28533.doc

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IMBRIS, INC.,

COMPLAINANT,

v.

GTE NORTHWEST INCORPORATED (now doing business as Verizon Northwest Inc.),

RESPONDENT.
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CASE NO. VZN-T-00-2

ORDER NO. 28533

On or about July 25, 2000, Imbris filed two “formal” complaints against GTE Northwest (now known as Verizon Northwest.). In the first complaint, Imbris claims that Verizon was imposing unreasonable restrictions on the transfer or supercedure of accounts from an existing customer (C-Systems) to a new customer (Imbris). In the second complaint, Imbris asserts that Verizon is discriminating against it by seeking customer deposits before installing new circuits that Imbris has ordered.
Initially this matter was processed by the Commission Staff under the Commission’s informal complaint procedures (IDAPA 31.01.01.021-.026). In the informal process, Verizon disputed the allegations made by Imbris. Following the Staff’s attempt to informally resolve the dispute, Imbris exercised its right to have the Commission formally consider the complaints pursuant to Rule 24, IDAPA 31.01.01.024. Based upon our review of the complaints, we affirm the Staff’s resolution of the first complaint and dismiss the second complaint without prejudice.
BACKGROUND
Imbris is an Internet service provider (ISP) serving much of northern Idaho. Imbris asserted that it was in the process of acquiring an existing ISP business previously owned by C-Systems. C-Systems was a business customer of Verizon. Rather than order all new facilities from Verizon, Imbris wanted to utilize many of the facilities and services that Verizon currently provided to C-Systems. By acquiring these services, Imbris would normally avoid having to pay new installation charges, would not experience any interruption in service, and would be allowed to keep C-Systems’ same telephone numbers. This transfer process is commonly called “supercedure.” Before a new customer may supercede the facilities and telephone number of an existing customer, Verizon’s tariffs permit the Company to collect all outstanding account balances prior to superceding the accounts and facilities.
At the time of the Imbris and C-Systems transaction, several of the C-Systems accounts were in arrears. Some of these accounts had built up large balances because GTE had failed to timely bill C-Systems for services. In accordance with the Commission’s Telephone Customer Relations Rules (IDAPA 31.41.01.203.03), C-Systems was given the same amount of time to pay its past due amount as Verizon failed to bill C-Systems.
In its efforts to take over C-Systems’ operations, Imbris superceded various accounts that were current or that only had small past-due balances. For those service accounts which had large past-due balances, Imbris decided to order new service or facilities thereby avoiding the past due charges. Although Verizon accepted the new orders for “replacement” services, facilities were not immediately provided to Imbris. At the same time, GTE began to disconnect accounts which were not transferred or superceded to Imbris. Because the new facilities were not yet provided and because Verizon was about to disconnect the non-superceded accounts, Imbris claims that it was “forced” to supercede several accounts and pay C-Systems’ outstanding balances in order to avoid service disruptions to its ISP customers. In other cases, Imbris claims that it was forced to pay other outstanding balances to restore Internet services to Netlink customers.
In June 2000, Verizon informed Imbris that it would require deposits on all pending and future orders for new service. Imbris alleges that when some of these service orders were placed in March and April 2000, Verizon did not disclose that it would require deposits on these accounts. Imbris maintains that if unused facilities would have been available or if Verizon would have timely converted the non-superceded C-Systems facilities for use by Imbris, then these service orders would have been provisioned well before the time that Verizon subsequently asked for deposits. Imbris insists that it is unreasonable to retroactively seek deposits for new facilities and that it was discriminatory to require deposits that Verizon does not require of other companies.
When Verizon began imposing deposit requirements for the new facilities, Imbris states that acquiring new facilities became “too expensive” given the need to pay both the installation charges and service deposits. Because of this “squeeze,” Imbris then applied to supercede these circuit accounts to avoid service disruption to its ISP customers due to the lack of facilities. In response, Verizon initially claimed that it could not process these “new” supercedure requests because the individual that signed the supercedure forms on behalf of C-Systems is no longer working for C-Systems but is now an employee of Imbris. Imbris countered that the supercedure forms were signed prior to the employee leaving C-Systems and pointed out that the Verizon supercedure form does not require a date.
In addition, Verizon claims that Imbris is essentially a sham company and is simply C-Systems under a new name. Verizon asserts that Imbris is utilizing the same offices, the same employees and is using the same operational name of “Netlink” for its ISP operations. In essence, Verizon insists that Imbris is attempting to acquire the assets (customer base and Verizon facilities) while at the same time avoiding substantial past-due charges that C-Systems owes to Verizon.
Imbris disputes this assertion and maintains it is a different company with new owners and management. Although it admits to hiring many former C-Systems employees, it claims that this is a legitimate and proper business decision given the expertise of the employees.
STAFF RECOMMENDATION
Supercedure and Payment Arrangements. In attempting to informally resolve Imbris’ first complaint, the Staff recommended that Imbris should be afforded the same opportunity to pay past-due accounts as C-Systems would be afforded. In other words, for superceded accounts with past-due amounts resulting from Verizon’s late billing, Imbris should be allowed to make reasonable arrangements to pay these account balances. If Imbris fails to meet the terms of the payment arrangements or fails to pay its monthly bills for service, Verizon could initiate termination procedures in accordance with the Telephone Customer Relations Rules, IDAPA 31.41.01.302-310.
For those more recent accounts that Imbris now wants to supercede but Verizon disputes the date that the supercedure forms were signed, Staff suggested that Verizon accept an affidavit from the employee stating that he was in fact employed by C-Systems at the time he agreed to relinquish the C-Systems accounts to Imbris. Staff suggested that the affidavit be executed within 7 days.
