990209.docx

Q.Please state your name and address.
A.My name is Wayne Hart.  My business address is 472 West Washington, Boise, Idaho.
Q.By whom are you employed, and in what capacity?
A.I am employed by the Idaho Public Utilities Commission (IPUC; Commission) as a Telecommunications Analyst in the Telecommunications Section.
Q.What is your educational background?
A.I received a Master's Degree in Bacteriology from the University of Wisconsin in Madison, Wisconsin, and a Bachelor's Degree in Biological Sciences from Indiana University in Bloomington, Indiana.
Q.Please outline your experience that is relevant to your testimony?
A.I served as a Utilities Compliance Investigator from May of 1994 through March of 1997, and handled nearly 2500 complaints, comments and inquiries, with over 1500 of those involving telecommunications issues.  I served on the Staff team that performed a service quality audit of U S WEST in 1995 and 1996 for Case No. USW-S-95-4.I joined the Telecommunications Staff in March of 1997 and have been assigned a wide variety of issues, including: rate cases, EAS, payphones, numbering, line extensions, and general telephone issues.
Q.Have you previously testified before this Commission?
A.Yes.  I presented testimony in Idaho Power’s general rate case (IPC-E-94-5) in 1995, in the recent
U S WEST rate case (USW-S-96-5), GTE’s rate rebalancing (GTE-T-98-2), the Homedale/Wilder/Parma EAS case
(GNR-T-93-13), and the Payette/Weiser/Mountain Home EAS case (USW-S-96-6 and USW-T-97-6) and other proceedings.
Q.What is the purpose of your testimony?
A.The purpose of my testimony is to address the petitions received by the Commission requesting extended area service (EAS) from the customers in the Tipanuk, Boise River, Prairie and Atlanta exchanges served by Rural Telephone Company (Rural) to Mountain Home and all of the communities in the Treasure Valley EAS region of U S WEST Communications, Inc. (U S WEST).  The Commission assigned Case No. GNR-T-97-9 to consider the reasonableness of establishing EAS routes between the communities of Tipanuk and the communities of Mountain Home and the Treasure Valley EAS region.  Subsequently, petitions from customers in the Boise River and Prairie exchanges were assigned to Case No. GNR-T-98-18.  Recently, petitions from customers in the Atlanta exchange were assigned to GNR-T-98-18.  
I will respond to the community of interest factors as set forth in Commission Order No. 26311, which established guidelines and factors to be followed when evaluating EAS petitions. In addition, I will examine the costs and lost revenues associated with the implementation of EAS.
Q.Would you describe the Rural exchanges involved in these petitions?
A.These exchanges, Tipanuk, Prairie, Boise River and Atlanta, like all of Rural’s exchanges, are clear examples of the high-cost, rural exchanges that are frequently mentioned in discussions regarding universal service and subsidies.  These are all sparsely populated and expensive to serve areas.  Prairie, Boise River and Atlanta are all located in northern Elmore County in fairly rugged and mountainous terrain.  According to Census data, 80% of the occupied buildings are used as vacation or seasonal homes.  Tipanuk is located in the desert between Mountain Home and Boise.  While it would not be considered prime recreational property, the lots are large, more like small farms or ranches.
Rural is recognized as being willing to serve the difficult and expensive-to-serve areas that other companies, especially the larger ones, shy away from.  Rural agreed to provide service to these areas after the customers were turned away by U S WEST.
Telephone service in these exchanges is highly subsidized.  On a per-line basis, Rural receives more support from the Universal Service Fund than all but one other Idaho telephone company.  On this same basis, it would probably compare similarly when it comes to federal support as well.  The level of subsidy is a direct indication of the high cost of providing service in these remote areas.  
Q.What towns or communities are included in the U S WEST Treasure Valley EAS region requested by the petitioners?
A.At the time most of these petitions were received, the Treasure Valley local calling area approved by this Commission included Boise, Caldwell, Eagle, Emmett, Idaho City, Kuna, Melba, Meridian, Middleton, Nampa and Star (hereinafter referred to as original Treasure Valley region).  In Orders Nos. 27774 and 27790, the Commission approved toll free calling between these communities and the communities of Payette, Weiser, New Plymouth, Mountain Home and Glenns Ferry.  As nearly all of these petitions specifically mentioned Mountain Home and Glenns Ferry, yet none specifically mention Payette, Weiser or New Plymouth, Staff includes all of the communities in the original Treasure Valley region plus the Mountain Home and Glenns Ferry exchanges in its analysis.  This area will be referred to as the requested region.
