20030522Oral Argument.pdf

052203~1.txt

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF THE APPLICATION OF)
QWEST CORPORATION FOR ) Case No.
DEREGULATION OF BASIC LOCAL ) QWE-T-02-25
EXCHANGE RATES IN ITS BOISE, NAMPA,)
CALDWELL, MERIDIAN, TWIN FALLS, )
IDAHO FALLS, AND POCATELLO ) ORAL ARGUMENT
EXCHANGES. )
___________________________________)

HEARING BEFORE

COMMISSIONER PAUL KJELLANDER(Presiding)
COMMISSIONER DENNIS S. HANSEN
COMMISSIONER MARSHA H. SMITH

PLACE: Commission Hearing Room
472 West Washington Street
Boise, Idaho

DATE: May 22, 2003

VOLUME I - Pages 1 - 34

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1 A P P E A R A N C E S

2

3 For the Staff: WELDON STUTZMAN, Esq.
Deputy Attorney General
4 472 West Washington
Boise, Idaho 83702
5
For Qwest Corporation: STOEL RIVES
6 by MARY S. HOBSON, Esq.
101 South Capitol Boulevard,
7 Suite 1900
Boise, Idaho 83702-5958
8
For Intervenors JOHN GANNON, Esq.
9 Meierotto, et al: Attorney at Law
1101 West River, Suite 110
10 Boise, Idaho 83702

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HEDRICK COURT REPORTING APPEARANCES
P. O. BOX 578, BOISE, ID 83701
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1 BOISE, IDAHO, THURSDAY, MAY 22, 2003, 10:02 A.M.
2
3
4 COMMISSIONER KJELLANDER: Good morning. We'll
5 now begin the hearing in QWE-T-02-25, also referred to as In
6 the matter of the Application of Qwest Corporation for
7 deregulation of basic local exchange rates in its Boise, Nampa,
8 Caldwell, Meridian, Twin Falls, Idaho Falls, and Pocatello
9 exchanges.
10 My name's Paul Kjellander; I'm the Chairman of
11 this proceeding. To my right is Commissioner Dennis Hansen,
12 and to my left is Commissioner Marsha Smith. The three of us
13 will be hearing the Oral Arguments today and will render a
14 Decision upon deliberation.
15 As I understand it, we have basically two oral
16 arguments that are in front of us. One is generated from the
17 Staff as it relates to the Declaratory Ruling, and then the
18 other also I believe is from Staff as it relates to the
19 vacation of the hearing. And so it would be my intent to begin
20 with the first argument this morning dealing with the
21 Declaratory Ruling. After we've gone through that, then to
22 move forward onto the Request for vacation of the hearing if
23 that is agreeable to all the parties.
24 MS. HOBSON: Yes.
25 COMMISSIONER KJELLANDER: At this point, I'd like
1

HEDRICK COURT REPORTING ARGUMENT
P. O. BOX 578, BOISE, ID 83701
 1 to take the appearances of the party, and if we could begin
2 with Mr. Stutzman.
3 MR. STUTZMAN: Thank you, Mr. Chairman.
4 Weldon Stutzman on behalf of the Commission Staff.
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5 COMMISSIONER KJELLANDER: Mr. Gannon.
6 MR. GANNON: John Gannon, on behalf of the
7 Intervenors Meierotto, et al.
8 COMMISSIONER KJELLANDER: Mr. Gannon, we have a
9 microphone in front of you there; hopefully we have a
10 microphone. When you hit the touch button and the red light is
11 on, then that means we can hear you, so if we could have you
12 say that one more time for the record?
13 MR. GANNON: You bet. John Gannon appearing for
14 the Intervenors Meierotto, et al.
15 COMMISSIONER KJELLANDER: Thank you.
16 And good morning, Ms. Hobson.
17 MS. HOBSON: Mary Hobson from Stoel Rives,
18 representing Qwest Corporation.
19 COMMISSIONER KJELLANDER: Thank you. Are there
20 any introductory comments or anything that needs to be brought
21 before the Commission before we move into this? If not then,
22 since Mr. Stutzman brought this before the Commission, let's
23 begin with you.
24 MR. STUTZMAN: Thank you, Mr. Chairman. I will
25 try to be mercifully brief.
2

HEDRICK COURT REPORTING ARGUMENT
P. O. BOX 578, BOISE, ID 83701
 1 Staff has set out its position in the two
2 Memoranda it filed in support of this Petition for Declaratory
3 Ruling. Also, I think the parties' Petitions present a fairly
4 straightforward issue of statutory interpretation for the
5 Commission's resolution.
6 The first rule of statutory construction is that
7 you accept the language of the Statute as written and apply it
8 without change or alteration, unless it makes no sense as
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9 written or the result is absurd.
10 Qwest changes Paragraph B of Idaho Code Section
11 62-622(3), the paragraph under which it filed its Application
12 in this case, to contain the term "basic local exchange
13 services" where the paragraph does not contain it. The
14 Legislature instead used the term "local services" in
15 Paragraph B. The Statute makes logical sense as written, it is
16 not ambiguous or absurd, and, in fact, adding the term "basic
17 local exchange service" to Paragraph B is illogical and makes
18 little sense.
19 The whole purpose of that paragraph is to allow a
20 comparison between telecommunications services that are not
21 basic local exchange services to see if they are functionally
22 equivalent to basic local exchange services. There simply is
23 no legitimate reason to interpret Paragraph B by inserting the
24 term "basic local exchange services" in place of the one used
25 by the Legislature, and to do so violates the most basic canon
3

