924PUC.docx

1 BOISE, IDAHO, THURSDAY, SEPTEMBER 24, 1998, 9:30 A.M.
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4 COMMISSIONER SMITH: Good morning, ladies
5 and gentlemen. This is the time and place set for
6 hearing in Case Nos. USW-T-97-6 and USW-T-96-6. This is
7 in the matter of the petition from Elmore County
8 residents for extended area service between Mountain Home
9 and Boise and between Glenns Ferry, Hammett,
10 King Hill, and Boise, and in the matter of the petition
11 from Weiser, Payette, and New Plymouth residents
12 requesting extended area service between Weiser, Payette,
13 New Plymouth, and Boise.
14 We will take the appearances of the parties
15 first. Mr. Ward, would you like to start?
16 MR. WARD: Conley Ward of the firm Givens,
17 Pursley, for the Idaho Telephone Association.
18 COMMISSIONER SMITH: Ms. Hobson.
19 MS. HOBSON: Mary S. Hobson from Stoel,
20 Rives, appearing for U S WEST Communications.
21 COMMISSIONER SMITH: Ms. Copsey.
22 MS. COPSEY: Cherri C. Copsey, Deputy AG,
23 appearing on behalf of the Commission Staff.
24 COMMISSIONER SMITH: I notice we also had
25 an intervention granted to Rural Telephone Company. And
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CSB REPORTING COLLOQUY
Wilder, Idaho 83676
1 let the record reflect there is no one here appearing on
2 behalf of the Rural.
3 MS. COPSEY: Madam Chair, I believe also
4 there may have been an intervention. I know there was an
5 intervention filed, and it may have already been granted
6 for Citizens, but I note they are not here.
7 COMMISSIONER SMITH: It's not reflected in
8 my file. The record can show that. All right. I assume
9 we want to start with U S WEST, or do the parties have a
10 different order they prefer?
11 MS. COPSEY: Madam Chair, there is one
12 preliminary matter. As you note, U S WEST, the Idaho
13 Telephone Association, and Staff have all prefiled direct
14 testimony, and also U S WEST and Staff have prefiled
15 rebuttal testimony. As each witness appears, would you
16 like to have that witness have both the prefiled direct
17 and the prefiled rebuttal, where appropriate, made part
18 of the record then so that we don't have to approach each
19 testimony separately?
20 COMMISSIONER SMITH: Ms. Copsey, my general
21 order of proceeding is to allow that decision to be made
22 by the attorney who is presenting the witness. And if
23 they choose to do both direct and rebuttal together,
24 that's fine with me. If they choose to reserve their
25 rebuttal to the end, that's fine with me, too. It's at
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CSB REPORTING COLLOQUY
Wilder, Idaho 83676
1 the pleasure of the lawyer. Is there anything else?
2 MS. COPSEY: Thank you. No.
3 COMMISSIONER SMITH: Ms. Hobson.
4 MS. HOBSON: U S WEST calls John Souba.
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6 JOHN SOUBA
7 produced as a witness at the instance of U S WEST
8 Communications, having been first duly sworn, was
9 examined and testified as follows:
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11 DIRECT EXAMINATION
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13 BY MS. HOBSON:
14 Q Would you please state your name and spell
15 your last name for the record.
16 A Yes. My name is John Souba. My last name
17 is spelled S-o-u-b-a.
18 Q Where are you employed and in what
19 capacity?
20 A I'm employed by U S WEST Communications as
21 a manager in regulatory affairs here in Boise.
22 Q In connection with that employment,
23 Mr. Souba, did you prepare and cause to have filed with
24 this Commission certain direct testimony dated September
25 14, 1998, consisting of 17 pages?
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CSB REPORTING SOUBA (Di)
Wilder, Idaho 83676 U S WEST
1 A Yes, I did.
2 Q Do you have any additions, corrections, or
3 deletions to make to that testimony at this time?
4 A I do not.
5 Q Mr. Souba, if I were to ask you questions
6 contained in that prefiled testimony, now that you have
7 been sworn, would your answers be the same?
8 A Yes, they would.
9 Q And, Mr. Souba, did you further prepare and
10 cause to have filed with this Commission certain rebuttal
11 testimony dated September 22, 1998?
12 A Yes, I did.
13 Q That testimony consists of ten pages, does
14 it not?
15 A Yes, it does.
16 Q Do you have any corrections, deletions,
17 changes to that testimony?
18 A I do not.
19 Q Mr. Souba, did you have any exhibits to
20 present to this Commission in connection with your
21 testimony?
22 A No, I do not.
23 Q And if I were to ask you the questions
24 contained in your prefiled rebuttal testimony now that
25 you have been sworn, would your answers be the same?
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CSB REPORTING SOUBA (Di)
Wilder, Idaho 83676 U S WEST
1 A Yes, they would.
2 MS. HOBSON: Madam Chair, at this point
3 U S WEST would spread Mr. Souba's direct and rebuttal
4 testimony on the record as it's read, and tender
5 Mr. Souba for cross-examination.
6 COMMISSIONER SMITH: If there is no
7 objection, it is so ordered.
8 MS. COPSEY: No objection.
9 (The following prefiled direct and
10 rebuttal testimony of Mr. John Souba is spread upon the
11 record.)
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CSB REPORTING SOUBA (Di)
Wilder, Idaho 83676 U S WEST
1 Q. PLEASE STATE YOUR NAME AND ADDRESS AND
2 POSITION WITH U S WEST COMMUNICATIONS.
3 A. My name is John Souba. My business address
4 is 999 Main Street, Boise, Idaho. I am a staff manager
5 in the Idaho Regulatory Affairs Department.
6 Q. PLEASE STATE YOUR BACKGROUND AND
7 QUALIFICATIONS.
8 A. I earned a B.A. degree in History/Economics
9 from Dartmouth College in 1975. Since joining U S WEST
10 in 1979, I have held a variety of management positions in
11 the Marketing organization dealing with major business
12 accounts. In February, 1988, I joined the Idaho
13 Regulatory Affairs Department. My responsibilities
14 involve a variety of areas including docket coordination,
15 tariff and catalog filing responsibilities, response and
16 witnessing in Extended Area Service (EAS) petitions and
17 coordination of discovery and interrogatory responses,
18 among other tasks.
19 Q. WHAT IS THE PURPOSE OF YOUR TESTIMONY?
20 A. My testimony will provide recommendations
21 for how extended area service (EAS) expansion should be
22 viewed in light of the establishment of U S WEST's three
23 new EAS regions created in 1997. I will reaffirm the
24 establishment of a cost recovery formula for U S WEST
25 operations as enacted in Order No. 27633. Finally, I
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John F. Souba, Di 1
U S WEST Communications
1 will present U S WEST's opinion as to whether the public
2 interest would be served by granting EAS for the
3 communities represented in this docket and the method and
4 amount of cost recovery required by the Company should
5 the Commission grant this petition.
6 Q. PLEASE DESCRIBE THE HISTORY OF THIS CASE.
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John F. Souba, Di 1A
U S WEST Communications
1 A. This case is the combination of two dockets
2 which involve U S WEST-served exchanges who have
3 petitioned to join the Boise area EAS region. The
4 petition from residents of Payette and Weiser, now
5 including the New Plymouth exchange, dates back to
6 November, 1994 when a petition with more than 180
7 signatures requested toll-free calling between Payette
8 and Weiser. The Commission on its own motion opened
9 docket USW-S-96-6 in August, 1996 to investigate this
10 request. Since opening this docket the Commission has
11 expanded the investigation to include New Plymouth
12 subscribers who have also requested consideration for EAS
13 and the Commission has, correctly, extended the original
14 petitions request for calling between just Payette and
15 Weiser to include calling between these three communities
16 and the entire Boise area EAS region.
17 The second group of U S WEST exchanges wishing to
18 join the Boise area EAS region are found in the Elmore
19 County Case No. USW-T-97-6 where petitions with 600
20 signatures were filed with the Commission in February,
21 1997. Here, two separate petitions sought EAS, first,
22 between Mountain Home and Boise and, secondly, between
23 Glenns Ferry, Hammett and King Hill for calling to Boise.
24 These two petitions have also been, correctly, extended
25 to include not just a request for toll-free calling to
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John F. Souba, Di 2
U S WEST Communications
1 Boise but to the entire Boise area EAS region.
2 Q. WHY DO YOU REFER TO THE "CORRECTNESS" OF
3 THESE PETITIONS BEING EXTENDED TO INCLUDE THE ENTIRE
4 BOISE AREA EAS REGION?
5 A. Simply because the rules changed when the
6 Commission took the bold step to create the three large
7 new EAS calling regions surrounding Boise, Twin Falls and
8 a combined
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John F. Souba, Di 2A
U S WEST Communications
1 region, including Pocatello and Idaho Falls, back in
2 1997. The new paradigm for EAS, particularly when the
3 request involves exchanges already found in one of the
4 new regions, is to extend toll-free calling throughout
5 the existing region.
6 Q. DOES U S WEST SUPPORT THIS NEW "STANDARD"
7 WHICH WOULD INCLUDE GRANTING EAS TO THE ENTIRE REGION?
8 A. Absolutely. U S WEST believes that, if the
9 Commission finds that a community of interest exists
10 between exchanges not in the region and those within the
11 region, the Commission should grant EAS to the entire
12 region. This is consistent with the approach the
13 Commission took with regard to petitions to join the
14 eastern Idaho region. In addition, such a result is more
15 readily understandable to subscribers and creates equity
16 among the affected exchanges. U S WEST further
17 recommends nothing less than two-way EAS should be
18 considered, particularly when the petitioning exchanges
19 are served by U S WEST.
20 Q. DOES THE COMPANY BELIEVE THE COMMISSION
21 SHOULD CONSIDER GRANTING LESS THAN REGION-WIDE EAS
22 ACCESS?
23 A. No, for two reasons. One, if the
24 Commission were to grant EAS only to a portion of the
25 region, it would invite EAS arbitrage. The Commission
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John F. Souba, Di 3
U S WEST Communications
1 has had to deal with this problem before when it decided
2 EAS bridging services are unlawful and ordered U S WEST
3 to file tariffs prohibiting this practice.
4 Second, it is my opinion that it is just human
5 nature for petitioning customers to feel that if their
6 request for any community within the region meets the
7 Commissions standards for EAS, they should have the
8 "whole thing" like the rest of the communities in the
9 region. In this
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John F. Souba, Di 3A
U S WEST Communications
1 combined case the petitioners would best be served by
2 participation in the entire Boise area EAS region.
3 Q. DOESN'T THIS REGION-WIDE ADVOCACY INCREASE
4 THE COST OF GRANTING EAS?
5 A. Yes. However, since is was appropriate
6 public policy to create a region-wide approach, it does
7 not seem inconsistent to apply the same policy for new
8 requests for EAS. It may prove out to cost less in the
9 long term if a single network design and response is
10 established at the initial request versus going back to
11 address additional community requests until all
12 communities within the regions feel they have local
13 calling parity.
14 Q. WHAT COMMUNITIES ARE CURRENTLY INCLUDED IN
15 THE BOISE AREA EAS REGION?
16 A. The Boise area EAS region includes the
17 following exchanges: Boise, Caldwell, Emmett, Idaho
18 City, Kuna, Melba, Meridian, Middleton, Nampa and Star.
19 This combined case represents the first request for
20 additions to the Boise area EAS region since it was first
21 established in 1997. U S WEST appreciates the
22 Commission's joint handling of the two cases here which
23 reduces expense and, potentially, increases efficiency in
24 implementing EAS should the requests ultimately be
25 granted by the Commission.
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John F. Souba, Di 4
U S WEST Communications
1 Q. LOOKING FIRST AT THE PAYETTE, WEISER, NEW
2 PLYMOUTH GROUP, DOES U S WEST BELIEVE THAT A COMMUNITY OF
3 INTEREST EXISTS BETWEEN THESE EXCHANGES AND THE BOISE
4 AREA EAS REGION?
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John F. Souba, Di 4A
U S WEST Communications
1 A. Based upon their volume of toll traffic
2 into the Boise area EAS region and their contiguity with
3 the region, it does appear there is a community of
4 interest between these three exchanges and the Boise
5 region. It is the Company's expectation that the Staff
6 testimony in this case will expand on other areas of
7 community of interest for the Commission's consideration.
8 Q. WHAT DID YOUR ANALYSIS OF CALLING VOLUMES
9 SHOW FOR THE PAYETTE, WEISER AND NEW PLYMOUTH EXCHANGES?
10 A. The calling volumes from the Payette,
11 Weiser and New Plymouth customers are consistent with the
12 levels of calling that have justified expansion of local
13 calling in the eastern Idaho EAS region. In fact, if you
14 include the calling between these exchanges themselves,
15 the calling volumes into the Boise area EAS region are
16 quite substantial. Calling from Payette to the region,
17 including calling to Weiser and New Plymouth, averaged
18 just over nine calls per line per month. Measured the
19 same way, the calling from Weiser to the region was just
20 under nine calls per line per month while calling from
21 New Plymouth was even greater at just under thirteen
22 calls per line per month.
