testimony. Interveners, or Staff for that matter, need only challenge or refute real credible
evidence that is presented.
While this may seem elementary, it does appear, that from time to time Qwest has
submitted evidence which lacks foundation, relevancy and the quality that one would expect in a
quasi judicial proceeding. (See for example Intervenors Objections to the Testimony of David
Teitzel). This testimony may suffice to make a claim, but this is not evidence which proves their
claim.
INTERVENER POST HEARING MEMORANDUM Page 2
With these considerations in mind, Interveners review the elements of proof and some of
the claims and evidence presented.
APPLICANTS MUST PROVE THE FOLLOWING ELEMENTS
l.Functional Equivalent
Functional Equivalent" certainly implies that there is some kind of end result. In other
words how can any technology be equivalent if it cannot be used at all by the end user? The
answer is the technology cannot be the equivalent under this circumstance, regardless of whether
the legal consideration is "voice to voice" transmission or "local service
Then there is a second question to ask in regard to this term. If the product can be used
but the product is more expensive, difficult, or inferior in its ultimate use, can it be the functional
equivalent of another product. Intervenors note that there was some evidence that cell phone
voice to voice transmissions are inferior and not reliable. (For example see Sales Tr 599 L 13-18).
Giving Qwest the benefit of the doubt on this issue, which is really not appropriate because Qwest
has the burden of proof, the question is still whether the end result of the voice to voice
transmission must be considered. If the technology drops calls or won t operate a home extension
phone for example, then how can it be the equivalent of a land line? Ifthe technology costs more
for a telephone book listing and doesn t allow number portability it cannot be the equivalent.
Qwests position ignores the fact that the voice to voice transmission in a cell phone is a different
technology from the land line transmission. This means the result of such trasmissions are
different and must be considered.
2. Comparatively Priced
Cell phone technology and land line technology price comparisons cannot consider just a
INTERVENER POST HEARING MEMORANDUM Page 3
voice transmission price comparison even if "basic local exchange service" is substituted for "local
service. Qwest's own witnesses agreed that all aspects of a product are considered by a consumer
when purchasing it.
Dr. Lincoln testified:
....
consumers buy and consume products because of their value in use.
Consumers buy products according to their perceived benefits. They buy
products for what they want or expect them to '' for them.
(Lincoln Reb Tr p262 L 19-21)
Mr. Teitzel testified:
Dr. Lincoln discusses in his testimony how customers base purchasing decisions
on all attributes of alternative services...." (Teitzel Reb Tr 395 L 15-17)
Regardless of whether "basic local exchange service" or "local service" is used, the term
comparatively priced" therefore requires that all the features of the land line and wireless line be
compared in order to achieve a conclusion regarding price comparison.
Unfortunately, there is no evidence before this commission regarding the relative price
values between land line and wireless, because every bit of evidence offered failed to include any
value for wireline features such as fax operation, data transmission, extension phones, number
portability, and other wireline benefits. In fact Mr.Teitzel agreed that a "customer might well
consider" a list of several different factors which were suggested to him as a basis for the wireless
or wireline decision. (Teitzel Tr 478). These factors were generally not included in the studies
presented by Qwest, Nor was any value added for mobility, which is the chief benefit ofthe
wireless technology, although on several occasions Qwest witnesses thought that was important
and commented that mobility added value for wireless.
More precisely, $26 for a landline buys much more than voice to voice transmission or
INTERVENER POST HEARING MEMORANDUM Page 4
local service. It buys data transmission, phone system and extension phone operations, and a
permanent phone number. How much of the $26 charge is for voice to voice and how much is
allocated for these other benefits?Qwest witnesses repeatedly failed to consider this aspect, and
for that reason the price comparisons offered do not meet the burden of proof regarding
comparatively priced". Its not Interveners job or the Commission s job to figure this out. This
evidence should have been presented by the Applicant.
Of course there can be no comparative pricing if one technology simply won t work for a
customer as in the case of small business.
