2000330_dh.doc

DECISION MEMORANDUM

TO: COMMISSIONER HANSEN
COMMISSIONER SMITH
COMMISSIONER KJELLANDER
MYRNA WALTERS
RON LAW
TONYA CLARK
STEPHANIE MILLER
DAVE SCHUNKE
BIRDELLE BROWN
CHRIS MASCHMANN
ANGIE VELASQUEZ
ALYSON ANDERSON
WORKING FILE

FROM:

DATE: MARCH 29, 2000

RE: ORDER TO SHOW CAUSE WHY DOLPHIN USA, LD NETWORK
SERVICES, NORTH AMERICAN COMMUNICATION GROUP, AND PARTNERS IN COMMUNICATION SHOULD NOT BE FOUND TO HAVE FAILED TO REPORT THEIR GROSS INTRASTATE REVENUES FOR 1998 AND PAY THEIR 1999 REGULATORY FEES; CASE NO. GNR-U-00-2

On January 28, 2000, the Commission issued Order No. 28274 directing Dolphin USA, LD Network Services, North American Communication Group, and Partners in Communication to show cause why they failed to report their 1998 gross intrastate revenues and failed to pay their 1999 regulatory fees as required by Idaho Code §§ 61-1003, 61-1005 and 62-611. In addition, the Order also alleged that Dolphin USA and North American Communication also failed to pay their regulatory fees for 1998. The companies were ordered to appear before the Commission’s Hearing Officer on February 22, 2000. The Commission ordered the companies to show cause why it should not: (1) seek civil penalties of $2,000 per day for each day after May 15, 1999, that the companies failed to pay their 1999 regulatory fees; (2) order other Idaho LECs not to carry the four companies’ traffic; and (3) cancel their tariffs/price lists until such time as the delinquent regulatory fees have been paid. Order No. 28274 at 3-4.
BACKGROUND
The Commission’s Regulatory Fee
Idaho Code §§ 61-1001 and 62-611 provide that each public utility subject to the Commission’s Title 61 or Title 62 jurisdiction shall pay to the Commission a special regulatory fee “to defray the amount to be expended by the commission for expenses in supervising and regulating the public utilities.” On or before April 1st of each year, each public utility is required to report its gross operating revenue from intrastate business in Idaho for the preceding calendar year. Idaho Code § 61-1003. Based upon all the utilities’ gross intrastate revenues and the Commission’s annual appropriation from the Legislature, the Commission then calculates the proportional assessment to be paid by each utility. Thereafter, each utility pays its regulatory assessment to the Commission in two equal semi-annual installments on or before May 15th and November 15th of each year. Idaho Code § 61-1005. “Upon failure, refusal or neglect of any public utility or railroad corporation to pay such fee the attorney general shall commence an action in the name of the state to collect the same.” Id. This section further provides that installments not paid in a timely fashion shall bear interest at the rate of 6% until such time as the full amount of the installment or annual fee is paid. Idaho Code § 61-1004(3) sets the minimum annual regulatory fee at $50.00.
In this case, the Commission Staff alleged that the four Title 62 companies failed to report their gross intrastate revenues for calendar year 1998 and failed to pay their 1999 regulatory fees. Order No. 28274 at 2-3. In addition, the Staff also alleged that Dolphin USA and North Communications Group failed to pay their regulatory fees for 1998. Tr. at 21. The Staff presented the prefile testimony of its Financial Support Technician, Christine Maschmann. She testified concerning the assessment procedures and the Staff’s efforts to obtain the 1998 gross revenues and to collect the regulatory assessments.
THE SHOW CAUSE HEARING
A. Designating Persons to Receive Service and Mail Issued
by the Commission Secretary

