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HomeMy WebLinkAboutEAS11181.txt 1 DRIGGS, IDAHO, TUESDAY, NOVEMBER 18, 1997, 2:30 P. M. 2 3 4 COMMISSIONER HANSEN: Good afternoon, 5 ladies and gentlemen. This hearing will be in order. 6 This is the time and place set by the Idaho Public 7 Utilities Commission for a technical hearing in 8 GNR-T-96-6 and we're going to combine that with 9 GNR-T-97-3, and this is known as in the matter of the 10 petition from residents of Swan Valley, Irwin and 11 Palisades requesting extended area service to all of 12 Bonneville County, and the towns of Ririe, Victor and 13 Driggs, and also in the matter of the petition from 14 residents of Gray's Lake, Wayan and Freedom requesting 15 inclusion in the U S WEST Communications eastern Idaho 16 calling region, and then we'll follow after this 17 technical hearing, we'll follow with the technical 18 hearing on GNR-T-97-8, known as in the matter of the 19 petition from residents of Teton County requesting 20 extended area service to the greater Idaho Falls area, so 21 we'll begin by taking the appearances of the parties and 22 we'll start with you, Mr. Ward. 23 MR. WARD: My name is Conley Ward with the 24 firm Givens, Pursley and Huntley for Silver Star 25 Telephone Company. 1 CSB REPORTING COLLOQUY Wilder, Idaho 83676 1 MS. HOBSON: I'm Mary Hobson with Stoel 2 Rives for U S WEST Communications. With me today is John 3 Souba who is the company's witness. 4 MR. HOWELL: And I am Donald Howell, Deputy 5 Attorney General, representing the Commission Staff. 6 COMMISSIONER HANSEN: Okay, thank you. 7 Before we start, do we have any members from the public 8 representing the public that would like to speak today 9 that will not be able to attend this evening? I think we 10 have, I know, one request and we'd like to do that and 11 then we'll proceed with the technical hearing. We'd 12 ask you to come forward, if you would, and 13 Commissioner Nelson needs to swear you in. He'll ask you 14 to raise your right hand and we'll have you take your 15 oath here. 16 17 JERRINE BEARD, 18 appearing as a public witness, having been first duly 19 sworn, testified as follows: 20 21 EXAMINATION 22 23 BY MR. HOWELL: 24 Q Good afternoon. 25 A Hi. 2 CSB REPORTING BEARD Wilder, Idaho 83676 1 Q Could you state your full name and spell 2 your last name for the record, please? 3 A My name is Jerrine Beard, B-e-a-r-d. 4 Q And where do you reside? 5 A In Tetonia or out of Tetonia on Badger 6 Creek. 7 Q Are you a petitioner in one of these three 8 cases before the Commission today? 9 A Yes. 10 Q And which case were you petitioning in? 11 A For the -- I don't know what it's called -- 12 long distance, to not be long distance, you know, in the 13 upper valley. 14 Q Close enough, and do you have a statement 15 you'd like to give the Commission today? 16 A I'd just like to see it come to pass. I 17 just don't think that it's fair that they drew the line 18 where they did and didn't let the rest of us in on it. 19 Q And who is your telephone company? 20 A Teton Telecom. 21 Q And can you give us an address for the 22 record as well? 23 A Their address? 24 Q Your address. 25 A My address is 36 West 1000 North, Tetonia, 3 CSB REPORTING BEARD Wilder, Idaho 83676 1 Idaho. 2 Q Great, thank you. Do you have any other 3 comments? 4 A No. 5 COMMISSIONER HANSEN: Let's see if we have 6 any questions. Do we have any questions from any of the 7 parties? 8 Thank you for your testimony. 9 THE WITNESS: You bet. Thank you. 10 (The witness left the stand.) 11 COMMISSIONER HANSEN: Do we have anyone 12 else from the public that would like to make a statement 13 here this afternoon that will not be here this evening? 14 Okay, we will now start with the technical 15 hearing and we'll begin with you, Mr. Ward, are you 16 ready? 17 MR. WARD: Yes, we are. Thank you, 18 Mr. Chairman. We'd call Kevin Kelly to the stand. 19 Mr. Chairman, while Mr. Kelly is getting 20 settled, because of the time frame in these cases and the 21 need to put our case together relatively quickly in 22 response to Staff, we will have some live rebuttal and 23 some additional exhibits and when I get to those, I 24 believe the Commissioners have a set of the exhibits in 25 front of them. 4 CSB REPORTING BEARD Wilder, Idaho 83676 1 I should also say just parenthetically, a 2 quick 10-second opening remark, with the exception of a 3 few hundred dollars' difference in revenue requirement, 4 in terms of the cost of this case, we are down to 5 basically two issues with the Staff, both having to do 6 with the stimulation factor to be applied to the traffic 7 in estimating the additional costs. As I said, we're 8 just a few hundred dollars apart, but there are a few 9 hundred dollars we can't quite match up for whatever 10 reason and Mr. Kelly will explain that further. 11 12 KEVIN J. KELLY, 13 produced as a witness at the instance of Silver Star 14 Telephone Company, having been first duly sworn, was 15 examined and testified as follows: 16 17 DIRECT EXAMINATION 18 19 BY MR. WARD: 20 Q Mr. Kelly, would you please state your 21 name, position and current business address? 22 A My name is Kevin J. Kelly. I'm a senior 23 regulatory consultant with the firm TCA out of Colorado 24 Springs and my business address is 3617 Betty Drive, 25 Colorado Springs, Colorado, 80917. 5 CSB REPORTING KELLY (Di) Wilder, Idaho 83676 Silver Star 1 Q Mr. Kelly, in preparation for your 2 appearance today, did you cause prefiled direct testimony 3 to be prepared? 4 A Yes, I did. 5 Q And did that testimony include Exhibits 6 Nos. 1 through 5? 7 A Yes. 8 Q Were those exhibits prepared by you or 9 under your direction and control? 10 A Yes. 11 Q If I were to ask you the testimony in 12 your -- the questions contained in your prefiled 13 testimony today, would your answers be as given? 14 A Yes. 15 Q And do you have any corrections to your 16 testimony? 17 A Just a couple. On page 3, line 12, delete 18 the year "1996" and that same correction needs to be made 19 on line 24 at page 3 as well, and then on page 4, 20 line 19, the number needs to be changed to "157,565." 21 Q Are there any other corrections you're 22 aware of other than minor typos? 23 A No. 24 Q Okay. Now, Mr. Kelly, in my opening 25 statement, I suggested that we are down to virtual 6 CSB REPORTING KELLY (Di) Wilder, Idaho 83676 Silver Star 1 agreement with the Staff on most of the revenue 2 requirement issues. Is it your understanding that 3 there's general agreement between the Staff and TCA with 4 a couple of exceptions? 5 A Yes, there's just a couple of minor 6 exceptions and I think we were within $1,000 of the 7 number that Staff came up with. 8 Q All right. Now, when you say that you're 9 within less than $1,000 of the number the Staff came up 10 with, does that assume, in making that statement, are you 11 assuming that that would be so if you used the same 12 stimulation factor the Staff used? 13 A No, there would be quite a much larger 14 difference using the 400 percent stimulation factor that 15 we proposed than the one that was utilized in Staff's 16 analysis, the 200 percent stimulation factor, and I 17 believe my numbers on that, I think the 200 percent 18 stimulation showed a state to interstate revenue shift of 19 approximately 43,000, which we were in agreement with 20 Staff on; however, at the 400 percent stimulation of 21 local traffic, that shift becomes $100,975. 22 Q All right. You mentioned that the 23 stimulation factor affects the interstate shift in 24 costs. Is there any other revenue item that it affects? 25 A I believe that it has a small impact on the 7 CSB REPORTING KELLY (Di) Wilder, Idaho 83676 Silver Star 1 amount of plant required, the 400 percent. Traffic 2 stimulated at 400 percent is going to require slightly 3 more plant and I think that has about a $3,000 impact 4 according to, I believe, Ms. Hall's analysis in her 5 testimony. 6 Q All right. Now, in her testimony, 7 Ms. Hall implies you agreed to use the 200 percent 8 stimulation factor. Is that in fact the case? 9 A Well, the 200 percent stimulation factor 10 that we ran our study at was mostly in an effort to get 11 to the same -- let me start over. We utilized different 12 methodologies in coming up with our numbers and were 13 having quite a bit of discrepancy between the two, so in 14 an effort to get closer to Staff's number, we decided to 15 use the same stimulation rate that they did and that 16 enabled us to get within the $1,000 that we mentioned 17 earlier. 18 Q So you ran the 200 percent stimulation 19 factor to see if you could duplicate Staff's numbers? 20 A Yes, that was the primary reason. 21 Q But does that indicate that you are 22 abandoning your proposal for use of a 400 percent 23 stimulation factor? 24 A No, it does not. 25 Q All right. Mr. Kelly, in preparation for 8 CSB REPORTING KELLY (Di) Wilder, Idaho 83676 Silver Star 1 the hearing today after it became obvious that there was 2 a dispute about the stimulation factor we used, did you 3 attempt to review additional evidence that may have been 4 available to you regarding stimulation factor that in 5 fact occurred in other EAS cases? 6 A Yes, I did. 7 Q And did you prepare some exhibits to 8 illustrate those stimulation factors? 9 A Yes, I did. 10 MR. WARD: Okay. Mr. Chairman, there's a 11 packet of exhibits, hopefully, in front of you, beginning 12 with Exhibit 6 which has the denomination in the upper 13 left-hand corner "Silver Star Telecom, Inc., EAS 14 Stimulation Analysis, Selected Colorado Exchanges" and I 15 believe that's been premarked as Exhibit 6. 16 Q BY MR. WARD: Mr. Kelly, can you tell the 17 Commission what's represented by Exhibit 6? 18 A Well, Colorado went through a similar 19 proceeding a few years back in expanding calling areas. 20 They came up with a plan called CICP and what it does is 21 just expand EAS pretty similar to what we're doing in 22 this case here, and our firm was contracted by several of 23 the companies to prepare the data and this is some of the 24 data that we have that we showed as reflected within 25 these different calling areas for different companies and 9 CSB REPORTING KELLY (Di) Wilder, Idaho 83676 Silver Star 1 it shows considerable local minute growth in the three 2 exchanges and -- 3 Q Mr. Kelly -- excuse me, I didn't mean to 4 interrupt you. 5 A That's okay. 6 Q With respect to Exhibit 6, could you 7 explain the communities, give the Commission a 8 description of the communities involved here? 9 A My exhibits are the non-numbered ones, 10 Conley. 11 MR. WARD: May I approach the witness, 12 Mr. Chairman? 13 COMMISSIONER HANSEN: You may. 14 (Mr. Ward approached the witness.) 15 THE WITNESS: Just to make sure we're all 16 on the same page here. Thank you. The first one is 17 several smaller communities within the Colorado Springs 18 area and it shows the base study of minutes, about 19 36,000. After several years of the expanded calling 20 area, the minute growth is probably 10 times what it was 21 prior to initiation of the calling area. 22 Q BY MR. WARD: Mr. Kelly, does the label at 23 the bottom indicate the communities involved in EAS 24 there? 25 A I'm sorry. Yes, it's Simla, which is a 10 CSB REPORTING KELLY (Di) Wilder, Idaho 83676 Silver Star 1 small town, and allows calling into primarily Colorado 2 Springs, but also the Black Forest, Calhan, Peyton and 3 Limon exchanges as well. 4 Q Can you give the Commission a rough idea of 5 the number of access lines in Simla on the one hand and 6 Colorado Springs on the other? 7 A Simla is a fairly small community. I 8 believe probably it's less than 1,000 access lines. 9 Colorado Springs is probably a population of 400,000 10 right now. 11 Q Okay. Let's turn to Exhibit 7. What 12 communities were involved there? 13 A This is a small community of Arriba, I 14 believe it's pronounced, and the expanded scope allowed 15 them to call into Limon, Hugo, Flagler and Genoa. Arriba 16 is a much smaller town, probably 3 to 400 access lines; 17 whereas, the other communities in here are also smaller. 18 Limon is probably 2 to 3,000 people and the other ones 19 are smaller than that yet. 20 MR. HOWELL: Mr. Chairman, I hate to 21 interject, but at this point if we're going to move 22 through these exhibits, I guess I would lodge an 23 objection to the introduction of Exhibits 6, 7, 8, 9 and 24 10 as being irrelevant, and the purpose for my motion to 25 strike these exhibits or not to admit them is that the 11 CSB REPORTING KELLY (Di) Wilder, Idaho 83676 Silver Star 1 issue in this case deals with the stimulation of 2 exchanges ideally situated in Idaho. A number of these 3 exhibits deal with Colorado exchanges and as Mr. Kelly 4 has already indicated, one of the calling areas, at least 5 as it pertains to Exhibit 6, is in excess of 400,000 6 population. 7 What the issue before this Commission is 8 what is the stimulation between Irwin and Wayan and the 9 U S WEST eastern Idaho calling area. These stimulation 10 factors are merely numbers and don't have a relevancy to 11 this proceeding. We do not know of the other community 12 of interests, we do not know whether there was growth, 13 industrial growth, in these communities. We have just 14 seen these exhibits an hour ago. We have not had an 15 opportunity to probe the relevancy of these exhibits and 16 for those reasons, I would urge that these exhibits not 17 be admitted. 18 COMMISSIONER HANSEN: Mr. Ward. 19 MR. WARD: Mr. Chairman, in Ms. Hall's 20 testimony, and, if necessary, I can probably turn right 21 to it in a couple of minutes, in Ms. Hall's testimony, 22 one of the things she says is the companies don't have 23 any concrete evidence of stimulation and neither do I. 24 Now, if the only relevant evidence would be the amount of 25 stimulation that occurs from Irwin to Wayan to the 12 CSB REPORTING KELLY (Di) Wilder, Idaho 83676 Silver Star 1 eastern Idaho service territory, we, obviously, have a 2 little proof problem. You can never prove that until you 3 actually do that. 4 What is relevant, and I maintain these 5 other communities are clearly relevant, we don't contend 6 that they are all identical, we tried to pull the numbers 7 that we had or could get available on short notice and in 8 terms of whether they are convincing, that's another 9 question and that's a question for the Commission to 10 decide, but I don't see how it can be seriously argued 11 that the experience of stimulation in other communities 12 is not relevant when you're trying to assess the 13 stimulation you will experience in these communities, and 14 I would say it's true that the Staff has not had these 15 exhibits but just today and, of course, we didn't have 16 Ms. Hall's testimony until Friday and everybody is 17 working under a compressed time frame here. 18 I would have no objection if after the 19 hearing if the Staff wants to send additional production 20 requests to us and find out additional information within 21 reason about this, we can do that, too, but I want to be 22 accommodating, but this is the only kind of probative 23 evidence you can get on this subject and I think it's 24 clearly relevant. 25 COMMISSIONER HANSEN: I believe we'll go 13 CSB REPORTING KELLY (Di) Wilder, Idaho 83676 Silver Star 1 ahead and allow these exhibits. The Commission will take 2 into consideration those objections made by the Staff and 3 we'll weigh these exhibits accordingly, so you can 4 proceed on them. 5 MR. WARD: Thank you, Mr. Chairman. 6 Q BY MR. WARD: Let's see, I believe you had 7 described the communities in Exhibit No. 7. Just so it's 8 clear, I think it's obvious, Mr. Kelly, but let me just 9 ask you, looking at Exhibit 7, for example, would I be 10 correct in assuming that EAS was implemented sometime in 11 1991 and that you have selected just one month, 12 obviously, in each year, the same month in each year to 13 get the comparative traffic data? 14 A Yes, that would be correct. 15 Q And so if I look at line 4 of Exhibit 7, it 16 says 280.53 percent on the right-hand side of the page, 17 that would be the stimulation in the first year of the 18 EAS implementation? 19 A Yes. 20 Q All right, turning to Exhibit 8, would you 21 please tell the Commission what territories were involved 22 in this EAS? 23 A This was another exchange, Bennett, and a 24 smaller community, probably less than 500 access lines, 25 and calling into not the entire metropolitan area of 14 CSB REPORTING KELLY (Di) Wilder, Idaho 83676 Silver Star 1 Denver, but to the eastern suburbs of Denver, primarily 2 Aurora, which I'm not exactly sure what the calling scope 3 of that community is, maybe a couple hundred thousand 4 access lines. 5 Q Okay. In your opinion, which of these 6 three exhibits we've just identified or three historical 7 examples would be most closely analogous to what we're 8 considering today? 9 A I'd say the numbers into -- of calling into 10 the Exhibit No. 6 which identifies the calling into the 11 Colorado Springs area would probably be most relevant. 12 It's not quite as large a community as the eastern 13 suburbs of Denver, plus a lot of these, the town, the 14 size of the town, that is initiating the phone calls, the 15 smaller communities are probably more similar to the 16 Wayan, Irwin ones. 17 Q All right, thank you. Now, looking at all 18 three of these exhibits, we see some pretty dramatic 19 growth over the period of, I guess we have, seven years 20 captured here, with two of them going, well, two of them 21 going over 1,000 percent growth in the course of seven 22 years, do you have an opinion as to the factors that may 23 be causing that kind of stimulation to occur? 24 A Yes, there's a couple of them, but I think 25 primarily is the initiation of flat rate Internet 15 CSB REPORTING KELLY (Di) Wilder, Idaho 83676 Silver Star 1 service. Really, once that becomes accessible to a small 2 community, it really increases the amount of local 3 calling minutes and I think that's why you notice a 4 considerable increase is in the last, you know, quite 5 sizeable in the last, couple of years. I'm looking at 6 Exhibit 6. There was over a 100,000 minute increase 7 between December of '96 and October of '97. There was 8 also kind of life-style changes as well with the advent 9 of computers and more people are able to telecommute. 10 For example, myself, I can telecommute from 11 home when my daughter is sick or the weather is bad or 12 something like that. I just dial into the server on our 13 network at the office and that precludes a trip into 14 work; however, it does also greatly increase the number 15 of local minutes the local telephone company is 16 recording. 17 Q And is it your understanding that the 18 implementation of EAS in this case will make Internet 19 access available for a local call for residents who do 20 not now have it? 21 A Yes, that is my understanding. 22 Q Okay. Just one more area, if you would. 23 Ms. Hall in her testimony suggests that the Commission 24 should choose a stimulation factor for the immediate 25 determination in this case and then true-up at the end of 16 CSB REPORTING KELLY (Di) Wilder, Idaho 83676 Silver Star 1 the year. Do you agree with that suggestion? 2 A Not really. I think there's a couple of 3 problems with that proposal. I guess the first one I see 4 is this going to be a retroactive true-up or a 5 prospective true-up. If it's continually a retroactive 6 true-up, the company is going to lose each time the 7 true-up occurs unless it is retroactive. 8 A second reason is just the cost involved. 9 The company is going to have to retain consultants, 10 attorneys and it's going to require additional Staff time 11 to do a true-up and the first one is -- and a final 12 reason, I guess, is just the growth in minutes does not 13 all occur in one year. As you can see from the exhibits 14 that I'm presenting here, it kind of multiplies on itself 15 and it's going to take place over a several-year period. 16 That in itself is going to necessitate more than a 17 one-year, I think, true-up if one were to occur and, 18 finally, I guess in this case I would hope that we'd be 19 setting rates in this case that would extend for more 20 than just a one-year period and it would be more of a 21 prospective period that we can set these rates, that 22 they'll be in place and there will be some rate stability 23 for the local ratepayers. 24 MR. WARD: Thank you. That's all the 25 supplemental testimony I have. If I did not ask that 17 CSB REPORTING KELLY (Di) Wilder, Idaho 83676 Silver Star 1 Exhibits 6 through 8 be identified, I would do so and I'd 2 ask that Mr. Kelly's testimony be admitted and with that, 3 he's ready for cross-examination. 4 COMMISSIONER HANSEN: Okay, if there be no 5 objection, it will be so ordered and the exhibits as 6 marked, I have 1 through 5, plus the addition of Exhibits 7 6, 7 and 8, Mr. Ward, in that packet, I also have 8 Exhibits 9 and 10, at this time you do not want those 9 admitted, then? 10 MR. WARD: That's correct. Mr. McCue who 11 will follow will sponsor those. 12 COMMISSIONER HANSEN: Okay, fine. If there 13 be no objections, then, the exhibits as marked and 14 identified will be part of the record. So ordered. 15 (Silver Star Telephone Company Exhibit 16 Nos. 1 - 8 were admitted into evidence.) 17 (The following prefiled testimony of 18 Mr. Kevin Kelly is spread upon the record.) 19 20 21 22 23 24 25 18 CSB REPORTING KELLY (Di) Wilder, Idaho 83676 Silver Star 1 Q PLEASE STATE YOUR NAME, POSITION AND 2 CURRENT BUSINESS ADDRESS. 3 A My name is Kevin J. Kelly. My business 4 address is 3617 Betty Drive, Colorado Springs, CO 80917. 5 Q BY WHOM ARE YOU EMPLOYED AND IN WHAT 6 CAPACITY? 7 A I am a Senior Consultant, employed by TCA, 8 Inc. (TCA), a telecommunications consulting firm. TCA 9 provides regulatory, management and financial consulting 10 services to independent telephone companies. 11 Q PLEASE SUMMARIZE YOUR EDUCATIONAL 12 BACKGROUND AND PROFESSIONAL EXPERIENCE. 13 A I hold a Bachelor of Business 14 Administration, with an accounting major, and a Masters 15 in Business Administration, with an emphasis in finance, 16 both from the University of Iowa. I am a Certified 17 Public Accountant. 18 From 1980 to 1985, I was employed by Kiesling and 19 Associates, a regional CPA firm specializing in external 20 audits of independent telephone companies. From 1985 to 21 1990, I was employed by Sprint in several positions for 22 three subsidiaries. During 1991 and 1992, I was employed 23 by the Kansas Corporation Commission as a Managing 24 Regulatory Auditor. From 1992 to 1994, I was employed as 25 a Senior Consultant by Overland Consulting Inc., a 19 Case No. GNR-T-96-6 KELLY (DI) 1 November 3, 1997 Silver Star Telephone Company 1 regulatory consulting firm. From 1994 to March 1997, I 2 was employed by Frederick & Warriner, LLC., a CPA firm 3 which provides auditing, regulatory, tax and 4 5 / 6 7 / 8 9 / 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 20 Case No. GNR-T-96-6 KELLY (DI) 1A November 3, 1997 Silver Star Telephone Company 1 consulting services to a clientele consisting primarily 2 of independent telephone companies. 3 I have participated in regulatory proceedings in 4 Kansas, Oklahoma, Missouri, California, New Jersey, 5 Texas, Vermont and Minnesota. Several of these 6 proceedings required providing expert testimony. 7 Q PLEASE DESCRIBE THE PURPOSE OF YOUR 8 TESTIMONY. 9 A I have been retained by Silver Star 10 Telephone Company, Inc. ("Silver Star" or "Company") to 11 quantify the revenue requirement impact of Extended Area 12 Service ("EAS") implementation. My analysis assumes 13 implementation of both proposed two-way EAS routes 14 between US West's Idaho Falls and Pocatello calling areas 15 and Silver Star's Irwin and Wayan exchanges. 16 Q PLEASE DESCRIBE HOW EAS REVENUE IMPACTS ARE 17 CALCULATED. 18 A There are two basic methods for quantifying 19 the impact of proposed EAS routes. The simplest, and 20 most widely used, is a revenue neutral direct analysis. 21 In this method, the analyst calculates the annual effect 22 of each EAS caused change in plant investment, expenses 23 and revenues. These individual items are summed, and 24 rates are then adjusted to produce additional revenues 25 equal to the net change in annualized expenses and 21 Case No. GNR-T-96-6 KELLY (DI) 2 November 3, 1997 Silver Star Telephone Company 1 revenues. This method is reasonably accurate and 2 relatively inexpensive. 3 There is, however, a second method of calculating 4 EAS costs that is both more sophisticated and more 5 accurate. In this method, the 6 7 / 8 9 / 10 11 / 12 13 14 15 16 17 18 19 20 21 22 23 24 25 22 Case No. GNR-T-96-6 KELLY (DI) 2A November 3, 1997 Silver Star Telephone Company 1 analyst conducts a full cost of service study using test 2 year data, and then conducts a second study after EAS 3 changes are input. This method fully captures all EAS 4 driven cost impacts. 5 Q WHICH APPROACH DID YOU USE IN THIS CASE? 6 A We used the cost of service approach in 7 this case. At the time we were asked to conduct this EAS 8 cost analysis, we were already engaged in preparing a 9 general rate case for Silver Star's Idaho operations. 10 This made the cost of service method cost effective 11 because we had to prepare a test year cost of service 12 study for the rate case anyway. 