3. Reasonably Available
Applicant must prove cell phone technology is reasonably available. This very phrase
implies that the technology can be used. Available certainly implies that the user can use it. For
example, how can cell phone technology be reasonably available if the small business cannot
integrate it into any known office phone system? How can a residential home phone system that
uses extension phones have cell phone technology reasonably available if it won t work?
It really makes no difference for this analysis whether "local service" means "basic local
service exchange" or not. Regardless of which term is used
, "
availability" implies that the voice to
voice transmission, or the broader "local service" transmission can be used reasonably by the
recipient.
4. Residential and Small Business
Qwest must prove that both residential and small business meet all the legal requirements
before deregulation can occur. The statute is conjunctive, not disjunctive. Therefore, the
Commission must find that Qwest has met its burden of proof for both groups before deregulation
INTERVENER POST HEARING MEMORANDUM Page 5
can occur.
Qwest's case has completely failed to prove that the maj ority of small business customers
can even use the cell phone technology.
The Majority of Small BusinessCustomers Have Multiple Lines,
Which Cell Phone Technology Cannot Operate
There are approximately 26 000 small business primary lines in the 7 exchanges. The
source for this figure is Dr. Lincoln s Direct Testimony on page 25 L 1-6 where he states:
" The small business list of numbers.... was drawn randomly from a list of
183 small business billing phone numbers (rollovers and multiple lines
eliminated) in the seven exchanges. The list of total population numbers
was provided by Qwest and included only businesses with five or fewer lines
(Lincoln Tr 231 L 1-
Mr. Teitzel agreed there were roughly 25 000 small business lines and 57 000 multiple
lines and that the vast majority of multiple lines were used by small business. (Tr p 486). On page
729 L 1-, Mr. Hart testified that at least 50% of the business customers subcribe to more than
one line at the same location based upon information in Qwests annual report. To be fair, Qwest'
counsel objected to a followup question on page 730 stating that Mr. Teitzel wasn t sure about the
000 figure and Mr.Hart was testifying outside the scope of his original testimony. The
objection to the last question was sustained on this basis.
Never the less, the record does reflect that Dr. Lincoln clearly stated there are 26 183
business lines, and that Mr.Hart did testify without objection that more than 50% of the business
customers subscribe to more than one line at the same location.
Thus, if the majority of small business customers have multiple lines and there is no cell
phone technology which will operate those lines, then Qwests case must completely fail.
INTERVENER POST HEARING MEMORANDUM Page 6
Intervenors testimony demonstrates time and again the need for small business phone
systems whether they are described as "PBX" or "Digital" or any other type. (Neal Tr 547-550)
(Sales Tr 598-602) ) (Chattin Tr 570-574) (Boyce Tr 611-614) (McManamon Tr 620-624)
Qwest made a weak attempt to show that there was technology available in Mr. Teitzels discussion
of Ascendent Technology. Mr.Teitzel said:
Solutions such as that offered by Ascendent described in my testimony
demonstrate that any perceptions that wireless service is not a viable substitute
for wireline service for these reasons is simply not accurate. Therefore, the
concerns rasised by the Intervenors Meierotto should be seen as being both
misperceptions ...." (Teitzel Reb P74 L 3-
However, at the hearing he admited that Ascendent technology is not a reasonable
alternative for a key type phone system. (Tr. P 484 L 10-14). He agreed it was designed for a
PBX system and it is only an alternative for more than 5 users, although he was unclear as to
whether a minimum of 50 were needed. (Teitzel Tr P 485 L 2-5). Mr. Teitzel could locate only one
cell operated Fax machine. (Teitzel Tr 482 L 11-13) and it was apparent there is no reasonable cell
technology that is available in Idaho to operate a Fax machine. (Teitzel Tr 482-483).
If anything, the evidence shows that the majority of small busiensses have multiple lines
which cannot be serviced by cell phone technology. Therefore there is no functional equivalent
comparatively priced and reasonably available alternative for this class of customers..
Therefore the majority of small business and the vast majority of small business lines
(including multiple lines) cannot use cell phone technology as a matter offact.