Ms. Maschmann first testified that Idaho Code § 62-619 provides that the Commission’s Rules of Procedure apply to the processing of Title 62 matters. She stated that the Commission’s Procedural Rule 16 provides that the Commission Secretary shall serve all Orders by mail. IDAPA 31.01.01.16.01. Tr. at 11. This Rule requires that all “utilities must maintain on file with the Commission Secretary a designation of such a person. Summonses and complaints directed to regulated utilities . . . may be served by registered or certified mail.” Tr. at 11-12 citing IDAPA 31.01.01.16.02.
Staff witness Maschmann also testified that Title 62 Rule 202 requires that each Title 62 corporation provide the Commission with “address of the principal place of business of the telephone corporation, and, if there is a principal place of business in Idaho, the address of the principal place of business in Idaho; [and an] agent in Idaho for service to process by the Commission in the state of Idaho.” IDAPA 31.42.01.202.02(b) and (c). Tr. at 10-11. She also noted that Rule 202.03 provides that “Orders and other documents issued by the Commission may be served by mail on the agent for service of process listed pursuant to Rule 202.01.(c) of this Rule. This service constitutes due and timely notice to the telephone corporation, and no further service is necessary to bind the corporation.” Tr. at 11 citing IDAPA 31.42.01.202.03. Idaho Code § 61-615 allows complaints against utilities to be served by registered mail. All the Orders and correspondence sent to the four companies in this case were sent to the addresses on file with the Commission.
B. The Companies’ Failure to Report Their Gross Revenues
and the Staff’s Efforts to Collect the Regulatory Fees

1. 1998 Fees. Ms. Maschmann outlined the measures taken by the Staff to collect Dolphin and North American’s 1998 regulatory fees. She reported that on April 22, 1998, the Commission Staff forwarded an assessment statement to the two companies advising them that their annual $50.00 regulatory fee of with $25.00 was due and payable no later than May 15, 1998. Exh. Nos. 7 (Sch. I), 9 (Sch. H). When the first installment of their regulatory fees were not received, the Commission’s attorney sent each company a letter (dated July 22, 1998) advising them that the 1998 first installment was not paid and that the company should forward a payment of $25.25. Exh. Nos. 7, 9 (Sch. J). Tr. at 24, 29. Again in October 1998 the two companies were sent a certified letter that the first installment has yet to be received. The letter advised each company that $25.57 was due then or the companies could pay their entire 1998 regulatory fees of $50.57 no later than October 30, 1998. Exh. Nos. 7, 9 (Sch. K’s); Tr. at 24, 29. Their 1998 fees were not paid. Id.
2. 1998 Revenues and 1999 Fees. On February 26, 1999, a letter was mailed to each of the four companies asking them to report their respective 1998 gross intrastate revenues on or before April 1, 1999. Exh. No. 7, 8, 9, 10 (Sch. A’s). The Companies did not respond to this letter nor did they otherwise report their 1998 gross operating revenues as required by Idaho Code §§ 61-1003 and 62-611. Tr. at 22, 25, 27, 30.
On April 23, 1999, each of the four companies was mailed a statement of their 1999 annual fee assessment. Exh. Nos. 7, 8, 9, 10 (Sch. B’s). This statement mentioned that the regulatory fee may be paid in two equal installments, the first due no later than May 15, 1999, and the second due no later than November 15, 1999. Tr. at 22, 25, 27, 30. Included with the fee statement was a separate letter notifying the Companies that they had failed to report their gross intrastate revenues. Exh. Nos. 7, 8, 9, 10 (Sch. C’s). In his separate letter, the Deputy Administrator, David Hattaway, stated that
on or before May 15, 1999, you must report your gross intrastate revenues and pay the Regulatory Fee. Should your reported gross intrastate revenues exceed $19,227, your regulatory fee will be greater than [the minimum fee amount of] $50. To calculate your correct assessment multiply the higher amount by .0026 to determine your adjusted fee.

Exh. Nos. 7, 8, 9, 10 (Sch. C’s) (emphasis original) Tr. at 22-23, 25, 27-28, 30.