23 These are substantial calling volumes that clearly
24 demonstrate a community of interest for these three
25 exchanges to be included in the Boise area EAS region.
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John F. Souba, Di 5
U S WEST Communications
1 U S WEST considers the calculation of calling volumes to
2 the be most important criteria for determining community
3 of interest. These three exchanges are well above the
4 level that U S WEST believes are required to justify the
5 expansion of local calling.
6 Q. PLEASE EXPLAIN YOUR REFERENCE EARLIER TO
7 THESE EXCHANGES CONTIGUITY WITH THE REGION?
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John F. Souba, Di 5A
U S WEST Communications
1 A. Of course. The Weiser and Payette
2 exchanges have a common exchange boundary as do the
3 Payette and New Plymouth exchanges, while New Plymouth
4 has a common boundary with both the Emmett and Caldwell
5 exchanges which are already members of the Boise area EAS
6 region. This simply means that it would be consistent
7 from a geographical sense to add all three exchanges to
8 the region while it would not, for instance, make
9 geographic sense to add Payette and Weiser to the region
10 without also including New Plymouth because of New
11 Plymouth's contiguous border with the current region.
12 Such a result would constitute leap-frogging of an
13 intervening exchange, in this case New Plymouth, and
14 would appear to be confusing and inconsistent treatment.
15 Q. DOES U S WEST HAVE CONCERNS REGARDING THE
16 CURRENT LOCAL CALLING AREAS FOR PAYETTE, WEISER AND NEW
17 PLYMOUTH?
18 A. Only to a minor degree. Payette currently
19 has toll-free calling to Fruitland, NuAcres, Ontario and
20 Oregon Slope. Weiser has toll-free calling only to
21 Oregon Slope. New Plymouth has toll-free calling to
22 Fruitland and NuAcres. U S WEST would not advocate that
23 any of these existing routes be eliminated. However,
24 since customers from these outlying exchanges (Fruitland,
25 NuAcres, Ontario and Oregon slope) will not be joining
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John F. Souba, Di 6
U S WEST Communications
1 the Boise area EAS region, it would be possible for such
2 customers to place a local call to a friend or relative
3 in either Payette, Weiser or New Plymouth and, by use of
4 three-way calling, be added on to a local call which
5 could be completed throughout the Boise area EAS region.
6 By doing this, customers in these outlying exchanges
7 could avoid toll charges. This type of incidental
8 "add-on" calling is a minor irritation when compared to
9 the Company's concerns over fullblown EAS arbitrage.
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John F. Souba, Di 6A
U S WEST Communications
1 Q. PLEASE EXPLAIN YOUR ARBITRAGE CONCERN MORE
2 FULLY.
3 A. All right. Full-blown EAS arbitrage in
4 this area of western Idaho could occur through an
5 arbitrage company setting up its operation in Payette and
6 allowing callers from Ontario to call a local Payette
7 number to enable the caller to complete local calls
8 throughout the Boise area EAS region for a small fee per
9 call. This would be a serious attack on the toll revenue
10 stream from Ontario to all of the exchanges within the
11 Boise region.
12 Q. HASN'T THE COMMISSION ADDRESSED THIS
13 CONCERN THROUGH THEIR FINAL ORDERS IN THE UPPER VALLEY
14 CASE NO. GNR-T-94-1 AND THE VALLEY LINK CASE NO.
15 USW-S-95-3?
16 A. U S WEST appreciates the strong stand taken
17 by the Commission against EAS arbitrage in those dockets
18 and through its approval of U S WEST tariff filings which
19 prohibit EAS arbitrage. Nevertheless, the Company
20 believes that sound public policy argues against creating
21 new EAS arbitrage opportunities whenever possible. The
22 Company is most concerned over arbitrage creation which
23 would bridge EAS regions together. Our limited
24 experience has found that EAS arbitrage firms can be
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John F. Souba, Di 7
U S WEST Communications
1 it causes customer confusion and a certain amount of
2 customer anger when they are removed from service. The
3 Company merely wishes to eliminate these problems
4 whenever it is possible.
5 Q. DO THESE FEARS OF EAS ARBITRAGE CHANGE YOUR
6 POSITION OF SUPPORTING EAS FOR PAYETTE?
7 A. No. Frankly, the number of customers in
8 the NuAcres, Oregon Slope and Fruitland exchanges suggest
9 arbitrage, even if it occurs in these areas, would have a
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John F. Souba, Di 7A
U S WEST Communications
1 minor impact. While Ontario is more of a concern because
2 the Payette to Ontario route predates the potential of
3 Payette joining the Boise region, the Company remains
4 supportive of the Payette petitioners request to join the
5 Boise region. The Company understands how difficult it
6 would be for the Commission to remove an existing EAS
7 route like the one between Payette and Ontario. Of
8 course, the Company will be counting on the Commission's
9 full support of its plans to take rapid and decisive
10 action against any arbitrager discovered in any area of
11 the state.
12 Q. IS IT YOUR RECOMMENDATION THAT THE
13 COMMISSION GRANT EAS TO ALL THREE PETITIONING EXCHANGES?
14 A. Yes, it is.
15 Q. MOVING ON TO THE ELMORE COUNTY EAS REQUEST,
16 WHAT DOES YOUR TRAFFIC ANALYSIS SHOW FOR MOUNTAIN HOME
17 AND GLENNS FERRY'S CALLING INTO THE BOISE AREA EAS
18 REGION?
19 A. My analysis shows a solid level of calling
20 into the Boise area EAS region that is consistent with
21 the level of calling that has justified expansion of
22 exchanges into the eastern Idaho EAS region. Calling
23 volumes from Glenns Ferry into the region averaged just
24 under six calls per line per month while calling from
25 Mountain Home to Boise was slightly higher at seven calls
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John F. Souba, Di 8
U S WEST Communications
1 per line per month.
2 This level of calling volumes is not extreme but
3 it is well within the range that this Commission has
4 recognized for expansion of EAS in the past. U S WEST is
5 confident that this level of calling justifies the
6 inclusion of Mountain Home and Glenns Ferry in the Boise
7 area EAS region.
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John F. Souba, Di 8A
U S WEST Communications
1 Q. DO THESE EXCHANGES ALSO HAVE A CONTIGUOUS
2 BORDER WITH THE BOISE AREA EAS REGION?
3 A. While there is no directly contiguous
4 border between the Mountain Home and Boise exchanges, the
5 area between them is open territory or uncertified to any
6 local exchange company. This means that for all
7 practical purposes the two exchanges do share a common
8 boundary. Mountain Home and Glenns Ferry do have a
9 contiguous boundary. It is significant to point out that
10 Glenns Ferry has a contiguous border to the east with the
11 Bliss exchange.
12 Q. WHAT MAKES THIS SIGNIFICANT?
13 A. U S WEST strongly believes that Glenns
14 Ferry and Mountain Home must deliberately chose to join
15 the Boise area EAS region, for which they have
16 petitioned, and not the Twin Falls area EAS region which
17 includes the Bliss exchange as its western boundary. If,
18 for instance, Glenns Ferry were to join the Boise area
19 EAS region and then subsequently request EAS to Bliss
20 there would be the potential for EAS arbitrage on a
21 massive scale between the Boise area EAS region and the
22 Twin Falls EAS region. U S WEST would strongly oppose
23 this scenario. Similar to my concern regarding
24 leap-frogging of exchanges for the Payette grouping, the
25 Company would oppose EAS between Glenns Ferry and the
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John F. Souba, Di 9
U S WEST Communications
1 Boise area EAS region if Mountain Home were not also
2 granted admittance to this region. Because Glenns Ferry
3 and Mountain Home have toll free calling between
4 themselves today and their calling volumes are quite
5 similar, the Company believes any commission decision on
6 EAS should impact both communities in the same way.
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John F. Souba, Di 9A
U S WEST Communications
1 Q. IS IT YOUR RECOMMENDATION THAT THE
2 COMMISSION GRANT THE MOUNTAIN HOME AND GLENNS FERRY
3 EXCHANGES PETITIONS TO JOIN THE BOISE AREA EAS REGION?
4 A. Yes, it is.
5 Q. IN YOUR VIEW, WOULD IT BE CONSISTENT WITH
6 PREVIOUS EAS GRANTS TO EXTEND EAS TO THE PETITIONING
7 EXCHANGES IN THIS COMBINED CASE?
8 A. It certainly would. U S WEST has
9 forty-eight exchanges served from within southern Idaho
10 (the Afton area is served from Wyoming), of these, forty,
11 or 83%, are currently included in one of the Company's
12 three EAS regions. If all five of the exchanges in this
13 combined case were to be approved, forty-five exchanges,
14 or 94%, of the Company's southern Idaho exchanges would
15 be included within one of the three EAS regions.
16 Q. WHY IS THIS GOOD POLICY?
17 A. For those U S WEST exchanges who are not in
18 a region today, and who have high calling volumes into a
19 contiguous region, like these five exchanges do, the
20 Company believes it is equitable to extend toll free
21 calling to the contiguous region. This presumes that an
22 EAS petition has been circulated and has received
23 significant support and that the petitioners support the
24 request in the public hearings already scheduled.
25 Q. TO COMPLETE YOUR DISCUSSION OF COMMUNITY OF
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John F. Souba, Di 10
U S WEST Communications
1 INTEREST ISSUES, WHAT FURTHER EVIDENCE TO SUPPORT EAS IN
2 THIS COMBINED CASE IS NECESSARY?
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John F. Souba, Di 10A
U S WEST Communications
1 A. As in all EAS cases, the attendance of
2 witnesses at the scheduled public hearings provides
3 valuable validation of the need for EAS and the
4 willingness of the subscribers to pay the increase in
5 local exchange rates caused by granting of toll-free
6 calling. In these hearings it will be up to the
7 benefactors of the new toll-free calling routes to state
8 their case directly to the Commission in support of the
9 petitions already received from each of these exchanges.
10 Q. MOVING ON TO A NEW AREA, HAS U S WEST AND
11 THE COMMISSION RESOLVED THE METHOD FOR RECOVERY OF COSTS
12 ASSOCIATED WITH GRANTING ADDITIONAL EAS REQUESTS?
13 A. I am delighted to report that the
14 Commission has formally resolved outstanding issues
15 related to U S WEST's recovery of EAS costs in its Order
16 No. 27633 issued on July 12, 1998.
17 Q. COULD YOU SUMMARIZE THE METHODOLOGY SET
18 FORTH IN THE STIPULATION AND ADOPTED IN ORDER 27633?
19 A. Yes. Compensation to U S WEST for the
20 costs of providing EAS for a U S WEST exchange to another
21 U S WEST exchange(s) is established at $.0861 per toll
22 minute. Compensation to U S WEST for the cost of
23 providing EAS between an independent telephone company
24 exchange and a U S WEST EAS region is established at
25 $.0818 per toll minute. These costs reflect a
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John F. Souba, Di 11
U S WEST Communications
1 stimulation factor of three times (3x) for calculating
2 anticipated EAS traffic, and toll minutes are adjusted to
3 reflect a "dial around" factor of 38%. Costs are to be
4 recovered through a uniform increase to business and
5 residential local exchange rates for customers within the
6 U S WEST EAS regions. In the event the Commission orders
7 inclusion of a new
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John F. Souba, Di 11A
U S WEST Communications
1 U S WEST exchange in a U S WEST EAS region, rates in the
2 affected exchange will be moved to the EAS region rates
3 ordered in Case No. USW-S-96-5 with any subsequent
4 increase in revenue used to offset the costs of EAS as
5 previously set forth.
6 Q. IS THIS COMPENSATION FORMULA APPLICABLE TO
7 THIS COMBINED EAS CASE?
8 A. Yes it is. In fact, the Company and the
9 Commission Staff have informally agreed that the first
10 increase in local exchange rates that would reflect cost
11 recovery for several completed EAS cases would not occur
12 until a decision is reached by the Commission in this
13 combined case.
14 Q. WHY IS THAT?
15 A. Simply because this combined case
16 represents a far greater number of minutes which convert
17 from toll to local than in all of the previously approved
18 EAS cases that are subject to the cost recovery formula.
19 Rather than change the local exchange rates for its
20 in-region customers after each and every EAS grant by the
21 Commission, the Company would prefer to change rates only
22 once a year or when a major EAS addition, such as this
23 one, is granted. This saves the Company from having to
24 make numerous billing systems updates and saves its
25 customers from numerous minor rate changes.