COMMUNITY OF INTEREST STANDARDS
Q.What are the criteria that the Commission established for EAS as set forth in Order No. 26311?
A.According to the Order, calling volume and calling distribution are among many primary and secondary factors to be used when evaluating EAS calling areas.  To determine whether a community of interest exists to support EAS, the primary factors in addition to the calling data, are as follows:
1.geographic proximity (distance between exchanges);
2.the presence of geographic or other physical barriers (mountains, rivers, valleys) between exchanges;
3.county seat relationship (are both exchanges in the same county);
4.the relationship to school districts (do both exchanges share the same school district);
5.the proximity to medical facilities and services;
6.the willingness of customers to pay increased rates.
Order No. 26311, page 9.
Q.Addressing the geographic proximity (distance between exchanges) and the presence of geographic or other physical barriers (mountains, rivers, valleys) as set out in Commission Order No. 26311, what were your findings?
A.All of the Rural exchanges lie within Elmore County, as do the U S WEST exchanges of Mountain Home and Glenns Ferry.  The other exchanges in the requested region lie in Ada, Canyon, Boise and Gem Counties.  The Tipanuk exchange is situated between and borders both the Mountain Home and Boise exchanges.  However, it is much closer to the community of Mountain Home.  Most Tipanuk residents live within 10 miles of downtown Mountain Home, with downtown Boise approximately 30 or more miles away.   It lies in an area considered desert by most, and is separated from both communities by additional desert land.  The other 3 exchanges lie in northern Elmore County.  Prairie and Boise River lie along the South Fork of the Boise River, with Atlanta along the Middle Fork of the Boise River.  The Prairie exchange includes the community of Prairie and the ranches and recreational property in the foothills to the north of the South Fork.  It probably has a higher percentage of year-round residents than either Boise River or Atlanta.  The Boise River exchange includes the area around the Anderson Ranch reservoir, the communities of Pine and Featherville, and a number of recreational home sites along the South Fork of the Boise River.  The Atlanta exchange serves the remote mountain community of Atlanta, which is located near the headwaters of the Middle Fork of the Boise River on the edge of the Sawtooth Wilderness.
Q.Where is the county seat of Elmore County?
A.The county seat is Mountain Home, which is currently a toll call from all of these exchanges.  
Q.Are any government services available with a local call to Rural customers.
A.All government services are a long distance call away, unless the agency provides a toll free number.  There are no state or federal agency offices located in any of these exchanges.
Q.Do the area students attend schools outside of the Rural exchange?
A.Yes.  They are all technically located within the Elmore County School system.  Atlanta, Prairie and Pine have elementary schools for grades K-8, but the only high school is in Mountain Home.  High school students typically live with families in Mountain Home, or make similar arrangements, as no transportation is provided from Prairie, Pine, Featherville or Atlanta to Mountain Home.  Some students in the Boise River exchange choose to go to Fairfield for high school.  Similarly, some Atlanta students choose the new Idaho City high school.  Students from Tipanuk are bused to Mountain Home for all grades.
Q.Do Rural customers in these exchanges have access to medical facilities and services with a local call?
A.No, there are no doctors, dentists or medical facilities located in any of these communities. This was a point raised by the petitioners, who indicated that no medical services were available with a local call.  Atlanta Residents must travel to the medical clinic in Idaho City, or to facilities in Boise.  Customers in the other exchanges must travel to Mountain Home, Boise or Twin Falls.
Q.Are other business facilities available locally.
A.Tipanuk has no local retail businesses.  A few tourism-centered businesses exist in each of the other exchanges which can provide emergency or convenience shopping, but for most residents of the area virtually all regular or speciality shopping is done in the larger communities of Mountain Home, Boise or Twin Falls.  
Q.Do Rural customers in these exchanges have higher than average toll bills?
A.I believe so.  According to information from the 1998 USF Administrator’s report, the statewide average revenue per line for intrastate toll calls is just over $11.  Based upon the billed revenue per line data provided by the Company, Prairie customers paid over twice that amount just for calls to exchanges within the requested region, not including calls to locations outside the requested region.  Tipanuk customers paid more than one and a half times the statewide average for calls within the requested region, while Boise River and Atlanta customers paid about the same for calls within the region as the typical customer paid for all in-state calls.