When the May 1999 payments and the 1998 intrastate revenue reports were not received, the Commission’s attorney forwarded a letter on September 9, 1999, to Dolphin USA, LD Network Services, and Partners Communication advising them that the Commission had not received the May installment of the regulatory fee and that each company owed $25.50. Tr. at 23, 25-26, 31. In North American Communication’s case, the letter stated that the company owed $79.31 (for the 1998 fee and the first installment of 1999) or $104.31 (for both 1998 and the entire 1999 year). Exh. No. 9 (Sch. D). The September letter further stated that the first three companies “may remit the entire 1999 fee of $50.50 (including the calculated interest).” Exh. Nos. 7, 8, 9, 10 (Sch. D’s). Id. Each company was further advised that failure to remit this amount may result in legal action including the assessment of a civil penalty up to $2,000 each day that the violation continued. Id.
After receiving no responses to the September 9 letter, a subsequent letter (dated December 10, 1999) was sent by certified mail from the Commission’s Attorney advising each company that the Commission had not received the first or second installment payment of the 1999 regulatory fee. The December letter advised LD Network and Partners in Communication that their 1999 regulatory fees (plus interest) were [then] $51.03 and must be paid no later than December 23, 1999 to avoid legal action for failure to pay the regulatory fee. Exh. Nos. 8, 10 (Sch. E’s). The December letter advised Dolphin USA and North American that they each owed $105.06 that must be paid to avoid legal action. Exh. Nos. 7, 9 (Sch. E’s). In addition, each December letter included a “tear-off” reply section so that the companies could advise the Commission if they were no longer in business and could request that their tariffs/price lists be removed from the Commission’s files. Tr. at 23, 26, 28, 31.
Staff witness Maschmann testified that the returned certified mail receipts for the companies (except Partners) showed that the December letter was delivered to each company and receipted for. Tr. at 23, 26, 28; Exh. Nos. 7, 8, 9 (Sch. F’s). The mail receipts for Partners was never returned by the post office. Tr. at 31.
Ms. Maschmann next stated that each company was served a copy of Show Cause Order No. 28274 by certified mail. Tr. 24, 26-27, 29, 32. Exh. Nos. 7, 8, 9, 10 (Sch. G’s). The post office’s mail receipts show that the companies did receive copies of the Commission’s Show Cause Order. Id.
None of the four companies appeared at the Show Cause hearing. Tr. at 83. Ms. Maschmann recommended that the hearing officer enter a default against these companies if they failed to report their intrastate gross revenues, pay their regulatory fee, or appear at the Show Cause hearing. Tr. at 32-33. She further recommended that the Commission issue an Order finding that the companies are in default for failure to pay their regulatory fees and that the companies be ordered to cease operating in Idaho until they have come into compliance. In addition, she suggested that local exchange companies should be ordered to deny or prohibit the carriage of traffic for these companies. Finally, she recommended that if the companies failed to pay their delinquent regulatory fee, that their price lists be cancelled and returned. Id.
At the hearing, the Staff Attorney assured the hearing examiner that the Staff had cross-checked the addresses on file at the Commission with those addresses maintained by the Secretary of State for the registration of corporations. Tr. at 82. He also noted that the December 10 letters sent by certified mail were also served on the agent for service at addresses both maintained by the Commission and the Secretary of State. Id.

C. The Hearing Examiner’s Recommendations
Having reviewed the testimony filed by Staff witness Maschmann and her exhibits, the Hearing Examiner found that appropriate service had been attempted on all four companies and that service of the fee statements, collection letters, and the Show Cause Order were valid. Tr. at 83. He found that during the Show Cause hearing, no parties had appeared. Id. He also noted that it was appropriate to enter default judgments against Dolphin USA, LD Network Services, North American Communication Group, and Partners in Communication for failure to report their 1998 gross intrastate revenues and failure to pay their respective 1999 regulatory fees. Tr. at 84. He also found that Dolphin USA and North American Communication Group had failed to pay their respective 1998 regulatory fees. Id..
The Hearing Examiner recommended and the Staff agreed that between the time of the hearing and the Commission taking this matter up at its decision meeting, that the Staff should consider entering into a consent agreement with any of the four companies if they offered to pay their fees. Tr. at 78-79, 88, 89. As of the date that this decision memorandum was prepared, none of the four companies had contacted the Staff regarding payment of their 1999 regulatory fees.
Commission Decision
1. Does the Commission find that the assessment letters and collection letters were properly served upon the companies’ designees and upon the agent of service in accordance with the Commission’s Procedural Rules and its Title 62 Rules?
2. Given the failure of any party to appear at the Show Cause hearing, does the Commission believe that it is appropriate to enter a default judgment against these parties as provided for in Procedural Rule 301?
3. Does the Commission find that Dolphin USA and North American Communications Group failed to pay their regulatory fee for 1998?
4. Does the Commission find that these companies have failed to report their 1998 intrastate gross revenues and to pay their regulatory fee for 1999 pursuant to Idaho Code §§ 61-1001, 61-1003, and 62-611?
5. Does the Commission order these companies to cease operating in business and direct LECs and CLECs to not transmit any traffic for these companies?
6. Does the Commission wish to cancel these companies’ price lists and return them as cancelled for failure to pay the regulatory fees?
7. Does the Commission wish to take any other action?

vld/M:GNR-U-00-02_dh

DECISION MEMORANDUM 7