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John F. Souba, Di 12
U S WEST Communications
1 Q. HAVE YOU USED THE COST RECOVERY FORMULA TO
2 CALCULATE U S WEST'S COSTS FOR EAS IN THIS COMBINED CASE?
3 A. Yes, I have. Based upon the Company's
4 billing records which have been previously provided to
5 the Commission Staff, the annualized toll minutes for the
6 Payette grouping
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John F. Souba, Di 12A
U S WEST Communications
1 includes 11,410,171 minutes and the Elmore County minutes
2 would add 10,381,066 minutes. Utilizing the stipulated
3 compensation of $0.0861 per toll minute, the Company's
4 cost for this combined case would be $1,876,225.00. From
5 this recoverable amount, I have subtracted the rate group
6 increase for these five exchanges which totals
7 $1,376,364.00, leaving a net recoverable balance of
8 $499,860.00
9 Q. HAS THE ISSUE OF REIMBURSING U S WEST FOR
10 ITS CAPITAL COSTS FOR GRANTING EAS BEEN RESOLVED FOR THIS
11 DOCKET?
12 A. Yes. Although those specific costs have
13 not yet been identified in detail by the Company's
14 engineers, the decision has been made for this docket to
15 reimburse U S WEST for new capital costs through use of
16 available Revenue Sharing Funds held by the Commission.
17 These capital expenditures will be booked by the Company
18 in a fashion consistent with previous use of Revenue
19 Sharing dollars to eliminate any impact on the Company's
20 rate base.
21 Q. IF THE COMMISSION DECIDES EXPANDED LOCAL
22 CALLING IS WARRANTED IN THIS CASE, HOW LONG DO YOU
23 ESTIMATE IT WILL TAKE TO IMPLEMENT THE REQUESTED ROUTES?
24 A. Unfortunately, I am unable to provide an
25 accurate estimate at this time. The Company is just now
30
John F. Souba, Di 13
U S WEST Communications
1 beginning to assess the backlog of work caused by the
2 recent work stoppage. I am advised that it may be
3 several more weeks before the new labor contract is
4 ratified and before many of the managerial employees
5 involved in designing and implementing changes to the
6 network (such as expanded EAS routes) will be able to
7 return to their normal assignments.
8
9 /
10
11 /
12
13 /
14
15
16
17
18
19
20
21
22
23
24
25
31
John F. Souba, Di 13A
U S WEST Communications
1 Many, if not most, of the managerial employees in
2 our network organization have been asked to remain on
3 their strike-related assignments to assist in maintaining
4 the network and work to diminish the backlog of work
5 created by the strike. Until these employees are back at
6 work for a period, it will not be possible to assemble
7 the normal implementation teams and ask them for
8 estimates of time for new jobs such as EAS expansion.
9 My belief is that any EAS cases ordered by this
10 Commission within the next 60 days involving U S WEST may
11 not be ready for implementation until late first quarter
12 or perhaps even second quarter of 1999. I only offer
13 this testimony at this time to request the Commission's
14 indulgence during this unusual set of circumstances and
15 to inform the public so that they will not be misled as
16 to how soon newly ordered EAS routes may be implemented.
17 The Commission has traditionally asked local
18 exchange companies to provide an implementation date
19 within 14 days of its orders granting new EAS routes. I
20 believe that by the time any pending cases are completed
21 and the Commission issues an order, U S WEST will be in a
22 position to provide a more accurate estimate.
23 Q. AGAIN, ASSUMING THE COMMISSION GRANTS THIS
24 COMBINED CASE, WHEN WOULD LOCAL EXCHANGE RATES CHANGE FOR
25 IN-REGION SUBSCRIBERS IN ALL THREE EAS REGIONS?
32
John F. Souba, Di 14
U S WEST Communications
1 A. The Company plans to implement increases to
2 local exchange rates for all in-region customers on the
3 day that EAS is implemented for the petitioning exchanges
4 in this combined case. This rate change would compensate
5 the Company for costs associated with this case and
6 several previous EAS grants already approved by the
7 Commission.
8
9 /
10
11 /
12
13 /
14
15
16
17
18
19
20
21
22
23
24
25
33
John F. Souba, Di 14A
U S WEST Communications
1 Since the implementation date for Fremont
2 Telephone customers to join the eastern Idaho EAS region
3 is currently planned for November 12, 1998, it is
4 unlikely that this combined case could be implemented
5 until late in the fourth quarter this year or, more
6 likely, first quarter 1999. Of course the actual
7 implementation date will be influenced by how quickly the
8 Commission reaches its decision in this case.
9 Q. WHAT WOULD BE THE AMOUNT OF THE INCREASE TO
10 LOCAL EXCHANGE RATES FOR IN-REGION SUBSCRIBERS?
11 A. Per the approved Stipulation in Order No.
12 27633 the following cumulative amounts would make up the
13 rate increase to be implemented on the day EAS is granted
14 for this combined EAS case:
15
16 CASE EXCHANGE COST RECOVERY
17 GNR-T-96-6 Swan Valley, Irwin $288,561
GNR-T-97-3 Wayan, Grays Lake (incl in 96-6)
18 GNR-T-97-8 Teton County (incl in 96-6)
GNR-T-96-5 Arbon, Rockland $144,026
19 GNR-T-97-7 Bear Lake County (incl in 96-5)
GNR-T-97-14 Fremont Telcom $501,808
20 USW-T-96-6 Weiser, Payette $982,415
USW-T-97-6 Mountain Home,
21 Glenns Ferry $893,809
22 TOTAL $2,801,619
Subtract Rate Group Incr. (1,376,364)
23
TOTAL NET RECOVERABLE $1,434,255
24
25
34
John F. Souba, Di 15
U S WEST Communications
1 Spreading the total cost of $1,434,255 for all of these
2 cases by the approximate number of Title 61 residence and
3 business lines in all three EAS regions would result in
4 an approximate $0.32 increase to each in-region line
5 throughout the state. U S WEST would be willing to work
6
7 /
8
9 /
10
11 /
12
13
14
15
16
17
18
19
20
21
22
23
24
25
35
John F. Souba, Di 15A
U S WEST Communications
1 through the exact calculation of these costs with Staff
2 to verify this estimated increase at the time of
3 implementation. This will allow for the spread of the
4 increase to the then current inventory of in-region
5 lines.
6 Q. COULD YOU PLEASE SUMMARIZE YOUR TESTIMONY?
7 A. Of course. Based upon the calling volumes
8 and geographic orientation of the U S WEST exchanges in
9 this combined case, U S WEST supports the extension of
10 toll-free calling from all petitioning exchanges into the
11 Boise area EAS region. The Company believes such
12 decision would be consistent with previous decisions by
13 the Commission and would be fair to the petitioning
14 subscribers assuming they support the petition in
15 upcoming public hearings. The Glenns Ferry exchange must
16 choose to support inclusion with the Boise area EAS
17 region and Mountain Home or it must decide that it has
18 closer ties to Bliss and the balance of the Twin Falls
19 area EAS region.
20 The method of cost recovery for U S WEST has been
21 previously decided by the Commission both in terms of any
22 new capital expenditures and in how the impact on local
23 exchange rates will be calculated. The local exchange
24 impact is estimated to be $0.32 per month, to all Title
25 61 in-region subscribers in the state, subject to
36
John F. Souba, Di 16
U S WEST Communications
1 verification by the Commission Staff. This rate increase
2 takes into consideration all EAS cases granted under the
3 stipulated formula to date. The rate increase is to be
4 added to the existing in-region rate of $17.12 for all
5 existing in-region customers and this estimated new rate
6 of $17.44 will also be applied to the petitioning
7 exchanges in this combined case.
8
9 /
10
11 /
12
13 /
14
15
16
17
18
19
20
21
22
23
24
25
37
John F. Souba, Di 16A
U S WEST Communications
1 U S WEST is unable at this time to commit to a
2 specific implementation date. However, the Company
3 should be sufficiently recovered from its work stoppage
4 to provide an exact date within 14 days of receiving
5 Commission approval in these cases.
6 Q. DOES THIS CONCLUDE YOUR TESTIMONY?
7 A. It certainly does.
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
38
John F. Souba, Di 17
U S WEST Communications
1 Q. PLEASE STATE YOUR NAME AND ADDRESS AND
2 POSITION WITH U S WEST COMMUNICATIONS.
3 A. My name is John Souba. My business address
4 is 999 Main Street, Boise, Idaho. I am a staff manager
5 in the Idaho Regulatory Affairs Department.
6 Q. HAVE YOU PREVIOUSLY FILED TESTIMONY IN THIS
7 CASE?
8 A. Yes. I filed direct testimony in this case
9 dated September 14, 1998.
10 Q. WHAT IS THE PURPOSE OF YOUR REBUTTAL
11 TESTIMONY IN THIS CASE?
12 A. I will correct my direct testimony as it
13 relates to the unserved area between the Boise exchange
14 and the Mountain Home exchange. I will react to the
15 testimony of Raymond Hendershot from the Idaho Telephone
16 Association who believes EAS is unjustified for the
17 U S WEST exchanges who have petitioned for expanded local
18 calling in this docket. In addition, I will support the
19 calling volumes cited by Mr. Hart and provide additional
20 parallels between the communities in this docket and
21 those already granted subsequent inclusion in an EAS
22 region. Finally, I will react to Mr. Hendershot's
23 suggestion of creating an all together new region for
24 Payette, New Plymouth and Weiser.
25 Q. MR. SOUBA HAVE YOU READ MR. HART'S
39
John F. Souba, Re 1
U S WEST Communications
1 TESTIMONY AND REVIEWED HIS EXHIBIT NO. 101 WHICH SHOWS
2 THE TIPANUK EXCHANGE SANDWICHED BETWEEN THE BOISE
3 EXCHANGE AND THE MOUNTAIN HOME EXCHANGE?
4 A. Yes, I have.
5
6 /
7
8 /
9
10 /
11
12
13
14
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16
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18
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22
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24
25
40
John F. Souba, Re 1A
U S WEST Communications
1 Q. DO YOU WISH TO REVISE YOUR PREVIOUS
2 TESTIMONY WHICH INDICATED THAT THE AREA BETWEEN BOISE AND
3 MOUNTAIN HOME IS AN UNSERVED AREA?
4 A. Yes, I do. I have further reviewed the
5 territory served by Rural Telephone Company and find that
6 Mr. Hart's exhibit is accurate. Although there is indeed
7 unserved territory north of the Mountain Home exchange
8 that borders unserved territory east of the Boise
9 exchange the unserved area is not as extensive as I
10 indicated in my direct testimony and I stand corrected.
11 Q. DOES THE INTERVENING TIPANUK EXCHANGE
12 CHANGE YOUR OPINION THAT EAS IS APPROPRIATE BETWEEN BOISE
13 AND MOUNTAIN HOME?
14 A. No, it does not. The actual borders
15 between the Boise and Mountain Home exchanges are quite
16 close to each other. The intervening Tipanuk exchange
17 serves a small group of approximately 40 subscribers. In
18 addition, the Tipanuk customers have already indicated
19 their interest in EAS by petitioning for toll free
20 calling to the Boise area EAS region and to the Mountain
21 Home exchange. This case has not yet been scheduled for
22 hearing by the Commission, but it was assigned Case
23 No. GNR-T-97-9 on July 14, 1997. If the Tipanuk EAS
24 petition were approved and Tipanuk given toll free
25 calling to the Boise area EAS region and to Mountain Home
41
John F. Souba, Re 2
U S WEST Communications
1 but the Mountain Home petition in this case denied, there
2 would be a serious potential for illegal EAS arbitrage
3 which would connect Mountain Home to the Boise region
4 through an arbitrage operation located in Tipanuk. The
5 mere existence of the Tipanuk EAS petition further
6 supports U S WEST's position that EAS between Mountain
7 Home and the Boise region is justified.
8
9 /
10
11 /
12
13 /
14
15
16
17
18
19
20
21
22
23
24
25
42
John F. Souba, Re 2A
U S WEST Communications
1 Q. MR. HENDERSHOT INDICATES THAT THE
2 PETITIONING EXCHANGES IN THIS CASE FAIL A COMMUNITY OF
3 INTEREST TEST BECAUSE THEY ALREADY HAVE TOLL FREE CALLING
4 TO "MOST, IF NOT ALL, ESSENTIAL FACILITIES AND SERVICES."
5 WHAT IS YOUR REACTION TO THIS STATEMENT?
6 A. I would not argue with either Mr.
7 Hendershot's or Mr. Hart's description of the relative
8 independence and availability of essential services that
9 are found in the petitioning exchanges in this case. I
10 would, however, argue that this independence does not,
11 and should not, foreclose the petitioning exchanges from
12 joining the Boise region.
13 Q. WHY NOT?
14 A. By having created the U S WEST EAS regions
15 the Commission has already set aside the requirement that
16 EAS may only be granted to communities who do not have
17 current access to essential services. The mere
18 availability of essential services did not prevent Nampa
19 and Caldwell from joining the Boise region when it was
20 created, nor did it prevent the Commission from joining
21 Pocatello and Idaho Falls into the same local calling
22 area. I would argue that any of these larger communities
23 are far more independent than any of the petitioning
24 exchanges in this case. The point of this is that
25 whether we are talking about exchanges similarly sized to
43
John F. Souba, Re 3
U S WEST Communications
1 Mountain Home such as Rexburg or Blackfoot or exchanges
2 similarly sized to Payette and Weiser such as Rigby,
3 Preston, or Buhl the availability of essential services
4 has not blocked these exchanges from membership in one of
5 the three Idaho EAS regions. The availability of these
6 same services should not prevent the petitioning
7 exchanges in this case from enjoying the benefits of
8 membership in the Boise region.