Q.Do customers in any of these communities have access to the Internet through a local call?
A.No.
Q.Please explain calling volume and calling distribution.
A.Call volume is simply the average number of calls per line made each month from the home exchange to the requested exchange.  Call distribution shows how many lines had 1 call, 2 calls, 3 calls, etc.
Q.Have you reviewed the testimony of Rural’s  witnesses, James Martell and Raymond Hendershot?
A.Yes, I have.  I compared the limited results of the analysis of the calling data that was contained in Company witness Hendershot’s testimony to that of my own analysis.
Q.Do you agree with the conclusions he has drawn from those results?
A.Only partially.  I believe the calling data supports a conclusion that a community of interest exists between Rural’s Tipanuk, Prairie and Boise River exchanges and U S WEST’s Mountain Home exchange, and probably between the Atlanta and the Boise exchange, but that is not necessarily the case for the other routes in the requested region.  
Q.What did your analysis indicate for the Tipanuk to Mountain Home route?
A.An average of nearly 24 calls per line per month were placed from Tipanuk to the Mountain Home exchange.  This is approximately 4 times the 6 calls per line level recommended by some of the parties in the Commission’s generic EAS Case No. GNR-T-93-13.  That is a very significant level of calling.  In addition, 78% of the Tipanuk customers made an average of 2 or more calls to the Mountain Home exchange per month, with the majority of the customers placing 10 or more calls per month.  This level of call distribution is the highest I have found in the cases in which I have testified, and is a significant indicator of a strong community of interest.
Q.What about Tipanuk to the other cities in the requested Region?
A.The volume to the requested region as a whole is 37.5 calls per line per month, with over 60% of that total going to Mountain Home, over 30% to Boise, and the remaining communities in the region receiving less than 10% of the calls.  I cannot determine a call distribution to the region as a whole or any other combination of exchanges, from the data provided by the Company.  That calculation is only possible for specific routes.  A reasonable case could be made for a community of interest between Tipanuk and Boise, with a calling volume of more than 11 calls per line per month, and just over 60% of the customers placing two or more calls per month.  However, with only one fourth of the customers placing 10 or more calls per month, the distribution is not nearly as strong as the 55% of the customers placing 10 or more calls to Mountain Home.  With all of the remaining communities sharing 10% of the total volume of calls, the community of interest to the rest of the region is extremely weak.
Q.What were the similar results for Prairie to Mountain Home?
A.An average of more than 18 calls per line per month were place from the Prairie exchange to the Mountain Home exchange.  Prairie’s calling volume is clearly indicative of a community of interest.  Over two thirds of the Prairie customers place 2 or more calls per month to Mountain Home.  
Q.How about the rest of the region?
A.Prairie customers place an average of 37 calls to the entire requested region, with over half of that to Mountain Home.  The calling volume to Boise from Prairie was an average of 6 calls per line per month, barely meeting the suggested threshold.  Call distribution to Boise from Prairie was weak, with 57% of the customers placing 2 or fewer calls.  As is often the case, 17% of the customers placed over 70% of all of the calls to Boise.  Calling to the other communities in the requested region accounted for approximately one third of the total calling from Prairie customers, and was dispersed, as would be expected, according to the size of the called exchange.
Q.What does the calling data indicate for Boise River to Mountain Home?
A.An average of nearly 7 calls per line per month were placed from the Boise River exchange to the Mountain Home exchange.  This call volume is within the range cited as evidence of a community of interest in previous cases before this Commission but never accepted by the Commission.  Call distribution was not as strong, but more than a third of the Boise River customers placed 2 or more calls to Mountain Home.  
Q.How does Boise River fare to the rest of the region?
A.Boise River customers placed only 13.3 calls per month to all of the exchanges in the requested region.  With more than half of those to Mountain Home, the rest of the region received just over the 6 call threshold.  The Boise exchange received an average of more than 4 calls per line, leaving all the remaining exchanges with less than 2 calls per line.  As one might expect in an area with so many vacation homes, call distribution was especially weak in the Boise River exchange.  Nearly 40% of the customers made no calls to Boise in the average month, and more than 60% of the customers made two or fewer calls to Boise each month.   