13 Q PLEASE DESCRIBE HOW THIS COST OF SERVICE 14 METHOD WAS APPLIED IN THIS CASE. 15 A We began by preparing a test year cost of 16 service study for Silver Star. This cost study, which is 17 summarized in Exhibit No. 1, was used as a starting point 18 for my EAS analysis. The cost study was then modified in 19 Exhibit No. 2 to incorporate identified cost impacts 20 associated with the proposed EAS routes. These proforma 21 adjustments begin with the increased investment in plant 22 directly attributable to EAS implementation. Proforma 23 expense adjustments include increased labor and 24 regulatory costs that are caused by EAS. Next, traffic 25 between the proposed EAS routes was stimulated to provide 23 Case No. GNR-T-96-6 KELLY (DI) 3 November 3, 1997 Silver Star Telephone Company 1 a more accurate reflection of future calling patterns, 2 and access charge revenues and billing and collection 3 revenues on the proposed routes were removed. Finally, 4 the revised cost study results were compared to the 5 original cost study to determine the net revenue impact 6 of EAS. 7 8 / 9 10 / 11 12 / 13 14 15 16 17 18 19 20 21 22 23 24 25 24 Case No. GNR-T-96-6 KELLY (DI) 3A November 3, 1997 Silver Star Telephone Company 1 Q PLEASE DESCRIBE THE MOST IMPORTANT OF THE 2 COST IMPACTS CAUSED BY EAS. 3 A Silver Star revenue streams will be 4 impacted in a number of ways. First, and most 5 importantly, converting traffic from long distance to 6 local will result in a loss of intrastate network access 7 revenues (including billing and collection charges) to 8 Silver Star. Secondly, traffic within the extended 9 calling area will increase disproportionately, which 10 impacts jurisdictional separation factors. The 11 resultant decrease in costs allocated to the interstate 12 jurisdiction will reduce interstate network access 13 revenues and support payments, thus increasing intrastate 14 costs. Finally, there are the direct costs of 15 implementing EAS, including costs attributable to 16 incremental investments and additional labor and 17 regulatory costs. 18 Q PLEASE SUMMARIZE THE NET EFFECT OF EAS 19 IMPLEMENTATION ON SILVER STAR. 20 A The net effect is summarized in Exhibit 21 No. 3. The bottom line is that providing two-way EAS 22 between both US West calling areas and Silver Star's 23 Wayan and Irwin exchanges will result in an increased 24 local exchange revenue requirement of $157,565. 25 Q HOW IS SILVER STAR PROPOSING TO RECOVER THE 25 Case No. GNR-T-96-6 KELLY (DI) 4 November 3, 1997 Silver Star Telephone Company 1 LOST REVENUES FROM IMPLEMENTATION OF TWO-WAY EAS? 2 A Silver Star is proposing recovering the 3 revenue shortfall from the combination of an increase in 4 local rates and an increase in support payments from the 5 Idaho USF. 6 7 / 8 9 / 10 11 / 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 Case No. GNR-T-96-6 KELLY (DI) 4A November 3, 1997 Silver Star Telephone Company 1 Q HAVE YOU PREPARED A RATE DESIGN PROPOSAL 2 THAT WILL RECOVER THE COST OF EAS? 3 A I have prepared three alternative proposals 4 for the Commission's consideration. Each of the three 5 incorporates an adjustment of access charges to the new 6 USF eligibility level specified by the Commission in 7 Order No. 27126. 8 Q PLEASE DESCRIBE YOUR RATE DESIGN PROPOSALS. 9 A Exhibit No. 4 provides three scenarios for 10 allocating the shortfall. All three options require 11 recovering a portion of the shortfall from State USF. 12 Q PLEASE DESCRIBE EXHIBIT NO. 4A. 13 A In this alternative, residential and 14 business rates set at the residential USF threshold of 15 $17.51. 16 Q PLEASE DESCRIBE EXHIBIT NO. 4B. 17 A In this scenario, residential and business 18 rates set at their respective USF thresholds of $17.51 19 and $36.57. 20 Q PLEASE DESCRIBE EXHIBIT NO. 4C. 21 A This final alternative increases 22 residential and business rates by a uniform percentage in 23 order to avoid exacerbation of the business residential 24 rate gap. If the Commission adopts this approach, it 25 will have to use federal USF support payments as a credit 27 Case No. GNR-T-96-6 KELLY (DI) 5 November 3, 1997 Silver Star Telephone Company 1 to reduce business rates from the nominal USF rate of 2 $36.57 to the rates proposed in Exhibit No. 4C. My 3 understanding is that there is precedent for the adoption 4 of this approach. 5 6 / 7 8 / 9 10 / 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 28 Case No. GNR-T-96-6 KELLY (DI) 5A November 3, 1997 Silver Star Telephone Company 1 Q WHICH OPTION IS DO YOU RECOMMEND THE 2 COMMISSION ADOPT? 3 A I recommend the Commission adopt Option 1. 4 In today's increasingly competitive environment it is no 5 longer appropriate for business customers to pay 6 considerably higher rates than residential customers. 7 Customers required to pay rates in excess of cost will 8 simply migrate to other providers. 9 Q DOES THIS CONCLUDE YOUR TESTIMONY? 10 A Yes. 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 29 Case No. GNR-T-96-6 KELLY (DI) 6 November 3, 1997 Silver Star Telephone Company 1 (The following proceedings were had in 2 open hearing.) 3 COMMISSIONER HANSEN: All right, the 4 witness then is available for questions. 5 Ms. Hobson. 6 7 CROSS-EXAMINATION 8 9 BY MS. HOBSON: 10 Q Just a couple of things, Mr. Kelly. When 11 you were testifying for Mr. Ward a few minutes ago, you 12 gave the Commission a number for the 13 interstate/intrastate revenue recovery shift and I didn't 14 get that number using the 400 percent stimulation factor, 15 what's that number? 16 A The shift results at $100,975. 17 Q And is that number depicted someplace in 18 your exhibits? 19 A No, it's not. 20 Q That helps, I guess. Is that number going 21 to be depicted somewhere in Mr. McCue's exhibits? 22 A No. The number was calculated -- 23 initially, when we prepared our initial case, we utilized 24 kind of a revenue requirement basis; however, in an 25 attempt to get a little closer to the numbers that the 30 CSB REPORTING KELLY (X) Wilder, Idaho 83676 Silver Star 1 Staff was using, we kind of switched to this revenue 2 neutral approach and at that time we reran the -- and 3 using that methodology, we had a base study and then we 4 just stimulated traffic at 200 and 400 percent, so we did 5 not ever submit the final results of that for the 6 record. It was never included in any exhibits. 7 Q Okay, and do you know, will Mr. McCue be 8 offering exhibits that show the result of that 9 calculation as a final impact of implementing EAS in his 10 case, his supplemental testimony? 11 A I don't believe he will, no. 12 Q Can you tell me, then, what your estimation 13 of the cost of EAS is with the 400 percent stimulation? 14 A That would be the 157,565. 15 Q And is that depicted in your exhibits? 16 A No, that's not depicted in the exhibits. I 17 think the number that's depicted in the exhibits is 18 134,000, but that was as a result of the change in 19 methodologies of calculating. 20 Q Thank you, and forgive me again if this was 21 obvious to everybody else but me, but in Exhibits 7 22 through 9, was EAS implemented at some particular point 23 for all of these exchanges? 24 A Yes. It was implemented 1991. I think the 25 base minutes that you see up above there was prior to the 31 CSB REPORTING KELLY (X) Wilder, Idaho 83676 Silver Star 1 implementation of EAS. 2 Q So as far as you know, this number, the 3 base number, was 1991 and then the 1991, December 1991, 4 number was the end of the partial year of implementation 5 of EAS? 6 A It was in the first year. I'm not exactly 7 sure of the dates that it was implemented. 8 Q For purposes of your federal cost recovery, 9 does the interstate jurisdiction, does the FCC look at 10 those numbers on an annual basis for minutes of use for 11 local and toll calling to determine what your cost 12 recovery will be or do they do that at different periods? 13 A I'm not sure what you mean by look at it, 14 but, yes, those are utilized to calculate your interstate 15 revenue requirement, yes. 16 Q On an annual basis? 17 A Yes, on an annual basis. 18 MS. HOBSON: Thank you. That's all I have. 19 COMMISSIONER HANSEN: Mr. Howell, do you 20 have any questions? 21 MR. HOWELL: I do. Thank you, 22 Mr. Chairman. 23 24 25 32 CSB REPORTING KELLY (X) Wilder, Idaho 83676 Silver Star 1 CROSS-EXAMINATION 2 3 BY MR. HOWELL: 4 Q Mr. Kelly, good afternoon. 5 A Good afternonn. 6 Q Let's start with, I guess, a couple of 7 points that you mentioned in your supplemental direct. 8 You mentioned that one of the causes of stimulation has 9 or is the advent of flat rate Internet service. Do you 10 know if Silver Star provides flat rate Internet service 11 in its service territory? 12 A It's my understanding that they do not 13 provide, these communities that we're looking at do not 14 have access to flat rate Internet service. 15 Q And so in answer to my question, Silver 16 Star does not provide flat rate Internet service? 17 A These Silver Star communities do not have 18 access to flat rate Internet. 19 MR. WARD: Mr. Chairman? 20 COMMISSIONER HANSEN: Mr. Ward. 21 MR. WARD: Mr. Howell, would you accept 22 that I could give you a better witness to ask that 23 question to? 24 MR. HOWELL: Sure. Rather than dancing 25 around, all right, I'll hold that. 33 CSB REPORTING KELLY (X) Wilder, Idaho 83676 Silver Star 1 Q BY MR. HOWELL: Now, Mr. Kelly, turning to 2 what's been identified and admitted as Exhibit 8, it 3 shows, I guess, over a several-year period a pretty hefty 4 increase in what has been labeled as "Stimulation," does 5 it not? 6 A Yes, it does. 7 Q All right, and isn't it true that there is 8 a new casino which has come on line in the town of 9 Bennett since these factors were measured for 10 stimulation? 11 A Not to my knowledge. I don't think Bennett 12 has, is eligible for a casino gambling. 13 Q Isn't Bennett near Cripple Creek? 14 A I think Cripple Creek is on the western 15 side of Denver. I'm not sure. 16 Q Okay. When we talk about stimulation, 17 doesn't the quantification of stimulation involve at 18 least two parts, and one part, as I look at Exhibits 6, 7 19 and 8, involves the normal growth in the number of 20 minutes of use, so one component would be growth in the 21 normal access minutes; would you agree with that? 22 A I guess I'm not following your question. 23 Q What I'm trying to get at is what are the 24 components involved in the calculation of stimulation as 25 portrayed in your Exhibits 6, 7 and 8? 34 CSB REPORTING KELLY (X) Wilder, Idaho 83676 Silver Star 1 A I guess I would define stimulation as just 2 the growth in the minutes on these routes as a result of 3 making calls which were once toll or long distance calls 4 free calls. 5 Q All right, and I guess that goes to the 6 second part of what at least I perceive as stimulation 7 and not that I'm testifying, so based on what you just 8 said, stimulation is the increase in calls once they are 9 converted from toll calls to local calls? 10 A Yes. 11 Q All right, and isn't there then also a 12 normal growth in the number of minutes of traffic that 13 normally is present in any exchange calculations of 14 revenue? 15 A There can be growth in minutes for other 16 reasons, yes, I'd agree with that. I don't know how you 17 would quantify it. 18 Q I guess, for instance, just looking at 19 Exhibit 8 which was the Bennett, the first year they 20 only, they experienced a 200 percent, 207 percent growth; 21 isn't that correct? 22 A That's correct. 23 Q All right, and then that next year, 24 wouldn't you assume some of that growth from 137,000 25 minutes to 174,000 minutes would have been the growth 35 CSB REPORTING KELLY (X) Wilder, Idaho 83676 Silver Star 1 that would have normally occurred even if EAS had never 2 been granted? 3 A One could assume that, but one could also 4 assume there would be less traffic as well. 5 Q Doesn't the company in this case assume a 6 revenue growth based on growth in traffic? 7 A In our filing for this, for these 8 communities, we did not assume any lost access growth, 9 no, we did not. 10 Q But you assumed a growth in access minutes, 11 did you not? 12 A No, we didn't. We just assumed a growth in 13 local minutes. 14 Q All right, turning to your page 2 of your 15 prefiled testimony, particularly on lines 9 through 13, 16 you indicate there that your analysis assumes 17 implementation of both two-way EAS routes between 18 U S WEST Idaho Falls and Pocatello calling areas. Isn't 19 it true that Idaho Falls and Pocatello are in a single 20 calling area? 21 A Yes. 22 Q You're not advocating simply EAS to those 23 two exchanges? 24 A No. 25 Q On page 3 of your testimony, you are 36 CSB REPORTING KELLY (X) Wilder, Idaho 83676 Silver Star 1 talking about on lines 5 through 9 what approach you used 2 to calculate your EAS cost analysis. Is it true that the 3 cost of service methodology that you initially used is 4 more expensive in terms of labor and time to construct on 5 your part as a consultant than using a revenue neutral 6 analysis? 7 A I don't know if I'd characterize it as more 8 expensive or less expensive. 9 Q Is it true that you used the cost of 10 service approach simply because you are in the process of 11 preparing the company's general rate case? 12 A I don't know if in the process is the right 13 word to use, but, yes, the company is planning on filing 14 a local rate increase, yes. 15 Q Now, on line 12 on that page, you struck 16 the date 1996. Can you tell us what test year you used 17 to prepare your cost of service study? 18 A We used a 12-month test period ending 19 August 31st, 1997. 20 Q All right. In your calculations of EAS 21 costs, which on page 4, line 19, total, I believe you 22 corrected it to, 157,565, does that include the cost of 23 your regulatory expenses in preparation of this case? 24 A Yes, it did. 25 Q And what cost did you utilize in factoring 37 CSB REPORTING KELLY (X) Wilder, Idaho 83676 Silver Star 1 in your expenses for this case? 2 A The same amount that the Staff used, the 3 $20,000. 4 Q Is that the same amount that the company 5 used for Mr. Hendershot's testimony? 6 A I'm not sure about that. 7 Q So you wouldn't have any reason to disagree 8 with me when I said your expenses were more than 9 Mr. Hendershot's? 10 A No, I would not. 11 Q If I could have you turn to your Exhibit 1, 12 and I guess for clarification purposes simply so I 13 understand, your Exhibits 1 and 2 as well as 3 were based 14 on a cost of service approach and your adjusted numbers 15 were based on a direct cost or revenue neutral approach; 16 is that correct? 17 A Yes. 18 Q All right, and is it fair for me to assume 19 that your Exhibits 1 and 2 are based on your cost of 20 service calculations? 21 A Yes, they are based utilizing that 22 methodology, yes. 23 Q If I could direct your attention to line 9 24 of Exhibit 1, it says as a description "Total 2001 Rate 25 Base." What does that description mean? 38 CSB REPORTING KELLY (X) Wilder, Idaho 83676 Silver Star 1 A That would be total, in the total -- in 2 column D, it would represent total company plant in 3 service. 4 Q In what year? 5 A As of 8/31/97. 6 Q All right; so the number 2001 isn't 7 referring to a test year of 2001, is it? 8 A No, no. That's the Part 32 account number 9 for that, for telephone plant. 10 Q Now, on page 5 and then in your 11 Exhibits 4A, 4B and 4C, and those last three exhibits I 12 just mentioned are all dated November 3rd, you have 13 presented the Commission with three rate design 14 alternatives to recover the EAS costs, have you not? 15 A Yes, that is what is represented in 4A, B 16 and C, that's correct. 17 Q And in particular, is it your testimony 18 that you urge the Commission to adopt your proposed rate 19 design shown in your Exhibit 4A dated November 3 which 20 has the residential and the business rates identical? 21 A Yes. 22 Q And that is your primary recommendation in 23 this case? 24 A Yes. We offered three alternatives, but 25 that would be the primary recommendation. 39 CSB REPORTING KELLY (X) Wilder, Idaho 83676 Silver Star 1 Q Well, under just this first alternative 2 which is represented in Exhibit 4A, would you agree with 3 me that in essence if the Commission were to implement 4 this EAS that business customers would receive the 5 benefits of EAS for free? 6 A That could be one way you'd characterize 7 it. Another way would be that they would receive it at 8 the same -- the price of their service would be identical 9 to the price of the service that the residents are 10 paying. 11 Q Isn't it true that the business rate would 12 actually drop $5.00, but the residential rate would 13 increase $2.51? 14 A Yes, under this rate rebalancing proposal, 15 that would be the result. 16 Q So then the proposed recovery that you're 17 recommending, residential customers would pay an 18 increased rate, yet business customers would pay a 19 decreased rate? 20 A Yes. 21 Q Now, knowing it's been some time since 22 you've been testifying before the Idaho Commission, 23 Mr. Kelly, do you see any problems that the company may 24 have with meeting its USF eligibility criteria if the 25 rates for business and residential were identical? 40 CSB REPORTING KELLY (X) Wilder, Idaho 83676 Silver Star 1 A I understand that they have to be, the 2 rates have to be, set at 125 percent of the statewide 3 average and I believe this 17.51 achieves that. 4 Q Well, let's talk about the statewide 5 average. When you said the 17.51 is the statewide 6 average, that is not the statewide average for business 7 rates, is it? 8 MR. WARD: Mr. Chairman,. 9 COMMISSIONER HANSEN: Mr. Ward. 10 MR. WARD: I'm going to object at this 11 point because Mr. Howell is leading into an area that 12 clearly calls for a legal conclusion and I'll tell you 13 what it is. Without pulling out my code, I can tell the 14 you that what the code says, in essence, is that the 15 rates, the threshold rates, shall be 125 percent or 16 greater of the statewide average local exchange rate. 17 The code does not reference business rates and local 18 rates, nor insist on a disparity between the two. Now, 19 Mr. Howell and I can argue about what that means, but 20 this witness really is not in a position to testify about 21 what that section of the code means. 22 COMMISSIONER HANSEN: Mr. Howell. 23 MR. HOWELL: Well, I guess I would simply 24 ask, then, the Commission take judicial notice of the 25 universal service statute and particularly Idaho Code 41 CSB REPORTING KELLY (X) Wilder, Idaho 83676 Silver Star 1 62-610(3)(a) which states, "The telephone corporation's 2 average residence and business local exchange service 3 rates for one-party single line service are in excess of 4 125 percent of the weighted statewide average rates for 5 residential and business local exchange service rates." 6 Thank you, Mr. Kelly. 7 I have no further questions, Mr. Chairman. 8 COMMISSIONER HANSEN: Let's see if we have 9 any questions from the Commission. Commissioner Nelson. 10 COMMISSIONER NELSON: Thank you. 11 12 EXAMINATION 13 14 BY COMMISSIONER NELSON: 15 Q Mr. Kelly, have you had any experience in 16 prior EAS cases, perhaps in other states? 17 A I've never testified in an EAS case before. 18 Q In your Exhibits 6, 7 and 8, I'm curious 19 about the stimulation from, say, the fourth to the 20 seventh year, which if you look at Exhibit 8, the 21 stimulation is even more than in the first four years for 22 the last three. Can you provide any explanation why it 23 would keep growing like that? 24 A I think the primary reason is just Internet 25 usage. The '91, '92, '93 time frame, and this is just 42 CSB REPORTING KELLY (Com) Wilder, Idaho 83676 Silver Star 1 from my personal experience, I was really not an Internet 2 user. Now you're seeing the continual growth of local 3 minutes in the last, especially in the last, three to 4 four years. 5 Q Do you know if these exhibits, if in the 6 preparation of these exhibits you took into account line 7 growth during that period? 8 A Well, yes, line growth would be taken into 9 account because we're just measuring the minutes on all 10 the lines in those communities. 11 Q Well, wouldn't you analyze that growth and 12 adjust it to a minutes per line rather than just show the 13 total? 14 A You could. I mean, that would be one 15 aspect of growth, but the communities we're discussing 16 are not experiencing much line growth. They're very 17 small rural communities and could be actually 18 experiencing population reductions. 19 Q So then would you say that these numbers do 20 not take line growth into account, it's just totals? 21 A They are based on a total minute on the 22 route, yes, not on a per line basis, that is correct. 23 Q Early in your testimony you said that you 24 had rerun the figures based on 200 percent stimulation 25 and you were within $1,000 of Ms. Hall's number. In 43 CSB REPORTING KELLY (Com) Wilder, Idaho 83676 Silver Star 1 looking through the testimony myself, I don't see any 2 numbers that are within $1,000. Where are you within 3 $1,000, of what number? 4 A I believe Ms. Hall shows a 200 percent 5 stimulation $95,844 number. 6 Q Okay, I've got that number and so if you 7 run your numbers at 200 percent stimulation, you're close 8 to that number? 9 A Yes, and it might be explained on one of 10 her exhibits. Exhibit 104 shows approximately a $3,178 11 difference and $2,773 is related to the additional 12 equipment needed for the 400 percent stimulation. 13 Q Okay, and so -- 14 A So when you subtract the two, it looks like 15 it's approximately $400 or so. 16 Q So if I compare her number of 95,000 to 17 your number of 157,000, the difference is the 18 stimulation? 19 A Yes, that is correct. 20 Q Does she include your fee in her $95,000 21 number, do you know? 22 A Yes, she does. It's on, I believe, line 5 23 on Exhibit 104. 24 Q And she amortizes that over three years? 25 A Yes. 44 CSB REPORTING KELLY (Com) Wilder, Idaho 83676 Silver Star 1 Q How do you measure these minutes once 2 they're no longer toll? 3 A All minutes, I guess, are measured off the 4 switch in order to run the traffic studies and run the 5 Part 36 separations studies. 6 Q Is that right? 7 A Yes. 8 Q So then you have the total minutes and 9 subtract out the toll? 10 A Yeah, they're jurisdictionalized between 11 state access, interstate access and then local. 12 Q Okay, one other area I wanted to ask you 13 about, your numbers show about a $2.50 increase in order 14 to implement EAS and yet, Ms. Hall's number, which is the 15 one I used, it looks like there's a monthly cost to 16 implement this per customer of about $16.00; is that 17 correct? 18 A I believe those are two different numbers. 19 I think the number that we're recommending as a local 20 increase is to the statewide threshold. I think the 21 number that Ms. Hall cites is the total cost assuming 22 none of the monies are obtained from the Idaho universal 23 service fund. 24 Q Well, how did I do that? I took 500 lines 25 a month, 6,000 lines and the total cost, maybe I used 45 CSB REPORTING KELLY (Com) Wilder, Idaho 83676 Silver Star 1 your $157,000, is that -- I don't know where I got the 2 number. Anyway, it looked to me like I had a monthly 3 cost on here of $16.00 a line. Would you say that's a 4 bad number? 5 A That might be an approximate number, 6 assuming none of the monies -- in our rate design 7 proposals, we only, we assumed that part of the monies 8 would be obtained through the Idaho high cost fund. 9 Q Part of it or most of it? 10 A Well, most of it. 11 Q Do you think that's fair? 12 A I guess is it fair? I mean, I think it is 13 fair that the calling area is expanded and that the 14 company needs to be made whole if they're going to expand 15 the calling areas. 16 Q Well, you know, as we travel these 17 hearings, we have, you'll see tonight -- 18 A Okay. 19 Q -- we have a lot of folks who show up to 20 testify. Now, the last couple of hearings we've had, 21 we've had, oh, from 150 to 300 people show up and they 22 all want EAS, but they all want it based on the fact it's 23 only going to cost them $2.50 a month. If it was going 24 to cost them $16.00 a month, do you think they'd want it? 25 A I guess that would depend on each 46 CSB REPORTING KELLY (Com) Wilder, Idaho 83676 Silver Star 1 individual's calling pattern. 2 Q Well, do you think it's fair that we 3 implement it and only charge the person receiving the 4 benefit $2.50 and the rest of the state picks up the 5 balance? 6 A I guess I think it would be fair if the 7 calling scopes for the smaller communities, and they were 8 paying a similar rate, they would have a similar calling 9 scope to the larger communities. I don't know if that 10 answers your question, but I guess their calling scope 11 now is currently much less than what someone in a larger 12 community pays. 13 Q My question is what do you think of this 14 system? 15 A The system whereby it would be recovered 16 from the high cost fund? 17 Q Uh-huh. 18 A I guess if the high cost fund is necessary 19 to equalize rates in urban and rural areas, I think 20 that's it's fair to the ratepayers in the rural and urban 21 areas. 