20110418Vol I Technical Hearing.pdf

ORIGINAL
"BEFORE THE IDAHÒ PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF TRACFONE WIRELESS, INC., FOR
DESIGNATION AS AN ELIGIBLE
TELECOMMUNICATIONS CARRIER
CASE NO.
TFW-T-09-01
TECHNICAL HEARING
HEARING BEFORE
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COMMISSIONER MARSHA H. SMITH (Presiding)
COMMISSIONER JIM D. KEMPTON
COMMISSIONER MACK A. REDFORD
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.'
PLACE:Commission Hearing Room
472 West Washington Street
Boise, Idaho
DATE:March 31, 2011
VOLUME I - Pages 1 - 210
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POST OFFICE BOX 578
BOISE, IDAHO 83701
208-336-9208
COURT REPORTING
J'ef~ tk ¥ ~,fÍtee 19
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20
21
22
23
24
. 25
1 APPEARANCES
2
3 For the Staff:NEIL PRICE, Esq.
Deputy Attorney General
472 West Washington
Boise, Idaho 83702
4
5
For TracFone:GREENBERG TRAURIG, LLP
by MITCHELL F. BRECHER, Esq.
2101 L Street Northwest,
Suite 1000
Washington, DC 20037
-and-
McDEVITT & MILLER, LLP
by DEAN J. MILLER, Esq.
420 West Bannock Street
Boise, Idaho 83702
6
7
8
9
10
11 For Intervenor
CTC Telecom:
RICHARDSON & 0' LEARY
by MOLLY O'LEARY, Esq.
Post Office Box 7218
Boise, Idaho 83707
12
13
14
For Intervenor
Idaho Telecom Alliance:
GIVENS PURSLEY, LLP
CYNTHIA A. MELILLO, Esq.
Post Office Box 2720
Boise, Idaho 8370115
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17
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19
HEDRICK COURT REPORTING
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APPEARANCES
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20
21
22
23
24.25
1 I N D E X
2
WITNESS EXAMINATION BY PAGE
3
4
Jose Fuentes
(TracFone)
Sworn
Mr. Brecher (Direct)
Prefiled DirectMr. Brecher (Direct-cont.)
Prefiled Rebuttal
Mr. Price (Cross)
Ms. O'Leary (Cross)
Ms. Melillo (Cross)
Commissioner Kempton
Commissioner Redford
Commissioner Smith
Commissioner RedfordMr. Brecher (Redirect)
35
36
38
70
72
102
119
163
178
192
198
198
199
14 NUMBER PAGE
15 For TracFone:
16 1.Available International Destinations,
2 pgs
Premarked
5
6
7
8
9
10
11
12 EXHIBITS
13
17
2.SafeLink Wireless Terms and Conditions, Premarked
16 pgs18
19 FCC 05-165, Order, CC Docket No. 96-45, Premarked
14 pgs
3.
4.PremarkedFCC 09-17, Order, CC Docket 96-45,
7 pgs
5.PremarkedCTIA Consumer Code for Wireless
Service, 4 pgs
6.SafeLink Wireless Privacy Policy, 5 pgs Premarked
7 .Maine PUC Order, Docket No. 2009-263,
13 pgs
Premarked
HEDRICK COURT REPORTING
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INDEX
EXHIBITS
.
.
20
21
22
23
24.25
1 8.Maine PUC Notice of Investigation,
Docket No. 2010-47, 5 pgs
Premarked
2
9.
3
Maine PUC Notice of Rulemaking,
Docket No. 2010-340, 9 pgs
Premarked
4 10.Arizona Corporation Commission Premarked
Recommendation, Docket T-20 664A-09-014 8,
21 pgs5
6 11.FCC 08-100, Order, CC Docket No. 96-45, Premarked
16 pgs
7
12.
8
FCC DA 11-54, Order, CC Docket
No. 96-45, 7 pgs
Premarked
9 13.Silver Star Communications information, Premarked
5 pgs
10
14.CTC Wireless information, 4 pgs Premarked
11
15.Syringa information, 6 pgs Premarked
12
16.
13
United States Statutes Title 47,
Chapter 5, Subchapter I, 2 pgs
Marked 204
14
For Staff
15
103.
16
Supreme Court of Washington Opinion,
170 Wash.2d 273, 242 P.3d 810, 18 pgs
Marked 108
17
For the Intervenors:
18
207.124
19
Corporation Commission of Oklahoma
Order No. 575501, 11 pgs
Marked
208.Massachusetts DTC 10-6, 10/19/10, 6 pgs Marked 131
209.134Idaho PUC Order No. 29841, 26 pgs Marked
210.Marked 146Confidential
211.Marked 153CTC Wireless plans, 2 pgs
212.176California PUC Resolution T-17235,
29 pgs
Marked
HEDRICK COURT REPORTING
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EXHIBITS
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1 BOISE, IDAHO, THURSDAY, MARCH 31,2011, 9:30 A.M.
2
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4 COMMISSIONER SMITH: Good morning, ladies and
5 gentlemen. This is the time and place set for a hearing before
6 the Idaho Public Utili ties Commission in Case No. TFW-T-09-01,
7 further identified as In the matter of the Application of
8 TracFone Wireless, Inc., for designation as an eligible
9 telecommunications carrier.
10 We'll begin today with the appearances of the
11 parties, beginning with the Applicant.
12 MR. MILLER: Thank you, Madam Chairman. Dean J.
13 Miller of the firm McDevitt and Miller on behalf of the
14 Applicant.
15 Let me also introduce Mr. Rick Brecher who has
16 been previously admitted as counsel for this case; and also
17 Mr. Jose Fuentes, the director of public affairs for TracFone,
18 who, as you know, will be the TracFone witness.
19 COMMISSIONER SMITH: Okay. Thank you.
20 COMMISSIONER REDFORD: Mr. Miller. Could you
21 spell your last name?
22 MR. BRECHER: Yes, I could, Commissioner Redford.
23 It's Brecher, B-R-E-C-H-E-R, with the law firm of Greenberg
24 Traurig in Washington, DC.
25 COMMISSIONER REDFORD: Thank you.
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COLLOQUY
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1 MR. BRECHER: And to lend a little more confusion
2 to an already confused record, I was introduced as "Rick," I go
3 by "Rick," but my real name is "Mitchell." So when I sign
4 pleadings, it's "Mitchell F. Brecher"; same guy.
5 COMMISSIONER REDFORD: Thank you.
6 MR. BRECHER: There you have it.
7 COMMISSIONER SMITH: Thank you very much.
8 And for the Staff?
9 MR. PRICE: Neil Price, deputy attorney general,
10 representing Commission Staff.
11 With me is Grace Seaman, Staff witness.
12 COMMISSIONER SMITH: Okay. Ms. 0' Leary.
13 MS. 0' LEARY: Molly 0' Leary, appearing on behalf
14 of CTC Telecom, doing business as CTC Wireless.
15 And just to share with Mr. Brecher, my legal name
16 is "Mary" but I go by "Molly," so there you go.
17 COMMISSIONER SMITH: Thank you. And for ITA.
18 MS. MELILLO: Cynthia Melillo with the law firm
19 of Givens Pursley, representing the Idaho Telecom Alliance, and
20 I actually go by my real name.
21 And shall I introduce -- and with CTC and ITA, we
22 have Dan Trampush as our witness.
23 COMMISSIONER SMITH: Okay. Thank you.
24 MS. MELILLO: And Jerry Piper as well.
25 COMMISSIONER SMITH: Who is --
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COLLOQUY
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1 MS. MELILLO: He is the president of the ITA and
2 general manager of CTC.
3 COMMISSIONER SMITH: Okay. Thank you.
4 As far as my records show, these are all the
5 parties to the case, so we -- I believe I have some Motions to
6 take up before we begin with the testimony. And are those
7 yours, Melillo or O'Leary? Which?
8 MS. 0' LEARY: Yes, Madam Chair, I am going to
9 take up the -- provide the argument that we have on our Motions
10 to Compel and our Motions in Limine. We filed these Motions
11 last week at the end of the week because of the time crunch
12 that we were under. I'm going to just basically address the
13 Rule that applies and the record before the Commission. The
14 I'm sorry. TracFone' s attorney did file a Response to our
15 Motion to Compel, and I would like to address those arguments.
16 The first argument in Response to our Motions to
17 Compel, Motions in Limine, was that we violated the
18 Commission's Rule 256.02, and that was a failure to confer. I
19 would just like to say straight up that they are correct, we
20 did not confer, and I apologize for that. It was an
21 inadvertent omission on my part. It just simply occurred in
22 the rush to respond to their obj ections and the context of this
23 looming hearing date. And I know Joe well, he's a good
24 attorney, and my apologies to Joe for not having called him.
25 So that's that issue.
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ARGUMENT
.1 A good portion of TracFone' s Response to our
2 Motions to Compel and Motions in Limine is spent on the issue
3 of presumed or implied delay, and that argument is wholly
4 unfounded. TracFone, really, as this Commission knows from the
5 record before it, is the party that has repeatedly delayed. It
6 filed an inadequate Application which it later had to amend; it
7 failed to hire local counsel, in violation of this Commission's
8 Rule and of Bar Commission Rule 2.22, and that failure
9 continued for five months -- more than five months -- even
10 after it was pointed out to TracFone. I think that's -- that
11 would qualify as delay. In light of their failure to hire
12 local counsel until late October, this matter was not properly.13 before the Commission until such time as they were in full
14 compliance with this Commission's Rules.
15 In addition, in light of TracFone' s withdrawal of
16 its ETC Applications in other jurisdictions where it has
17 encountered opposition, Intervenors did not feel it was wise to
18 propound discovery until it was clear that TracFone intended to
19 go forward with its Idaho Application.
20 And as this Commission also knows from the record
21 before it, even in the year-plus that this matter has been
22 before the Commission in one form or another, the facts have
23 changed. It's a shifting landscape. So to propound discovery
24 five months before they have local counsel and in the midst of.25 their changing service offering would have gotten us
4
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ARGUMENT
.1 ineffective Responses, which we would have simply had to redo.
2 That's not a good use of your resources or the parties'
3 resources.
4 As you know, a scheduling conference was held by
5 the parties November 15th once they -- again, once they had
6 local counsel, but at that point in time, even though we came
7 prepared to set forth a schedule for a hearing including
8 discovery deadlines and testimony deadlines, instead what we
9 met was a position advocated by TracFone that we didn't even
10 need a hearing. And the result of that November 15th
11 scheduling conference was this decision that we should file an
12 issues brief..13 We were against that. We thought we should have
14 gone ahead with the scheduling conference as this Commission
15 had ordered us to do -- in fact, had ordered it to be done
16 clear back in the spring, six months earlier but, again,
17 that was delayed because of TracFone' s failure to hire local
18 counsel. So instead of going forward with the scheduling
19 conference at that point in time and scheduling a hearing and
20 discovery and testimony, what we ended up instead was a
21 three-month delay.
22 We filed a issues brief for this Commission to
23 consider, which it did consider, and as a result of that filing
24 we are here today. We did decide -- you decided, rather.25 that a technical hearing was, in fact, important in this matter
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ARGUMENT
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1 of first impression. That was like another three-month delay,
2 because the Commission's Order for the technical hearing came
3 out February 17th.
4 And just to back up for a minute, the Commission
5 took up the matter of our issues brief on whether or not we --
6 a hearing -- a technical hearing was needed in this matter on
7 January 24th. At the conclusion of that technical hearing, I
8 visi ted with Mr. Price, the Commission's attorney on this
9 Application, and expressly requested of him that whatever
10 hearing date we came up with, that there was enough time built
11 into the schedule for appropriate discovery, not only for us to
12 propound our discovery but for the TracFone to answer the
13 discovery. And I also specifically noted that there had been
14 discovery disputes in many jurisdictions where TracFone has
15 submi tted their ETC Applications, that it was -- it was very
16 clear or predictable that we would have discovery disputes here
17 as well, and that that needed to be factored into the issue.
18 COMMISSIONER SMITH: So, Ms. 0' Leary, I think the
19 Commission is aware there are discovery disputes, so I guess
20 could we focus the discussion on what the discovery disputes
21 are, what was asked for, what was not provided, why should it
22 be compelled?
23 MS. O'LEARY: Okay.
24 COMMISSIONER SMITH: The whole --
25 MS. O'LEARY: Yes, Madam Chair.
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ARGUMENT
.1 COMMISSIONER SMITH: We will stipulate there's a
2 tortured history.
3 MR. BRECHER: What?
4 COMMISSIONER SMITH: I said, "We will stipulate
5 there's a tortured history."
6 MS. 0' LEARY: The tortured history has been
7 stipulated to. Thank you.
8 So now we get to the real issue, as you say, and
9 that is the relevance of our Discovery Requests. I'm going to
10 take these in the order of the Discovery Requests that were
11 asked, referring to our First Production Request and those
12 questions, and then our Second Production Request..13 Our First Production Request was basically for
14 financial information. As you know from reviewing the
15 materials submitted by TracFone, they make much ado about the
16 free nature of their Lifeline service and the related handset.
17 They also claim that 100 percent of the Lifeline support that
18 they receive from the federal USF flows through to the
19 customers. They make these claims as a basis for this
20 Commission to determine whether its proposed service meets all
21 applicable federal Rules and this Commission's Rules and is in
22 the public interest.
23 Intervenors' Production Requests 7 and 10, I'm
24 going to speak to the relevance of those. Production Request 7.25 is essentially we ask for the business plans, budgets,
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ARGUMENT
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1 forecasts, and margin analyses or related studies showing
2 profi tabili ty by product or service. No. 10, we asked for some
3 financial information regarding the cost of the so-called free
4 handsets.
5 In a confidential Response to our Production
6 Request No. 21, TracFone identified the number of customers it
7 expects to capture the first three years if it is granted ETC
8 status. Because of the confidential nature of that, we don't
9 need to go into numbers. TracFone' s rebuttal testimony,
10 however, claims that it is going to increase participation in
11 the Lifeline program anywhere from 100 to 600 percent.
12 The budgets or forecasts that we have asked for
13 would enable us to confirm what they really expect to achieve.
14 The margin analyses that we asked for would shed light on how
15 much of the forecasted support would be passed through to
16 customers, versus how much of the support is actually retained
17 by TracFone. The forecasts that we asked for would show how
18 the cost of the handsets which TracFone asserts they give away
19 and absorb the cost of are actually treated by TracFone from a
20 budget business case standpoint.
21 Bear in mind that those handset costs were the
22 subj ect of the ex parte disclosure that the FCC -- or, that
23 TracFone made to the FCC and which prompted us to say, No, we
24 really do need to get this information. They're providing it
25 elsewhere and we are going to come forward with a Motion to
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ARGUMENT
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1 Compel based on that.
2 Which, by the way, we discovered the ex parte
3 communication on March 23rd and we filed our Motion to Compel
4 the following day. No delay there; 24-hour turnaround.
5 Intervenors' First Production Request No. 14 had
6 to do with copies of the Reseller Agreements that TracFone has
7 entered into with its underlying carriers. That would be AT&T,
8 T-Mobile, and Verizon. TracFone only provided the AT&T
9 Agreement in Response to Staff's First Production Request 31,
10 and in that document that they provided to Staff, the cost data
11 towards the back of the Agreement was redacted.
12 COMMISSIONER SMITH: Okay. So I'm looking at
13 Request No. 14 --
14 MS. 0' LEARY: Uh-huh.
15 COMMISSIONER SMITH:and it asks for
16 Resellers' Agreements or contracts with T-Mobile and Verizon
17 Wireless.
18 MS. 0' LEARY: Yes, it does. The point being we
19 did have, because of the Production Request propounded by
20 Staff, we did have a copy -- a redacted copy -- of the AT&T
21 Agreement.
22
23
COMMISSIONER SMITH: Okay.
MS. O'LEARY: What we did ask for in 14 was in
24 the Staff's Request 31 to TracFone, they asked for these --.25 they asked for all three. They got one and TracFone promised
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ARGUMENT
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1 to give them the other two. The other two never showed up. So
2 by the time we were involved and did our discovery, we noted
3 that and said, Well, let's get these other two Agreements.
4 COMMISSIONER SMITH: Thank you. Okay, got it.
5 MS. 0' LEARY: So the AT&T Agreement, by the
6 way -- again, we don't have to go into it right at this
7 moment but it was provided confidentially to the Staff. I
8 just want to make note of that.
9 The reason we asked for these Agreements was
10 because these Agreements will provide the Commission with
11 information regarding the duration of the contracts and terms
12 if TracFone is a pure reseller,for cancellation; how long
13 its service -- its ability to serve customers in Idaho depends
14 on those underlying contracts. I think it's important for this
15 Commission to know exactly how long TracFone is going to be
16 able to provide the service it's asking for ETC designation
17 for.
18 The other important element of these contracts
19 would be the coverage which is relevant to TracFone' s proposed
20 service area. I'm sure this Commission has come to the
21 realization by looking at the record that the issue of
22 TracFone' s coverage is really
23 COMMISSIONER SMITH: Which question was that?
24 MS. 0' LEARY: This was No. 14, Reseller
25 Agreements.
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ARGUMENT
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1 COMMISSIONER SMITH: Okay. Okay.
2 MS. O'LEARY: I'm telling you why they're
3 relevant, why we are asking for them. We're asking for them to
4 get to the terms and conditions for cancellation of the
5 contracts and the expected contract duration; also to be able
6 to look at their coverage so that we could line that up with
7 what they are saying that their proposed service area is; and
8 then the other piece of it is the direct cost of the data. I
9 mean, it's purchased from the underlying carriers. That is
10 relevant to knowing how much of the Lifeline support TracFone
11 receives is actually passed through to the customers. This
12 pass-through of 100 percent of its Lifeline support is an issue
13 that TracFone has promoted in this proceeding and is saying
14 that this is one of the reasons why the Commission should rule
15 in favor of its Application
16 And then, finally, in the financial portion of
17 this discovery discussion, we had our Request for Production
18 No. 24, and in that one, we asked for measures used by TracFone
19 to monitor quality of service and internal management reports
20 for the past three years. Again, TracFone responded in part
21 with a confidential Response; however, that Response was
22 incomplete. The Response lists two types of measures,
23 discloses two data points about answer time and time
24 resolution, but that's all. The Answer is incomplete and
25 TracFone should be compelled to fully answer this Request, as
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ARGUMENT
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1 this Request goes to the issue of whether TracFone meets this
2 Commission's requirement that an ETC Applicant be able to
3 demonstrate its commitment to service quality. TracFone says
4 it will provide service quality comparable to other ILECs, but
5 there is no evidence in this record to support that claim. And
6 these this Discovery Request was intended to see what
7 evidence there might actually be, either in favor or against
8 that claim.
9 Then, finally, the Second Production Request that
10 we filed a Motion to Compel on was we asked for all of the
11 communications between TracFone and/or its agents and Governor
12 Otter or Representative Jaquet and/or any of their agents. We
13 received an objection to that Request March the 23rd, and we
14 filed our Motion to Compel the following day; again, a 24-hour
15 turnaround, not evidence of delay.
16 The reason that that information is relevant is
17 because that is in the record, intended presumably to show that
18 there's a lot of political support for this Application, that
19 someone no less than the Governor of the State of Idaho has
20 said, Yes, this is a good thing for Idaho; and we think it's
21 important that those letters be viewed in the context in which
22 they were written.
23 There was -- we were simply trying to get to
24 evidence of, well, what did Governor Otter know when he wrote
25 that letter? Did he know about all the various issues that are
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ARGUMENT
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1 going to come to light in this hearing.
2 We did get a Response from TracFone yesterday,
3 just before noon yesterday. It was a one-page Response, and it
4 essentially was saying that their lobbyist had visited with --
5 had oral communications with Representative Jaquet and had oral
6 communications with Governor Otter or his office, but they
7 acknowledged that the information was incomplete and could not
8 be completed because their lobbyist is out of the country.
9 So, in conclusion, I would like to again renew
10 our Motion to Compel the Response to these Discovery Requests
11 or, in the alternative, to strike from the record any claims by
12 TracFone related to these Discovery Requests which they have
13 refused to provide information to support.
14 And, you know, just as a final note, if, in fact,
15 the Commission would prefer to wrap this all up very quickly
16 and simply deny TracFone' s Application based on the record
17 before it, we would support that Decision as well.
18 COMMISSIONER SMITH: I guess, Mr. Brecher, are
19 you going to be the person speaking or
20 MR. BRECHER: Yes, I am.
21 COMMISSIONER SMITH: Okay. So before we get to
22 that, Ms. O'Leary, I just want to let you know that we'll hear
23 his Response and then any final comments you have, but if you
24 seriously want to strike material from witnesses' testimony,
25 you need to be prepared with page and line number. It's just
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ARGUMENT
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1 we'll rule on your Motion to Compel the discovery, but if
2 that's not adequate and you have a desire to strike testimony,
3 you're going to have to be prepared with page number and a line
4 reference.
5 Mr. Brecher.
6 MR. BRECHER: Thank you, Commissioner Smith.
7 Good morning. I'm Mitchell Brecher for TracFone.
8 Let me just say as a preliminary matter with
9 respect to the --
10 COMMISSIONER SMITH: Just one moment. One more
11 clarification: The First Production Request has I think 50
12 questions, but we are only dealing with Nos. 7, 10, 21, 14, and
13 24. Is that correct?
14 MS. 0' LEARY: I don't think there's a -- excuse
15 me. I didn't have my --
16 We're dealing with 7, 10 -- just 7 and 10, 14,
17 and 24. The reference to 21 was simply to explain why the
18 other information as a whole was important.
19 COMMISSIONER SMITH: All right, so just four of
20 the 50. Okay, thank you.
21 MR. BRECHER: May I proceed?
22 COMMISSIONER SMITH: Yes, please.
23 MR. BRECHER: Thank you. As a preliminary
24 matter, with respect to the Intervenors' acknowledged violation
25 of Rule 256.02, let me just state: Apology accepted. All of
14
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ARGUMENT
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1 us who practice law from time to time make missteps. I've
2 missed them, I've missed deadlines, I've failed to comply with
3 discovery Rules. It happens to everybody. No hard feelings.
4 That said, there are reasons for Rules, and in
5 the case of discovery, there are meet and compel -- meet and
6 confer requirements to avoid exactly the situation we're in
7 today: Wasting your resources and your time arguing about
8 issues that the parties could have resolved. Rules have
9 consequences, and if you don't follow them, you pay the price
10 for not following them.
11 Now, as far as the concerns about delay -- and I
12 don't want to dwell on delay because I think you are much more
13 interested in the substantive concerns -- let me just say that
14 whatever delay TracFone caused back in 2009 by not filing what
15 was deemed to be a satisfactory Application and not engage in
16 local counsel, that was TracFone' s responsibility; and, quite
17 candidly, TracFone paid a stiff price for that: The initial
18 Application was denied, we had to go through reconsideration,
19 TracFone had to reapply. So that's, as far as I'm concerned,
20 is water over the dam. The delay that we're talking about in
21 this Petition is a delay in the hearing once the hearing on the
22 Amended Application has been scheduled.
23 Now, let me walk you through very quickly the
24 timeline:
25 Hearing was scheduled for March 31st.
15
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ARGUMENT
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1 There was a March 11th Response date for the
2 Discovery Requests that were submitted to TracFone by the
3 Intervenors, and under the Rules of this Commission, objections
4 had to be lodged one week in advance.
5 On March 4, 2011, TracFone filed a series of
6 obj ections to those Discovery Requests.
7 The Intervenors had from March 4th until March
8 24th or 25th, knowing full well about the objections, to
9 obj ect. They didn't have to wait until three or four business
10 days before the hearing.
11 Okay, I don't want to belabor that; let's move
12 on.
13 The first -- the first Discovery Request that for
14 which information is being compelled is No.7, which is a
15 detailed -- or, excuse me, business plans, budgets, and
16 forecasts. I understand that discovery is liberally construed
17 to look to seek information that could lead to admissible
18 evidence, and I realize that the discovery material need not
19 itself be admissible. That said, discovery is not an unlimited
20 license to engage in a fishing expedition about an Applicant's
21 business. The scope of discovery has to be reasonably limited
22 to the subj ect matter of the proceeding, and this proceeding is
23 about whether or not TracFone Wireless meets the specified
24 qualifications for designation as an eligible
25 telecommunications carrier, under applicable federal law and
16
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ARGUMENT
.1 applicable Idaho law, and whether that would meet the
2 designation would meet the public interests. And its business
3 plans and its forecasts, which are admittedly nothing more than
4 best guesses, has nothing to do with whether or not it meets
5 the qualifications, the qualification requirements, and whether
6 or not designation would serve the public interest.
7 As far as the handset costs, let's put this to
8 rest once and for all. TracFone is a designated ETC in 36
9 states. It provides Lifeline service in all but two or three
10 of those states which it simply hasn't brought out the service
11 yet. Every TracFone customer in each of those states receives
12 a telephone, a wireless handset, paid for by TracFone. Whether.13 that phone costs a dollar, $10, or $100, it's coming out of
14 TracFone' s pocket. There is not a scintilla of evidence in the
15 record of this proceeding that any portion of that handset cost
16 is being paid for by anybody but TracFone; and how much that --
17 how much that telephone costs TracFone has nothing to do with
18 who's paying for it. Okay? What it pays to its vendors -- and
19 TracFone' s handset vendors are the leading vendors of wireless
20 telecommunications equipment that are household names of all of
21 you: Motorola, Samsung, LG, Nokia, and so on -- those are the
22 product of confidentially-negotiated business relationships
23 between TracFone and those vendors. That is none of the
24 Intervenors' business. How much those handsets cost is not.25 relevant to whether or not designation of TracFone as an ETC in
17
HEDRICK COURT REPORTING
P. O. BOX 578, BOISE, ID 83701
ARGUMENT
.1 Idaho would serve the public interest. There is no dispute,
2 there can be no dispute, that neither the ratepayers nor the
3 federal Universal Service Fund nor any state fund is going to
4 contribute a dime to payment of those handsets.
5 As far as the Agreements with the underlying --
6 with TracFone' s underlying carriers AT&T, Verizon Wireless, and
7 T-Mobile, I understand that this Commission, like many State
8 Commissions, is very familiar with regulated reseller
9 arrangements between CLECs, other resellers, and
10 facilities-based carriers. Under Section 252 of the
11 Communications Act, as I'm sure that you're aware, the prices
12 that companies pay to resell or acquire access to incumbent.13 telephone companies' networks is regulated. In sharp contrast
14 to that, Wholesale Agreements between underlying wireless
15 providers and resellers are what the term "de jure" is; mobile
16 virtual network operators like TracFone, those Agreements are
17 not regulated, they are not subject to the provisions of the
18 Communications Act, they are the result of arms-length
19 negotiations. And let me tell you what happens:
20 TracFone sits down periodically with each of
21 those vendors: With AT&T, with Verizon Wireless, with
22 T-Mobile. TracFone wants to get as much capacity from those
23 carriers at the lowest possible price. And, guess what? Each
24 of those vendors wants TracFone to pay the highest possible.25 price. And the more service that TracFone is willing to buy,
18
HEDRICK COURT REPORTING
P. O. BOX 578, BOISE, ID 83701
ARGUMENT
.1 the more those vendors are willing to offer a favorable
2 wholesale price. The point is that those are the result of
3 very proprietary arms-length business negotiations, and what
4 TracFone pays or doesn't pay to its vendors is not relevant to
5 whether or not it meets the qualifications of being an eligible
6 telecommunications carrier.
7 Now, I heard Ms. 0' Leary suggest that those
8 Agreements would be necessary in order to determine TracFone' s
9 coverage. With all due respect, that is simply incorrect.
10 There is nothing in those Agreements that address coverage.
11 What those Agreements address is price and the terms of
12 service. If you want to know where AT&T has coverage in.13 Ohio -- excuse me, in Idaho -- it's not terribly difficult:
14 You go to AT&T and you get its coverage map, the same for
15 T-Mobile, the same for Verizon Wireless. TracFone' s coverage
16 area is the sum of the coverage areas of each of those
17 carriers. Those coverage maps are readily available from the
18 carriers and from other sources. In fact, we have provided
19 coverage maps, and our coverage maps are not created by us,
20 believe me. They are simply compendia of the underlying
21 carriers' coverage maps. The point is there is nothing in the
22 Agreements that would provide any information about where in
23 Idaho those carriers have coverage that isn't available already
24 on the record in this proceeding..25 Now, as far as the fore-going back to the
19
HEDRICK COURT REPORTING
P.O. BOX 578, BOISE, ID 83701
ARGUMENT
.1 forecasts, I heard Ms. 0' Leary state -- I may have
2 misunderstood -- that TracFone represented that it would
3 increase the participation in the Lifeline program in Idaho by
4 100 to 600 percent.
5 Well, that's not quite what TracFone said,
6 because TracFone doesn't know how much it's going to increase
7 participation by. It thinks it will increase it by quite a
8 bit. It expends considerable effort in resources to attract
9 Lifeline customers.
10 What it said in Response to a Data Request is
11 that in other states, it had been able to increase Lifeline
12 participation by 100 to 600 percent. And I believe that we.13 provided -- it may have been in Mr. Fuentes' rebuttal
14 testimony, I don't recall -- examples of other states where
15 the -- we provided the range of increase in Lifeline
16 participation. We don't know how successful the Company is
17 going to be in Idaho. We hope it's going to be very
18 successful. We hope that tens of thousands of low-income
19 households who are not Lifeline participants today will
20 participate in the TracFone Lifeline program, but it is
21 impossible to project how many will. It depends on the market,
22 it depends on the economy, it depends on competition. If three
23 other companies come into the state and offer a similar
24 service, it will be harder for TracFone to attract customers.25 than if nobody else does. We can't control those factors.
20
HEDRICK COURT REPORTING
P. O. BOX 578, BOISE, ID 83701
ARGUMENT
.
.
.
1 As far as quality of service, we have described
2 in the testimony the way TracFone provides service and the way
3 it addresses customer complaints, and I think the record is
4 ample in that respect.
5 As far as how long the Company will be providing
6 service, let's get this straight, let's get this clear:
7 TracFone began to provide wireless resale service to the
8 goingUni ted States in 1996. It's been at this going on 14
9 on 15 years. It's got a pretty good track record. I am not
10 worried about AT&T pulling the plug next month and forcing
11 TracFone to shut its doors in the state of Idaho. Its track
12 record speaks for itself. It's been an MVNO for 15 years, it
13 has managed to procure network capacity services from
14 underlying that enable it to provide the service efficiently
15 and economically for all that time.
16 Now, one last point and then I'll close: There's
17 been a lot of discussion about this issue of whether or not the
18 entirety of the Universal Service Fund support that TracFone
19 receives is going to flow through to consumers. Here's what we
20 know based on the existing record:
21 We know that every ETC in the state, wireline and
22 wireless, gets about the same amount of support from the
23 federal Universal Service Fund, and that amount of support
24 and it's all codified in the FCC's Rules. I refer you to
25 47 CFR 54.403 which sets the ground rules, and there's Tier
21
HEDRICK COURT REPORTING
P. O. BOX 578, BOISE, ID 83701
ARGUMENT
.
.
.
1 One, Tier Two, and Tier Three support. The only variable is
2 Tier One is based on the subscriber line charge of the local
3 exchange carrier, and if it's 6.50, then the total support is
4 $10. If it's less than 6.50, it's a little bit less than $10.