9
10 /
11
12 /
13
14 /
15
16
17
18
19
20
21
22
23
24
25
44
John F. Souba, Re 3A
U S WEST Communications
1 Q. MR. SOUBA, HOW HAVE U S WEST CUSTOMERS
2 REACTED TO THE CREATION OF THE EAS REGIONS?
3 A. With very few exceptions, customer reaction
4 has been very positive. Newspaper editorials and
5 reactions from public officials have been universally
6 supportive of the expanded calling areas. I believe that
7 the regions have solidified the business community within
8 each region. The occasional detractor indicates that
9 he/she does not call to a particular exchange in a region
10 and would prefer to not pay for that privilege. While
11 such customers may not benefit based upon their outbound
12 calling patterns, they may well benefit from being able
13 to receive calls from exchanges which they do not call.
14 U S WEST believes that the Commission's vision to create
15 EAS regions in Idaho has proven to be a very positive
16 experience for the state.
17 Q. MR. HENDERSHOT'S TESTIMONY WARNS AGAINST
18 THE COMMISSION ABANDONING WHAT HE SEES AS BEING THE
19 TRADITIONAL EAS STANDARDS, HAS MR. HENDERSHOT'S POSITION
20 BEEN CONSISTENT ON BEHALF OF ALL ITA MEMBERS?
21 A. No. Mr. Hendershot, in his direct
22 testimony on behalf of Lakeside Communications in Case
23 No. GNR-T-97-7 filed less than a year ago, made the
24 following statement:
25 "When the Commission established the three
45
John F. Souba, Re 4
U S WEST Communications
1 U S WEST calling areas in southern Idaho it
clearly discarded the traditional
2 community-of-interest test for EAS. In effect the
Commission created a new standard or definition of
3 toll free calling areas."
4
5 /
6
7 /
8
9 /
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
46
John F. Souba, Re 4A
U S WEST Communications
1 Although I recognize that each EAS case has unique
2 variables, this testimony was offered by Mr. Hendershot,
3 in support of granting EAS from the Paris exchange in the
4 eastern Idaho EAS region. This testimony is particularly
5 pertinent because the calling volume from Paris to that
6 region was comparable to or less than, the calling
7 volumes from the five exchanges in this case to the Boise
8 region.
9 Q. WHAT FURTHER EVIDENCE EXISTS THAT THE
10 TRADITIONAL COMMUNITY-OF-INTEREST STANDARDS HAVE BEEN
11 CHANGED BY ADOPTING THE EAS REGIONAL APPROACH?
12 A. In Order 26672, which approved the U S WEST
13 EAS regions, the Commission stressed the importance of
14 the "hub and spoke" configuration of EAS regions and
15 reaffirmed that it is not necessary for each spoke
16 exchange meet community-of-interest standards with each
17 other spoke within the region. This order goes on to say
18 that the creation of EAS regions may be appropriate
19 "despite the inability of all included exchanges to meet
20 strict community-of-interest criteria."
21 Q. ARE THE CALLING VOLUMES IN THE PETITIONING
22 EXCHANGES IN THIS CASE SUFFICIENT TO JUSTIFY THEIR
23 INCLUSION IN THE BOISE AREA EAS REGION?
24 A. I believe they are. Although certain other
25 additions to the regions were based on higher calling
47
John F. Souba, Re 5
U S WEST Communications
1 volumes, it is also true that dramatically lower volumes
2 have resulted in inclusion in an EAS region.
3 Q. COULD YOU GIVE ME EXAMPLES?
4
5 /
6
7 /
8
9 /
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
48
John F. Souba, Re 5A
U S WEST Communications
1 A. Of course. The best examples involves the
2 exchanges of Preston, Montpelier and Paris who are
3 members of the eastern Idaho EAS region. The
4 Preston/Montpelier exchanges were added to the region in
5 Case No. USW-T-96-13. The Paris exchange was added
6 subsequent to above case in Case No. GNR-T-97-7. In
7 neither of these dockets were calling volumes as high as
8 the Commission is presented with in this case. To
9 demonstrate, Staff witness Joe Cusick made the following
10 observations in Staff comments in the 96-13 case: "The
11 calling rate for New Plymouth or Glenns Ferry to Boise is
12 over 200% greater than that of Preston to Pocatello.
13 Calling from Mountain Home to Boise is 200% greater than
14 Montpelier and 300% greater than Preston."
15 Q. WHAT CALLING VOLUME WAS PRESENT IN THE
16 PARIS CASE NO. GNR-T-97-7?
17 A. The Paris exchange averaged 4.7 calls per
18 line per month. Since both the Paris and
19 Preston/Montpelier cases have been approved by the
20 Commission based partly upon calling averages which are
21 less than the levels in this case, it would appear
22 perfectly logical for the Commission to grant regional
23 inclusion to the petitioning exchanges in this case.
24 Q. WHAT DO YOU DEDUCE FROM THE COMMISSION
25 HAVING GRANTED EAS TO PARIS, PRESTON AND MONTPELIER?
49
John F. Souba, Re 6
U S WEST Communications
1 A. I deduce that the keys to having EAS
2 granted in this new paradigm which includes EAS regions
3 are a) a demonstration of at least a minimal calling
4 volume from the petitioning exchange to the hub city or
5 cities in the region, b) community support for expanded
6 calling as demonstrated by letters, calls and testimony
7 in public hearings, c) participation in a larger
8
9 /
10
11 /
12
13 /
14
15
16
17
18
19
20
21
22
23
24
25
50
John F. Souba, Re 6A
U S WEST Communications
1 socioeconomic region in southern Idaho, and d) a
2 willingness by the petitioning exchange to pay the higher
3 rates associated with granting of EAS.
4 Q. HAS THE COMMISSION ESTABLISHED A CALLING
5 VOLUME THRESHOLD FOR GRANTING EAS IN IDAHO?
6 A. No, it has not. However, in docket
7 GNR-T-93-13, which reviewed the geographic boundaries of
8 local calling areas in Idaho, the Commission received
9 testimony from intervening parties as to what minimum
10 calling volumes they felt justified the granting of EAS.
11 Q. WHAT WERE THE CALLING VOLUME THRESHOLDS
12 IDENTIFIED IN THAT CASE?
13 A. The Commission recited the parties'
14 opinions of the required levels of calling in Order
15 26311. U S WEST and MCI recommended 6 calls per line per
16 month from the petitioning exchange, AT&T recommended 8
17 calls while the ITA and Century recommended 5 calls per
18 subscriber line. Mr. Hendershot was the witness for ITA
19 in that docket. The calling volumes in this docket are
20 in line with the levels of calling identified by those
21 parties as being sufficient to grant EAS and exceed the
22 level specified by Mr. Hendershot in the previous docket.
23 Q. HAS EXPANSION OF LOCAL CALLING BEEN
24 IDENTIFIED BY THE LEGISLATURE AS A PRIORITY?
25 A. Yes. The Telecom 92 Report from the
51
John F. Souba, Re 7
U S WEST Communications
1 legislature has often been quoted as urging the
2 Commission to "review existing local calling areas to
3 determine the largest economically feasible extended
4 service area (EAS) local calling areas and to develop
5 policies that will achieve that expansion."
6
7 /
8
9 /
10
11 /
12
13
14
15
16
17
18
19
20
21
22
23
24
25
52
John F. Souba, Re 7A
U S WEST Communications
1 Q. IN U S WEST'S OPINION HAS THE COMMISSION
2 MET THIS CHALLENGE FROM THE LEGISLATURE?
3 A. I believe they have and they are continuing
4 to make progress in addressing the great interest in EAS
5 in Idaho.
6 Q. MOVING ON TO A NEW AREA, MR. HENDERSHOT HAS
7 RECOMMENDED THE COMMISSION REVIEW CREATION OF AN EAS
8 REGION WHICH HUBS ON ONTARIO, OREGON AND PAYETTE. IS
9 THIS SOUND ADVICE?
10 A. That is difficult for me to evaluate since
11 I am unaware of any petitions for EAS from customers of
12 Farmers Mutual, Midvale Telephone, Cambridge Telehone or
13 Council Telephone Company. It would not surprise me if
14 there were increased interest in EAS from customers in
15 these companies if the Commission ultimately grants the
16 petitions in this case. However, I don't believe the
17 Commission should hold off on deciding legitimate, long
18 standing petitions from U S WEST exchanges because of
19 possible future petitions from independent company
20 customers that may or may not materialize. I believe any
21 future case should be dealt with on its own merits at
22 that time and not prejudice or delay the Commission
23 decision in the current docket.
24 Q. DO YOU HAVE ANY COMMENT ON THE MERITS OF A
25 JOINT PAYETTE AND ONTARIO "MINI-REGION?"
53
John F. Souba, Re 8
U S WEST Communications
1 A. Only that I am unaware of any pending
2 petitions from Ontario subscribers for expanded calling
3 into Idaho. I spoke with Jim Jensen, president of
4 Malheur Telephone Company which serves Ontario, and he
5 indicated no appreciable interest on behalf of Ontario
6 subscribers
7
8 /
9
10 /
11
12 /
13
14
15
16
17
18
19
20
21
22
23
24
25
54
John F. Souba, Re 8A
U S WEST Communications
1 for participating in a "mini-region" made up of
2 additional Idaho exchanges. In fact, the Oregon
3 Commission has its own EAS standards and procedures which
4 are currently expanding Ontario's calling to Harper,
5 Oregon and is also considering EAS expansion to Farewell
6 Bend, Oregon.
7 On the Idaho side of Mr. Hendershot's
8 "mini-region," I am unaware of pressure from Payette,
9 Weiser and New Plymouth to expand their EAS calling
10 beyond the current petition. In summary, I believe the
11 Commission must deal with the current petition from
12 Payette, Weiser and New Plymouth and worry about the
13 consequences of any future actions by independent company
14 exchange customers based upon whatever those future
15 actions might be. I have high confidence that, if and
16 when the Idaho Commission is faced with EAS petitions
17 from independent company exchanges to join the Boise
18 region, the Commission will weigh the impacts of such a
19 decision and make the right decision which is in the
20 public interest.
21 Q. WOULD EXPANDING EAS TO ONTARIO CAUSE ANY
22 UNUSUAL COMPLICATIONS?
23 A. Yes. Any EAS involving an Idaho exchange
24 and the Ontario, Oregon exchange would require approval
25 of both the Idaho and Oregon Public Utilities
55
John F. Souba, Re 9
U S WEST Communications
1 Commission's. This adds increased complexity and lessens
2 the likelihood of receiving dual approvals of expanded
3 local calling.
4 Q. MR. SOUBA, AS A FINAL AREA OF
5 INVESTIGATION, ARE YOU AWARE OF ANY PROBLEMS RELATED TO
6 U S WEST PROVIDING INSUFFICIENT TRUNKING FOR TOLL CALLS
7 FROM FARMERS, MIDVALE AND CAMBRIDGE AS ALLUDED TO BY
8 MR. HENDERSHOT?
9
10 /
11
12 /
13
14 /
15
16
17
18
19
20
21
22
23
24
25
56
John F. Souba, Re 9A
U S WEST Communications
1 A. I am unaware of any specific problems with
2 any of the mentioned companies, although my duties would
3 not normally make me aware of such problems. I do know
4 that U S WEST monitors the reliability and throughput of
5 its toll network trunking and, when problems are
6 identified, the Company takes action to eliminate those
7 problems. If there are more specific allegations of
8 trunk sizing or slow response to add trunking from any of
9 these companies, I would be happy to comment on the
10 specific problem in more detail once I have been able to
11 research the allegation. As a final comment, the issue
12 of trunking levels between independent companies and
13 U S WEST does not seem to be helpful to the Commission in
14 making its EAS decision. If anything, a grant of EAS
15 should have the effect of eliminating toll trunking
16 problems by converting such traffic to local. Any
17 required U S WEST network expansions have been previously
18 determined by the Commission to be borne by residual
19 Revenue Sharing funds which would eliminate any incentive
20 for the Company to undersize the local network.
21 Q. DOES THIS CONCLUDE YOUR TESTIMONY?
22 A. Yes, it does.
23
24
25
57
John F. Souba, Re 10
U S WEST Communications
1 (The following proceedings were had in
2 open hearing.)
3 COMMISSIONER SMITH: Ms. Copsey, do you
4 have any questions?
5 MS. COPSEY: Yes, I have a few questions,
6 Madam Chair.
7
8 CROSS-EXAMINATION
9
10 BY MS. COPSEY:
11 Q Mr. Souba, have you read Mr. Hart's
12 rebuttal testimony?
13 A Yes, I have.
14 Q I draw your attention to Page 3, Line 3 of
15 his rebuttal testimony. Do you have it before you?