22 COMMISSIONER NELSON: Okay, thank you. 23 24 25 47 CSB REPORTING KELLY (Com) Wilder, Idaho 83676 Silver Star 1 EXAMINATION 2 3 BY COMMISSIONER HANSEN: 4 Q Mr. Kelly, I've just got one question. At 5 the public hearing that we had in Soda Springs, we had 6 individual after individual indicate that they'd be 7 willing to pay anywhere from 6 to $20.00 more a month and 8 yet, you're taking and picking the priority rate at 9 $2.00, a little over $2.50, for these people as an 10 increase. I guess I'm kind of curious of why if the 11 public voices support to pick up a greater share of EAS 12 why in your exhibits are you downplaying that to such a 13 small amount? 14 A Well, we offered three different proposals 15 for rate recovery. The reason we recommended, that I 16 recommended, No. 1 was primarily to eliminate the large 17 disparity between business and residential customers, and 18 in addition, it's also similar to the -- it's at the 19 threshold rate which is based upon an average statewide 20 rate, so it kind of makes, I guess puts everybody on an 21 equal basis. 22 I did offer two other proposals, one which 23 offers a same percentage increase to both the business 24 and residential customers and then a third alternative 25 which moves both of them up to the statewide business and 48 CSB REPORTING KELLY (Com) Wilder, Idaho 83676 Silver Star 1 statewide residential rates. 2 Q You were at the hearing in Soda Springs, 3 weren't you? 4 A No, I was not. 5 Q Oh, you weren't there? 6 A No. 7 COMMISSIONER HANSEN: That's all I have. 8 Mr. Ward, do you have any redirect? 9 MR. WARD: Yes. 10 11 REDIRECT EXAMINATION 12 13 BY MR. WARD: 14 Q Mr. Kelly, do you have Ms. Hall's testimony 15 and exhibits in front of you? 16 A Yes, I do. 17 Q If you'd turn to Exhibit 104, let me see if 18 I can help bring in a little clarity to the matter 19 Ms. Hobson was asking you about. With Exhibit 104 -- 20 first of all, to cut to the chase, isn't it true that 21 what you're saying is that in the original testimony, you 22 and the Staff used quite different cost analysis 23 approaches? 24 A Yes, that would be a true statement. 25 Q In an effort to get the numbers to mesh, 49 CSB REPORTING KELLY (Di) Wilder, Idaho 83676 Silver Star 1 you essentially have adopted, for want of a better word, 2 the Staff's approach? 3 A Yes. 4 Q All right. Now, if we look at Exhibit 104, 5 there Ms. Hall has summarized the comparison between 6 consultant and Staff, there's no column heading, but if 7 you look at the second line, you'll see a column heading 8 called "Consultant" and I assume those are TCA's numbers 9 with adoption of the Staff approach? 10 A Yes, they're very close. I think there's 11 some minor discrepancies, but nothing worth arguing 12 about. 13 Q All right, and on the right-hand side is 14 the Staff that represents Ms. Hall's approach as you 15 understand it? 16 A Yes. 17 Q Now, if you look down at line 6, you'll see 18 totals and on the totals there, you'll see 99,022 for 19 consultant, do you see that number? 20 A Yes. 21 Q Now, if we were to add to your number and, 22 for that matter, Ms. Hall's numbers -- well, let's just 23 start with line 3. If you'll look at line 3, you see 24 that there is a number of 7,953 under consultant, do you 25 see that number? 50 CSB REPORTING KELLY (Di) Wilder, Idaho 83676 Silver Star 1 A Yes. 2 Q Does that represent plant required, the 3 ongoing cost of plant required, at 400 percent 4 stimulation? 5 A Yes, it does. 6 Q And conversely, Ms. Hall's number, 5,180, 7 represents plant at 200 percent stimulation? 8 A Yes, I believe that's the difference there. 9 Q Now, if you go to -- so in that instance, 10 Ms. Hall did include the 400 percent stimulation cost in 11 your numbers; correct? 12 A I believe she did. 13 Q Now, if we go to line 4, there both numbers 14 are identical and is it your understanding they are at 15 200 percent stimulation? 16 A Yes. 17 Q And that's the interstate revenue shift as 18 we've called it? 19 A Yes, and that's the number she agreed with. 20 Q What would the number be under your column 21 for line 4 at 400 percent stimulation? 22 A That number would be 100,975. 23 Q And now if we add the numbers up in your 24 column, we should get something hopefully that matches 25 your 150 some thousand dollar number? 51 CSB REPORTING KELLY (Di) Wilder, Idaho 83676 Silver Star 1 A Yes. Like I said, there's some slight 2 discrepancies, but, hopefully, you're going to be within 3 a couple thousand dollars. 4 Q Okay, and if we put a 400 percent 5 stimulation factor in effect and the change in numbers 6 for Ms. Hall's column on lines 3 and 4, she too would get 7 150 some thousand dollars or within a very few hundred 8 dollars of your number; is that correct? 9 A I believe so. 10 MR. WARD: Thank you. That's all I have. 11 COMMISSIONER HANSEN: Thank you for your 12 testimony. 13 (The witness left the stand.) 14 MR. WARD: We call Ron McCue to the stand. 15 16 RON B. McCUE, 17 produced as a witness at the instance of Silver Star 18 Telephone Company, having been first duly sworn, was 19 examined and testified as follows: 20 21 DIRECT EXAMINATION 22 23 BY MR. WARD: 24 Q Mr. McCue, would you please state your name 25 and address for the record? 52 CSB REPORTING McCUE (Di) Wilder, Idaho 83676 Silver Star 1 A My name is Ron B. McCue and my address is 2 104101 Highway 89, Freedom, Wyoming. 3 Q By whom are you employed and in what 4 capacity? 5 A I am employed by Silver Star Telephone 6 Company and in the capacity as vice president. 7 Q Mr. McCue, in preparation for our hearings 8 today, did you cause prefiled testimony to be prepared? 9 A Yes, I did. 10 Q And do you have any corrections or changes 11 to that testimony? 12 A No, I do not. 13 Q If I were to ask you the questions 14 contained in that testimony today, would your answers be 15 as given? 16 A Yes, they would. 17 MR. WARD: Mr. Chairman, I'd move that 18 Mr. McCue's testimony be spread upon the record as if 19 read. 20 COMMISSIONER HANSEN: If there be no 21 objection, so ordered. 22 MR. WARD: He has no exhibits. 23 COMMISSIONER HANSEN: Okay. 24 MR. WARD: At least not yet. 25 (The following prefiled testimony of Mr. Ron B. McCue is spread upon the record.) 53 CSB REPORTING McCUE (Di) Wilder, Idaho 83676 Silver Star 1 Q PLEASE STATE YOUR NAME, POSITION, AND 2 CURRENT ADDRESS. 3 A My name is Ron B. McCue. I am the Vice 4 President of Silver Star Telephone Company, Inc., 5 hereinafter referred to as Silver Star, and the Vice 6 President of Teton Telecom. My business address is 7 104101 Highway 89, P.O. Box 226, Freedom, Wyoming 83120. 8 Q DOES EXHIBIT NUMBER 1 CORRECTLY SET FORTH 9 YOUR EDUCATIONAL AND OCCUPATIONAL BACKGROUND? 10 A Yes, it does. 11 Q HAVE YOU PROVIDED EXPERT TESTIMONY BEFORE? 12 A Yes, I have provided testimony during a 13 variety of telecommunications related hearings before 14 Commissions in Alaska, Montana, Colorado, North Dakota, 15 Idaho and Wyoming. In addition, I have appeared before 16 the Federal Communications Commission on issues such as 17 independent company networks and network reliability. 18 Last, I have appeared before legislative bodies of the 19 states of Wyoming, Alaska, and Montana, as well as 20 appearing before members of the United States Congress to 21 testify about telecommunications related matters. 22 Further, I have written or co-written seven articles on 23 telecommunications matters. 24 Q PLEASE STATE YOUR CURRENT RESPONSIBILITIES 25 FOR SILVER STAR TELEPHONE. 54 Case No. GNR-T-96-6 McCUE (DI) 1 November 3, 1997 Silver Star Telephone Company 1 A My duties currently include the general 2 guidance and supervision of the day to day activities of 3 a number of departments at Silver Star 4 5 / 6 7 / 8 9 / 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 55 Case No. GNR-T-96-6 McCUE (DI) 1A November 3, 1997 Silver Star Telephone Company 1 Communications and Teton Telecom. These include 2 supervision of all plant and switching activities and 3 personnel; supervision of some of the administrative 4 personnel; organization and direction of some office 5 activities; legislative and regulatory activities; 6 customer relations, tariff drafting and execution and 7 rate case participation. 8 Q WHAT IS THE PURPOSE OF YOUR PARTICIPATION 9 IN THIS PROCEEDING? 10 A As the Vice President, I am responsible for 11 many of the day to day operations of the company. 12 Because of this involvement over the last eight years, it 13 has become eminently clear to me that the customers in 14 both the Irwin and Wayan areas are demanding an Extended 15 Area Service ("EAS") arrangement be implemented. My 16 testimony supports the wishes of the communities 17 involved, and offers the requisite documentation and/or 18 schedules to demonstrate that EAS can easily be 19 accomplished. 20 Q WOULD YOU PLEASE DESCRIBE WHAT YOU HAVE 21 DONE IN THIS FILING? 22 A In conjunction with Mr. Allen Hoopes, I 23 prepared, or caused to be prepared, all of the documents 24 contained in this filing. In preparing many of the 25 documents, I personally worked with Mr. Jerry Rhinehart 56 Case No. GNR-T-96-6 McCUE (DI) 2 November 3, 1997 Silver Star Telephone Company 1 and Mr. George Clark, our Cost Consultants, of Tallon 2 Cheeseman & Associates. 3 Q WHY DO YOU BELIEVE THAT THE CUSTOMERS OF 4 SILVER STAR TELEPHONE IN THE IRWIN AND WAYAN EXCHANGES 5 6 / 7 8 / 9 10 / 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 57 Case No. GNR-T-96-6 McCUE (DI) 2A November 3, 1997 Silver Star Telephone Company 1 DESIRE EXTENDED AREA SERVICE? 2 A During my eight year tenure at Silver Star 3 Telephone I have had the opportunity to be in contact 4 with a considerable number of our customers. One of the 5 dominant issues in those conversations is the lack of EAS 6 service between the commercial areas and the county 7 seats. Customers have been emphatic about their desire 8 to eliminate the long distance calling between these 9 areas. The most dominant needs are because the junior 10 high, high school, doctors, dentists, county offices 11 bank, etc., are located in areas that require a toll 12 call. For customers to function in their day to day 13 lives, as well as communicate with many of their children 14 in school, this has been problematic to say the least. 15 Additionally, Silver Star conducts customer 16 satisfaction surveys on a routine basis. In these 17 surveys Silver Star asks for direct suggestions or 18 comments from the customers. To the best of my 19 knowledge, a survey has not been completed to date 20 without a number of comments about this EAS matter. In 21 my eight years, I have only heard from one person who 22 felt EAS should not be implemented. When you measure 23 that with the hundreds of comments in support of EAS, a 24 clear pattern seems to present itself. 25 Q BASED UPON YOUR EXPERIENCE IN THE INDUSTRY, 58 Case No. GNR-T-96-6 McCUE (DI) 3 November 3, 1997 Silver Star Telephone Company 1 AS WELL AS YOUR OPERATION IN OTHER STATES, DO YOU BELIEVE 2 THAT THERE ARE ANY GENERALLY ACCEPTED PARAMETERS FOR EAS 3 IMPLEMENTATION? 4 5 / 6 7 / 8 9 / 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 59 Case No. GNR-T-96-6 McCUE (DI) 3A November 3, 1997 Silver Star Telephone Company 1 A Yes, there has become something of a 2 de facto standard in the Rocky Mountain region by virtue 3 of U S WEST's position on this matter. I have generally 4 concurred in U S WEST's reasoning that the smaller 5 exchange should make an average of approximately six 6 calls per line per month to the larger exchange. As a 7 further criteria, at least 50% of the customers in the 8 smaller exchange need to make at least two calls per line 9 per month to the larger exchange. 10 Q HOW DOES THAT APPLY TO THE SILVER STAR 11 INFORMATION YOU HAVE PREPARED IN THIS CASE? 12 A In order to analyze this question 13 thoroughly, it is necessary to separate the response 14 between the Irwin and Wayan exchanges. Based upon my 15 analysis, the Silver Star Wayan customers make an average 16 number of six calls per line per month to the U S WEST 17 Soda Springs exchange. Further, it appears that 80% of 18 the customers make two or more calls per month to the 19 U S WEST Soda Springs exchange and 67% make six or more 20 calls to the U S WEST Soda Springs exchange per month. A 21 similar calling pattern emerges in the Wayan to Pocatello 22 calling data. However, the Wayan customers calling 23 volumes to the remainder of the towns in Eastern Idaho 24 drops sharply. 25 To address the Irwin exchange next, the Silver 60 Case No. GNR-T-96-6 McCUE (DI) 4 November 3, 1997 Silver Star Telephone Company 1 Star Irwin customers make an average number of nine calls 2 per line per month to the U S WEST Idaho Falls exchange. 3 Further, it appears that 90% of the customers make two or 4 more calls per month to the U S WEST Idaho Falls 5 exchange, and 82% make six or more calls to the U S 6 7 / 8 9 / 10 11 / 12 13 14 15 16 17 18 19 20 21 22 23 24 25 61 Case No. GNR-T-96-6 McCUE (DI) 4A November 3, 1997 Silver Star Telephone Company 1 WEST Idaho Falls exchange per month. Again, the calling 2 volumes drop sharply to the remainder of the towns in the 3 Eastern Idaho calling area. 4 Q DOES THIS ANALYSIS INCLUDE THE FREEDOM, 5 IDAHO EXCHANGE? 6 A No, because the Freedom, Idaho, exchange 7 represents a border anomaly that has historically been 8 under the jurisdiction of the Wyoming Commission, and it 9 currently has EAS service available in the Alpine and 10 Afton, Wyoming area. Any change of its EAS area in Idaho 11 would necessitate a change in the calling area of the 12 Alpine and Afton, Wyoming areas that would require 13 Wyoming and perhaps Federal approval. 14 Q WHAT PERIOD DID YOU USE TO ANALYZE THE 15 TRAFFIC FOR THIS CASE? 16 A The period that was utilized was 17 information that was prepared for October 1, 1995, 18 through November 1, 1996. The specific period used was 19 an actual sample of traffic from October 1, 1995 through 20 November 1, 1996. These months were chosen because they 21 represent typical months, as well as months that included 22 periods when the high school and junior high were in 23 session. 24 Q BASED UPON YOUR UNDERSTANDING OF THE 25 COMMUNITIES, DO YOU ADVOCATE ONE-WAY EAS FROM SILVER STAR 62 Case No. GNR-T-96-6 McCUE (DI) 5 November 3, 1997 Silver Star Telephone Company 1 TO THE U S WEST EXCHANGES, OR DO YOU ADVOCATE TWO-WAY 2 EAS? 3 A In my experience, one way EAS creates 4 customer confusion and a host 5 6 / 7 8 / 9 10 / 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 63 Case No. GNR-T-96-6 McCUE (DI) 5A November 3, 1997 Silver Star Telephone Company 1 of other problems. I strongly recommend two way EAS. 2 Q ARE THERE ADEQUATE FACILITIES IN PLACE TO 3 PROVIDE EAS? 4 A From Silver Star's perspective adequate 5 facilities do exist. Silver Star has analyzed the number 6 of trunks necessary to provide EAS, using its own 7 information as well as data provided by U S WEST. 8 Obviously, traffic will not remain static when calls are 9 toll free, and we want to be sure we have adequate 10 facilities turned up to accommodate the increase. 11 Therefore, based upon my best engineering judgment, I 12 have inflated the actual traffic by 400%. This would 13 call for 48 EAS circuits for Irwin and 24 for Wayan to be 14 established. Adequate facilities exist to provide these 15 circuits. 16 Q WHEN COULD IMPLEMENTATION BE ACCOMPLISHED 17 ON THE FIBER SYSTEM AS YOU HAVE RECOMMENDED? 18 A To the best of my knowledge, by January 1, 19 1998. 20 Q WOULD YOU PLEASE SUMMARIZE YOUR TESTIMONY. 21 A Yes, it is Silver Star's position, and my 22 personal recommendation, that EAS between the Eastern 23 Idaho exchanges, and the Irwin and Wayan exchanges of 24 Silver Star Telephone be implemented in the most 25 efficient and expeditious manner possible. Given the 64 Case No. GNR-T-96-6 McCUE (DI) 6 November 3, 1997 Silver Star Telephone Company 1 facilities available, the number of calls being placed, 2 and the cost estimates of the companies, it is clear to 3 me that the time has come to provide the customers of 4 Irwin and Wayan with the service they desire. 5 6 / 7 8 / 9 10 / 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 65 Case No. GNR-T-96-6 McCUE (DI) 6A November 3, 1997 Silver Star Telephone Company 1 Q DOES THIS CONCLUDE YOUR TESTIMONY? 2 A Yes, it does. 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 66 Case No. GNR-T-96-6 McCUE (DI) 7 November 3, 1997 Silver Star Telephone Company 1 (The following proceedings were had in 2 open hearing.) 3 MR. WARD: Again, Mr. Chairman, I'd like to 4 ask just a few supplemental questions. 5 6 DIRECT EXAMINATION 7 8 BY MR. WARD: (Continued) 9 Q Mr. McCue, are you aware of Ms. Hall's 10 testimony to the effect that neither party has any 11 concrete evidence regarding stimulation? 12 A Yes, I am. 13 Q Did you attempt to review the stimulation 14 that has actually occurred in extended area service cases 15 with which you're personally familiar? 16 A Yes, I have. 17 Q And was there an extended area service case 18 involving Silver Star's Freedom exchange and the Afton 19 exchange of U S WEST in Wyoming in the recent past? 20 A Yes. A couple of years ago there was 21 involvement in the Freedom area with a consumer petition 22 to obtain extended area service from the Freedom/Alpine 23 and Freedom, Idaho areas into the Afton, Wyoming area. 24 Q And if you would look at the document 25 that's been premarked as Exhibit No. 9, let me ask you if 67 CSB REPORTING McCUE (Di) Wilder, Idaho 83676 Silver Star 1 you can identify this document. 2 A Yes. This is an exhibit that I caused to 3 be prepared that analyzed the minutes of stimulation, 4 both originating and terminating, from the Freedom 5 Wyoming, Freedom, Idaho, and Alpine areas into the Afton 6 area, as well as the terminating minutes arriving back in 7 those exchanges from the Afton area. Any time we 8 implement extended area service, we segregate it on a 9 discrete trunk group basis; that is, that we measure EAS 10 separately from toll traffic or local traffic, as it 11 might be, by completely segregating that traffic on to 12 its own trunk group element so no other traffic can go 13 over those, then we apply a traffic measurement system 14 called source destination matrix to those to arrive at 15 that information. 16 Q All right; so would it be correct to say 17 that given that segregation of traffic you have a high 18 degree of confidence that you can identify the actual 19 minutes of use after EAS occurs? 20 A Very high degree of confidence in the 21 numbers that we've prepared based on the minutes that 22 we've captured. 23 Q All right. Now, let me back up just a 24 little bit and go to line 1 of this exhibit. Can you 25 tell me why the base minutes are listed only under total 68 CSB REPORTING McCUE (Di) Wilder, Idaho 83676 Silver Star 1 two-way minutes? 2 A The base minutes were prepared using a rate 3 case analysis in May, June and July of 1995. At that 4 time we were not able to identify the actual minutes. We 5 took the grossed-up minutes given to us by U S WEST from 6 the Afton exchange terminating in Freedom and the 7 estimated toll minutes, intrastate toll minutes, arriving 8 from those three exchanges going towards Afton. When you 9 don't measure them, there's always the potential for 10 dial-around in situations like that, so the best you can 11 do is give a pretty close approximation. 12 Q All right, and so the base of 106,627 there 13 represents obviously two-way traffic between the 14 exchanges prior to EAS? 15 A That's correct. 16 Q All right. Now, without going through 17 these numbers in excruciating detail, first of all, let 18 me anticipate some questions you were asked and probably 19 will be asked by the Commissioners, these numbers don't 20 necessarily give you a per line growth figure, do they, I 21 mean they're total gross minutes of use? 22 A They're gross minutes actually measured on 23 those trunk groups irrespective of actual access line 24 growth in that exchange, in any of those exchanges. 25 Q So would it be fair to say that access line 69 CSB REPORTING McCUE (Di) Wilder, Idaho 83676 Silver Star 1 growth could account for a very few percent a year of 2 this, two, three, four percent? 3 A Access line growth would account for some 4 stimulation factor in these numbers, absolutely. 5 Q But would it be significant compared to the 6 numbers we see here? 7 A Not at all. 8 Q All right. Now, let me ask you, just 9 looking at the gross numbers for combined totals, how 10 long did it take these two exchanges to reach the 400 11 percent growth figure? 12 A As the exhibit indicates from August of 13 1995 down to approximately line 19, which would be 14 January of 1997, some 14 or 15 months to reach the 15 400 percent stimulation factor and then moved beyond 16 after that. 17 Q Okay. Let me just -- can you describe just 18 very quickly for the record, I know the Commissioners are 19 probably familiar with it, what the features of the 20 Alpine/Freedom exchanges on the one hand and the Afton 21 exchange on the other are like? 22 A Yes, I could. Alpine and Freedom are what 23 I would consider typical rural remote exchanges. There's 24 not a lot of business in those areas. We had to reach 25 out to the Afton community for junior high, high school, 70 CSB REPORTING McCUE (Di) Wilder, Idaho 83676 Silver Star 1 for groceries, for shopping areas, for medical, our 2 license plates. Our county seat area is in Afton. One 3 could largely say that most all commerce in that valley 4 is done to Afton. 5 Q Okay. Now, is there also some commercial 6 traffic that would -- would you expect there's some 7 community of interest between Freedom and Alpine and 8 Jackson? 9 A As one analyzes the local area, there's a 10 substantial area of interest from what I'll call the 11 northern part of Star Valley, the Alpine, Wyoming, 12 Alpine, Idaho, northern Freedom exchange, because most of 13 those people have either business ties in the Jackson 14 community or in fact work there and commute back and 15 forth and live in that area. I guess my analysis here is 16 intended to show the Afton and Freedom, the ones that I 17 can accurately identify knowing full well that there's 18 some community of interest calling missing. 19 Q All right, and given what you know about 20 the community of interest between those two sets of 21 exchanges and the sets of exchanges we're considering 22 here today, do you believe this would be a reasonably 23 accurate surrogate for the exchanges we're considering 24 today or higher or lower, do you have an opinion? 25 A I do have an opinion and I think while each 71 CSB REPORTING McCUE (Di) Wilder, Idaho 83676 Silver Star 1 given community has its own merits, has its own inherent 2 community interests, its owns calling patterns, its own 3 public reactions to things, I think this is the best 4 analysis I could give you for Irwin and Wayan, Idaho, 5 again those people knowing the communities. Wayan, just 6 over 100 access lines, no real business community, has to 7 do everything through their schools, hospitals, groceries 8 in the Soda Springs area. 9 In addition, when you look at the Irwin, 10 Idaho area, again has one elementary school, does junior 11 high, high school, groceries, medical, county in the 12 Idaho Falls area. I would caution, however, that you've 13 got to remember we're talking about a 2,000 access line 14 calling area, Freedom/Alpine, into roughly a 3,000 access 15 line calling area. Where they tend not to be analogous 16 in my opinion is you must remember that we're talking 17 probably in excess of 100,000 access lines in the eastern 18 Idaho calling area that Wayan and Irwin would have access 19 to that are not reflected in these numbers. 20 Q All things being equal, would the greater 21 number of access lines in the eastern Idaho area suggest 22 to you that stimulation would be even greater? 23 A Based on about 21 years of experience in 24 the telephone industry, that's exactly what it would lead 25 me to believe. 72 CSB REPORTING McCUE (Di) Wilder, Idaho 83676 Silver Star 1 Q Now, at one time were you also -- let me 2 strike that. Did Columbine Telephone Company at one time 3 own exchange properties in Colorado? 4 A Yes, Columbine Telephone Company, Inc. 5 operated in the San Luis Valley serving the areas of 6 Crestone and Mosca, Colorado. 7 Q If you would, Mr. McCue, would you look at 8 Exhibit 10 and tell me how this exhibit came to be 9 prepared? 10 A This exhibit was caused to be prepared by 11 me based on my experience with Columbine Telephone in the 12 San Luis Valley area for the Crestone and Mosca 13 exchanges. As Mr. Kelly had indicated, the Colorado 14 Commission had implemented a CICP, community of interest 15 calling plan, C-I-C-P. I was a participant in that 16 proceeding and process as it related to Columbine 17 Telephone. 18 Q All right, would you tell me, here we have 19 headings for column C and column E headed "Crestone" and 20 "Mosca," if I'm pronouncing that right, would you tell 21 me what those headings represent? 22 A Those represent traffic minutes for each of 23 those communities. As you can see on lines 21 and 23, 24 the Crestone exchange was, had EAS service placed into 25 effect for Mosca, Alamosa amd Saguache communities. 