5 If TracFone's an ETC, it will get $10 or thereabouts per month
6 for every Lifeline customer it signs up, just as each of
7 Ms. O'Leary's and Ms. Melillo's ETC clients get the same $10.
8 So then it seems, to me, what's relevant is
9 whether or not the amount of service that TracFone provides
10 with that $10 is comparable to the amount of service that other
11 ETCs provide receiving the same $10; and this is not the time
12 to argue the substance of our case, but I think that the record
13 will demonstrate that at the very least, the service is
14 comparable.
15 Now, one last point, and that was on the Second
16 Data Request, which was a Request for information regarding the
17 communications with Governor Otter and Representative Jaquet.
18 As Ms. 0' Leary pointed out, TracFone provided Response to that
19 Request yesterday, and it provided all the information that it
20 had. And all it said was that it engaged the services of a
21 professional public relations lobbying consultant here in
22 Idaho -- a Mr. Reberger who I have never met; I'm sure you are
23 familiar with him -- to represent TracFone in trying to obtain
24 support from public officials, including the Governor.
25 Well, this is the United States of America. In
22
HEDRICK COURT REPORTING
P. O. BOX 578, BOISE, ID 83701
ARGUMENT
.
.
.
1 the United States of America, people are allowed to petition
2 their government and ask their local -- their elected officials
3 to support them. My client does it, the Intervenors do it.
4 It's perfectly permissible. There is nothing secretive about
5 it, there is nothing not aboveboard about it. TracFone
6 retained a consultant; we identified the consultant.
7 Unfortunately, Mr. Reberger is out of the country, so whatever
8 e-mails or notes or telephone calls he had were not available
9 to us. If they were, I would provide them. If they become
10 available, I will provide them later. But there's no secret
11 about it. TracFone engaged its professional service provider
12 to procure that support
13 I don't want to wear out my welcome.
14 COMMISSIONER SMITH: That's very wise.
15 Ms. 0' Leary.
16 MS. 0' LEARY: Thank you, Madam Chair. I would
17 like to just respond briefly to Mr. Brecher's argument. He did
18 touch again on the issue of delay briefly; I'm not going to go
19 on ad nauseum about that.
20 COMMISSIONER SMITH: No, that's not even relevant
21 to these four questions which we're trying to get to the bottom
22 of.
23 MS. 0' LEARY: All right. All right. If you
24 really stop and listen to what Mr. Brecher said, an awful lot
25 of what he said is kind of like what they say throughout this
23
HEDRICK COURT REPORTING
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ARGUMENT
.
.
.
1 process and the Application and the testimony: It is because
2 we tell you it is. That's all the information we have to
3 provide you. We will just tell you in fact that the handset is
4 free and you don't need to ask us about that. We will tell you
5 in fact that 100 percent of the support flows through; you
6 don't need to explore any further than that. We tell you it
7 is; therefore, it is. You don't need additional information to
8 test that testimony against.
9 Relative to the issue of --
10 Oh, I did like this comment by Mr. Brecher: He
11 said -- he referred to the fact that there was not a "scintilla
12 of evidence in the record." That's a good phrase, I like that,
13 because we're going to see more of that as the day goes on.
14 "There is not a scintilla of evidence in the record" regarding
15 the cost of the handsets.
16 Well, that is precisely why we asked for this
17 information, so that there could be some evidence in the record
18 regarding the cost of the handsets, since this seems to be a
19 key point that TracFone relies on in its Application as to why
20 its service and offering would be in the public interest.
21 Again, I will just touch on the Reseller
22 Agreements. We're aware, this Commission is aware, that those
23 Agreements are not regulated. That's nothing new. It has
24 nothing to do with the reason we were asking for them.
25 And as he said, sure enough, the more service you
24
HEDRICK COURT REPORTING
P. O. BOX 578, BOISE, ID 83701
ARGUMENT
.
.
.
1 push and sell, the better the price. We all know about supply
2 and demand, and we all know about how all of that works.
3 He also referred to the fact that they're
4 proprietary. Well, we did file -- or, we all signed a
5 Protective Agreement, and we are bound by that Protective
6 Agreement. And that Protective Agreement says that we cannot
7 share it with anyone who has not also signed an Exhibit A to
8 that Protective Agreement, and we cannot use it for anything
9 other than the purposes of this hearing. So to try to argue
10 that it's, well, we didn't have to give it because it's
11 proprietary, it just ignores the whole process that we went
12 through in signing a Protective Agreement so that we would have
13 access to this information.
14 Let's see. He does say, again referring to the
15 Reseller Agreements again, he says, Trust me, I know what's in
16 them. They aren't going to tell you a thing about coverage.
17 Well, gee, if we had a chance to look at them, I
18 guess we would know whether that statement was true or not, but
19 we're being asked to just rely on that statement.
20 And he says he's not worried about TracFone' s
21 ongoing ability to provide service once it gets ETC designation
22 because they have been in business since 1996. But the
23 question isn't whether or not Mr. Brecher, who is representing
24 the Applicant, is worried; the question is should this
25 Commission be worried. That is the point of asking for those
25
HEDRICK COURT REPORTING
P. O. BOX 578, BOISE, ID 83701
ARGUMENT
.
.
.
1 Agreements, so the light of day can be shed on all the facts
2 and then the Commission can make its Decision based on all of
3 the facts.
4 Thank you.
5 COMMISSIONER SMITH: I forgot to ask, are there
6 any questions from the Commissioners?
7 COMMISSIONER REDFORD: Yes, I do have a question
8 of Ms. O'Leary.
9 You've made the comment that you should be
10 entitled to have information as to the Agreements and to the
11 cost, et cetera, et cetera.
12 What if you find out that the cost is $1 or you
13 find out it's $200? What I'm trying to dig at, what the
14 relevance of the cost of the handset is to this proceeding as
15 to whether TracFone should be an ETC carrier or not. What
16 I'd kind of like to ask you a little bit of an offer of proof
17 of what -- what it is you expect to -- not to find, but when
18 you do find out what you find out, what do you intend to do or
19 what is the point of -- for the Commission to consider as far
20 as granting an ETC license?
21 MS. O'LEARY: Thank you, Commissioner Redford.
22 If you would like an offer of proof, then I would like to bring
23 our expert witness to the stand, have him sworn in, and have
24 him tell you exactly what it was that he would do with that
25 type of information.
26
HEDRICK COURT REPORTING
P. O. BOX 578, BOISE, ID 83701
ARGUMENT
.
.
.
1 COMMISSIONER REDFORD: Well, it seems, to me,
2 that maybe that was something that you should have put into
3 your Motion in Limine. If you're going to ask that the --
4 ei ther the evidence be stricken under a Motion under the in
5 limine theory, what is it -- it seems, to me, that you should
6 have provided to us what it is that you intend to either find
7 or that you -- variations of finding. I will take your word
8 for what your expert is going to say, but I think you can give
9 the offer of proof orally. And if we have any further
10 questions about it, I want to know what's the difference?
11 What's the relevance?
12 MS. 0' LEARY: Commissioner Redford, the issue --
13 we don't care if the handsets cost a dollar or $200, only to
14 the extent that that flows into how they are accounted for by
15 TracFone and where all of this money is going. They are
16 getting -- this is a very unusual -- what's the word I want
17 an unusual model, if you will, for a Universal Service support.
18 Typically, when a telecom provider gets Universal Service
19 support, this Lifeline discount, it flows through, it's on the
20 bill, you can see what it is: Here's what the cost of the
21 service is if you have it, here's what the cost of the service
22 is if you don't have it. It's $10 from the Feds, 3.50 from
23 Idaho, it's 13.50 total, there it is. With TracFone, it all
24 kind of depends on how they choose to price their minutes.
25 It should be noted that TracFone is only offering
27
HEDRICK COURT REPORTING
P. O. BOX 578, BOISE, ID 83701
ARGUMENT
.
.
.
1 a very stripped down, limited version of its many prepaid
2 wireless offerings for its Lifeline customers. Why that
3 limi tation? How is it accounting for those minutes? You know,
4 why are the minutes worth X number of cents in the one context
5 when it's free, and then when the customer is paying for them
6 they're worth less money per minute? You know, who's
7 subsidizing the difference in that cost?
8 That is the type of information that we think
9 we -- our expert, who has experience in accounting matters and
10 finance matters and business matters, would be able to look at
11 that information and determine exactly, you know, what is
12 where, what is flowing where, how is it all calculated. That
13 is our intent.
14 Our intent is not to get sensi ti ve business
15 information. We're here because of the Application; otherwise,
16 we wouldn't be here. This is not a fishing expedition. We
17 truly have an intent to look at that information and see if
18 we can -- if TracFone can substantiate its claims.
19 COMMISSIONER REDFORD: It seems --
20 Madam Chairman.
21 COMMISSIONER SMITH: Yes.
22 COMMISSIONER REDFORD: It seems, to me, that
23 you're going -- delving into a little -- into an area that I'm
24 not sure is really relevant. So what the -- so what if the
25 phone costs nothing? So what if TracFone has to come up with
28
HEDRICK COURT REPORTING
P. O. BOX 578, BOISE, ID 83701
ARGUMENT
.1 extra dollars to pay for the phone? It's a business plan, it's
2 a business scheme, whereby TracFone all admittedly believe that
3 it's for the purpose of gathering and gaining customers. How
4 they get to the cost of it is beyond me how it's really
5 relevant to whether or not or whether ETC -- whether TracFone
6 is entitled to become an ETC carrier. And I think we're taking
7 up a lot of time on issues that don't seem, to me, are all that
8 relevant, but go ahead.
9 MS. 0' LEARY: If I may, Commissioner Redford, you
10 know, I guess part of me says, Well, gee, we'll agree that the
11 free handsets and the free minutes are not relevant and
12 therefore should not be part of this Application and should not.13 be part of this Commission's Decision.
14 And that would go to the issue of the Motion in
15 Limine. If you think that information isn't relevant, might be
16 willing to agree with you on that.
17 We think it's relevant to the extent that they
18 have said that that information is relevant, they have put it
19 in their Application, they have put it in their testimony, they
20 have made claims about the free nature of their service.
21 They're saying the free nature of their handsets, the free
22 nature of their air minutes, all has to do with the public
23 interest element that is a requirement of this Commission to
24 get ETC designation..25 It's also a requirement of this Commission and
29
HEDRICK COURT REPORTING
P. O. BOX 578, BOISE, ID 83701
ARGUMENT
.
.
.
1 the FCC that they comply with FCC Rules regarding Lifeline
2 support. We are trying to ascertain whether or not, in fact,
3 100 percent of the support they receive is flowing through to
4 the customers. Again, when you have a traditional Lifeline
5 support telecom provider, you can see that it's being flowed
6 through, it's right there under -- it's just not complicated
7 mathematics. In this particular business model, it is very
8 difficul t to tell whether or not 100 percent of the support is
9 actually being flowed through to the customer in the form of
10 free minutes, subsidized minutes; or if, in fact, there is
11 something perhaps going on with how those minutes are valued
12 which then in the back end of things actually allows some of
13 that support to not be buying air time from AT&T and T-Mobile
14 and Verizon, but to in fact be covering some of the costs of
15 the free service by using the subsidy to subsidize the free.
16 So, they're saying, We're the good guys. We're
1 7 giving it away for free. We're giving away this handset. It's
18 coming out of our pocket. It's coming out of our pocket.
19 We don't know that. We have no proof, not a
20 scintilla of evidence in this record.
21 COMMISSIONER REDFORD: Well, I won't belabor this
22 any longer, but so what? So what if it's coming out of their
23 pocket or it's not coming out of their pocket? The fact of the
24 matter is -- and I believe that you can probably ascertain the
25 information that you're seeking from the cross-examination of
30
HEDRICK COURT REPORTING
P. O. BOX 578, BOISE, ID 83701
ARGUMENT
.
.
.
1 the witnesses that TracFone is intending to present -- I -- you
2 know, again, how does this have anything to do with whether or
3 not TracFone should be granted ETC status?
4 And I'm not going to -- you don't have to respond
5 to that, but I -- I'm having a great deal of difficulty with
6 that.
7 Thank you, Madam Chairman.
8 COMMISSIONER SMITH: Commissioner Redford.
9 MR. BRECHER: May I briefly respond to one point?
10 COMMISSIONER SMITH: Mr. Brecher.
11 MR. BRECHER: I realize, Chairman Smith, that at
12 this Commission, like in most tribunals, the moving party bears
13 the burden of proof and gets to go last. It's not my intent to
14 depri ve Ms. 0' Leary of that, but I cannot let inaccurate
15 statements go unrefuted.
16 And Ms. 0' Leary in her response made a statement
17 where she referred to the TracFone Lifeline program as a
18 stripped-down version of TracFone service. And let me be as
19 clear as I can possibly be about that: That is unquestionably
20 inaccurate. The service that TracFone provides to its Lifeline
21 customers is identical in every respect to that of other
22 TracFone customers. The calls are carried on the same network.
23 COMMISSIONER SMITH: Mr. Brecher, may I suggest
24 that when your witness takes the stand, you could clarify that
25 with him?
31
HEDRICK COURT REPORTING
P. O. BOX 578, BOISE, ID 83701
ARGUMENT
.
.
.
1 MR. BRECHER: Okay.
2 COMMISSIONER SMITH: Thanks.
3 We are going to take about a ten-minute break,
4 and we'll be back at 10: 30.
5 (Recess. )
6 COMMISSIONER SMITH: All right, we'll go back on
7 the record. The Commission has conferred on the Motions to
8 Compel.
9 Wi th regard to Request No.7, it's the
10 Commission's determination that the profitability of TracFone
11 is not regulated by the Commission, and that this information
12 would not be relevant to our concern of customer treatment and
13 the public interest.
14 Wi th regard to Request No. 10 about the handset
15 cost, we find that the relevant issue to the Commission is what
16 the customer pays, not what TracFone pays, and so we will not
17 compel Answer to that either.
18 For Request No. 14 with regard to the Resellers'
19 Agreements, if the Request is for the purpose of determining
20 coverage, we believe the maps are sufficient with one
21 exception, and that is if any of the service area coverage
22 includes a tribal area, we request that TracFone provide
23 information on any negotiations or contacts it has had with
24 tribal authorities, because we understand that the TracFone is
25 not able to piggyback on the underlying carriers' service in a
32
HEDRICK COURT REPORTING
P. O. BOX 578, BOISE, ID 83701
ARGUMENT
.
.
.
1 tribal area.
2 With regard to Request No. 24 about quality of
3 service which had what Ms. 0' Leary termed an "incomplete"
4 Response, if TracFone needs to supplement its Response, it
5 should do so. The Commission, however, believes that if it
6 if we choose to grant ETC status for this Company, we will be
7 designing our own reporting and measures of customer quality of
8 service which will be for our purposes, so probably we don't
9 need to know what other people are doing.
10 Wi th regard to the Second Production Request, we
11 just find that the Request is truly irrelevant. Under our
12 process, anyone may comment. The Commission's Decision will be
13 based on the record that's created here today with the
14 witnesses and the cross-examination and the briefs the parties
15 have filed. So, public comment is taken from anyone, and we do
16 read them and consider them and give them the weight to which
17 they're entitled.
18 So, that is the Commission's Decision on the
19 discovery issues. With that, if there's nothing else --
20 anything else, Ms. 0' Leary?
21 MS. 0' LEARY: Would this be the time to cover
22 other preliminary matters?
23 COMMISSIONER SMITH: It would be.
24 MS. O'LEARY: Okay, thank you. Two other
25 preliminary matters, Madam Chairman:
33
HEDRICK COURT REPORTING
P. O. BOX 578, BOISE, ID 83701
ARGUMENT
.
.
.
1 The first would be that it came to our attention
2 in preparing for this hearing that TracFone did not comply with
3 the Commission' Rule 228.02 regarding identifying the witness
4 who was responding to our discovery on its behalf. So we would
5 like to have TracFone clarify for the record whether or not we
6 do, indeed, have a TracFone witness here today who can respond
7 to questions regarding its discovery Responses.
8 COMMISSIONER SMITH: So are these
9 cross-examination questions that you intend to ask of their
10 witness today?
11 MS. O'LEARY: Yes.
12 COMMISSIONER SMITH: I think you will go ahead
13 and ask them; and then if it turns out he wasn't responsible or
14 can't answer, then if you have an obj ection, you can raise it
15 at that time.
16 MS. 0' LEARY: Okay, thank you.
17 And one final matter: We may have some
18 cross-examination on confidential information that's been filed
19 pursuant to the Protective Agreement that I referred to
20 earlier, and we would like to know what process the Commission
21 would like to use when we hit that little bump in the road.
22 COMMISSIONER SMITH: When you get to that stage,
23 we will ask anyone in the hearing room who has not signed a
24 Protective Agreement to leave the room, and we turn off the
25 speaker system which allows the proceedings in this room to be
34
HEDRICK COURT REPORTING
P. O. BOX 578, BOISE, ID 83701
ARGUMENT
.
.
.
1 heard in the offices of the Commission Staff. And I --
2 Is that acceptable, Mr. Brecher?
3 MR. BRECHER: Yes, it is.
4 COMMISSIONER SMITH: And I leave it to you,
5 Mr. Brecher, to know if people in the room don't leave when
6 they're supposed to, because you're the folks who know who
7 signed those Agreements.
8 MR. BRECHER: Thank you.
9 COMMISSIONER SMITH: And it's your information.
10 Okay, anything else?
11 MS. 0' LEARY: That's it. Thank you.
12 COMMISSIONER SMITH: Thank you. All right, we'll
13 turn to Mr. Brecher.
14 MR. BRECHER: Thank you, Chairman Smith. At this
15 time, I'd like to call TracFone' s first and only witness,
16 Jose Fuentes, to the stand.
17
18 JOSE FUENTES,
19 produced as a witness at the instance of TracFone, being first
20 duly sworn, was examined and testified as follows:
21
22 MR. BRECHER: May I proceed?
23
24
25
35
HEDRICK COURT REPORTING
P. O. BOX 578, BOISE, ID 83701
FUENTES (Di )
TracFone
.
.
1 DIRECT EXAMINATION
2
3 BY MR. BRECHER:
4 Q.Good morning, Mr. Fuentes. Would you please
5 state your name, title, and business address for the record?
6 A.Good morning. Jose Fuentes, director of
7 government relations for TracFone Wireless. We're located
8 at 9700 Northwest 112th Avenue, Miami, Florida, 33178.
9 Q.Mr. Fuentes, on or about February 25, 2011, did
10 you cause to be filed in this proceeding prefiled testimony
11 consisting of 32 pages?
12 A.I did.
13 Q.And did that testimony contain with it Exhibit
14 Nos. 1 through 6?
15 A.Yes, it did.
16 Q.Was that testimony prepared by you or under your
17 immediate supervision?
18 A.It was.
19 Q.Mr. Fuentes, if I were to ask you the same
20 questions today under oath as those that you addressed in your
21 prefiled initial testimony, would your answers be the same?
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A.They would.
Q.Do you have any additions or corrections to your
24 testimony?.25 A.None at this time.
36
HEDRICK COURT REPORTING
P. O. BOX 578, BOISE, ID 83701
FUENTES (Di)
TracFone
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1 MR. BRECHER: At this time, I would ask that
2 Mr. Fuentes' direct testimony be entered into the record, and
3 marked for identification with the Exhibits 1 through 6.
4 COMMISSIONER SMITH: If there's no obj ection, we
5 will order that the prefiled testimony with Mr. Fuentes be
6 spread upon the record as if read, and Exhibits 1 through 6 are
7 identified.
8 (The following prefiled direct testimony
9 of Mr. Fuentes is spread upon the record.)
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HEDRICK COURT REPORTING
P. O. BOX 578, BOISE, ID 83701
FUENTES (Di)
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WHAT is YOUR NAME AND OCCUPATION?
My name is Jose Fuentes. I have been Director of Governent Relations for
TracFone Wireless. Inc. ("TracFone") for the past two years. i am responsible for
facilitating TracFone's designation as an Eligible Telecommunications Carrer by
state utility commissions and for implementing SafeLink Wireless~ Lifeline
service throughout the United States. I am also the corporate spokesperson for the
SafeLink Wireless4Î brand.
WHAT IS THE PURPOSE OF YOUR TESTIMONY?
This direct testimony is being filed in support ofTracFone's First Amended ETC
Application. filed with this Commission on March i. 2010. My testimony wil
show that TracFone's First Amended ETC Application meets the federal and
Idaho requirements for ETC designation to the extent those requirements are
applicable to TracFone as a prepaid. non-facilities-based reseller of commercial
mobile radio service ("CMRS") that seeks ETC designation for the limited
purpose of using federal Universal Service Fund resources to provide Lifeline
serice to qualified low-income Idaho households.
The federal requirements are contained at Section 2 1 4 of the
Communications Act of 1934. as amended. and in the rules of the Federal
Communications Commission ("FCC"). The Idaho ETC designation. certification
and reporting requirements are contained in the Appendix to In the Matter of the
Application ofWWC Holding Co., Inc. DBA Cellular-One~ Seeking Designation
as an Eligible Telecommunications Carer That May Receive Federal Universal
Service Support. Order No. 29841. Case No. WST - T -05- 1 (Idaho Pub. Utilties
38
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Comm'n: August 4.2005). which I will reference as the "ETC Checklist" in my
testimony.
WHAT is TRACFONE?
TracFone is a 98%-owned subsidiary of America MoviL. America Movil is the
fourth largest wireless telecommunications carrer in the world. serving over 260
millon customers throughout Latin America. the Caribbean and the United States.
TracFone is the largest provider of prepaid wireless service in the United States
serving over 17 millon customers under the brands TracFone4Î. NETI04Î. Straight
Talk4Î. and SafeLink Wireless4Î. TracFone's market share in prepaid wireless in
the United States continues to grow. now at over 30% according to Neilson and
others. TracFone is also the fifth largest wireless carrer and largest mobile
virtal network operator in the United States in terms of total customer counts.
TracFone is incorporated under the laws of the State of Delaware and is
headquarered at Miami. Florida. Its corporate offces are located at 9700 N.W.
1 12th Avenue. Miami. FL 33178.
DOES TRACFONE HAVE A PRESENCE IN IDAHO?
TracFone is a reseller of CMRS throughout the United States. including the State
ofIdaho. TracFone provides service through a "virtual network" consisting of
services obtained from licensed operators of wireless networks. TracFone has
provided CMRS service throughout the State of Idaho continuously for over
twelve years. In Idaho, TracFone obtains service from the following underlying
carriers: AT&T Mobility. T-Mobile, and Verizon Wireless. TracFone's
39
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arangements with these providers enable it to offer services wherever any of
those providers offer service in the State of Idaho.
DOES TRACFONE HAVE THE ABILITY TO PROVIDE LIFELINE?
Yes. TracFone, though its arangements with the underlying carers listed
above. has the ability to provide all services and functionalities supported by the
universal service program, as detailed in the FCC rules at 47 C.F.R. § 54.101,
throughout its underlying carers' coverage areas in Idaho. Upon designation as
an ETC, TracFone wil make available to consumers a Lifeline offering, under the
brand SafeLink Wireless4Î, which wil provide consumers with all of the
functionalities and features currently provided by TracFone to existing customers.
TracFone wil provide Lifeline service to qualifying low-income Idaho
households requesting these services pursuant to the univeral service program
and in accordance with federal law. TracFone requests ETC designation
statewide in all exchanges to the extent that its underlying carers have facilties
and coverage.
WHAT ARE THE GENERAL TERMS OF TRACFONE'S SAFELINK
WIRELESS4Î LIFELINE SERVICE?
TracFone's Lifeline customers in all states, including Idaho, have the option to
select from three monthly plans. The plans are as follows:
1) 250 free minutes each month, which do not car over to the next
month if unused (unless there are unused purchased minutes at the
end of the month), with texting available at a rate of one text per
minute of airtime; or
40
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TracFone Wireless, Inc.
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2) 125 free minutes each month, which carryover to the following
month if unused, with texting available at a rate of one text per
minute of airtime; or
3) 68 free minutes each month, which carryover to the following
month if unused, with texting available at a rate of 3 texts per each
minute of airtime, plus International Long Distance calling to over
100 destinations.
A list of the international destinations is provided as Exhibit No. I. Customers
who choose the 125 minute plan or the 68 minute plan are able to carryover all
unused minutes on a month-to-month basis. There is no limit on the number of
minutes that may be carried over to the following month. As noted above.
whenever a SafeLink Wireless4Î customer enrolled in the 250 minute plan
purchases additional airtime minutes. those purchased additional minutes wil not
expire at the end of the month of purchase. Instead. those purchased minutes wil
be carred over for three succeeding months. In addition, when such customers
purchase additonal minutes during a month the unused portions of those
customers' free allotment of 250 minutes will not expire at the end of the month.
Rather, like the purchased additional minutes. they wil be carred over for three
succeeding months. However, if a customer enrolled in the 250 minute plan does
not purchase any additional minutes, unused minutes wil not carr over to the
following month. Extending the expiration of the free allotted minutes of Lifeline
customers who purchase additional airtime minutes wil ensure that no customer
41
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who purchases additional minutes wil lose any purchased. but unused. minutes in
less time than the normal expiration date for such purchased minutes of airtime.
TracFone wil provide E91 I-compliant handsets to its paricipating
Lifeline customers at no charge. The cost of those handsets, including delivery to
consumers, wil be borne solely by TracFone with no support from the federal
Universal Service Fund. TracFone wil pre.-activate handsets provided to
qualified customers, enroll the customers in the Lifeline plan, and allocate the
appropriate number of minutes of usage to the customers' accounts. The handsets
wil be delivered to customers upon enrollment in the program with the first
month's free usage allotment already activated and ready for immediate use upon
receipt. Low-income customers who have limited access to communications
sources wil gain immediate and free access to wireless telecommunications
service simply by turnng on the handsets provided by TracFone. In addition,
SafeLink Wireless4Î Lifeline customers in Idaho wil be able to contact customer
service by dialing 61 1 from their Safe link Wireless4Î phones, without having
any minutes deducted.
TracFone pledges that one hundred percent of the federal Lifeline support
it receives wil be flowed through to Lifeline customers in the form of free usage.
TracFone's terms and conditions governing SafeLink Wireless4Î Lifeline service
are attached as Exhibit NO.2.
WILL IDAHO LIFELINE CUSTOMERS BE ABLE TO PURCHASE
ADDITIONAL WIRELESS AIRTIME MINUTES? IF SO. AT WHAT PRICE?
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Yes. SafeLink Wireless~ Lifeline customers will be able to purchase additional
minutes at any retail location where TracFone services are sold at a rate of $0. I 0
per minute. Although additional minutes may be purchased, based on TracFone's
experience as an ETC in other states, it does not expect that many Idaho Lifeline
customers wil purchase additional minutes. In the states where TracFone has
been providing Lifeline service as an ETC under its prior plan, fewer than seven
percent of Lifeline customers purchased additional wireless airtime in any month.
With the increase of the availability in the number of free minutes to 250.
TracFone has observed that a significantly lower percentage of customers who
select the 250 minute option purchase additional minutes.
EARLIER IN THIS PROCEEDING, TRACFONE STATED THAT ITS
SAFELINK WIRELESS4Î SERVICE INCLUDED 67 MINUTES OF AIRTIME
EACH MONTH. WHY DID TRACFONE ENHANCE ITS LIFELINE
PROGRAM WITH THESE NEW OPTIONS?
TracFone is the industry leader in prepaid wireless Lifeline service. It was the
first wireless carrer to obtain a favorable forbearance ruling from the FCC to
enable it to be designated as an ETC for the purpose of providing Lifeline service
without providing service, at least in part, using its own facilities. TracFone was
the first non-facilities-based telecommunications company to become designated
as an ETC in any state. TracFone was the first ETC to offer a Lifeline plan which
provided Lifeline customers with free service rather than discounts on the
monthly service prices biled to those customers. As TracFone's Lifeline business
grew, and as it sought ETC designation in other states, it was becoming apparent
43
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TracFone Wireless. Inc.
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that consumer groups and others were becoming increasingly critical of
TracFone's program and were advocating that low-income consumers needed
more free minutes. TracFone was also aware that another ETC offering prepaid
wireless Lifeline service in certain states had introduced a Lifeline plan which
provided its Lifeline customers with 200 free minutes per month. As a result of
these developments. TracFone began to evaluate its Lifeline program and to
consider changes. In 2010, TracFone commissioned extensive market research
into customer needs and wants and commenced a series of market tests in which it
offered differing amounts of free minutes in varous states. The results of that
research and testing enabled TracFone to gauge such factors as the relationship of
free minutes to consumer demand, whether consumers preferred additional free
minutes to other benefits such as the ability to carr over unused minutes to
succeeding months, or the ability to place international calls, and the importance
of text messaging to Lifeline customers. TracFone analyzed the data it compiled
from its market tests and developed the three options.
PLEASE DESCRIBE THE DIFFERENCES IN THE THREE OPTIONS?
The first option provides for 250 free minutes of wireless airtime each month.
Unlike the other two options, unused minutes do not car over from month to
month (unless, as I explained earlier, there are unused purchased minutes at the
end of the month). This plan was developed in response to concerns from
consumer advocacy groups around the countr that low-income households need
more free minutes than were available under TracFone's prior plan. TracFone's
second option provides 125 free minutes each month with unused minutes
44 Fuentes, Di 7
TracFone Wireless, Inc.
carrng over from month to month. That option also allows for text messaging at
the rate of 1 text per minute of airtime. This plan, like TracFone's initial plan
(now the third option) allows for minutes to carryover but provides 57 more
minutes (nearly an hour of airtime) per month. It also allows for text messaging.
The third option provides 68 free minutes each month, with unused minutes
carrying over to the following month. The plan also allows for text messaging,
but at a lower rate than the text rate of the first two options. The plan also allows
for international long distace callng. This is the only plan in the industry that
allows international long distance callng to more than i 00 international
destinations at no additional charge.
WHICH OPTION IS MOST BENEFICIAL TO CONSUMERS?
Which of the three options is most favorable to any Lifeline customer wil depend
on the calling needs of the specific customer. For those customers who want the
maximum amount of free airtime each month, the first option wil be the best
choice. Therefore, TracFone expects that most Lifeline customers wil select that
option. However, TracFone's market research and testing confirmed that some
Lifeline-eligible low-income households prefer the carryover feature and prefer
to save unused minutes from month to month rather than lose unused minutes at
the end of the month. For those customers, either the second or third option
would be preferable. Other customers do not have large daily callng needs but
do have an ongoing need to communicate with persons in foreign countries. For
example, many of TracFone's Lifeline customers who are recent immigrants
value the ability to use their free Lifeline minutes to call frends and relatives in.45
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their home countries. For such customers. the third option which includes
international callng would be the most attractive option, despite the fact that the
option provides fewer total free minutes than either of the other two options. The
point is that Lifeline eust9mers will have a choice of options which best meet
their needs.
DOES TRACFONE ANTICIPATE FURTHER CHANGES TO ITS LIFELINE
OPTIONS?
The wireless telecommunications serice market is evolving as new competitors
enter, new products are introduced and technology improves. TracFone, like most
prudent businesses. constantly monitors market developments and changes its
services accordingly. When TracFone first introduced SafeLink Wireless4Î in
2008, its plan was "state ofthe art." No other company before had offered a
Lifeline program which included free service. As with other wireless services,
what was deemed to be a desirable service two years ago may no longer be what
consumers need and expect. It is for that reason that TracFone introduced its new
plans in August 2010. At this time, TracFone has no plans to change these
options. However, it is possible that in the future, furter changes wil be
appropriate. One thing is certain -- thoughout the history of the commercial
mobile service industry the consistent trend has been lower prices, increased and
improved services and features. TracFone expects that trend to continue
thoughout the wireless telecommunications market, including the Lifeline
segment of the market. TracFone is a company prepared for change and it wil
continue to respond accordingly.