16 A I will in one moment. I have it.
17 Q On that page Mr. Hart recalculates
18 U S West's cost; is that correct?
19 A Yes, he does.
20 Q Do you agree with his calculation?
21 A Yes, I do.
22 Q Do you agree that the recalculation will
23 result in an approximate increase of 30 cents per month
24 per in-region line if the Commission approves these
25 petitions?
58
CSB REPORTING SOUBA (X)
Wilder, Idaho 83676 U S WEST
1 A Yes, I do. In fact, in my direct testimony
2 I commit to work with the Staff at the time of the actual
3 rate increases to work through the exact number of total
4 minutes and that calculation that will result in the
5 actual increase to in-region customers.
6 At this point I agree with Mr. Hart that that estimate is
7 30 cents.
8 Q Thank you. I would like to show you what's
9 been marked as Staff Exhibit 103. I think I gave you a
10 copy ahead of time. Can you identify that for the
11 record?
12 A Yes. This is a page from U S WEST
13 Communications' Basic Local Exchange Tariff. It is in
14 section 2, and it deals with general regulations.
15 MS. COPSEY: I'll give you a copy of that.
16 I would like to give this back to the Clerk.
17 I would like to move its introduction
18 into the record at this time.
19 COMMISSIONER SMITH: If there is no
20 objection, it's so ordered.
21 (Staff Exhibit No. 103 was admitted
22 into evidence.)
23 MS. COPSEY: I just have a few
24 questions.
25 Q (By Ms. Copsey) You've already described
59
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1 what it is. Can you look at subsection 4 on that page?
2 A Yes.
3 Q Can you tell us what that says? You don't
4 have to read it, but in essence what it says.
5 A Yes. Basically what it is saying is that
6 there is a prohibition from bridging of EAS areas and a
7 requirement that bridgers must purchase services from our
8 access service catalog.
9 Q And if they fail to do so, what does it
10 also provide?
11 A The Company shall immediately disconnect
12 such services purchased from this tariff or exchange in
13 our access service catalog.
14 Q In that event does the Commission need to
15 participate in that disconnect?
16 A I believe that based upon this tariff
17 provision and the close working relationship that the
18 Company has had with the Commission in eliminating EAS
19 bridging, that the Company's actions would probably start
20 by disconnecting a bridger and requiring that bridger to
21 file a complaint with the Commission against the
22 Company.
23 MS. COPSEY: Thank you. I have no further
24 questions.
25 COMMISSIONER SMITH: Thank you.
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1 Mr. Ward.
2
3 CROSS-EXAMINATION
4
5 BY MR. WARD:
6 Q Just a few, Mr. Souba. First of all, would
7 you agree with me that, as a practical matter, if these
8 petitions are granted, the potential option of forming
9 the new EAS mini region around the lower Payette and
10 Weiser Valley is foreclosed?
11 A Probably from a practical point of view you
12 are correct, only because once Payette and Weiser and New
13 Plymouth join the Boise region, I think it would be
14 difficult to establish a new region that would not
15 include the entire Boise area. U S WEST is concerned
16 about this EAS arbitrage issue.
17 And if, in fact, additional EAS were
18 granted between exchanges not in the region, and given
19 EAS to any of the three exchanges that will be joining
20 the region, those three exchanges become a bridging
21 location for illegal arbitrage. However, those cases, I
22 don't believe, are before the Commission yet. And I'm
23 not sure if and when they will be heard by the
24 Commission.
25 Q To the best of your knowledge, has there
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1 been any study or analysis of the comparative merits to
2 the customers in an area that I'm going to loosely
3 characterize as Payette and Washington Counties, of the
4 comparative benefits of EAS to a Payette/Ontario hub, as
5 compared to the Boise region, has anyone formally
6 analyzed that situation?
7 A Not to the best of my knowledge.
8 Q Just one other area. Are you familiar with
9 geography of the Weiser River Valley?
10 A I have driven through, yes.
11 Q Would you agree with me that there are no
12 natural barriers between Weiser and the upper end of that
13 valley all the way to New Meadows -- geographical
14 barrier?
15 A Yes, I would.
16 Q Finally, if the Commission grants these
17 petitions, and I'm thinking now of the Payette area
18 petitions, do you believe it's likely that there will be
19 additional petitions or additional EAS pressures from
20 other communities and other telephone companies in that
21 valley, the Weiser River Valley?
22 A In re-reading Mr. Hart's testimony prior to
23 this hearing, I did see reference in his direct testimony
24 to a request for additional local calling to Ontario, I
25 believe. It is certainly within the realm of possibility
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1 that there will be additional requests for EAS, if and
2 when Payette, Weiser, and New Plymouth are included in
3 the Boise region.
4 Q And without jumping over the merits of
5 that too far, you've taken the position in this case
6 that U S WEST should recover its costs incurred in
7 providing the EAS if these petitions are granted. Do
8 you believe that the independent companies should,
9 likewise, recover their costs if EAS is ultimately
10 granted in their service territories?
11 A I certainly do.
12 MR. WARD: That's all I have. Thank you.
13 COMMISSIONER SMITH: Thank you,
14 Mr. Ward.
15 We would like to acknowledge the presence
16 and welcome State Representative Donna Jones.
17 We're ready for questions from the
18 Commission.
19 Commissioner Nelson.
20
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25
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1 EXAMINATION
2
3 BY COMMISSIONER NELSON:
4 Q Ms. Copsey asked you those questions from
5 Mr. Hart's testimony, and I opened my book and found a
6 blank there. So I'm going to -- while I read that, I
7 don't have it memorized, and I want to do just a little
8 math here. If it's going to cost 30 cents a month a line
9 to grant these petitions -- we're talking about both
10 petitions, are we?
11 A Actually, allow me to clarify just a
12 second. The 30-cent calculation includes not just the
13 Payette, Weiser, New Plymouth, Glenns Ferry, Mountain
14 Home. The price for those exchanges that we are dealing
15 with in this hearing is approximately 12 cents. The
16 30-cent figure includes all of the previously granted
17 EASs in eastern Idaho for which the Company has not yet
18 taken a rate increase. It's everything granted today,
19 sir.
20 COMMISSIONER NELSON: That would throw
21 quite a different light on it, in my mind. Okay. If
22 that's the case, then I don't have any further
23 questions. Thank you.
24 COMMISSIONER SMITH: Commissioner Hansen.
25 COMMISSIONER HANSEN: No.
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Wilder, Idaho 83676 U S WEST
1 EXAMINATION
2
3 BY COMMISSIONER SMITH:
4 Q I guess, Mr. Souba, the concern I have is
5 I share some of the independent companies' concerns.
6 And I understand U S WEST's desire not to create any
7 opportunities for illegal bridging activities, but I'm
8 wondering if you were in the shoes of the independent
9 companies, do you see merit to their concerns, also?
10 A Madam Chair, I can understand that they
11 would have a concern. EAS is a difficult decision for
12 the Commission to make. What U S WEST has perceived
13 over the years is that petitioners for EAS can be
14 rather tenacious. I believe that the Eden/Hazelton
15 customers petitioned four times before they were
16 finally granted EAS.
17 Q Over 25 years.
18 A Over 25 years. I believe that there are
19 numerous other examples of multiple petitions being
20 faced by the Commission prior to the petitioners
21 getting what they really wanted. So I guess U S WEST
22 would say that if anything other than the Boise region
23 were to be given to the U S WEST exchanges of Payette,
24 Weiser, and New Plymouth, that my suspicion would be
25 they would be back in the hearing room with those same
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1 petitioners wanting inclusion in the Boise region.
2 As to the independent company exchanges
3 who are not a part of this hearing, if they are given
4 something less than the region; i.e., if they are given
5 a mini region including Payette and Weiser, for
6 instance, I believe that over time that will be
7 considered by them to be half a loaf and that they will
8 be visiting the Commission with additional petitions in
9 the future.
10 Q As you pointed out, EAS has evolved. And
11 I think Eden/Hazelton is an good example. 20 years
12 ago, 15 years ago, 10 years ago, the Commission
13 said, "No," and they probably had good reasons for
14 doing so. Then, as it became appropriate, the
15 Commission said, "Yes." So I'm just wondering if you
16 see any advantage to letting this progress slowly, as
17 opposed to projecting into the future and saying, "We
18 might get there 20 years from now, so let's do it
19 today"?
20 A I believe that the Commission, again, has
21 very difficult decisions to make in that regard. As to
22 whether it's appropriate for those exchanges to be
23 included in either a mini region or a larger region, I
24 think the Commission is going to have to take a hard
25 look at those petitions when it receives those
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1 petitions.
2 In evaluating the standards that were
3 created in the '93 case, one of the strong concerns
4 expressed by the Commission was the cost to the
5 Company. And I have great confidence that this
6 Commission, if it finds that the cost is too great,
7 will, in fact, deny a petition for EAS. So from a
8 U S WEST perspective, which provides my paycheck, we're
9 concerned that those issues might delay inevitable
10 result of an appropriate decision by the Commission for
11 Payette, Weiser, and New Plymouth.
12 COMMISSIONER SMITH: Thank you.
13 COMMISSIONER NELSON: Madam Chair, if I
14 might?
15 COMMISSIONER SMITH: Commissioner Nelson.
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Wilder, Idaho 83676 U S WEST
1 EXAMINATION
2
3 BY COMMISSIONER NELSON:
4 Q Going back to the 30 cents a line, that
5 line of questions that you were asked, you say 12 cents
6 is involved in this petition. So are you saying, then,
7 that there's 18 cents out there in unrecovered costs that
8 U S WEST is going to want to talk about?
9 A Because of the Company and the Staff and
10 the Commission's order in the EAS compensation case,
11 those 18 cents are due the Company. And so it is merely
12 a matter of when does U S WEST wish to begin recovering
13 those costs. U S West's opinion is that it wants to
14 eliminate yo-yoing of rates and raising rates every time
15 an EAS is granted.
16 As a result, the Company has held off until
17 the conclusion of this case to determine exactly how many
18 cases and what volume have been granted, and will make a
19 rate change then. Then we anticipate making rate changes
20 approximately annually after that. So it isn't a matter
21 of anything other than the Company providing
22 documentation to Staff to validate the 18 cents.
23 COMMISSIONER NELSON: Thank you. That's
24 helpful.
25 MS. COPSEY: Commissioner Nelson, if I
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1 might draw your attention to Page 15 of his testimony,
2 his direct testimony, when he lays out that this 30 cents
3 that we're talking about includes those EASs that were
4 previously determined by the Commission and ordered by
5 the Commission, and these were from the independents into
6 the EAS's regions.
7 And at that time the Commission put off the
8 actual calculation of that amount. And this is the
9 result of both the stipulation between the Company and
10 Staff, which was approved by the Commission, and those
11 earlier orders. So that's where the 18 cents is
12 associated with those previous EAS's that have already
13 been ordered.
14 COMMISSIONER NELSON: Thank you.
15 COMMISSIONER SMITH: Ms. Hobson.
16 MS. HOBSON: Well, that eliminates some of
17 my redirect. Thank you.
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Wilder, Idaho 83676 U S WEST
1 REDIRECT EXAMINATION
2
3 BY MS. HOBSON:
4 Q Mr. Souba, Ms. Copsey was asking you about
5 the Staff Exhibit 103 and procedures that that outlines
6 for handling an instance of EAS arbitrage. I believe you
7 indicated that U S WEST, under this tariff language,
8 would perhaps disconnect an instance of EAS bridging if
9 it should be detected. Then what is your best guess as
10 to what might occur after that, given your experience
11 with other EAS arbitrages?
12 A Having been down this road, without this
13 tariff language in place, I might add, we found a very
14 difficult process and a lengthy process to get final
15 approval to disconnect the service of the EAS bridger.
16 My expectation would be that if we disconnected the
17 service of an EAS bridger, that they would file a
18 complaint and an immediate request for reinstatement of
19 service, pending hearing of whether or not they were
20 involved in any illegal activity.
21 Whether the Commission would grant that
22 request or not, I dare not to speculate. But if they
23 did, then we would be back into a situation where a
24 potential lengthy proceeding could be required prior to
25 ultimate disconnection of service.
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Wilder, Idaho 83676 U S WEST
1 The EAS bridging is a very dangerous
2 animal. What it does, in one sense, is build a great
3 deal of loyalty among the customers who are enjoying that
4 service. And they get very angry when it's taken away.
5 So the Company believes that it will receive support from
6 the Staff on the first instance of finding this activity,
7 and that the appropriate action is to disconnect that
8 service immediately.
9 Q Mr. Souba, were you working on the EAS
10 bridging case this Commission decided a couple years ago
11 with the upper valley, I believe?
12 A Two cases, I believe. Upper Valley and
13 Valley Lake. Yes, I was.
14 Q Do you recall how long the process took,
15 including any appellate process that was involved in
16 those cases, to reach an ultimate conclusion?
17 A I don't have an exact figure, but I know it
18 was more than nine months.
19 Q Mr. Ward asked you whether there were
20 geographic barriers in the Weiser River Valley. I guess,
21 between Weiser and New Meadows. And I think you
22 indicated you did not recall any such barriers; is that
23 right?