73 CSB REPORTING McCUE (Di) Wilder, Idaho 83676 Silver Star 1 Mosca exchange had a different number of exchanges, 2 Crestone, Alamosa, Center and Monte Vista. Again with 3 the theory that you establish separate trunk group 4 routing to the communities that they have, we had to 5 measure the Crestone traffic different than the Mosca 6 traffic which really gave us a better analysis to peg 7 actual numbers. 8 Q If my memory of Colorado is correct, would 9 it be correct to assume that Alamosa is the larger 10 community there and can you tell us what size it is? 11 A Alamosa is the larger community. 12 Crestone -- the entire company was about 950 access 13 lines, Columbine Telephone. Rough numbers, about 490 14 were in Mosca and the residual were in Crestone, Crestone 15 being the smaller exchange, and Alamosa being the 16 commerce center, again medical, dental, grocery, and it's 17 a town of about 10,000 people, roughly. 18 Q And how long did it take those two 19 exchanges to get to 400 percent stimulation? 20 A Well, based on our December minutes, it 21 took from October of 1991, which is what the base line 22 minute count was taken from at the implementation date, 23 again October 1991, until sometime right around December 24 of 1992 for the Crestone exchange where it reached 401 25 percent, and roughly 382 percent, not quite 400 percent, 74 CSB REPORTING McCUE (Di) Wilder, Idaho 83676 Silver Star 1 for the Mosca exchange. 2 Q Okay. Counting your Exhibits 9 and 10, 3 Mr. McCue, as well as the previously introduced exhibits, 4 we have six examples here, how long did it take, in these 5 examples, how long did it take for these communities to 6 get to 400 percent stimulation? 7 A Being a very rough approximation, anywhere 8 from 13 to 15 or 16 months. 9 Q In the fastest of them; is that right? 10 A Yeah. 11 Q Let me turn to another subject here. With 12 this kind of evidence in hand, you recall that Ms. Hall 13 has suggested that the equipment that you proposed, that 14 Silver Star proposes to install could be cut in half 15 because stimulation will be only 200 percent. In your 16 judgment, what would happen if you in fact installed half 17 as much equipment as you had projected? 18 A It would lead one to a very obvious 19 analysis that during the early months you would be fine, 20 at some point there'd be a cross-over and you'd have a 21 blockage at that point and then from there on your 22 blockage rate would continue to be much higher. 23 Q Regardless of what the Commission decides 24 about stimulation, would you in fact only install enough 25 equipment to handle 200 percent stimulation? 75 CSB REPORTING McCUE (Di) Wilder, Idaho 83676 Silver Star 1 A Based on my professional experience, no, I 2 couldn't in good conscious do that based on two factors. 3 The first factor is I helped price out the equipment. 4 When you looked at the 400 percent stimulation, you got 5 approximately a 20 percent break on the purchase cost of 6 the equipment. When you couple that with the fact that 7 that traffic is coming, anybody that says it's going to 8 stop at 200 percent is inaccurate, it's going to continue 9 to grow, we have an obligation to our customers as a 10 public utility to meet and achieve a P1 grade of service, 11 a level of blockage that is an industry standard, we have 12 an obligation. Whether the Commission allows 200 percent 13 or some other number, we're obligated to meet that and I 14 would put it in. 15 Q Whether the Commission let's you recover 16 your costs or not? 17 A Yes, sir. 18 Q All right. Just to pick up on a couple of 19 other questions, loose ends, you have some familiarity 20 with the geography of Colorado, do you not? 21 A Yes, I do. 22 Q Is Bennett on the opposite side of Denver 23 from Cripple Creek? 24 A Yes, Bennett is on the eastern plains. If 25 one were to look, it would be directly east of Denver. 76 CSB REPORTING McCUE (Di) Wilder, Idaho 83676 Silver Star 1 Cripple Creek is actually southwest of Denver in the 2 mountainous areas. 3 Q Okay, and lastly, would you clarify the 4 situation regarding Internet access in the Silver Star 5 exchanges? 6 A I'd be happy to. Internet service is under 7 one of my departments. It operates at my direction. In 8 the Wayan area, Silver Star began providing Internet 9 service just a couple of months ago because of the 10 facilities that are available. Internet service by 11 Silver Star is not currently offered in the Irwin 12 exchange and will not be until such time as services or 13 facilities are available and that is not in the immediate 14 foreseeable future. 15 Q If EAS is granted, is it true that the 16 residents of those exchanges will be able to reach 17 Internet providers or other Internet providers, including 18 America Online and the on-line services? 19 A Yes. I have received a number of comments 20 from citizens, particularly in the Irwin exchanges as one 21 might imagine, if we're not going to provide Internet 22 service, couldn't we at least help them get EAS so they 23 could get it from SRV Net or other providers in the 24 Pocatello, Blackfoot and Idaho Falls area. 25 Q Okay. One final loose end, Mr. McCue. As 77 CSB REPORTING McCUE (Di) Wilder, Idaho 83676 Silver Star 1 Commissioner Hansen suggested, there have been a number 2 of public witnesses who have testified they'd be willing 3 to pay up to $20.00, perhaps, for extended area service. 4 What do you think will happen if there is a significant 5 disparity, and you can define significant however you 6 like, between the bottom line rate paid by U S WEST 7 customers, including any EAS surcharges, and those of 8 Silver Star, do you think the residents of Silver Star 9 will be content if there's a significant disparity in 10 those rates? 11 A No, I don't believe so. Again, in talking 12 to the consumers in the Wayan and Irwin areas, as one 13 starts looking at the analyses from the $2.00 bottom end, 14 roughly, up to the $16.00 range, as you migrate up that 15 scale, there becomes a varying degree of buy-in from the 16 consumers, and once you start passing that number where 17 the consumers believe U S WEST is at, there's a sharp 18 division. They object to having to pay more than 19 U S WEST because of the number of callers they have 20 access to. 21 MR. WARD: That's all I have. 22 Thank you, Mr. Chairman. 23 COMMISSIONER HANSEN: Okay, Mr. Ward, would 24 you like the exhibits marked on the record? 25 MR. WARD: Yes, thank you, Mr. Chairman. 78 CSB REPORTING McCUE (Di) Wilder, Idaho 83676 Silver Star 1 Yes, I'd request that Exhibits 9 and 10 be marked for 2 identification. 3 COMMISSIONER HANSEN: If there be no 4 objection, so ordered. 5 (Silver Star Telephone Company Exhibit 6 Nos. 9 and 10 were marked for identification.) 7 COMMISSIONER HANSEN: Let's see if we have 8 questions. 9 MR. HOWELL: Mr. Chairman, just a 10 procedural matter, maybe Mr. McCue's testimony ought to 11 be spread on the record. 12 MR. WARD: If I omitted his testimony being 13 spread, I will do so now, Mr. Chairman. 14 COMMISSIONER HANSEN: If there be no 15 objection, so ordered. 16 Okay. Now, we'll see if we have any 17 questions. Ms. Hobson. 18 MS. HOBSON: Thank you. 19 20 CROSS-EXAMINATION 21 22 BY MS. HOBSON: 23 Q Mr. McCue, I want to talk to you real 24 briefly about Freedom. You indicated that's your home? 25 A I live in Thayne, I work in Freedom, that's 79 CSB REPORTING McCUE (X) Wilder, Idaho 83676 Silver Star 1 correct. 2 Q That's the home of your business, then? 3 A That's our corporate office, yes. 4 Q And it's in Wyoming, in the State of 5 Wyoming? 6 A Yes, it is. 7 Q Is there another community -- I'm sorry to 8 say I haven't spent as much time up here as I would like 9 to, is there another community that is known as Freedom, 10 Idaho? 11 A Ms. Hobson, you ought to come on down. 12 We're always welcome to host folks. Freedom is 13 separated, if I can use the term Freedom proper is 14 separated, by a state highway where the north lane of the 15 highway, northbound lane, is in Wyoming and the 16 southbound lane is in Idaho, appropriately cutting the 17 town of Freedom in half. 18 Q So you have, like, one mayor and one city 19 council and so on for Freedom? 20 A No. 21 Q No? 22 A No. 23 Q Do you have any mayors or city council? 24 A I'm sure there are a number of people that 25 have elected themselves mayor, but to the best of my 80 CSB REPORTING McCUE (X) Wilder, Idaho 83676 Silver Star 1 knowledge, there's no mayor or city council. Again, the 2 property identified on the Idaho State side is in Idaho 3 and taxed as such and the property in Wyoming is in 4 Wyoming and taxed as such. It is effectively one 5 community, however. I mean, it literally is across the 6 street. 7 Q Is there a separate exchange within your 8 company that is the Freedom exchange? 9 A There's two exchanges. Freedom, Wyoming is 10 (307) 883 and Freedom, Idaho, served off the same switch, 11 is (208) 873, both effectively given Wyoming rates 12 through a long-standing practice with the Idaho and 13 Wyoming commissions. 14 Q And do the Idaho Freedom customers have EAS 15 to Afton? 16 A They have EAS to Afton and to Alpine as a 17 result of prior orders by the Wyoming Commission, yes. 18 Q Is that an interLATA EAS or where is the 19 LATA boundary? 20 A That is interstate intraLATA, meaning that 21 they are in the Wyoming LATA. 22 Q So the Idaho customers are in a Wyoming 23 LATA? 24 A Yes, they are. 25 Q And Silver Star is not supportive of the 81 CSB REPORTING McCUE (X) Wilder, Idaho 83676 Silver Star 1 concept of giving the Freedom, Idaho customers EAS to the 2 eastern Idaho region; is that correct? 3 A We are not supportive of that for a couple 4 of reasons. One is that it orders the division of a 5 LATA. It becomes intraLATA service going both ways 6 across LATA boundaries. There's a diminimus impact to 7 those customers, I believe. While they are in Caribou 8 County, Idaho, those folks have hospital services, 9 schools, groceries and if we were put in a position of 10 granting EAS service to the Idaho area, we would feel 11 obligated to cut it off from the Wyoming area, thus 12 making it long distance to call across the street or into 13 Afton where their school and hospitals are and I don't 14 believe the community would like that. 15 MS. HOBSON: Thank you. That's all I have. 16 COMMISSIONER HANSEN: Mr. Howell. 17 MR. HOWELL: Thank you, Mr. Chairman. 18 19 CROSS-EXAMINATION 20 21 BY MR. HOWELL: 22 Q Mr. McCue, a couple of questions about 23 Exhibits 9 and 10. First, on Exhibit 9, can you identify 24 in the top of the page in column C, it says originating 25 minutes, what was the originating exchange? 82 CSB REPORTING McCUE (X) Wilder, Idaho 83676 Silver Star 1 A The originating minutes in that exchange 2 would be the Freedom exchange, I'm sorry, and the 3 terminating minutes would be from Afton back to Freedom. 4 Q Okay. In looking at line 11, which is at 5 least described as May 1996, is that a typo or how do you 6 account for what looks like a sudden drop in phone 7 service there? 8 A It's actually a typo. I realized that this 9 morning on the way over here. It's the wrong number and 10 I apologize. 11 Q So it doesn't represent some additional EAS 12 switchover or anything like that? 13 A It does not. It's simply an error on my 14 part. 15 Q And if we were to look under the 16 originating minutes, column C, from Freedom, basically 17 starting on line 4 which shows 116,000 minutes down to 18 October of '97, we only have an increase of about 80,000 19 originating minutes over that course of time, don't we? 20 A That's correct. 21 Q And yet, on the terminating side, there's a 22 tremendous amount of growth. Can you explain the 23 distinction between what appears to be a much smaller 24 growth in originating minutes and a much larger growth in 25 terminating minutes? 83 CSB REPORTING McCUE (X) Wilder, Idaho 83676 Silver Star 1 A Yes, I can. Again, if I can point out, the 2 106,627 base line, if one assumed a one-to-one ratio, you 3 could virtually divide that in half as to originating and 4 terminating for purposes of the initial case, so if you 5 were to do that, basically 53,000, assuming that would be 6 a correct way, 53,000 minutes for August of 1995 would be 7 the originating basis and just two months later in 8 October it jumped to 116, so that was a fairly 9 significant increase. I can directly attribute, I 10 believe, the terminating minute growth is to Silver Star 11 provides Internet service in the Afton exchange and for a 12 good portion of that time there were no other Internet 13 providers and, consequently, the Afton people are calling 14 into the Freedom exchange to access the Internet. 15 Q And does the company offer flat rate 16 service, Internet service? 17 A We offer a host of different costing 18 methodologies from an introductory level which has a time 19 charge to a flat rate charge, yes. 20 Q Then turning to Exhibit 10, when the 21 Colorado Public Utilities Commission adopted the 22 community of interest calling plans, were those plans 23 optional or mandatory for customers? 24 A They were mandatory. 25 Q Okay, and in the Colorado Commission's 84 CSB REPORTING McCUE (X) Wilder, Idaho 83676 Silver Star 1 docket, what stimulation factor did that Commission 2 adopt? 3 A That commission over my objections adopted 4 a 200 percent stimulation factor and, as you can see, it 5 was generally incorrect. 6 Q All right. On page 3 of your testimony, 7 you discuss about lines 15 through 18 about surveys that 8 the company periodically conducts. As a part of that 9 survey, do you ask customers what they'd be willing to 10 pay for additional EAS service? 11 A We do not. 12 Q Okay, and on page 4 of your testimony at 13 the top, you more or less discuss a de facto standard of 14 six calls per line per month being an indication of 15 community of interest. With that standard in mind, are 16 you advocating EAS to those exchanges that don't meet 17 that six calls per month standard? 18 A Yes, I am. As we analyzed this, I caused 19 to be prepared or prepared a number of different analyses 20 for the Irwin and the Wayan exchange looking at just that 21 kind of a criteria, what was the call stimulation, what 22 was the calling pattern to certain communities, if you 23 understand the geography of that area. For example, if 24 you looked at what I'll call the Pocatello calling area, 25 I use that very loosely to define everything from 85 CSB REPORTING McCUE (X) Wilder, Idaho 83676 Silver Star 1 Blackfoot south, would that be a number that would be 2 more palatable to the citizens. In the Irwin area, I 3 looked at what I would call the Idaho Falls calling area 4 and what we found, just a number that stuck in my mind, 5 for the Wayan customers, if you sort of analyzed the 6 traffic and took Montpelier, Paris, Preston, Grace, 7 Bancroft into it, they didn't meet it in all those cases, 8 but is there a community of interest there, for some 9 folks there is. Would you deduct it, it would make about 10 three cents a month difference. In my estimation, that 11 was a diminimus impact and didn't warrant consideration. 12 In fact, we looked at it, would our 13 customers be substantially disadvantaged versus the 14 U S WEST implemented calling area and we think they would 15 be and so we have asked for the entire calling area. 16 Q And then the basis, then, for recommending 17 the entire area, realizing there that are many exchanges 18 as you've just pointed out that have less than one call 19 per month, the basis is because it was cost diminimus? 20 A Yes, that's correct. 21 Q Earlier I was asking Mr. Kelly some 22 questions about the components of stimulation and I 23 believe earlier on your supplemental testimony you were 24 talking about growth rates. Do you remember in the sales 25 cases when Silver Star purchased exchanges from U S WEST 86 CSB REPORTING McCUE (X) Wilder, Idaho 83676 Silver Star 1 what line growth the company assumed in calculating its 2 forward-looking revenue? 3 A I don't remember the exact number. In 4 recent conversations with Mr. Allen Hoopes, I believe he 5 is prepared to discuss those. I don't have a personal 6 knowledge. 7 Q Nice hand-off. 8 MR. WARD: We'll see if it gets completed. 9 MR. HOWELL: It's kind of like the lateral, 10 isn't it? 11 All right, thank you, Mr. Chairman. I have 12 no further questions. 13 COMMISSIONER HANSEN: Commissioner Nelson. 14 COMMISSIONER NELSON: Thank you. 15 16 EXAMINATION 17 18 BY COMMISSIONER NELSON: 19 Q I had a question that came to me as just a 20 periphery issue here, but there's no question that a lot 21 of the stimulation is coming from Internet use. Whether 22 you go to EAS or not, use of the Internet is promoting 23 use of the telephone line, and this by itself is causing, 24 isn't it, quite a shift from interstate to intrastate 25 minutes? 87 CSB REPORTING McCUE (Com) Wilder, Idaho 83676 Silver Star 1 A I think in almost any analysis I've done, 2 Commissioner, there is inherently in the earlier years 3 some Internet impact, although I'm not sure we could 4 identify what it was. Clearly, in the last two years 5 with just a skyrocketing effect of Internet, it is 6 causing a substantial shift in cost settlements from the 7 interstate to the state and local side, yes. 8 Q So just by itself this is affecting your 9 revenue and your revenue requirement? 10 A No question. 11 Q Well, isn't an awful lot of use of the 12 Internet actually interstate? 13 A It's an issue that's a near and dear one to 14 my heart because I'm an Internet user myself and I know a 15 lot of people who are and virtually all of the Internet 16 web sites that they're visiting or keying on are out of 17 state, so what gets tuned up and looks like a local 18 minute in my opinion is really an interstate minute. 19 Q Is there any way to address this issue to 20 get that turned around? 21 A There are, but none of them are easy, 22 Commissioner. 23 Q Well, this doesn't have a lot to do with 24 this case except for the stimulation, but it seems to me 25 like it is going to have a huge effect on every Idaho 88 CSB REPORTING McCUE (Com) Wilder, Idaho 83676 Silver Star 1 company, on every company. 2 A It has a huge effect and one of the areas 3 that I consider is what you can do, Commissioner, is each 4 Internet service provider and ISP has a router or a 5 mechanism and you know the number of minutes that your 6 customers are on line. Whether they are on a 9.95 7 10-hour or whether they're on a hypothetical 19.95 8 unlimited, as an ISP provider, you know the number of 9 minutes that that customer is on and you can gross those 10 up and if one even applied an allocation factor to them, 11 you'd get much closer than we are today. You could 12 either assume they're 100 percent interstate or you could 13 apply in inter/intrastate allocation factor to them and 14 allocate them on that way minimizing the impact on the 15 interstate cost shift. 16 Q Do you know if the FCC has been approached 17 with that issue? 18 A I know they've been approached on a number 19 of occasions with different methodologies and they are 20 undertaking, I believe, a docket to study that right 21 now. 22 COMMISSIONER NELSON: Okay, thank you. 23 24 25 89 CSB REPORTING McCUE (Com) Wilder, Idaho 83676 Silver Star 1 EXAMINATION 2 3 BY COMMISSIONER HANSEN: 4 Q I've got a question. In Mr. Kelly's 5 Exhibit 4, he shows 26 business customers in Wayan. 6 A Yes, sir. 7 Q As they testified at that hearing and 8 they'd get up and say they had a business to sell dogs 9 and horses and cattle and whatever, I asked them if they 10 had a business phone and they said no. 11 A Yes. 12 Q And I guess I'd like to ask you the 13 question, I'm really curious where these 26 businesses 14 are in Wayan and I guess the real question is what 15 difference do you see in business service and residential 16 service in a small community such as that? 17 A If I can address it, Mr. Commissioner, in 18 two parts. The Wayan business customers are very 19 predominantly the large mines, being phone service at 20 Dravo, a contractor for Monsanto, Monsanto's own lines 21 there and phone service to another mine that we serve 22 called Rhone-Poulenc. I would wager a rough guess that 23 95 plus percent of those 26 lines are at those 24 locations. The other one would be Whitelock's Marina and 25 so the ones that I can recall off the top of my head are 90 CSB REPORTING McCUE (Com) Wilder, Idaho 83676 Silver Star 1 true store front-type businesses. 2 The second part of the question is a 3 philosophical determination by Mr. Hoopes and myself and 4 you see it referenced in option one. In our opinion, 5 there's two factors. In Silver Star's territory, in most 6 small independents areas, and certainly here in Driggs, 7 you don't have a lot of really big business. What you 8 have is a little mom and pop working out of the house 9 versus maybe my Aunt Mabel that lives down the street 10 that spends six hours a day on the phone just talking to 11 folks and as you start analyzing those, as most folks 12 know, for many years it was a value of service versus a 13 cost of service and the value of service analogy was that 14 businesses typically had a greater value on the use of 15 that line than did a residence and, therefore, businesses 16 were artificially set higher, the rates were set higher. 17 They effectively subsidized residential 18 service, but now as you come to these cottage industries 19 and you have a really hard time looking at the use of my 20 Aunt Mabel's phone versus a mom and pop cottage business 21 operating out of their home, it's hard to determine that 22 those look that much different in their usage of that 23 phone, and as competitive service comes for U S WEST and 24 for any of the independents, that's an area that 25 wholesalers and retailers are attacking competitive 91 CSB REPORTING McCUE (Com) Wilder, Idaho 83676 Silver Star 1 services. They are buying bulk resale -- bulk 2 residential service at an unbundled discount rate, 3 turning around and selling it to a business because they 4 have no determination of whether that's a business or 5 not, nor do they care, so when you look at ratemaking in 6 the future, it is my opinion, it's the opinion of the 7 management at Silver Star, we're going to have to start 8 making that business/residence rate diverge because the 9 use is the same. 10 Q Would you say, though, in your mind, would 11 you say that businesses require greater demand on your 12 services during the daylight hours than residential? 13 A I don't know as I could make that 14 statement. One could certainly look at it and measure 15 it. I think you certainly could used to make that 16 statement. I don't know if you could do that any more. 17 Q So really, you wouldn't say that had any 18 correlation, then, with the way they allocate toll rates 19 based on cheaper rates in the evening and weekends 20 because of the usage by, say, businesses during the day 21 and you're saying that wouldn't hold true, then? 22 A Not in a small urban area, Mr. Commissioner, 23 I don't believe so. You know, obviously, that theory was 24 set for large businesses in a highly urbanized or metro 25 area. I don't think that's true in a very rural area 92 CSB REPORTING McCUE (Com) Wilder, Idaho 83676 Silver Star 1 like the ones we serve. 2 Q One last question, are you aware of what 3 U S WEST customers pay for EAS? 4 A Not specifically. Very generally I am, but 5 not specifically as to quote dollar and cents, no. 6 Q Would you, just with the knowledge you 7 have, would you think that it's higher than the $2.51 or 8 $3.51 proposed in Exhibit 4A? 9 A I believe it would be slightly higher. 10 COMMISSIONER HANSEN: Thank you. That's 11 all I have. 12 Mr. Ward, do you have any redirect? 13 14 REDIRECT EXAMINATION 15 16 BY MR. WARD: 17 Q Yes, I want to ask one other question 18 Commissioner Hansen asked in a slightly different way. 19 Let's assume that you have a farmer in this community 20 who, like most farmers, calls for parts, calls for 21 prices, calls for sales information, whether it be toll 22 or local makes no difference for my analogy, and he has 23 a, this farmer has a, residential line and you have a 24 small mom and pop store that calls for supplies and calls 25 for parts and occasionally calls for service, is it clear 93 CSB REPORTING McCUE (Di) Wilder, Idaho 83676 Silver Star 1 to you which of those two is the true business customer 2 or whether there's any difference between the two? 3 A It's been my personal experience in this 4 area over the last four or five years that the line is 5 becoming so fine that it's almost indeterminable. We've 6 had a number of problems with, you know, the farm 7 advertising, the business advertising and who's causing 8 the use of the system. It's really difficult 9 operationally to say you are a business and therefore you 10 should pay more versus the farmer, that you're not a 11 business and you should pay less. 12 Q One follow-up, do you have some experience 13 of what happens to a small telephone company when it 14 tries to reclassify farmers as businesses? 15 A Unfortunately, yes. 16 Q Was it pleasant? 17 A It was not. 18 MR. WARD: Thank you. That's all I had. 19 COMMISSIONER HANSEN: Thank you for your 20 testimony. 21 THE WITNESS: Thank you. 22 COMMISSIONER HANSEN: I believe right now, 23 we've been at this for about an hour-and-a-half, I think 24 we'll take a ten-minute break and then come back. 25 (Recess.) 