46
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WILL TRACFONE ASSIST APPLICANTS FOR ENROLLMENT IN ITS
LIFELINE PROGRAM TO SELECT THE OPTION MOST APPROPRIATE
FOR THE APPLICANTS?
Yes. TracFone's website will contain detailed descriptions of each of the three
options. In addition, when prospective SafeLink Wireless4Î Lifeline customers
contact TracFone's Lifeline enrollment department, they will be asked to select
which option they prefer. Customer service representatives who assist customers
in the Lifeline enrollment process wil be trained to explain the options. to answer
questions and to help applicants determine which option is best for them.
Moreover, customers are free to change plans as often as they wish. Therefore, if
a customer is not satisfied with a certain option. he or she can switch to another
option.
HOW DOES TRACFONE'S LIFELINE OFFERING BENEFIT IDAHO
CONSUMERS?
Not too many years ago, wireless telecommunications service was considered to
be a luxury item that only upper income consumers and business customers could
afford. In recent years, wireless service prices have decreased. new and improved
services and devices have become available and milions of Americans have come
to rely on wireless service as an essential tool in an increasingly mobile society.
Until recently, the lowest income segments of the population had limited, and
often no, available wireless service options. TracFone has made it possible for
Lifeline-eligible low-income households in many states to obtain wireless
handsets and mobile seivice through its SafeLink Wireless4Î Lifeline program.
47
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Furermore, the mobile nature of SafeLink Wireless4Î wil bring Lifeline-
supported service to those needy Idahoans with no peranent fixed address.
TracFone has been working with the FCC and with operators of homeless shelters
in various states to enable homeless persons residing in such shelters to enroll in
SafeLink Wireless~. It plans to do that in Idaho as well.
TracFone's Lifeline offerng wil enable low-income Idaho residents who
qualify for Lifeline assistance to receive 250 minutes of free service per month.
TracFone is not aware of any pary to this proceeding who has suggested that 250
free minutes wil not be a suffcient amount of service. Neither is TracFone
aware of any wireless ETC operating in Idaho or elsewhere which provides
Lifeline customers with more free minutes than TracFone wil provide to Idaho
Lifeline customers under its first option.
WILL TRACFONE'S LIFELINE OFFERINGS DIFFER FROM THOSE OF
OTHER IDAHO ETCS? IF SO. HOW?
TracFone's Lifeline offerings differ from other Idaho ETCs' Lifeline programs in
several ver important respects. First, TracFone wil offer low-income consumers
the convenience, portability, and security of wireless serices. In addition, unlike
all other ETCs' Lifeline programs, TracFone's Lifeline service wil provide
quantities of wireless usage at no charge to the consumer. Stated simply.
TracFone's Lifeline service wil be free to qualified customers. Typically,
Lifeline programs provide participating consumers with discounts below carers'
standard rates. However. enrolled Lifeline customers stil must pay the ETC's
discounted rates as well as standard rates for additional services and features not
48
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subject to the Lifeline discount (including. for example. long distance toll charges
and charges tor vertical features like call waiting, voice mail, and caller 10), and
face service termination if they fail to pay the amounts owed. For example, if a
provider's standard monthly charge is $30.00 and the Lifeline customer receives a
$ 10.00 discount funded by the USF. the customer wil stil receive an invoice for
$20.00. plus additional charges incurred during the biling period as well as
various taxes and fees. Such customers wil face tennination of service .if they
fail to pay those biled amounts -- amounts which often are well in excess of the
discounted local service portion of their bils. TracFone's Lifeline customers wil
not receive bills. Furthermore, TracFone's Lifeline customers wil be able to
initiate and receive calls from their wireless phones without incurring any
activation charges. In addition, unlike the Lifeline services of other Idaho ETCs.
TracFone's service wil include at no additional charge important vertical features
like caller ID. call waiting, and voice maiL.
DOES TRACFONE MEET THE REQUIREMENTS FOR ETC
DESIGNA nON?
TracFone meets all applicable federal and Idaho requirements for ETC
designation. In addition, TracFone recognizes that the Communications Act
states that ETCs shall offer services. at least in part, over their own facilties and
prohibits state commissions from designating as an ETC a telecommunications
carer that offers services exclusively through the resale of another carrier's
services. However. on September 8, 2005. the FCC granted a petition fied by
TracFone that requested the FCC to exercise its forbearance authority with respect
49
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to the facilities-based service requirement ("TracFone Forbearance Order"). The
TracFone Forbearance Order is attached as Exhibit NO.3. In an Order dated April
i 1, 2008, the FCC designated TracFone as an ETC in ten states and the District of
Columbia, subject to the conditions set forth in the TracFone Forbearance Order.
Those conditions include TracFone providing its Lifeline customers with 911 and
enhanced 91 I ("E91 1") access regardless of activation status and availability of
prepaid minutes; obtaining a certification from each Public Safety Answering
Point ("PSAP") where TracFone provides Lifeline service confirming that
TracFone complies with the 911 service condition; providing its Lifeline
customers with E91 I-compliant handsets; requiring its customers to self-certify at
time of service activation and annually thereafter that they are the head of
household and receive Lifeline-supported serice only from TracFone; and
establishing safeguards to prevent its customers from receiving multiple TracFone
Lifeline subsidies at the same address. On March 5, 2009, the Commission issued
an Order modifying one of the conditions imposed in the TracFone Forbearance
Order requiring that TracFone obtain a certification from each PSAP where
TracFone provides Lifeline service confirming that it provides its customers with
access to basic and E91 1 service. The March 5, 2009 Order is attached as Exhibit
No.4.
DO ANY OF THE CONDITIONS IMPOSED ON TRACFONE IN THE
FORBEARANCE ORDER APPLY TO TRACFONE'S DESIGNATION AS AN
ETC IN IDAHO?
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Yes. I understand that all state commissions, including this Commission, are
required to comply with the FCC's decision to forbear from applying or enforcing
the facilties requirement on TracFone. Accordingly, the FCC-imposed
conditions of forbearance are binding on TracFone in all jurisdictions where it
may be designated as an ETC.
WHAT FUNCTIONS WILL TRACFONE OFFER TO LIFELINE CUSTOMERS
IF GRANTED ETC STATUS?
Upon designation as an ETC in Idaho, TracFone wil offer all of the services and
functionalities required by the FCC's rules (47 C.F.R. § 54.101) and the ETC
Checklist, ~ A.2. as applicable to TracFone. These services and functionalities
include the following:
Voice Grade Access to the Public Switched Network.
The voice grade access provided by TracFone enables a user of
telecommunications services to transmit voice communications, including
signaling the network that the caller wishes to place a call, and to receive voice
communications, including receiving a signal indicating there is an incoming call.
Local Usage.
As par of the voice grade access to the public switched telephone
network, an ETC must provide local calling. TracFone provides customers the
ability to send and receive local phone calls wherever it provides service.
TracFone's Lifeline offering allows customers to use their free airtime minutes
(68, 125, or 250 minutes, depending on fhe Lifeline offering in which the
customer is enrolled) to send and receive local phone calls by using their free
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airtime minutes. Thus, a certain amount of free local usage is included in.2 TracFone's Lifeline callng plan. The FCC rules require an ETC applicant to
3 show it has a local usage plan comparable, although not identical, to that offered
4 by the incumbent local exchange carrers ("ILECs") in the same service areas.
5 Furthermore, the FCC has not adopted any minimum local usage requirements.
6 As a designated ETC, TracFone wil comply with any applicable minimum local
7 usage requirements established by the FCC. Wireless and wireline services,
8 though increasingly substitutable for each other, are different from each other and
9 they are priced differently. Given those differences, the FCC and ETC
10 designating authorities in 24 states have concluded that TracFone's local service
11 offering meets the comparability standard codified in the FCC's rules.
12 This Commission, however, does not require ETC applicants to comply.13 with the FCC's comparability standard. Instead, ETC Checklist, ~ B.4 requires an
14 ETC applicant to provide a description of its local usage plans and a description
15 of the local usage plans ofthe ILECs. As I just described, TracFone's Lifeline
16 offering includes free airtime minutes that can be used for local calling. Based on
i 7 a review of information available on ILECs' websites, ILECs providing service
18 within TracFone's proposed Lifeline service area offer unlimited local usage at
19 the following rates: Cambridge Telephone Company - $16.50-$24.10; Inland
20 Telephone Company - $13.80-$26.00; Rural Telephone Company _ $25.76;
21 Verizon Northwest - $12.78; Qwest Corporation - $12.00-$24.00. The ILECs'
22 monthly rates may var depending on the location ofthe customer. ILECs'local
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usage plans are also available on the Commission's website at
http://www.puc.state.id.us/tarff/approved/approved.htm.
Dual Tone Multi-Frequency (DTMF) Signaling or Its Functional Equivalent.
DTMF signaling allows carrers to provide expeditious call set-up and call
detail information and enables modem usage. All telephone handsets provided
by TracFone are DTMF-capable as required by federal law.
Single-party Service or Its Functional Equivalent.
Single-party service means that only one party wil be served by a
subscriber line or access loop in contrast to a multi-party line. TracFone provides
customers with single-party access for the duration of every phone call.
Access to 911 and E91 1 Emergency Service.
TracFone provides universal access to the 911 system for its customers.
TracFone has implemented and wil continue to implement enhanced 911 services
consistent with the FCC's rules and orders applicable to wireless resellers. Given
that TracFone is a reseller, it does not own or operate any facilties. TracFone has
the ability to remain functional in emergency situations. TracFone provides
service in Idaho by reselling services of underlying wireless network carrers,
including AT&T Mobility, T -Mobile, and Verizon Wireless. Those network
operators have implemented state-of. the-art network reliabilty standards.
TracFone and its customers benefit from the network operators' high standards.
Throughout its more than twelve years of operation, TracFone has never received
a complaint about a 91 1 system failure.
Access to.Operator Services..53
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TracFone offers all its customers access to operator services.
Access to Interexchange Service.
TracFone does not impose separate charges for interexchange calls. Long
distance callng is included in TracFone's service with no additional charge.
Access to Directory Assistance.
All TracFone customers, including those customers located in Idaho, have
access to directory assistance services provided by TracFone's vendors. Unlike
other telecommunications carers, TracFone does not impose separate charges for
directory assistance.
Toll Limitation for Qualified Low-Income Customers.
There is no need for TracFone to offer a toll limitation feature to
qualifying low-income customers. Since TracFone's service is a prepaid service,
no customer wil incur toll charges that they cannot pay for or be disconnected
for failure to pay toll charges or, for that matter, any other charges. TracFone
treats long distance minutes of use as any other usage. Therefore, customers are
not subject to additional charges for toll services.
WILL TRACFONE OFFER LINK-UP SERVICE IN IDAHO?
TracFone does not seek designation as an ETC for the purose of offering Link-
Up service to customers. In the TracFone Forbearance Order, the FCC forbear
from applying the facilties requirement to TracFone only for the purpose of
offering Lifeline service. Moreover, TracFone does not impose activation or
coiuectIon charges -- charges which are offset by Link-Up support. Thus, there is
no need for TracFone to offer Link-Up.
54
Fuentes, Di 17
TracFone Wireless~ Inc.
.Q.HOW QUICKLY WILL TRACFONE BE ABLE TO START PROVIDING
2 LIFELINE SERVICE?
3 Within a very reasonable timeframe, since TracFone already provides
4 service in Idaho by reselling service which it obtains from underlying facilities-
5 based providers. Each of those providers' networks are operational and largely
6 built out. Thus, TracFone already serves those areas. The only delay wil be the
7 time needed to implement procedures and internal systems to offer the Lifeline
8 program.
9 Q.HOW RELIABLE is TRACFONE'S QUALITY OF SERVICE?
10 A.As a reseller of other carriers' wireless services, TracFone's service is of the same
11 quality and reliability as that of its underlying vendors. I cannot assure the
12 Commission that TracFone wil never experience service disruptions. Occasional.13 dropped calls and inconsistent coverage depending on atmospheric conditions are
14 a fact of life in the wireless industry. However, TracFone's service is as reliable
15 as that of any other wireless provider serving the Idaho market. To demonstrate
16 its commitment to high service quality, TracFone wil comply with the CTIA -
17 The Wireless Association4Î Consumer Code for Wireless Service. A copy of the
18 CTIA Code is attached as Exhibit NO.5. TracFone's SafeLink Wireless(l service
19 is also subject to a Privacy Policy available to all customers on its website at
20 www.safelink.com. A copy of the Privacy Policy is attached as Exhibit No.6.
21 Q.CAN TRACFONE MEET ALL RESPONSIBILITIES UNDER THE CTIA
22 CONSUMER CODE GIVEN ITS RESELLER STATUS?
.55
Fuentes, Di 18
TracFone Wireless, Inc.
.A.
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.
Yes. TracFone is able to and does meet each of the CTIA Consumer Code
provisions. The following describes TracFone's compliance with each of the
provisions of the CTIA Consumer Code for Wireless Service.
Disclose rates and terms of service to consumers: TracFone discloses its rates and
terms of service to consumers on its website.
Make available maps showing where serice is generally available: TracFone
makes available maps showing where service is generally available on its website.
See http://www.tracfone.com/jsplib/verify mapcov.jsp. Coverage maps are
accessed by clicking on "Site Map" on TracFone's home page, then clicking on
"Coverage Maps".
Provide contract terms to customers and confirm changes in servce: TracFone
does not require its customers to enter into contracts. TracFone's service is
governed by the terts and conditions as set fort on its website.
Allow a tral period for new serice: TracFone only offers prepaid service and
does not charge an early termination fee. Consumers can purchase the amount of
airtme minutes they wish to use. Therefore, there is no need for TracFone to
offer a tral period for service. Customers may terminate their use ofTracFone
service at any time without incurrng any penalty or termination charge.
Provide specific disclosures in adverising: TracFone provides specific
disclosures in any advertising of prices. TracFone does not charge activation or
initiation fees, monthly access fees, or early termination fees and does not have a
required contract term or peak and off-peak callng times. TracFone makes all
disclosures related to prices that are applicable to its service.
56
Fuentes, Di 19
TracFone Wireless, Inc.
.
2
3
. 4
5
6
7
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1 1
12.13
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23
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Separately identify carrer charges from taxes on billing statements: As a prepaid
,
service provider, TracFone does not issue biling statements. Therefore,
requirements concerning biling statements are not applicable to TracFone.
Provide customers the right to terminate service for changes to contract terms:
TracFone does not require its customers to enter into contracts. TracFone's
service is governed by the terms and conditions as set forth on its website.
Therefore, requirements concerning cancellation of contracts are not applicable to
TracFone.
Provide ready access to customer service: TracFone provides ready access to its
customer serice department via a toll-free telephone number during regular
business hours. TracFone's toll-free customer service telephone number is
provided on its website and in all communications with its customers.
Promptly respond to consumer inquiries and complaints received from
governent agencies: TracFone promptly responds to consumer inquiries and
complaints received from federal and state government agencies.
Abide by policies for protection of consumer privacy: TracFone's Privacy Policy
is available to all customers on its website. TracFone also complies fully with
applicable requirements governing Customer Proprietary Network Information set
forth at Section 222 of the Communications Act and in the FCC's rules.
HOW WILL TRACFONE ENSURE THAT ELIGIBLE CUSTOMERS ARE
MADE A WARE OF ITS SERVICES?
TracFone wil aggressively advertise the availability of its SafeLink Wirelesstl
Lifeline service and the associated charges using media of general distribution, in
57
Fuentes, Di 20
TracFone Wireless, Inc.
.2
3
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accordance with the requirements under federal and Idaho state law. TracFone
plans to utilize such marketing and outreach efforts as necessary and appropriate
to ensure that as many potentially eligible consumers are aware ofTracFone's
prepaid wireless Lifeline offering. TracFone understands that it wil be
competing with other ETCs in Idaho, including the incumbent local exchange
carers, which may be chosen by consumers to be their Lifeline service provider.
TracFone wil utilze traditional means for promoting the availability of its
Lifeline program. These means wil include print and broadcast advertising in
media outlets most likely to reach consumers eligible for Lifeline. These would
include national publications as well as local and community newspapers, and
commercial broadcast stations, especially those stations whose programming is
targeted to significant lower income communities including, for example, Spanish
language stations in areas with significant Spanish-speaking populations.
WILL TRACFONE OFFER LIFELINE SERVICES THROUGHOUT THE
PROPOSED SERVICE AREA AND ATTEMPT TO PROVIDE SERVICE TO
EVERY REQUESTING CUSTOMER IN THE AREA AS REQUIRED BY ETC
CHECKLIST,,r B.l?
Yes. This requirement is based on FCC rule 54.202(a)(l)(i) (47 C.F.R. §
54.202(a)(l )(i)), which provides that in order to be designated as an ETC, a
carer must commit to provide service throughout its proposed designated service
area to all customers making a reasonable request for service. ETC Checklist, ,
B. 1 also refers to the six-step process that must be used when service is requested
within the applicant's service area, but outside its existing network coverage. The
58
Fuentes, Di 2 i
TracFone Wireless, Inc.
..
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10 Q.
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12 A..13
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purpose of this requirement is to ensure that an ETC is using high-cost support to
expand and improve network services. TracFone does not own and operate a
network and it will not seek high-cost support. However, TracFone wil provide
service on a timely basis to all qualified customers requesting Lifeline service
within its designated service area. TracFone, as a reseller, defines its service area
to include the coverage areas of its underlying carers. TracFone does not have
the ability to expand or make any changes to the networks of its underlying
carers. As such, it can only comply with requests for service within its
underlying caers' service areas.
is TRACFONE ABLE TO REMAIN FUNCTIONAL IN EMERGENCIES AS
REQUIRED BY ETC CHECKLIST, ir B.2?
In accordance with FCC Rule 54.202(a)(2) (47 C.F.R. § 54.202(a)(2)) and ETC
Checklist, ir B.2, TracFone has the ability to remain functional in emergency
situations. Given that TracFone is a reseller, it does not own or operate any cell
sites, microwave hubs, or switches. Therefore, the requirement that TracFone
demonstrate that it has back-up power and is able to reroute and manage traffc in
emergency situations is not applicable. TracFone provides service in Idaho by
resellng services of underlying wireless network carrers, including AT&T
Mobility, T-Mobile, and Verizon Wireless. Those network operators have
implemented state-of-the-art network reliability standards. TracFone and its
customers benetìt from the network operators' high standards. Throughout its
over twelve years of operation, TracFone's service reliability has compared
favorably with that of any facilities-based operator in the wireless
59
Fuentes, Di 22
TracFone Wireless, Inc.
telecommunications industr..2 Q.WILL TRACFONE'S RESELLER STATUS LIMIT ITS ABILITY TO
3 RESOLVE ALL COMPLAINTS REGARDING ITS SERVICE THAT MAYBE
4 RECEIVED BY THE COMMISSION?
5 A.No. TracFone has been providing nationwide wireless telecommunications
6 service for more than twelve years. During that time period, TracFone has
7 satisfactorily resolved complaints that have been forwarded to it by state utility
8 commissions and by the FCC. TracFone's status as a reseller has not limited its
9 abilty to address and resolve any complaint. TracFone wil promptly work to
10 resolve any complaints it receives from this Commission or from an Idaho
1 1 customer.
12 Q.WILL TRACFONE BE ABLE TO COMPLY WITH THE ANNUAL.13 REPORTING REQUIREMENTS FOR ETCS IN IDAHO?
14 A.TracFone understands that the anual reporting requirements for ETCs are set
15 fort in the ETC Checklist, ,¡ C. TracFone wil be able to comply with all
16 reporting requirements to the extent that they are applicable to a reseller that only
17 offers Lifeline service. Some of the reporting requirements relate to high-cost
18 support or network improvements, such as the two-year network improvement
19 plan required by'¡ C. 1 and the high-cost certification required by'¡ D. Such
20 reporting requirements are not applicable to TracFone because it does not seek
21 high-cost support and does not own or operate a network.
22 ETC Checklist, ,¡ C.2. requires a wireless ETC to fie an annual outage
23 report consistent with 47 C.F.R. § 54.209(a)(2).ETC Checklist, ,¡ C.2 requires.Fuentes,Di 23
60 TracFone Wireless, Inc.
.
2
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7
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20 A.
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the annual outage report to include information detailing: (A) the date and time
of onset of the outage; (B) a brief description of the outage and its resolution; (C)
the particular services affected; (D) the geographic areas affected by the
outage; (E) steps taken to prevent a similar situation in the future; and (F) the
number of customers affected. TracFone receives outage information from each
of its underlying carers in Idaho. The information received by TracFone
identifies the date and time of the onset of the outage, the duration of the outage,
the nature of the outage, and the general geographic location of the outage.
However, as a reseller, TracFone does not own or operate any switches, and
therefore cannot identify the steps taken to prevent a similar situation in the
future. Furthermore, the outage information provided to TracFone does not
enable TracFone to identify the number of customers affected. Therefore,
TracFone will provide outage infoniiation to the extent that it is able to do so. In
this regard, the Commission should be aware that Section 54.209 of the FCC's
rules is applicable to TracFone as a designated ETC. TracFone submits Section
54.209 reports annually to the FCC for the states in which it is a FCC-designated
ETC.
WHY WOULD DESIGNATION OF TRACFONE AS AN ETC SERVE THE
PUBLIC INTEREST?
The FCC has determined that designation of competitive ETCs serves the public
interest by promoting competition and benefits consumers by increasing customer
choice, innovative services, and new tecluologies. Designation of TracFone as
an ETC wil provide a valuable alternative to the existing Lifeline wireline and
61
Fuentes, Di 24
TracFone Wireless, Inc.
.2
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wireless services available in Idaho. TracFone's Lifeline service wil provide
important public interest benefits, including larger local callng areas, the
convenience and security afforded by mobile telephone service, the opportnity
for customers to control their costs by purchasing in advance only the volumes of
service which they need and supplementing those quantities on an as-needed basis
after exhausting their monthly supply of free service, availability of important
vertical features such as caller ID, call waiting, and voice mail at no additional
charge, and availability ofE91 1 service in accordance with the FCC's E91 1
requirements. In addition, TracFone's inclusion of all distance callng (local and
long distance) and roaming withn its callng plans wil enable consumers to avoid
the risk of becoming burdened with large and unanticipated charges for toll
calling.
IS TRACFONE ADDRESSING THE CURRENT ECONOMIC DOWNTURN?
TracFone's SafeLink Wireless4Î Lifeline service offers important benefits that are
especially needed by low-income Idaho residents in this time of economic
downturn. Idaho has an unemployment rate of9.5 percent. These conditions
have had a significant impact on Idaho residents. The availability of a mobile
telephone is critical to many unemployed Idaho residents' efforts to search for
other employment opportunities. Without a mobile telephone, unemployed
individuals face extreme difficulty in finding employment. A mobile telephone
allows individuals to be reached at any time and location, which enables
unemployed individuals to respond to potential employers immediately. In
addition, a mobile telephone assists employed low-wage individuals by allowing
62
Fuentes, Di 25
TracFone Wireless, Inc.
.
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9 A.
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those individuals to stay in contact with employers, manage relationships with
supervisors, and respond to requests for work of additional shifts or hours.
TracFone's SafeLink Wireless4Î Lifeline program wil enable thousands ofldaho
residents, including residents seeking employment and residents with low-wage
positions, to obtain a handset and wireless service which would otherwise be
unavailable to them.
WHY WOULD IDAHO BENEFIT FROM ANOTHER ETC PROVIDING
LIFELINE SERVICE?
As I wil describe below, a significant number of Idaho residents who are eligible
for Lifeline benefits are not enrolled in a Lifeline program with an ETC. While
TracFone does not know the precise causes for the underutilzation of a program
established to provide discoU11tèd telecommunications services to low-income
households, based 011 its experience in other states, it believes that its Lifeline
service wil attract a significant number eligible low-income Idaho consumers.
WHAT ARE SOME BENEFITS OF INCREASED COMPETITIVE CHOICE?
The benefits of competitive choice are especially valuable in situations in which
wireless providers like TracFone seek to provide service to rural communities and
elsewhere. The availability of a wireless competitive alternative benefits those
rual consumers who often must drive significant distances to work, schools,
stores, and other community locations. TracFone's prepaid wireless service
alterative wil provide all qualified Lifeline consumers with convenient and
affordable telecommunications service, both from their residences and when they
are away from their homes.
63
Fuentes, Di 26
TracFone Wireless, Inc.
I TracFone believes that many consumers, including qualified Lifeline.2 customers, view the portability and convenience of wireless service as a modem
3 necessity, not a luxury. Parents need to be able to reach their children wherever
4 they may be, and vice versa; persons seeking employment opportnities need to
5 be reachable by potential employers, even when they are away from home;
6 persons need to be able to call for emergency assistance while away from home,
7 since not all emergencies requiring 91 1 access occur at home. TracFone
8 recognizes that not all Lifeline-eligible low-income Idaho consumers wil select
9 TracFone's SafeLink Wireless4Î offering. Some consumers wil prefer the
10 traditional Lifeline plans of other ETCs, such as that of their incumbent wireline
1 i local exchange carer. For those consumers who would prefer the benefits of a
12 wireless Lifeline plan, SafeLink Wireless4Î wil provide an important alterative..13 According to most recent FCC data available, Idaho's statewide Lifeline
14 paricipation rate is 22.1 percent of eligible households and according to
i 5 Universal Administrative Service Company the statewide participation rate for
16 2009 was between 20 and 50 percent of eligible households. In other words, more
17 than 50 percent of low-income Idaho household that are eligible to receive
18 Lifeline are not receiving Lifeline benefits. TracFone expects that many
i 9 qualified low-income households wil elect to enroll in its SafeLink Wireless(ß
20 Lifeline program, and that the availability of competing Lifeline programs wil
21 encourage greater paricipation in Lifeline. In fact, since late 2008 when
22 TracFone commenced offering SafeLink Wireless4Î Lifeline service in three states
23 (Tennessee, Virginia, and Florida), TracFone has substantially increased the
.64
Fuentes, Di 27
TracFone Wireless, Inc.
number of Lifeline participants in each state where SafeLink Wireless4Î is offered.
For example, in each of those states, TracFone has increased Lifeline enrollment
by more than one hundred percent.
WHAT ARE THE ADVANTAGES OF TRACFONE'S SERVICE
OFFERINGS?
As described earlier in my testimony, TracFone's entire business model is
predicated on providing easy-to-use, pay-as-you-go, affordable wireless
telecommunications service to consumers to whom wireless service would be
otherwise unavailable or unaffordable. TracFone wil offer qualified low-income
Idaho consumers an opportunity to acquire wireless service using state-ot:the-art
E91 I-compliant handsets and such features as caller ID, call waiting, voice mail,
text messaging, and long distance callng without toll charges, as well as
international callng to more than i 00 destinations. Because TracFone's service
requires no tenn contracts, no minimum service periods or volume commitments,
no credit checks, and no early termination fees, the service is available to
everyone - irrespective of age; irrespective of residency; irrespective of
creditworthiness. Moreover, TracFone's prepaid service is unique in that usage
information and remaining balance information is stored in the handsets and is
thus available to consumers on a "real-time" basis. TracFone's prepaid service
offers Lifeline-qualified customers access, quality and price. All of these
benefits and advantages wil be available to TracFone's Idaho Lifeline customers.
.65
Fuentes, Di 28
TracFone Wireless, Inc.
I Q.WILL TRACFONE'S DESIGNATION AS AN ETC RESULT IN.2 CREAMSKIMMING IN THE RURAL ILEC AREAS IN WHICH IT SEEKS
3 DESIGNATION AS AN ETC?
4 A.No. A creamskimming analysis as par of the Commission's consideration of
5 TracFone's ETC application is neither not relevant nor appropriate. TracFone is a
6 reseller which seeks ETC designation for the limited purpose of providing
7 Lifeline service and wil not seek support from the high-cost fund. The FCC
8 developed the "creamskimming" analysis requirement when it began to designate
9 wireless ETCs who sought support from this high-cost portion of the Universal
10 Service Fund to subsidize the costs of building alternative networks which would
11 compete with rural LECs. The FCC's concern was that such facilities-based
12 wireless ETCs would get high-cost support to build out competing networks with.13 those of the rural LECs but would actually deploy competing networks only in the
14 most populous areas of the rural ILECs service terrtories -- effectively
15 "creamskimming" in the LECs' terrtories since the ILECs had to build out
16 thoughout their entire service areas, including the sparsely-populated portions of
17 their service areas. Since TracFone is a reseller, it wil not, and canot, engage in
18 creamskimming as that term has been used by the FCC. It can provide Lifeline
19 serice only where its underlying vendors have wireless coverage. If its
20 underlying vendors do not have coverage, it canot provide service.
21 Q.WHAT KIND OF IMPACT WILL TRACFONE HAVE ON THE FEDERAL
22 UNIVERSAL SERVICE FUND IF GRANTED ETC STATUS?
.66
Fuentes, Di 29
TracFone Wireless, Inc.
.The FCC considered the impact on the USF when determining whether to grant
TracFone's petitions for designation as an ETC and concluded that designation of
TracFone as an ETC for the limited purpose of offering Lifeline would not have a
significant impact on the USF. The FCC noted in its decision granting TracFone
forbearance from the fàcilities requirement for ETCs: "Any increase in the size of
the fund would be minimal and is outweighed by the benefit of increasing eligible
paricipation in the Lifeline program, furthering the statutory goal of providing
access to low-income consumers." TracFone Forbearance Order, ii 17.
Whatever impact designation ofTracFone as an ETC in Idaho wil have
on the size of the universal service fund wíl be relatively modest and wil be
more than offset by the fact that USF resources wil be used for a very important
purpose -- to make available to all Americans, including low-income persons,.affordable telecommunications services. TracFone seeks ETC designation solely
to enable it to offer Lifeline benefits to eligible low-income Idaho consumers.
TracFone does not seek access to funds from the federal Universal Service Fund
for the purpose of obtaining high-cost support.
TracFone's designation as an ETC wíl not increase the number of persons
eligible for Lifeline support. As stated in the Communications Act, the universal
service fund was established to ensure that quality services are available to all
individuals at just, reasonable, and affordable rates. TracFone's abilty to increase
the Lifeline paricipation rate of qualified low-income individuals from the
current participation rate ofless than 50 percent wil further the goal of Congress
to provide all individuals with affordable access to telecommunications service.
.67
Fuentes, Di 30
TracFone Wireless, Inc.
Q.ARE THERE ANY OTHER WAYS IN WHICH TRACFONE'S.2 DESIGNATION AS AN ETC WILL BENEFIT THE PUBLIC INTEREST IN
3 IDAHO?
4 A.As a national leader in prepaid wireless services, TracFone has done much to
5 advance the availability of wireless service for those portions of the population for
6 whom wireless service is otherise unavailable or, if available, is too costly and
7 requires ter duration and volume commitments which are beyond the means of
8 many consumers.
9 Moreover, designation of TracFone as an ETC wil serve the public
10 interest by further promoting the extensive role TracFone plays in the provision of
11 communications services to lower income and lower volume users, transient
12 users, as well as other consumers who either choose not to enter into long-term.13 service commitments or who are unable to meet the credit requirements necessar
14 to obtain service from other wireline or wireless carers. TracFone's wireless
15 service enables consumers to enjoy the convenience and security of wireless
16 telecommunication without being subject to extensive credit reviews and long-
17 term service commitments which historically have limited the availabilty of
18 wireless service to many Americans, including many Idaho residents.