HEDRICK COURT REPORTING ARGUMENT
P. O. BOX 578, BOISE, ID 83701
 1 of statutory expression. So Staff is asking first for a
2 Declaratory Ruling that the term "basic local exchange
3 services" should not be inserted into Paragraph B.
4 The second ruling Staff requests follows from the
5 first. By inserting the term "basic local exchange services"
6 into Paragraph B, Qwest construes the functionally equivalent
7 review under that paragraph to be limited to determining only
8 whether the allegedly competitive product is capable of
9 providing voice communications. Qwest gets there by claiming
10 the definition of "basic local exchange services" is only voice
11 communications.
12 First, the statutory definition of "basic local
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13 exchange services" is not as narrow as Qwest claims. It is the
14 provision of access lines to residential and small business
15 customers with the associated transmission of two-way
16 interactive voice communications within a local exchange
17 calling area. Basic local exchange customers use their access
18 lines in more ways -- excuse me -- than two-way voice
19 communication, as is apparent from Qwest's own basic local
20 exchange tariff on file with the Commission. Qwest's basic
21 local exchange tariff includes a fully regulated Title 61 rate
22 for connecting a customer's computer to an access line. Until
23 this case, as far as I know, Qwest has never claimed that use
24 of an access line by a residential or small business customer
25 for data transmission is not part of basic local exchange
4

HEDRICK COURT REPORTING ARGUMENT
P. O. BOX 578, BOISE, ID 83701
 1 service. Excuse me.
2 Finally, the Staff asks the Commission to rule
3 that Paragraph B not be read in isolation from the
4 Legislature's intent so as to eliminate the requirement that
5 competition be actual, effective, substantive, and meaningful
6 before local rates are deregulated. That is nothing more than
7 what the Commission already ruled in the Burley case in
8 Order No. 28369.
9 In that Order, the Commission noted that the
10 primary purpose in agency construction of a statute is to
11 determine legislative intent and give effect thereto. U S WEST
12 in that case argued the only operative language in Section
13 62-622(3) is that contained in subparagraph A. That is the
14 same argument Qwest makes here, except this time it's in regard
15 to subparagraph B.
16 The Commission rejected that interpretation,
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17 saying: By that interpretation, the Legislature's express
18 requirement that competition be effective, actual, substantive,
19 meaningful, is all rendered meaningless.
20 Staff really is asking for a Declaratory Ruling
21 that Section 62-622(3)(b) be accepted as written and enacted by
22 the Legislature in order that the purpose and intent of the
23 Legislature be given effect.
24 Thank you.
25 COMMISSIONER KJELLANDER: Mr. Stutzman.
5

HEDRICK COURT REPORTING ARGUMENT
P. O. BOX 578, BOISE, ID 83701
 1 Let's move to Ms. Hobson.
2 MS. HOBSON: Thank you, Mr. Chairman.
3 As I looked over the Memoranda that Staff filed
4 in this case and got ready to prepare for this morning, it
5 occurred to me that there is more here that we agree about than
6 may appear at first blush.
7 Staff has teed this up as a case about
8 interpreting 62-622, but I'm not so sure that we are
9 necessarily far apart on what that Statute actually says and
10 how that's to be interpreted. What Staff and Qwest are really
11 arguing about is what does Qwest have to prove in this case.
12 In other words, what is the scope of the evidence that you
13 should be considering in deciding this case. To decide that
14 issue then, let's cut to the chase and remind ourselves what it
15 is that you're trying to figure out when you hear this case.
16 What you're deciding here is when should the
17 Commission stop price regulating basic local exchange service.
18 Every other significant Qwest service has been deregulated
19 since 1989. Basic local exchange service, for all intents and
20 purposes, is what's left. And, of course, the Legislature told
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21 you when you are to cease regulating basic local exchange
22 service in 62-622. Now --
23 Oh, John, would you pass these out, please? I'm
24 sorry.
25 MR. JOHN SOUBA: May I approach the Bench?
6

HEDRICK COURT REPORTING ARGUMENT
P. O. BOX 578, BOISE, ID 83701
 1 COMMISSIONER KJELLANDER: Yes.
2 MS. HOBSON: We've just -- I'm not sure you can
3 hear me. We have just made some blowups of the statutory
4 language so we can all keep track of exactly where we are, and
5 I'm passing out copies of the same language in the more
6 notebook-friendly basis.
7 If you look at the Statute, the Commission shall
8 cease regulating basic local exchange rates in a local exchange
9 calling area upon a showing by the incumbent telephone
10 corporation that effective competition exists for basic local
11 exchange service throughout the local calling area. Effective
12 competition exists, we're told by the Legislature, throughout a
13 local exchange calling area when either -- and Qwest is going
14 under subpart B, so we'll stick to B -- there are functionally
15 equivalent, competitively priced local services reasonably
16 available to both residential and small business customers from
17 a telephone corporation unaffiliated with the incumbent
18 telephone corporation.
19 That's the -- that's what you're supposed to do.
20 You're supposed to find out, determine, whether or not we have
21 shown effective competition for basic local exchange services.
22 Please notice that it does not say you're
23 supposed to look at whether there is effective competition for
24 local services. That's not what it says. Nor does it say you
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25 should cease regulating when there's effective competition for
7