94 CSB REPORTING McCUE (Di) Wilder, Idaho 83676 Silver Star 1 ALLEN R. HOOPES, 2 produced as a witness at the instance of Silver Star 3 Telephone Company, having been first duly sworn, was 4 examined and testified as follows: 5 6 DIRECT EXAMINATION 7 8 BY MR. WARD: 9 Q Mr. Hoopes, would you state your name and 10 address for the record? 11 A Yes, Allen R. Hoopes, H-o-o-p-e-s, 12 104101 Highway 89, Freedom, Wyoming, 83120. 13 Q And, Mr. Hoopes, in preparation for this 14 hearing today, did you cause prefiled testimony to be 15 prepared? 16 A Yes, I did. 17 Q Do you have any changes or corrections to 18 that testimony? 19 A I do not. 20 Q If I were to ask you the questions 21 contained in that testimony today, would your answers be 22 the same? 23 A Yes, they would. 24 Q Mr. Hoopes, you had an exhibit tentatively 25 marked ARH-1, did you not? 95 CSB REPORTING HOOPES (Di) Wilder, Idaho 83676 Silver Star 1 A Yes, I did. 2 MR. WARD: Mr. Chairman, could we have that 3 marked Silver Star's Exhibit 11 for identification? 4 COMMISSIONER HANSEN: Okay, that will be 5 marked as Exhibit 11. 6 (Silver Star Telephone Company Exhibit 7 No. 11 was marked for identification.) 8 MR. WARD: And this time before asking a 9 couple of supplemental questions, I'd move that 10 Mr. Hoopes' testimony be spread on the record as if read 11 and Exhibit 11 identified. 12 COMMISSIONER HANSEN: If there be no 13 objection, so ordered. 14 (The following prefiled testimony of 15 Mr. Allen Hoopes is spread upon the record.) 16 17 18 19 20 21 22 23 24 25 96 CSB REPORTING HOOPES (Di) Wilder, Idaho 83676 Silver Star 1 Q PLEASE STATE YOUR NAME, POSITION AND 2 CURRENT BUSINESS ADDRESS. 3 A My name is Allen R. Hoopes, my position 4 with Silver Star Telephone Company, Inc., hereinafter 5 referred to as Silver Star, is President/CEO. My 6 business address is 104101 Highway 89, P.O. Box 226, 7 Freedom, Wyoming 83120. 8 Q DOES EXHIBIT NUMBER 1 CORRECTLY SET FORTH 9 YOUR EDUCATIONAL AND OCCUPATIONAL BACKGROUND? 10 A Yes, it does. 11 Q WHAT IS THE PURPOSE OF YOUR APPEARANCE 12 BEFORE THIS COMMISSION TODAY? 13 A As President and CEO of Silver Star, I am 14 appearing to present testimony in support of two-way 15 Extended Area Service (EAS) between the Irwin/Wayan 16 exchanges and the Southeastern Idaho EAS calling areas of 17 U S WEST. 18 Q WOULD YOU PLEASE DESCRIBE YOUR ROLE IN THIS 19 FILING? 20 A I have participated with our consulting 21 firm, Tallon, Cheeseman & Associates, Silver Star's 22 staff, my Vice President, Mr. Ron McCue, and the Idaho 23 Public Utilities Commission Staff in reviewing, preparing 24 or causing to be prepared, the documents and schedules 25 that are a part of this filing. 97 Case No. GNR-T-96-6 HOOPES (DI) 1 October 31, 1997 Silver Star Telephone Company 1 Q WHY DO YOU FEEL AS A TELEPHONE COMPANY 2 MANAGER THAT TWO-WAY EAS SHOULD BE IMPLEMENTED IN THESE 3 AREAS? 4 5 / 6 7 / 8 9 / 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 98 Case No. GNR-T-96-6 HOOPES (DI) 1A October 31, 1997 Silver Star Telephone Company 1 A There is a great deal of community interest 2 and a large amount of telephone calling that occurs 3 across Southeastern Idaho that supports EAS from a policy 4 perspective. 5 Substantial public interest exists for 6 implementing two-way EAS for both Irwin and Wayan for 7 several reasons. First, many of Irwin's and Wayan's 8 basic services are not located in these communities. 9 Basic services such as the hospital, high school and 10 junior high, county offices, library, and county 11 extension and social services are routinely called by 12 Irwin and Wayan residents at the price of a long distance 13 call. Secondly, over the years many customers have asked 14 for EAS and are continuing to indicate this is a service 15 they desire between the communities. Silver Star's 16 independent surveys have repeatedly indicated a strong 17 desire for this service. Third, during the past two 18 decades recreational and tourism activities have grown 19 bringing many citizens from the Idaho Falls area who own 20 property in the Swan Valley area. These individuals 21 often spend their weekends in Swan Valley and have a need 22 to communicate with family and work on a regular basis in 23 the Idaho Falls area. Fourth, in the Wayan area the work 24 force of the phosphate mining business has grown to 25 include many Wayan residents who work in the Soda Springs 99 Case No. GNR-T-96-6 HOOPES (DI) 2 October 31, 1997 Silver Star Telephone Company 1 mines or Soda Springs businesses on a daily basis and 2 have a need to be in touch with family and the elementary 3 school. 4 Q THE EAS PETITIONS IN THIS CASE ALSO 5 REQUESTED EAS FROM THE IDAHO PORTION OF SILVER STAR'S 6 FREEDOM 7 8 / 9 10 / 11 12 / 13 14 15 16 17 18 19 20 21 22 23 24 25 100 Case No. GNR-T-96-6 HOOPES (DI) 2A October 31, 1997 Silver Star Telephone Company 1 EXCHANGE TO THE SOUTHEASTERN REGION. WHAT IS YOUR 2 POSITION ON THAT REQUEST? 3 A I understand why the residents have made 4 that request, but Silver Star must oppose it. The 5 Freedom exchange serves customers in both Idaho and 6 Wyoming. It already has extended area service to Afton, 7 Wyoming that was implemented as a result of a Wyoming 8 Public Service Commission order. If Freedom also 9 received EAS to the southeastern Idaho region, the result 10 would be an administrative nightmare for both Silver Star 11 and U S WEST. Without going into great detail, an 12 interstate EAS route raises a host of issues, not the 13 least of which is the possibility of EAS arbitrage. As a 14 practical matter, the request is virtually impossible to 15 implement. 16 Q WHAT IS THE REVENUE IMPACT ON SILVER STAR 17 IF IT OFFERS TWO-WAY EAS? 18 A This filing for two-way EAS is designed to 19 be revenue neutral to Silver Star. When I say revenue 20 neutral, I mean that Silver Star will not lose any 21 revenue or receive any additional revenue from the 22 implementation of this service. EAS will result in lost 23 access charges and billing and collection charges for 24 calling to the various Southeastern Idaho exchanges, but 25 Silver Star proposes to recover an equivalent amount of 101 Case No. GNR-T-96-6 HOOPES (DI) 3 October 31, 1997 Silver Star Telephone Company 1 revenue by adjusting local rates and/or increasing its 2 disbursements from the Idaho USF. 3 I should also add that Silver Star is planning to 4 file a rate increase request within the next few weeks. 5 This request is not related to the EAS petitions, but is 6 simply an attempt to recover increased 7 8 / 9 10 / 11 12 / 13 14 15 16 17 18 19 20 21 22 23 24 25 102 Case No. GNR-T-96-6 HOOPES (DI) 3A October 31, 1997 Silver Star Telephone Company 1 costs Silver Star has experienced since its last rate 2 case. Silver Star's last rate case before this 3 Commission was implemented January 1, 1989. 4 Q IF SILVER STAR WILL NOT RECEIVE ANY 5 ADDITIONAL REVENUE FROM THIS FILING, THEN WHY IS TWO-WAY 6 EAS IMPORTANT TO SILVER STAR AS A COMPANY? 7 A The implementation of two-way EAS is 8 important to Silver Star because Silver Star feels it is 9 important to its customers. Communication services are 10 becoming increasingly more important to the average Idaho 11 citizen. Whatever services Silver Star's customers 12 require to meet their communications needs are important 13 to Silver Star. Also, as I stated earlier, Silver Star's 14 management feels that two-way EAS will be good for the 15 communities as a whole. 16 Q WOULD YOU PLEASE SUMMARIZE YOUR TESTIMONY. 17 A In summary, Silver Star feels that two-way 18 EAS should be implemented between Irwin and the Idaho 19 Falls/Pocatello U S WEST Southeastern Idaho calling 20 areas. EAS should also be implemented between the Wayan 21 exchange and the Pocatello/Idaho Falls U S WEST 22 Southeastern Idaho calling areas. If the Teton Telecom 23 customers are ultimately included in the U S WEST calling 24 area, Irwin and Wayan should also have EAS to those 25 areas. Silver Star feels that such implementation is 103 Case No. GNR-T-96-6 HOOPES (DI) 4 October 31, 1997 Silver Star Telephone Company 1 consistent with the public interest. Both the Irwin and 2 Wayan communities will benefit by having access to their 3 hospitals, high schools, county seats, and other 4 necessary social services without having to place a long 5 distance call. 6 7 / 8 9 / 10 11 / 12 13 14 15 16 17 18 19 20 21 22 23 24 25 104 Case No. GNR-T-96-6 HOOPES (DI) 4A October 31, 1997 Silver Star Telephone Company 1 Q DOES THIS CONCLUDE YOUR TESTIMONY? 2 A Yes, it does. 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 105 Case No. GNR-T-96-6 HOOPES (DI) 5 October 31, 1997 Silver Star Telephone Company 1 (The following proceedings were had in 2 open hearing.) 3 4 DIRECT EXAMINATION 5 6 BY MR. WARD: (Continued) 7 Q Mr. Hoopes, in the interest of moving right 8 along, I'm just going to cut right to the chase of the 9 principal issue we wanted to address through your 10 supplemental testimony. Are you aware that Ms. Hall has 11 suggested that one way to resolve the question about 12 stimulation would be to fix a stimulation rate for now, 13 so to speak, and then to do a true-up at the end of the 14 year? 15 A Yes. 16 Q Does that sound like a reasonable or 17 sensible proposal to you? 18 A It does not. It would put the company in a 19 constant position of having to recover their costs. If 20 there was retrospective ratemaking, we possibly could be 21 made whole, but the fact that all ratemaking is generally 22 prospective, we would always be behind in catching up 23 with the cost, plus in relationship to the cost, we would 24 have to hire consultants, attorneys, basically do a mini 25 rate case that would involve a lot of our time and I'm 106 CSB REPORTING HOOPES (Di) Wilder, Idaho 83676 Silver Star 1 sure it would involve Staff time and if it happened for 2 all of the independents, which a lot of them are involved 3 in EAS across the state, a lot of the other ITA members, 4 it would probably almost be a full-time job for a Staff 5 person at the Commission. 6 Q All right, thank you, you anticipated my 7 next question. You've looked at the exhibits prepared 8 regarding stimulation factors, have you not? 9 A Yes, I have. 10 Q And in a general way, they show significant 11 growth every year, don't they? 12 A Yes, they do. 13 Q So if we were going to start doing 14 true-ups, would we have to do it every year? 15 A Yes, we would, because the impact to not be 16 understood within just a single year or even two years, 17 it takes a few months to a number one to three years for 18 calling habits to change, and the other thing that is 19 changing calling habits, as has been brought out, there's 20 the advent of the Internet, there is telecommuting and 21 all these types of technological changes that are 22 changing people's calling habits, causing them to stay on 23 line longer and hold up trunks longer than they normally 24 would in a voice-type situation. 25 Q Okay, just very quickly, I don't want to go 107 CSB REPORTING HOOPES (Di) Wilder, Idaho 83676 Silver Star 1 into great detail, but is it possible that stimulation 2 would be higher than we used to see historically, say, 10 3 years ago, because of the presence of alternative 4 carriers and, if so, why would that, how would that 5 happen? 6 A It's definitely possible. You know, when 7 we analyzed the minutes in this case, we had a set number 8 of minutes that was based on U S WEST traffic and in the 9 Soda Springs hearing, there were several questions that 10 you asked of various individuals about who their carrier 11 was and several of them mentioned Excel being their 12 carrier. We know that there are a lot of minutes that we 13 are not capturing in this process. Now, when I say we're 14 not capturing them, we are capturing all of our access 15 minutes, but we don't know what portion of these 16 dial-around carriers are intrastate minutes. They give 17 us a PIU, a percentage of interstate usage, that is 18 98 percent interstate and two percent intra, but we 19 really know that it's probably 50 percent intra and 20 50 percent inter, so we're losing a lot of minutes in the 21 intrastate jurisdiction that we're not capturing in this 22 case. 23 Q Just so that point is clear, is the 24 interstate access charge significantly lower than the 25 intrastate? 108 CSB REPORTING HOOPES (Di) Wilder, Idaho 83676 Silver Star 1 A Yes, it is, very significantly. 2 Q All right, and conversely, once EAS is 3 granted, would those people obviously leave those 4 carriers for the new local traffic? 5 A Yes, they could not compete with a flat 6 rate calling area, so they would immediately leave those 7 carriers and we would be dumped those additional minutes 8 on our facility. 9 Q Okay. Now, I want to return back to the 10 true-ups for just one second. What is your understanding 11 about the time period we normally try to set rates for 12 when we adjust rates? 13 A I think typically we try to set them 14 between two to three years, somewhere in that area. We 15 try not to rate shock our customers every year and 16 basically with this true-up with the stimulation that 17 we're seeing, I would think that we would be changing 18 rates every year if we did the true-up route, but 19 generally, we try to do a two to three-year average rate. 20 Q And in fact, how long has it been since 21 Silver Star's last rate case? 22 A We have not had a rate increase since 23 January 1st of 1989. 24 Q Other than USF driven changes? 25 A Correct, other than USF driven changes. 109 CSB REPORTING HOOPES (Di) Wilder, Idaho 83676 Silver Star 1 MR. WARD: Thank you. 2 That's all I have, Mr. Chairman. 3 COMMISSIONER HANSEN: Okay, Ms. Hobson. 4 MS. HOBSON: No questions. 5 COMMISSIONER HANSEN: Mr. Howell. 6 MR. HOWELL: Thank you, Mr. Chairman. 7 8 CROSS-EXAMINATION 9 10 BY MR. HOWELL: 11 Q Mr. Hoopes, I had asked, I think, Mr. McCue 12 earlier if he remembered the access line growth that we 13 utilized in the sales case and I was wondering if you 14 know the answer to that. 15 A Is that the sales case with respect to 16 Teton, Mr. Howell? 17 Q It is. 18 A Okay, I've got that exhibit right in front 19 of me. Mr. Hendershot was so kind as to provide it for 20 me. What we forecast was because of pent-up demand here 21 in the valley, a 10 percent growth rate in residence for 22 approximately two years, that was '95 and '96, and a 23 business growth rate of 5 percent and an overall growth 24 rate of 7 percent for revenues, but the 10 percent was 25 only for the first two years and it was falling off to 110 CSB REPORTING HOOPES (X) Wilder, Idaho 83676 Silver Star 1 5 percent in later years in the residential growth rate 2 and in overall business as low as 2.5 percent in later 3 years, so we figured there was quite a bit of pent-up 4 demand in early years. 5 Q Mr. Ward was asking you questions about the 6 dial-around and those kinds of or that line of 7 questioning, do you have an estimate or a guesstimate of 8 how many minutes are currently dial-around now? 9 A I have a guesstimate that it's somewhere 10 between, it could be as high as 50 percent, it might be 11 somewhere between 30 and 50 percent, I would say. 12 Q And the reason you don't know is because 13 you're having to accept the usage factors given to you by 14 other carriers? 15 A Correct. We're having to rely on the fact 16 that they say only two percent of their traffic is 17 intrastate. 18 Q And isn't one of the possible ways of 19 verifying traffic is for conceivably, I guess, the 20 Commission to perform PIU audits? 21 A That would be a possible way, yes. It 22 would probably be quite an undertaking, though, 23 especially getting those carriers to come clean. 24 MR. HOWELL: Oh, you know we have tons of 25 time. Well, Mr. Chairman, in the interest of time, I 111 CSB REPORTING HOOPES (X) Wilder, Idaho 83676 Silver Star 1 think that concludes my cross. 2 COMMISSIONER HANSEN: Okay, 3 Commissioner Nelson. 4 COMMISSIONER NELSON: I just had one 5 question. 6 7 EXAMINATION 8 9 BY COMMISSIONER NELSON: 10 Q What actual growth rates are you 11 experiencing here? 12 A Here in Teton? We have achieved this year, 13 I think, right around 10 percent. A lot of that was 14 pent-up demand, so I think we did about between 200 and 15 300 additional customers. 16 Q You have 2,000 customers? 17 A We have 3,000 customers and we've achieved 18 right around between 200 and 300 line growth. 19 COMMISSIONER NELSON: Good. That's all I 20 had. Thanks. 21 COMMISSIONER HANSEN: Mr. Ward, do you have 22 any redirect? 23 MR. WARD: Just one. 24 25 112 CSB REPORTING HOOPES (Com) Wilder, Idaho 83676 Silver Star 1 REDIRECT EXAMINATION 2 3 BY MR. WARD: 4 Q Mr. Hoopes, you're far nicer than I am, to 5 use a euphemism, is pent-up demand a euphemism for 6 primarily held orders when you took over? 7 A Yes. 8 MS. HOBSON: I object. 9 (The witness left the stand.) 10 MR. WARD: That concludes our case, 11 Mr. Chairman. 12 COMMISSIONER HANSEN: Ms. Hobson. 13 MS. HOBSON: Well, we were going to call a 14 witness, but now we're mad. U S WEST calls John Souba. 15 16 17 18 19 20 21 22 23 24 25 113 CSB REPORTING HOOPES (Di) Wilder, Idaho 83676 Silver Star 1 JOHN F. SOUBA, 2 produced as a witness at the instance of U S WEST 3 Communications, Inc., having been first duly sworn, was 4 examined and testified as follows: 5 6 DIRECT EXAMINATION 7 8 BY MS. HOBSON: 9 Q Mr. Souba, would you please state and spell 10 your last name for the record? 11 A Yes. My name is John Souba. The last name 12 is spelled S-o-u-b-a. 13 Q Where are you employed and in what 14 capacity? 15 A I'm employed by U S WEST Communications and 16 I'm a regulatory affairs manager for Idaho. 17 Q In connection with your duties as a 18 regulatory affairs manager, did you prepare and cause to 19 have filed with this Commission certain written 20 testimony? 21 A Yes, I did. 22 Q Would you identify that testimony for the 23 record? 24 A Yes. It was filed on October 31st and it 25 is for three case numbers in combination, GNR-T-96-6, 114 CSB REPORTING SOUBA (Di) Wilder, Idaho 83676 U S WEST Communications 1 GNR-T-97-3 and GNR-T-97-8. It consisted of, let's see, 2 10 pages with no exhibits. 3 Q Do you have any corrections or changes to 4 make to that testimony at this time? 5 A No, I do not. 6 Q Mr. Souba, if I were to ask you the 7 questions that are contained in that prefiled written 8 testimony at this time, would your answers be the same? 9 A Yes, they would. 10 MS. HOBSON: I guess, with that, I ask that 11 Mr. Souba's testimony be spread upon the record of this 12 case and of the Teton case and tender the witness for 13 cross-examination. 14 COMMISSIONER HANSEN: If there be no 15 objections, it will be so ordered. 16 (The following prefiled testimony of 17 Mr. John Souba is spread upon the record.) 18 19 20 21 22 23 24 25 115 CSB REPORTING SOUBA (Di) Wilder, Idaho 83676 U S WEST Communications 1 Q. PLEASE STATE YOUR NAME AND ADDRESS AND 2 POSITION WITH U S WEST COMMUNICATIONS. 3 A. My name is John Souba. My business address 4 is 999 Main Street, Boise, Idaho. I am a staff manager 5 in the Idaho Regulatory Affairs Department. 6 Q. PLEASE STATE YOUR BACKGROUND AND 7 QUALIFICATIONS. 8 A. I earned a B.A. degree in History/Economics 9 from Dartmouth College in 1975. Since joining U S WEST 10 in 1979, I have held a variety of management positions in 11 the Marketing organization dealing with major business 12 accounts. In February, 1988, I joined the Idaho 13 Regulatory Affairs Department. My responsibilities 14 involve a variety of areas including docket coordination, 15 certain tariff and catalog filing responsibilities, 16 response and witnessing in Extended Area Service (EAS) 17 petitions and coordination of discovery and interrogatory 18 responses, among other tasks. 19 Q. HAVE YOU PREVIOUSLY TESTIFIED BEFORE THIS 20 COMMISSION? 21 A. Yes, I have testified in two EAS cases 22 involving Eden/Hazelton's petition to call Twin Falls in 23 1988 and in Albion's petition to call Burley in 1990. I 24 also testified in U S WEST's 1996 southern Idaho general 25 rate case. 116 JOHN F. SOUBA, DI 1 U S WEST Communications, Inc. 1 Q. WHAT IS THE PURPOSE OF YOUR TESTIMONY? 2 A. My testimony will discuss U S WEST's 3 positions regarding EAS expansion in southern Idaho as 4 that expansion is related to the three cases captioned in 5 this consolidated docket. I will describe traffic 6 patterns between the petitioning communities and 7 U S WEST's eastern Idaho EAS region including annual 8 revenue estimates. I will provide recommendations for 9 how EAS expansion should be viewed in light of the 10 establishment of the three new EAS regions in 1997 which 11 surround Boise, Twin Falls and the Pocatello/Idaho Falls 12 areas. Also included in this testimony is a discussion 13 of and suggestions for dealing with the backlog of 14 pending EAS petitions in the state involving U S WEST 15 exchanges. 16 17 / 18 19 / 20 21 / 22 23 24 25 117 JOHN F. SOUBA, DI 1A U S WEST Communications, Inc. 1 Q. PLEASE DESCRIBE THE HISTORY OF THIS CASE. 2 A. On May 9, 1997 the IPUC received an EAS 3 petition from the residents of Teton County with over 500 4 signatures asking for their inclusion in U S WEST's 5 eastern Idaho EAS region. Similarly, in 1996 the 6 residents of the "Greater Swan Valley" communities of 7 Swan Valley, Irwin and Palisades petitioned the 8 Commission for toll free calling to Idaho Falls, Ririe, 9 Victor and Driggs. Finally, the telephone subscribers in 10 the Gray's Lake, Wayan and Freedom, Wyoming areas 11 petitioned to be included in the U S WEST eastern EAS 12 region. In Order 27150, the IPUC found it appropriate 13 and reasonable to consolidate these three petitioning 14 efforts due to the proximity and similarity of the 15 requested EAS extensions. U S WEST agrees that the 16 consolidation limits the expense and time required to 17 decide the merits of these petitions. 18 Q. PLEASE REVIEW WHICH TELEPHONE COMPANY 19 SERVES THE LOCAL COMMUNITIES INVOLVED IN THESE PETITIONS. 20 A. Of course. The Wayan, Gray's Lake, 21 Freedom, Swan Valley, Palisades and Irwin communities are 22 served by Silver Star Telephone Company (Silver Star) 23 while Victor, Driggs, Tetonia and Felt are served by 24 Columbine Telephone Company doing business as Teton 25 Telecom (Teton). U S WEST Communications, Inc. 118 JOHN F. SOUBA, DI 2 U S WEST Communications, Inc. 1 (U S WEST) is the local service provider for the 2 communities of Ririe and Idaho Falls and, of course, the 3 balance of the exchanges which currently make up the 4 eastern Idaho EAS region. 5 Q. WHAT COMMUNITIES ARE INCLUDED IN THE IDAHO 6 EASTERN EAS REGION OR LOCAL CALLING AREA? 7 A. The eastern Idaho EAS region includes the 8 communities of American Falls, Bancroft, Blackfoot, 9 Dayton, Downey, Firth, Franklin, Grace, Idaho Falls, 10 Inkom, Lava Hot Springs, Lewisville, McCammon, Menan, 11 Montpelier, Pocatello, Preston, Rexburg, Rigby, Ririe, 12 Riverside, Roberts, Shelley, Soda Springs, and Thatcher. 13 All calling between these exchanges was converted to 14 local, seven-digit dialing at the time of implementation 15 of the eastern Idaho EAS region on May 23, 1997. 16 17 / 18 19 / 20 21 / 22 23 24 25 119 JOHN F. SOUBA, DI 2A U S WEST Communications, Inc. 1 Q. WHAT IS U S WEST'S POSITION REGARDING 2 REQUESTS FOR EAS TO ONE OR MORE COMMUNITIES WITHIN ONE OF 3 THESE NEW LOCAL CALLING REGIONS? 4 A. U S WEST believes that if the Commission 5 determines that there is a community of interest between 6 the exchanges which are named in the petitions and the 7 public interest is served by granting expanded local 8 calling, the approval should extend to the whole region. 9 U S WEST further recommends that only two-way EAS be 10 considered. 11 Q. DOES THE COMPANY BELIEVE THE COMMISSION 12 SHOULD GRANT LESS THAN REGION WIDE ACCESS IF IT DEEMS 13 EXPANDED LOCAL CALLING IS APPROPRIATE? 14 A. No, for two reasons. One, if the 15 Commission were to grant EAS only to a portion of a 16 region, it would invite EAS arbitrage. The Commission 17 has had to deal with this problem before as it decided 18 EAS bridging services are unlawful and ordered U S WEST 19 to issue tariffs prohibiting this practice. 20 Second, it is my opinion that it is just 21 human nature for petitioning customers to feel that if 22 their request for any community within the region meets 23 the Commissions standards for EAS, they should have the 24 "whole thing" like the rest of the communities in the 25 region. Otherwise they are likely to feel they are being 120 JOHN F. SOUBA, DI 3 U S WEST Communications, Inc. 1 disadvantaged. Many pending petitions were initiated 2 before the new regions were established, such as the 3 "Greater Swan Valley" area request, and many communities 4 adjacent to the new regions are just being exposed to the 5 new calling patterns. Some of the newer petitions, like 6 the other two in this docket, are indeed mentioning that 7 they really want to be included in the entire region. I 8 suspect as knowledge of the new regions spreads 9 communities will request nothing less than region-wide 10 membership. 