Q.Do the calling levels for Atlanta to Boise indicate a community of interest?
A.They are very similar to those for Boise River to Mountain Home, with nearly 8 calls per line per month from Atlanta to Boise, and 55% of the customers placing 2 or more calls per month to Boise.  Both of these numbers are above the threshold levels we like to see when analyzing an EAS route.
Q.What about Atlanta to Mountain Home?
A.There are significant geological separations between these communities and this is mirrored in the calling data.  The calling volume was significantly less than one call per line per month, and less than 10% of the lines placed 2 or more calls to Mountain Home per month.
Q.Does Atlanta have a community of interest with any of the other communities in the requested region?
A.Because of the geographic link to Idaho City, I specifically looked at the calling data for that route.  The calling volumes are only 2 calls per line per month, with more than 70% of the lines not placing any calls at all.  This data, along with the other community of interest factors, falls far short of establishing a community of interest.  
Q.Please recap the community of interest factors you have discussed.
A.Tipanuk, Prairie and Boise River definitely share a strong community of interest with Mountain Home.  This is the hub city that provides most of the services these customers need for routine living:  banks, grocery supermarkets, car dealers and repairs, medical and dental care, drug stores, variety stores, restaurants, etc.  Boise serves a similar role for the Atlanta customers.  This link is especially strong for Tipanuk and Prairie, which do not have as many vacation or second home residents.  Residents of these exchanges rely on businesses located in the exchanges in Mountain Home for most economic transactions, and they share churches and other civic organizations with those in Mountain Home.  A typical customer in these exchanges incurs a higher than average toll bill, primarily because they make long distance calls to people and businesses in Mountain Home for services and activities that most Idaho residents can make with a toll free call.
Tipanuk and perhaps Prairie share weak communities of interest with Boise.  EAS over these routes should only be approved if an overwhelming majority of customers are willing to bear the increased costs of such EAS.  The community of interest to the remaining exchanges within the requested region from any of the 4 exchanges is not sufficient to justify an EAS.
EAS COSTS
Q.What costs are associated with providing EAS?
A.  There are 2 types of costs for providing EAS.  One is the actual costs incurred to carry out EAS and the other is the shift of cost responsibility from toll traffic to non-toll traffic.  This not only includes revenues a company currently receives from customers and other carriers, but also includes decreases in federal payments a company may receive due to a shift in overall traffic usage from the interstate to intrastate jurisdiction.
Q.Do you agree with the actual costs identified by Rural’s witnesses Martell and Hendershot?  
A.No.  These exchanges do not have that many customers and the calling volumes that can reasonably be expected, even at a 3x stimulation factor, after EAS is granted should not require the facilities identified by Mr. Martell and Mr. Hendershot.  The level of upgrade proposed by the Company is certainly questionable if the Commission accepts Staff’s recommendation to approve only a portion of the requested routes.  If Staff’s base recommendation is adopted by the Commission, the total increase in minutes at a 3x stimulation factor will be under 35,000 minutes per month.  While I recognize that this does not consider concurrent and/or peak usage, for comparison a single, analog, copper pair can carry over 43,000 minutes per month.  We are talking about very limited usage.
For Tipanuk, Rural has a 25-pair cable to the meet point with U S WEST, where it is met by U S WEST’s 11-pair cable.  U S West’s cable is less than half the size of Rural’s cable.  Therefore, the maximum that Rural’s cable can be used at now is 44% of capacity.  With fewer than 70 customers in the Tipanuk exchange, it is probably well below that level.  It should not need upgrading.  
The microwave facilities that carry traffic between the other 3 exchanges and the microwave tower at Deer Point should be capable of carrying the additional calling volume, although they may need some reconfiguration or additional cards or facilities of some type to carry the additional traffic.  While a fiber opticcable connection between the Boise River and Prairie office, and between the Prairie office and U S WEST may be very beneficial to Rural’s system and may require expenses the Company should incur, it is not necessary for the EAS, and the costs associated with these fiber extensions should not be included in the costs of EAS.
The costs of the new billing software are also questionable.  Staff does not believe there is anything special about an EAS that would require new billing software.  There will be changes in monthly rates, and the Company will no longer bill for some of the toll it previously billed for, but the existing billing software should be able to accommodate such changes.  Changes to the billing program should be considered normal costs of doing business and not special costs associated with the EAS.