B. Intervener Witnesses Provide First Hand
Evidence That Cell Phones Cannot Be Used By Small Business
In Place of Land Lines
INTERVENER POST HEARING MEMORANDUM Page 7
Five of the intervenors and their witnesses testified regarding the need for small business
systems for themselves and their type of business. They have been in business a long time and they
have extensive personal knowledge and experience regarding the communication needs of their
business. They didn t testify regarding hearsay or repeat the testimony of others. In many ways
they are the best evidence of the needs and requirements of people who use communications
devices in the Boise Meridian and Nampa exchanges.
And their testimony was essentially unrefuted.
An attorney (Gary Neal); a small realtor (Steve Chattin); a CPA (Carolyn Boyce); a small
contractor (Joel Sales); a small business and former telephone sales and installation manager
(Dennis McManamon) all testified that wireless technology cannot be used in a small office with
multiple lines and that a wireline was usually essential for any size business. Each of them had 5
wire lines or less and was therefore within the statutory definition of a regulated small business.
Of every witness presented by all parties in this case, Dennis McManamon has the best
hands on, every day familiarity with the communication needs of small business and residential. He
sold and installed telephone systems for 10 years and he has actually "lived" the business here in
the Boise/Meridian/Nampa exchange. From 1998 - 2000 he sold wireless equipment. His
testimony was unrefuted by anyone. He testified very succinctly:
There is no cell phone phone system available on the market that could
substitute for our land line telephone system at Awnings Unlimited. Cell Phone
technology has not developed such that any combination of cell phones could
allow all lines to be included in one phone and in all extension phones.
(McManamon Tr 621 L 24-25; Tr 622 L 1-3).
He testified that he was unable to sell cell phone technology to small business customers to
replace their land line system:
INTERVENER POST HEARING MEMORANDUM Page 8
.. .. I was unsuccessful. The technology is simply not here yet to enable most
serious small businesses to operate without a land line system. Certainly,
occasionally sold cell phones to someone who worked part time out of the
home or did a little consulting." (McManamon Tr 623 L 3-
It is not in the public interest to deregulate local service line charges "because cell phones
can t compete, as I have described, so prices would just go up." (McManamon Tr 623 L 11-12)
Realtor Steve Chattin testified that he is not aware of any real estate office that relies on an
office cell phone system. (Chattin Tr 572 L 15-16). He reviewed a list of real estate brokers and
agents in the Treasure Valley, and concluded the phone numbers listed were almost all land lines
and nearly every listing had a fax number. (Chattin Tr 573 L 20-21) (Intervenor Ex 208).
Attorney Gary Neal reviewed the current list of attorneys and concluded they all have fax
machines and appeared to have land line prefixes. (Intervenors Ex 202). Similarly CPA Carolyn
Boyce reviewed the current list of CP A's on the internet and came to a similar conclusion.
(Intervenors Ex 204). Both testified they could not operate their offices without landlines.
Intervenor Witness Joel Sales, who has spent 20 years in the glass industry, summed up
the ultimate issue in this case when he was asked whether a cell phone is a replacement or
something used in conjunction with a land line.
It is a convenience.(Sales Tr P 608 L 18)
Dr. Lincolns Survey Fails to Prove Small Business
Even Perceives It Can Use Cell Phone Technology
Dr. Lincolns survey addressed perception, which makes its value ofless importance than
the reality that has already been described in this brief
But the survey, unfortunately, did not ask several followup questions which would make
INTERVENER POST HEARING MEMORANDUM Page 9
the survey results more valuable, and there is a serious methodology issue because 33% of
respondents did not answer the phone after 3 calls.
i. Followup Questions Were Not Asked
The Small Business perception result was that only 31% thought they could solely rely on
a cell phone. The vast majority did not and that on its face hurts Qwest's position. .
Not a single one of the 3 1 % was asked a followup question to determine the depth of their
knowledge or to determine the basis for their response. (Lincoln Tr P 324)
But the "" answers were asked such a followup question. They were asked for the
primary reason why they answered "No.Many responded with a "data transmission" concern.