HEDRICK COURT REPORTING ARGUMENT
P. O. BOX 578, BOISE, ID 83701
 1 basic wireline services. It says you should cease regulating
2 when there's effective competition for basic local exchange
3 service.
4 John, would you?
5 John, my assistant here, stepping in for
6 Vanna White, has now changed it to the second slide, which is
7 simply the statutory definition of basic local exchange
8 services. Oddly enough, it seems to me that this is where
9 Qwest and Staff seem to be disagreeing. Staff says Qwest is
10 being too restrictive in how it reads this definition because
11 we concentrate on voice and ignore the lines, which can be used
12 for lots of different things, and I submit to you that that's
13 not what's happening at all.
14 Our response is that you, the Commission, have to
15 give effect to all of the words in that definition. You have
16 to look at the lines, but you also have to look at the fact
17 it's restricted to the transmission of two-way interactive
18 switched voice communications. And by the way, it's restricted
19 to the local calling area. Obviously, lines can be used for
20 toll, lines can be used for international calling, but that's
21 not what the definition says. The definition says it's the
22 provision of access lines to residential and small business
23 customers with the associated transmission of two-way
24 interactive voice communications within a local calling area.
25 That's an unambiguous definition. It does not
8

HEDRICK COURT REPORTING ARGUMENT
P. O. BOX 578, BOISE, ID 83701
 1 talk about all associated transmissions. It doesn't talk about
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2 the transmissions of voice and data, or transmissions of voice
3 and facsimile, it says voice. So if we can agree on what the
4 basic -- what the definition is of "basic local exchange
5 service," then I think it's much clearer what is supposed to
6 happen under 62-622.
7 And so let's go to slide three, John.
8 All that you have here with the next slide is
9 essentially the same statutory language you saw in the first
10 page and we've just underlined portions of it to sort of get to
11 the part that this argument is about.
12 The Commission shall cease regulating basic local
13 exchange rates upon a showing that effective competition exists
14 for basic local exchange service. Effective competition exists
15 when -- part B -- there are functionally equivalent,
16 competitively priced local services reasonably available.
17 So that's the essence of what we're trying to
18 look at.
19 So what is it that these local services that are
20 mentioned in subpart B are supposed to be compared with to
21 determine whether they're functionally equivalent and
22 competitively priced? The answer is right there before you in
23 the Statute. They're to be compared with a service that you're
24 considering deregulating; that is, basic local exchange
25 service, the service whose definition we just looked at.
9

HEDRICK COURT REPORTING ARGUMENT
P. O. BOX 578, BOISE, ID 83701
 1 So, John, if you would show us the next -- next
2 slide?
3 Basically then what you have is a comparison
4 between two things. In slot one, as I've called it, it's basic
5 local exchange service. That's what you have to compare
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6 whatever is being offered up with. Question is is basic local
7 exchange service functionally equivalent and competitively
8 priced with whatever local services the incumbent company is
9 asking you to take a look at. In this case, Qwest is asking
10 you to take a look at wireless, but of course the Legislature
11 didn't say wireless, the Legislature said local service.
12 We could be asking you to take a look at UNEP, we
13 could be asking you to take a look at cable -- you know,
14 voice-over television cable, if the facts had worked out that
15 way, but we're not. We are asking you to take a look at
16 wireless. So wireless goes in one of the slots, but the other
17 slot is always occupied by the same definition. It's basic
18 local exchange service.
19 I think Staff said it best in their Reply
20 Memorandum. I'm now quoting them at page 4 of their Reply:
21 Use of the term "local services" is consistent
22 with the notion that the alternative service, although not
23 identical, may nonetheless be functionally equivalent to basic
24 local exchange service. The Legislature is inviting comparison
25 of the different products to determine whether they are
10

HEDRICK COURT REPORTING ARGUMENT
P. O. BOX 578, BOISE, ID 83701
 1 functionally equivalent, and, ultimately, whether they
2 effectively compete for customers.
3 We agree with what Staff says there.
4 Now, what Staff says that we disagree with is
5 because local services may mean something different than basic
6 local exchange service, that the Commission can look more
7 broadly at other topics, and it's this -- it's here that the
8 Staff tries to persuade you that you should be looking at
9 whether wireless services are effective competition to things
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10 like sending faxes and accessing the Internet. That's where
11 the Staff went wrong.
12 What you are to be looking at is whether or not
13 they're functionally equivalent with basic local exchange
14 service. 62-622 does not say that you are supposed to consider
15 whether there is effective competition for local services. It
16 asks you to look at whether these local services provide
17 effective competition to basic local exchange service. So
18 whatever local service is being considered, whether it has more
19 functionality or not, the only functionalities that are
20 relevant are those that are or are not functionally equivalent
21 to basic local exchange service.
22 If you start trying to decide whether wireless
23 service is functionally equivalent with wireline access to the
24 Internet or wireline data transmission of some sort, then
25 you're not doing what the Statute asked you to do.
11

HEDRICK COURT REPORTING ARGUMENT
P. O. BOX 578, BOISE, ID 83701
 1 John, would you go back to number three?
2 MR. JOHN SOUBA: (Indicating.)
3 MS. HOBSON: Going back to the version of the
4 Statute that we simply underlined, wanted to show you that just
5 to show you that what I've done is underline portions of the
6 Statute that kind of get down to this argument.
7 And then if we can go to five, what we've done
8 here on the fifth page of your handout is simply show you that
9 same underlined language with the rest of the part that wasn't
10 underlined left out. That leaves us with this:
11 The Commission shall cease regulating basic local
12 exchange rates upon a showing that effective competition exists
13 for basic local exchange service. Effective competition exists
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14 when there are functionally equivalent, competitively priced
15 local services reasonably available.
16 Now, if you look at the next slide, all that
17 we've done here in this slide is take the same definition that
18 was on the last slide or the last board and substitute X for
19 basic local exchange service. We're making this into a formula
20 for you for a minute.
21 And then as Staff suggests, local services is
22 broader -- this is their argument -- it's broader than basic
23 local exchange service, so I'm calling local services X plus Y.
24 The result that you get if you assume that we have to prove X
25 and Y is shown below:
12