The costs of software upgrades for the switches may be an appropriate cost, but the level reported may be higher than necessary, especially if EAS is approved on fewer than requested routes.
Q.Do you have cost estimates for the facility upgrades you propose?
A.Yes.  They are identified in Staff Exhibit No. 101.  However, these are very rough estimates.  The Company’s responses to Staff’s Production Request failed to specifically identify what facilities are currently being used to carry traffic over the routes that are the subject of this case, nor did they provide any information regarding the capacity of those facilities.  Therefore, Staff’s estimate of what facilities upgrades will be necessary is somewhat speculative.  As the Company’s response to Staff’s Production Request did not identify any facility upgrades, it also did not identify any costs for such upgrades.  The workpapers provided to Staff’s request for support for the costs identified in Mr. Hendershot’s testimony failed to provide the level of detail that would enable Staff to prepare reasonably accurate estimates for the facility upgrades Staff believes may be neccessary.
Q.What about lost access or toll revenues?
A.As Rural does not carry the toll, they would not incur lost toll revenue.  However, they would lose the access revenues they receive from the companies that do carry the toll.  Based upon the access minutes identified in the calling data provided to Staff, the total access revenues the Company would have received for calling over all of the routes in the requested region, including billing and collection revenue, would be less than $15,000 per year.  This is less than half of the amount identified by the Company’s witnesses.
Q.Do you agree with the $129,918 per year impact projected by Rural witness Hendershot for the shift in usage from interstate to intrastate?
A.Mr. Hendershot did not provide documentation as to how this number was derived.  However, given the difference in our projections of lost access revenues,
I find this number to also be highly questionable.  For the purposes of my calculations, I simply used a number that was 44% of the value used by Mr. Hendershot, as that was the percentage difference in our projections of lost access revenues.  My estimate of the cost of the interstate shift was only $57,680 for an EAS over all of the routes in the requested region.  For analyzing the costs for EAS covering only a portion of the routes, I adjusted my figure by the proportion of access minutes in the proposed routes to the total number of access minutes in the requested region.
Q.Do you agree with the estimate of costs for EAS over the routes between Rural’s own exchanges?
A.As these routes were not identified in any of the petitions, I did not request and therefore did not have, any information to use to verify this estimate.  However, that estimate is more than half the total I estimated for lost access revenues for calling to the entire requested region, which make it seem particularly high.
Q.Are there other cost estimates in the Company’s testimony which cause you concern.  
A.Yes.  The estimate of $60,000 for the consultant fees for this EAS case is exorbitant.  It is considerably higher than Staff has accepted for similar cases.  Staff also objects to the presumption that this case will be as involved as a rate case.  I have utilized an additional cost for consultant fees of $30,000 amortized over 3 years or $10,000 annually.
Q.What figures are included in the annual cost for depreciation and rate of return?
A.Depreciation and return are based on estimated facility upgrades of $75,000.  Depreciation is calculated at a rate of 12% for the categories upgraded resulting in an annual depreciation cost of $9,000.  The rate of return is calculated using a return on equity of 12% and a gross-up factor of 1.6469 resulting in a return of $5,897.  Terri Carlock, Audit Section Supervisor calculated these figures for use in this testimony.  The final revenue requirement will be based on the actual routes and upgrades approved by the Commission in these proceedings.
Q.Do you agree with witnesses Martell and Hendershot, that the Company should receive increased funding from the Universal Service Fund in order to recover some of the costs of implement EAS?
A.No.  This Commission has historically refused to increase a company’s eligibility for USF funding for the specific purpose of recovering EAS costs.  Staff supports that position.
QWhat is the total of the financial impacts, based upon the changes you recommend if EAS were to be granted over all the routes in the requested region.
A.The total impact, if the expansion can be accommodated without significant upgrades to facilities would be just $100,000 over per year, or more than $17 per customer per month.
Q.Do you think the majority of Rural’s customers in these exchanges would want EAS to the entire requested region if it were to cost an additional $20 per month.