24 A I'll be honest with you, Ms. Hobson, I'm
25 not so familiar with the geography that I can say there
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1 are or not. I have high confidence in Mr. Ward's
2 understanding of the geography of that area and I will
3 simply support him.
4 Q Wonderful. And you should be relieved to
5 know that I was not about to ask you about the Payette
6 escarpment, but instead I was going to ask if you knew
7 which telephone companies are per the communities in the
8 upper part of that valley, that is New Meadows and
9 McCall, Donnelly, that area?
10 A I believe there are three telephone
11 companies involved in the immediate area. Farmer's
12 Mutual, Cambridge, and Midvale Telephone Company.
13 Q Do you know which company serves McCall and
14 New Meadows?
15 A I believe that would be Citizens Telephone
16 Company.
17 Q Very good. Mr. Souba, I almost hesitate to
18 ask you this, but are you familiar with the fact that
19 Citizens Telephone Company presently has before this
20 Commission a petition or an application to offer its
21 customers optional calling plans that they feel meet
22 their customers' calling needs?
23 A I am aware. However, I am not the staff
24 manager of U S WEST who is following that case.
25 Q Do you know, based upon your general
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1 awareness, whether Citizens Telephone Company is
2 suggesting that its customers need EAS to -- McCall,
3 Donnelly, and New Meadows customers need EAS to the Boise
4 region, do you know one way or the other what they are
5 suggesting?
6 A I do not.
7 MS. HOBSON: That's all I have.
8 COMMISSIONER SMITH: Thank you,
9 Ms. Hobson. Thank you, Mr. Souba.
10 (The witness left the stand.)
11 COMMISSIONER SMITH: Does that conclude
12 your case?
13 MS. HOBSON: Yes. Thank you.
14 COMMISSIONER SMITH: We'll go to
15 Ms. Copsey.
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25
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1 WAYNE HART
2 produced as a witness at the instance of the Staff,
3 having been first duly sworn, was examined and testified
4 as follows:
5
6 DIRECT EXAMINATION
7
8 BY MS. COPSEY:
9 Q Thank you, Mr. Hart. Would you please
10 state your name, position, and current business address
11 for the record.
12 A My name is Wayne Hart, H-a-r-t. I'm
13 employed as a telecommunications analyst for the Idaho
14 Public Utilities Commission here in Boise.
15 Q Are you the technical analyst in this case?
16 A Yes, I am.
17 Q Mr. Hart, in preparation for your
18 appearance today, did you cause to prefile direct
19 testimony dated September 14, 1998, consisting of
20 19 pages?
21 A I did.
22 Q Did you also cause to be filed prefiled
23 rebuttal testimony dated September 22, consisting of five
24 pages, with the Commission?
25 A I did.
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Wilder, Idaho 83676 Staff
1 Q Did that testimony include Exhibit
2 Nos. 101 and 102 filed under seal as confidential and
3 proprietary, that direct testimony?
4 A At least Exhibit 102 was confidential,
5 yes. It did include two exhibits.
6 Q Were those exhibits prepared by you or
7 under your direction and control?
8 A Yes.
9 Q If I were to ask you the testimony that is
10 found in both your prefiled direct and your prefiled
11 rebuttal testimony, if I ask those same questions would
12 your answers be the same as given in that testimony?
13 A They would. I would point out that the
14 confidential exhibit was revised, and a revised copy of
15 that was provided to the parties. I also received a copy
16 of the confidential exhibit in accordance with the
17 revised exhibit, yes.
18 Q Do you have any corrections to your
19 testimony, either one?
20 A No.
21 MS. COPSEY: Madam Chair, I would move that
22 Mr. Hart's direct and rebuttal testimony be spread upon
23 the record as it's read.
24 COMMISSIONER SMITH: If there's no
25 objection, it's so ordered.
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Wilder, Idaho 83676 Staff
1 (The following prefiled direct and
2 rebuttal testimony of Mr. Hart is spread upon the
3 record.)
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CSB REPORTING HART (Di)
Wilder, Idaho 83676 Staff
1 Q. Please state your name and address.
2 A. My name is Wayne Hart. My business address
3 is 472 West Washington, Boise, Idaho.
4 Q. By whom are you employed, and in what
5 capacity?
6 A. I am employed by the Idaho Public Utilities
7 Commission (IPUC; Commission) as a Telecommunications
8 Analyst in the Telecommunications Section.
9 Q. What is your educational background?
10 A. I received a Master's Degree in Bacteriology
11 from the University of Wisconsin in Madison, Wisconsin,
12 and a Bachelor's Degree in Biological Sciences from
13 Indiana University in Bloomington, Indiana.
14 Q. Please outline your experience that is
15 relevant to your testimony.
16 A. I served as a Utilities Compliance
17 Investigator since May of 1994, and have handled nearly
18 2500 complaints, comments and inquiries, with over 1500
19 of those involving telecommunications issues, since
20 joining the IPUC Staff. I served on the Staff team that
21 performed a service quality audit of U S WEST in 1995 and
22 1996 for Case No. USW-S-95-4. I joined the
23 Telecommunications Staff in March of 1997.
24 Q. Have you previously testified before this
25 Commission?
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1 A. Yes. I presented testimony in Idaho Power's
2 general rate case (IPC-E-94-5) in 1995, in the recent
3 U S WEST and GTE rate cases (USW-S-96-5, GTE-T-98-5), and
4 in other EAS cases.
5 Q. What is the purpose of your testimony?
6 A. The purpose of my testimony is to address
7 the petitions received by the Commission requesting
8 extended area service (EAS) from the customers in the
9 U S WEST Communications, Inc. (U S WEST; Company)
10 exchanges of Mountain Home and Glenns Ferry to the
11 Treasure Valley extended calling area (Case No USW-T-97-
12 6) and from the exchanges of Payette, New Plymouth and
13 Weiser to each other and to the Treasure Valley extended
14 calling area (Case No. USW-S-96-6). I will respond to
15 the community of interest factors as set forth in
16 Commission Order No. 26311, which established guidelines
17 and factors to be followed when evaluating EAS petitions.
18 Q. What towns or communities are included in
19 the Treasure Valley extended calling area the petitioners
20 are requesting?
21 A. The Treasure Valley extended calling area
22 currently includes the communities of Boise, Caldwell,
23 Eagle, Emmett, Idaho City, Kuna, Melba, Meridian,
24 Middleton, Nampa and Star.
25
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1 COMMUNITY OF INTEREST STANDARDS
2 Q. What are the criteria that the Commission
3 established for EAS as set forth in Order No. 26311?
4 A. Order No. 26311 states:
5 we find that many of these factors
are appropriate in evaluating the
6 community of interest existing
between two exchanges. The factors
7 may be divided into two categories.
We find that the first category
8 carries more significance that the
second category. The first category
9 of factors includes: [1] geographic
proximity (distance between exchanges);
10 [2] the presence of geographic or
other physical barriers (mountains,
11 rivers, valleys) between exchanges;
[3] county seat relationship
12 (are both exchanges in the same
County); [4] the relationship to
13 school district (do both exchanges
share the same school district);
14 [5] the proximity to medical facilities
and services; and [6] the willingness
15 of customers to pay increased rates.
We believe these factors, in addition
16 to the calling data shall be designated
as the primary factors or guidelines
17 to be applied in evaluating community
of interest for EAS routes.
18
19 Q. What factors are in the second category?
20 A. The Order goes on to state:
21 The second set of factors represent
refinements or adjustments to our
22 primary community-of-interest factors.
The secondary set of factors include:
23 [1] the number of lines in the home
exchange(s) and the target exchange(s);
24 [2] toll-free access to information
providers (e.g. Internet, on-line
25 databases, distance learning resources);
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9/14/98 Staff
1 and [3] the number of foreign exchange,
private line and 1-800 customers in
2 each exchange.
3 MOUNTAIN HOME AND GLENNS FERRY
4 Q. Let's examine the Mountain Home and Glenns
5 Ferry case first. How do these exchanges fare in
6 relationship to "geographic proximity"?
7 A. As can be seen from Staff Exhibit No. 101,
8 Mountain Home and Glenns Ferry share a border but neither
9 shares a border with any of the exchanges in the Treasure
10 Valley extended calling area. The Mountain Home exchange
11 is separated from the Boise exchange by Rural Telephone's
12 Tipanuk exchange, which has also petitioned for calling
13 into the Treasure Valley extended calling area (Case
14 No. GNR-T-97-9). Mountain Home is 43 miles from Boise,
15 while Glenns Ferry is 65 miles from Boise.
16 Q. What about the presence of geographic or
17 other physical barriers?
18 A. The Mountain Home and Glenn Ferry exchanges
19 share a contiguous boundary. They are separated from the
20 Treasure Valley extended calling area by a stretch of
21 dessert. However, changes in technology, better roads,
22 higher speed limits and growth in both directions have
23 now turned the trip between Boise and Mountain Home,
24 which used to seem to take forever, into a matter of
25 minutes. With some development visible from nearly every
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1 point along the freeway, the once desolate and barren
2 stretch is essentially being eliminated.
3 Q. What about county seat relationships?
4 A. All of the Mountain Home exchange and most
5 of the Glenns Ferry exchange lie within Elmore County, of
6 which Mountain Home is the county seat. A small section
7 of the Glenns Ferry exchange goes into Owyhee County.
8 These residents would need to call Murphy, the county
9 seat, or Bruneau or Homedale, the larger cities in Owyhee
10 County to obtain county services. Murphy is served by U
11 S WEST and is part of the Melba exchange, which is in the
12 Treasure Valley calling area. Homedale is served by
13 Citizens and, depending upon the Commission's decision in
14 Case No. CTC-T-98-03, Homedale may also be included in
15 the Treasure Valley calling area.
16 Q. What about school district boundaries?
17 A. The Mountain Home District reported a number
18 of students who could not be reached without long
19 distance calls. However, these students lived in the
20 Tipanuk, Pine, Atlanta, Boise River and Grandview
21 exchanges, which are not directly under consideration in
22 this case. The Glenns Ferry District indicated they did
23 not currently have any students outside of either the
24 Glenns Ferry or Mountain Home exchanges. Glenns Ferry
25 already has EAS to Mountain Home.
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1 All the school districts indicated that
2 teachers lived outside of the exchange in which the
3 school was located and in the exchanges for which
4 extended calling had been requested. District officials
5 also indicated parents often worked in the foreign
6 exchanges and admitted that teachers and other officials
7 were somewhat hesitant to contact the parents of these
8 students because of the long distance charges, and that
9 communication with such families suffered as a result.
10 Q. What medical care is available locally?
11 A. Medical facilities are available in each of
12 these communities, and a number of physicians, dentists
13 and other providers are available with a local call.
14 There is a hospital in Mountain Home that provides basic
15 medical needs. Glenns Ferry has a clinic, staffed with a
16 Physician's Assistant or Nurse Practitioner. However,
17 most specialized care would require a long distance call.
18 Q. How about other business and commerce needs?
19 A. For the most part, these communities are
20 fairly self reliant with a well developed business
21 district. Most of the day-to-day needs of residents can
22 be found locally. The combined business community of
23 Mountain Home and Glenns Ferry includes banks, office
24 supply stores, major grocery stores, farm supply stores,
25 implement dealers, car and truck dealers, clothing
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1 stores, drug stores, and facilities providing most other
2 common needs.
3 Q. Have the customers indicated a willingness
4 to pay increased rates?
5 A. Yes, although the amount the customers
6 indicated they would be willing to pay was somewhat less
7 than Staff's projection of the actual price impacts
8 expected from a Commission decision to grant EAS over
9 these routes. Slightly more than half of the petitioners
10 from the Mountain Home area indicated a willingness to
11 pay more than $3 dollars a month more if EAS were
12 granted, with more than 20% willing to pay more than $5
13 dollars a month.
14 Q. Turning to the secondary criteria, what are
15 the number of lines in the home and target exchanges?
16 A. Staff Exhibit No. 102, which contains data
17 U S WEST has identified as confidential, contains the
18 average number of lines, both business and residential,
19 for the affected exchanges.
20 Q. What about access to information providers?
21 A. This is an area which is improving.
22 Residents in each of these 2 exchanges have 3 Internet
23 service providers that can be accessed with a local call.
24 Cyberhighway franchises are located in both Mountain Home
25 and Glenns Ferry. Micron Internet Services now has a
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1 local point of presence in Mountain Home. In addition,
2 there is one additional independent local business
3 providing a local dial-up number in Mountain Home. As
4 Glenns Ferry currently has extended area service to
5 Mountain home, customers in both of these exchanges can
6 reach the Mountain Home dial-up numbers without incurring
7 a toll charge.
8 Q. What does the calling data indicate?
9 A. In Case No. GNR-T-93-13, the various
10 intervening parties recommended that the number of calls
11 per line per month range from between 5 and 8 calls.
12 However, the Commission refused to endorse any specific
13 number in that case, partially due to the unreliability
14 of calling data.
15 Q. What was the calling volume or average
16 calls per customer per month?
