20060803_1629.pdf

DECISION MEMORANDUM
TO:CO MMISSI 0 NER KJELLAND ER
CO MMISSI 0 NER SMITH
CO MMISSI 0 NER HANSEN
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL
FROM:CECELIA A. GASSNER
DATE:JULY 31, 2006
SUBJECT:APPLICATION OF DIRECT COMMUNICATIONS STAR WEST, INc.
FOR APPROVAL OF A CERTIFICATE OF PUBLIC CONVENIENCE
AND NECESSITY TO PROVIDE LOCAL SERVICE IN IDAHO; CASE
NO. DCS-OS-
On August 9 2005, Direct Communications Star West, Inc. ("Direct" or "Company
filed an Application for a Certificate of Public Convenience and Necessity with the Commission.
In its Application, Direct states that it currently provides broadband and dial-up Internet access
to over 3 000 residents and businesses in southeastern Idaho. Direct intends to provide Voice
over Internet Protocol (VoIP) telecommunications services to its current customers and to
potential customers in Idaho.
Direct is an Idaho corporation with corporate headquarters in Rockland, Idaho. The
Company has a Certificate of Incorporation dated February 23, 1993 , and also a Certificate of
Good Standing issued by the Idaho Secretary of State on June 3 , 2005. The Company has
provided financial information and the appropriate contact information for its registered agent for
service of process within Idaho. The Company also filed a revised illustrative tariff on June 29
2006.
On July 7, 2006, the Commission issued a Notice of Application and Modified
Procedure, requesting comments regarding the Company s filing. Order No. 30094. The
Commission received comments from Commission Staff and from Qwest Corporation. No other
comments were submitted.
DECISION MEMORANDUM
COMMENTS
Staff Comments
Staff reviews all requests for a Certificate of Public Convenience and Necessity
(CPCN) pursuant to Idaho Code ~~ 61-526 through -528 , IDAPA 31.01.01.111 and 112 (Rules
111 and 112), and Procedural Order No. 26665. To obtain a CPCN, an applicant must provide
the Commission with the following information: (1) name, address, and form of business; (2) the
date on which the applicant proposes to begin construction or anticipates that it will provide
service, including a written description of customer classes and services proposed to be offered;
(3) the proposed service territory; (4) certain financial information; (5) maps regarding the
proposed service area; (6) a proposed initial tariff and price sheets; (7) contact information; (8)
interconnection agreements, if any; (9) an agreement to comply with the Commission s Rules;
and (10) an escrow account with a bonded escrow agent if the Company requires advanced
deposits from its customers. Order No. 26665.
Through its review of the Application and numerous discussions with the Company,
Staff has determined that the Company s filing complies with the requirements of the
Commission. However, Staff notes that in its Application the Company has indicated that Direct
will compete with Direct Communications Rockland, Inc. ("Rockland") and Qwest. Rockland is
the Incumbent Local Exchange Carrier (ILEC) within the service territory and receives federal
and state Universal Service Funding. While this service territory arrangement is highly unusual
Staff does not believe it is cause for denial of the Company s Application. That said, Staff
believes that some monitoring may be warranted to avoid any possible conflict between the
closely held companies. In its Application the Company stated that it understands and agrees to
comply with Commission rules and requirements.Staff further believes that the Company
possesses the requisite financial, managerial and technical qualifications necessary to operate as
a provider of telecommunications services.
Based on its review of the Application, Staff recommends approval of the
Application for a Certificate of Public Convenience and Necessity with a waiver of the escrow
account requirement until such time as the Company decides to collect deposits. In the future
should the Company decide to collect deposits, Staff recommends that the Company be ordered
to comply with the escrow requirement as well as the Commission s Rules for interest on
deposits.
DECISION MEMORANDUM
Qwest Comments
Qwest Corporation ("Qwest") filed comments with the Commission regarding this
Application, expressing concern regarding the effect of granting Direct's Application on rural
telecommunications competition in general, and on customers of Direct Communications
Rockland and Idaho customers who pay into the Idaho Universal Service Fund (USF) more
particularly. Qwest comments that rural telephone companies are currently afforded certain
protections against competition. It states "if rural companies such as Rockland are now open to
competition from non-regulated affiliates, Qwest submits that the time has come to withdraw all
special competitive protections that have sheltered these companies." Qwest Comments, p. 3.
Qwest acknowledges that the Idaho Legislature maintains authority to enact or repeal statutes
relevant to such protections, but recognizes that the Commission plays an important role in
implementing competition in rural areas.
Qwest's comments note that the Company states that it intends to compete with
Direct Communications Rockland in a rural area. Qwest believes that as customers move to the
Company s services, Direct Communications Rockland will experience a corresponding loss of
customers, likely resulting in Direct Communications Rockland needing to seek additional
sources of revenue. These additional sources could be a rate increase from remaining customers
or an increased draw from the Idaho USF.
Qwest believes that it may be appropriate for the Commission to "impose additional
financial reporting and cost accounting requirements" on Rockland and the Company. Qwest
Comments, p. 2. It expresses a request that the effect of the competition between Rockland and
the Company be considered by this Commission.
COMMISSION DECISION
Does the Commission desire to approve Direct's Application and grant it a
Certificate of Public Convenience and Necessity? If so, does the Commission desire to waive
the escrow account requirement until such time as the Company decides to collect deposits?
Does the Commission desire to impose any further requirements on the Company or another
party?
M:DCS-O5-cg2
DECISION MEMORANDUM