19 Q.IS THERE ANYTHING ELSE YOU WOULD LIKE TO ADD TO YOUR
20 TESTIMONY?
21 A.Based on my testimony above, I would like to reiterate that TracFone meets all
22 legal requirements for designation as an ETC and that designation ofTracFone as
23 an ETC for the limited purpose of providing Lifeline serice to low-income Idaho
Fuentes,Di 31.68 TracFone Wireless, Inc.
1 households wíl serVe the public interest. Accordingly, the Idaho Public Utilties.2 Commission should unconditionally and promptly grant TracFone's application
3 for designation as an eligible telecommunications carer so that TracFone may
4 commence providing its SafeLink Wireless4Î servce to low-income Idaho
5 households at the earliest possible time.
.
.69
Fuentes, Di 32
TracFone Wireless, Inc.
.
.
1 (The following proceedings were had in
2 open hear ing . )
3 Q.BY MR. BRECHER: Okay. Mr. Fuentes, do you also
4 have in front of you testimony dated March 23rd that you caused
5 to rebuttal testimony that you caused to be filed consisting
6 of 30 pages?
7 A.I do.
8 Q.And did your rebuttal testimony consist of --
9 include also Exhibit Nos. 7 through 151
10 A.It does.
11 Q.Do you have any corrections or additions to your
12 rebuttal testimony?
13 A.I do not.
14 Q.Mr. Fuentes, if I were to ask you the same
15 questions today under oath as those that you've answered in
16 your rebuttal testimony, would your answers be the same?
17 A.They would.
18 MR. BRECHER: I would ask that Mr. Fuentes'
19 rebuttal testimony be spread upon the record as if read,
20 including Exhibits 7 through 15.
21 At this time, the witness is available for
22 cross-examination. And before that, just so I understand the
23 procedures at this Commission, is it your preference that we
24 formally move the admission of the evidence after the.25 cross-examination or before? I've seen it done both ways.
70
HEDRICK COURT REPORTING
P. O. BOX 578, BOISE, ID 83701
FUENTES (Di )
TracFone
.
.
20
21
22
23
24.25
1 COMMISSIONER SMITH: Well, we will now spread the
2 prefiled rebuttal testimony of Mr. Fuentes upon the record as
3 if read if there is no obj ection, and identify the exhibits.
4 (The following prefiled rebuttal testimony
5 of Mr. Fuentes is spread upon the record.)
6
7
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71
HEDRICK COURT REPORTING
P. O. BOX 578, BOISE, ID 83701
FUENTES (Di )
TracFone
.Q.WHAT is YOUR NAME AND OCCUPATION?
2 A.My name is Jose Fuentes. I have been Director of Governent Relations for
3 TracFone Wireless, Inc. ("TracFone") for the past two years. I am responsible for
4 facilitating TracFone's designation as an Eligible Telecommunications Carier
5 ("ETC") by state utility commissions and for implementing SafeLink Wireless4Î
6 Lifeline service throughout the United States. I am also the corporate
7 spokesperson for the SafeLink Wireless4Î brand.
8 Q.WHAT IS THE PURPOSE OF YOUR REBUTTAL TESTIMONY?
9 A.The rebuttal testimony I am providing today responds to the testimony and
10 exhibits fied by Grace Seaman, a Utilties Analyst employed by the Commission,
11 and by Daniel L. Trampush, a consultat retained by Idaho Telecom Allance
12 ("IT A") and CTC Telecom, Inc. ("CTC") fied with the Commission on March.13 18,2011.
14 Q.HA VE YOU PREVIOUSLY PROVIDED TESTIMONY IN THIS
15 COMMISSION'S PROCEEDING CONCERNING TRACFONE'S ETC
16 APPLICA TION?
17 A.Yes. On February 25,2011, I provided direct written testimony and exhibits to
18 the Commission. My direct testimony was filed in support of TracFone's First
19 Amended ETC Application, fied with the Commission on March 1,2010.
20 Q.HA VE YOU REVIEWED THE TESTIMONY OF MS. SEAMAN?
21 A.Yes.
22 Q.WHAT is YOUR UNDERSTANDING OF MS. SEAMAN'S TESTIMONY?
.72 Fuentes, Di-Reb 1
TracFone Wireless, Inc.
.A.Ms. Seaman testifies that Commission Staff believes that TracFone's ETC
2 Application does not meet Idaho's ETC requirements, and, therefore, the
3 Commission should not designate TracFone as an ETC.
4 Q.WHA T REASONS DOES MS. SEAMAN PROVIDE FOR COMMISSION
5 STAFF'S CONCLUSION THAT TRACFONE DOES NOT MEET IDAHO'S
6 ETC REQUIREMENTS?
7 A.Ms. Seaman asserts that TracFone's ETC Application should be denied for three
8 reasons: (1) non-payment to the Idaho Telecommunications Assistance Program
9 ("ITSAP"); (2) non-payment of the 91 1 fee to the Idaho Emergency Services fund
10 ("91 I Fund"); and (3) incomplete evidence to support that all rural wire centers
1 1 are fully served.
12 Q.DID MS. SEAMAN INDICATE THAT THERE ARE ANY OTHER REASONS .13 FOR THE COMMISSION TO DENY TRACFONE'S ETC APPLICATION?
14 A.No.
15 Q.DO THE ISSUES RAISED BY MS. SEAMAN WARRANT DENIAL OF
16 TRACFONE'S ETC APPLICATION?
17 A.No. While TracFone appreciates Staffs concerns, issues regarding whether
18 TracFone is required to pay certain state fees can be resolved by other means as I
19 wil describe in this rebuttal testimony. As it has done in other states, TracFone
20 wil remit all fees upon final detennination that such fees are applicable to it
2 I pursuant to state law. In addition, Ms. Seaman's concerns about rural wire center
22 coverage is not relevant to whether TracFone should be designated as an ETC in
23 its service area in Idaho..Fuentes, Di-Reb 2
73 TracFone Wireless, Inc.
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HOW DOES TRACFONE PROPOSE TO ADDRESS STATE FEE ISSUES?
Based on Ms. Seaman's testimony, it appears that Commission Staff does not
agree with TracFone's conclusion based on its own examination of the relevant
state law provisions that it is not obligated to contrbute to the ITSAP fud nor to
the 91 1 Fund. Idaho is not the first state where attempts have been made to
subject TracFone to state fee requirements which TracFone concluded are not
applicable to it, or to delay approval of TracFone's ETC applications based on
disputes regarding such fees. Neither is it the only state where legitimate, good
faith, disagreements regarding applicability of certain fees and taxes have been
shown to exist between TracFone and others, including state commission stafs.
In such states, TracFone has consistently worked cooperatively with legislators,
regulatory deparments, and other stakeholders to resolve such disputes and has
been able to reach agreements for mechanisms which would allow TracFone to be
designated as an ETC and to deliver its unique SafeLink Wireless4Î Lifeline
service to low-income households while TracFone and other staeholders sought
resolution of the issues regarding fee applicabilty. As discussed below, TracFone
is committed to doing the same in Idaho.
If the Commission deems it necessar to determine whether TracFone and
other prepaid wireless providers are legally obligated to contribute to the ITSAP
and 9 i 1 funds, it should open a separate proceeding to address that issue.
TracFone faced a similar issue before the Maine Public Utilties Commission
("Maine PUC"). In the Maine PUC proceeding regarding TracFone's ETC
petition, the Maine PUC Staff raised the issue of whether TracFone was obligated
74 Fuentes, Di-Reb 3
TracFone Wireless, Inc.
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to make contributions to certain Maine fùnds, including the Maine USF and
Maine Telecommunications Education Access Fund ("MTEAF"). TracFone
asserted that it was not obligated to contribute to those funds because under
applicable laws, contributions were based 011 biled intrastate revenues, and
TracFone, as a provider of prepaid wireless services, does not bil its customers,
and therefore has no biled intrastate revenues within the ambit of the applicable
statutes. In the order designating TracFone as an ETC, the Maine PUC noted that
its designation of TracFone as an ETC did not "absolve TracFone of any
obligations it may have to abide by the Commission's rules regarding
contributions to MUSF, MTEAF and payment of other regulatory fees." The
Maine PUC decided to "open an investigation in a separate docket into whether
TracFone is required to contribute to MUSF and MTEAF, and whether TracFone
is in compliance with its obligations to pay other applicable regulatory fees." The
Maine PUC's Order designating TracFone as an ETC and the Maine PUC Notice
of Investigation are provided as Exhibit No.7 and Exhibit No.8. The Maine PUC
subsequently closed the investigation and opened a rulemaking proceeding to
address the applicability of the subject fees to all prepaid providers, including
TracFone. The Maine PUC's Notice of Rulemaking is provided as Exhibit NO.9.
Like the Maine PUC, this Commission could open a separate docket to address
any statutory fee issues within its jurisdiction, rather than resolve those issues in
this ETC proceeding. Because the Maine PUC wisely chose to resolve the fee
dispute issues in a proceeding separate from the ETC designation process, today
many low-income Maine households are able to enroll in SafeLink Wireless~ and
75
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TracFone Wireless, Inc.
receive free mobile telecommunications service, while the Maine PUC and
affected stakeholders address the fee requirements.
Similarly, when TracFone sought ETC designation in Arizona, issues were
raised regarding the applicability of certain Arizona fees to TracFone's prepaid
wireless services. On March I, 201 1, the Arizona Corporation Commission
designated TracFone as an ETC enabling it to provide Lifeline service to that
state's low-income households. However, that designation was subject to a
condition that TracFone send letters to each of the State of Arzona deparents
with jurisdictional authority to enforce the fee requirements at issue. Specifically,
TracFone was directed to solicit opinions from those departments as to whether
the fees in question are applicable, and to submit copies of those letters and any
responses received to the Arizona Corporation Commission as a compliance item
in the TracFone ETC docket. A copf of the Arizona order is provided as Exhibit
No. 10.
The Maine and Arizona solutions serve as examples of ways in which the
Commission may address questions about the applicabilty ofITSAP and 91 1 fees
to TracFone without depriving Idaho's neediest households of an invaluable
wireless Lifeline service offering.
ARE THE ITSAP FEE AND 911 FEE WITHIN THIS COMMISSION'S
JURISDICTION?
TracFone understands that the ITSAP fee is within the Commission's jurisdiction.
However, the 9 i 1 fee is subject to enforcement by the Idaho Emergency
Communications Commission, which is par of the Deparent of Administration.
76 Fuentes,Di-Reb 5
TracFone Wireless, Inc.
.Q.IF THE COMMISSION DOES NOT HA VE JURISDICTION TO ENFORCE
2 THE 91 1 FEE, HOW SHOULD THAT ISSUE BE RESOLVED?
3 A.As noted above, TracFone recently faced a similar issue in Arizona.TracFone, as
4 a requirement of the Order designating it as an ETC, shall submit letters to the
5 state agencies with jurisdiction to enforce the disputed fees (i.e., Arizona
6 Department of Administration, the Arizona Commission on the Deaf and Hard of
7 Hearing, and the Arizona Corporation Commission), seeking a determination as to
8 whether the fees, over which the agencies have jurisdiction, are applicable to
9 TracFone's services as an ETC in Arizona. This Commission, similarly could
10 require TracFone to submit a letter to the Idaho Emergency Communications
11 Commission seeking a determination as to whether TracFone is obligated to
12 contribute to the 91 1 fund under current law..13 Q.IF THIS COMMISSION OR THE EMERGENCY COMMUNICATIONS
14 COMMISSION DETERMINED THAT TRACFONE IS SUBJECT TO THE
i 5 ITSAP AND 91 1 FEES, WOULD TRACFONE COMMENCE PA YMENT OF
16 THOSE FEES?
i 7 A.TracFone would commence payment of the ITSAP and 91 1 fees upon receiving a
18 final determination that it is obligated to remit those fees.
19 Q.WHAT IS MS. SEAMAN'S CONCERN ABOUT TRACFONE PROVIDING
20 LIFELINE SERVICE IN ALL WIRE CENTERS?
21 A.In response to a production request from IT A and CTC, TracFone provided a list
22 of exchanges and ILEC rate centers in which it provides service. Ms. Seaman is
.77
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concerned that TracFone's service area may not include entire rual wire centers,
and as such may raise the issue of creamskimming.
WHAT is TRACFONE'S RESPONSE TO THIS CONCERN?
First, I want to point out that creamskimming is not a relevant issue when a
wireless service provider seeks ETC designation solely for puroses of providing
Lifeline service. In 2008, when the FCC designated TracFone as an ETC in 11
States, it stated: "In addition, we need not perform a cream skimming analysis
because TracFone is seeking to be eligible for Lifeline support only." A copy of
the FCC's Order is provided as Exhibit NO.1 1. Furhermore, as I noted in my
direct testimony, the FCC developed the "cream skimming" analysis requirement
when it began to designate wireless ETCs who sought support from the high-cost
portion of the Universal Service Fund to subsidize the costs of building alternative
networks which would compete with rural LECs. The FCC's concern was that
such facilities-based wireless ETCs would get high-cost support to build out
competing networks with those of the rual LECs but would actually deploy
competing networks only in the most populous areas of the rural ILECs service
territories -- effectively using Universal Service Fund support to engage in
"cream skimming" in the ILECs' territories since the ILECs had to build out
throughout their entire service areas, including the sparsely-populated portions of
their service areas. Since TracFone provides service only where its underlying
vendors have wireless coverage, it wil not, and canot, engage in creamskiniing
as that term has been used by the FCC. It is for that reason that the FCC
78 Fuentes, Di-Reb 7
TracFone Wireless, Inc.
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concluded in 2008 that a creamskimming analysis is not necessary when
considering Lifeline-only ETC designation requests.
Second, requiring TracFone, or any wireless carrier, to define its service
area in tenus of ILEC wire centers is inappropriate. Wire centers are wireline
service area concepts; they have no relevance to wireless services. While
TracFone can clearly define its service area in terms of Zip Codes and can provide
service area maps, it does not have access to information that would allow it to
identify whether it is serving a portion of an ILEC wire center.
Third, while other state commissions considering TracFone's ETC
applications have required TracFone to describe its coverage area in terms of wire
centers or exchanges, no state commission has conducted a creamskimming
analysis or required TracFone to perform such an analysis. Indeed, of the 36
states in which TracFone has been designated as an ETC, only the Kansas
Corporation Commission analyzed whether TracFone's coverage area included
parial wire centers and then designated TracFone only in those wire centers that
were fully included within TracFone's coverage area, based on Kansas
Corporation Commission Staffs analysis of the coverage area information
TracFone provided and other data available to the Staff. All other state
commissions and the FCC that have designated TracFone as an ETC have defined
TracFone's service area as all areas within the coverage areas of TracFone's
underlying carriers or by using other coverage area information provided by
TracFone. For the reasons I just discussed, a creamskimming analysis is
unnecessary and inappropriate.
79
Fuentes, Di-Reb 8
TracFone Wireless, Inc.
.1 Q.WHAT is TRACFONE'S RESPONSE TO MS. SEAMAN'S TESTIMONY
2 THAT DUPLICATE CLAIMS ARE AN ISSUE?
3 A.Duplicate claims for Lifeline support occur when an individual receives Lifeline-
4 supported service from more than one ETC. This is an issue throughout the
5 industry and is not limited to TracFone's service. At this time, ETCs only have
6 access to their own customer lists; ETCs have no access to other ETCs' customer
7 lists. Only a few states maintain and make available to ETCs databases of
8 enrolled Lifeline customers which can be used to determine whether an applicant
9 for Lifeline service is receiving Lifeline-supported service from another ETC.
10 Idaho is not one of those states. Moreover, under the FCC's rules and the rules of
1 i most states, ETCs are required to obtain from applicants for Lifeline servce self-
12 certifications under penalty of perjur that the applicant is not receiving Lifeline.13 benefits from another ETC. All ETCs must rely on those self-certifications in the
14 absence of accessible databases to confirm the accuracy of the customers' self-
15 certifications. Therefore, neither TracFone nor any other ETC -- wireline or
16 wireless -- has access to information to enable it to determine whether a Lifeline
17 applicant is already receiving Lifeline-supported service from another ETC. The
18 FCC's current rules do not provide any means for minimizing duplicate claims.
i 9 However, the FCC has recently commenced a rulemaking proceeding in which it
20 is considering changes to the FCC's rules governing Lifeline to prevent the waste
21 of fuds caused by duplicate claims. One option being considered by the FCC is
22 the development of a database of all Lifeline customers that would enable ETCs
23 to check whether a Lifeline applicant is already receiving Lifeline service from.80 Fuentes, Di-Reb 9
TracFone Wireless, Inc.
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another ETC. See In the Matter of Lifeline and Link Up Reform and
Modernization, et aI., No/ice of Proposed Rulemaking, WC Docket No. 1 i -42,
(released March 4,2011). The FCC's Lifeline proceeding has been commenced
in response to recommendations received from the Federal-State Joint Board on
Universal Service in November 2010. The Federal-State Joint Board received
comments from many interested stakeholders, including state commissions, and
consumer groups, as well as many telecommunications companies and their
industry associations. TracFone was among the entities submitting comments to
that Joint Board. In FCC fiings with the Joint Board, TracFone advocated for
establishment of such as database as the most effcient and effective means to
minimize duplicate enrollment in Lifeline programs. TracFone continues to
believe that a national database is the best way to prevent duplicate claims. The
FCC's rulemaking notice articulates a clear intent by that agency to promulgate
reforms to the Lifeline program to prevent waste, fraud, and abuse of Universal
Service Fund resources and to mandate that such reforms become minimum
requirements for states. Among those FCC proposals is the establishment of a
national database and suggested by the Joint Board and as supported by TracFone
and others. TracFone expects that the concerns about improper duplicate
enrollment described in Ms. Seaman's testimony will be addressed by the FCC.
Accordingly, TracFone encourages the Commission and other affected
stakeholders in Idaho to participate in that proceeding and share their views and
suggestions with the FCC, rather than deny the benefits of TracFone's Lifeline
service to low-income Idaho households while the FCC addresses those issues.
81
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TracFone Wireless, Inc.
.Q.
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WHAT DOES TRACFONE DO TO PREVENT DUPLICATE CLAIMS?
TracFone, like all other ETCs, does not have access to information that would
allow it to determine whether a Lifeline applicant or customer is receiving
Lifeline-supported service from another ETC. Therefore, at this time, there is no
way for TracFone or any other ETC to ensure that an applicant or customer is not
receiving Lifeline benefits from another service provider. However, in
accordance with the FCC's 200S Forbearance Order (the FCC order which
allowed TracFone to be designated as an ETC without providing service using its
own facilties), TracFone requires every Lifeline customer to verify on an anual
basis that the customer remains head of household and only receives Lifeline-
Supported services from TracFone. That additional verification requirement was
imposed by the FCC on ETCs like TracFone who are subject to forbearance. It is
not imposed on other ETCs. No Idaho ETC is required to verify anually that
every Lifeline customer receives Lifeline-supported service only from that ETC.
Thus, if designated as an ETC by the Commission, TracFone would be subject to
a more rigorous condition to prevent duplicate enrollments than any other Idaho
ETC.
As Ms. Seaman notes in her testimony, TracFone petitioned the FCC to
modify this requirement to allow it to request the required self-certification from a
statistically-valid sample of its Lifeline customers, rather than from all of its
Lifeline customers. However, the FCC's Wireline Competition Bureau denied
TracFone's petition. The Wireline Competition Bureau's stated reason for
denying TracFone's petition was that the fact that TracFone's Lifeline service is
82 Fuentes, Di-Reb i i
TracFone Wireless, Inc.
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provided for free increased may increase the risk of duplicate claims. A copy of
the Denial Order is provided as Exhibit No. 12.
HA VE YOU REVIEWED THE TESTIMONY OF MR. TRAMPUSH?
Yes.
WHA T is YOUR UNDERSTANDING OF MR. TRAMPUSH'S TESTIMONY?
Mr. Trampush testifies that designation of TracFone as an ETC in areas served by
rural companies in Idaho is not in the public interest.
WHA T REASON DOES MR. TRAMPUSH PROVIDE FOR HIS
CONCLUSION THAT TRACFONE'S DESIGNATION AS AN ETC IN AREAS
SERVED BY RURAL TELEPHONE COMPANIES IN IDAHO IS NOT IN THE
PUBLIC INTEREST?
Mr. Trampush cites several reasons for his conclusion, including his belief that
the public interest benefits claimed by TracFone are not valid. Mr. Trampush also
asserts that TracFone's Lifeline offering does not provide any unique advantages
over the current Lifeline plans available in Idaho.
DO YOU AGREE WITH MR. TRAMPUSH'S CONCLUSION?
No. TracFone's SafèLink Wirelessoo Lifeline service is a unique offering. It
differs significantly from the Lifeline services of any other Idaho ETC.
TracFone's Lifeline service wil provide important and invaluable public interest
benefits. Many of these benefits were described in TracFone's Amended ETC
Application and in my direct testimony and will not be repeated here. Suffce it to
say that TracFone was the first ETC in the nation to provide Lifeline customers
with free wireless handsets (paid for by TracFone with no support from the USF),
83
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TracFone Wireless, Inc.
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free quantities of wireless all-distance airtime, and a ful complement of important
vertical features, such as call waiting, caller ID, and voice mail -- features which
other Idaho ETCs, including several of those who sponsored Mr. Trampush's
testimony, offer only at additional charges -- charges which are not subject to
Lifeline discounts. The perceived value of TracFone's Lifeline service is best
demonstrated by the fact that more than 3 milion low-income households are
currently enrolled in the program and enjoying its benefits in the more than 30
states where the service currently is available.
IN TRACFONE'S ETC APPLICATION, TRACFONE ASSERTS THAT ITS
LIFELINE SERVICE WILL PROVIDE LARGER CALLING AREAS IN
IDAHO. PLEASE EXPLAIN HOW IT EXPANDS LOCAL CALLING AREAS
FOR IDAHO RESIDENTS?
TracFone, through its relationsl1ips with AT&T Mobilty, T-Mobile, and Verizon
Wireless, offers a coverage area that exceeds the coverage area of each of the four
wireless ETCs mentioned in Mr. Trampush's testimony, as well as the coverage
areas of each of the ILECs who are members ofITA. A TracFone customer in
Idaho can use airtime minutes to place and receive calls from all areas where its
underlying cariers have coverage throughout the United States, without incurrng
any roaming charges. While Mr. Trampush asserts without any factua support
that TracFone wil not provide larger local callng areas, that is obviously
incorrect. As generally understood, a local calling area is the geographic area
within which a telephone service customer may initiate calls without being
subject to additional charges. For wireline ETCs, the local calling area is the
84
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TracFone Wireless, Inc.
geographic covered by some -- or a portion of -- that carrier's exchange facilities.
Calls within that area are not subject to additional charges; calls beyond that
specified area are subject to additional charges. Thus, a call traversing a distance
of only a few miles will often be subject to toll charges simply because such calls
are beyond the ETC's limited local calling area. With TracFone's service, callers
may call anywhere within the United States and not incur additional charges.
Even roaming calls are not subject to additional charges. In short, unlike Idaho's
other ETCs, and contrary to Mr. Trampush's testimony, the entire United States
(including, of course, the entire State of Idaho) wil be the local callng area for
TracFone's Lifeline customers. Even Idaho's currently-designated wireless ETCs
have a more limited local calling area. For example, Silver Star Wireless charges
a higher rate for roaming (i.e., calls initiated outside that company's coverage
area). As stated on its website: "Roaming minutes wil be charged at 50 cents per
minute. Roaming charges will apply to all calls originating outside of the Silver
Star Wireless network (see map). Nationwide calling is on CDMA network with
Silver Star Wireless preferred CDMA roaming partners." Silver Star, by charging
a 50 cent roaming rate for calls outside of its network, limits its customers' local
calling area. See Exhibit No. 13. eTC Telecom, itself an intervenor in this
proceeding and a sponsor of Mr. Trampush's testimony, also has "home" airtime
rates and "roan)" airtime rates. See Exhibit No. 14. Syringa Wireless requires
customers to use at least 50 percent of their monthly airtime minutes on the
Syringa Wireless network. See Exhibit NO.1 5. TracFone offers its customers,
including its Lifeline customers, national callng. Thus, TracFone offers a
.85
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TracFone Wireless, Inc.
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significantly more expansive "local callng area" then that offered by the current
wireless ETCs in Idaho -- all of whom subject their customers, including their
Lifeline customers, to costly additional charges for calls initiated outside their
limited local callng areas.
DO THE CURRENT IDAHO WIRELESS ETCS OFFER PLANS THAT ARE
COMPARABLE TO THE LIFELINE PLAN PROPOSED BY TRACFONE?
No. Mr. Trampush claims that TracFone's Lifeline service is not unique because
wireless ETCs in Idaho offer pay-as-you-go plans with unlimited local callng.
He states that Silver Star Wireless offers weekly and monthly pay-as-you-go
plans. Silver Star Wireless's least expensive monthly plan provides for "up to
250 minutes" for $25. See Exhibit No. 13. Under this plan, local minutes are
charged at a rate of $0.25 per minute, while calls for which roaming is necessary
are charged at a rate of $0.50 per minute. Assuming that a Lifeline discount of
$13.50 is applied, Silver Star Wireless's Lifeline customers would pay $1 1.50 per
month ($25.00 - $23.50 = $1 1.50). As compared with TracFone's SafeLink
Wireless4Î most popular Lifeline option which provides 250 minutes at no charge,
a Silver Star Lifeline customer on the plan described above would pay $ 11.50 for
the additional 50 minutes above the free minutes that the customer could receive
at no charge under TracFone's plan. Those additional 50 minutes would require
the Lifeline customer to pay $0.23 per minute -- assuming that all of those
minutes were local minutes within Silver Star's local callng area, and not subject
to roaming charges. Similarly, although Syringa Wireless offers unlimited local
callng for $30.00 (which would cost $16.50 for a Lifeline customer), at least half
86
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TracFone Wireless, Inc.
.of the calls must be on the Syringa Wireless Network or service will be
2 terminated. See Exhibit No. 15. Mr. Trampush refers to a $24. I 0 monthly plan
3 for crc Wireless. However, the least expensive wireless plan I have found for
4 CTC Wireless is 300 minutes per month tor $35.50 (which would cost $22.00 for
5 a Lifeline customer after application ofthc $13.50 discount funded by the
6 Universal Service Fund). See Exhibit No. 14. Comparing that Lifeline plan with
7 that of TracFone, a CTC Wireless Litèlinc customer would have to pay $22.00
8 per month to acquire 50 minutes more than TracFone would provide that
9 customer at no charge. The per minute price of those 50 additional minutes
10 (assuming that all those calls were local calls) would be $.0.44 -- a per minute
1 i price substantially higher than the $0.10 per minute price which TracFone wil
12 charge for additional minutes beyond the 250 free minutes. I simply do not.13 understand the basis for Mr. Trampush's conclusion that the public interest would
i 4 be served by charging low-income consumers $0.44 per minute for minutes which
15 TracFone would provide at no charge. I understand how that arangement would
16 be in CTC Wireless's interest, but I do not understand how it would serve the
17 public interest. Moreover, given this substantial disparity between the real costs
18 incured by TracFone's Lifeline customers and the real costs incurred by those
19 other ETCs' Lifeline customers, I do not understand the basis for Mr. Trampush's
20 conclusion that TracFone's Lifeline program wil not be different from those of
21 other Idaho ETCs. TracFone's Lifeline plan, which provides 250 minutes that can
22 be used anywhere in the United States tor no charge whatsoever, plus a free
.87
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handset, provides unique advantages over each of the plans cited by Mr.
Trampush.
DO TRACFONE'S LIFELINE CUSTOMERS INCUR ANY COSTS
ASSOCIATED WITH THE HANDSET?
No. Mr. Trampush asserts that the Commission needs to know the cost of the
handset to determine whether TracFone's customer's end up paying more for
Lifeline service from TracFone than from an existing ETC. This assertion is
baseless. TracFone does not charge its Lifeline customers a single dime for the
handset either directly or in the form of other charges. TracFone's Lifeline
service is completely free to qualified low-income households. Moreover,
TracFone offers a larger "local" calling area than the current Idaho wireless
ETCs, plus it does not charge for roaming. TracFone's Lifeline customers may
purchase additional airtime minutes, if they choose, at a rate of no more than
$0.10 per minute -- significantly lower than Silver Star Wireless's local rate of
$0.25 per minute -- or CTC's rate of $0.44 per minute for the additional 50
minutes. There simply are no inflated or other charges associated with
TracFone's decision to provide free handsets to Lifeline customers. Lest there be
any doubt about whether TracFone's uses its Lifeline plan to force customers to
purchase additional service, no Lifeline customer is required to purchase
additional service and, in fact, very few do so. According to company data, less
than 2 percent of Lifeline customers who choose the 250 minute plan purchase
any additional service.
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TracFone Wireless, Inc.
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DOES TRACFONE EXPECT TO INCREASE THE LIFELINE
PARTICIPATION RATE IN IDAHO?
Yes. In several states in which TracFone has provided Lifèline service it has
increased the Lifeline participation fate by more than 100%. For example,
TracFone has provided Lifèline service in Florida, Virginia, and Tennessee since
late 2008 and in several other states since 2009. In October 2009, TracFone
analyzed the impact of the introduction otÏts Lifeline service on enrollment in
several states. As of October 2009, TracFone had enrolled more than 2.5 milion
low-income households in its Lifèline program and had dramatically increased
Lifèline enrollment in the fo1lowing states: Alabama - 162 percent; Florida _ 300
percent; Georgia - 285 percent; North Carolina - i 56 percent; Teiiessee _ 268
percent; and Virginia - 692 percent. Based on its history of significantly
increasing Lifeline enro1lment from historically low levels in every state where it
offers Lifeline service, TracFone is confident that it wil similarly increase
Lifeline enrollment among qualified low-income Idaho households. Mr.
Trampush notes that the Universal Service Administrative Company ("USAC")
website shows that Idaho's Lifeline paricipation rate for 2009 was between 20
and 50 percent (i.e., that in the "best case," more than one-half of the state's
Lifeline-eligible low-income households are not receiving Lifeline benefits) and
that the participation rate for several states in which TracFone offers Lifeline at
least one-half of Idaho's low-income households currently do not receive Lifeline
benefits does not indicate that TracFone wil not materially increase the Lifeline
participation rate in Idaho as it has done in every other state where it offers
Fuentes, Di-Reb i 8
TracFone Wireless, Inc.
89
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3
4
5
6
7
8
9 Q.
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13 A.
14
15
16
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18
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.
Lifeline service as an ETC. First, TracFone only commenced service in many
states in 2009, so any increase in paricipation rates would most likely occur in
2010. Second, the USAC data do not indicate where within the 20 to 50 percent
range lies Idaho's actual Lifeline enrollment. Nothing in his testimony provides
any basis for concluding that Idaho's current Lifèline participation rate is not
closer to twenty percent than to fifty percent of eligible households. Based on
TracFone's experience in other states, it anticipates that it wil be able to
significantly increase the Lifeline participation rate in Idaho.
MR. TRAMPUSH ASSERTS THAT A LOW LIFELINE PARTICIPATION
RATE SIMPLY MEANS THAT MANY PEOPLE ELIGIBLE FOR LIFELINE
ARE DECIDING NOT TO TAKE ADV ANT AGE OF THE PROGRAM. DO
YOU AGREE WITH THAT ASSESSMENT?
No. TracFone believes, that a low Lifeline paricipation rate is the result of there
not being an attractive Lifeline service of which eligible people are aware.
