20050506Decision Memo.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
CO MMISSI 0 NER SMITH
COMMISSIONER HANSEN
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL
FROM:KIRA DALE PFISTERER
DATE:MAY 6, 2005
RE:CASE NO. WST-05-
APPLICATION OF WESTERN WIRELESS FOR ETC DESIGNATION
On February 17, 2005 WWC Holding Co., Inc. d/b/a CellularOnetID ("Western
\Vireless" or the Company) submitted an Application requesting that it be designated as a federal
eligible telecommunications carrier (ETC) in certain service areas in Idaho. ETC designation
would allow Western Wireless to receive federal universal service support.
While the Western Wireless Application was pending, the Federal Communications
Commission (FCC) adopted new rules governing ETC designation proceedings under the
jurisdiction of the FCC pursuant to 47 D.C. ~ 214(e)(6). In the Matter of the Federal-State
Joint Board on Universal Service CC Docket No. 96-45 March 17 2005 FCC Order
Although these rules are not binding on ETC designation proceedings before the state
. commissions, the FCC encourages the states to adopt them at least as minimum standards.
On April 1 , 2005, the Commission issued a Notice of Application, Notice of Modified
Procedure, and Order allowing for a 28-day comment period. See Order No. 29749. The
Commission s Order urged all parties submitting comments to address the new requirements in
the FCC Order. The Commission received timely comments from: (1) Western Wireless, (2) the
Colr..:.'11ission Staff (3) Citizens Telecommunications Company of Idaho dba Frontier
Communications of Idaho ("Frontier ); and (4) CenturyTel of the Gem State, Inc. and
CenturyTel of Idaho, Inc. ("CenturyTel"). In addition, the Idaho Telephone Association (ITA)
filed a related Motion to Dismiss on April 14, 2005. The Commission decided to deny the
Motion in part at a decision meeting on May 3 2005. This Memo outlines the comments on the
Application and FCC rules and describes the remaining issue set forth in ITA's Motion.
DECISION MEMORANDUM
I. BACKGROUND
The Commission has jurisdiction and authority to designate Western Wireless an
ETC pursuant to the Telecommunications Act of 1996 (the "Act") as set forth in 47 D.C. ~
214(e)(l)-(2) and 47 C.R. ~ 54.101. To be designated an ETC, the telecommunications
provider must: (1) be a "common carrier" as defined by 47 D.C. ~ 153(10); (2) offer
throughout its proposed service areas the services set forth in 47 C.R. ~ 54.101(a); and (3)
must advertise the availability of its universal service offering and the charges therefore using
media of general distribution. 47 D.C. 214(e)(1).
In addition, in those service areas that are already selved by an lnCUllibtilil lu~dl
exchange carrier (LEC), the Act provides that
, "
( u )pon request and consistent with the public
interest, convenience, and necessity, the State commission may, in the case of an area served by
a rural telephone company, and shall, in the case of all other areas, designate more than one
common carrier as an eligible telecommunications carrier." 47 D.C. ~ 214(e)(2). For those
service areas served by a rural telephone company, the Act further provides that "(b )efore
designating an additional eligible telecommunications carrier for an area served by a rural
telephone company, the State commission shall find the designation is in the public interest." Id.
The new FCC rules, addressed by all parties commenting on the Application, build on
the statutory framework outlined above and provide additional requirements relevant to both
initial ETC designation as well as annual reporting requirements. Pursuant to the new FCC
requirements, in order to be eligible for ETC status, the telecommunications provider must
demonstrate: (1) the commitment and ability to provide supported services; (2) the ability to
relllain functional in emergencies; (3) a commitrnent to COnSUll1er protection and 5clv'icc; (4)
local usage plan comparable to that of the incumbent LEC; and (5) recognition that the carrier
may someday be asked to provide equal access. To meet the above standards, the FCC rules
require various commitments and reporting requirements, plus submission of a five-year network
improvement plan demonstrating how universal support funds will be used to improve coverage
signal strength, or capacity that would not occur absent receipt of high-cost support.
1 The supported services are: (1) voice grade access to the public switched network; (2) local calling; (3) touch tone
signaling or its functional equivalent; (4) single-party service or its functional equivalent; (5) access to 911
emergency services where available; (6) access to operator services; (7) access to long-distance service; (8) access to
directory assistance; and (9) toll limitation service. 47 C.R. 9 54.101(a). In addition, ETCs are also required by
FCC Regulations 99 54.405 and 54.411 to offer qualifying low-income customers both "Lifeline and Link Up
programs as a condition precedent to receiving federal universal service support.