HEDRICK COURT REPORTING ARGUMENT
P. O. BOX 578, BOISE, ID 83701
 1 The Commission shall cease regulating X upon a
2 showing that effective competition exists for X. Effective
3 competition exists for X when there are functionally
4 equivalent, competitively priced X and Y reasonably available.
5 I submit to you that that result is absurd, and
6 to hammer that point home just one more time, if instead of X
7 and Y we substitute -- next slide, please -- we substitute
8 apples and oranges, I think that what you see here is a formula
9 that makes no sense if what you're trying to determine is
10 whether customers have effective competition for regulated
11 service:
12 The Commission shall cease regulating apples --
13 that is, basic local exchange service -- upon a showing that
14 effective competition exists for apples. Effective competition
15 exists for -- exists when there are functionally equivalent,
16 competitively priced apples and oranges reasonably available.
17 I submit to you that's not what the Legislature
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18 had in mind.
19 Staff is urging that the relatively unfixed
20 definition of local services gives this Commission the
21 opportunity to examine the level of competitiveness for things
22 that are not basic local exchange services -- oranges, if you
23 will -- but they are wrong. The Statute forces the comparison
24 simply with apples -- with basic local exchange service, the
25 apples.
13

HEDRICK COURT REPORTING ARGUMENT
P. O. BOX 578, BOISE, ID 83701
 1 And so by trying to expand the definition of
2 local services, if you will -- if you'll go back, John, I'm
3 sorry, to number four, which is the slots slide -- by expanding
4 that definition, basically Staff is expanding the wrong side of
5 the equation. Local services may or may not be broader than
6 basic local exchange services, but that doesn't affect what
7 Qwest has to prove. That doesn't affect what you should
8 be considering. The only thing that you are to be considering
9 is whether they are functionally equivalent and competitively
10 priced with a fixed definition of basic local exchange service.
11 See, you add more things on this side, it doesn't matter,
12 because there isn't any equivalent on the other side of the
13 equation. Staff is just mistaken as to how this question of
14 statutory interpretation affects this case.
15 So, I will submit to you that it really doesn't
16 matter whether you believe local services means -- includes
17 things like data transmission or not, because whether it does
18 or not is not really relevant to what you need to be
19 considering. You need to be considering what is the
20 functionality and what is the competitive pricing of basic
21 local exchange service.
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22 I want to take just a minute to respond to
23 Staff's argument that Qwest is focusing on subsection B to the
24 exclusion of the rest of 62-622 and to the legislative intent
25 sections of 62-602. I could only say to you that that's simply
14

HEDRICK COURT REPORTING ARGUMENT
P. O. BOX 578, BOISE, ID 83701
 1 not true. Qwest believes that it has a compelling case that
2 wireless services effectively compete with basic local exchange
3 service. But that's for you to decide. After you have heard
4 our evidence, after you've seen our witnesses, after you've
5 seen the massive record that we have -- have put in already for
6 this Commission, it's for you to decide whether we have met
7 those standards, but it is not a question of statutory
8 interpretation. I'm really puzzled by that.
9 Qwest is not suggesting to you that you don't
10 need to look at 62-602 or that you can somehow, through
11 alchemy, avoid looking at the question of effective
12 competition. We're not saying that at all. But we are saying
13 that the Legislature told you what the scope is of what it is
14 that you're trying to do. You're trying to deregulate the only
15 thing, the only really effective thing that you currently
16 regulate, which is basic local exchange service.
17 Now, 62-622 -- or, 62-602, excuse me -- the
18 legislative intent Statute, says effective -- we must have
19 effective competition involving a significant number of
20 customers having both provider -- I'm sorry -- having both
21 service provider and service option choices. Qwest believes
22 that we will be able to demonstrate that very clearly to you.
23 More than the mere presence of a competitor, we think we can
24 show that hands down, and substantive and meaningful
25 competition throughout the incumbent's local calling areas. We
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15

HEDRICK COURT REPORTING ARGUMENT
P. O. BOX 578, BOISE, ID 83701
 1 submit to you through our evidence you're going to be convinced
2 of that.
3 But, again, whether or not you are, it's a
4 question of -- it's a question of fact and you need to hear the
5 evidence. Qwest doesn't want to preview all of that for you at
6 this time, but we do not argue that the mere presence of a
7 competitor is enough. So don't take Staff's word on that.
8 Please go ahead and look at our evidence.
9 But we do want to point out that when the
10 Legislature was talking about effective competition in 62-602,
11 they were referring to the term "effective competition" in
12 62-622, and the question is: Effective competition with what?
13 It's not effective competition for microwave ovens. It's not
14 effective competition for automobiles. It's effective
15 competition for what you regulate: Basic local exchange
16 service. So when you look at the standards of 62-602, you're
17 still to be considering them in the context of the entire
18 statutory scheme, including 62-622.
19 Finally, I want to respond, because I will only
20 take this one opportunity, to a couple of issues that were
21 raised in the Intervenors' memo. Intervenors have mistaken the
22 stage of the proceedings, it seems to me, and gone ahead and
23 argued the merits of their case a little bit. Qwest believes
24 that these arguments that they have presented are answered in
25 the evidence that we will be presenting to you at hearing, and
16