Dr. Lincoln then added those data transmission respondents to the "Yes" answers and claimed that
87% of small business users meant to answer "Yes
However, the data transmission respondent was not asked whether there was another
reason why the respondent might would answer "No." Dr. Lincoln agreed these "data transmission
respondents might have given another reason why they could not solely rely on a cell phone for
their business. (Lincoln Tr P 327 L 13-24).
The problem with the survey result then, is that at least two more key questions should
have been asked so that there is a real foundation and evidence to support the claimed conclusion.
ii. 33% Didn t Answer the Phone
And there is one more problem, which goes to methodolgy. Fully 33% of the business
respondents did not answer their phone after 3 separate calls according to those who performed
the survey! (Lincoln Tr P325 L 5-13); (Exhibit 6 Page 1). This makes no sense whatsoever, since
as Dr. Lincoln agreed, a basic principle of business marketing is "answer the phone." This result
INTERVENER POST HEARING MEMORANDUM Page 10
makes even less sense when the residential respondents failed to answer the phone only 25% of the
time. (Exhibit 6 Page 2). The only inference has to be that the original list given to Dr. Lincoln
was somehow flawed, or those making the phone calls weren t reliable. Clearly there is some kind
of methodology problem and Dr. Lincoln could not explain its origin. (Tr P325)
Cell Phone Technology Does Not Offer
Effective Competition for Residential Customers Either
Cell Phone technology is inconvenient, burdensome and difficult to use for most Idaho
households. Intervener Sharon Herrick details the typical concerns of residential customers:
Our house is large and with our remodeling it will be 3000 square feet. With
5 adults and this size of a home I absolutely have to have a land line with extension
phones. (Herrick Tr 584 L 15-17)
As I say, I do have a cell phone, but it can t have extension phones and I can just
imagine where it would be if it was the only phone in the house. Someone would
take it with them, or someone would leave it in a room where we can t hear the
phone. If we had more than one cell phone, the second one would cost more.
And which number would be listed in the phone book or would we have to list
both numbers. Cell phone replacement for our land line is simply impractical
and there is the expense." (Herrick Tr 584 L 19-24)
Qwest attempted to counter such concerns, by claiming for example that Qwest
experienced a decline of 14 000 residential land lines in the 7 exchanges. (Souba Testimony). But
Qwest offered no evidence whatsoever to support this claim. In fact Qwest didn t even purport to
present such evidence. Mr. Souba said:
Qwest never attempted to prove a precise loss oflines attributable to wireless
competition." (Souba Reb Tr 94 L 8-9).
Instead Qwest contended it is "reasonable and obvious in light ofDr.Lincoln s survey as
well as numerous other articles and interviews from various media." (Souba Tr 94 L 15-17)
INTERVENER POST HEARING MEMORANDUM Page
Interveners concede that some people, especially young single people such as college
students probably use the cell phone as their sole phone. Intervener Witness Joel Sales said as
much in describing the communication devices used by his son who attends college. But the issue
is more complex. Does that cell phone replace a land line, or is it in addition to a land line?
This is why evidence of why Qwest lost 14 000 land lines is so important. These land lines
might have been lost because:
1. The economy has slowed down and people are reducing costs.
2. Some small businesses may have closed (Souba Tr p 112) .
3. People are dissatisfied with Qwest billing and service practices. Intervenors note that
Mr. Souba acknowledged these practices were so serious that the Idaho Attorney General had to
step in and a payment of money by Qwest was made to settle its problems. (Souba Tr 128 L 17-
22). Both Mrs.Herrick (Herrick Tr 585 L 12-14) and Mr.Neal (Neal Tr 553 L 11-13) considered
using alternative services after their billing disputes with Qwest.
4. Switching one of the home lines to DSL, and there was testimony that 1400 ofthe
000 lines may be in this category. (Souba Tr 145 L 14-19).
Qwest could conduct brief land line termination interviews which would probably be
helpful to the company and the issues before this Commission. Again, though, it is Qwests job to
prove why 14 000 land lines have been lost.
Qwest also presented Dr.Lincolns survey but the same basic concerns apply to the
residential part of the survey as apply to the small business part of the survey.