DECISION MEMORANDUM
II. COMMENTS
The following analysis considers the comments in two parts: first as they relate to
the \Vestern \Virclcss Application and second, as they relate to the nev~ FCC rilles outlir..~d in th~
FCC Order. All parties agree that the Western Wireless Application does not meet the new FCC
rules. Further, the parties agree that Western Wireless meets the basic service requirements for
ETC designation. The points of contention are: (1) whether granting Western Wireless ETC
status is in the public interest and (2) whether Western Wireless should be held to any or all
the new requirements in the FCC rules.
A. Comments on the Western Wireless Application
1. Western Wireless
vVestern Wireless argues that the Commission should grant the Application in its
entirety on Modified Procedure. Western Wireless seeks immediate ETC designation in the
identified Qwest, non-rural wire centers and in the Farmers Mutual Telephone Co. study area.
addition, Western Wireless seeks conditional ETC designation in 18 rural telephone company
wire centers located within four rural telephone company study areas.
'Xl estern \Vireless argues that its Application meets the public interest test set fertll i!l
the FCC'Virginia Cellular Order and adopted by this Commission in the ClearTalkfN"extel
decision. See Order No. 29541. Essentially, this standard entails a cost-benefit analysis
balancing the advantages of ETC designation against the drawbacks.
F or advantages Western Wireless first argues that ETC designation will promote
competition in Idaho to the benefit of consumers. According to Western Wireless ETC
designation will allow the Company greater opportunities to compete and expand network
facilities in Idaho, resulting in more choices for basic service and greater access to the advanced
serv ices provided on the Western Wireless network. Western Wireless notes that ETC
designation will bring choices not available from incumbent LECs, including the benefit of
mobility and expanded local calling areas, which Western Wireless argues are of particular
importance in rural areas. Further, the implementation of Phase 2 E911 will allow customers to
be located by emergency service providers via global positioning system ("GPS") technology.
Finally, \"1 estern \Vireless argues that ETC designation will provide greater co!!1petiti0!!
specifically in the Lifeline and Link Up programs.
DECISION MEMORAND.
Second, Western Wireless argues that it has demonstrated a commitment to provide
responsive customer service. Western Wireless has adopted and complies with the Cellular and
Telecommunications and Internet Association ("CTIA") Consumer Code for Wireless Service.
In addition, W estern Wireless explains that its current customer service policies are generally
consistent with the Commission s customer service rules applicable to landline carriers.
Third, Western Wireless argues that it has the ability to provide service throughout
the designated service areas.Western Wireless currently serves more than 85% of the
population in which it seeks designation and plans to build five new cell sites in 2005 , provided
that it obtains universal support. Moreover, Western Wireless states that it is committed to
implementing the six-step process for addressing requests for service set forth in the Virginia
Cellular Order.
In addition, Western Wireless states that it will make annual reports to the
Commission demonstrating how it has complied with the above commitments.Western
Wireless pledges that it will submit annual reports regarding (1) the number of complaints
received; (2) details regarding unfilled requests for service; and (3) details regarding completed
and anticipated network improvements in the designated areas.
Ultimately, Western Wireless argues that granting it ETC status is in the public
interest because there are no drawbacks to weigh against the identified benefits. Western
Wireless warns that the Commission should not presume that rural telephone companies will be
adversely impacted by the entry of a competitive ETC, and instead should consider the positive
effect competition might have on the services provided by rural LECs. In the Matter of Western
Wireless Corp. Petition for Designation as an Eligible Telecommunications Carrier in the State
of Wyoming, CC Docket No. 96-45 Memorandum Opinion and Order, DA 00-2896. In addition
the Company argues that its designation will not significantly impact the universal service fund.
Finally, because Western Wireless serves some of the rural study areas only in part, it
can be designated an ETC in these areas only if the Commission with the consent of the FCC
redefines the ETC service areas from the study area to the wire center. See 47 U.C. ~
54.207(b). Western Wireless argues that it meets the standards for redefinition for the 18 rural
telephone company wire centers identified in the Application. In addition, the Western Wireless
Comments add an analysis of the creamskimming issue for the designated areas requiring
DECISION MEMORANDUM
redefinition. According to Western Wireless, there is no risk of creamskimming that would
justify a denial of the redefinition request.