Deposits. Turning to the second issue, Staff determined that Verizon may generally request a deposit for new service if the customer or applicant is likely to be a credit risk. IDAPA 31.41.01.101. The Commission does not have a specific deposit rule for ISP customers. However, Customer Relations Rule 110 generally allows companies to collect “reasonable” deposits.
Although Verizon may generally require deposits for new service, the timing of the deposit requests in this case is problematic. The Staff did note there was not a Customer Rule that addressed the imposition of deposits retroactively but Staff further stated that other companies had imposed deposit requirements after an order has been placed. Staff concluded that the deposit complaint warranted further investigation. The Commission took this matter up at its July 31, 2000 Decision Meeting with representatives of both parties present.
DISCUSSION AND FINDINGS
1. Supercedure. First, the Commission agrees with the Staff’s recommended resolution of this complaint that an affidavit from the former C-Systems employee regarding when he signed the supercedure forms should be sufficient to support the outstanding supercedure requests. Addressing the issue of supercedure, we find that it is appropriate and have in fact, previously approved Verizon tariffs allowing Verizon to require that the past due accounts be either paid in full or that satisfactory payment arrangements are in place before transferring or superceding an account from an existing customer to a new customer. Without specifically addressing Verizon’s allegation that the Imbris and C-Systems transaction is a sham, we note that it is common practice in the industry to prohibit supercedure unless all accounts are current.
The underlying basis for this supercedure policy is that the assignment of facilities is the responsibility of the local exchange company. The transfer of facilities from one customer to another should not occur without the expressed permission of the local exchange company. This policy also minimizes the creation of uncollectable accounts which revenue deficiency generally falls upon the general body of ratepayers. In this case, we believe that Verizon may reasonably require that past-due accounts be satisfied before transferring facilities.
However, we also find it is reasonable for those accounts which have accrued large balances due to the untimely billing of Verizon, for Imbris to be afforded the same opportunity to repay these balances as would have been provided to C-Systems. Telephone Customer Relations Rule 201 requires that local exchange companies bill their customers regularly. Due to Verizon’s administrative oversight, it did not bill several C-Systems accounts for a considerable length of time. As has been our practice, customers have typically been afforded an opportunity to pay over time when they have not been charged or been under charged by the utility. See Order No. 28329 (Case No. IPC-E-00-3). Consequently, Imbris should be afforded suitable payment arrangements on any outstanding balances for the superceded accounts. If Imbris fails to meet the payment arrangements or to pay for the current charges, then Verizon should be allowed to terminate service as outlined in our Telephone Customer Relations Rules 301-307, IDAPA 31.41.01.301-.307.
2. Deposits. Turning next to the issue of requiring deposits, Imbris objected to the imposition of retroactive deposits and alleged that Verizon does not seek deposits of similar companies. We note that our Telephone Customer Relations Rules allow local exchange companies to impose deposits for customers who potentially pose credit risks. All deposits must be “reasonable.” While our Rules do not specifically address retroactive deposits, the Rules do not restrict when deposits may be requested. Staff asserted that other telecommunications companies have imposed deposit requirements after an order for service has been received. Staff also recognized that deposits are often required for new customers that order “relatively expensive services.” Rule 101.02 allows local exchange companies to require a small business customer to provide deposits if the customer “has not had previous service with [the] telephone company.” IDAPA 31.41.01.101.02. As a new customer, it is reasonable for GTE to request deposits from Imbris. Pursuant to Rule 107 these deposits may be returned with interest after 12 months of good credit.
We conclude that it is reasonable to require deposits in this case and that Imbris has not been the subject of discrimination. Consequently, we find that it is appropriate to dismiss Imbris’ second complaint without prejudice. The Commission has jurisdiction to investigate this complaint under Idaho Code §§ 61-503, 61-507, and 62-616.
O R D E R
IT IS THEREFORE ORDERED that Imbris’ first complaint against Verizon Northwest is granted and the second complaint is dismissed without prejudice.
IT IS FURTHER ORDERED that Verizon accept an affidavit from the former C-Systems employee regarding the date(s) the supercedure forms were executed.
IT IS FURTHER ORDERED that Verizon make suitable payment arrangements for Imbris to pay outstanding balances on those accounts which are superceded. Verizon may initiate termination procedures if Imbris fails to meet the terms of the payment arrangements or fails to pay for its monthly service.
IT IS FURTHER ORDERED that Verizon may collect reasonable deposits upon Imbris’ orders for new facilities.
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. VZNT002 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. VZNT002. 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 October 2000.

DENNIS S. HANSEN, PRESIDENT

MARSHA H. SMITH, COMMISSIONER

PAUL KJELLANDER, COMMISSIONER

ATTEST:

Jean D. Jewell
Commission Secretary

bls/O:vznt002_dh
In Case No. CSY-T-99-1/GTE-T-99-2, C-Systems requested that the Commission arbitrate an interconnection dispute with GTE. See Order No. 28250. C-Systems d/b/a Netlink also was issued Certificate No. 349 to provide basic local exchange service in Idaho.

Facilities such as T-3 trunks, ISDN lines, etc.

For example, in one account GTE failed to bill C-Systems for 18 months which resulted in a past due amount of approximately $130,000. Under Telephone Customer Relations Rule 203, C-Systems was allowed to remit this past due amount over a period of time equal to the delayed billing. In other words, C-Systems owed $7,222.22 per month ($130,000 ( 18 mos.) in addition to its regularly incurred monthly charges.

ORDER NO. 28533 1

Office of the Secretary
Service Date
October 11, 2000