HEDRICK COURT REPORTING ARGUMENT
P. O. BOX 578, BOISE, ID 83701
 1 so we're not going to talk about those things now, but we do
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2 want to point to one thing that the Intervenors argue that is
3 relevant to the legal questions that are before the Commission
4 today.
5 On page 2 of their memo, they point out that
6 62-602 -- that is, the legislative intent Statute -- states in
7 subsection one that, quote, There is a need for establishing
8 legislation to protect and maintain high-quality universal
9 telecommunications at just and reasonable rates for all classes
10 of customers.
11 Now, the term "universal telecommunications
12 services," to me, echoes the term "universal service," and of
13 course the phrase "just and reasonable rates" suggests to me
14 "regulation." That's the standard formula that has been used
15 for many decades now to talk about what kind of rates the
16 Commission sets.
17 The term "universal communications," as I said,
18 echoes the term "universal services," and that term the
19 Legislature has given to you to define in 62-610(c). And we
20 talked about this point in our Memoranda on pages 14 through 17
21 and I ask you to take a look at that, not so much for
22 argument -- hopefully you've absorbed that -- but for the
23 language that you, yourselves, used back when you were deciding
24 what the scope of universal service was. When you took on that
25 task, the very first thing you put on the list was, quote,
17

HEDRICK COURT REPORTING ARGUMENT
P. O. BOX 578, BOISE, ID 83701
 1 voice grade access to the public switched network. You did not
2 list access to the Internet or the ability to operate a fax
3 machine or any other data transmission anywhere in your list of
4 universal service; nor do you regulate those -- those services.
5 The point is the Legislature was concerned about
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6 universal service. The Legislature deregulated everything but
7 voice grade service. The scope of 62-622(3) is the
8 deregulation of basic local exchange service, and that
9 interpretation is the only interpretation that is consistent
10 with 62-602
11 Thank you.
12 COMMISSIONER KJELLANDER: Thank you, Ms. Hobson.
13 Let's move to Mr. Gannon.
14 MR. GANNON: Thank you, Mr. Chairman.
15 Thank you, Mr. Chairman. Very generally, I think
16 the factual -- very general, factual argument that's being
17 presented has to be -- that's going to be presented has to be
18 considered, because in making the ruling that both parties are
19 asking the Commission make, I think there's an impression that
20 that ruling may exclude certain evidence from coming in; and
21 very generally, it seems to me that in comparing the cell phone
22 to the land line, the cell phone has voice transmission
23 capability, obviously, but the land line has many more
24 capabilities than voice transmission, including the ability to
25 operate a fax, to operate DSL and the Internet, to operate an
18

HEDRICK COURT REPORTING ARGUMENT
P. O. BOX 578, BOISE, ID 83701
 1 office phone system which are used by small business
2 extensively, and to operate extension phones which are used by
3 Idaho's families and households.
4 Now, in considering whether this kind of evidence
5 is going to come in as evidence, we need to look at not only
6 the -- not only the Statute that has been presented in these
7 cards, but in particular, we need to look at the legislative
8 intent regarding this whole Telecommunications Act of 1998.
9 And I would point out that, first of all, as you look through
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10 the Idaho Code, many statutory acts don't even have a
11 legislative intent. Most that do have maybe a short paragraph.
12 But we're fortunate enough to have nearly a whole page devoted
13 to what does the Legislature intend in enacting this particular
14 Statute, and it is quite detailed and extensive.
15 The effective competition has to be substantive
16 and meaningful, so that if we're comparing a cell phone to a
17 land line, don't we really need to compare what -- what
18 functions a cell phone can have versus what functions a land
19 line can have? You may be able to buy a small business land
20 line for $42, but if you can do so many more things with it,
21 don't you have to compare that to what functions a cell phone
22 can play in your office and, therefore, whether there is really
23 competitive pricing or effective competition, whether a person
24 with a small office is going to buy the cell phone.
25 So, the competition has to be, according to the
19

HEDRICK COURT REPORTING ARGUMENT
P. O. BOX 578, BOISE, ID 83701
 1 legislative intent, it has to be meaningful, and it has to be
2 substantive, the word "actual" is used, the public interest has
3 to be considered, and, generally, rates have to be just and
4 reasonable for all classes of customers.
5 Now, how does that play into this particular
6 Statute? Well, first of all, the Legislature has said local
7 services, as we all know from the -- and there's no -- as
8 generally known, if there's a mistake made in the Statute, a
9 trailer bill can be passed by the Legislature or a cleanup bill
10 can be passed by the Legislature or a Legislature can change
11 the law, but they never have. Nobody has ever changed that
12 term "local services." It's sitting there. And, apparently --
13 and apparently now, we want to change that term to read
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14 something else.
15 In order to change that term to read something
16 else, it has to be considered, which is really I think a
17 significant undertaking to say that something that is in
18 writing that has been in law -- I think this was enacted in
19 1998 -- for five years really means something else and we
20 should put in some other words. I think you have to then
21 consider the legislative intent, and that legislative intent is
22 that competition has got to be meaningful.
23 Now, it doesn't mean a darn thing to a lot of
24 people if you can't use it. If you can't use a cell phone to
25 operate your office and fulfill your office needs versus the
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HEDRICK COURT REPORTING ARGUMENT
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 1 office needs of a land line, then how is that meaningful
2 competition? And that is really -- and that is really where a
3 lot of the Intervenors' or the thrust of the Intervenors'
4 argument comes.
5 Similarly, with functional equivalence, fine to
6 say, well, we can deliver a voice -- a voice to your office,
7 but you can't use it because it's a cell phone voice and it
8 won't work in your office system.
9 And so once again, and -- and some of what I'm
10 presenting is our position and I realize there may be
11 contrary -- contrary views by Qwest, but the point is that that
12 evidence needs to come in in order to determine what -- what is
13 functionally equivalent, what is competitively priced. And so
14 any construction of the Statute so as to exclude all that means
15 that a good part of the evidence which will be presented, which
16 is the cell phone isn't of any use to a small office situation,
17 a good part of that won't come in, at least as I'm
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18 understanding Qwest's position.
19 So we think the only reasonable interpretation of
20 the Statute consistent with the legislative intent is that
21 "local services" means "local services." Now, whether "local
22 services," it's a pretty general term and it's much more
23 general than "basic local exchange rate," but it's still --
24 it's there, and it's a general term, it's broad, and we think
25 that it probably encompasses nearly all the evidence that is to
21