11 Q. WON'T A REGION-WIDE APPROACH POTENTIALLY 12 COST MORE? 13 14 / 15 16 / 17 18 / 19 20 21 22 23 24 25 121 JOHN F. SOUBA, DI 3A U S WEST Communications, Inc. 1 A. Yes. However, since it was appropriate 2 public policy to create a region-wide approach, it does 3 not seem inconsistent to apply the same policy for new 4 requests for EAS. It may prove out to cost less in the 5 long term if a single network design and response is 6 established at the initial request versus going back to 7 address additional community requests until all 8 communities within the regions feel they have local 9 calling parity. 10 Q. WOULD YOU PLEASE SUMMARIZE THE TRAFFIC 11 PATTERNS FROM CALLS ORIGINATING IN THE U S WEST EXCHANGES 12 TO THE EXCHANGES SERVED BY SILVER STAR AND TETON, 13 STARTING WITH THE TETON EXCHANGES OF DRIGGS, TETONIA AND 14 VICTOR? 15 A. Yes. Pursuant to Staff's request, U S WEST 16 prepared a toll study for its originating traffic which 17 was based upon four months calling data from May-August 18 1997. This study reveals that U S WEST customers in the 19 region spend approximately $175,000 per year calling 20 Driggs, Victor and Tetonia. In addition, the Driggs, 21 Victor and Tetonia lines generate another $225,0001 of 22 toll for calling into the eastern EAS region. The sum of 23 these figures represents an estimate of U S WEST's 24 current revenue stream for these toll routes. 25 The calling data reveals that, on average, the 122 JOHN F. SOUBA, DI 4 U S WEST Communications, Inc. 1 vast majority of U S WEST customers in the eastern Idaho 2 local calling region make fewer than 2 calls per month to 3 the three Teton exchanges. The data also reveals that 4 the largest concentration of calls from U S WEST 5 exchanges to Teton appears to be from Idaho Falls and 6 Rexburg. Well over ninety percent of the calls from 7 U S WEST's eastern Idaho EAS region to Teton originate in 8 the just the three communities of Idaho Falls, Rexburg 9 and Rigby. However, in none of the study months did even 10 10% of the lines in any of these three U S WEST exchanges 11 call the Driggs area. 12 13 / 14 15 / 16 17 / 18 19 20 21 22 23 1 U S WEST estimated the originating toll from Driggs, 24 Victor and Tetonia using a toll study prepared for a previous case which annualizes three months of toll data 25 from 1995. 123 JOHN F. SOUBA, DI 4A U S WEST Communications, Inc. 1 Q. IN YOUR OPINION DOES THIS DATA INDICATE 2 THAT A COMMUNITY OF INTEREST EXISTS BETWEEN THE EASTERN 3 IDAHO REGION AND DRIGGS? 4 A. I would say that it appears only a 5 relatively small number of U S WEST customers call the 6 Driggs area each month, and therefore, it is likely there 7 is not a high level of interest among U S WEST customers 8 in adding the Driggs area to the eastern Idaho EAS 9 region. It should be noted, however, that the calling 10 patterns could be significantly different when viewed 11 from the perspective of the petitioning communities into 12 the larger communities served by U S WEST. 13 In fact, when establishing the eastern Idaho EAS 14 region, U S WEST observed that calling volumes were 15 significantly lower from its "hub" exchanges of Boise, 16 Twin Falls, and Pocatello/Idaho Falls going out to the 17 smaller "spoke" communities which surround them in the 18 EAS region. Further, the Commission has made it clear 19 that calling data should not be used in isolation to 20 determine a community of interest. I expect the 21 Commission Staff to more fully analyze other factors such 22 as those mentioned in Case No. GNR-T-93-13 Order No. 23 26311, where the Commission set criteria to be reviewed 24 when evaluating EAS and provide the parties with an 25 analysis of these factors along with its recommendation. 124 JOHN F. SOUBA, DI 5 U S WEST Communications, Inc. 1 Q. TURNING TO THE SILVER STAR EXCHANGES OF 2 IRWIN AND WAYAN, PLEASE SUMMARIZE THE TRAFFIC PATTERNS 3 FROM CALLS TO AND FROM THE EASTERN IDAHO EAS REGION. 4 A. All right. A similar four month period, 5 from April-July 1997 was used to review calling from the 6 EAS region into Irwin and Wayan. This study found that 7 U S WEST customers are spending approximately $60,000 per 8 year calling Irwin and Wayan. U S WEST also stands to 9 lose the toll revenue from Irwin and Wayan's calling into 10 the region which amounts to another $70,000 per year. 11 There was insignificant calling on a percentage 12 basis from any individual U S WEST exchange to Wayan or 13 Irwin. Highest call volumes into Irwin came from Idaho 14 Falls while highest call volumes into Wayan were from 15 Soda Springs. As with the Driggs area, it is 16 17 / 18 19 / 20 21 / 22 23 24 25 125 JOHN F. SOUBA, DI 5A U S WEST Communications, Inc. 1 unlikely that a significant number of U S WEST customers 2 would greatly benefit from Wayan and Irwin joining the 3 EAS region. The corollary would mean that the price tag 4 to pay for adding the small exchanges would also be quite 5 small. 6 Q. IF THE COMMISSION DECIDES TO GRANT EAS TO 7 THE PETITIONING EXCHANGES AND PART OR ALL OF THE EASTERN 8 IDAHO REGION, WHAT ARRANGEMENTS EXIST BETWEEN U S WEST, 9 TETON AND SILVER STAR FOR THE EXCHANGE OF LOCAL TRAFFIC? 10 A. At the present time, U S WEST does not have 11 a local interconnection agreement with either Teton or 12 Silver Star. I understand, however, that the necessary 13 negotiation process has begun to put such an agreement in 14 place that will provide compensation for the companies 15 for carrying and terminating the traffic originating from 16 the other local carriers. 17 Q. WILL THE NEGOTIATION OF SUCH AN AGREEMENT 18 DELAY IMPLEMENTATION OF EAS IF THE COMMISSION ORDERS IT 19 IN THIS CASE? 20 A. I am hopeful it will not. If the 21 Commission enters an order in this case granting any of 22 the EAS petitions, there will be a period during which 23 the companies prepare their networks to accommodate the 24 traffic. If that is not sufficient time to complete the 25 negotiation process, the companies may be able to work 126 JOHN F. SOUBA, DI 6 U S WEST Communications, Inc. 1 out a short term interim arrangement. However, since I 2 am not involved in the negotiation process, I am not 3 prepared to suggest how and on what terms that might be 4 accomplished. 5 Q. SHOULD THE COMMISSION DECIDE THAT EAS 6 EXPANSION IS APPROPRIATE HOW DO YOU PROPOSE U S WEST BE 7 COMPENSATED FOR ITS CAPITAL EXPENSES ASSOCIATED WITH 8 IMPLEMENTING ANY OF THE NEW EAS ROUTES? 9 A. In Case No. USW-S-96-4 the Commission 10 adopted a stipulation between U S WEST and Staff which 11 called for using available revenue sharing funds to 12 compensate 13 14 / 15 16 / 17 18 / 19 20 21 22 23 24 25 127 JOHN F. SOUBA, DI 6A U S WEST Communications, Inc. 1 the Company for any capital expenditures required to 2 implement the new EAS routes. The Company believes this 3 arrangement could be appropriate for dealing with pending 4 EAS cases since at this time additional revenue sharing 5 dollars are still available. 6 Q. HOW SHOULD THE COMMISSION DEAL WITH 7 U S WEST'S LOST TOLL REVENUE? 8 A. In cases such as this one where some of the 9 exchanges impacted by the proposed EAS are served by 10 another local exchange company, the Commission needs to 11 consider the net effect on U S WEST's revenues. 12 In this case U S WEST pays Teton and Silver 13 Star access charges which may or may not exceed U S WEST 14 toll revenues for the calls originating within 15 Teton/Silver Star territory and terminating within 16 U S WEST local exchange communities. I propose that if 17 the Commission grants EAS, U S WEST would net the 18 difference between the access charges it pays them and 19 its toll revenues. If the toll revenues exceed the 20 access charges then U S WEST should be allowed to recover 21 the net revenue loss in rates to its customers through 22 adjustment to its "in-region" local service rates. If 23 access charges exceed toll revenues then U S WEST's 24 customers could enjoy an expense reduction which could 25 serve to offset rate increases occasioned by the 128 JOHN F. SOUBA, DI 7 U S WEST Communications, Inc. 1 Commission granting of other EAS petitions affecting the 2 U S WEST regions. 3 Q. ARE YOU AWARE OF ANY OTHER LOST TOLL 4 REVENUE STREAMS THAT WOULD RESULT FROM THE EXPANSION OF 5 INDEPENDENT COMPANY EXCHANGES JOINING ONE OF THE EXISTING 6 U S WEST EAS REGIONS? 7 A. Yes. Any toll which exists between 8 independent company exchanges who join a region, for 9 which U S WEST is the contract carrier, would also be 10 lost upon these exchanges joining an EAS region. For 11 instance, were the Commission to grant entry to the 12 eastern Idaho region to Paris, Idaho and to Aberdeen, 13 Idaho, the toll, calling between these two exchanges, if 14 any, would need to be added to U S WEST's lost toll 15 compensation. The timing as to when each exchange was 16 added to the region would determine the value of the 17 18 / 19 20 / 21 22 / 23 24 25 129 JOHN F. SOUBA, DI 7A U S WEST Communications, Inc. 1 toll revenue which has been eliminated between the two 2 exchanges. This is one more advantage to reviewing 3 U S WEST's total toll losses on an annual basis as will 4 be discussed more fully later in this testimony. 5 Q. HOW WOULD YOU PROPOSE THE COMMISSION HANDLE 6 THESE SMALL RATE IMPACTS ASSOCIATED WITH PROCESSING EAS 7 PETITIONS? 8 A. U S WEST does not wish to see "deaveraging" 9 the "in-region" price for its local service between the 10 three EAS regions. We recommend, therefore, that the 11 Commission adopt procedures to handle EAS petitions 12 affecting all of southern Idaho in an annual process. 13 Once the year's impact of EAS changes is known, the 14 individual effects of each order (i.e. revenue loss or 15 expense reduction) could be netted and one annual rate 16 change would then be ordered for all "in-region" U S WEST 17 customers. I will discuss this annual process further a 18 bit later in this testimony. 19 Q. DO YOU HAVE A RECOMMENDATION FOR 20 COMPENSATION FOR THE OTHER LOCAL EXCHANGE COMPANY'S LOSS 21 OF ACCESS REVENUES? 22 A. Yes. It would seem fair to me that local 23 exchange rates should be the first to increase to reflect 24 added value created by the expanded local calling area. 25 Additional funding, if necessary, may require further 130 JOHN F. SOUBA, DI 8 U S WEST Communications, Inc. 1 scrutiny by the Commission and appropriate rate design or 2 support. 3 Q. DO YOU HAVE OTHER RECOMMENDATIONS REGARDING 4 THE BACKLOG OF PENDING EAS CASES? 5 A. Yes. In Case Nos. GNR-T-93-7 and 6 GNR-T-93-11 the Company recommended a process where the 7 Commission would group the pending petitions by the local 8 telephone company serving the petitioners and schedule 9 hearings accordingly. 10 The hearings scheduled since the combined 11 case mentioned above appear to follow this methodology. 12 The Company appreciates the Commission's efforts to 13 continue to 14 15 / 16 17 / 18 19 / 20 21 22 23 24 25 131 JOHN F. SOUBA, DI 8A U S WEST Communications, Inc. 1 combine as many petitions as practical and set hearings 2 accordingly. This approach should save the parties time 3 and resources and allows the Commission to better 4 evaluate the total financial impact of all pending 5 petitions for each of the small rural telephone companies 6 before rendering its decision. 7 The Company believes it would also be 8 helpful to establish Commission rules or practices which 9 set a time frame annually for filing EAS petitions and a 10 maximum time for dealing with each year's petitions. 11 Q. WHAT DO YOU MEAN BY YOUR SUGGESTION OF 12 COMPANY-SPECIFIC CASES? 13 A. I recommend that petitions be grouped 14 according to the local exchange company which serves the 15 petitioners and consolidated into a single annual docket 16 and hearing schedule. The companies and Staff could 17 establish a single set of traffic data and networking 18 analysis rather than working each petition separately. 19 This more global view of the impacts on a company could 20 be helpful in determining long term economic impacts and 21 appropriate rate design while providing all of the 22 affected companies and the Commission economies of scale 23 with their limited resources. 24 Many of the pending petitions involve 25 smaller independent companies which may benefit from 132 JOHN F. SOUBA, DI 9 U S WEST Communications, Inc. 1 addressing the whole mix of petitions with a single 2 economic remedy and assist in their long-term planning. 3 Customers may feel they are being treated more fairly if 4 all pending petitions within their local exchange company 5 were addressed at approximately the same time. Further, 6 as I have already suggested, to the extent U S WEST 7 in-region customers will be affected by EAS changes, the 8 net impact could be calculated on an annual basis and new 9 rates implemented. 10 Q. YOU MENTION AN ANNUAL REVIEW. HOW WOULD 11 YOU PROPOSE THIS BE ACCOMPLISHED? 12 A. EAS petitions would be accepted during a 13 predetermined time period each year, combined by company 14 or region, and then docketed. Petitions filed after this 15 predetermined period would be held for docketing the next 16 year. I believe something 17 18 / 19 20 / 21 22 / 23 24 25 133 JOHN F. SOUBA, DI 9A U S WEST Communications, Inc. 1 similar to this could work for Idaho as long as the 2 public was given sufficient notice. It might also be 3 helpful for the Commission to establish a set of rules or 4 guidelines to provide guidance for all parties interested 5 in EAS proceedings. 6 Q. WOULD YOU PLEASE SUMMARIZE YOUR TESTIMONY? 7 A. Yes. The Company has reviewed the calling 8 volumes from its eastern Idaho local calling area to the 9 communities served by Teton and Silver Star. It found 10 only a small percentage of U S WEST customers in an 11 average month place calls to these communities. However, 12 the Company is cognizant of this Commission's directive 13 to look at other factors in determining if an appropriate 14 community of interest exists to grant EAS. If after 15 reviewing these factors the Commission determines 16 expanded local calling is appropriate for these 17 communities, the Company recommends they be granted EAS 18 to the entire eastern Idaho local calling area. 19 The Company also recommends that it be 20 compensated for any loss of revenues and capital 21 expenditures in a manner similar to that approved by the 22 Commission when it approved the establishment of the 23 three new regional local calling areas within U S WEST's 24 southern Idaho territory. 25 The Company further recommends that the 134 JOHN F. SOUBA, DI 10 U S WEST Communications, Inc. 1 Commission consider combining the pending EAS petitions 2 by originating company groupings and establish a single 3 annual case for each of these groups of petitions. 4 Q. DOES THIS CONCLUDE YOUR TESTIMONY? 5 A. Yes, it does. 6 7 / 8 9 / 10 11 / 12 13 14 15 16 17 18 19 20 21 22 23 24 25 135 JOHN F. SOUBA, DI 10A U S WEST Communications, Inc. 1 (The following proceedings were had in 2 open hearing.) 3 COMMISSIONER HANSEN: Okay, we'll see if we 4 have any questions. 5 Mr. Howell. 6 MR. HOWELL: Thank you, Mr. Chairman. 7 8 CROSS-EXAMINATION 9 10 BY MR. HOWELL: 11 Q Mr. Souba, do you believe there is a 12 community of interest if there is less than one call per 13 line per month? 14 A That's an interesting question. For the 15 calling between an exchange that is calling another 16 exchange and only has one call per line per month, there 17 is probably not a significant community of interest, but 18 if that calling is from a very large exchange, there may 19 well be reciprocal calling from a smaller exchange to 20 that exchange that is greater than the one call per line 21 per month and so there may be community of interest 22 between the two exchanges, it's simply not represented by 23 the small calling from the large exchange to the small 24 exchange. 25 Q Were you present when Mr. McCue testified 136 CSB REPORTING SOUBA (X) Wilder, Idaho 83676 U S WEST Communications 1 earlier today? 2 A Yes, I was. 3 Q And if I can paraphrase his testimony, he 4 testified that the reason the company Silver Star was 5 willing to implement EAS even to those exchanges with 6 less than one call per month was because the costs were 7 diminimus. Do you agree with that observation? 8 A Well, I think there's two issues involved 9 there and, yes, I basically do agree. First of all, the 10 small additional cost to add additional exchanges is so 11 small that the issue of parity becomes even more 12 important and if you're going to have a set of exchanges 13 as large as we currently have for the eastern Idaho 14 region, U S WEST would not support picking off certain 15 exchanges to be given to an outside exchange today. We 16 would prefer that EAS remain two way and that EAS be 17 granted to the entire EAS region. 18 Q Knowing that you worked long and hard on 19 the recently completed U S WEST rate case, can you tell 20 the Commissioners and those members present of the public 21 today what the EAS differential was in the recently 22 completed rate case? 23 A Yes, I can give you two numbers. When the 24 EAS case was originally completed, the EAS differential 25 was $3.62. In the recently concluded rate case, the 137 CSB REPORTING SOUBA (X) Wilder, Idaho 83676 U S WEST Communications 1 Commission determined that for exchanges that are not in 2 an EAS region, their rate should be $5.50 less than the 3 rate of those exchanges within an EAS region. 4 Q So is it true that the $5.50 represents the 5 cost of EAS or the EAS surcharge? 6 A Well, in essence, that is the design of the 7 rates for those exchanges within and without, so, yes, it 8 is. 9 Q All right. Have you or the company 10 calculated the capital expenditures necessary to 11 implement the EAS requests in these cases? 12 A No, we have not. 13 Q Do you have any idea when EAS could be 14 implemented once the Commission approves it if it were to 15 approve the EAS requests? 16 A Yes. U S WEST because we have over 20 17 exchanges that would need to be reviewed for potential 18 modifications and growth additions has a significant 19 engineering job ahead of it to grant additional EAS 20 exchanges and so the company requests from the point of 21 the granting of the order by the Commission 120 days. 22 Q When the company as part of the rate case 23 calculated the EAS costs in the rate case, what 24 stimulation factor did the company use? 25 MS. HOBSON: I'm going to object. I don't 138 CSB REPORTING SOUBA (X) Wilder, Idaho 83676 U S WEST Communications 1 believe that there was any such calculation made in the 2 rate case and I don't believe there's any foundation laid 3 for this witness to be prepared to answer that question. 4 COMMISSIONER HANSEN: Mr. Howell. 5 MR. HOWELL: Well, Mr. Chairman, I think 6 the question, if the witness doesn't know the answer, he 7 can simply say that. Whether he knew it or not, I don't 8 know. That's the source of the question and the 9 foundation is that we are currently engaged in 10 determining what is the appropriate stimulation factor to 11 use. We have heard evidence presented by the 12 applicants. This company, U S WEST, just recently 13 completed a very large and massive EAS and I'm interested 14 in determining whether this witness even knows what 15 stimulation was used on behalf of the company in that 16 case. 17 MS. HOBSON: May I respond just by way of 18 clarification? If your question -- if counsel's question 19 relates to the question of the stimulation factor used by 20 the company in its EAS case, I think the question is 21 properly posed. I believe the question was for purposes 22 of calculating its rate case calculation, which I 23 perceive to be two very different questions. 24 COMMISSIONER HANSEN: Mr. Howell, do you 25 have a problem then rewording the question? 139 CSB REPORTING SOUBA (X) Wilder, Idaho 83676 U S WEST Communications 1 MR. HOWELL: I would reformulate my 2 question to ask the witness whether he knows what 3 stimulation was used in the company's EAS case. 4 THE WITNESS: Yes, I do. 5 Q BY MR. HOWELL: And what stimulation was 6 used? 7 A It was a 2x factor. 8 Q On page 7 of your direct testimony, 9 Mr. Souba, you discuss that some of the routes involved 10 would be possibly what is in the industry called as a 11 toll loser; in other words, the company actually pays 12 more access charges than it receives toll revenue for. 13 Do you know which routes involved in the cases that are 14 currently before us would be toll losers? 15 A In the cases that we're dealing with in my 16 testimony, none of them are toll losers. U S WEST would 17 have a revenue requirement from the netting of our 18 current toll revenues versus our loss of access expense. 19 Q And in your testimony, again, on page 7 and 20 over on page 8, you talk about the company's desire to be 21 compensated for its lost toll. Isn't it a fact that the 22 Commission has priorly stated in orders that it's not 23 appropriate to allow the company to recover its lost toll 24 revenue? 25 MS. HOBSON: Object. I think it calls for 140 CSB REPORTING SOUBA (X) Wilder, Idaho 83676 U S WEST Communications 1 a legal conclusion. 2 COMMISSIONER HANSEN: Mr. Howell. 3 MR. HOWELL: I'm asking the witness whether 4 he simply knows whether a prior Commission order contains 5 such an observation or a directive. 6 COMMISSIONER HANSEN: I'm going to allow 7 the question. 8 THE WITNESS: I don't remember the exact 9 case, but I have read a reference in a Commission order 10 relative to compensation of U S WEST for lost toll; 11 however, I don't believe that in this current round of 12 EAS cases, which is to say those EAS cases following the 13 generic statewide docket, that that determination has 14 been made. 15 MR. HOWELL: And I guess rather than hide 16 the ball, I guess I would ask the Commission to take 17 notice of its own Order 26311 which contains that 18 requirement, and if the Commission is interested, I'd be 19 happy to read that part of the Order into the record. 20 COMMISSIONER HANSEN: We can take notice. 21 MR. HOWELL: Mr. Chairman, I have nothing 22 else. 23 COMMISSIONER HANSEN: Okay, Mr. Ward. 24 COMMISSIONER NELSON: I have a question 25 before we go to Mr. Ward. Oh, excuse me. I'm out of 141 CSB REPORTING SOUBA (X) Wilder, Idaho 83676 U S WEST Communications 1 order. 2 3 CROSS-EXAMINATION 4 5 BY MR. WARD: 6 Q Mr. Souba, you referenced the U S WEST use 7 of a 200 percent stimulation factor in the EAS case. Was 8 that for a cost of EAS determination? 9 A It was the actual engineering estimate that 10 was utilized to build the EAS networks associated with 11 each of the grants of the three regions. 12 Q Okay, and some of these EAS routes 13 obviously had routes between more substantial communities 14 than we're dealing with here in terms of access lines? 15 A Correct. 16 Q And in fact, even with the 200 percent -- 17 well, let me ask you about the engineering that was the 18 ultimate question I wanted to get to. If they engineer 19 for 200 percent, does that mean the engineers install 20 enough capacity to serve 200 percent additional traffic 21 or do they install something more? 22 A That depends on the individual route and 23 the amount of equipment that happens to exist. On a 24 fiber route, you may well have a multiplexor that has 25 availability of, say, 20 trunks and we may feel like we 142 CSB REPORTING SOUBA (X) Wilder, Idaho 83676 U S WEST Communications 1 only need 18, in that case, they would not have added any 2 equipment. If we had 20 trunks available and we felt we 3 needed 30, they would have put in a shelf that may well 4 have capacity for another 30, so it comes in multiples. 5 Q Right; so, in essence, to the extent there 6 was any blockage probabilities identified by the 7 engineers, would it be safe to assume that they would put 8 in some fail-safe capacity in addition to the 200 9 percent? 10 A Yes. 11 Q Now, refresh my memory of when these EAS 12 areas were implemented, approximately, if you can. 13 A I certainly can. The Twin Falls region was 14 cut in February, the Boise area was cut in April and the 15 eastern Idaho region was cut at the end of May. 16 Q All in this year? 17 A Correct. 18 Q Being 1997? And with the 200 percent plus 19 whatever it may have been capacity installed, has 20 U S WEST experienced any indication of unacceptable 21 blocking or increased blocking on any of these routes? 22 A Yes, they have. 23 Q And do you know in general what sort of 24 routes they would be? 25 A The one in particular that I was involved 143 CSB REPORTING SOUBA (X) Wilder, Idaho 83676 U S WEST Communications 1 in preventing a crisis, if you will, was the Idaho Falls 2 to Rexburg route. 3 Q Oh, a quick question about the surcharges. 4 Am I correct that the existing U S WEST rate as of the 5 last rate case characterized as base rate plus surcharge 6 or local rate, however you want to characterize it, is 7 $16.99 for residential? 8 A For those exchanges within an EAS region 9 which represents about 80 percent of our lines, yes. 10 Q So anybody in the eastern Idaho EAS is 11 paying 16.99 if they're a residential customer? 12 A A flat rated residential customer is paying 13 16.99. 14 Q What's the business customer paying? 15 A Thirty-two dollars. 16 MR. WARD: Okay, thank you. That's all I 17 have. 18 THE WITNESS: Incidentally, excuse me, just 19 to clarify, that will not go into effect until the 27th 20 of this month, so that is what was ordered. 21 MR. WARD: Thank you. 22 COMMISSIONER HANSEN: And I know 23 Commissioner Nelson has a question. 