2. The Commission Staff
After reviewing the Western Wireless Application in light of the existing ETC
standards articulated most recently in the Commission s ClearTalk/Nextel decision, Staff
recommends that the Commission grant Western Wireless immediate ETC designation in the
non-rural areas identified in the Application but believes more information is necessary to
process the Application as it applies to rural areas. However, before conducting a lengthy
analysis of the Application as it applies to these rural areas, Staff decided to wait until the
Commission determined the issue of what standards to apply. That way, Western Wireless may
amend or resubmit its Application in a single effort.
Staff agrees that Western Wireless has demonstrated that it offers all of the required
services and functionalities. However, Staff does not have enough information to (1) conduct an
appropriate public interest determination and (2) analyze whether it is appropriate to redefine the
rural service areas at the wire center level. At a minimum, Staff would like to see maps and
other information demonstrating the current network coverage area and the coverage area that
would result from the build-outs Western Wireless has planned in the event it is granted ETC
designation and receives federal universal service support.Without this information, Staff
cannot conclude that granting Western Wireless ETC designation is in the public interest.
3. Frontier
Frontier argues that Western Wireless has not met the public interest test and has
failed to demonstrate that the benefits of ETC designation outweigh the costs. Frontier questions
what benefits can be attributed to granting Western Wireless ETC designation, noting that the
value of increased competition, by itself, is unlikely to satisfy the public interest test.
addition, Frontier states that Western Wireless has not made any commitments about what rates
it will charge or how its prices might be lowered as a result of the universal service support.
Further, despite Western Wireless' statements of intent , the Company has not truly committed to
increasing investments in rural Idaho.
While Frontier sees no benefit to ETC designation ' it identifies at least one cost
attributed to ETC designation and that is the direct financial burden on the federal universal
DECISION MEMORANDUM
service fund. Therefore, on balance, Frontier suggests that ETC designation is not in the public
interest.
4. Cen tury Tel
CenturyTel submitted comments specific to the new FCC rules, encouraging the
Commission to adopt these rules. CenturyTel also supported ITA's Motion to Dismiss but
otherwise did not comment on the substance of the Western Wireless Application.
B. Comments Specific to the FCC Rules
The majority of the comments received are in favor of the Commission adopting the
new FCC guidelines in its consideration of ETC designations, including the Application of
Western Wireless. Nonetheless Western Wireless is strongly opposed to applying the new
standards to its Application, which was filed before the FCC Order was issued. Western
Wireless suggests that the Commission could adopt the FCC's standards, or similar standards , in
a rulemaking proceeding; however, any requirements would be prospective and shouid not be
applied when considering this Application.
1. Western Wireless
Western Wireless admits that the filing does not meet the new standards, which were
not in place when the Application was filed but argues that the new standards should not be used
to deny the Application. In the alternative, Western Wireless argues that its Application is
generally consistent with the new FCC rules, and seems to suggest that it would be willing to
comply with at least some of the new requirements. Specifically, Western Wireless discusses the
five-year service improvement plan and annual reports regarding such a plan. Western Wireless
argues that a detailed filing covering two years of planned improvements would be more useful
to the Commission, because telecommunications carriers generally do not have definitive plans
further than two years in advance; nonetheless, the Company offers to provide a five-year service
plan provided that the Commission determines such a requirement is necessary.
Ultimately, Western Wireless ' central argument is that the FCC iules l,;annUL dull
should not apply to its Application. Support for this argument is found in the Company s April
2005 response to ITA's Motion to Dismiss.
2. Staff
Staff supports the Commission adopting the FCC rules and applYing them to the
Western Wireless Application. However, Staff notes that the FCC suggested that there are areas
DECISION MEMORANDUM
within the rules that allow for state-specific determinations. In light of the room for
interpretation, Staff recommends that the Commission put the new requirements set forth in the
FCC Order out for public comment with a 28-day comment period before ultimately deciding
what requirements to adopt.
3. Frontier
Frontier argues that the Commission, as part of its ETC designation analysis, should
require that Western Wireless meet all of the conditions recommended in the FCC Order.
Further because the Western Wireless Application does not meet these standards, Frontier
supports ITA's Motion to Dismiss.