A.No.  Especially in the Boise River and Atlanta exchanges where the majority of the customers are owners of recreational property, many of whom only occupy their homes during a portion of the year.  The calling data provided by the Company indicated that the majority of customers in these 2 exchanges do not make sufficient calls to these exchanges to make this increase an economically rational choice.  Even for the Tipanuk and Prairie exchanges this increase is near the average in billed toll for these routes.  This typically indicates the majority of customers would pay more under this plan than they do currently.
Some of the petitions submitted in this case included a way for customers to indicate how much they would be willing to pay for EAS.  However, none of the petitions even included an estimate as high as $20 per month.
Q.Do you recommend any alternatives to EAS to all the routes in the requested region?
A.Yes.  My base recommendation is to provide EAS over the routes between Tipanuk, Prairie and Boise River and Mountain Home, and the route between Atlanta and Boise.  These routes had the most significant levels of community of interest.  Approving these routes would provide the customers of these rural exchanges with toll free access to the majority of their routine needs, schools, medical care, common shopping needs, etc., yet avoid the costs associated with toll free access to the entire requested region.
Q.What would be the costs associated with such an alternative?
A.I estimate the total annual costs of this alternative to be approximately $53,000.
Q.How do you propose raising this revenue?
A.The Company will be required to raise all of its rates to the 125% threshold in order to maintain eligibility for USF funding.  This will increase residential rates to approximately $19.14, and business rates to $38.22.  This will increase the Company’s revenues by nearly $42,000.  The balance could be funded through an EAS adder to the 484 lines in these 4 exchanges.  At a total cost of $53,000, the EAS adder would be under $2.00 per month per line.  This would result in residential rates of approximately $21/month and business rates of approximately $40/month.
Q.If Staff’s assumption that EAS over these routes can be accomplished without significant facility upgrades is incorrect, and the costly upgrades identified by the Company are determined to be necessary, would Staff’s recommendation change?
A.Certainly.  With so few customers in these exchanges, minor increases in costs result in significant increases in the monthly charges to each customer.  If EAS can not be provided without the facilities identified in the Company’s testimony, then Staff would recommend that EAS not be provided.
Q.Are there other options you could recommend?
A.Yes.  Although not as strong as the community of interest to Mountain Home, Tipanuk, and to a lesser extent, Prairie, both have some community of interest ties to Boise.  If, after the costs of EAS over these routes are known, the customers of these exchanges still express a willingness to pay for EAS over these routes, Staff would support mandatory EAS for these 2 routes as well.
Q.What do you estimate the costs of EAS for these routes to be?
A.I project an incremental monthly cost for EAS over both the Tipanuk to Boise and Prairie to Boise routes of approximately $8.00 per line in the Tipanuk and Prairie exchanges, again assuming no significant facility upgrades would be required.  If Tipanuk-Boise were considered alone, the incremental monthly cost would be approximately $10.00/line in the Tipanuk exchange.  For Prairie alone, the monthly increase would be approximately $6.00 per line in the Prairie exchange.
Q.Has Staff integrated a review of the Company’s earnings into its recommendations?
A.No.  Staff has simply identified the increased costs directly related to implementing EAS over the proposed routes and identified rate changes to recover those specific costs.  A review of the Company’s earnings is currently underway.  If the Commission determines more EAS routes are warranted and/or large EAS costs are necessary, the earnings level from the audit should be considered before the Company’s eligibility payments from USF funds is increased.
Q.Have you considered any optional calling plans?
A.No, although optional calling plans may be the most appropriatechoice, especially for the Boise River and Atlanta exchanges, I did not have sufficient data to consider such options.  A measured optional plan, one with a low measured rate per minute, might be especially appropriate given the Company’s concerns about the impact of Internet usage over EAS routes.  Staff shares this concern.  A plan that discourages unlimited usage, such as a per minute charge, with or without a base level of usage, may be most appropriate for all 4 of these Rural exchanges, as none of them currently have a local dial up access point of presence for the Internet.
Q.Does Staff recommend a measured service rate for these exchanges?
A.No.  With the high level of vacation homes in these exchanges, Staff believes the subscription level for any measured option would be high enough to have serious impacts on revenues.  Staff believes the revisions to the ITSAP credits should be sufficient to address universal service concerns.  If the Commission believes a lower cost option should be made available to these customers, Staff recommends that in lieu of a measured rate option coupled with a mandatory EAS, the Company consider an optional calling plan.  The impacts of a measured rate in exchanges with such a high number of vacation homes is probably similar to that of an optional calling plan, yet optional calling plans provide every customer with options to obtain better control over their phone costs.