TracFone has substantial experience in serving and marketing to low-income
customers and believes that it has developed a Lifeline product that wil meet the
needs of low-income Idahoans. TracFone has succeeded in enrollng large
numbers of quaified low-income households in Lifeline where other ETCs have
failed. It attributes this to two primar reasons. First, TracFone has aggressively
and creatively marketed its Lifeline service. It advertises in print and electronic
media likely to reach targeted low income households -- households who all too
often in the past were never made aware of the availabilty of Lifeline support
despite the requirement contained at Section 214(e)(l)(B) of the federal
90
Fuentes,Di-Reb 19
TracFone Wireless, Inc.
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3
4
5
6
7
8
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14 A.
15
16
17
18
19
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.
.
Communications Act and in the FCC's rules that ETCs advertise the availability
of Lifeline using media of general distribution. Second, TracFone's Lifeline
service is frec. Qualified customers receive telecommunications service with no
financial outlay whatsoever. To many low-income households, even the
discounted prices charged by ETCs after receipt of their Lifcline subsidies leave
the service priced beyond their means. Relatedly, there is no risk ofa TracFone
Lifeline customer incurring billed charges for additional services which the
customer cannot afford to pay and then having service terminated for non-
payment. These factors -- aggressive and creative marketing, and free service--
have enabled TracFone to increase significantly the number of low-income
households enrolled in Lifeline programs.
DOES MR. TRAMPUSH ASSERT THAT THERE ARE RISKS ASSOCIATED
WITH TRACFONE BEING DESIGNATED AS AN ETC?
Yes. Mr. Trampush states that because TracFone wil only provide service where
its underlying carners have coverage and wil not expand the existing networks,
there is a potential for creamskimming. As I testified earlier, a creamskimming
analysis is unnecessary and inappropriate when a wireless telecommunications
provider seeks designation as an ETC solely to provide Lifeline service. Mr.
Trampush also asserts that when a customer switches service from an ILEC to
TracFone, that customer no longer contributes to the Universal Service Fund, and
therefore, there is an upward pressure on the fund. Mr. Trampush provides no
basis for this position and the statement is erroneous. TracFone contributes to the
Universal Service Fund based on its interstate telecommunications service
Fuentes, Di-Reb 20
TracFone Wireless, Inc.
91
.revenues in the same manner as do all other providers of such service. It
2 completes and fies FCC Form 499 as required and remits the amounts invoiced to
3 it based on those reports.
4 Q.DOES MR. TRAMPUSH RAISE ANY OTHER CONCERNS ABOUT
5 TRACFONE'S SERVICE?
6 A.Yes. Mr. Trampush asserts that TracFone has not demonstrated its abilty to stay
7 functional in an emergency and is not able to meet the CTIA Consumer Code for
8 wireless services. Neither of these accusations are correct. TracFone provides
9 service in Idaho by resellng services of underlying wireless network cariers,
10 including AT&T Mobilty, T-Mobile, and Verizon Wireless. Those network
11 operators have implemented state-of-the-art network reliabilty stadards and
12 TracFone and its customers benefit from their high standards. Thrughout its.13 more than twelve years of existence, TracFone's service reliabilty has compared
14 favorably with that of any facilties-based operator in the wireless
15 telecommunications industr. TracFone currently provides wireless service
16 Idaho, and has done so for more than twelve years. During that period, it never
i 7 has failed to remain functional during an emergency. Moreover, the ETC
18 designating authorities in not less than 36 states have found that TracFone has
19 demonstrated its abilty to remain functional in an emergency, and so should this
20 Commission.
21 Q.WHAT IS MR. TRAMPUSH'S CONCERN REGARDING TRACFONE'S
22 COMPLIANCE WITH THE CTIA CONSUMER CODE?
.92
Fuentes, Di-Reb 21
TracFone Wireless, Inc.
A.Mr. Trampush alleges that TracFone does not comply with the CTIA Consumer.2 Code because it does not offer a trial period or provide its customers a refund for
3 unused minutes.This assertion too is incorrect. The CTIA Consumer Code
4 provides the following regarding trial periods: "When a customer initiates service
5 with a wireless carrier, the customer wil be informed of and given a period of not
6 less than 14 days to try out the service. The carrier wil not impose an early
7 termination tee if the customer cancels service within this period, provided that
8 the customer complies with applicable return and/or exchange policies. Other
9 charges, including airtime usage, may stil apply." As I already testified in my
10 direct testimony, customers may terminate their use of TracFone service at any
1 i time without incurring any penalty or termination charge, therefore a 14 day trial
12 period is not necessary..i 3 Q.MR. TRAMPUSH ASSERTS THAT THERE ARE COMPLAINTS ABOUT
14 TRACFONE'S CUSTOMER SERVICE ON THE INTERNET, INCLUDING
15 COMPLAINTS REGARDING WAIT TIMES. WHAT is TRACFONE'S
16 RESPONSE TO THESE ASSERTIONS?
i 7 A.While I am not aware of the specifics of the complaints referenced in Mr.
18 Trampush's testimony, I do know that TracFone is highly committed to providing
19 high quality customer service to all of its customers. TracFone has a process for
20 resolving complaints quickly and effectively. TracFone also continuously
21 monitors customer service and analyzes the quality of its customer service based
22 on several criteria and then makes changes to its customer service when
.93
Fuentes, Di-Reb 22
TracFone Wireless, Inc.
I necessary.Finally, TracFone's wait times compare favorably to the industry.
2 average.
3 Q.DO YOU AGREE WITH MR. TRAMPUSH THAT THE ONLY PUBLIC
4 INTEREST BENEFIT TO TRACFONE'S LIFELINE SERVICE IS THAT IT
5 WILL PROMOTE COMPETITION?
6 A.No. As I testified earlier, TracFone's Lifeline service offers unque advantages
7 over the Lifeline plans offered by wireline and wireless ETCs in Idaho, including
8 those ETCs who have sponsored Mr. Trampush's testimony. Those advantages
9 include a more expansive, indeed, a nationwide, local callng area, importt
10 service features at no additional charge, and a free handset. No ETC currently
11 operating in Idaho provides that unique combination of consumer benefits.
12 TracFone also anticipates that it wil significantly increase the Lifeline.13 paricipation rate among low-income households in Idaho as it has done in every
14 other State where it offers Lifeline'service as an ETC. Furthermore, there are no
15 risks associated with designating TracFone as an ETC. While TracFone's
16 entrance into the Lifeline service market wil promote competition, that is not the
17 sole public interest benefit of its Lifeline service.
18 Q.HOW WILL TRACFONE CERTIFY THE ELIGIBILITY OF LIFELINE
19 APPLICANTS IN IDAHO?
20 A.TracFone wil certify the eligibilty of its Lifeline in accordance with Idaho law.
21 Pursuant to Section 56-903(1) of the Idaho Code, "the department of health and
22 welfare shall develop procedures for taking applications for assistance and for
23 determining and certifying program eligibilty." As noted on the ITSAP fact.Fuentes, Di-Reb 23
94 TracFone Wireless, Inc.
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3
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6
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10 Q.
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12 A.
13
14
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18
19 A.
20
21
22
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.
sheet available on the Commission's website at
http://www.puc.idaho.gov/CONSUMERIITSAP.PDF, a person who is interested
in receiving Lifeline must apply at a Community Action Partnership ("CAP")
offce or with an Idaho Department of Health and Welfare ("DHW") Regional
Office. If the person is detennined to be eligible, the person's information wil be
forwarded to the person's chosen telephone company. Therefore, a CAP or
DHW, not TracFone, will verify eligibility in Idaho. However, TracFone wil
work with the CAPs and DHW to ensure that only eligible individuals are
accepted into the Lifeline program.
TRACFONE WAS RECENTLY AUDITED BY VSAC. WHAT DID USAC
FIND?
USAC found that TracFone's Lifeline service, including the process it uses to
certify initial eligibility and continued eligibilty for Lifeline service complied
with the FCC's rules.
WHA T DO THE FCC RULES PROVIDE REGARDING HOW ETCS MUST
CERTIFY THE INITIAL ELIGIBILITY OF LIFELINE APPLICANTS WHO
CLAIM THEIR ELIGIBILITY BASED ON PARTICIPATION IN A LOW-
INCOME PROGRAM?
The FCC rules provide that such applicants must certify under penalty of
perjury
that they participate in a program that qualifies them to receive Lifeline benefits.
As USAC found, TracFone complies with the FCC's rules concerning
certification of eligibility. However, in Idaho, and as permitted by the FCC's
Fuentes, Di-Reb 24
TracFone Wireless, Inc.
95
.rules, TracFone wil comply with Idaho's rules governing certification of
2 eligibilty.
3 Q.IS THE FCC CONSIDERIG REVISING THE RULES GOVERNING THE
4 LIFELINE PROGRAM?
5 A.Yes. As Mr. Trampush mentions, the FCC is concerned about waste, fraud and
6 abuse in the Lifeline program. One issue about which the FCC is paricularly
7 concerned is when an individual receives Lifeline service from more than one
8 ETC. This is known as "double dipping" "duplicate enrollment." As I explained
9 earlier, ETCs do not have access to other ETCs' customers lists. Therefore, it is
10 difficult, if not impossible, for any ETC to prevent duplicate enrollment. The
11 FCC has initiated a rulemaking proceeding to address this issue, as well as other
12 issues related to the Lifeline program. The FCC also is actively considering.13 taking interim steps to prevent duplicate enrollment pending completion of the
14 FCC rulemaking proceeding. In recent weeks, TracFone has been an active
15 paricipant in meetings convened by the FCC to develop such an interim solution.
16 If such an interim solution is finalized and adopted while this proceeding is
17 pending, I wil submit a supplement affidavit describing that solution and
18 attaching any FCC documents memorializing the solution.
19 Q.WHILE THE FCC PROCEEDING IS PENDING, SHOULD THE
20 COMMISSION DEFER A DECISION IN THIS CASE?
21 A.No. Any new rules ultimately issued by the FCC in the rulemakng proceeding
22 wil apply to all ETCs. In the meantime, TracFone, as well as all other ETCs, are
23 required to comply with the curent rules The FCC, fully aware that carers are.Fuentes, Di-Reb 25
96 TracFone Wireless, Inc.
.2
3
4
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6
7 Q.
8
9 A.
10
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15 Q.
16
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18
19 A.
20
21
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23
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.
continuing to request ETC designation at the FCC, as well as at state
commissions, has not required that any ETC proceedings be delayed or
suspended. Mr. Trampush's assertion that customers may be confused by
changes in the rules is unfounded and provides no basis for delaying the current
proceeding. Delaying the proceeding will only result in delaying the availabilty
ofTracFone's Lifèline service to eligible low-income Idahoans.
WHY HAS TRACFONE REFUSED TO PROVIDE INFORMATION ABOUT
ITS COST STRUCTURE TO ITA AND CTC?
TracFone's costs and expenses are not relevant to any requirement for designation
as an ETC. So far as TracFone is aware, no other ETC has been required to
provide cost information as part of the ETC designation process in Idaho. In this
regard, I remind Mr. Trampush and others that Section 332(c) of
the federal
Communications Act prohibits states from regulating the rates of commercial
mobile radio service providers.
MR. TRAMPUSH ASSERTS THAT THE COMMISSION SHOULD IMPOSE A
NUMBER OF CONDITIONS AND REPORTING REQUIREMENTS ON
TRACFONE IF IT IS DESIGNATED AS AN ETC. WOULD TRACFONE
AGREE TO THOSE CONDITIONS?
Mr. Trampush proposes that TracFone should be required to make a compliance
fiing for approval by the Commission. The fiing would include TracFone's
Lifeline rate plans, terms and conditions, proposed advertising language, a
Lifeline application form for Idaho, and a certification that TracFone wil comply
with all applicable federal and state statutes and regulations. TracFone does not
97
Fuentes, Di-Reb 26
TracFone Wireless, Inc.
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20
21 A.
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23
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oppose these conditions, with two exceptions. First, Mr. Trampush proposes that
the advertising language should include information directing customers to
contact the Commission or an appropriate Idaho state agency for complaints
regarding any Lifeline service issue. The New Jersey Board of Public Utilties
("New Jersey Board") also required similar language in TracFone's advertising,
but has since asked TracFone to remove the reference to the New Jersey Board in
its advertising. According to the New Jersey Board Staff, they were receiving
numerous calls regarding various Lifeline service issues that had no relation to
complaints, and that responding to these inquiries was straining that Board's
resources. TracFone has no objection to including such language in its Idaho
advertising if the Commission deems it appropriate. However, TracFone cautions
the Commission that the inclusion of language in advertising materials directing
customers to contact the Commission may result in the Commission receiving
numerous calls and burdening Commission resources. Second, TracFone clarifies
that it would be wiling to certify compliance with all applicable laws governing
state fees, once those laws are determined to be applicable to TracFone either in a
separate proceeding or through a final determination made by the appropriate
state agency.
WOULD TRACFONE AGREE TO THE REPORTING REQUIREMENTS
PROPOSED BY MR. TRAMPUSH?
Mr. Trampush proposes several reporting requirements, including that TracFone
fie any future changes to its rates, terms and conditions, at least i 0 days prior to
the effective date of the changes, provide infonnation on its terms, rates, and
98
Fuentes, Di-Reb 27
TracFone Wireless, Inc.
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conditions in the welcome packet sent to Lifeline customers, and post its rates,
terms, and conditions on its website. TracFone would agree to this requirement.
Mr. Trampush also proposes that TracFone apply a non-usage policy in Idaho
whereby TracFone would be required to deactivate a Lifeline customer who has
no usage for 60 consecutive days. TracFone has a non-usage policy in place in all
states in which it otfers Lifeline service and wil also follow that policy in Idaho.
Incidentally, the FCC has proposed in its Lifeline rulemaking proceeding that all
ETCs be required to implement a 60 day non-usage policy, based on TracFone's
current non-usage policy.
ARE THERE ANY OTHER REPORTING REQUIREMENTS PROPOSED BY
MR. TRAMPUSH?
Mr. Trampush also states that TracFone should be required to provide quarterly
reports on the number of Lifeline customers enrolled each month in each of the
plans and the number of customers deactivated and the reason for the
deactivation. TracFone would not oppose this requirement. Although, like the
non-usage policy, the benefits of that proposed reporting requirement are such
that all ETCs should be subject to it.
DOES MR. TRAMPUSH PROPOSE ANY OTHER REQUIREMENTS?
Mr. Trampush asks that TracFone be required to comply with Commission Staffs
requests for information. TracFone wil comply with requests from the
Commission Staff, but wil seek appropriate protections for confidential
information. TracFone wil also work with DHW and the CAPs to verify the
99
Fuentes, Di-Reb 28
TracFone Wireless, Inc.
.eligibilty of all Lifeline applicants and wil advise the Commission of
the
2 verification procedures agreed upon.
3 Q.WOULD TRACFONE BE WILLING TO FILE WITH THE COMMISSION ITS
4 CUSTOMER RECORDS AND A REPORT ON CUSTOMER COMPLAINTS
5 ON AN ANNAL BASIS?
6 A.TracFone would agree to fie customer records so long as they receive
7 confidential treatment. TracFone would need to work with Commission Staf
to
8 agree upon a format and scope of the records to be fied. TracFone would also
9 agree to fie an annual report on customer complaints fied with TracFone, the
10 Commission and the FCC.
11 Q.WOULD TRACFONE BE WILLING TO PROVIDE A COPY OF ITS
12 ANNAL LIFELINE VERIFICATION SURVEY RESULTS THAT IT FILES.13 WITH USAC EACH YEAR?
14 A.Yes. Indeed, there is merit to many of Mr. Trampush's reporting requirement
15 proposals. Since that information would be invaluable to the Commission's
16 efforts to effectively monitor the performance of TracFone as an ETC as well as
17 the operation of the Lifeline program in Idaho, I respectfully suggest that those
18 reporting requirements be made applicable to all ETCs providing Lifeline service
19 in Idaho.
20 Q.SHOULD THE COMMISSION BE ABLE TO REVOKE TRACFONE'S ETC
21 DE SIGNA TION IF TRACFONE FAILS TO COMPLY WITH ANY OF THE
22 CONDITIONS OR REPORTING REQUIREMENT PROPOSED BY MR.
23 TRAMPUSH?.Fuentes, Di-Reb 29
100 TracFone Wireless, Inc.
1 A.TracFone understands that the Commission has the right to revoke an ETC.2 designation for violation of applicable legal requirements. However, TracFone,
3 like any other ETC, should provided with notice and afforded an opportunity to
4 be heard and present evidence as to why its designation should not be revoked in
5 the event that the Commission determines that revocation may be necessar.
6 Q.is THERE ANYTHING ELSE YOU WOULD LIKE TO ADD TO YOUR
7 TESTIMONY?
8 A.Based on my testimony above, i would like to reiterate that TracFone meets all
9 legal requirements for designation as an ETC and that designation of TracFone as
10 an ETC for the limited purpose of providing Lifeline service to low-income Idaho
1 i households will serve the public interest. Accordingly, the Idaho Public Utilties
12 Commission should unconditionally and promptly grant TracFone's ETC.13 Application so that TracFone may commence providing its SafeLink Wireless4Î
14 service to low-income Idaho households at the earliest possible time. TracFone
15 looks forward to soon bringing this important Congressionally-mandated
16 telecommunications benefit to low-income Idaho households as it already is doing
17 in 33 other States.
18 Q.DOES THIS CONCLUDE YOUR REBUTTAL TESTIMONY?
19 A.Yes, it does.
.101
Fuentes, Di-Reb 30
TracFone Wireless, Inc.
.
.
1 (The following proceedings were had in
2 open hearing.)
3 COMMISSIONER SMITH: And you may ask for
4 admission of the exhibits at the end; or if I forget to do
5 that, by operation of our Rules, they are admitted.
6 MR. BRECHER: That's good to know, because on
7 more than one occasion I've forgotten.
8 COMMISSIONER SMITH: We have a safety net there
9 if somebody forgets. Then by operation of our Rules, the
10 exhibits are automatically admitted at the close of the
11 hearing.
12 MR. BRECHER: Thank you, Chairman Smith.
13 Mr. Fuentes is available for cross-examination.
14 COMMISSIONER SMITH: Thank you.
15 Mr. Price.
16 MR. PRICE: Thank you, Chairman Smith.
17
18 CROSS-EXAMINATION
19
20 BY MR. PRICE:
21
22
23
Q.Good morning, Mr. Fuentes.
A.Good morning, Mr. Price.
Q.To start off, I would refer you to page 6 of your
24 rebuttal testimony, speaking of lines 9 through 12. And in.25 this passage, you make the assertion that the Commission could
102
HEDRICK COURT REPORTING
P. O. BOX 578, BOISE, ID 83701
FUENTES (X)
TracFone
.
.
20
1 ask the Idaho Emergency Communications Commission to submit a
2 letter as to whether or not the E911 fee is applicable to
3 TracFone. Correct?
4 A. That is correct.
5 Q. And have you had an opportunity to review all of
6 the comments that were issued in this case?
7 A.Yes.
8 Q.And would that include the comment filed by
9 Mayor Garret Nancolas, chair of the Idaho Emergency
10 Communications Commission?
11 A.No, not that one.
12 Q.Okay. So then you are not aware that he did
13 express an opinion to that matter?
14 A. No, I am not aware.
15 Q. I would refer you to the testimony of Staffperson
16 Grace Seaman. Do you have that in front of you?
1 7 A. I do not.
18 MR. BRECHER: If you would give me a moment, I
19 can provide him with a copy.
MR. PRICE: Okay. I would refer the
21 Commissioners there as well.
22 Q.BY MR. PRICE: Do you have that in front of you
23 now?
24.25
A.I do, if you can cite the --
Q.If you turn, the very last page or second to last
103
HEDRICK COURT REPORTING
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FUENTES (X)
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.
1 page of her testimony.
2 COMMISSIONER SMITH: That would be page 16?
3 Q.BY MR. PRICE: It's actually following the
4 prepared testimony and it's used as an attachment. It's a
5 letter with the letterhead Idaho Emergency Communications
6 Commission.
7 A.Yes.
8 Q.Addressed to the Commissioners.
9 COMMISSIONER SMITH: That would be Exhibit 102.
10 MR. PRICE: Okay, I'm sorry, referred to as
11 Exhibit 102. Thank you.
12 Q.BY MR. PRICE: And could you please read in that
13 first paragraph the last full sentence?
14 A.First paragraph, last full sentence.
15 Q.I'm sorry, the last two sentences.
16 A.On the first paragraph.
17 Q.On the first paragraph.
18 A.Last two sentences:
19 Further, it is the IECC's position that
20 TracFone' s failure to do so is in violation of the Idaho
21 Emergency Communications Act, Idaho Code Section 31-4801,
22 et sequi ter.
23 Q.Okay. So, you know, I understand that TracFone
24 disputes this matter, but that does, in fact, represent a.25 communication from the chairperson for the Idaho Emergency
104
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FUENTES (X)
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1 Communications Commission as to the matter of whether the E911
2 fees are applicable to TracFone. Correct?
3 A.On that first paragraph, yes, it would.
4 Q.Okay. All right. Well, I'd also refer you to
5 page 21 of your rebuttal testimony. And in your testimony, I'm
6 speaking of lines 15 and 16, the sentence there that begins
7 with "TracFone," you make the statement that TracFone has been
8 operating in Idaho for more than 12 years. Correct?
9 A.Correct.
10 Q.And during that time, TracFone has not
11 contributed any funds to the E911 fund. Correct?
12 A.Not that I'm aware of.
13 Q.Nor to the ITSAP fund. Correct?
14 A.Not that I'm aware of.
15 Q.And one of the -- one of the justifications that
16 TracFone uses for why it shouldn't have to contribute to
17 this -- these funds is that it doesn't render a traditional
18 end-of-the-month bill to its -- to the end user. Correct?
19 A.Correct. But if you're getting into specifics
20 about the fund and how things are managed, I'm not the
21 appropriate person
22 MR. BRECHER: Let me address that. I was going
23 to object but I didn't because it was a very limited question.
24.25
COMMISSIONER SMITH: Is your mic on? Thank you.
MR. BRECHER: It's just touch.
105
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FUENTES (X)
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1 Mr. Fuentes, neither his direct testimony nor his
2 rebuttal testimony addresses the legal issues surrounding the
3 applicability of the 911 surcharge or for that matter the ITSAP
4 charge. The Company has articulated a legal position in its
5 filings; it is prepared to further articulate those in
6 memoranda or law or briefs. Mr. Fuentes' responsibilities do
7 not include making legal determinations as to the applicability
8 of taxes and fees, and he is not competent to address those.
9 We can address those as a matter of law using the appropriate
10 process.
11 COMMISSIONER SMITH: Mr. Price.
12 MR. PRICE: I wasn't asking Mr. Fuentes to make
13 ita legal conclusion. I understand that that's beyond his
14 expertise. However, I do think that we have the leeway to ask
15 him whether or not he's aware that the Company contributes to
16 those funds in Idaho, as a representative for the Company.
17 MR. BRECHER: Fair enough. I have no objection
18 to that.
19 COMMISSIONER SMITH: I will allow the question.
20 MR. PRICE: Okay. Should I restate the question?
21 I think it stands on its own. He did answer it previously, so
22 I'll go ahead and move on.
23 Q.BY MR. PRICE: So, is it your understanding that
24 the Company does have a mechanism in place to track the usage
25 rate of its individual customers? Correct?
106
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1 A. "Its usage rate" meaning how many minutes are
2 deducted from the phone?
3 Q.Correct.
4 A.Yes, we can see our customers, if they were to
5 contact us with an issue, how many minutes was last recorded
6 that we could see on their time tank, as we call it.
7 Q.Okay. So the Company does track service periods,
8 end dates, and deactivation times. Correct?
9 A.Yes.
10 Q.And that was the finding that was reached by the
11 Washington Supreme Court.
12 MR. PRICE: I do have an exhibit that I would
13 like to present if I had permission to approach the witness.
14 COMMISSIONER SMITH: You do.
15 MR. BRECHER: Again, I'm going to renew my
16 objection. I have no problem whatsoever with administrative
17 law Decisions or judicial Decisions being introduced into the
18 record; they're public documents. I -- Mr. Fuentes is not
19 competent to interpret, construe, or explain those Decisions.
20
21
MR. PRICE: And I will not ask him to do that.
COMMISSIONER SMITH: Thank you, Mr. Price. This
22 will be 103.
23
24.25
MR. PRICE: Yes.
COMMISSIONER SMITH: We will mark this as
Exhibit 103.
107
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20
21
1 (Staff Exhibit No. 103 was marked for
2 identification. )
3 Q.BY MR. PRICE: With the previous admonition, I
4 won't ask you to render a legal conclusion regarding this
5 Decision. However, I would refer you to the last full page of
6 the Decision rendered by the Washington State Supreme Court and
7 I'm speaking of the document in front of you, TracFone
8 Wireless, Incorporated, versus Washington Department of
9 Revenue, argued on November 10, 2010, and decided October 28,
10 2010.
11 COMMISSIONER SMITH: Page number, Mr. Price.
12 MR. PRICE: That would be page 18.
13 COMMISSIONER SMITH: Well, my pagination has two
14 numbers: One at the top
15 MR. PRICE: I'm sorry, page 18 of the original
16 page number.
17 COMMISSIONER SMITH: Which would be 19 of 19?
18 MR. PRICE: Nineteen of 19. I omitted the
19 Westlaw page.
COMMISSIONER SMITH: Thank you.
Q.BY MR. PRICE: I apologize. I marked it on my
22 original one and I made copies and I am sorry. It is on
23 page 16. That would be 17 of 19. And then the section on the
24 left-hand side below Conclusion, starting with the word.25 "because," could you read that sentence?
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1 A. Because TracFone knows the service periods, end
2 dates, and deactivation times for the radio access lines wi thin
3 its prepaid services, it can calculate the amount of tax due
4 wi thout any problem with uniformity. Moreover, regardless of
5 claim difficulties in collecting the tax from the use
6 subscribers, the tax may lawfully be assessed with payment made
7 by TracFone.
8 Q.That's enough right there. So, TracFone has made
9 it a practice or a custom to dispute whether or not these E911
10 fees are applicable in multiple states throughout the United
11 States. Correct?
12 A. Where the law has been vaguely defined or does
13 not include prepaid as wi thin the law, we do not pay.
14 Q.And is TracFone currently contributing to the
15 E911 fund in Washington, at this moment?
16 A.I can't tell you "yes" or "no." I don't know the
17 answer to that question.
18 Q.And TracFone has made similar arguments to the
19 one it made before the Washington State Supreme Court in other
20 states, including Ohio, Maine, California, Colorado, and
21 Kentucky?
22 A.Ohio; we did propose an argument in Maine; it's
23 currently under review by the Maryland Public Service
24 Commission, I believe. One more state.
25 MR. BRECHER: I'm going to reiterate my objection
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1 that this witness is not responsible for the Company's
2 decisions whether and when to challenge state tax laws.
3 That said, to move things along, I am prepared to
4 stipulate that TracFone has contested the applicability of
5 certain 911 tax laws in a number of jurisdictions, including
6 several which Mr. Price mentioned, if that helps.
7 MR. PRICE: Okay, that's enough for me.
8 COMMISSIONER SMITH: Okay. Thank you.
9 MR. PRICE: That Stipulation is sufficient.
10 We'll move on then.
11 Q.BY MR. PRICE: In your testimony in Response to
12 Staff's Production Request, you have stated that TracFone will
13 seek to provide service to residents of homeless shelters.
14 Correct?
15 A.Correct.
16 Q.And this business plan would normally violate the
17 FCC's one household policy. Correct?
18 A.Correct.
19 MR. BRECHER: Objection: A, it calls for a legal
20 conclusion; B, I think it's an inaccurately-worded question. I
21 don't think the determination has been made by the FCC.
22 Q.BY MR. PRICE: Okay. Well, I guess we can refer
23 to the Response that the Company made to Staff's Second
24 Production Request. Do you have that in front of you?.25 A.Just a minute. Let me check my notes here. Not
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1 wi th this testimony, but hold on.
2 Q. It's the Response regarding Staff's Production
3 Request dealing with service provided to shelter -- in a
4 shel ter program.
5 MS.O'LEARY:Thirty-three.
MR.PRICE:Thirty-three.
MR.BRECHER:Do you have the number of the page?
MS.MELILLO:Third page of the document.
MR.BRECHER:Thirty-one.
MR.PRICE:Have you been able to locate that
6
7
8
9
10
11 yet?
12 MR. MILLER: Jose.
13 MR. BRECHER: My copy only goes to 31.
14 COMMISSIONER SMITH: Let's be at ease.
15 (Discussion off the record.)
16 COMMISSIONER SMITH: All right, let's go back on
17 the record.
18 Q.BY MR. PRICE: Okay, so in that
19 COMMISSIONER SMITH: Mr. Price, would you please
20 identify what you're having the witness look at?
21 MR. PRICE: Okay. I have directed the witness to
22 review the Response to Staff Production Request No. 33.
23 Q.BY MR. PRICE: And that Response was issued by
24 you, Mr. Fuentes. Correct?.25 A.Uh-huh. Correct.
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1 Q. And in that, you describe certain negotiations
2 that have been undertaken with the FCC regarding the shelter
3 program. Correct?
4 A. Correct.
5 Q. And that those negotiations were imperative,
6 because if not, the FCC and TracFone was concerned that there
7 would be a violation of the one household policy?
8 A.Correct. However, we -- when it comes to
9 shel ters, we do not advertise. And that's something that we
10 discussed with the FCC. We do not advertise that we are
11 providing services to shelters. The shelters have to be aware
12 of it and they contact us, and there's a series of processes
13 that are in place before a shelter can even begin to receive
14 phone service. There is a protocol. There are documentation
15 materials that they need to provide before that even starts.
16 Q.Okay. So the Company finds a shelter
17 representati ve is what was referred to in your Response.
18 Correct?
19 A.Finds a shelter representative, but the
20 shel ter -- in this case, the representative of the shelter
21 would contact us, and that would begin the series of procedures
22 that we would have to put in place.
23 Q.And that individual, this shelter representative,
24. is responsible for helping to enroll shelter residents?
25 A.The shelter in the end is responsible for the
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1 phones and the service that is being provided, and they have to
2 ensure that the phone is -- from my understanding is the phone
3 is designated to a bed or room in this case, whichever it may
4 be, and that during that period of time, that phone is active.
5 And the shelter must inform us when that -- there's no occupant
6 in that area, and then that phone is deactivated.
7 Q.Okay. And you would agree that residents of
8 homeless shelters are, by nature, transitory. Correct?
9 A.Yes.
10 Q.Doesn't that situation seem ripe for duplication
11 of claims?
12 A.Absolutely not, because what we're doing is the
13 shel ter would notify us and they're immediately deactivated
14 from the service.
15 There are very strict guidelines and procedures
16 that have been in place, and this has been in consultation with
17 the FCC. And nor would we even remotely allow a phone to be
18 active if it's not being used and there's no name associated
19 wi th that phone.
20 Q.But you're relying upon this shelter
21 representative to come in contact with you after the fact,
22 after these persons have moved on to wherever they're going,
23 because obviously this is a temporary situation for them;
24 you're relying upon that shelter representative to contact the.25 Company and let them know that they're no longer living there.
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1 Correct?
2 A.Of course. But, I mean, they have made great
3 pains to contract us. And believe me, the process to sign up
4 for the service is not easy, it's not a blanket window that
5 they just walk in through and we just hand them phones. They
6 have to go through a very strict process, and there have been
7 shel ters that have walked away from willing to abide by the
8 rules.
9 Q.All right. We'll move on to --
10 Oh, I'm sorry, can we get our binder back?
11 A.Is this your binder?
12 Q.Yeah. Let's proceed to pages 28 through 29 of
13 your testimony.