17 A. Customers from the Glenns Ferry exchange
18 made an average of nearly 6 calls per month per line into
19 the exchanges within the Treasure Valley calling area,
20 with the Boise exchange accounting for nearly 5 of the 6
21 calls. Customers from the Mountain Home exchange made a
22 slightly higher number of calls, averaging just over 7
23 calls per month per line to the Treasure Valley calling
24 area. Again, calls to the Boise exchange made up the
25 bulk of the calling, averaging over 5.5 calls per line
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1 per month.
2 Q. What does the call distribution data
3 indicate?
4 A. Call distribution information for the
5 calling region as a whole was not available. However,
6 using data for calling from these exchanges into the
7 Boise exchange, which would typically be lower than the
8 values for the region as a whole, gives some information
9 about the distribution of calling from these exchanges.
10 Q. What does the data for calling to the Boise
11 exchange indicate?
12 A. The information provided for Mountain Home
13 and Glenns Ferry indicated that between 50% and 60% of
14 the customers made 3 or more calls per month into the
15 Boise exchange. Approximately one third of the lines in
16 Mountain Home and Glenns Ferry did not place any calls to
17 the Boise exchange.
18 Q. What do you conclude about the community of
19 interest?
20 A. While the community of interest between
21 Mountain Home and Glenns Ferry and the other communities
22 in the Treasure Valley extended calling area is not as
23 strong as the other EAS cases in which I have testified,
24 it is within the range that I would consider acceptable.
25 There is no question that Mountain Home and Glenns Ferry
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1 are a part of the regional economy of the Treasure
2 Valley. Many of the goods and services that were once
3 available locally are now only available from Boise.
4 Listening to the rush hour traffic reports, its clear
5 that many individuals from the Mountain Home and Glenns
6 Ferry areas work in the Treasure Valley as well.
7 PAYETTE, NEW PLYMOUTH AND WEISER
8 Q. Turning to the Payette, New Plymouth and
9 Weiser case (Case No. USW-T-96-6), how do these exchanges
10 fare in relationship to "geographic proximity"?
11 A. As can be seen from Staff Exhibit No. 101,
12 the Payette and Weiser exchanges share a border. The New
13 Plymouth exchange shares a border with Payette. The New
14 Plymouth exchange also shares a border with the Emmett
15 and Caldwell exchanges, which are both part of the
16 Treasure Valley extended calling area. Using the
17 vertical and horizontal coordinates formula, the same
18 formula used by most long distance companies to calculate
19 the distance between central offices, Weiser is 13 miles
20 from Payette, 21 miles from New Plymouth, and 58 miles
21 from Boise, the metropolitan center of the Treasure
22 Valley extended calling area.
23 Q. What about the presence of geographic or
24 other physical barriers?
25
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1 A. Although Weiser is in the Weiser River
2 drainage and Payette and New Plymouth in the Payette
3 River drainage, there really isn't much of a divide
4 between the 2 drainages. The land between these 3
5 communities is predominantly farmland. The same can be
6 said about the boundaries and land between New Plymouth
7 and the Caldwell and Emmett exchanges of the Treasure
8 Valley calling area.
9 Q. What about county seat relationships?
10 A. The Payette exchange extends slightly into
11 Washington County, but lies mostly within Payette County,
12 of which Payette is the county seat. The New Plymouth
13 exchange also lies mostly within Payette County, but also
14 includes a small portion of Gem County, of which Emmett
15 is the county seat. The Weiser exchange lies entirely
16 within Washington County, of which Weiser is the county
17 seat.
18 Q. What about school district boundaries?
19 A. School district boundaries are also shared
20 by these exchanges. Weiser School District officials
21 indicated a number of families located in the Weiser
22 District had Payette exchange phone numbers. The Payette
23 District indicated they had students attending their
24 schools from the Weiser District with Weiser phone
25 numbers. However, these families chose to attend Payette
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1 instead of Weiser, often because of where the parents
2 worked.
3 All the school districts indicated that
4 teachers lived outside of the exchange in which the
5 school was located and in the exchanges for which
6 extended calling had been requested. District officials
7 also indicated parents often worked in the foreign
8 exchanges and admitted that teachers and other officials
9 were somewhat hesitant to contact the parents of these
10 students because of the long distance charges, and that
11 communication with such families suffered as a result.
12 Q. What medical care is available locally?
13 A. Each of these 3 communities has access to
14 both physicians and dentists with a local call. There
15 are hospitals in Weiser and Ontario (a local call from
16 Payette) that provide basic medical needs. Only New
17 Plymouth would not be able to reach a hospital with a
18 local call. However, most specialized care would require
19 a long distance call. In addition, many residents of the
20 Payette, and especially New Plymouth, exchanges would
21 find the hospital in Caldwell (or Emmett), was closer
22 than the hospital in Ontario, especially in terms of
23 time.
24 Q. How about other business and commerce needs?
25 A. For the most part, these communities,
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1 especially Payette and Weiser, are fairly self reliant
2 with a well developed business district. Most of the
3 day-to-day needs of residents can be found locally. Both
4 Weiser and Payette have banks, fast food outlets, office
5 supply stores, major grocery stores, farm supply stores,
6 implement dealers, car and truck dealers, clothing
7 stores, drug stores, and facilities providing most other
8 common needs.
9 Q. Have the customers indicated a willingness
10 to pay increased rates?
11 A. Yes, although the amount the customers
12 indicated they would be willing to pay was somewhat less
13 than Staff's projection of the actual price impacts
14 expected from a Commission decision to grant EAS over
15 these routes. Payette-Weiser area customers signing the
16 petitions were not willing to pay the $5.50 difference
17 between current out-of-region rates and the in-region
18 rates. More than a quarter of those petitioners only
19 indicated a willingness to pay less than $1 dollar, and
20 nearly 60% only willing to pay between $1 and $3 dollars
21 a month. Only 16% indicated a willingness to pay more
22 than $3 dollars a month. While the response on petitions
23 often indicates a desire, rather than willingness, this
24 response does cause some concern.
25 Q. Turning to the secondary criteria, what are
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1 the number of lines in the home and target exchanges?
2 A. Staff Exhibit No. 102, which contains data
3 U S WEST has identified as confidential, contains the
4 average number of lines, both business and residential,
5 for the affected exchanges.
6 Q. What about access to information providers?
7 A. This is an area which is improving.
8 Residents in each of these exchanges have at least one
9 Internet service provider that can be accessed with a
10 local call and many have a choice of 2 local providers.
11 Cyberhighway franchises are located in Payette, New
12 Plymouth, and Weiser. Micron Internet Services now has a
13 local point of presence in Ontario which is a local call
14 for Payette.
15 Q. What does the calling data indicate?
16 A. In Case No. GNR-T-93-13, the various
17 intervening parties recommended that the number of calls
18 per line per month range from between 5 and 8 calls.
19 However, the Commission refused to endorse any specific
20 number in that case, partially due to the unreliability
21 of calling data.
22 Q. What was the calling volume or average calls
23 per customer per month?
24 A. Calling volumes from the Payette, New
25 Plymouth and Weiser areas all exceeded the low end of the
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1 threshold values identified in GNR-T-93-13. New Plymouth
2 customers averaged a total of 11.4 calls per line per
3 month into the Treasure Valley calling area. As might be
4 expected for an exchange that borders the Caldwell and
5 Emmett exchanges, calling from New Plymouth was more
6 dispersed through the calling area with less than half of
7 the calls going to the Boise exchange, with the Emmett,
8 Caldwell and Nampa exchanges each receiving approximately
9 15% of the New Plymouth calls. Weiser customers made an
10 average of just over 6 calls per line per month to the
11 region with over half of those going to Boise. Payette
12 customers made just under 7 calls per line per month,
13 with about half going to Boise.
14 Q. What about calling between Payette and
15 Weiser?
16 A. Weiser callers placed an average of 2.6
17 calls per line per month into the Payette exchange, while
18 Payette customers placed an average of 2.3 calls per
19 month per line to Weiser. New Plymouth customer placed
20 an average of 1.8 calls per line per month into Weiser.
21 Q. What does the call distribution data
22 indicate?
23 A. Call distribution information for the
24 calling region as a whole was not available, however,
25 using data for calling from these exchanges into the
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1 Boise exchange, which would typically be lower than the
2 values for the region as a whole, gives some information
3 about the distribution of calling from these exchanges.
4 Q. What does the data for calling to the Boise
5 exchange indicate?
6 A. The calling data for Payette, Weiser and New
7 Plymouth indicated that approximately half of the lines
8 made 1 or more calls to Boise. Call distribution data
9 for calling between Weiser and Payette was not available.
10 Q. What do you conclude about the community of
11 interest?
12 A. These communities lie on the outer edge of
13 what is typically referred to as the Treasure Valley.
14 There is no question that there is a heavy reliance on
15 Boise and the other large cities in the Treasure Valley
16 extended calling area for many specialized needs. These
17 rural communities are growing more dependent upon the
18 larger metropolitan cities, and this dependency is likely
19 to continue to grow. Many businesses, including those
20 regulated by this Commission, have closed their rural
21 branch offices in these cities and centralized their
22 operations in the metropolitan cities. The business
23 districts in these towns, although stronger than some
24 small towns, show the same kinds of changes that are
25 occurring to small towns throughout the country. Many of
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1 the goods and services that were once available locally
2 are now only available from Boise, Caldwell or Nampa.
3 The calling volumes to the region, while lower than
4 previous EAS cases in which I have testified, support the
5 petitioners claim that these communities are part of the
6 Treasure Valley.
7 EAS COSTS
8 Q. What costs are associated in providing EAS?
9 A. In Order No. 27633, the Commission accepted
10 a Stipulation Agreement between U S WEST and the
11 Commission Staff that defined the terms for any
12 compensation that U S WEST would receive if additional
13 exchanges were added to the Company's regional calling
14 areas in Southern Idaho. In summary, the Stipulation
15 provides that the Company would be entitled to additional
16 revenue of $0.0861 per toll minute of use, minus the net
17 increase in revenues the Company would receive from
18 raising the rates for the customers of the added
19 exchanges to the "in-region" rates currently in effect.
20 Q. What is the net result of your calculations?
21 A. If all of these exchanges were added to the
22 Treasure Valley region, the Company would be entitled to
23 an additional amount that is just under $600,000 per
24 year.
25
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1 Q. What would the impact be on all U S WEST
2 customers?
3 A. The annual costs per customer would be
4 approximately $1.50, or between 12 and 13 cents per
5 month.
6 Q. Does Staff recommend the Commission grant
7 extended area service over these routes?
8 A. Probably. These cases both involve
9 exchanges that are on the outer edge of what most would
10 consider the Treasure Valley. The community of interest
11 ties, while present, are marginal. In addition, these
12 petitions were submitted at a time when the rate
13 differential between the in-region and out-of-region
14 rates was considerably less than it is today. Staff
15 questions whether the majority of customers in these
16 exchanges would still support expanded area calling at
17 the rates that would be required. If the Commission
18 determines that the majority of customers in these
19 exchanges are willing to pay the in-region rates, Staff
20 supports including these exchanges in the Treasure Valley
21 calling area.
22 Q. Some of the petitions requested extended
23 area service to Ontario and other communities in
24 Washington County as well. Have you looked into these
25 routes?
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1 A. Not yet. When the petitions dealing with
2 other exchanges in Washington County and Ontario were
3 first received by the Commission, Staff felt it would
4 make the case too complicated to deal with multiple
5 companies and multiple states all at once. Staff
6 recommended, and the Commission agreed, to address the
7 routes involving calls between U S WEST exchanges in this
8 case, which had already been established, and to deal
9 with the U S WEST routes first. Staff expects to address
10 the routes involving the other companies' exchanges after
11 a decision is reached in this case.
12 Q. Does this conclude your direct testimony in
13 this proceeding?
14 A. Yes, it does.
15
16
17
18
19
20
21
22
23
24
25
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1 Q. Please state your name and address.
2 A. My name is Wayne Hart. My business address
3 is 472 West Washington, Boise, Idaho.
4 Q. By whom are you employed, and in what
5 capacity?
6 A. I am employed by the Idaho Public Utilities
7 Commission (IPUC; Commission) as a Telecommunications
8 Analyst in the Telecommunications Section.
9 Q. Are you the same Wayne Hart who previously
10 filed direct testimony in this proceeding?
11 A. Yes, I am.
12 Q. What is the purpose of this rebuttal
13 testimony?
14 A. I will respond to concerns expressed by
15 U S WEST and ITA witnesses about the extent of the
16 region, compensation and EAS bridging.
17 Q. On page 3 of the testimony prefiled in this
18 case by U S WEST witness John Souba, he refers to a new
19 "Standard" of granting EAS to an entire region. Does
20 Staff support such a "Standard?"
21 A. No. Staff believes this issue should be
22 decided on a case by case basis. In this particular
23 case, I think considering the U S WEST Treasure Valley
24 extended calling region as a whole makes sense and
25 equally important there is no compelling reason to do
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1 otherwise. However, there are circumstances where this
2 may not be the case, and Staff does not believe the
3 Commission should limit its options in all cases to those
4 that only consider the entire region.