Q.Is Staff’s recommendation for EAS for the Tipanuk customers consistent with the concerns expressed by Commissioners when it approved the creation of the Tipanuk exchange?
A.No.  The original 22 customers desired service from Rural rather than U S WEST in order to avoid the higher, one-time fees that U S WEST would have imposed had it provided them with service.  U S WEST raised concerns at that time, that it would not be fair to U S WEST’s customers for Tipanuk customers to avoid paying U S WEST’s costs by obtaining basic service from Rural, and subsequently ask the Commission for EAS to get the Mountain Home calling area.  While the Commission Order approving Rural’s Application to serve the area includes language that indicated the Commission could not prejudge a petition it had not yet received, members of the Commission cautioned the Tipanuk customers not to submit such a petition.
Q.What has changed since that time to make your recommendation appropriate?
 A.It has been 13 years since Commission members cautioned the 22 Tipanuk customers not to request EAS.  There are now almost 3 times that number of customers in the Tipanuk exchange.  Even if every one of the original customers were still customers today, they would be outnumbered, 2 to 1, by customers that did not hear that caution.
Q.Did Staff review any other testimony in this case?
A.U S WEST witness John Souba also filed testimony in this case.  He indicated U S WEST does not object to the granting of EAS for these routes if it is granted to the entire requested region and if U S WEST is compensated according to the procedures in Order
No. 27633 for its costs in implementing EAS, which he estimated to be approximately 1 cent per line per month for the Boise River and Tipanuk exchanges.  His analysis did not include the Prairie or Atlanta routes.
Q.Does Staff agree with Mr. Souba’s calculation?
A.As Mr. Souba pointed out, Staff had calling data for a different period than U S WEST and therefore direct comparisons are not possible.  However,
Mr. Souba’s estimates appear to be in the same general range as Staff’s.
Q.Does Staff agree with U S WEST’s position that EAS be granted to the entire region?
A.No.  As a result of Commission Order
No. 27789, as clarified in Order No. 27826, approving Citizens Optional calling plans, the region is not the same for all customers.  For some, it includes Payette, New Plymouth and Weiser, for some, it does not.  Some customers in the region identified by Mr. Souba will be able to call toll free to the Citizens exchanges of Parma, Homedale, Wilder and Marsing, while others will not.  Some will be able to call toll free to Garden Valley, Horseshoe Bend and Sweet, while others will not.  Staff recognizes that customers may perceive one exchanges’s local calling area as preferred to that of another, but does not consider that to be sufficient reason to force some customers to pay more for toll free calling they seldom would use.
Staff also believes U S WEST now has the tools it needs to control EAS arbitrage, should it occur.
Q.Could you please summarize your testimony?
A.Staff finds that a community of interest does exist between the Rural exchanges of Tipanuk, Prairie and Boise River and the U S WEST exchange of Mountain Home.  A community of interest also exists between the exchanges of Boise and Atlanta.  To a much lesser extent, a community of interest also exists between the Rural exchanges of Tipanuk and Prairie and the Boise exchange.  The community of interest between the remaining exchanges in the requested region is too weak to justify the cost of EAS over those routes.  Staff disagrees with the Company’s estimate of costs to implement EAS over all the routes in the requested region, particularly in regards to the need for the extensive upgrading of facilities identified by Rural.  Staff estimated the incremental cost of providing EAS over all the routes in the requested region to be approximately $20 per line per month, a cost that it believes customers would be unwilling to incur.  Staff recommends EAS over the routes between Mountain Home and Tipanuk, Prairie and Boise River, and between Boise and Atlanta, if EAS can be implemented over these routes without significant facility upgrades.  Staff projects EAS over these routes can be accomplished without increasing Rural’s revenues from the USF fund, by raising Rural’s rates to the 125% of Statewide average threshold, and an EAS adder of approximately $4 per line for these four exchanges.  In addition, Staff would support EAS over the Tipanuk-Boise and Prairie-Boise routes, if the majority of customers in the Tipanuk and Prairie exchanges are willing to pay the additional $9 per line per month Staff estimates EAS over these routes would cost.
Q.Does this conclude your direct testimony in this proceeding?
A.Yes, it does.