14 MR. BRECHER: Direct or rebuttal?
15 Q.BY MR. PRICE: Your rebuttal testimony.
16 And that incomplete sentence on page 28 of your
17 direct rebuttal testimony beginning with "TracFone" states that
18 you will work with the Department of Health and Welfare
19 acronym DHW -- and CAPs -- Community Action agencies -- during
20 the Lifeline enrollment process. Correct?
21
22
A.That is correct.
Q.And do you have the names of any individual
23 contacts of those agencies in Idaho?
24.25
A.Not yet.
Q.Can you describe a process or procedure for
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1 working with Department of Health and Welfare or the CAP
2 agencies in Idaho?
3 A.I would assume that if they have a database, our
4 operations team would get in contact with their IT person or
5 operations to find out how they would like the information to
6 flow. Once that's done, we would probably do a test run to
7 make sure that the system's working fine. And that's pretty
8 much it. I mean, it's pretty self-explanatory.
9 Q. Have you personally spoken with anybody from the
10 Idaho Department of Health and Welfare or an Idaho CAP
11 agency?
12 A.No, I have not.
13 Q.Next, I would go to page 11 of your rebuttal
14 testimony, lines 4 through 6. And in that sentence beginning
15 with "therefore," you make an assertion that it's virtually
16 impossible for the Company TracFone -- to verify the end
17 users are not receiving Lifeline service from another provider.
18 Correct?
19 A.Correct.
20 MR. BRECHER: Just to clarify the question, the
21 words "virtually impossible" do not appear in that statement.
22 Isn't that correct, Counsel? I believe it says there's "no
23 way. "
24.25
MR. PRICE: I wasn't aware that I was under
examination, but they don't appear. That is my phrasing of the
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1 question.
2 COMMISSIONER SMITH: I think it would be more
3 clear if you would use the witness's exact quotation.
4 Q.BY MR. PRICE: Could I have you read then that
5 sentence beginning with "therefore" and ending with
6 "provider"?
7 A.Therefore, at this time, there is no way for
8 TracFone or any other ETC to ensure that an applicant or
9 customer is not receiving Lifeline benefits from another
10 service.
11 Q.So, essentially, TracFone claims that duplicate
12 entries or duplicate enrollments cannot be eliminated?
13 A.Under the current system, no, because, I mean, no
14 ETC is going to call another ETC to ask them, Hey, is this
15 person on your rolls?
16 And the best way to solve that is if a database
17 by a third party or state entity or federal entity or whatever
18 maintains that list. Would we be more than happy each month or
19 on a quarterly basis provide our subscriber data as well as
20 every other ETC to check for duplication? Sure, as long as
21 it's right up all across the board, every ETC has to do the
22 very same thing. We have no issues with that.
23 We take double-dipping very seriously. We do
24 everything possible that we can on our end to eliminate
25 double-dipping. We have verification systems set up in place
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1 to make sure within our own systems that a customer cannot use
2 that residence more than once. Or if that customer moved, we
3 do verification, we check, because sometimes there's been
4 si tuations where a person moves out of an apartment or a new
5 person comes in and that person is receiving Lifeline benefits
6 from that, and we go through a very painstaking process to make
7 sure that the customer moved or the customer was deactivated
8 from the program and a new customer is in and does live at that
9 new address.
10 Q.However, it's your own statement in your
11 testimony that there is, quote, no way for TracFone or any
12 other ETC to ensure that an Applicant or customer is not
13 recei ving Lifeline benefits from another service provider.
14 Correct?
15 A.The way that the system is set up at this time,
16 yes.
17 Q.Okay. And are you aware of the most recent audit
18 from USAC in the state of Florida regarding duplicate claims?
19 A.Yes.
20 Q.And what is the approximate percentage of
21 duplicate claims in Florida?
22 A.That, I don't recall the exact percentage. It
23 might be somewhere in the 40 s, I'm not sure.
24.25
Q.All right. Well, as I mentioned earlier,
TracFone has been involved in this sort of litigation regarding
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18
1 E911 fees in various other states, and you responded that you
2 were aware that in the state of Maine that was a disputed
3 issue. Correct?
4 A.Yes. That was delinked from ETC's designation
5 and it went through its own process.
6 Q.And that's referenced in page 4 of your rebuttal
7 testimony?
8 A.Correct.
9 Q.You propose an approach wherein the proceeding
10 would be bifurcated -- in other words, that there would be a
11 separate rulemaking proceeding -- as to whether TracFone would
12 have to contribute to an E911 fund?
13 A.That is correct.
14 Q.You support that approach in Idaho?
15 A.Absolutely.
16 Q.What was the outcome of that case in Maine?
17 A.It hasn't been decided yet, to my knowledge.
Q.So while that's under dispute, the Company is not
19 currently contributing to that fund?
20
21
22
23
24
. 25
A.That is correct.
MR. PRICE: That's all I have.
COMMISSIONER SMITH: Thank you, Mr. Price.
Ms. 0' Leary.
MS. 0' LEARY: Thank you.
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1 CROSS-EXAMINATION
2
3 BY MS. 0' LEARY:
4 Q.Mr. Fuentes, I do have a few questions to ask you
5 today. In TracFone' s Amended Application, it provided a copy
6 of what has been commonly referred to as the Forbearance Order
7 as Exhibit 4. Do you have a copy of that exhibit with you?
8 A. I believe I do.
9 MR. BRECHER: Make sure you give it back.
10 THE WITNESS: Was it Exhibit 4?
11 Q.BY MS. 0' LEARY: Exhibit 4, your Application.
12 MR. BRECHER: No, no, it was September 8,
13 Forbearance Order.
14 COMMISSIONER SMITH: Okay, we'll be at ease for a
15 minute.
16 (Discussion off the record.)
17 COMMISSIONER SMITH: Okay, so just so the record
18 is clear, this is not Exhibit 4 to the witness's direct
19 testimony. This is Exhibit 4 to the Amended Application which
20 was filed with the Commission on March 1, 2010. All right.
21
22
23
MS. O'LEARY: Yes, thank you.
COMMISSIONER SMITH: Thank you.
Q.BY MS. 0' LEARY: Mr. Fuentes, would you please
24 turn to page 10 and read the first sentence that begins at the.25 bottom of page 10 and continues at the top of page 11, just
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19
1 that first sentence?
2 A. You're referring to line 23.Correct?
3 Q.On Paragraph 23, yes.
4 A.I'm sorry, Paragraph 23.
5 Q.Yes.
6 A.Public interest. Section 10 (a) (3) requires that
7 we consider whether enforcement of the facilities-based
8 requirement of Section 24 -- 214 (e) for a pure wireless
9 reseller that seeks ETC designation for Lifeline support only
10 is in the public interest. In this instance, based on the --
11 Q.Yes, go ahead. I was going to ask you to read
12 that next sentence, so please continue with that next sentence.
13 A.Okay. In this instance, based on the record
14 before us, we find that the statutory goal of providing
15 telecommunications access to low-income consumers outweighs the
16 requirement that TracFone own facilities, where TracFone,
17 should it be designated an ETC, will be eligible only for
18 Lifeline support.
Q.Okay. Thank you. So according to the language
20 you just read, Mr. Fuentes, the FCC expressly limited its
21 Forbearance Order to the record before it. Is that correct?
22
23
A.Correct.
Q.Thank you. Mr. Fuentes, at page 14 of your
24 direct testimony, you state that it is your belief -- I'm going.25 to get there while you're getting there.
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1 MR. BRECHER: Are you going to ask him more
2 questions about that Order or can I retrieve my book?
3 MS. O'LEARY: Right now you can retrieve your
4 book, but I couldn't guarantee you that --
5 MR. BRECHER: You'll ask some more?
6 Q.BY MS. 0' LEARY: Okay, page 14 -- I had to get
7 there myself, sorry. At the top of page 14 of your direct
8 testimony, beginning with line 1, you state well, would you
9 read that first sentence? Your answer there would be lines 1
10 through 5 at the top of page 14 of your direct testimony,
11 A.Forgi ve me, I was looking at my rebuttal.
12 Lines 1 through 5?
13 Q.Yes.
14 A.Okay:
15 Yes. I understand that all State Commissions,
16 including this Commission, are required to comply with the
17 FCC's Decision to forbear from applying or enforcing the
18 facili ties requirement on TracFone. Accordingly, the
19 FCC-imposed conditions of forbearance are binding on TracFone
20 in all jurisdictions where it may be designated as an ETC.
21 Q.Thank you. I think if I understood your earlier
22 responses to Mr. Price's cross-examination and Mr. Brecher's
23 objections to some of that line of questioning, that you are
24 not an attorney?.25 A.That is correct, I am not.
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20
21
1 Q. You are not. So then you are not qualified to
2 render a legal opinion on the question of whether this
3 Commission is required to comply with the FCC's Forbearance
4 Order. Is that correct?
5 A.To a certain degree, but 36 jurisdictions have
6 approved us as an ETC and the forbearance issue has not been
7 Q.I'm sorry, I asked you are you qualified to
8 render a legal opinion
9 A.No, I am not.
10 Q.-- before this Commission?
11 A.No, I am not.
12 Q.Thank you. Mr. Fuentes, are you aware of any
13 state in which TracFone has applied for ETC designation that
14 did not agree with your position that all State Commissions are
15 required to comply with the Forbearance Order?
16 A.Yes.
17 Q.And what state did not agree with that
18 conclusion?
19 A.Oklahoma.
Q.Thank you. Mr. Fuentes --
MS. 0' LEARY: I'm sorry, Mr. Brecher, I am going
22 to ask for the Forbearance Order again.
23
24.25
MR. BRECHER: All right.
COMMISSIONER SMITH: And that would be Exhibit 4
to the Application.
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20
i THE WITNESS: Thank you.
2 MS. O'LEARY: Yes, Exhibit 4 to the Application.
3 MR. MILLER: The Amended Application.
4 COMMISSIONER SMITH: Oh, sorry. Thank you. The
5 Amended.
6 MS. 0' LEARY: Actually, Madam Chair, if I may, I
7 would like to introduce an exhibit in relation to the question
8 I just asked Mr. Fuentes about the Oklahoma Commission.
9 COMMISSIONER SMITH: Sure. Oh, that brings up
10 your exhibit numbers, which I notice that the Commission did
11 not issue a Notice of Parties, so your numbers will be in the
12 200 series. So your prefiled would be 201 to 206, and this
13 would be 207.
14 MR. PRICE: I will state on the record that that
15 is my fault.
16 COMMISSIONER SMITH: Not necessary, but happy
17 when people take responsibility.
18 MS. O'LEARY: If I may?
19 COMMISSIONER SMITH: You may.
MS. 0' LEARY: I don't need to approach the
21 witness because he says he's familiar with this, but I did
22 bring copies for the parties that are here and for the
23 Commission Staff. And as was just noted by Commissioner
24 Smith -- I'm sorry this will be marked as Exhibit 207..25 I don't have any further questions -- I have one
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22
1 for you; I'll be right back.
2 I do not have any further questions at this time,
3 but I did want you to have that in your possession.
4 (Intervenors' Exhibit No. 207 was marked
5 for identification.)
6 Q.BY MS. 0' LEARY: Now I am ready to move on to
7 Exhibi t 4 once again to TracFone' s Amended Application. And
8 you do have that in your hand. Is that correct?
9 A.That is correct.
10 Q.Okay. I am going to ask you to turn to page 9
11 and Paragraph 18, and if you'll just take a moment to
12 familiarize yourself. I'm sure you've read this a hundred
13 times, but just to make sure we' re literally all on the same
14 page if you'll just take a moment to look at that.
15 A.Okay.
16 Q.Is it your understanding from having read this
17 numerous times and just reviewing that paragraph there that the
18 FCC requires TracFone to require its customers to self-certify
19 under penalty of perjury that they are the head of household
20 and only receive Lifeline-supported service from TracFone?
21 A.Yes.
Q.Okay. Do you -- did you prepare TracFone' s
23 Response to -- this is where we're going to get into is he the
24 right witness for the Discovery Responses, Madam Chair..25 Did you prepare TracFone' s response to the ITA
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19
1 and CTC Telecom -- hereafter, we're going to call ourselves the
2 "Intervenors" -- First Joint Production Request No. 26?
3 A.I did not prepare it, but I was part of the
4 overseeing.
5 Q.I'm sorry?
6 A.I didn't prepare it mysel f, but I am aware of it,
7 I did oversee the production of it.
8 Q.So are you the proper witness to respond to
9 questions regarding ITA and CTC' s Discovery Requests and your
10 Response -- TracFone' s Responses to those Requests?
11 A.Yeah, for the most part.
12 Q.Okay. Well, we'll just struggle along as we go
13 here.
14 MR. BRECHER: What was the date of those
15 Responses?
16 MS. O'LEARY: Oh, heavens, Mitch -- I mean Rick.
17 March 4? March 11th?
18 MS. MELILLO: Yeah, it was March 11th.
MS. O'LEARY: If you'll bear with me, I'm going
20 to get there.
21
22
23
MR. PRICE: It's date-stamped March 17th.
MR. BRECHER: I have it.
Q.BY MS. O'LEARY: Do you have a copy of that in
24 front of you, Mr. Fuentes?.25 A.No, I'm trying to find it right now.
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20
21
22
23
24.25
1 MR.BRECHER:Do you have a particular question
you're asking him about?
MS.0' LEARY:Number 26.
MR.BRECHER:I'm sorry.Here you go.
THE WITNESS:This is marked "confidential. "
2
3
4
5
6 Q.BY MS. O'LEARY: You've had a chance to look at
7 that, Mr. Fuentes?
8 A.Yes. Yeah, it is confidential.
9 MR. BRECHER: This is asking about a confidential
10 Response.
11 COMMISSIONER SMITH: So, Ms. O'Leary, will your
12 question require the disclosure of confidential information?
13 MS. O'LEARY: Yes.
14 COMMISSIONER SMITH: Anyone who has not signed a
15 Confidentiali ty Agreement should vacate the room. We'll be at
16 ease while they do that.
17 (Whereupon, persons who had not signed a
18 Confidentiality Agreement were directed to leave the room.)
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2 separate cover at the Commission.)
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4
5
6
7
8
9
10
11
12.13
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24.25
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2 separate cover at the Commission.)
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1 (The following proceedings were had in
2 open hearing, and persons previously directed to leave the
3 hearing room were allowed back in.)
4 COMMISSIONER SMITH: All right, please proceed.
5 MS. 0' LEARY: We're ready to continue here?
6 COMMISSIONER SMITH: Yes, we are. Thank you.
7 Q.BY MS. 0' LEARY: Mr. Fuentes, did you prepare
8 TracFone' s Response to Intervenors' First Joint Production
9 Request No. 31?
10 A.This question is relating to how many TracFone
11 customers have been prosecuted for providing Lifeline service?
12 Q.That is the question.
13 A.I just wanted to clarify. Yes.
14 Q.You did prepare or supervise that?
15 A.Yes.
16 Q.And how many -- can you read the question and
17 TracFone' s Response?
18 A.Please identify how many TracFone customers have
19 been prosecuted for providing false information on a Lifeline
20 enrollment form since TracFone began offering
21 Lifeline-subsidized cell phone service. For each such
22 customer, please identify: A, in what state the customer
23 resided at the time of their enrollment; B, what the nature of
24 their perjury was; C, by whom they were prosecuted; and, D,.25 what penal ties were imposed.
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1 Q.And TracFone' s Response?
2 A.TracFone is not aware of any customers who have
3 been prosecuted for providing false information on the Lifeline
4 enrollment form.
5 But if you allow me to expand, it's not for lack
6 of trying. We don't
7 Q. No, I don't need you to.
8 A. We've tried.
9 Q.I just simply wanted to know how many. Okay,
10 next question, if I may:
11 Mr. Fuentes, what percentage, on average, of
12 TracFone' s customers have been determined to be ineligible for
13 Lifeline-supported service after they have been enrolled?
14 A.What question is that? I'm sorry, are you
15 reading off of still?
16 Q.I am not looking at discovery. I am asking you a
17 question now
18 A.Of how many?
19 Q.in follow-up. i will repeat the question:
20 What percentage, on average, of TracFone' s
21 customers have been determined to be ineligible for
22 Lifeline-supported service after they have been enrolled?
23
24.25
A.That's --
MR. BRECHER: And I'm going to direct the witness
only to answer the question if he knows the answer, and not to
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1 guess.
2 THE WITNESS: No, I don't know.
3 Q.BY MS. 0' LEARY: Thank you.
4 MS. 0' LEARY: If I may, I would like to approach
5 the witness with an exhibit. Thank you. And if I'm keeping
6 track of numbers correctly, this will be marked as Exhibit 208.
7 I may have done my math right and had the right number. Again,
8 this is Intervenors' Exhibit 208.
9 (Intervenors' Exhibit No. 208 was marked
10 for identification.)
11 Q.BY MS. 0' LEARY: Mr. Fuentes, would you please
12 read the first three sentences of Section 1?
13 Well, before I ask you that, I'm going to
14 establish for the record what it is I've just handed the
15 wi tness. This is a Decision from the Commonwealth of
16 Massachusetts Department of Telecommunications and Cable, dated
17 October 19, 2010, and the case number on this document is
18 DTC 10-6. And it is labeled an Order. It says TracFone
19 Wireless, Inc., Annual Verification of SafeLink Wireless
20 Lifeline subscribers.
21 A.I am very familiar with it. However, you didn't
22 provide me with a copy.
23
24.25
Q.Oh, I'm sorry.
A.I have a copy with me if you ran out.
Q.We will give you your very own copy.
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1 A.That ruling seems to follow me.
2 Q.Especially if I'm asking you to read, I think it
3 would be nice of me to give you a copy.
4 COMMISSIONER SMITH: Could we go at ease for a
5 minute.
6 (Discussion off the record.)
7 COMMISSIONER SMITH: We will go back on the
8 record.
9 MS. 0' LEARY: We are back on the record. Again,
10 I am -- I've handed the witness Intervenors' Exhibit 208. It
11 is an Order from the Commonwealth of Massachusetts Department
12 of Telecommunications and Cable, dated October 19, 2010.
13 MR. BRECHER: Just to correct the record, it's a
14 part of an Order. Is that correct?
15 MS. O'LEARY: It is. We're missing page 4, I'm
16 sorry, page 4, which will be provided to the Commission at the
17 soonest available moment.
18 Q.BY MS. O'LEARY: I am going to ask the witness to
19 turn to page 2 of this Order and read the first three sentences
20 of Section 1 on page 2. It begins "The audit report."
21 A.The audit report indicates that TracFone verified
22 140, or 57 percent, of the subscribers in the sample. Audit
23 report at Attachment 1. The remaining 104 subscribers, or 43
24 percent, of the sample were ineligible. The Department finds.25 that while the audit results have improved slightly since last
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1 year, the rate of ineligible subscribers remains unacceptably
2 high, again raising the issues of probability -- I'm sorry,
3 issues of possibly significant numbers of customers
4 fraudulently obtaining Lifeline service.
5 Q.Thank you. Mr. Fuentes, does TracFone have a
6 procedure for reporting suspected perj ured applications or
7 eligibility certifications for prosecution, a process for
8 reporting suspected perj ury?
9 A.Reporting to whom?
10 Q.To the authorities that are responsible for
11 prosecuting any perjured statements.
12 A.That I'm aware of -- and we've tried -- there is
13 no state or federal entity that has a Lifeline police, and
14 we've been told this repeatedly.
15 Q.Excuse me. I'm sorry?
16 A.We've been told repeatedly by state authorities
17 that it's not their responsibility to prosecute, that it's a
18 federal matter. And the federal government has not indicated
19 at all who to go to. There's no Lifeline police out there.
20 And we've tried to prosecute. We've had
21 instances, and all that we're able to do on our end is
22 deactivate the person from service and they will never receive
23 service from us. That is all that we can do. And until a
24 state entity or federal government agency is willing to.25 prosecute, we cannot do a single thing, because we have tried.
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1 Q.Thank you. Mr. Fuentes, I would like to ask you
2 if your -- is it your testimony that TracFone' s Amended
3 Application meets all of the requirements set forth in this
4 Commission's Idaho ETC Requirements Order, which is Order No.
5 29841?
6 A.Yes.
7 Q.Are you familiar with that Order?
8 A.I have to read it in front of me, but vaguely.
9 MS. O'LEARY: May I approach the witness?
10 COMMISSIONER SMITH: You may.
11 MS. 0' LEARY: This will be marked as Intervenors'
12 Exhibit 209 for the record.
13 (Intervenors' Exhibit No. 209 was marked
14 for identification.)
15 Q.BY MS. 0' LEARY: Have you had a chance to look
16 that over?
17 A.Yes.
18 Q.Okay. Mr. Fuentes, is TracFone requesting
19 designation as an ETC in any portion of Idaho that includes
20 tribal lands?
21 A.Not off of the top of my head do I remember. I
22 believe that we are in all areas, in all areas that our
23 carriers have coverage area.
24.25
Q.So there are tribal lands wi thin the area that
you are requesting ETC designation for?
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1 A.I would assume.
2 Q.Okay, thank you. Mr. Fuentes, would you please
3 turn to the appendix of this Order that I just handed to you
4 which--
5 I'm sorry. Exhibi t 209, for the record, is a
6 copy of this Commission's Order 29841 in which the Commission
7 sets forth what is known as the Idaho ETC requirements for
8 designation.
9 Do you have the appendix handy, Mr. Fuentes?
10 A.I have it in front of me, yes.
11 Q.Okay. Could you please look on page 2 of that
12 appendix?
13 A.Yes.
14 Q.And could you look at the top of the page where
15 it lists Item 5, and that's in category Subsection A. At the
16 top of the page, it's just marked "5" and starts Tribal
17 Notification?
18 A.Yes.
19 Q.Could you read that for me, please?
A.An ETC applicant seeking ETC designation for any
21 part of tribal lands shall provide a copy of its Application to
22 the affected tribal government or tribal regulatory authority
23 as applicable at the time it files its Application with the
24 Commission. In addition, the Commission shall send the.25 relevant public notice seeking comment of any petition for
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1 designation as an ETC on tribal lands, at the time it is
2 released, to the affected tribal government and tribal
3 authori ty as applicable.
4 MR. BRECHER: Your Honor, let me see if I can
5 save everybody a little bit of time with the tribal land issue.
6 I will stipulate to the fact that TracFone did not comply with
7 the requirement that Ms. 0' Leary just read. But let me state
8 further that service to tribal lands raises a host of other
9 issues. There is Tier Four issues, there is the impact on the
10 companies serving tribal lands.
11 I am prepared to discuss with the client
12 modifying the Application so as not to seek ETC designation to
13 serve tribal lands, because I recognize that that raises a
14 variety of complicating factors that could take a lot of the
15 Commission's resources and it simply may not be worth the
16 effort. And just so you know, the Company has agreed to do
17 that in other jurisdictions.
18 COMMISSIONER SMITH: Do you have any more
19 questions regarding the tribal notification issue, Ms. 0' Leary?
20 MS. 0' LEARY: I do not have any more questions on
21 that. I just want to make sure I understand that it has now
22 been stipulated to by TracFone that their Amended Application
23 does not, in fact, comply with this element of the Idaho ETC
24 requirements Order.
25 COMMISSIONER SMITH: Well, it sounded to me like
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1 what they're asking is to file a Second Amended Application.
2 MS. 0' LEARY: That the current Application does
3 not comply and that they are asking to file a Second Amended,
4 yes.
5 Okay, I'm ready to move on.
6 MR. BRECHER: I trust that could be dealt with by
7 an Amendment and not resubmitting the entirety of the
8 Application. Is that correct?
9 COMMISSIONER SMITH: Well, I guess we'll talk
10 about that.
11 Ms. 0' Leary.
12 MS. O'LEARY: One moment, please.
13 Q.BY MS. O'LEARY: Mr. Fuentes, at page 25 of
14 TracFone' s Amended Application
15 A.I don't have it.
16 MR. BRECHER: I think I gave him a copy of it.
17 Do you have the Application?
THE WITNESS: No, no, I don't have the
19 Application. I have my testimony.
20
21 Application itself.
MR. BRECHER: This is not the testimony, it's the
22
23
24.25
THE WITNESS: Yeah, thank you.
Q.BY MS. 0' LEARY: Are we there?
A.Yes, page 25.
Q.Thank you. At page 25 of TracFone' s Amended
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1 Application, Mr. Fuentes, TracFone pledges that 100 percent of
2 the federal Lifeline support that it receives will be flowed
3 through to Lifeline customers in the form of free usage. Is
4 that correct?
5 A.That is correct.
6 Q.Mr. Fuentes, what verifiable documentary evidence
7 is there in the record before this Commission that 100 percent
8 of the Lifeline support TracFone receives in any of the
9 jurisdictions where it currently offers Lifeline service is, in
10 fact, flowed through to Lifeline customers?
11 A.I believe the FCC stated it to TracFone itself
12 that we must, and we do.
13 Q.But the question was what verifiable documentary
14 evidence is there in the record that this statement is, in
15 fact, true? Is there any documentary evidence supporting this
16 statement?
17 A.Not off the top of my head do I know if we filed
18 anything to support that.
19 Q.Thank you. Mr. Fuentes, how is 100 percent of
20 the Lifeline support claimed by TracFone from the Universal
21 Service Fund, the federal fund, flowed through to TracFone
22 customers -- a TracFone customer who does not use all of its
23 free minutes in a given month or its cumulative free minutes in
24 a period of a year if it's on a plan that rolls minutes
25 forward?
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1 A.Those minutes just rollover, and as long as they
2 have the phone active and they are receiving free minutes and
3 they're a active Lifeline subscriber, they will continue
4 getting minutes.
5 Q.So if I understand your answer correctly, there
6 could be a Lifeline phone that has been issued and activated to
7 a customer, and it could be used or not used for a period of
8 time and Lifeline could continue to -- or, TracFone could
9 continue to get support for that?
10 A.No. If it's not -- if it's not being used,
11 there's a 60-day inactive policy in which we make all the means
12 necessary to notify the customer that they will be deactivated
13 from the program.
14 Q.And, Mr. Fuentes, what happens to the support
15 that TracFone receives in the interim from the Universal
16 Service Fund for a phone that has not been used?
17 A.Like any other company, we still collect from
18 USAC those payments.
19 Q.Thank you. Mr. Fuentes, at Footnote 39 on
20 page 25 of TracFone' s Amended Application
21 A.Yes.
22 Q.-- TracFone states that it reserves the right to
23 modify its Lifeline plan based on changes in market conditions
24 or the amount of USF support available. Is that correct?
25 A.That is correct.
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1 Q.Since TracFone filed its initial ETC Application
2 in this case in October 2009, TracFone has increased its free
3 minutes from 67 or 68 -- there was a difference in that -- to a
4 maximum of 250. Is that correct?
5 A.That is correct.
6 Q.And TracFone has also agreed not to deduct
7 air-time minutes from customer services. Is that correct?
8 A.That is correct.
9 Q.And TracFone has agreed to drop the cost of
10 additional air-time minutes from 20 cents a minute to ten cents
11 a minute. Is that correct?
12 A. That's correct.
13 Q.So, Mr. Fuentes, would you say TracFone has
14 already demonstrated an ability to respond to market
15 condi tions?
16 A.Yes.
17 Q.So just as the facts that TracFone based its
18 initial Application on have changed since October 2009 and,
19 again, since it filed its Amended Application in February of
20 2010, the facts that TracFone currently bases its Request for
21 ETC designation on may change. Is that correct?
22
23
24.25
Is that correct? It's just a "yes" or "no."
A.It may change, but very doubtful.
Q.Thank you. Thank you. Mr. Fuentes, we
previously discussed the Commission's Order 29841, commonly
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1 referred to as the Idaho ETC requirements Order. Is that
2 correct?
3 A.I'm sorry, could you repeat that?
4 Q.I will. We've previously discussed this
5 Commission's Order 29841, commonly referred to as the Idaho ETC
6 requirements Order. Is that correct?
7 A. Yes, that is correct.
8 Q. And that's been marked as Exhibit 209 for this
9 proceeding. Do you have that in front of you?10 A. I do.
11 Q. Could you please again refer to the appendix of
12 that Order?
13 A.Yes.
14 Q.Could you please read into the record,
15 Mr. Fuentes, Requirement No. 2 on page 3 of the appendix to
16 that Order?
17 A.Read page 2?
Q.Page 3.
A.I'm sorry,page 3.
Q.Requirement No.2.
A.Requirement No.2.
remain functional in emergencies.
18
19
23 demonstrate that it has a reasonable amount of backup power to
24 ensure functionality without external power source, is able to.25 reroute traffic around damaged facilities, and is capable of
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1 managing traffic spikes resulting from emergency situations.
2 Q.Thank you. Mr. Fuentes, has TracFone
3 demonstrated that it has a reasonable amount of backup power to
4 ensure functionality without an external power source?
5 A.That is in a scope of area that I am not familiar
6 wi th in our process. I'm not an engineer wi thin the Company.
7 I do know that we have fail-safes within the Company to ensure
8 that service does continue, and there are --
9 Mr. Fuentes, has TracFone demonstrated that it isQ.
10 able to reroute traffic around damaged facilities?
11 A. I know for a fact in the Company we train because
12 we're in the in Miami, hurricanes are very frequent, and
13 every year we go through training exercises to ensure that
14 service does continue without interruption.
15 Q.Mr. Fuentes, the question was has TracFone
16 demonstrated to this Commission that it is able to reroute
17 traffic around damaged facilities?
18 MR. BRECHER: That was not the question. The
19 question was, "Has TracFone demonstrated." I believe the
20 witness has answered the question.
MS. O'LEARY: I'm sorry.
COMMISSIONER SMITH: We will allow the witness to
23 answer the question Ms. O'Leary just propounded.
24.25
Q.BY MS. O'LEARY: I'll repeat the question.
Mr. Fuentes, has TracFone demonstrated its
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2 demonstrated to this Commission?
3 A.Define "demonstrated."
4 Q.Provided verifiable documentary, factual
5 evidence?
6 A.I have to check.
7 Q.It's a "yes" or "no" question.
8 COMMISSIONER SMITH: Ms. O'Leary, give the
9 wi tness a moment to find his response.
10 THE WITNESS: I don't have it in any of my notes,
11 but usually I believe that's incorporated in our Amended
12 Application where we state that TracFone does have the
13 capabili ty, in the event of a natural disaster and emergency,
14 that service would continue without interruption.
15 Q.BY MS. 0' LEARY: So your answer, if I understand
16 it correctly, is that you have stated as much in your
17 Application, but you are not able to put your hands on any
18 verifiable documentary evidence to support that statement?
19 A.I don't have the amended testimony -- Amended
20 Application before me, but I know that it's a common procedure
21 that we do add that to our Application.
22
23
Q.Mr. Fuentes, has TracFone demonstrated that it
is to this Commission -- that it is capable of managing
24 traffic spikes resulting from emergency situations?.25 A.Again, I would have to look through the Amended
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1 Application and find the section in which we do state it.
2 Q.So your testimony is that you believe there's a
3 statement to that effect in the Application, but my question is
4 is there any documentary verifiable evidence in the record?
5 MR. BRECHER: Would it help, Counsel, if I showed
6 the witness or referred the witness to his own direct testimony
7 which he has in front of him at page 22, line 10, where he is
8 asked: Is TracFone able to remain functional in emergencies,
9 as required by ETC checklist B. 2?
10 MS. 0' LEARY: It certainly I have no obj ection
11 to you showing him that. I'm not sure that exactly answers the
12 question, but he can certainly look at that.
13 MS. MELILLO: I'm sorry, which one were you in?
14 MS. 0' LEARY: This was in TracFone' s direct, did
15 you say, Mr. Brecher?