Specifically, Frontier argues that Western Wireless (1) did not submit a five-year
network improvement plan pursuant to 47 C.R. ~ 54.202(1)(B); (2) failed to demonstrate the
ability to remain functional in emergency situations pursuant to 47 C.R. ~ 54.202(2); (3) failed
to show how its local usage plan is comparable to the incumbent LECs in the same service areas
pursuant to 47 C.R. ~ 54.202(4); and (4) neglected to acknowledge its potential obligation
pursuant to 47 C.R. ~ 54.202(1)(5) to provide equal access if all other ETCs in a designated
area relinquish their designations. In addition, Frontier notes that the additional requirements
described in the FCC Order and rules are minimum standards, and the states can implement
additional standards as necessary to ensure that ETC petitions in rural areas are in the public
interest.
4. CenturyTel
CenturyTel supports the new requirements in the FCC rules, as well as ITA's Motion
to Dismiss. However, CenturyTel encourages the Commission to adopt additional more
rigorous requirements above and beyond the minimum eligibility requirements described in the
FCC Order.
CenturyTel argues that the Commission should at a mInImum adopt the FCC
guidelines. CenturyTel argues that the new requirements are necessary in order to ensure that
only qualified ETC designations are granted. According to CenturyTel, when only qualified
carriers, capable and committed to providing universal service, receive funds, the long-term
sustainability of the fund is improved and the ETC will be able and willing to serve all customers
in a designated service area. CenturyTel also notes that if all the state commissions adopt the
federal guidelines, it would allow for a more consistent and predictable application process
DECISION MEMORANDUM
among the states. Further, because state decisions have national implications, clear national
eligibility and certification standards are necessary to protect the long-term health of the fund
and assure rural consumers that they will have access to high-quality, affordable local telephone
service. The national standards also encourage ETCs to plan their long-term business and
investment strategies and protect against inferior service offerings.
CenturyTel also emphasizes that the FCC noted certain rules allowed for state-
specific determinations. Specifically, the FCC suggested that the state commissions could adopt
a minimum local usage requirement; impose additional consumer protection and quality
requirements; and identify additional, geographically-specific factors relevant to required
emergency functionality. In addition to these FCC suggestions, CenturyTel proposes three
additional requirements: (1) competitive ETCs should serve the incumbent LECs entire study
area or receive support based on the incumbent LECs costs only for the area that the competitive
ETC seeks to serve; (2) competitive ETCs should be required to assume carrier of last resort
obligations; and (3) competitive ETCs should demonstrate adequate financial resources.
CenturyTel also comments on the problems with the current ETC designation
process, which CenturyTel argues, allows competitive ETCs to obtain federal universal support
based on the lowest possible standards of local exchange service with no clear benefit to
consumers.Further, while the competitive ETCs do not undertake the same service
commitments as incumbent LECs, they receive the same support. In contrast, fully regulated
incumbent LECs are required to provide high-quality local exchange service and to serve as the
carrier of last resort. In most rural areas, the incumbent LEC' s ability to provide such support is
dependent upon universal service funding. By allowing the competitive ETCs to receive
additional funding, CenturyTel argues, the funds are not being used as intended by the Act and
the universal service fund is overburdened, without increased benefits for rural customers. The
end result harms the public and puts the incumbent LECs at a disadvantage.
Finally, CenturyTel identifies specific problems with wireless ETC designations in
rural areas. According to CenturyTel, wireless ETC designations in rural areas do not attract
competition to the markets. CenturyTel provides that the rural wire line providers are not
necessarily losing lines to wireless carriers, and rural customers are not gaining access to new
service offerings once the wireless carrier becomes an ETC.
DECISION MEMORANDUM
III. REMAINING ISSUES
ITA's Motion to Dismiss, filed April 14, 2005, presented the Commission with two
arguments. First, IT A argues that the Western Wireless Application should be dismissed for
failure to comply with the FCC requirements. This aspect of the Motion was denied at a decision
meeting on May 3 2005.
The second aspect of the IT Motion argued that Modified Procedure was not
appropriate for a Commission decision on the merits of the Western Wireless Application as it
applies to rural areas. ITA argued that a hearing is necessary to make the public interest
determination required before designating a competitive ETC in an area served by a rural
telephone company. The Commission decided to table discussion of that issue for a later time.
IV. COMMISSION DECISION
(1) Does the Commission wish to hold an evidentiary hearing on the Western
Wireless Application as recommended by IT A in its Motion to Dismiss?
(2) If the Commission determines that a hearing is not necessary, does the
Commission wish to approve or deny the Western Wireless Application?
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CISION MEMORANDUM