20030303_399.pdf

DECISION MEMORANDUM
TO:CO MMISSI 0 NER KJELLAND ER
CO MMISSI 0 NER SMITH
CO MMISSI 0 NER HANSEN
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL
FROM:LISA NORDSTROM
DATE:FEBRUARY 28, 2003
RE:IN THE MATTER OF THE APPLICATION OF EXCEL
TELECOMMUNICATIONS, INc. FOR A CERTIFICATE OF PUBLIC
CONVENIENCE AND NECESSITY TO PROVIDE LOCAL EXCHANGE
TELECOMMUNICATIONS SERVICES. CASE NO. EXC-02-
On January 28, 2002, Excel Telecommunications, Inc. (Excel, Company) filed an
Application for a Certificate of Public Convenience and Necessity to provide competitive local
exchange service within the State ofIdaho. Excel proposed to initially provide residential customers
a full range of telecommunications and data services including local service, private line, data
transmission service and Internet service via UNE-Ps and resold services. If future economic
conditions permit, it may offer services to business customers as well. Excel's Application stated
that the Company is not requesting authority to provide service in areas that fall within the scope of
rural exemptions.
In the Notice of Application and Modified Procedure issued February 4, 2003 , the
Commission solicited comments regarding Excel's Application. Order No. 29190. No comments
were received other than those submitted by Commission Staff.
STAFF COMMENTS
Case No. EXC- T -97 -Excel previously applied for a Certificate of Public Convenience
and Necessity in Case No. EXC-97-1. Staff opposed that 1997 Application based on the
Company s record of operations as an interexchange carrier and numerous complaints from Excel'
customers regarding billing problems, rates and policies, carrier selection and slamming, and other
miscellaneous issues. Staff noted that Excel had been sanctioned by the Federal Communications
DECISION MEMORANDUM
Commission (FCC) for slamming and forging letters of agency. The Commission also received
comments expressing support for Excel's Application. Excel subsequently requested permission to
withdraw its Application without prejudice until its business plans permitted it to concentrate on
obtaining certification and providing high quality cost-efficient services in Idaho. The Commission
granted this request on October 17 , 1997 and dismissed the case without prejudice. Order No.
27159.
Recent Developments.Since 1997 , the number of complaints against Excel from Idaho
customers has significantly decreased. However, Staff was concerned when the Commission
received five complaints in a five-month period in 2002. Of these complaints, four customers
complained of slamming but only two provided Staff with enough information to pursue
investigations. In both cases, Excel was found to have slammed its customers. In one instance
Excel reported that the customer s service was changed by a relative who was not a resident of the
household but presented herself as an authorized decision maker. Excel reimbursed the customer for
all charges incurred in this process. In the second instance, Excel failed to respond to the
Commission s correspondence. According to the Commission s Customer Relations Rules, failure
to respond to a slamming allegation within 21 days will result in a determination by Staff that the
customer was slammed. IDAP A 31.41.01.703.02. Excel apologized and reimbursed the customer
for the charges incurred and subsequently fired the representative who failed to respond.
In response to Staffs concerns, Excel explained to Staff in February 2003 that its
business profile has undergone significant changes since 1997. This privately-held corporation sold
more than $750 million of communications services in 2002 and was purchased by VarTec in April
2002. Excel has taken the following steps to address and correct the concerns Staff expressed in
1997:
(1 ) Excel utilizes a nationwide third party verification (TPV) system to confirm
residential primary interexchange carrier changes;
(2) The Company has developed a specialized group within the Customer
Service Department whose sole function is to investigate and resolve
slamming allegations and other related issues. This group ensures that
consumers' concerns are fully addressed and any appropriate credits and
adjustments are made;
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(3)Excel's Independent Representatives (IRs) are encouraged to build ongoing
relationships with their customers to ensure continued satisfaction with
Excel's products and services; and
(4)Excel has adopted a strict "zero tolerance policy" and business code of
ethics. Excel will promptly terminate its relationship with any IR who is
found to have engaged in illegal or improper conduct, specifically with
regards to slamming.
The Company stated in a letter to Staff dated February 21 , 2002
, "
Excel has the utmost
commitment to ensuring that the potential for slams is avoided. . . . The Company believes that it has
proven itself as a quality provider of interexchange telecommunications services and eager to expand
its service offerings to the competitive residential local telephone market." In recent years several
state Commissions and the FCC have noted the extraordinary steps that Excel has implemented to
advance the accuracy ofthe customer order provisioning process and to devise complaint resolution
safeguards effectively setting an industry standard.
Excel submitted unaudited Income Statements, Balance Sheets and Cash Flow statements
for 1999, 2000 and eleven months of2001 with its Application. These documents reflect financial
events prior to VarTec ' s purchase of Excel and showed declining revenue accompanied by reduced
expenses. The Company s total profit margin was up slightly in 2001 from 2000, and its net
operating income was slightly less negative in 2001 than in 2000. In response to Staffs concerns
Excel submitted an Affidavit from VarTec dated July 25 , 2002 wherein VarTec guarantees the
financial support of Excel.
The Company s illustrative tariff includes a deposit requirement that reflects the
Commission rules. Excel has agreed to correct a few points in its final tariff to address Staff s other
concerns. The Company further agrees to comply with all applicable Commission rules but requests
the Commission waive the requirement for an escrow account to cover customer deposits due to
VarTec s written guarantee of financial support.
Staff Recommendation.Excel has submitted the necessary documents and met the
Commission s requirements for a Certificate of Public Convenience and Necessity. While its
customer relations history has not been stellar, Staff noted that Excel has made considerable
improvements in recent years and promises to continue to improve. Although Excel's financial
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history would normally lead Staff to recommend some form of surety, VarTec s affidavit
guaranteeing financial support of Excel appeared to relieve this concern.
Staff recommended that the Commission grant Excel's Application for a Certificate of
Public Convenience and Necessary to provide statewide service in Idaho (excluding service in areas
that fall within the scope of rural exemptions). Staff also recommended the Commission accept
VarTec s guarantee of financial support in lieu ofa surety bond for Excel.
COMMISSION DECISION
Does the Commission wish to approve Excel's Application for a Certificate of Public
Convenience and Necessity and waive the requirement for an escrow account to cover customer
deposits?
Lisa Nordstr
M: EXCTO20 1 In
DECISION MEMORANDUM