16 MR. BRECHER: Yes, page 22, beginning at line 10.
17 THE WITNESS: Yes, I have it here in front of me.
18 And in accordance with FCC Rules
19 Q.BY MS. 0' LEARY: I'm sorry?
A.In accordance with FCC Rules, TracFone has the
21 ability to remain functional in emergency situations.
22 Q.Thank you. So, my question to you, Mr. Fuentes,
23 was has TracFone demonstrated, and you asked me to define
24 demonstrated and I said provided verifiable documentary.25 evidence to support your testimony on page 22, line 12 through
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1 line 14?
2 A.No, but if the Commission would request that
3 documentation, I'm sure we would be more than happy to
4 facili tate that.
5 Q.So there is no such evidence in the record before
6 the Commission?
7 A.No, there is not.
8 Q.Thank you. Mr. Fuentes, in Response to Staff's
9 First Production Request No. 11 you know, actually, I'm
10 going to move on. I don't need to ask that question. Sorry,
11 I will move on.
12 I am going to refer now to a confidential
13 exhibit, so we have to go through the fire drill again about
14 who has and has not signed the Protective Agreement. Sorry.
15 (Whereupon, persons who had not signed a
16 Confidentiali ty Agreement were directed to leave the room.)
17
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4 COMMISSIONER SMITH: All right, we'll be back on
5 the record.
6 MS. 0' LEARY: Thank you. For the record, I have
7 just handed the witness an exhibit marked as Exhibit 211. It
8 is a CTC Wireless brochure which describes the CTC Wireless
9 offerings available in its rural ETC designated service area.
10 Q.BY MS. 0' LEARY: Mr. Fuentes, have you had a
11 chance to look this over?
12 A.Yes.
13 Q. Thank you. Mr. Fuentes, are you aware that CTC
14 Wireless offers its customers in Cambridge, Council, Cuprum,
15 Bear in Indian Valley, and other portions of its rural service
16 area 3,000 minutes per month under its Talk-A-Lot Plan for just
17 24.95?
18 A.Is that for Lifeline?
19 Q.24.95 before the Lifeline discount is deducted?
A.No, I'm not aware.
MR. BRECHER: Is that on thi s page?
MS. O'LEARY: Yes, it is. It is on the left-hand
23 column of the first page, Talk-A-Lot Plan, in the blue section
24 on the left-hand side..25 MR. BRECHER: I see, where it says 3,000 minutes
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1 of local calling?
2 MS. O'LEARY: Yes.
3 MR. BRECHER: I see it.
4 Q.BY MS. O'LEARY: So you're -- I'm going to repeat
5 my question since we
6 COMMISSIONER SMITH: He actually answered your
7 question, so I think you can move on.
8 MS. 0' LEARY: Okay, he was not aware of that.
9 Okay.
10 Q.BY MS. O'LEARY: And that this plan includes
11 caller ID and call waiting. Were you aware of that?
12 A.Okay, yeah.
13 Q.And that it does not require a monthly contract.
14 Were you aware of that?
15 A.No.
16 Q.Thank you. Mr. Fuentes, I don't know how good
17 you are at math, but if CTC Wireless's Talk-A-Lot Plan provides
18 3,000 minutes for 24.95 a month, and after 13.50 in state and
19 federal low-income support that plan -- is deducted that plan
20 would only cost the customer $11.45, what is the cost of that
21 service plan per minute for Lifeline customers?
22 A.I think it's up to the consumer to decide whether
23 or not they want a paid Lifeline service or a free service.
24.25
Q.So, Mr. Fuentes, would it surprise you if I told
you that 11.45 divided by 3,000 minutes is less than four cents
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1 a minute?
2 A.I don't know. ¡ was very bad in math in
3 school.
4 Q.Thank you.
5 MR. BRECHER: Just I'd like a point of
6 clarification, Counsel: Are you referring to this plan that
7 says 3,000 minutes of local calling?
8 MS. O'LEARY: Yes, that is the --
9 MR. BRECHER: Local calling, no other calling?
10 MS. O'LEARY: That is the Talk-A-Lot Plan, yes.
11 That is the one I referred to in my question.
12 THE WITNESS: So this doesn't include
13 international destinations or long distance phone calling?
14 Q.BY MS. O'LEARY: I asked about the local
15 Talk-A-Lot Plan.
16 A.Texting. No, because I think there's a
17 difference between our plan, which is free, which includes all
18 of that --
19 Q.Mr. Fuentes --
COMMISSIONER SMITH: Let the witness respond,
21 please. Thank you.
22
23
Mr. Fuentes.
THE WITNESS: I'm just -- I know what you're
24 trying to get at here, and we -- our plans are very different..25 Our plans include international calling, they include texting,
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1 they include local calling. And local calling for us is
2 nationwide calling; it is not a local phone call.
3 And -- but what you all -- what your -- who you
4 represent offers is a plan for 3,000 minutes local. I don't --
5 that is a tremendous difference between plans.
6 Q.Thank you.
7 A.And, in addition, our plan is free.
8 Now, if you were to change your plan and say
9 3,000 minutes for whatever amount of 13.50 it was and include
10 all that, that might be a very attractive offer. But at the
11 end of the day, it's up to the consumers to decide which plan
12 is better for them, not necessarily what another telecom says
13 is better for them.
14 COMMISSIONER SMITH: Thank you.
15 Q.BY MS. 0' LEARY: Mr. Fuentes, are you aware that
16 CTC Wireless also offers its customers in Cambridge, Council,
17 Cuprum, Bear in Indian Valley, and other portions of its rural
18 ETC service area 250 minutes per month under its Simple 250
19 Plan -- which I will direct the witness's attention to the
20 middle column on the first page of Exhibit 211 that starts
21 it says Simple Plans, and right underneath it, it says 1,000
22 nights and weekends included -- for just 29.95 before the
23 Lifeline discount is deducted?
24.25
A.So as opposed to 250 free minutes each month that
include nationwide calling?
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1 Q.I just asked you, Mr. Fuentes -- I would
2 appreciate it if you would actually answer the question.
3 A.Right, I will answer. I'm just differentiating
4 our plans. One is a paid service and one is a free service for
5 $30, 250 minutes, yes, I see that here.
6 Q.Thank you. So were you aware that this 250
7 minutes per month for 29.95 includes caller ID, call waiting,
8 call forwarding, and voice mail ?
9 A.Yeah, I think it's in my -- I think we reference
10 it in my testimony here, but it doesn't include nationwide
11 calling.
12 Q.And the plan includes 1,000 free nights and
13 weekend minutes?
14 A.Okay. That I was not aware of.
15 Q.Were you aware that this free CTC -- that this
16 plan also offers free CTC Wireless mobile-to-mobile minutes?
17 A.I wasn't aware of that.
18 Q.Were you aware that this plan also offers free
19 calls for its customers wi thin their friends and family network
20 of up to ten people?
21 A.I -- that is a marketing -- that is a marketing
22 tool that's used by CTC Wireless. They have a marketing plan
23 how to get and attract customers. We have our own plan too.
24 We can go down the list of differences between the plans, and,.25 again, one's free and one is paid. It should be up to the
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i customers to decide which one is best for them. And if at the
2 end of the day it turns out if we were approved you actually
3 get more customers because we were advertising the service and
4 you started -- and CTC Wireless started advertising a little
5 bi t more, then fine, we have no obj ections to that. It's the
6 fact that Lifeline has been nonexistent and all we're trying to
7 do is provide a service. And if that propels other companies
8 like Assurance Wireless in the past to increase and create
9 competi tion, then it's a heal thy business model, for everybody.
10 Q.Thank you, Mr. Fuentes, for testifying in
11 addi tion to the question I actually asked you.
12 A.You're very welcome.
13 Q.Mr. Fuentes, are you familiar with the comments
14 that were filed in this case? I think we spent some time
15 talking about those a couple hours ago. These would be, in
16 particular, I'm asking about the comments that were filed by
17 Governor Butch Otter and Representative Wendy Jaquet?
18 A.Yes. I don't have it in front of me.
19 Q.I don't actually need you to look at the records,
20 I'm not going to ask you to read from them, but you are
21 familiar with them?
22
23
A.Yeah, to -- yes.
Q.Okay, thank you. Mr. Fuentes, is there any
24 verifiable documentary evidence in the record regarding what.25 information Governor Otter had regarding TracFone' s operations
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1 in Idaho or elsewhere prior to writing that letter?
2 A.No.
3 Q.Mr. Fuentes, are you familiar with the letter
4 signed by Representative Jaquet? I think you said you were
5 familiar with both of those. Is that correct?
6 A.Yes.
7 Q.Mr. Fuentes, is there any verifiable documentary
8 evidence in the record regarding what information
9 Representati ve Jaquet had regarding TracFone' s operations in
10 Idaho or elsewhere prior to writing that letter?
11 A.No.
12 Thank you. So, Mr. Fuentes, there is no evidenceQ.
13 in the record from which this Commission can determine whether
14 Governor Otter and/or Representative Jaquet were aware at the
15 time they wrote those letters that TracFone does not collect or
16 remit ITSAP surcharge fees?
17 A.Not that I'm aware.
18 Or that TracFone does not collect or remit 911Q.
19 fees?
20 I'm not the person to be talking about fees.A.
21 Q.Or that the FCC has specifically ruled that
22 TracFone' s compliance with all applicable state laws is a
23 precondi tion to designation of TracFone as an ETC?
24.25
A.I wouldn't --
MR. BRECHER: Objection. That's not what the FCC
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1 ruled.
2 COMMISSIONER SMITH: Ms. O'Leary, are we going to
3 ask the same questions about the letter from the Alliance for
4 Generational Equity, the National Consumers League, the League
5 of United Latin American Citizens?
6 I mean, public comment is filed with the
7 Commission all the time, in all our cases, and I guess I don't
8 see the relevance of inquiring what the people knew when they
9 wrote.
10 MS. 0' LEARY: I believe
11 COMMISSIONER SMITH: So I guess I don't know what
12 point you're trying to make here, but
13 MS. O'LEARY: I believe, Madam Chairman, the
14 relevance is to provide context to go to the weight of the
15 comments.
16 COMMISSIONER SMITH: And the Commission will
17 determine that accordingly, thank you.
18 MS. O'LEARY: And I'm sure the Commission will,
19 Madam Chair, but it is my obligation on behalf of my client to
20 provide the contextual background if available, if it is not
21 provided.
22 Q.BY MS. O'LEARY: That is all I have for you.
23 Thank you, Mr. Fuentes.
24 A.Thank you very much.
COMMISSIONER SMITH: I assume the Commissioners
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19
20
1 may have questions.
2 COMMISSIONER REDFORD: No, I don't.
3 COMMISSIONER KEMPTON: I do.
4 COMMISSIONER SMITH: Would you like to do lunch
5 first or questions first?
6 MS. MELILLO: Madam Chair, I actually have some
7 questions of the witness.
8 COMMISSIONER SMITH: Oh. Then we will do lunch
9 first.
10 MR. BRECHER: I do have a question.
11 COMMISSIONER SMITH: I'm sorry I misunderstood.
12 I thought Ms. 0' Leary was taking it for the group you term
13 Intervenors.
14 MR. BRECHER: My procedural question, Madam
15 Chairman, is I am going to want to do some very limited
16 redirect, and is that appropriate either before or after the
17 Commissioners' questions?
COMMISSIONER SMITH: Usually we do it after.
MR. BRECHER: Okay.
COMMISSIONER SMITH: Because sometimes it's the
21 Commissioners who generate the most redirect.
22
23
MR. BRECHER: Makes sense to me, your Honor.
24 adj ourned until 1: 30.
COMMISSIONER SMITH: All right. We'll be
.25 (Noon recess.)
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1 COMMISSIONER SMITH: We'll go back on the record.
2 Ms. Muleeloe (phonetic)did I say that right?
3 Mulie- (phonetic) -- help me.
4 MS. MELILLO: Mulilloe (phonetic).
5 COMMISSIONER SMITH: Thank you.
6 MS. MELILLO: You're welcome.
7 Madam Chair, I do have page 4 to one of the
8 exhibits, but I'm trying to find out which exhibit it was.
9 COMMISSIONER SMITH: It is --
10 MS. MELILLO: 208.
11 COMMISSIONER SMITH: -- 208.
12 MS. MELILLO: Are you ready for me?
13 COMMISSIONER SMITH: Yes.
14 MS. MELILLO: Fortunately for Mr. Fuentes, I
15 think I had about 30 pages of questions, but Mr. Price and
16 Ms. 0' Leary took most of those, so --
17 THE WITNESS: I was hoping for 55 questions.
19 I'm sure you'll let me know if I am.
MS. MELILLO: I will try not to be repetitive, so
20
21
22
CROSS-EXAINATION
23 BY MS. MELILLO:
24.25
Q.I want to back up to the 911 issues.
A.Uh-huh.
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1 Q. In your rebuttal testimony, you stated that
2 TracFone was confident that it would increase Lifeline
3 participation rates in Idaho. And that was referred to
4 earlier, there were a bunch of -- it's rebuttal.
5 MR. BRECHER: What page reference?
6 MS. MELILLO: It is at lines 15 to 30 in rebuttal
7 testimony, and I don't have a page number.
8 THE WITNESS: Page 6?
9 Q.BY MS. MELILLO: And this is where you gave the
10 other -- I don't think it's page 6.
11 MS. 0' LEARY: Here, I think it probably is at --
12 Q.BY MS. MELILLO: And in any event, you already
13 testified to the increases in other states and --
14 There we go. It is page 18 in rebuttal
15 testimony, lines 10 through 13 or so -- 13.
16 You said that you are confident you'd increase
17 your rates, and obviously you don't know how much, but the
18 average increase if you looked at all those that you said is
19 about 300 percent. And if you were likely to increase it here
20 by that much, wouldn't that increase in customers also increase
21 the demands upon the Emergency Communications System?
22 A.Not necessarily, because there's a couple of
23 factors you have to look into. Some states are
24 self-certification states, meaning that upon penalty of.25 perj ury, the person is certifying that the information that
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1 they provided to you is correct.
2 My guess --
3 Q. I don't think we're answering?
4 A. I'm getting to your answer.
5 Q. Okay.
6 A. My guess in the state of Idaho, the system is
7 different. It's technically a full certification state,
8 meaning we can't approve anybody off the bat. It has to go
9 through its process and it has to be approved by a state
10 agent -- by the state agency or CAP. So the percentages there
11 would probably -- I would assume they wouldn't be as high.
12 Yet would we increase the penetration rate? Yes,
13 but I wouldn't see as a dramatic increase off the bat, because
14 there's all these other series of steps that need to be taken
15 before.
16 Q.Wouldn't any increase increase the demands on the
17 Emergency Communication System?
18 A.Best way that I can look at is those
19 noninitialized phones that are given out by police stations, do
20 those increase a burden on the 911 system?
21 Q.I didn't hear what kind of phone you're talking
22 about.
23 A.A noninitialized phone, meaning a phone that is
24 not activated, can only dial 911, that's issued by police
25 stations, women who are abused.
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1 Q.But yours would also increase the burden on the
2 911 system?
3 A.If --
4 Q.It's a simple "yes" or "no," Mr. Fuentes.
5 A.No, I'm saying I don't think it would increase
6 any more than any line service that's been provided.
7 Q.But you maintain you don't have to have a fund to
8 deal with that burden.
9 MR. BRECHER: I'm going to obj ect to the question
10 as asked.
11 MS. MELILLO: Wi thdrawn.
12 Q.BY MS. MELILLO: If you take customers from other
13 phone companies that aren't paying into the fund as well,
14 aren't you doubly increasing the burden on the 911 fund?
15 A. But we're not saying we're not going to pay into
16 the fund. What we've said is in this particular case, the
17 issue should be delinked and a separate proceeding should be
18 determined on whether or not the funds needed to be paid.
19 Now, at the end of the day, if there was a ruling
20 and it said you must comply with 911 fees, we will comply with
21 911 fees. We won't skirt that obligation. But there has not
22 been an official determination yet that states you must pay 911
23 fees.
24.25
Q.Okay. In your testimony in one place, you said
TracFone had been in business in Idaho for ten years and
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1 somewhere else it was 12 years. And you also stated that the
2 Idaho Emergency Communications Act as presently drafted with
3 the prepaid wireless language in it has been on the books since
4 2007.
5 We haven't attempted to get a -- TracFone hasn't
6 attempted to get a determination prior to this time whether it
7 would be required to pay those funds?
8 A.I wouldn't be aware if we have or haven't. I
9 don't know that answer.
10 Q. But now that you want something from this
11 Commission, you want that determination now?
12 A.I don't know. I mean --
13 Q.Okay. I'm going to go back to the certification
14 and verification of eligibility, and I'm just kind of confused
15 on this issue. On page 17 in the Amended Application, TracFone
16 asserts that it will petition the Commission for a waiver of
17 any rules that impose certification and verification of
18 requirements that differ from the FCC requirements.
19 Specifically, are there any requirements from
20 which TracFone will seek a waiver here in Idaho?
21 A.So your question was any specific
22 Q.Will you be seeking a waiver; and if you are,
23 what requirements are you seeking a waiver from?
24 A.That I'm aware of, I think in my rebuttal
25 testimony we stated that we would comply with all the rules
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1 including when it came to certifying a customer by using the
2 Department of Human Resources (sic) or the Community Action
3 Program.
4 Q.Okay. I just wasn't sure, because you had
5 contradictory things in there.
6 In your rebuttal testimony on page 14, lines 7
7 through 9, you stated that TracFone will work with the CAPs and
8 DHW to ensure.
9 So could you tell me how that would work, how
10 TracFone would work with them? Would they follow the processes
11 that they have in place?
12 A.We would follow the same process as any other ETC
13 when it came to DHR (sic) or CAP. We would have -- and as I
14 stated earlier in the cross-examinations, we would contact
15 them, we would find out how their systems work, and see how
16 we can integrate our systems with the agencies' integration and
17 move from there.
18 Q.Okay, that's the part I'm not understanding. So
19 there will be no TracFone self-certification online process
20 then?
21 A.There can't be any. The Rules state that you
22 have to go through this process.
23 Q.All right. Okay. So once verified -- and I
24 think some of these issues were hit upon by Mr. Price on the
25 duplication thing, so I won't get into that.
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1 Once someone has been verified, TracFone sends a
2 phone?
A.
Q.
A.
Q.
A.
Q.
to go?
A.
Q.Does TracFone track who actually got that phone?
3 Yes.
4 And the phone is active?
5 Yes.
6 With the minutes?
7 Yes.
8 So when I open my box, I've got my phone, ready
9
10 Yes.
11
12 Is there any verification that the person who said, "I'm Joe
13 Smith, I live at this address," how do we know that Joe Smith
14 at this address got this phone?
15 A.My understanding that we use FedEx, and it has a
16 tracking system and it shows when the phone was delivered.
17 Q.TracFone has a policy in place that if the phone
18 is not active for 60 days, then upon a 30-day notice, you will
19 deactivate that phone and stop seeking USF support. Correct?
20 A.After 60 days, we stop. We will not seek
21 reimbursement.
22
23
Q.Would you define what "usage" is?
A."Usage" can be anything: A text message,
24 recei ving a phone call, dialing a -- making a phone call..25 Q.Okay. Do you have your direct testimony in front
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1 of you?
2 A.Yes.
3 Okay. Your terms and conditions are attached asQ.
4 Exhibit 2 to your direct testimony?
A.Uh-huh.
Q.And I want you to look at Section 8.
A.Section 8.
Q.If you can just give me a minute,please.Okay.
5
6
7
8
9 Under No Usage, De-enrollment, and Deactivation,
10 third line down, would you define "usage" there?
11 A.What was the
12 Under Section 8, the one, two, three -- theQ.
13 fourth paragraph down, it says No , De-enrollment, and
14 Deactivation.
15 A.You said Section A or 8?
16 Eight, the number. This is the terms andQ.
17 conditions that was attached to your direct testimony, not to
18 your Application. They're different.
19 A.Right.
COMMISSIONER SMITH: So are we talking about
21 Exhibit 2?
22
23
MS. MELILLO: Exhibit 2 to the direct testimony.
COMMISSIONER SMITH: Yeah, okay. We're on
24 Exhibit 2..25 THE WITNESS: Right, direct testimony, but
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21
1 Section 8, Service End Date, Deactivation and Reactivation?
2 Q.BY MS. MELILLO: Yes, fourth paragraph down.
3 A.Yes.
4 Q.Third line down, Usage. Would you please read
5 that, the definition of "usage"?
6 A.The whole paragraph or starting --
7 Q.No, just the definition of "usage."
8 A."Usage" is defined as any transaction including,
9 but not limited to, making or receiving calls, sending or
10 opening a text message, downloading data content, adding air
11 time, or receiving your free monthly air time. Upon
12 de-enrollment
13 Q.No, that's fine. So just by you pushing out your
14 free monthly air time to them every month, that's usage;
15 whether or not they use it at all, the unilateral action of
16 TracFone pushing out those minutes is defined as usage?
17 A.If the phone does receive its minutes, it's
18 considered usage. But it's entirely up to the customer that
19 first month if they're going to use the phone.
Q.I understand.
A.And there are many circumstances in which we have
22 seen customers that have been deactivated and they later call
23 back, and the reason why they have been deactivated was because
24 they were in the hospital, or in some instances they were on.25 vacation and they just didn't take that phone.
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1 I mean, the phone is designed really for what its
2 intended purposes is, an emergency situation, which could be
3 ei ther their car broke down or they need gas. And we've seen
4 instances where our customers leave those phones in the glove
5 box and use it in the cases of when they need it the most.
6 Q. But we have this nonusage requirement for a
7 reason. Right?
8 A. Yeah, and we designed it along with the state of
9 Wisconsin, and it's been implemented in the 34 actually, in
10 every single state that we operate in. And we were the first
11 ones to do so and we abide by our own usage policy of 60 days.
12 It's no different than any other company that -- a wireline,
13 for example, if they're on Lifeline and that person seems to be
14 out for a whole month, they didn't use the phone.
15 Q.Li ttle difference though, don't you think?
16 A.No.
17 Q.In that the wireline person actually also pays
18 for that service?
19 A.Our service is no different from any other
20 service except with the fact that instead of receiving a
21 discount on your phone, what we do is the monthly discount that
22 you would receive is a credit -- is credited towards the
23 minutes and that's how many minutes you receive, whether from
24 68 ranging to 125 to 250 minutes.
25 Q.My point is TracFone can keep that phone active
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1 just every month shooting out those 67 minutes?
2 A. Not every month. Not every month.On 60 days,
3 on day afterwards, if they haven't used that phone for whatever
4 reason, they are discon- -- deactivated from the service.
5 Q.But it says usage is getting the free minutes?
6 A.Yeah.
7 Q.Make me understand.
8 A.No, it's no different from any other company that
9 sends -- in your case what you're saying is it sends a bill but
10 that line is discounted, but that person may not use the phone
11 for a whole month.
12 COMMISSIONER SMITH: So if the person doesn't use
13 the phone, are the free minutes still sent the next month?
14 THE WITNESS: For that first time period, yes,
15 they are.
16 COMMISSIONER SMITH: So what about the second
17 month?
18 THE WITNESS: The second month, if we see
19 nonusage, if we don't see activity, that's when we flag the
20 phone and we start making every attempt possible to contact the
21 customer, warning them in that -- in the time frame they have
22 60 days.
23 COMMISSIONER SMITH: Are the free minutes sent in
24 the second month if there's no usage in the first?.25 THE WITNESS: Yes.
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1 COMMISSIONER SMITH: Are the free minutes sent in
2 the third month if there was no usage in the first and
3 second?
4 THE WITNESS: Let's see. Thirty, sixty. No,
5 that would be we have 30 days in which we monitor and then
6 day one or two. It would be three months total.
7 COMMISSIONER SMITH: So are the free minutes sent
8 in the third month if there is no usage on the phone in the
9 first two months?
10 THE WITNESS: Yes.
11 COMMISSIONER SMITH: Are the free minutes sent in
12 the fourth month if there's no usage in the first three
13 months?
14 THE WITNESS: No.
15 COMMISSIONER SMITH: Okay. Thank you.
16 MS. MELILLO: Thank, Madam Chair.
17 Q.BY MS. MELILLO: In your Response to Intervenors'
18 First Production Request No. 23, we asked TracFone where they
19 had had Applications that have been denied. Do you recall your
20 Response?
21
22
A.I don't have that one in front of me.
MR. BRECHER: Do you have a date of those
23 Responses?
24.25
MS. MELILLO: First Production Request, it's 11.
It's the 11th. It's the 11th of March. May be wrong.
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20
1 COMMISSIONER SMITH: We'll go at ease.
2 (Discussion off the record.)
3 COMMISSIONER SMITH: All right, we'll go back on
4 the record.
5 Q.BY MS. MELILLO: In Response to that question,
6 your answer, it says Where TracFone' s Applications have been
7 denied.
8 MR. BRECHER: Do you have the document in front
9 of you?
10 THE WITNESS: No. It's not the one that I have
11 here.
12 Okay.
13 Q.BY MS. MELILLO: Where has TracFone' s Application
14 been denied?
15 A.Alaska.
16 Q.Is that the only state?
17 A.Oklahoma is also a state, but the circumstances
18 are different from --
Q.So, Oklahoma and Alaska?
A.Alaska was as it relates to low-income support.
21 It's very different from Oklahoma. Oklahoma was a forbearance
22 issue that they have completely wrong.
23 MR. BRECHER: Just to correct the record, your
24 Honor, no Application was denied in Oklahoma. TracFone.25 withdrew its Application voluntarily in Oklahoma.
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1 COMMISSIONER SMITH: Thank you for that
2 clarification.
3 MS. MELILLO: I have an exhibit.
4 COMMISSIONER SMITH: Do you think that maybe
5 Ms. 0' Leary could pass those out and you could keep talking?
6 MS. MELILLO: You bet.
7 COMMISSIONER SMITH: And we could move along.
8 MS. MELILLO: What Ms. O'Leary is handing out is
9 an Order from the State of California, which will be --
10 THE COURT REPORTER: 212.
11 MS. 0' LEARY: 212. Our court reporter says we're
12 on 212.
13 (Intervenors' Exhibit No. 212 was marked
14 for identification.)
15 Q.BY MS. MELILLO: Mr. Fuentes, could you just read
16 the bold caption right there in the middle under "Resolution."
17 A.Resolution to deny the Request of TracFone
18 Wireless to be designated as an eligible telecommunications
19 carrier in California.
20
21
Q.So we can add California to that list?
A.No. I believe that we withdrew our Application
22 wi thin California.
23 Q.Do you recall how long it was before this
24 Resolution was that you withdrew your Application?.25 A.I'm not familiar with all the circumstances of
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21
22
23
1 California. There were issues that were beyond my scope, and
2 that was taken -- that was done above me.
3 Q.Would it surprise
4 MR. BRECHER: Counsel, are you planning to
5 introduce the subsequent Order in this case, the case where
6 this Decision was vacated?
7 MS. MELILLO: No, I was not. I was merely trying
8 to point out that you withdrew two days before the Order was
9 issued, kind of like quitting on the way to the boss's office.
10 In any event
11 COMMISSIONER SMITH: Could we just strike that
12 comment.
13 As I said previously, the lawyer's job is to ask
14 the questions, the witness is going to answer, and extraneous
15 remarks are not appropriate.
16 MS. MELILLO: Sorry, Madam Chair.
17 Q.BY MS. MELILLO: Just one other question,
18 Mr. Fuentes: In what other states has TracFone voluntarily
19 withdrawn its Application?
A.Oklahoma comes to my mind, but
Q.I'm sorry, I can't hear you.
A.Oklahoma is the only one that I'm
MR. BRECHER: Your Honor, just to move this
24 along, I am prepared to stipulate to the fact that in addition.25 to Oklahoma, TracFone voluntarily withdrew an Application in
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22
1 the state of Colorado.
2 THE WITNESS: Yes.
3 MR. BRECHER: The witness may not recall that,
4 but it is true and I have no reason not to disclose that.
5 THE WITNESS: Yes, that is correct.
6 MS. MELILLO: Thank you. I have no further
7 questions.
8 COMMISSIONER SMITH: Questions from the
9 Commission. Commissioner Kempton.
10 COMMISSIONER KEMPTON: Thank you, Madam Chairman.
11
12 EXAMINATION
13
14 BY COMMISSIONER KEMPTON:
15 Q.Okay, Mr. Fuentes, on page 2 of your direct
16 rebuttal--
17 MR. BRECHER: Direct or rebuttal? Direct
18 testimony or rebuttal?
19 COMMISSIONER KEMPTON: I said, "Direct rebuttaL."
MR. MILLER: Rebuttal.
COMMISSIONER KEMPTON: Page 2.
Is this working up here for me? Do you hear me
23 all right?
24.25
Let me pull this over here. Can you hear me now?
Not to get that mixed up with some other telecommunication
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1 company.
2 Q.BY COMMISSIONER KEMPTON: So on your direct
3 rebuttal on page 2, line 19, in the middle of line 19, there
4 the sentence starts with "As." Do you have that?
5 A.Yes.
6 Q.Could you read that for me, please, and read
7 through the bottom of the page?
8 A.As it has done in other states, TracFone will
9 remi t all fees upon final determination that such fees are
10 applicable to it pursuant to law. In addition, Ms. Seaman's
11 concern about rural wire centers' coverage is not relevant to
12 whether TracFone should be designated as an ETC in its service
13 area in Idaho.
14 Q.Who makes the final determination, in your mind,
15 of whether such fees are applicable?
16 A.I believe that with regards to the 911 fee, the
17 911 -- it's in the 911 Commission's jurisdiction to make that
18 determination.
19 When it comes to the ITSAP fees, it's -- it
20 should be determined by this Commission.
21 Q.Okay. And I was ambiguous in that question, so
22 let me rephrase it.
23 In terms of whether it's the office who has the
24 primary responsibility of making such a determination at the.25 state or federal level, is that, in fact, the final determining
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1 factor or are there other issues that TracFone might introduce
2 into consideration as to whether that's a final decision?
3 A.To be honest, Commissioner, I would not know that
4 answer. That's just beyond my scope. But I would just assume
5 that it's just these two issues that we are discussing.
6 COMMISSIONER KEMPTON: Mr. Brecher, same
7 question.
8 MR. BRECHER: I'm not sure I'm permitted to
9 testify.
10 COMMISSIONER KEMPTON: Let me put it this way:
11 Do you have anybody here that can answer questions related to
12 final determinations of TracFone? Because it's replete in this
13 document of emphasis on that final determination.
14 MR. BRECHER: I think I can, if you indulge me,
15 and I realize I'm not the witness.
16 COMMISSIONER KEMPTON: Sure.
17 MR. BRECHER: The Company's policy, so there's no
18 misunderstanding, is to take a very careful look at tax and fee
19 laws, mindful of the fact that unlike companies that have a
20 mechanism to collect taxes and fees from customers through a
21 billing process, it does not. It takes a careful look. If it
22 concludes that the fee or the tax is applicable to it, it
23 complies. It may not be happy about it, but it complies. If
24 it concludes that the fee or the tax is unapplicable to it, it.25 asserts its reasons why, and whatever tribunal has the
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1 authority to make that determination, whether it be the State
2 Public Service Commission or the State Department of Revenue or
3 an appellate court, that would be a final determinate.
4 COMMISSIONER KEMPTON : Thank you.
5 Q.BY COMMISSIONER KEMPTON: So, Mr. Fuentes, how
6 many states where TracFone operates their wireless service have
7 an ETC designation?