First, the 50% of respondents who said they "could rely" were not asked any followup
question to ascertain the basis or degree to which they could rely. (Lincoln Tr P317 L 17-19).
INTERVENER POST HEARING MEMORANDUM Page 12
For example they could have been asked about extension phones in their home, fax machines, the
cost of a phone book listing, number portability, or the threshold at which they "would"rely on
cell phone technology. The 12% of "data transmission" respondents were not asked a followup
question as to whether there might be some other reason why they can t use cell phone technology.
(Lincoln Tr 323 L 19-23).
For these reasons and others, such as outlined in the Objections to the Testimony of David
Teitzel and elsewhere in this brief, Intervenors do not believe Qwest has met its burden of proof
ARBITRA TION OF BILLING/SALES DISPUTES
Because of the state of the evidence, it seems likely that Qwests Application will be denied.
Thus, the public interest conditions concerning deregulation won t be addressed and Interveners
request that the public interest include an arbitration requirement for all small bill and sales disputes
would probably be moot.
Interveners have presented evidence that there are serious customer relation problems for
the company. A significant part of this problem is based upon Qwests collection of dubious
charges for company s that are unknown and who gouge customers. Gary Neal details how he
was charged, without notice, $17.10 for a 4 minute collect call from a phone booth. (Neal Tr 552-
553) (Ex 203). Instead oftaking its customers side, Qwest collectors sided with a price gouging
long distance telephone carrier called Zero Plus Dialing. Qwest should stand up for its customers
not unreasonable communications companies. Mr. Neal had no choice but to payor spend hours
trying to mediate and argue.
Qwest witness John Souba acknowledged Qwests problems with many customers for
whom the Idaho Attorney General sought relief And Sharon Herrick detailed her problems with
INTERVENER POST HEARING MEMORANDUM Page 13
Qwest billings. (Herrick Tr 585).
Qwest discussed "concessions" in some of its testimony and any future consideration of a
deregulation request should include this proposal in order to protect the public interest.
FAIR TAX TREATMENT FOR BOTH TECHNOLOGIES
Interveners believe the land line system should be preserved and that Qwest should recover
a reasonable profit from the system. There is no reason to treat the land line system differently
from the wireless system, and therefore taxes should be equally assessed. Otherwise, government
action will prefer one system over another and artificially support that preference.
Dated this 27th day of June, 2003
INTERVENER POST HEARING MEMORANDUM Page 14
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT ON THE 27th DAY OF JUNE, 2003 , I
SERVED THE FOREGOING PLEADING IN CASE NO QWE-02-25. BY MAILING
A COpy THEREOF, POSTAGE PREPAID, (UNLESS OTHERWISE INDICATED) TO
THE FOLLOWING:
MARY S HOBSON
STOEL RIVES LLP
SUITE 1900
101 S CAPITOL BLVD
BOISE, ID 83702
ADAM L SHERR
QWEST
1600 7th AVE, ROOM 3206
SEATTLE, WA 98191
CONLEY WARD
GIVENS PURSLEY LLP
277 N 6th ST, SUITE 200
PO BOX 2720
BOISE, ID 83702-2720
CLAY R STURGIS
MOSS ADAMS LLP
601 W RIVERSIDE, SUITE 1800
SPOKANE, W A 99201-0663
DEAN J MILLER
McDEVITT & MILLER LLP
PO BOX 2564
BOISE, ID 83701
BRIAN THOMAS
TIME WARNER TELECOM
223 T AYLOR AVE NORTH
SEATTLE, W A 98109
(pERSONAL SERVICE)
WELDON STUTZMAN
DEPUTY ATTORNEY GENERAL
IPUC
PO BOX 83720
BOISE, ID 83720-0074
DEAN RANDALL
VERIZON NORTHWEST INC.
17933 NW EVERGREEN PKWY
BEAVERTON, OR 97006-7438
MARLIN D ARD
WILLARD L FORSYTH
HERSHNER, HUNTER, ET AL
180 E 11th AVE PO BOX 1475
EUGENE, OR 97440-1475
CERTIFICATE OF SERVICE