HEDRICK COURT REPORTING ARGUMENT
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 1 be presented as far as what the -- as far as what is intended
2 by the Legislature in order for there to be effective
3 competition, and, therefore, deregulation.
4 We note that in the phone book, which we've asked
5 the Commission to take notice of and I've been accused of being
6 devious in doing that because -- because one or two of the
7 Qwest's witnesses have land lines listed as their phone numbers
8 in the phone book, but that wasn't the main reason, we have
9 another reason. But in the phone book, they talk about local
10 services. It's a term that is generally known to the public
11 and well known, and unless there's some huge reason and I think
12 they would have to show that it was contrary to legislative
13 intent or it was totally -- I don't think "absurd" is the word
14 to describe it. I think that maybe it's not one that's to
15 Qwest's liking, but whether it's absurd or not, "absurd" is way
16 too strong a word to describe the alleged inconsistency.
17 So our view that "local service" means "local
18 service." Could have been changed and it wasn't, and
19 therefore, the evidence as to whether the -- as to what -- as
20 to what kind of evidence is admissible to determine effective
21 competition for local services is quite broad, and that the
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22 evidence that we want to present, as well as other -- other
23 witnesses, should be admitted.
24 COMMISSIONER KJELLANDER: Thank you, Mr. Gannon.
25 Before we return to Mr. Stutzman, let me just
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HEDRICK COURT REPORTING ARGUMENT
P. O. BOX 578, BOISE, ID 83701
 1 move to the Commission, see if there are any questions from
2 members of the Commission. Commissioner Hansen.
3 COMMISSIONER HANSEN: I believe I just have one
4 question, and I guess it's kind of brought to my attention with
5 your analysis relating to oranges and apples, and I guess I'm
6 just kind of curious:
7 Is a local measured service customer's call to a
8 local dial-up Internet provider or a dial-up to send a fax, is
9 that counted by Qwest as a local call for billing service?
10 MS. HOBSON: Do you know?
11 MR. JOHN SOUBA: Yes.
12 MS. HOBSON: Yes. Yes, it is.
13 COMMISSIONER HANSEN: Thank you. That's all I
14 have.
15 MS. HOBSON: It's counted as a local call for
16 billing purposes, and of course the FCC has counted it as an
17 interstate call for purposes of reciprocal compensation if, for
18 example, that Internet service provider is served by someone
19 other than Qwest -- an EI, for example. So even though the
20 customer would pay for his time on the line, Qwest would not
21 pay reciprocal compensation on that call because it wouldn't be
22 considered a local call by the FCC.
23 COMMISSIONER HANSEN: Just a follow-up so I
24 understand you:
25 But it would be, on a measured service customer
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HEDRICK COURT REPORTING ARGUMENT
P. O. BOX 578, BOISE, ID 83701
 1 call, it would be counted as part of their time and their
2 billing as a call. Is that correct?
3 MS. HOBSON: My witness here says that that's
4 correct.
5 COMMISSIONER HANSEN: Thank you very much.
6 COMMISSIONER KJELLANDER: Thank you, Commissioner
7 Hansen.
8 Mr. Gannon, just a question for you:
9 I want to make sure that I understand your
10 position, and this is perhaps my characterization of where
11 you were headed and if I'm wrong please correct me and jump in,
12 but am I hearing you correctly that while we're here today to
13 try to place meaning on the words "local services," it's your
14 impression that what we're really doing is defining what the
15 term "functionally equivalent" is?
16 MR. GANNON: I think in the Motion they're
17 asking -- the Staff asks for both those, for a definition of
18 "functional equivalent" and also the statutory interpretation
19 of "local services," so I think there were those two issues.
20 COMMISSIONER KJELLANDER: From your perspective,
21 you saw that depending on how this went, most of your testimony
22 would be irrelevant in a further proceeding?
23 MR. GANNON: No. I think that's the -- that's
24 the goal, but I think it comes in under either one of those,
25 either local services or functional equivalent or competitive
24

HEDRICK COURT REPORTING ARGUMENT
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 1 pricing, or under effective -- effective competition. I mean,
2 I think the evidence will ultimately come in whether it's
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3 under -- even if Qwest were to prevail in its position today,
4 our argument would be that evidence of DSL, fax, would come in
5 under "competitively priced," because if you had -- if a land
6 line at the same price can operate a fax machine and DSL, then
7 the Commission would have to consider whether that -- that
8 package is competitively priced with what a cell phone would do
9 for you, for your office. So I think it will come in
10 ultimately, although it seemed to me from the discussion in the
11 Briefs that maybe there was some impression that this would
12 resolve whether that evidence would come in at all, but I'm not
13 positive on that. I think there was some -- I had an
14 impression that that might be the case.
15 COMMISSIONER KJELLANDER: Thank you,
16 Mr. Gannon.
17 Are there further questions from members of the
18 Commission? If not then, Mr. Stutzman.
19 MR. STUTZMAN: Thank you, Mr. Chairman.
20 Listening to Counsel, it sounded almost as if Qwest was giving
21 up most of its position in an argument it had previously made
22 or had maintained in this case, so if I'm understanding that
23 Qwest is not -- no longer arguing or maintaining that "basic
24 local exchange service" needs to be inserted into subparagraph
25 B, I appreciate that, but it still sounds as if the goal -- and
25