8 A.We are approved in 36 states.
9 Q.And in those 36 states, are there any ongoing
10 actions where states have imposed postapproval requirements for
11 TracFone to comply with?
12 A.Wi th regards to the subj ect of fees?
13 Q.Yes.
14 A.Okay. Commissioner, Maine is still ongoing its
15 proceeding. Arizona in its ETC designation requested that we
16 send letters for declaration on where we stand with fees. Ohio
17 is still reviewing. Those are the only ones that come to my
18 head right now, Commissioner.
19 Q.Thank you. And those you have referred to in
20 your testimony in various spots, I believe. In other words,
21 there are only three or four states right now where there are
22 ongoing issues related to whether the ETC compliance is being
23 met?
24.25
A.Yes, sir.
Q.And how long is the longest one of those, how
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1 long has it been going on, roughly?
2 A. I would -- I would I wouldn't know, sir.
3 MR. MILLER: Isn't Ohio?
4 COMMISSIONER KEMPTON: Is that a response to the
5 question that I asked?
6 COMMISSIONER SMITH: No, they just need to turn
7 off their mic.
8 MR. BRECHER: My apologies.
9 Q.BY COMMISSIONER KEMPTON: Okay, if you would
10 refer to page 6 of your direct rebuttal?
11 A.Yes, Commissioner.
12 Q.And on line 9 again, if you would read the
13 sentence beginning with "This Commission"?
14 A.This Commission similarly could require TracFone
15 to submit a letter to the Idaho Emergency Communications
16 Commission, seeking a determination as to whether TracFone is
17 obligated to contribute to the 911 fund under current law.
18 Q.Okay. And earlier in the testimony you were
19 referred to Ms. Seaman Exhibit 102, which had a letter from the
20 E911 administrator that -- let's just go to that exhibit.
21
22
23
A.Yes, I recall the letter.
Q.So let's go to Exhibit 102. In that letter
and I'll read this time. This letter also this is the third
24 paragraph:.25 This letter is also to confirm that TracFone has
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1 not made any attempt to negotiate a process for collecting the
2 Emergency Communications fee for the IECC or any of the local
3 governments that collect a fee.
4 And then jumping down to the last sentence on
5 that page: Accordingly, the Commission of the IECC
6 respectively requests that the PUC deny the Application for
7 them until TracFone comes into compliance with existing law
8 regarding the kind of services they provide in Idaho.
9 Would you consider that a final determination, a
10 final Decision, on the issue of E911?
11 A.It's not wi thin my purview. It would need to be
12 a decision with our the legal counsel in my Company to make
13 that determination.
14 COMMISSIONER KEMPTON: Mr. Brecher, would you
15 care to indicate why there is no attorney present that can
16 address this or any other Company representative you would like
17 to have had address the issue of compliance on fees?
18 MR. BRECHER: Well, with your indulgence and with
19 the disclaimer that I am not a witness -- excuse me.
20 With your indulgence and the disclaimer that I am
21 not a witness, perhaps I can explain or at least provide you
22 wi th an answer, and that is, yes, there was a letter sent over
23 about a year ago by the Idaho Emergency Communications
24 Commission. There was never an opportunity at that point for
25 TracFone to articulate its legal justification why those -- why
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.1 it believes the fee does not apply.
2 If this Commission were to direct TracFone to
3 solicit an Opinion from the Emergency Communications Commission
4 and afford an opportunity to state its case, my advice to my
5 client would be to avail itself of that, get that Opinion, and
6 if the Opinion was the fees were applicable, that my advice
7 would be to pay them.
8 And that's precisely what TracFone has done in a
9 number of other states. These issues have come up around the
10 country, and very candidly, Commissioner Kempton, TracFone has
11 prevailed in some, it's lost in some. All we would ask is that
12 we be given a chance to explain to the decision maker, to the.13 appropriate tribunal, the reasons why it believes that the fee
14 under the current law is inapplicable.
15 COMMISSIONER KEMPTON: Okay. Thank you,
16 Mr. Brecher.
17 And so let me, in recognizing that you are not
18 formally testifying but are providing background information to
19 the Commission, is it your experience with the Company that the
20 Company always expects a Commission requirement of the Company
21 to go do those things, rather than the Company initiating that
22 on their own initiative?
23 MR. BRECHER: Not necessarily, Commissioner
24 Kempton. It depends on the state, it depends on the laws of.25 the state. In a number of states, the issue of fee
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1 applicabili ty has arisen wholly outside the context of the ETC
2 designation process.
3 For example, in the state of Washington -- your
4 wi tness was asked questions about the Washington Supreme Court
5 Decision earlier. The Utili ties and Transportation Commission
6 had nothing to do with that; they were aware of it. But that
7 was a matter where TracFone challenged a preliminary finding of
8 the Department of Revenue, had a full hearing before the
9 Department of Revenue, it lost. It exercised its right to seek
10 judicial review of that Department of Revenue Decision and it
11 lost at the Supreme Court.
12 So, it really depends on the state. I hope
13 that's responsive.
14 COMMISSIONER KEMPTON: It is. And during this
15 time, as I understand it, in those -- in the case of
16 Washington, the ETC had been authorized. Is that correct?
17 MR. BRECHER: Excuse me. At the time of the
18 appeal?
19 COMMISSIONER KEMPTON: Uh-huh.
20 MR. BRECHER: No. The Department of Revenue
21 enforcement process began before TracFone had applied to become
22 an eligible telecommunications carrier, and the eligible
23 telecommunications carrier Application with the Utility and
24 Transportation Commission was pending while the appeal was
25 pending. And the Commission, in approving the ETC Application,
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1 made it clear -- and I don't recall if this was an express
2 condi tion in the Order or not, I just don't have it in front of
3 me. It was very clear of the Commission that it will not get
4 in the middle of the fee dispute that's before the Supreme
5 Court, but it would consider the Supreme Court Decision when it
6 was rendered.
7 The Decision was rendered, and as far as I'm
8 concerned, that issue is a dead issue. My client lost at the
9 Supreme Court and it's required to pay the fees, and as far as
10 I know, it does.
11 COMMISSIONER KEMPTON: All right. So my question
12 is, as you pointed out, it is irrelevant about who won or lost
13 in another state, but it is relevant as to whether TracFone was
14 actively soliciting customers during that period of time.
15 MR. BRECHER: Soliciting customers or soliciting
16 Lifeline customers?
17 COMMISSIONER KEMPTON: Lifeline customers.
18 MR. BRECHER: Oh, no, it could not solicit
19 Lifeline customers until it was approved as an ETC by the
20 Washington Utilities and Transportation Commission.
21 COMMISSIONER KEMPTON: Right. And so let's go
22 ahead and terminate that, because like you say, you're not in
23 the position of providing anything other than background
24 information.
25 BY COMMISSIONER KEMPTON: I'll refer to anotherQ.
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1 case where the ETC was actually extended to thè Company and
2 then this went on for some time, which is a concern to me
3 personally simply because of the process of soliciting
4 customers before the -- there's certain knowledge that TracFone
5 has actually accomplished the obj ecti ves of the different --
6 the obj ecti ves of the different states when they impose those
7 obj ecti ves on TracFone as a condition related to the issuing of
8 the ETC. So I will get back to that and then give you some
9 forewarning of where I'm going to be going there.
10 In Ms. Seaman's testimony, in her direct
11 testimony on page 13, there's a discussion that goes on there
12 in relation to just exactly what we talked about just now, and
13 that was in Ohio; and that discussion relative to the ETC
14 designation and conditions imposed by Ohio goes over to
15 page 14. And, Mr. Fuentes, the top line on page 14, it
16 mentions
17 Let's go back to the bottom line on page 13. Do
18 you have that page, Ms. Seaman's page?
19 A.No, I do not have her testimony with me.
20 Q.Seaman direct, 13.
21 A.Yes, Commissioner.
22 Q.Okay. The bottom sentence there on page 13 and
23 this has to do with ETC being extended to -- you know, through
24 the state of Ohio, and the language on line 24: In Ohio, in
25 May 2009, the Public Utilities Commission granted a one-year
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1 conditional ETC designation and ordered TracFone to remit 911
2 fees.
3 The latter part of that being on page 14.
4 Almost two years later, the Company has not yet
5 complied.
6 It goes on: In other states such as Florida,
7 Oregon, and Minnesota, TracFone supported legislation to
8 require retailers to collect and remit the 911 fees. The
9 legislation had been successful in Florida but has been
10 taken -- has taken the Florida legislation two years to be
11 enacted. In the meantime, rapidly increasing number of
12 TracFone users, both prepaid and Lifeline, in the state have
13 the benefit of accessing emergency services without
14 contributing funding to support the agencies providing this
15 public service.
16 So going back, you were issued a conditional ETC
17 for one year, but it took almost two years and the Company
18 hasn't yet completed the requirements of one year. So are
19 those extensions of the Ohio Utilities Commission, I mean,
20 officially, is this something that TracFone has asked, or how
21 do we get to two years for a one-year conditional ETC?
22 A.There was a hearing, but Ohio still hasn't made a
23 determination yet. We're still waiting to hear from them.
24 In the case of Florida, there's a moratorium
25 on 911, and I'm not entirely sure, but I believe that
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23
.25
1 point-of-sale legislation was trying to be enacted in that
2 state.
3 Minnesota -- to be honest with the remaining
4 states of Oregon and Minnesota, I really can't discuss as much
5 as what the status is on those with -- as it pertains to 911
6 fees, but I can tell you in Minnesota we haven't launched in
7 the state yet.
8 Q.Okay. In Ohio though, they did issue a one-year
9 condi tional ETC.
10 A.Correct. But then they had their hearing. We
11 submitted testimony, rebuttals, but the Ohio Public Service
12 Commission has not made a final determination yet.
13 Q.The substance of my concern though still being
14 there, that during the period of time, that's two years plus
15 whatever time is extended on beyond that, are you actively
16 soliciting customers during that period of time?
17 A.Yes, we are.
18 Q.Okay.
19 A.Which we're allowed to by the -- the State of
20 Ohio at no point has ever asked us to suspend our ETC process.
21 Q.Right.
22 MR. BRECHER: Commissioner Kempton.
COMMISSIONER KEMPTON: Mr. Brecher.
24 MR. BRECHER: Would you object if I provide more
background?
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.1 In Ohio, you're correct, there was a one-year
2 conditional ETC designation awarded. At the end of the year,
3 the PUC of Ohio commenced, oh, I guess you'd call it an
4 investigation. It sent some questions, inquiry letters, to
5 TracFone.
6 TracFone also formally raised the question of the
7 applicability of the 911 fee in a letter to the attorney
8 general of Ohio. In Ohio, the way it works, the Attorney
9 General's Office provides legal support to the Public Utility
10 Commission, so the letter was sent to the Attorney General's
11 Office, the attorneys that work with the puc. A Response was
12 received. Nothing was ever resolved..13 The PUCO then I guess "converted" is the best
14 term the TracFone inquiry into more of a generic proceeding,
15 into prepaid Lifeline services in general, and solicited
16 comments from all kinds of interested parties on a host of
17 issues, many of which are the same issues as the subj ect of
18 this hearing: Not just fees but verification and eligibility,
19 the type of issues that Commissions federal and state talk
20 about when they talk about Lifeline, some of the changes to the
21 service.
22 Comments were filed. The reply comments were
23 filed. The Public Utility Commission of Ohio has not made a
24 ruling on that yet..25 In the meanwhile, the Public Utility Commission
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1 of Ohio is aware that TracFone continues to provide service; it.2 has told TracFone it can continue to provide service, there's
3 no question about that; and the ball is in the State
4 Commission's court.
5 And I think analogies or experiences in other
6 states are always a little bit dangerous because every state
7 operates differently, every state's law is a little bit
8 different. I guess my suggestion to you, if it's appropriate
9 for me to make a suggestion, is that if you convene any kind of
10 an inquiry like that, that you don't take the year and a half
11 or so that the PUC of Ohio has done. I don't know why it's
12 taken them that long, but that's something also I don't think.13 that any of us can control.
14 Q. BY COMMI S S lONER KEMPTON:Mr. Fuentes, in the
15 states where you've had an extended time from the issuance of
16 an ETC to resolving the conditional nature of that ETC; and
17 where TracFone has continued to solicit customers , give them
18 free phones, sign them up for the program; it would seem, to
19 me, that the unwinding of a Gordian knot that is established
20 that way where you have the conditional ETC approved and then
21 you go through the process of the conditions is not an
22 advantage to either the Company or the Commission that's
23 reviewing it.
24 Have you ever had to -- had a Commission Decision.25 that, after the conditional issuance, the ETC was retracted?
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1 A.No.
2 COMMISSIONER KEMPTON: That's all the questions I
3 have, Madam Chair.
4 COMMISSIONER SMITH: Did you have any questions?
5
6 EXAMINATION
7
8 BY COMMISSIONER REDFORD:
9 Mr. Fuentes, after listening to the testimonyQ.
10 today, is ita Company policy that once you're denied for the
11 ETC designation, that you al- -- as your Counsel stated, you
12 always go to a supreme court or you go to a court to have this
13 matter finally resolved?
14 Commissioner, that's a legal question that in myA.
15 three years at the Company, I think it just depends on the
16 nature and the circumstances of the opinions given. I don't
17 necessarily think that we always opt for court.
18 But it is a pretty good indication that from theQ.
19 testimony today, that that's your Company policy. Would you
20 say that's correct?
21 I guess in the circumstances that were providedA.
22 in this case, yeah, then those cases we have gone to court.
23 So it's generally your position that you don'tQ.
24 pay the fees unless you're forced to pay fees by some
25 Commission or some court; and then if you're turned down by
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1 that Commission or the court, you generally go to court to have
2 this finally resolved?
3 A.Not necessarily. I know that in states where
4 there might be a ruling or a Commission determines that we have
5 to pay 911 fees, we are very interested in passing point of
6 sale.
7 And from the legislative perspective, that's
8 where we try to do most of our work is to change the 911 laws
9 to be fair to prepaid in general. It's an industry issue; it's
10 not a TracFone issue.
11 Q.Where do you -- what states have you been
12 successful in in changing the legislation?
13 A. In point of sale, I believe it's been in 13
14 states: Texas, West Virginia was the first state
15 How many times were you turned down or were youQ.
16 approved?
17 A.To my knowledge, I wouldn't know where we may
18 have lost, but it started -- West Virginia was our first state,
19 and then from there it started to pick up some. Virginia is
20 another point that passed point of sale.
21 And that's the best method.
22 And it seems to me that there's also some sort ofQ.
23 a trend or a policy that once you get to a point in a
24 proceeding that it doesn't look too good for TracFone, you
25 wi thdraw your Application?
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1 A. No, Commissioner, that would be the worst mistake
2 I think our Company can make.
3 Q.Well, you've done it here. You've done it
4 elsewhere.
5 A.We re- -- we made some errors on our Application
6 and we refiled.
7 Q.You did it in Washington?
8 A.In Washington, no, we did not.
9 Q.How about California?
10 A.California, that's -- that's an entirely
11 separate -- the conditions in California are very, very
12 different from --
13 Q.How about in Ohio?
14 A.In Ohio, we did not withdraw in Ohio.
15 Q.Okay. But you do use it quite often when things
16 are looking bad, you just withdraw the Application?
17 A.No, I would say not. I think it's -- it would
18 look very bad on our Company. I think it would give the
19 appearance that this is a -- that our Company would be one that
20 if we don't get our way, we just leave.
21 And we're not a fly-by-night Company. We're the
22 fifth largest provider. We take our role seriously. We take
23 our service that we provide seriously. And, personally,
24 Commissioner, I wouldn't work for a company like that..25 MR. BRECHER: Commissioner, if I could perhaps
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21
1 save some time, I'm prepared to stipulate to the fact that
2 TracFone has withdrawn its Application for ETC designation in
3 three states: The states of California, the state of Colorado,
4 and the state of Oklahoma. And the Oklahoma withdrawal was
5 voluntarily for reasons that had nothing to do with any dispute
6 as to any fee.
7 COMMISSIONER REDFORD: And the state of Idaho?
8 MR. BRECHER: No, TracFone never withdrew an
9 Application in the state of Ohio -- Idaho. TracFone had an
10 Application denied in the state of Idaho, but it never
11 withdrew.
12 COMMISSIONER REDFORD: But you withdrew your
13 Motion for Reconsideration, I believe?
14 MR. BRECHER: On advice of Staff Counsel.
15 COMMISSIONER REDFORD: On what?
16 MR. BRECHER: On advice of Staff Counsel. I was
17 advised not to seek reconsideration but to resubmit an
18 Application, and that's what I did.
19 COMMISSIONER REDFORD: Okay. Well, sometimes
20 you're bound by your attorney.
MR. BRECHER: But, again, to be clear, TracFone
22 never withdrew an Application for ETC. It withdrew a Petition
23 for Reconsideration.
24.25
COMMISSIONER REDFORD: Well, just being very
candid with you, sir -- and you have testified quite a bit
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1 here, without objection, of course -- it just seems, to me,
2 that you haven't brought a lot of witnesses that could have
3 answered the questions that were posed by Counsel. And when
4 the witnesses were a little technical or were a little
5 confusing, you jumped in to offer the testimony. And while you
6 can do that, it seems, to me, that all the questions or a
7 majority of the questions that we have received today, they
8 were fair questions, and very few of them were able to be
9 answered. I am -- I won't say any more.
10 BY COMMISSIONER REDFORD: But, also, I wanted toQ.
11 get back to this -- oh, the letter on which extension or --
12 Exhibit 102, Mr. Fuentes, from the Idaho Emergency
13 Communications Commission. Once that the -- you received this
14 letter or a copy of the letter
15 Or, I guess I'll ask you, did you receive a copy
16 of the letter?
17 I did not personally receive a copy.A.
18 Did the Company?Q.
19 I believe. Yeah, I would assume that.A.
20 Well, I can understand that you don't receiveQ.
21 every document that comes in to the Company.
22 It feels like it sometimes.A.
23 So if the Company received it, I'd like you toQ.
24 acknowledge that the Company did receive it.
25 A.Yes.
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1 Was there any effort on your behalf or any effortQ.
2 on behalf of the Company to go back to the Idaho Emergency
3 Communications Commission and say, Wait a minute, we'd like to
4 clear this up with you so that we can get a favorable
5 recommendation to the PUC?
6 It doesn't seem like you did that, and I believe
7 that the statement was made: We don't do that until the final
8 dog is heard in a state or the Commission or in the court.
9 Am I misinterpreting that?
10 I wouldn't know what our Response would haveA.
11 been.
12 Did you make an effort to go back to the IdahoQ.
13 Emergency Communications Commission?
14 A. I don't know if we did or not.
15 Who knows all of these questions?Q.
16 That would be our in-house legal counsel.A.
17 Okay. Well, I don't have any further questions,Q.
18 but it just seems, to me, like your -- a lot of your
19 questions -- your answers have been very, very evasive, and not
20 forthcoming.
21 Thank you.
22
23
24
25
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1 EXAMINATION
2
3 BY COMMISSIONER SMITH:
4 Mr. Fuentes, are you the person who makes theQ.
5 Company policy?
6 A.No, I am not.
7 So you wouldn't know when or why they .wouldQ.
8 establish a policy to not go to the various state agencies and
9 get a determination before some Commission makes them?
10 That would not be me. I would not know.A.
11 Okay. Thank you.Q.
12 COMMISSIONER SMITH: Redirect.
13 MR. BRECHER: May I have a moment?
14 COMMISSIONER SMITH: Certainly.
15 COMMISSIONER REDFORD: Madam Chairman, could I
16 ask one more further questions? I'm sorry.
17 COMMISSIONER SMITH: Sure.
18
19 EXAMINATION
20
21 BY COMMISSIONER REDFORD:
22 Q. Who is that person that would make the
23 determination? Does your legal counsel run the Company or
24 in-house legal counsel? You keep saying that was an effort
25 made by the legal counsel?
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1 A. That would either be our executive vice president
2 and general counsel Richard Salzman, or our deputy assistant
3 counsel Leighton Lang.
4 Q.Don't you have directors and officers that make
5 those policy decisions?
6 A.We do, but I work in an entirely different
7 division altogether when it comes to that. That's all done on
8 that end.
9 Q.Well, do you have a boss?
10 I do, but he does not make determinations onA.
11 fees. He is the senior vice president of Lifeline services,
12 and his job is to ensure that Lifeline
13 in-house legalQ.Is it your legal counsel
14 counsel -- that makes all these policy determinations?
15 A.Wi th regards to -- with fees, yes.
16 Q.Okay. Thank you.
17 MR. BRECHER: May I proceed with redirect?
18 COMMISSIONER SMITH: Please.
19
REDIRECT EXAMINATION
22 BY MR. BRECHER:
23 Q.Working backwards, Mr. Fuentes, Ms. Melillo asked
24 you some questions about the nonusage policy, and she asked you.25 to read from the statement of terms and conditions. I just
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1 want to clarify one point:
2 When -- in order for a customer -- a Lifeline
3 customer -- of TracFone to receive the minutes at the end of
4 the month, is it necessary that the handset be turned on?
5 A.Correct.
6 So if the customer is not using the service, theQ.
7 handset is in the glove compartment or in a dresser or lost and
8 not turned on, that customer will not receive minutes?
9 A.Correct.
10 And that customer -- and there will be no usageQ.
11 that month?
12 A.Correct.
13 So the customer must perform an overt act ofQ.
14 turning on the phone in order to receive the minutes?
15 A.Correct.
16 Now, you were asked, were you not, I believe byQ.
17 Mr. Price regarding a Decision of the Supreme Court of the
18 State of Washington
19 Do you have that document with you?
20 A.Yes, I do.
21 Can you turn to it?Q.
22 COMMISSIONER SMITH: You're now referring to
23 Exhibit 103.
24 MR. BRECHER: I believe that's correct.
25 BY MR. BRECHER: And I direct your attention toQ.
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22
23
1 page 16. That's page 17 of 19 of the handout, but page 16 of
2 the actual printed Opinion.
3 COMMISSIONER KEMPTON: I'm sorry, what page?
4 MR. BRECHER: Page 16 of the Opinion.
5 Q.BY MR. BRECHER: And following the conclusion, do
6 you see the words in capitals "WE CONCUR," colon?
7 A.Yes.
8 Q.And how many names follow that Opinion, those
9 words, "WE CONCUR"?
10 A.Four.
11 Q.Now I direct your attention to page 18 of the
12 Supreme Court Decision. And on the right-hand column following
13 a dissenting Opinion that was authored by Justice Chambers, do
14 you see the words "WE CONCUR" and how many names appear
15 there?
16 A.Three.
17 Q.So this was, would you agree, sir, that the
18 maj ori ty Opinion authored by Chief Justice Madsen was a five to
19 three Decision of the Supreme Court?
A.Yes.
Q.It was not a unanimous Decision?
A.It was not.
Q.Would that indicate to you that even the Justices
24 of the Supreme Court of Washington --.25 MR. PRICE: I'm going to object to that. That
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1 calls for a legal conclusion.
2 COMMISSIONER SMITH: Mr. Price.
3 MR. PRICE: I'm going to obj ect to that on the
4 grounds that it calls for a legal conclusion.
5 MR. BRECHER: Question withdrawn.
6 COMMISSIONER SMITH: Thank you.
7 BY MR. BRECHER: You were asked again I believeQ.
8 by Mr. Price about the Company's policy of providing service to
9 residents of homeless shelters, and you've testified that the
10 Company had developed some procedures in consultation with the
11 Federal Communications Commission?
12 A.Correct.
13 Do you have any idea how many residents ofQ.
14 homeless shelters have been enrolled in TracFone' s Lifeline
15 program under those policies?
16 I don't have an exact number, but I would assumeA.
17 that it's relatively low.
18 Q.Fewer than 100 maybe?
19 It could be around that number.A.
20 And in how many jurisdictions has TracFoneQ.
21 enrolled customers of homeless shelters?
22 A.Two.
23 Q.And those are?
24 DC -- District of Columbia -- and Massachusetts.A.
25 Now, there's been quite a bit of discussionQ.
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24.25
1 during your cross-examination about what's commonly referred to
2 as duplicate enrollment. You refer to it as double-dipping. I
3 prefer not to refer to it as double-dipping because when I do,
4 I put on a few pounds.
5 Is it your understanding that the FCC is aware of
6 this problem?
7 A.Yes.
8 Q.And what has the FCC done about it?
9 I understand that the FCC has been takingA.
10 aggressive steps in meeting with various ETCs to come up with
11 an interim solution to the duplicate situation.
12 Has TracFone been a party to those discussionsQ.
13 wi th the FCC?
14 A.Yes, it has.
15 Q.And is the subj ect of duplicate enrollment and
16 how to prevent it addressed in the FCC's recently issued
17 Lifeline Notice of Proposed Rulemaking?
18 A.Yes, it is.
19 Q.Now, during
20 MR. BRECHER: I'd like to hand out an exhibit, I
21 guess will be marked for identification as --
22 What number are we up to, your Honor?
23 COMMISSIONER SMITH: Sixteen.
MR. BRECHER: This will be Exhibit 116. Is that
correct?
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1 COMMISSIONER SMITH: Sixteen.
2 MS. SEAMAN: Sixteen.
3 COMMISSIONER SMITH: One six.
4 MR. BRECHER: One six.
5 (TracFone Exhibit No. 16 was marked for
6 identification. )
7 Q.BY MR. BRECHER: What I've shown you,
8 Mr. Fuentes, is a copy of Section 10 of the Communications Act
9 of 1934, as amended, codified at 47 United States Code,
10 Section 160.
11 You were asked some questions by Ms. 0' Leary
12 about the effect of the FCC's forbearance Order. Do you
13 remember those questions?
14 A. Yes.
15 Q.And you were specifically asked whether the
16 record before the FCC would make that forbearance Order
17 applicable to the state of Idaho?
18 A.Correct.
19 Q.I'd like to draw your attention to Section --
20 Subsection (e) of 47 United States Code 160, and would you be
21 kind enough to read into the record what Subsection (e) says?
22 A.Subsection (e), State enforcement after
23 Commission forbearance. A State Commission may not continue to
24 apply or enforce any provisions of this chapter that the.25 Commission has determined to forbear from applying under
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1 Subsection (a) of this section.
2 Q.Now, I recognize that you're not a lawyer and
3 you're not qualified to render a legal opinion, but looking at
4 Subsection (a), the plain English, is it your understanding
5 that the FCC's forbearance Order would be binding on states
6 based on Section 10 (e) ?
7 MS. MELILLO: Object: That's exactly what he's
8 asking for, a legal conclusion.
9 MR. BRECHER: Withdrawn.
10 COMMISSIONER SMITH: Thank you.
11 BY MR. BRECHER: You were asked about a DecisionQ.
12 rendered by the Oklahoma Corporation Commission. Are you
13 familiar with that Decision?
14 A.Yes.
15 And is that the Decision where the OklahomaQ.
16 Corporation Commission voted not to follow the FCC's
17 forbearance Order?
18 A.Correct.
19 In how many states is TracFone designated as anQ.
20 eligible telecommunications carrier?
21 A.Thirty-six states.
22 Has any state Commission that you're aware ofQ.
23 other than Oklahoma concluded that the FCC forbearance Order is
24 not applicable to it?
25 A.No.
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1 Q.Would you conclude that the view of the Oklahoma
2 Corporation Commission on that question is what represents the
3 weight of authority among the states?
4 A.No, it doesn't.
5 MS. 0' LEARY: Obj ection: Asks for a legal
6 conclusion.
7 MR. BRECHER: I think the question has already
8 been answered.
9 MR. PRICE: Motion to strike.
10 MS. 0' LEARY: Can we have that comment stricken
11 from the record?
12 COMMISSIONER SMITH: If you have something to
13 say, you're going to have to use your mic. So
14 MS. 0' LEARY: Thank you. I'm sorry.
15 COMMISSIONER SMITH: So, it did seem, to me, that
16 you are asking for a legal conclusion. We've already
17 established hours ago --
18 MR. BRECHER: I'll withdraw the question.
19 COMMISSIONER SMITH: Thank you.
Q.BY MR. BRECHER: Now, you were also asked
21 you were shown a document -- and I apologize, I believe it was
22 Document No. 208 or Exhibit No. 208, pardon me, which was an
23 audit issued by -- on October 19, 2010, by the Commonwealth of
24 Massachusetts Department of Telecommunication and Cable..25 A.Yes.
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1 Q.Do you recall those questions?
2 A.Yes.
3 Q.Do you have the document in front of you?
4 A.I do.
5 Q.I'd like to call your attention to page 2 of that
6 document, and at the top of the page, you see Roman numeral
7 two?
8 A.Yes.
9 Q.And how is that Roman numeral two captioned?
10 A.Background and procedural history.
11 Q.No, Roman numeral two at the top of page 2.
12 COMMISSIONER SMITH: This is Exhibit 208.
13 Q. BY MR. BRECHER: 208. This is the Massachusetts
14 Department of Telecommunications and Cable audit report.
15 I was reading the wrong one, I apologize.A.
16 Analysis and findings, annual verification audit.
17 Okay. Would you, sir, read into the record theQ.
18 first sentence of Roman numeral two?
19 As an initial matter, the Department finds thatA.
20 TracFone complied with current eligibility verification
21 requirements.
22 Q.Are you aware of any Decision rendered by any
23 federal or state regulatory agency that has concluded that
24 TracFone does not comply with current eligibility verification.25 requirements?
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1 A.None.
2 Q.Are you aware of any conclusion rendered by the
3 Uni versal Service Administrative Company that has concluded
4 that TracFone has not complied with existing eligibility
5 requirements?
6 A.None.
7 Q.Now, you were asked some questions about receipt
8 by TracFone of Lifeline support for customers that do not use
9 their service for a period of time: 30 days or 60 days?
10 A.Yes.
11 Q.Now, is it correct that if a customer doesn't use
12 the service to make a single phone call during a 30-day period,
13 TracFone would get Lifeline support for that customer?
14 A.Yes.
15 Q.Okay. Now, are you familiar with other ETCs,
16 including those that operate in the state of Ohio?
17 MR. MILLER: Idaho.
18 Q.BY MR. BRECHER: Idaho.
19 A.Yes.
20 If another ETC in the state of Idaho, landline orQ.
21 wireless, had a customer that went -- a Lifeline customer --
22 had a Lifeline customer that went 30 days without making a
23 single phone call, would that ETC receive Lifeline support from
24 the Universal Service Fund?.25 A.Yes.
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1 Q.Are you aware of any requirement that would
2 obligate that ETC to refund the Lifeline support for those
3 customers that did not use the service for 30 days?
4 A.No.
5 Q.Is it possible that other ETCs' customers by
6 reason of illness, absence from the state, whatever, might go
7 30 days without using the service?
8 A.It is possible.
9 Q.So that is not a situation that would be unique
10 to TracFone?
11 A.No.
12 Q.In your testimony, you described that TracFone
13 would remain functional in emergency situations, and that was
14 the subj ect of some cross-examination earlier today.
15 Are you aware of any situation since you've been
16 employed by TracFone or prior to that where the Company's
17 service became unavailable due to an emergency situation?
18 A.I've never heard of a situation.
19 Q.You have never heard of a situation?
20 A.A situation where we weren't able to operate.
Q.Are you aware of any state Utility Commission
22 that has ever concluded that TracFone is not able to remain
23 functional in an emergency situation?
24.25
A.No.
MR. BRECHER: I believe that's all the redirect I
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24.25
1 have, Chairman Smith.
2 COMMISSIONER SMITH: Thank you very much.
3 We thank you for your help, Mr. Fuentes.
4 THE WITNESS: Thank you very much, Commissioners.
5 (The witness left the stand.)
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