20230620Technical Hearing Opening Statement.pdf

Opening Statement
CAM-T-23-01
Cambridge Telephone Company's objection is based upon a mistake in over-reporting its
intrastate operating revenue for fiscal year 2022.As this Commission is aware,the statutory
authority for this special regulatory fee is Idaho Code Title 61,chapter 10.Section 61-1003
states that each public utility shall file with the commission a return verified by an officer
showing such utility's "gross operating revenues from its intrastate utility business in Idaho."
The Company's "Gross Intrastate operating Revenues Statement"was provided on a one-page
form verified by an officer of the Company ("Certification").The one-page form was filed along
with the Company's Annual Report of Small Telephone Companies to the Idaho Public Utilities
Commission ("Report").
The Annual Report sets forth all gross operating revenues of the Company no matter where
received or from what sources.There is also a column for all gross operating revenues of the
Company from Idaho.This column excludes revenues received from operations in other states.
For instance,some small telephone companies in Idaho do business in Oregon,or Washington
or Nevada.The numbers included in the Idaho column in Idaho is not where the Companies
separate what constitutes revenues from interstate and non-regulated activities from revenues
from the Company's intrastate utility business,it is the column where the Company reports all
gross revenue received in Idaho.The Certification provided by the Company is the only place
where the distinction between revenues from its Intrastate utility business versus interstate and
non-regulated business is made to the Commission.
In its initial filing of the Certification,the Company reported all gross income as intrastate
revenue,failing to remove from the Certification those revenues generated from interstate and
non-regulated activities.In the Company's objection,the Company removed the revenues
generated from interstate and non-regulated activities to arrive at the new calculation of
revenues generated from its infrastate utility business in Idaho.While the numbers reported in
the Annual Report are used in determining which revenue categories will ultimately be included
in Intrastate revenues,the Annual Report does not provide for separating those revenues.
Company believes that Commission Staff,in its affidavit confuses the revenues reported in the
annual report with the revenues considered as part of the Company's intrastate utility business.
Commission staff affidavit states that Staff calculated Company's GIOR as $4,962,101.66 -
which is the entirety of Company's reported gross revenues (Paragraph 9 of Affidavit).Staff
goes on to recommend a separation study to separate interstate versus intrastate gross
operating revenue (Paragraph 11 of Affidavit).If Staff recommends assessment based on total
gross revenues as stated in Paragraph 9,then there would be no reason for a separation study.
If Staff believes that there are revenues of the Company that are considered interstate (and thus
not subject to assessment)then Staff's calculation cannot be correct.
Staff's primary argument is based on a mistaken interpretation of Commission Order 28760.In
that Order,the Commission defined "gross income"for purposes of Public Utilities Law in the
same manner "gross income"is defined under the Idaho code governing taxation,which in turn
refers to the Internal Revenue Code.In essence,"gross income"is "all income from whatever
sources derived."(Order 28760 at page 10).Staff then goes on to use the definition of "gross
income"as equivalent to Gross Intrastate Operating Income (Paragraph 13 of Affidavit),and
that the Gross Revenue reported by the Company should be the basis of the assessment.In
Paragraph 17,you can see that Staff confuses the annual report of gross operating revenues
with Gross intrastate operating reveriues.Staff repeatedly refers to the reports as showing
Company's Gross intrastate operating revenues filed on various dates.Company was not
reporting Gross intrastate operating revenues -it was reporting gross revenues.eOrder 28760
did not equate "gross incomelgross revenue"with Gross Intrastate Operating Income.In fact,in
that case,the Commission did not assess the company involved on the full amount of the
Company's gross income.Company dos not take issue with the definition of Gross
Incomelgross revenue as stated in the Order,but for purposes of the Special Regulatory Fee,
that is not the end of the analysis.Staff fails to allow the analysis of what portion of gross
income was derived from the Company's intrastate utility business versus interstate and non-
regulated income.Not all income generated in Idaho is generated from intrastate business.
Staff asserts in Paragraphs 14,15 and 16 that Company erroneously reported intrastate
revenues in the various revenue categories established by Staff.Again,the Annual Report
where revenues are reported are not segregated into intrastate versus interstate revenues,they
are reported under various codes,but in the report,the revenues reported under those codes
are not separated into intrastate versus interstate revenues.However,certain of those
categories clearly state they are "interstate"revenues and thus can easily be placed into a
category of interstate revenue and thus should not be included in the basis for the assessment --
yet Staff included all revenues in all categories.Based upon an attachment located on the
Commission website,Titled Attachment 1 --Gross Intrastate Operating Revenues Definition
and Examples,the following are examples of revenues that can excluded from Gross Intrastate
Operating Revenues:Servicing or installing Customer Premises Equipment for a customer,
revenues from cellular services,NetworkAccess Services Revenues that come from interstate
operations and non-regulated income.[I can provide this to you for your reference if you
would like.I was not given Exhibit numbers for this hearing so I do not have it labeled as
an exhibit.]Neither Title 61 nor Title 62 regulate internet activities.Thus,those categories
which reflects revenue from broadband internet activity should not be included in gross
intrastate operating revenue.As to VOIP services,based on FCC guidelines and standard
accounting principles in this industry,64.9%of VOlP revenue is considered interstate,as some
portion runs over internet and some portion can be considered to have a basis in intrastate
activities.