24 COMMISSIONER NELSON: Thank you. 25 144 CSB REPORTING SOUBA (X) Wilder, Idaho 83676 U S WEST Communications 1 EXAMINATION 2 3 BY COMMISSIONER NELSON: 4 Q I was wondering if you know if U S WEST has 5 looked at what the actual stimulation has been or is it 6 too soon? 7 A We actually from a network point of view 8 monitor the network and when we find significant 9 blockages we fix them, but there is not necessarily an 10 exact measuring of each route on an ongoing basis. It's 11 a matter of validating the alarms that go off when we're 12 not meeting our particular standards and criteria. 13 Q What's the talk around the water cooler? 14 A I think we did pretty well, but you have to 15 keep in mind with the size of these areas, there's 16 obviously not going to be 2x traffic between a place like 17 a Montpelier and the northern part of the eastern Idaho 18 region, so all in all, I think we did pretty well. 19 Incidentally, that was an aggressive schedule as well. 20 Q That does raise another question I had and 21 I didn't write it down and that is you're talking about 22 addressing these, needing 120 days to address these EAS 23 routes. The increased calling that you would expect in 24 your larger exchanges would be much smaller as a factor 25 or a percentage than what you would expect from the 145 CSB REPORTING SOUBA (Com) Wilder, Idaho 83676 U S WEST Communications 1 smaller Silver Star exchanges, wouldn't it, less of a 2 problem in other words? 3 A I'm not sure it's less of a problem because 4 the same amount of calling that they're going to be 5 sending us by and large we're going to be sending them. 6 Now, as a percentage of our overall traffic, it's much 7 smaller, but that doesn't mean that we don't have to deal 8 with those routes, engineer the routes, order the 9 hardware, install it and then turn it up. Just the 10 translations issues of dealing with 25 offices are 11 incredibly complex. 12 COMMISSIONER NELSON: Okay, thank you. 13 That's all I have. 14 COMMISSIONER HANSEN: Ms. Hobson, do you 15 have any redirect? 16 MS. HOBSON: Just very briefly to kind of 17 fill in the gaps here on the discussion of stimulation. 18 19 REDIRECT EXAMINATION 20 21 BY MS. HOBSON: 22 Q Did U S WEST use stimulation as any part of 23 its revenue requirement calculation in implementing EAS 24 apart from the capital cost necessary for new equipment? 25 A No. 146 CSB REPORTING SOUBA (Di) Wilder, Idaho 83676 U S WEST Communications 1 Q So U S WEST isn't attempting to capture or 2 was not attempting to capture this interstate/intrastate 3 shift of revenue recovery that the independents are? 4 A Absolutely not. 5 MS. HOBSON: Thank you. That's all I have. 6 COMMISSIONER HANSEN: Thank you for your 7 testimony. 8 (The witness left the stand.) 9 MS. HOBSON: U S WEST rests. 10 COMMISSIONER HANSEN: Okay, thank you. 11 We'll now go to Mr. Howell. 12 MR. HOWELL: Thank you, Mr. Chairman. The 13 Staff would call Carolee Hall. 14 MR. WARD: Mr. Chairman, if I may, 15 Mr. Kelly has a flight tonight which he would like to 16 make. I'd like to have him excused if the parties would 17 be willing. 18 COMMISSIONER HANSEN: Is there any 19 objection? Hearing none, so granted. 20 MR. WARD: Thank you, Mr. Chairman. 21 (Pause in proceedings.) 22 COMMISSIONER HANSEN: Okay, we're ready, 23 Mr. Howell. 24 25 147 CSB REPORTING SOUBA (Di) Wilder, Idaho 83676 U S WEST Communications 1 CAROLEE HALL, 2 produced as a witness at the instance of the Staff, 3 having been first duly sworn, was examined and testified 4 as follows: 5 6 DIRECT EXAMINATION 7 8 BY MR. HOWELL: 9 Q Could you state your name and spell your 10 last for the record, please? 11 A Carolee Hall, H-a-l-l. 12 Q And who are you employed by and in what 13 capacity? 14 A I'm employed with the Idaho Public 15 Utilities Commission as a telecommunications analyst. 16 Q And did you have cause to prepare or 17 prefile testimony in Cases GNR-T-96-6 and GNR-T-97-3 18 dated November 14th, 1997? 19 A Yes, I did. 20 Q Did you also cause to be prepared Exhibits 21 No. 101 through 105? 22 A Yes, I did. 23 Q Do you have any changes to your testimony 24 or exhibits? 25 A Yes, I do. On page 10, line 13, we need to 148 CSB REPORTING HALL (Di) Wilder, Idaho 83676 Staff 1 strike "from the federal and." 2 Q Hang on, let everybody get there. On 3 line 13, page 10, strike the words what now? 4 A "From the federal and," and on line 14, we 5 need to strike "or both" and put a period after the paren 6 "USFs," right paren. 7 Q Keep going. 8 A Page 11, line 11 should read "12-month 9 period." Page 21, line 6 should be "102 lines." Line 18 10 should be "415 lines." 11 Q And does that conclude your changes to your 12 testimony or exhibits? 13 A Yes, it does. 14 Q If I were to ask you the questions set out 15 in your prefiled testimony, would your answers be the 16 same as set out there? 17 A Yes, they would. 18 MR. HOWELL: With that, Mr. Chairman, I 19 would move that we spread Ms. Hall's testimony upon the 20 record as if read and mark for identification purposes 21 Exhibits 101 through 105. 22 COMMISSIONER HANSEN: Okay, Exhibits 101 23 through 105 will be marked and with no objections, it 24 will be spread upon the record. So ordered. 25 (The following prefiled testimony of Ms. Carolee Hall is spread upon the record.) 149 CSB REPORTING HALL (Di) Wilder, Idaho 83676 Staff 1 Q. Please state your name and business address. 2 A. My name is Carolee Hall and my business 3 address is 472 West Washington Street, Boise, Idaho, 4 83702. 5 Q. By whom are you employed and in what 6 capacity? 7 A. I am employed by the Idaho Public Utilities 8 Commission as a Telecommunications Analyst. 9 Q. Please describe your work experience and 10 educational background. 11 A. I have been with the Commission since April 12 1997. I recently completed a Regulatory Studies program 13 offered through NARUC. 14 Before coming to work for the Commission, I 15 worked as a Financial Manager for a competitive long 16 distance provider. I graduated from Boise State 17 University in 1993 with a B.B.A. in Finance. 18 Q. What is the purpose of your testimony in 19 this case? 20 A. The purpose of my testimony is to address 21 the petitions received by the Commission requesting 22 extended area service (EAS) from the customers served by 23 Silver Star Telephone Company, Inc. (Silver Star). The 24 communities within Silver Stars serving area include Swan 25 Valley, Irwin, Freedom, Grays Lake and Wayan. 150 GNR-T-96-6/GNR-T-97-3 HALL (Di) 1 11/14/97 Staff 1 Generally, petitioners have requested to be included in 2 U S WEST Communications, Inc.'s (U S WEST) eastern Idaho 3 EAS calling regions. 4 I will briefly address another petition 5 received from the Irwin and Swan Valley communities 6 requesting EAS calling into Columbine Telephone Company 7 d/b/a Teton Telecom Communications' (Teton) region as 8 well. Teton Telecom is an affiliated company of Silver 9 Star and is located in Teton County; Staff Exhibit 10 No. 101 shows the proximity of the two exchanges. The 11 Teton Telecom communities being requested are Driggs, 12 Victor and Tetonia. I will respond to the community of 13 interest factors as set forth in Commission Order No. 14 26311, which are used to evaluate EAS petitions. In 15 addition, I will examine the costs and lost revenues 16 associated with the implementation of EAS. I will also 17 recap calling data obtained from Silver Star through 18 Staff's production requests. 19 Q. What towns and communities are included in 20 the U S WEST eastern Idaho EAS region the petitioners are 21 requesting? 22 A. The Silver Star customers are requesting to 23 be included in the eastern Idaho regional calling area 24 approved by this Commission for U S WEST. This calling 25 area includes: American Falls, Bancroft, Blackfoot, 151 GNR-T-96-6/GNR-T-97-3 HALL (Di) 2 11/14/97 Staff 1 Dayton, Downey, Firth, Franklin, Grace, Idaho Falls, 2 Inkom, Lava Hot Springs, Lewisville-Menan, McCammon, 3 Montpelier, Pocatello, Preston, Rexburg, Rigby, Ririe, 4 Riverside, Roberts, Shelley, Soda Springs and Thatcher. 5 COMMUNITY OF INTEREST STANDARDS 6 Q. What are the criteria that the Commission 7 established for EAS as set forth in Order No. 26311? 8 A. According to the Order, calling volume and 9 calling distribution are among many primary and secondary 10 factors to be used when evaluating EAS calling areas. To 11 determine whether a community of interest exists to 12 support EAS, the primary factors, in addition to the 13 calling data are as follows: 14 1. geographic proximity (distance between exchanges); 15 2. the presence of geographic or other physical barriers 16 (mountains, rivers, valleys) between exchanges; 17 3. county seat relationship (are both exchanges in the same 18 county); 4. the relationship to school 19 district (do both exchanges share the same school 20 district); 5. the proximity to medical 21 facilities and services; 6. the willingness of customers to 22 pay increased rates. 23 Order No. 26311, page 9. 24 25 Q. Please explain calling volume and calling 152 GNR-T-96-6/GNR-T-97-3 HALL (Di) 3 11/14/97 Staff 1 distribution. 2 A. Call volume is simply the average number of 3 calls per line made each month from the home exchange to 4 the requested exchange. Call distribution shows how many 5 lines had 1 call, 2 calls, 3 calls, etc. 6 SILVER STAR PETITIONS INTO THE U S WEST REGION 7 Q. What did the calling data reveal in your 8 analysis? 9 A. The calling data that Silver Star provided 10 in its response to my first production request was for 11 twelve months from November 1995 to October 1996 12 combined. 13 Staff Exhibit No. 102, shows annual 14 distributions of toll calling by Wayan and Irwin 15 customers into U S WEST exchanges. This exhibit also 16 shows average monthly call volumes into each U S WEST 17 exchange and the total of all exchanges. Both Silver 18 Star exchanges had a monthly average of about 12 calls 19 per line to the U S WEST region, with over 80% of those 20 calls going into just three nearby, larger exchanges. 21 There are 102 lines in the Wayan exchange. 22 The primary exchanges that Wayan customers called were 23 Soda Springs (52% of annual calls) and Pocatello (20.9% 24 of their annual calls), followed by Idaho Falls (8.5%). 25 The distribution of the calls from Irwin's 153 GNR-T-96-6/GNR-T-97-3 HALL (Di) 4 11/14/97 Staff 1 415 lines showed a strong interest in calling Idaho Falls 2 with 74.3% of their annual calls going into that exchange 3 followed by significant calling to Rigby (7.3%) and Ririe 4 (6.5%). See Staff Exhibit No. 102. 5 Q. What is the geographic proximity (distance 6 between exchanges) and the presence of geographic or 7 other physical barriers (mountains, rivers, valleys) 8 between exchanges? 9 A. As part of my investigation, I visited this 10 area in October 1997, I found that Irwin and Swan Valley 11 are three miles apart on Highway 26 and are approximately 12 30 miles east of Ririe. Ririe is roughly 15 miles 13 northeast of Idaho Falls. Wayan is south of Irwin and 14 Swan Valley. However, to get to Wayan from Swan Valley 15 requires traveling 26 miles around Palisades Reservoir to 16 Alpine, Wyoming. From Alpine I traveled south through 17 Wyoming approximately 17 miles on Highway 89 to Freedom, 18 Wyoming and then west, back into Idaho on Highway 34 for 19 20 miles. In the middle of this loop is the Caribou 20 mountain range, Palisades Reservoir and Grays Lake. See 21 Staff Exhibit No. 103. 22 Q. How many exchanges does Silver Star have 23 within the petitioners' calling area? 24 A. There are two exchanges within Silver Star's 25 service area. One exchange is located in Irwin and the 154 GNR-T-96-6/GNR-T-97-3 HALL (Di) 5 11/14/97 Staff 1 second exchange is in Wayan; Staff Exhibit No. 101 shows 2 the location of these towns in the exchanges. 3 Q. Do the petitioners served by Silver Star 4 all share the same county seat? 5 A. No, they do not. The customers who live in 6 Wayan and Freedom are located in the Wayan exchange, 7 which is in Caribou and Bonneville Counties. The county 8 seat for Caribou County is Soda Springs, which is in the 9 southern portion of the U S WEST eastern EAS region, 10 while the county seat for Bonneville County is Idaho 11 Falls, which is in the northern portion of the region. 12 The Silver Star customers who live in Irwin and Swan 13 Valley are in the Irwin exchange, in Bonneville County. 14 Q. Do the students of Irwin and Wayan attend 15 schools in different school districts? 16 A. Yes, the school districts are not only in 17 different counties, but two other counties entered the 18 equation. Wayan and Swan Valley each have grade schools. 19 However, secondary education students in Wayan are bused 20 to Soda Springs in Caribou County. The secondary 21 education students of Irwin and Swan Valley attend school 22 in Ririe, which is in Jefferson County. There are two 23 students from Irwin that attend school in Driggs, Idaho 24 in Teton County. Both Jefferson and Caribou counties are 25 in the U S WEST calling region. Teton County is the 155 GNR-T-96-6/GNR-T-97-3 HALL (Di) 6 11/14/97 Staff 1 Driggs exchange owned by Teton Telecom. In the statewide 2 study, I found 16 students from Swan Valley/Irwin at 3 Idaho Falls High School. (Ririe High School did not 4 respond to my survey.) With the secondary schools being 5 in different local exchanges (Teton and U S WEST), 6 calling between these areas are toll calls. This may be 7 a hindrance to education. It could certainly be an 8 expense for parents with teenagers attending any social 9 functions. 10 Q. What did your analysis show with respect to 11 the proximity to medical facilities and services for the 12 residents of Irwin and Wayan? 13 A. Based on the differing counties and the 14 geographic location of the towns within the exchanges, 15 there are two observations. The people in Wayan have 16 limited choices for hospital and medical facilities. 17 Those facilities are in Soda Springs where, according to 18 the 1992 County Profiles of Idaho, there is one hospital 19 with 27 beds. Soda Springs is 34 miles south of Wayan. 20 See Staff Exhibit No. 103. Another option for Wayan 21 residents would be to travel to Afton, Wyoming where 22 there is a hospital as well. Calls to either of these 23 choices results in a toll call. 24 Irwin and Swan Valley residents have two 25 options as well. They could travel 50 miles to Idaho 156 GNR-T-96-6/GNR-T-97-3 HALL (Di) 7 11/14/97 Staff 1 Falls in Bonneville County or go to Driggs, Idaho. 2 Driggs is, as mentioned, in Teton County approximately 15 3 miles northeast of Swan Valley. To get to Driggs the 4 Swan Valley/Irwin residents must travel over Pine Creek 5 Pass, which is located between the two communities. See 6 Staff Exhibit No. 103. Bonneville County has one 7 hospital with 286 beds. Teton County has one hospital 8 with 13 beds. 9 As for doctors and medical centers, the 10 situation would be the same. There are no medical 11 facilities or doctors in Wayan, Swan Valley or Irwin. 12 Q. What is the sixth factor for analyzing EAS 13 requests? 14 A. The sixth factor is the willingness of 15 customers to pay increased rates for expanded local 16 calling. Throughout the petitioners' letters was a 17 commonality of low or fixed income levels within the 18 area. EAS for any region is not without its cost. I was 19 concerned that the residents in these small communities 20 may not be able to afford EAS. However, when weighed 21 against their long distance phone bills and the public 22 testimony and supporting letters, this may not be a 23 problem. 24 Q. Please recap the previous community of 25 interest factors discussed? 157 GNR-T-96-6/GNR-T-97-3 HALL (Di) 8 11/14/97 Staff 1 A. The community of interest standards support 2 the granting of EAS to some of the requested exchanges. 3 The calling data suggests that many customers do make a 4 significant number of toll calls, even without 5 considering the number of calls that may be carried by 6 companies other than U S WEST. Based on the location of 7 the communities in relationship to schools, county seats, 8 medical facilities, grocery stores, banks etc., there is 9 supporting data that would warrant EAS. The petitioners 10 have a choice to drive, at a minimum, 35 miles or make 11 long distance phone calls to carry on daily activities. 12 EAS COSTS 13 Q. What costs are associated in providing EAS? 14 A. There are essentially two types of costs 15 involved with providing any EAS. They are the actual 16 costs incurred to implement EAS and the revenue lost to 17 the telephone companies providing the service. Comments 18 received in Case No. GNR-T-93-13, which investigated the 19 provision of EAS in Idaho, identified some of the costs 20 that might be incurred: "lost" revenue, including 21 foregone revenue associated with toll, FX, and toll 22 access, and expenses directly applicable to EAS 23 expansion. 24 Q. Are there particular cost issues for small 25 rural carriers? 158 GNR-T-96-6/GNR-T-97-3 HALL (Di) 9 11/14/97 Staff 1 A. Yes. When a small LEC toll route is 2 converted to EAS, there are two significant impacts. 3 First, toll access charges previously paid to the LEC are 4 discontinued. Second, when toll calls become local EAS 5 calls, local calling usage usually increases. This 6 causes a shift in overall traffic usage from the 7 interstate jurisdiction to the intrastate jurisdiction. 8 This shift affects the small companies more dramatically 9 because federal high-cost recovery mechanisms are 10 disproportionately weighted to the interstate 11 jurisdiction. Consequently, the reduction in revenue 12 from these two sources must be recovered from an 13 increase in local rates, or state Universal Service Funds 14 (USFs). 15 Q. Do you know how much this interstate 16 compensation loss will be? 17 A. According to Silver Star's consultant, Kevin 18 Kelly, with Telecommunications Consultants, TCA, Inc. 19 (TCA) there will be an annual revenue loss of $43,948. 20 This amount is calculated using a 200% stimulation 21 factor. Initially TCA estimated this revenue loss to be 22 more than twice this amount. TCA has done some 23 recalculating and I would now agree with this 200% 24 calculation, however it seems high. 25 Q. What type of revenue would Silver Star 159 GNR-T-96-6/GNR-T-97-3 HALL (Di) 10 11/14/97 Staff 1 "lose" because of EAS? 2 A. Silver Star will lose its originating access 3 revenues and billing and collection revenues. Silver 4 Star will also incur an additional revenue requirement 5 associated with the capitalization of the new plant 6 required to implement expanded local calling. 7 Q. How did you calculate lost access revenues? 8 A. I used Silver Star's Exhibit Nos. 1 and 2 9 submitted in response to Staff's Production Request Nos. 10 1 and 2, which showed direct-dialed calling data for the 11 12-month period from November 1, 1995 through October 31, 12 1996. The call data was for calling from the Irwin and 13 Wayan exchanges into the U S WEST and Teton exchanges. 14 It showed call frequency for peak and off-peak access 15 minutes. After determining the access minutes, I used 16 Silver Star's tariffed access rates weighted to reflect 17 the 40% off-peak calling discount. I multiplied the 18 minutes by the appropriate rate to arrive at the "Annual 19 Projected Lost Access Revenue". The last two columns of 20 Staff Exhibit No. 102, page 2, reflect this calculation. 21 Q. Were there any access revenue losses 22 presented by Mr. Kelly for Silver Star? 23 A. Yes, however there have been numerous 24 changes to this data. After I received one of the "final 25 numbers" from Mr. Kelly, there was still a discrepancy 160 GNR-T-96-6/GNR-T-97-3 HALL (Di) 11 11/14/97 Staff 1 between the total number of minutes. The data provided 2 to me by Silver Star showed 209,401 peak originating and 3 78,437 off-peak originating access minutes. When 4 compared with the data used by Mr. Kelly in his 5 calculation, there was a disparity of 2,909 minutes 6 combined. When applying the tariffed peak/off-peak 7 access rate to these numbers, the net difference was 8 $124.00 per year in originating access revenue. After 9 discussing this discrepancy with Mr. Kelly, he felt that 10 it was insignificant and appropriate to use Staff's 11 calculations. Staff Exhibit No. 105, line 1, shows the 12 agreed upon annual lost access revenue of $12,193. 13 Q. Will Silver Star lose terminating access 14 revenues? 15 A. Silver Star will lose some terminating 16 revenue as a result of toll calls being converted to 17 local calls. To accurately determine this amount, Mr. 18 Kelly and I agreed that a Terminating/Originating (T/O) 19 ratio would be appropriate to use. By using a 1:1 ratio, 20 there is an assumption that originating and terminating 21 minutes will be equal. After analyzing the call data 22 provided to Staff by Silver Star this ratio was very 23 close to accurate. With this ratio in place, the lost 24 terminating access revenue for peak and off-peak will 25 total $12,193 annually. See Staff Exhibit No. 105, 161 GNR-T-96-6/GNR-T-97-3 HALL (Di) 12 11/14/97 Staff 1 line 2. 2 Q. You mentioned that Silver Star will also 3 lose billing and collection (B&C) revenues. Were you 4 able to compute this revenue loss? 5 A. Yes, however there is still a discrepancy 6 between Staff's calculations and Mr. Kelly's. One of the 7 discrepancies is that Mr. Kelly was not given the same 8 data provided to Staff. After numerous discussions with 9 Silver Star and Mr. Kelly, the gap has narrowed. I have 10 calculated an annual revenue loss of $15,663 and Mr. 11 Clark, of TCA, has recalculated the total messages 12 (received November 13, 1997) and now shows a loss of 13 $15,820. The difference is $157 as shown in Staff 14 Exhibit No. 104, line 2. I believe that the $15,663 is 15 more accurate, since it was calculated using actual 16 calling data. Therefore, I have used it in my 17 calculation of Silver Star's lost B&C revenue. 18 Q. Will Silver Star need to upgrade any 19 equipment or facilities to implement EAS? 20 A. Yes, but the Company provided two sets of 21 costs. The first set was presented to me by Silver Star 22 in its September 30, 1997 response to Staff's First 23 Production Request. Silver Star indicated that it would 24 need to add 24 trunk cards to the Irwin exchange and 20 25 to Wayan. These numbers are based on a 200% stimulation 162 GNR-T-96-6/GNR-T-97-3 HALL (Di) 13 11/14/97 Staff 1 factor (the estimated increase of local phone calls once 2 the former toll charges are removed). Silver Star also 3 indicated that it would take 100 hours of labor at $40 4 per hour to install these cards for each exchange. The 5 total labor cost was $8,000, and the total equipment cost 6 was $13,832, for a total investment of $21,832. This is 7 the amount I used for calculating the annual revenue 8 requirement associated with Plant Investment. See Staff 9 Exhibit No. 105, lines 11-17. 10 On October 22, 1997, I received Silver 11 Star's response to my second production request. In this 12 later response Silver Star increased its stimulation 13 factor to 400%. This change resulted in an increase of 14 48 trunk cards for Irwin at an investment of $14,000 and 15 40 trunk cards for Wayan, which resulted in an increased 16 investment of $13,664. The labor to install twice as 17 many cards remained constant at $8,000 for both 18 exchanges. The total investment for the second set of 19 submitted numbers was $27,664. This is the amount that 20 Mr. Kelly used in his calculation for plant investment. 21 Q. You mentioned that initially the Company 22 used a 200% stimulation factor that Staff had found to be 23 reasonable, and then increased it to 400%. Did Mr. Kelly 24 explain why a 400% stimulation factor is more reasonable 25 than the original factor submitted to Staff? 163 GNR-T-96-6/GNR-T-97-3 HALL (Di) 14 11/14/97 Staff 1 A. No, he did not. 2 Q. Could you please explain these percentages 3 and what impact it would have with EAS? 4 A. A stimulation factor is the anticipated 5 increase in calling volume as a result of toll calling 6 becoming local calls and, thus toll free. A 200% 7 stimulation factor means that the number of calls, over a 8 given route, are estimated to double in volume. This 9 factor is important when calculating lost revenue and 10 cost of plant needed to carry the increased number of 11 calls. The ultimate result of this factor is the cost to 12 the customer and the Company. I believe that a 200% 13 stimulation factor is reasonable and is used throughout 14 my calculations. 15 The Company has presented no evidence to 16 support its assumption that calling will increase by 17 400%. Likewise, I have no concrete evidence that calling 18 will double. It is my understanding that call 19 stimulation varies between communities and can't be known 20 with certainty before the fact. I recommend therefore, 21 that whether the Commission accepts the Company's 22 assumption of 400% or the Staff assumption of 200%, the 23 Company be required to report actual stimulation 24 experienced during the first year of EAS to the 25 Commission and that rates be adjusted accordingly to 164 GNR-T-96-6/GNR-T-97-3 HALL (Di) 15 11/14/97 Staff 1 compensate for the EAS costs. 