HEDRICK COURT REPORTING ARGUMENT
P. O. BOX 578, BOISE, ID 83701
 1 sort of to get to your question, Mr. Chairman -- the goal that
2 Qwest seeks by its interpretation is to severely limit the
3 evidence that can come in under the functional equivalent
4 review.
5 So Staff has asked as part of its Request for
6 Declaratory Ruling that the Commission not allow the
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7 interpretation, Qwest's interpretation of subparagraph B, to
8 limit the functional equivalence review to whether or not voice
9 communication is available from the allegedly-competitive
10 product. And I don't think Qwest is giving up on that point,
11 even though it seems, if I understand it correctly, they're now
12 saying it doesn't matter whether or not basic local exchange
13 service -- the term "basic local exchange service" -- is
14 actually inserted in the subparagraph B.
15 The point is the Legislature asked for a review
16 of effective competition and a determination of these two
17 products and as to their functional equivalence, and that
18 requires a review of all of their functions and features, and
19 that's all that we're asking for from the Commission.
20 COMMISSIONER KJELLANDER: Thank you,
21 Mr. Stutzman.
22 Are there further arguments we need to hear on
23 this issue? Before we go there, I believe we have a question
24 from Commissioner Smith, which trumps you.
25 MS. HOBSON: No question about that.
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HEDRICK COURT REPORTING ARGUMENT
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 1 COMMISSIONER SMITH: Mr. Stutzman, I'm interested
2 in your statement that Qwest is seeking to somehow limit the
3 evidence the Staff is presenting. I'm not aware that there
4 have been any Motions to Strike.
5 MR. STUTZMAN: True. We will get to that if we
6 need to, but there --
7 COMMISSIONER SMITH: But we don't get to that
8 until we get to hearing, so it just seems to me how can you --
9 I don't understand. Is this anticipatory objection?
10 MR. STUTZMAN: Well, no, it's a matter of the
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11 manner or the relevant facts or the facts that the parties have
12 determined are relevant or not. The filings, to date, are as
13 if there are two different, almost unrelated, cases that are
14 filed because of the interpretation that the parties put on the
15 Statute.
16 COMMISSIONER SMITH: Don't you think the
17 Commission is capable of hearing the evidence in the case and
18 sorting out what's relevant to the Decision that it's going to
19 make?
20 MR. STUTZMAN: Certainly, but it also makes a
21 difference in the way that a party prepared the case. If we're
22 completely wrong, if one party is completely wrong about what
23 facts are relevant, then the testimony and exhibits ought to be
24 prepared in a manner that's consistent with what the Commission
25 determines the law says, and so the facts that are relevant.
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HEDRICK COURT REPORTING ARGUMENT
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 1 COMMISSIONER KJELLANDER: Ms. Hobson.
2 MS. HOBSON: Thank you. I just wanted to clarify
3 Mr. Stutzman's statement that Qwest is giving up its argument.
4 Qwest has told you that we think the term "local
5 services" is short for "basic local exchange services." That's
6 what we have said in our testimony, if you've had a chance to
7 look at it, and that's what we've said in our Memoranda. What
8 I'm telling you this morning is that whether you think that
9 it's shorthand for "basic local exchange service" or whether
10 you think it's broader really doesn't matter, because the key
11 is functional equivalence, the key is competitive pricing. And
12 if you look at either the term "equivalence" or "competitive,"
13 you understand right away, as an English speaker, that you're
14 talking about comparing two things. Something can't be a
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15 functionally equivalent without having a standard to compare it
16 with, and the standard is what remains fixed here. The
17 standard is basic local exchange service and we've looked at
18 that definition.
19 So whether it's shorthand or whether it means
20 something broader, that doesn't really matter. What matters is
21 what you compare "local services" to, and that is fixed.
22 That's our only point.
23 COMMISSIONER KJELLANDER: Thank you, Ms. Hobson.
24 Any further comments? If not, then I believe
25 we're ready to move on to the next issue in the oral argument,
28

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 1 and Mr. Stutzman.
2 MR. STUTZMAN: Thank you, Mr. Chairman.
3 It is clear from the prefiled testimony that the
4 parties have significantly different understandings of what the
5 law is, and prepared significantly different cases based on
6 that understanding of what the law is. We're asking the
7 Commission to provide guidance on the interpretation of the
8 Statute that will inform the parties on what the relevant facts
9 are, and it would be appropriate then to file -- for one thing,
10 it would greatly simplify the issues, we will both be singing
11 from the same song book, and it will make the hearing efficient
12 because we can then prepare our testimony and exhibits based on
13 a common understanding of what the law requires.
14 So we're asking that the hearing dates be vacated
15 so that the parties can reassess their case in light of the
16 Commission's guidance, and refile testimony and exhibits
17 consistent with that guidance.
18 COMMISSIONER KJELLANDER: Thank you,
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19 Mr. Stutzman.
20 Let's move to Ms. Hobson.
21 MS. HOBSON: Thank you, Mr. Chairman.
22 Qwest opposes the Motion to Vacate the hearing.
23 Qwest's position that we were looking at functional equivalence
24 and competitive pricing with basic local exchange service was
25 obvious the day we filed our Application and testimony, which
29