I would like to address a few additional comments made in Staff's affidavit that put Company in
a bad light.Staff asserts that Company's calculations should not be considered in determining
the assessment because of inaccuracies or differences in amounts reported in different reports
over time.There is a simple explanation for such differences.Company's initial annual report
submitted on April 14 was based on Company's books and records prior to completion of the
Company's annual audit.When Company submitted a revised annual report on May 15 in
connection with the objection,the audit was completed and therefore the numbers are based on
the most current audited books and records.The other report mentioned by Staff was the IPUC
Form I which does in fact separate interstate versus intrastate regulatedrevenues.This was
filed by a firm engaged by Company for regulatory reporting and Company's Separation Study
prior to the April 1 filing deadline.Staff refers to this report in Paragraph 17 of the affidavit
where it states that the report listed Gross Intrastate Operating Revenue as $4,482,487.Again,
that is not correct.The report states that $4.482,487 is the Total Idaho Operations Subject to
Separations.On the same page of that report,the report states total revenues from intrastate
operations as $716,954.[I can provide this to you for your reference if you would like.I
was not given Exhibit numbers for this hearing so I do not have it labeled as an exhibit.]
That number is much closer to what Company reported as Intrastate revenue than what Staff
contends the intrastate revenue to be.The difference between the amount claimed by Company
of $928,139 versus $716,954 in Form I is that the Form I and the Annual Report do not report
the same things and the timing of the two reports is different.Form I reports revenues subject
to regulation so does not include non-regulated revenues Form-I does not include ACAM
support ($1,258,534)or non-regulated revenue from certain funds received from Syringa
Networks.Company claims a portion of the ACAM support as intrastate revenue (11.31%or
$326,992.49)as well as the lease and transport revenues received from Syringa Networks.For
clarification,the only time Company ever reported Gross intrastate operating revenues was first
in the mistaken Certification and then in the objection and that number is $1,258,533.94 (which
is the Gross Revenues less revenues generated from interstate and non-regulated activity)
(Column A-4 of Attachment A to Staff's Affidavit).AII of the reports submitted are reports of
Gross Revenues with no separation of intrastate versus interstate revenues.
Staff is further concerned with the codes under which certain revenues were reported.Company
initially reported certain revenues under Code 5250 because that is the code reference on the
Annual Report Form.There was no place to break out those revenues.They were later
reported under a different,more descriptive code.Moving them from one code to another is not
the basis for Company's filing error as Staff contends.The basis for the objection is that the
revenues reported under those codes (as well as other revenue reported on the Annual Report)
are not intrastate revenues.The revenues reported under the revised codes are all derived from
internet activities and that is the reason they should not be included as intrastate revenues (See
Attachment D to Staff's affidavit).
Finally,Staff states that Company did not fully respond to audit requests.Company would like
to state on the record that Company provided full financials and responded to all questions
presented.Company was never informed that Staff needed different or additional information,
and Company resents the implication that the Company was not cooperative.
CLOSING
The calculations submitted by Company as intrastate utility revenue in the revised filing are
consistent with the revenues reported for revenues generated from its intrastate utility business
in Idaho in prior years.And an assessment calculated on such amount would be consistent with
assessments for prior years.
To now consider Company's gross income as the Company's gross intrastate operating
revenues is to ignore the distinction between interstate and intrastate revenue and make the
plain language of Idaho Code 61-1003 meaningless.If the assessment was to be based on
gross income,the statute would say gross income rather than "operating revenues from its
intrastate utility business."
Moreover,including revenues from clearly established interstate activities and non-regulated
activities such as internet would have implications beyond this Company's assessment.
Company does not believe any other company is charged an assessment on such revenues
and charging only Company would create issues regarding the uniformity of application of the
statute to Company versus all other Companies.And to go back and assess all other
companies on such revenues would arguably be beyond the Commission's statutory authority to
base the assessment on revenues from Intrastate Utility Business.Assessments based on
internet revenues would be an issue that would likely have to be decided by the courts and not
the Commission.
Company respectfully requests that the Commission find that Company's calculation of its
revenues generated from its intrastate utility business in Idaho is accurate and consistent with
Idaho Code and standard accounting practices for the telecommunications industry,and assess
the Special Regulatory Fee on such Company calculation.