2 Q. Other than the stimulation factor, what 3 other differences are there between your revenue 4 requirement associated with plant and the Company's? 5 A. I calculated the annual revenue requirement 6 associated with plant will be $5,180, Staff Exhibit 7 No. 105, lines 11-17, reflect this calculation. Mr. 8 Kelly's annual revenue requirement total was $7,953 9 (which reflects the 400% stimulation factor). Mr. Kelly 10 used a depreciation rate of 12.5% for an annual 11 depreciation amount of $3,458. His 9.75% overall rate of 12 return equaled $2,697. He used a combined income tax 13 rate of 40%, which calculated to $1,798. See Staff 14 Exhibit No. 104, line 3. 15 According to Commission Order No. 22237, 16 Silver Star's rates were set in 1989. These rates were 17 set using 13% for the cost of equity, a gross-up factor 18 of 1.558105 for taxes, cost of debt of 5.51% and a 19 depreciation rate of 5.5%. These rates equate to an 20 overall rate of return of 9.222%. The investment 21 required for implementing this EAS is not that 22 significant and Staff has agreed with Mr. Kelly's 12.5% 23 depreciation rate. The 12.5% depreciation rate was 24 approved for booking purposes in GNR-T-97-1, Order No. 25 26788. Therefore, Staff has accepted this rate for the 165 GNR-T-96-6/GNR-T-97-3 HALL (Di) 16 11/14/97 Staff 1 EAS calculation. The remaining depreciation rates, cost 2 of capital and gross-up factor will be evaluated and 3 adjusted if necessary in Silver Star's rate case. The 4 total revenue requirement associated with the additional 5 plant investment is $5,180 using the ordered rates 6 previously discussed and adjusting the depreciation rate 7 to 12.5%. See Staff Exhibit No. 105, lines 11-17. 8 Q. Are there any other costs associated with 9 this EAS filing? 10 A. Yes. While I was never provided any work 11 papers associated with any of the calculations received 12 from TCA, according to Mr. Kelly's memo received on 13 November 5, 1997, there is a charge of $20,000 for the 14 consultant's expense associated with this EAS filing. 15 These expenses were part of a larger number that I 16 requested Mr. Kelly itemize so that actual costs could be 17 determined. I have amortized these expenses over three 18 years for an annual expense of $6,667 per year but Staff 19 will review the reasonableness of these expenses in the 20 rate case. See Staff Exhibit No. 105, line 7. 21 Q. We have covered a large amount of 22 information, could you please review your calculations 23 for the cost of EAS? 24 A. Yes. I have calculated the lost access 25 revenues, lost billing and collection revenues, the shift 166 GNR-T-96-6/GNR-T-97-3 HALL (Di) 17 11/14/97 Staff 1 in federal service revenues as a result of toll calling 2 becoming toll free calling, and the revenue requirement 3 associated with plant investment. I have totaled these 4 numbers to compile an annual cost for EAS calling into 5 the eastern Idaho U S WEST region. The annual cost to 6 Silver Star for implementing EAS will be $95,844. When 7 divided by the total lines within the exchange, the 8 monthly cost of EAS will be $16.00. Staff Exhibit No. 9 104, lines 6-8, reflect this calculation. 10 Q. How does your calculations compare to the 11 Company's proposed revenue requirement? 12 A. As indicated in my Exhibit No. 104, line 6, 13 my revenue calculations are $3,178 less than the 14 Company's based upon my 200% stimulation factor. 15 RATE DESIGN TO RECOVER EAST COSTS 16 Q. Having concluded that EAS is warranted and 17 the costs of EAS, how should these costs be recovered? 18 A. I propose two alternatives for the 19 Commission's consideration and also address the Company's 20 proposed rate design for EAS recovery. My first 21 alternative is to increase basic exchange rates up to 22 125% of the statewide average (USF threshold). 23 Currently, Irwin residential customers are paying $15.00 24 per month and business customers are paying $22.50 per 25 month. The Wayan residential customers are paying $14.00 167 GNR-T-96-6/GNR-T-97-3 HALL (Di) 18 11/14/97 Staff 1 per month and business customers are paying the same as 2 the Irwin business customers ($22.50). Adjusting the 3 basic rates up to the USF threshold of $17.51 for 4 residential customers results in an increase of $2.51 for 5 Irwin residential service and $3.51 for Wayan residents. 6 When adjusting business rates to $36.57 for business 7 customers, this increase results in a monthly increase of 8 $14.01. These increases will produce additional revenue 9 of $32,188, thereby reducing the additional annual 10 revenue requirement associated with EAS to $63,656. See 11 Staff Exhibit No. 105, line 8. Silver Star is currently 12 collecting Idaho USF funds, and to comply with Idaho Code 13 Section 62-610 it would need to make this adjustment to 14 maintain eligibility for USF disbursements. 15 Q. What is your second alternative? 16 A. My second alternative is based upon what 17 Silver Star customers are receiving as an EAS "benefit." 18 Silver Star customers will be receiving EAS into the 19 entire eastern Idaho U S WEST region as well as Teton 20 Telecom. It would be reasonable for the Commission to 21 consider charging more for EAS than the recommended $2.51 22 for Irwin residential customers and $3.51 for the Wayan 23 residential customers. This increase will raise 24 residential rates just to the USF threshold. By 25 increasing the monthly residential rate an additional 168 GNR-T-96-6/GNR-T-97-3 HALL (Di) 19 11/14/97 Staff 1 $3.49, the net increase for residential service would be 2 $6.00 for Irwin and $7.00 for Wayan. Increasing rates by 3 this additional amount would decrease the annual USF draw 4 by $16,584 resulting in annual USF support of $47,071. 5 With the additional $3.49 increase, the 6 total residential rate would be $21.00. Once the effect 7 of the new U S WEST rate is factored into the USF 8 calculation, this $21.00 rate will be near the 9 anticipated USF statewide threshold level. With this 10 increase, residential rates will be stable for some time. 11 Residents will be able to call into a much larger region 12 and experience a significant reduction in their toll 13 bills as a result. It is reasonable to expect them to 14 pay more for EAS before the remainder is drawn from the 15 Universal Service Fund. This is also in conformance with 16 the public testimony to date that customers are willing 17 to pay $5 to $10 more for EAS. Under my second 18 alternative, I do not propose that business rates 19 increase because these customers will already be 20 experiencing a significant increase of $14.01 per month. 21 Such an increase will increase their monthly rates to the 22 current USF threshold of $36.57 per month and decrease 23 the business-residential rate differential ("gap"). 24 Q. Did you analyze the calling data based on 25 the separate county seats and look at splitting the 169 GNR-T-96-6/GNR-T-97-3 HALL (Di) 20 11/14/97 Staff 1 eastern region into two regions? 2 A. Yes, I looked at the calling data that 3 clearly reflected a division in calling patterns based on 4 the separate counties involved. The calling frequency 5 for the customers of Wayan was predominately into the 6 Soda Springs and Pocatello areas. Of the 102 lines in 7 the Wayan exchange, 52% of their annual toll calls were 8 to Soda Springs and 21% to Pocatello. These percentages 9 equate to 6.335 calls per line, per month into Soda 10 Springs and 2.5 into Pocatello. Montpelier and Grace 11 were the other two towns for which at least one call per 12 line, per month were made. Calls to the other 13 communities within the U S WEST eastern Idaho region show 14 less than one call per month, per Wayan line. See Staff 15 Exhibit No. 102. 16 Idaho Falls was the predominate called 17 exchange for the customers in the Irwin exchange. Irwin 18 has 415 lines. Irwin customers had 74% of their annual 19 toll calls going into Idaho Falls, which equates to nine 20 calls per line, per month. The remaining calling data 21 showed less than one call per line, per month was made. 22 See Staff Exhibit No. 102. 23 For a cross comparison, I looked at 24 customers in the Wayan area calling Idaho Falls and the 25 Irwin customers calling Soda Springs. From the Wayan 170 GNR-T-96-6/GNR-T-97-3 HALL (Di) 21 11/14/97 Staff 1 exchange, 8.5% of their annual calls went to Idaho Falls 2 and the percentage of annual calls for the customers from 3 Irwin calling Soda Springs was only 1.5% annually. This 4 clearly showed a division in the community of interest 5 for EAS. 6 One consideration was to recommend that the 7 customers of Irwin and Swan Valley have EAS into Idaho 8 Falls or the "northern" tier of the U S WEST eastern 9 Idaho region and Wayan customers have the "southern" tier 10 into Soda Springs, Pocatello and the surrounding area. 11 Q. What was the cost distribution for two EAS 12 routes for the two exchanges? 13 A. By dividing the plant investment between 14 exchanges and the minutes for lost access revenues and 15 the lost billing and collection, it was definitely not an 16 equitable division. After the Wayan customers basic 17 rates increased to the USF threshold, there was still a 18 monthly deficit of $21.96 per customer. Irwin had a 19 deficit of $4.64 per customer per month after increasing 20 basic rates to the USF threshold. When comparing the 21 significant disparity of these deficits, combining the 22 exchanges for a monthly net deficit of $11 seemed more 23 reasonable as shown in Staff Exhibit No. 105, line 10. 24 Based on the disparity between the 25 exchanges, I discounted the division of the EAS region 171 GNR-T-96-6/GNR-T-97-3 HALL (Di) 22 11/14/97 Staff 1 all together. In order for optional calling plans to be 2 a consideration, Silver Star would need to do a break- 3 even analysis to price various plans such that it would 4 be an equitable proposal for all customers that would 5 want them. 6 Q. In Mr. Kelly's Exhibit No. 4A, he proposed 7 to set business and residential rates at the residential 8 USF threshold rate of $17.51, what is your feeling about 9 this proposal? 10 A. I do not see how making business and 11 residential rates equal could possibly be a fair and 12 reasonable option. This proposal has never been proposed 13 or accepted previously. I question whether Silver Star 14 would still be eligible to receive state Universal 15 Service funds. To be eligible for state USF funding, a 16 company must set its business rates at a level that 17 equals 125% of the weighted statewide monthly rate. That 18 monthly business statewide average rate is $36.57. Thus, 19 Silver Star would not meet the business rate eligibility 20 threshold. 21 In addition, prior to the recent U S WEST 22 rate case there was approximately a 2.5 ratio between 23 business and residential rates. Since the rate case that 24 ratio has been established to be 1.88. While the 25 Commission has narrowed the gap, there is apparently not 172 GNR-T-96-6/GNR-T-97-3 HALL (Di) 23 11/14/97 Staff 1 sufficient justification to eliminate it completely. 2 Based on the "gap" established by this Commission, I 3 would reject this Company option. 4 Q. In Exhibit No. 4B of Mr. Kelly's testimony, 5 he proposes that residential and business rates be set at 6 the current respective USF thresholds of $17.51 and 7 $36.57. Could you please comment? 8 A. By increasing the monthly business and 9 residential rates to the USF threshold, it will reduce 10 the amount that Silver Star will need to draw from the 11 Idaho USF fund as a result of implementing this EAS. It 12 will also keep Silver Star in compliance with Idaho Code 13 Section 62-610, which stipulates that local rates be set 14 at a threshold level in order for a local exchange company 15 to qualify for USF disbursements. In the recent U S WEST 16 rate case, the residential rate was set at $16.99 and 17 business rates were set at $32.00. When these rates are 18 factored into the USF calculations, the statewide USF 19 threshold rates will increase. Increasing basic rates to 20 the USF threshold helps decrease the draw on the USF 21 fund. 22 Q In Mr. Kelly's Exhibit No. 4C, he proposes 23 to increase residential and business rates by a "uniform 24 percentage" to avoid "exacerbation of the business 25 residential rate gap." Could you please address this 173 GNR-T-96-6/GNR-T-97-3 HALL (Di) 24 11/14/97 Staff 1 option? 2 A. In this option, Mr. Kelly proposes 3 increasing residential rates to $17.51 and business rates 4 to $28.27. I do not believe this approach would meet the 5 USF eligibility criteria. Idaho Code 62-610 requires 6 that, 7 . . . the telephone corporation's average residence and business 8 local exchange service rates....are in excess of 125% of the weighted 9 statewide average rates for residence and business local 10 exchange service rates for one- party single line service 11 respectively.... 12 13 The result of this option would increase both business 14 and residential rates; however, it would not comply with 15 Idaho Code Section 62-610. 16 The "gap" would be somewhat eliminated, but 17 as previously mentioned, this gap has been set at 1.88. 18 If residential rates were increased to $17.51, then 19 business rates would need to be increased to $32.92 when 20 the 1.88% gap was applied. This is well above the 21 business USF threshold. The Commission has decreased the 22 gap between business and residential rates, but they have 23 not eliminated it as yet. Though the methodology of this 24 option is interesting, I would reject it based on the USF 25 threshold levels for business and residential service. 174 GNR-T-96-6/GNR-T-97-3 HALL (Di) 25 11/14/97 Staff 1 Q. Were any adjustments made to the access 2 rates? 3 A. Not for calculating the lost access revenues. 4 The rates were held at the current tariffed rate and 5 adjusted for the 40% off-peak calling discount. However, 6 Silver Star will need to adjust its access rates to the 7 new USF level of $.060851 to maintain its eligibility for 8 USF draws. 9 GREATER SWAN VALLEY PETITIONS FOR EAS INTO TETON TELECOM 10 Q. In your introduction you mentioned another 11 EAS area that the Swan Valley and Irwin customers were 12 requesting, would you please address that issue? 13 A. In August 1996 a notice of petition was 14 issued by this Commission. In this petition the residents 15 of Swan Valley, Irwin and Palisades requested EAS not only 16 into the Idaho Falls area, but into the towns of Victor 17 and Driggs. Driggs is in Teton County and is served by 18 Columbine Telephone Company, Inc. d/b/a Teton Telecom 19 (Teton). Teton Telecom is an affiliated company of 20 Silver Star. 21 Q. Have you looked at the calling data or done 22 any analysis on this? 23 A. Yes, I studied it along with this entire EAS 24 analysis. The calculated EAS cost to the customer 25 included calling into the Driggs exchange along with the 175 GNR-T-96-6/GNR-T-97-3 HALL (Di) 26 11/14/97 Staff 1 entire U S WEST region. 2 Q. Why would you consider this a viable EAS 3 request? 4 A. As noted in my testimony prior, Driggs is 5 another source for medical facilities for the residents in 6 the greater Swan Valley area. There are 499 lines in the 7 Irwin and Wayan exchanges. There were 293.5 calls per 8 month from Irwin to Driggs. Driggs also offers stores, an 9 implement dealer, banking facilities and other amenities 10 that are located closer to the residents of the greater 11 Swan Valley than driving 50 miles into Idaho Falls. 12 Q. Would you please summarize your 13 recommendation? 14 A. I believe that the location of the Irwin and 15 Wayan exchanges in relationship to county seats, schools, 16 medical facilities, etc., clearly reflects a need for EAS. 17 While there is not a significant amount of calling data 18 that would conclusively support a large demand for EAS, 19 there is still a need for toll relief. There are three 20 recommendations I would present for consideration by the 21 Commission with respect to calling routes. First, I would 22 recommend toll-free calling between Wayan and Irwin. 23 Second, I would recommend two-way EAS for Irwin and Wayan 24 into U S WEST's eastern Idaho region. Third, I believe a 25 two-way EAS route between Silver Star and Teton Telecom 176 GNR-T-96-6/GNR-T-97-3 HALL (Di) 27 11/14/97 Staff 1 would warrant consideration as well. 2 Next, I presented two options for the 3 Commission to consider with respect to rates. My first 4 option would be that Silver Star increase its basic rates 5 to the USF threshold of $17.51 for residential rates and 6 $36.57 for business rates. Silver Star will need to 7 increase its access rates to $.060851 per minute to 8 maintain its eligibility for USF draws. With this option 9 implemented, the revenue required for EAS would be 10 reduced, thereby reducing the draw on the Universal 11 Service Fund. I have discussed a rate case with Mr. Clark 12 of TCA, and he is aware that Silver Star will be filing 13 soon for this. At that time, the cost of capital and any 14 additional revenue requirement can be evaluated. Staff 15 believes the EAS case and rate case should be separated at 16 this time. The second rate option would be to increase 17 local residential rates by $6.00 for Irwin and $7.00 for 18 Wayan. All business rates would increase by $14.01. 19 Q. Which option would you recommend? 20 A. Precedents has always set basic and access 21 rates at the USF threshold. With all of the EAS cases 22 currently being reviewed by the Commission, I feel that we 23 should evaluate the total rates and how much USF 24 disbursements offset these EAS costs. The second option 25 would set residential rates such that another increase 177 GNR-T-96-6/GNR-T-97-3 HALL (Di) 28 11/14/97 Staff 1 would not occur for some time and it would help defray the 2 amount of USF funding that would be required to compensate 3 Silver Star for implementing this EAS region. I recommend 4 option 2. 5 Q. Was there any other testimony filed for 6 this case? 7 A. Yes, U S WEST filed testimony in support of 8 granting EAS to the entire eastern Idaho calling region. 9 Q. Does this conclude your direct testimony in 10 this proceeding? 11 A. Yes, it does. 12 13 14 15 16 17 18 19 20 21 22 23 24 25 178 GNR-T-96-6/GNR-T-97-3 HALL (Di) 29 11/14/97 Staff 1 (The following proceedings were had in 2 open hearing.) 3 MR. HOWELL: And this witness is available 4 for cross. 5 COMMISSIONER HANSEN: Okay, we'll start 6 with you, Ms. Hobson. 7 MS. HOBSON: Thank you. 8 9 CROSS-EXAMINATION 10 11 BY MS. HOBSON: 12 Q Ms. Hall, am I correct that your testimony, 13 in your testimony you do not take a position on 14 U S WEST's recovery of revenues in connection with this 15 EAS route? 16 A No, we do not. Staff has discussed this 17 and we feel that with the EAS implementation and the 18 cases that we have pending that should be addressed at a 19 later date when we can all sit down and take note of what 20 it's costing and what the actual cost revenue is that 21 U S WEST is requesting. 22 Q And is it also correct that you do not cite 23 anywhere in your testimony any prior Commission order on 24 the subject of what U S WEST's recovery should be? 25 A No, I do not. 179 CSB REPORTING HALL (X) Wilder, Idaho 83676 Staff 1 Q Is it also correct that you do not take a 2 position in your testimony with regard to whether or not 3 Freedom, Idaho customers should be granted EAS? 4 A No, I do not. 5 MS. HOBSON: Thank you. That's all I have. 6 COMMISSIONER HANSEN: Okay, Mr. Ward. 7 MR. WARD: Yes, just a couple of 8 housekeeping matters. 9 10 CROSS-EXAMINATION 11 12 BY MR. WARD: 13 Q Ms. Hall, if you would look at page 25, 14 line 19 of your testimony, there you say business rates 15 would need to be increased to 32.92 when the 1.88 percent 16 gap was applied and then you say this is well above the 17 business USF threshold and yet, if I turn over to page 23 18 of your testimony, I see what I take to be the business 19 USF threshold at line 18 stated as 36.57, do you see 20 that? 21 A That would be -- yes, I do see that. 22 Q Is that incongruous in some fashion? I 23 don't want to necessarily resolve it if you have to think 24 it through. 25 A I believe that the 36.57, 36.57 is 125 180 CSB REPORTING HALL (X) Wilder, Idaho 83676 Staff 1 percent of the statewide average, the weighted statewide 2 average. 3 Q If that's the case, it would not be 4 correct, would it, to say that 32.92 is well above the 5 business USF threshold? 6 A That is correct. 7 Q I'm going to ask you just generally, I know 8 you don't keep hours the way we do, but how much time 9 have you spent on this case, this EAS case, the 10 collective cases between Teton and Silver Star? 11 Guesstimate if you can. 12 A Quite a few. My last time sheet was 102 13 hours and these are the two cases that I worked on for 14 that entire time. 15 Q Okay. Notwithstanding the fact that we 16 might do our best to expedite proceedings, if we were to 17 have annual true-ups of stimulation driven revenue 18 requirements hereafter, don't you think it would be fair 19 to say that you or some other Staff member would have 20 some pretty significant time invested in each of those 21 cases? 22 A Well, I think, hopefully, we'd be able to 23 get accurate data the first time out. The data has 24 changed significantly and numerous times and I think if 25 we could track calling data, we'd be able to maybe reduce 181 CSB REPORTING HALL (X) Wilder, Idaho 83676 Staff 1 that time factor if we had correct data. 2 Q You're confident we're going to have better 3 data a year from now? 4 A We can hope. 5 Q Just so it's clear on the record, measuring 6 traffic in any regulatory scenario involving 7 telecommunications companies is a difficult matter any 8 more these days, is it not, because of multiple carriers, 9 multiple routes, et cetera? 10 A Yes. 11 Q On page 20, line 9, you state there, "With 12 this increase, residential rates will be stable for some 13 time." Do you think there is a public interest in having 14 stability of rates over some reasonable number of years? 15 A Yes, I do. 16 Q Okay. 17 A And the reason I said that was this is an 18 alternative option to a calling plan increasing the 19 rates. It also goes on to state that after the U S WEST 20 rate case, rates are calculated into the USF threshold. 21 That level will eventually increase, so Silver Star would 22 not have to increase rates twice. 23 Q Or at least not as much, the adjustment 24 would be minor? 25 A Right. 182 CSB REPORTING HALL (X) Wilder, Idaho 83676 Staff 1 MR. WARD: All right, the rest are minor. 2 That's all I have. I will have a couple of questions on 3 the other case. 4 COMMISSIONER HANSEN: Commissioner Nelson. 5 COMMISSIONER NELSON: I don't think I have 6 any questions. No, I think I really asked my questions 7 of Mr. Kelly where there were differences in the 8 testimony and so thank you. 9 COMMISSIONER HANSEN: Mr. Howell, do you 10 have any redirect? 11 MR. HOWELL: No redirect. 12 COMMISSIONER HANSEN: Thank you for your 13 testimony. 14 THE WITNESS: Thank you 15 (The witness left the stand.) 16 COMMISSIONER HANSEN: Does that complete 17 your case? 18 MR. HOWELL: Mr. Chairman, this completes 19 the Staff's presentation in the 96-6 and 97-3 cases. 20 Ms. Hall has prepared prefiled testimony in the 97-8 21 case, but we have not taken the company's testimony, so 22 with that, I would move that our exhibits be admitted. 23 COMMISSIONER HANSEN: If there's no 24 objections, it will be so ordered. 25 MR. WARD: No objection. 183 CSB REPORTING HALL (X) Wilder, Idaho 83676 Staff 1 (Staff Exhibit Nos. 101 - 105 were 2 admitted into evidence.) 3 COMMISSIONER HANSEN: Okay, this brings us 4 to the end of this technical hearing and we will recess 5 this particular case until tomorrow at 10:00 a.m. in Swan 6 Valley where we will have a public hearing. 7 MR. WARD: Mr. Chairman, before you bring 8 down the gavel, I'm not sure if I moved the introduction 9 of our exhibits which I believe are numbered 1 through 10 11. 11 COMMISSIONER HANSEN: Okay; so -- 12 MR. WARD: And I would like to so move that 13 our exhibits be admitted into evidence. 14 COMMISSIONER HANSEN: If there be no 15 objections, the exhibits will be admitted. So ordered. 16 (Silver Star Telephone Company Exhibit 17 Nos. 9 - 11 were admitted into evidence.) 18 COMMISSIONER HANSEN: Okay, let's go at 19 ease, then, for just a moment. 20 (The Hearing adjourned at 5:00 p.m.) 21 22 23 24 25 184 CSB REPORTING COLLOQUY Wilder, Idaho 83676 1 AUTHENTICATION 2 3 4 This is to certify that the foregoing 5 proceedings held in the matter of the petition from 6 residents of Swan Valley, Irwin and Palisades requesting 7 extended area service (EAS) to all of Bonneville County, 8 and the towns of Ririe, Victor and Driggs, and in the 9 matter of the petition from residents of Gray's Lake, 10 Wayan and Freedom requesting inclusion in the U S WEST 11 Communications eastern Idaho region, commencing at 12 2:30 p.m., on Tuesday, November 18, 1997, at the Teton 13 West Motor Inn Conference Room, 476 North Main, Driggs, 14 Idaho, is a true and correct transcript of said 15 proceedings and the original thereof for the file of the 16 Commission. 17 Accuracy of all prefiled testimony as 18 originally submitted to the Reporter and incorporated 19 herein at the direction of the Commission is the sole 20 responsibility of the submitting parties. 21 22 23 24 CONSTANCE S. BUCY Certified Shorthand Reporter #187 25 185 CSB REPORTING AUTHENTICATION Wilder, Idaho 83676