HEDRICK COURT REPORTING ARGUMENT
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 1 was back in December. We are now, what, five, six months down
2 the line from that day, and only now, only after Qwest filed
3 its rebuttal testimony, do we see this Motion for Declaratory
4 Ruling.
5 Frankly, I don't see the filings quite the way
6 Staff does. I think Staff has taken its best shot, if you
7 will, at a whole range of issues. Among them is whether or not
8 basic local exchange service is functionally equivalent with
9 things that are not basic local exchange service like land line
10 access to the Internet, and a lot of other ways in which Staff
11 wants to present a functional equivalence question to you:
12 Service quality, you know, safety of using the cell phone, so
13 on and so forth. They have already done that. And it's not
14 unusual, in my opinion, that parties present testimony that may
15 be broader than what the Commission considers to be the
16 relevant points.
17 Qwest does not move to strike. Qwest did not,
18 frankly, intend to move to strike. And you have every
19 opportunity of telling us at hearing who's right and who's
20 wrong about how we interpret the Statute, but ordinarily we
21 would have expected that to be teed up in posthearing briefs
22 after you've already heard the evidence.
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23 So, we -- Qwest is anxious to have this issue
24 decided. As I said, we filed back in December. When we filed
25 the Burley case that took a long time, and we had hoped and
30

HEDRICK COURT REPORTING ARGUMENT
P. O. BOX 578, BOISE, ID 83701
 1 understood that the Commission was going to take our next case
2 under this Statute on an expedited basis. We are not blaming
3 anyone, but at this point we feel like this has gone on long
4 enough. If Staff needed this clarification before it presented
5 its testimony, it certainly could have done that. It didn't do
6 that, and now nothing is going to happen here except that Qwest
7 is going to experience another delay before we get a chance to
8 present you with our evidence.
9 COMMISSIONER KJELLANDER: Thank you, Ms. Hobson.
10 Mr. Gannon.
11 MR. GANNON: I don't think the Intervenors feel
12 strongly one way or the other. The only thing I note is that
13 in the rebuttal testimony that was filed by Qwest, it seemed
14 that there were some new factual issues, some new facts that
15 were raised, and we might want to talk about those and -- but,
16 you know, we can certainly do that within this time frame. I
17 mean, it would be very brief, but there were a few issues that
18 were raised in the rebuttal testimony, which was quite
19 extensive for rebuttal testimony, and there were a few things
20 that my witnesses might want to comment on.
21 COMMISSIONER KJELLANDER: Thank you,
22 Mr. Gannon.
23 MR. GANNON: Briefly.
24 COMMISSIONER KJELLANDER: Before we move to
25 Mr. Stutzman, are there any questions from the Commission?
31
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HEDRICK COURT REPORTING ARGUMENT
P. O. BOX 578, BOISE, ID 83701
 1 None.
2 Mr. Stutzman.
3 MR. STUTZMAN: Thank you, Mr. Chairman.
4 Well, I just reiterate that the cases are
5 fundamentally different based on the different understandings
6 of the Statute, and, for example, in Staff's case, if the
7 Commission is -- determines that we're only going to be
8 considering voice communication in a functional equivalence
9 comparison, then much of our testimony as it relates to that
10 issue and even as it relates to pricing is irrelevant, because
11 that was not our understanding of the Statute. So we're asking
12 that we be allowed to prepare testimony, both parties prepare
13 testimony, based on the same understanding of the law.
14 COMMISSIONER KJELLANDER: Thank you,
15 Mr. Stutzman.
16 Are there further arguments that need to come
17 before the Commission on the issue? If not, then it would be
18 our intent to go off the record and the Commission will
19 deliberate on these specific matters, and hopefully return with
20 at least some guidance regarding the issues raised in oral
21 argument today. So with that, we'll go off the record, and
22 please hover around the building.
23 MS. HOBSON: Thank you.
24 (Recess.)
25 COMMISSIONER KJELLANDER: We'll be back on the
32

HEDRICK COURT REPORTING ARGUMENT
P. O. BOX 578, BOISE, ID 83701
 1 record.
2 First of all, I want to thank all of the parties
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3 for keeping their arguments very brief and succinct. Thank you
4 very much for that.
5 And the Commission has deliberated on both items,
6 and it's the Commission's impression based on what we have
7 heard today that we will continue to take under advisement the
8 request to actually define the issue of "local services," with
9 the intention that we would not vacate the hearing, we would
10 move forward on the hearing. We have heard from Qwest that
11 there is no intent to strike any of the testimony that's there.
12 So we would proceed with the impression that
13 should the Commission need to make a ruling on the issue with
14 regards to the definition of "local services" and its meaning,
15 that we could do so at any time during the proceeding. And if
16 there needs to be further argument on that, that that can be
17 accomplished in the Posthearing Briefs. So it's our intent
18 then to move forward and see where things take us with regards
19 to that specific hearing.
20 So if there are no other issues that need to come
21 before the Commission, we are adjourned.
22 (The hearing concluded at 11:11 a.m.)
23
24
25
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HEDRICK COURT REPORTING AUTHENTICATION
P. O. BOX 578, BOISE, ID 83701
 1 AUTHENTICATION
2
3
4 This is to certify that the foregoing is a
5 true and correct transcript to the best of my ability of the
6 proceedings held in the matter of the Application of Qwest
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7 Corporation for deregulation of basic local exchange rates in
8 its Boise, Nampa, Caldwell, Meridian, Twin Falls, Idaho Falls,
9 and Pocatello exchanges, Case No. QWE-T-02-25, commencing on
10 Thursday, May 22, 2003, at the Commission Hearing Room, 472
11 West Washington, Boise, Idaho, and the original thereof for the
12 file of the Commission.
13
14

15

16 ___________________________________________
WENDY J. MURRAY, Notary Public
17 in and for the State of Idaho,
residing at Meridian, Idaho.
18 My Commission expires 2-5-2008.
Idaho CSR No. 475
19

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