5 Q. What about the EAS arbitrage issue he also
6 raised on page 3?
7 A. EAS bridging is a valid concern, but there
8 are ways of addressing this concern other than denying
9 customers options that are otherwise within the public
10 interest. The Company now has prohibitions against EAS
11 bridging services in its tariffs, which provide it the
12 tools to address this potential problem in a timely
13 manner. Staff also believes the Company's concerns on
14 this issue are out of proportion to the actual risk. It
15 is technically possible to bridge calls between New
16 Plymouth, which has EAS into Payette, and Ontario, which
17 also has EAS into Payette, right now, yet Staff is not
18 aware of any problems in this area.
19 Q. What about his concern about customer's
20 perceptions about not having the "whole thing?"
21 A. I don't think that would be a significant
22 problem, as long as they were not paying the same rates
23 as those who do get the "whole thing."
24 Q. Near the bottom of page 15 of his testimony,
25 Mr. Souba identifies an approximate increase of 32 cents
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1 to each in-region line. Do you agree with his
2 calculation?
3 A. Not entirely. In Mr. Souba's calculation,
4 the amount of the cost to be recovered is based upon the
5 total volume of toll minutes, from both Title 61 and
6 Title 62 customers, yet he distributes this requirement
7 solely among Title 61 customers. Staff was concerned
8 that this would allow rates paid by Title 61 customers to
9 subsidize services used by Title 62 customers. Staff
10 discussed this concern with U S WEST. U S WEST asserted
11 that the calculation of the cost shifts between Title 61
12 and Title 62 customers made by Ms. Wright in the rate
13 case, Case No. USW-T-96-5, that was the basis from which
14 the cost per minute compensation rate was developed
15 already adjusted for the Title 61 and Title 62
16 redistribution. Therefore, U S WEST took the position
17 that since the costs and cost method already accounted
18 for these shifts, it was not appropriate to make any
19 further adjustment. Staff agreed to split the difference
20 and include half of the Title 62 lines in the
21 calculation. The result of this change is a decrease in
22 the approximate increase to slightly more than 30 cents
23 per month per in-region line. It was also agreed that
24 the actual calculations would be completed at the time of
25 implementation of any extended calling area, and the
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1 number of lines used in the calculation would be updated
2 to the most recently available data.
3 Q. Do you see any merit to the ideas expressed
4 on pages 6 and 7 of the testimony of the Idaho Telephone
5 Association's witness, Mr. Ray Hendershot, that an
6 extended calling region involving Payette, Washington,
7 and portions of Adams County, hubbed on Payette and
8 Ontario, Oregon, is a better option to including Payette,
9 Weiser and New Plymouth in the Treasure Valley extended
10 calling region?
11 A. The only relatively recent data I have
12 concerning calling to Ontario is from Case No.
13 MTB-T-90-7, where the Commission denied EAS between New
14 Plymouth and Ontario. That calling data, which is nearly
15 ten years old, indicates the volume of calls per line
16 between Ontario and New Plymouth in 1990 was
17 approximately half of the volume of calls per line in
18 1996 from New Plymouth to the Treasure Valley extended
19 calling region, and in the same range as the volume of
20 calls from Weiser to the Treasure Valley region. That
21 data provides at least some support to an option of a
22 separate region hubbed by Payette and Ontario. However,
23 it also indicates that for many customers, especially in
24 the New Plymouth exchange, it may not be preferred over
25 an option that includes the Treasure Valley extended
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1 calling area.
2 Q. Does this conclude your rebuttal testimony
3 in this proceeding?
4 A. Yes, it does.
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
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1 (The following proceedings were had in
2 open hearing.)
3 MS. COPSEY: I do, also, have a few other
4 questions based on what's already occurred.
5
6 DIRECT EXAMINATION
7
8 BY MS. COPSEY (Continued):
9 Q Has the Commission received additional
10 petitions for EAS from Midvale customers, Cambridge, or
11 Council customers?
12 A We have received petitions from Washington
13 County residents requesting EAS into the exchanges within
14 Washington County and Payette County, as well as into the
15 Boise region, as well as into Ontario.
16 Q Has the Commission already issued any
17 notices for those petitions?
18 A No. Those petitions were received starting
19 in October of 1997, and Staff prepared a memo to the
20 Commission acknowledging that this case was already
21 underway, and suggesting that the petitions be, as they
22 pertained to this case, that they be made a part of the
23 record in this case. And that the additional exchanges'
24 request for EAS, for the other exchanges not currently a
25 part of this case, be deferred until after this case was
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Wilder, Idaho 83676 Staff
1 concluded.
2 Q Are you also familiar with the fact that
3 petitioners in this case have requested EAS to Ontario,
4 Oregon?
5 A Yes.
6 Q Did the Commission defer action in this
7 part of the request at the same time that it deferred
8 action on the new petitions?
9 A Yes.
10 Q And I want to ask one or two more questions
11 along that line. Are you familiar with the earlier case
12 dealing with the request for EAS between New Plymouth and
13 Ontario, Oregon, that occurred -- I think it's
14 NTB-T-90-7?
15 A I have read some of the documents from that
16 case. I was not with the Commission at that time.
17 Q Are you familiar with what the Commission
18 did in that case?
19 A They denied the petition.
20 MS. COPSEY: And at this time I would ask
21 the Commission to take official notice of Order No.
22 23827, which was issued in NTB-T-90-7, pursuant to the
23 Rules of Procedure 263. I have no further questions.
24 MR. WARD: Madam Chairman, before you do
25 so, I'm not sure I have an objection, but maybe Counsel
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Wilder, Idaho 83676 Staff
1 can tell me why she thinks that's relevant.
2 MS. COPSEY: I don't think it's strictly
3 relevant, but I wanted to make sure the record was
4 complete as to what had earlier occurred with requests
5 for EAS to Ontario, Oregon. I don't think it's
6 necessary, but I would like to take official notice of
7 it.
8 COMMISSIONER SMITH: Ms. Hobson, do you
9 have any questions for Mr. Hart?
10 MS. HOBSON: Thank you.
11
12 CROSS-EXAMINATION
13
14 BY MS. HOBSON:
15 Q Mr. Hart, are you aware that the EAS
16 petitions to which you have referred, that is Washington
17 County to various places, and the other petitions from
18 New Plymouth were not served on
19 U S WEST?
20 A That wouldn't surprise me.
21 Q I'm now going to further demonstrate the U
22 S WEST lack of information about geography by asking you
23 which communities are located in Washington County from
24 which you are receiving petitions?
25 A I believe it includes the communities of
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CSB REPORTING HART (X)
Wilder, Idaho 83676 Staff
1 Midvale and Cambridge, but not Council. But I would not
2 say that my geography was excellent.
3 Q Did you understand those customers to be
4 served by the Midvale and Cambridge Telephone Companies,
5 respectively?
6 A I did. The petitions also reference
7 Fruitland, which includes the Farmers Telephone
8 Cooperative.
9 Q Is Fruitland in Washington County?
10 A It's in Payette County.
11 Q So do we have the petition from Fruitland?
12 A The petitions included -- requested EAS
13 between the communities of Payette County and Washington
14 County, and the Boise region or the Terasure Valley
15 region. I cannot say for sure that there were any
16 Fruitland residents that signed -- or Farmers customers
17 that signed the petitions we received, but the petitions
18 were fairly encompassing.
19 Q Excuse me, Mr. Hart. If I could direct
20 your attention just briefly to your rebuttal testimony on
21 Page 1?
22 A Unfortunately, that's one I forgot to pick
23 up. Thank you. I'm ready.
24 Q Do I correctly understand your testimony
25 that on the facts of this case Staff believes that it
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Wilder, Idaho 83676 Staff
1 makes sense for the Commission to consider the granting
2 of EAS from the petitioning U S WEST exchanges that is
3 New Plymouth, Weiser, and Payette to the whole Boise
4 region?
5 A Would you repeat that?
6 Q I'm questioning whether Staff thinks -- I
7 think this is what you're stating on Page 1, that it
8 makes sense for the Commission to consider granting EAS
9 from the U S WEST petitioning exchanges to the whole
10 U S WEST Boise region?
11 A I think it does.
12 Q And so the import of your testimony is only
13 that Staff thinks there may be other cases in the future
14 that are not before the Commission right now where it may
15 want to consider granting EAS to outlying exchanges which
16 EAS would not include the whole region?
17 A That's correct.
18 Q When you are considering that, are you
19 considering some of these petitions that have not been
20 served on U S WEST from these outlying exchanges?
21 A I didn't have any specific instances in
22 mind.
23 Q So that's just a general observation; Staff
24 wants to keep its options open to analyze those cases on
25 a case-by-case basis?
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CSB REPORTING HART (X)
Wilder, Idaho 83676 Staff
1 A That's correct.
2 Q It's true, is it not, that in eastern Idaho
3 the Commission has not considered partial grants of EAS,
4 but has, in fact, granted the whole eastern Idaho region
5 to petition the exchanges that want to get into that
6 region?
7 A I can't say what the Commission has
8 considered. I have to agree with you that's what they
9 granted.
10 Q Are you aware of any case in eastern Idaho
11 where the Commission -- since the creation of the eastern
12 Idaho U S WEST region, where the Commission has denied an
13 EAS petition from either a U S WEST exchange or an
14 independent exchange into the whole region?
15 A I don't think so.
16 MS. HOBSON: That's all I have.
17 Thank you.
18 COMMISSIONER SMITH: Thank you,
19 Ms. Hobson.
20 Mr. Ward.
21
22
23 CROSS-EXAMINATION
24
25 BY MR. WARD:
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Wilder, Idaho 83676 Staff
1 Q Mr. Hart, do you happen to have a
2 calculator with you?
3 A No, I do not.
4 MR. WARD: Could we take a couple minutes?
5 COMMISSIONER SMITH: We will be at ease for
6 a few moments while we obtain a calculator.
7 (Recess.)
8 COMMISSIONER SMITH: I believe,
9 Mr. Ward, we were with you.
10 MR. WARD: Thank you, Madam Chair. May I
11 inquire if the Commissioners have the proprietary Exhibit
12 102 with Mr. Hart's testimony?
13 COMMISSIONER SMITH: Is this the
14 handwritten one-page faintly visible Xerox copy?
15 MR. WARD: No.
16 MS. COPSEY: It's attached to the --
17 COMMISSIONER SMITH: Yes, we have that
18 one.
19 MR. WARD: If it's yellow, that must be
20 it.
21 Q Mr. Hart, you prepared Exhibit 102, did you
22 not?
23 A Yes, I did.
24 Q And I assume you prepared that from
25 information that U S WEST provided?
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Wilder, Idaho 83676 Staff
1 A Yes, I did.
2 Q Now, realizing we're dealing with
3 proprietary information, I want to do this relatively
4 carefully here. During the short recess, Mr. Hart, I
5 asked you to make some calculations. And I don't want
6 you to read me the numbers, obviously.
7 I asked you to take the access lines listed
8 on Exhibit 102 and divide them into the minutes of use;
9 is that correct?
10 A The originating minutes of use.
11 Q Correct. And you, in fact, performed that
12 calculation?
13 A I did.
14 MR. WARD: Madam Chair, there's a
15 handwritten exhibit that I would like to have marked for
16 identification as Exhibit 301. On the upper left side it
17 says "Payette."
18 COMMISSIONER SMITH: All right.
19 (Idaho Telephone Association
20 Exhibit 301 was marked for identification.)
21 Q (By Mr. Ward) Exhibit 301, does it contain
22 the calculation of the minutes per customer that you
23 calculated?
24 A Yes, it does.
25 Q In the third column; is that correct?
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CSB REPORTING HART (X)
Wilder, Idaho 83676 Staff
1 A That's correct.
2 Q Now, assuming there's a $5.50 automatic
3 increase as a result of these exchanges moving into a
4 higher rate group if this petition is granted, and that's
5 accurate, is it not?
6 A That would be my understanding.
7 Q Using the $5.50 figure, did you calculate a
8 cost per minute for these customers?
9 A Yes, I did. That's the item in column 4.
10 Q Now, again, I'm not going to ask you to
11 specify the numbers, but would you agree -- first of all,
12 would you, in the normal course of events, expect that
13 the calling pattern would show disproportionate minutes
14 of use by business customers, as opposed to residential?
15 A It's my understanding that business
16 customers typically use more than residential customers,
17 if that's what you mean by disproportionate?
18 Q On a per-access line basis?
19 A Yes.
20 Q Now, turning to the numbers that you have
21 calculated -- I'm trying to think how to ask this without
22 discussing numbers. Let me just cut to the chase.
23 For the Weiser and Payette customers, just
24 looking at these figures here, and assuming $5.50
25 additional is all they pay, do these numbers lead you to
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Wilder, Idaho 83676 Staff
1 believe that this EAS is greatly beneficial to the
2 typical residential customer in Payette and Weiser?
3 MS. HOBSON: I'm going to object to the
4 question. I think it is misleading on the basis of this
5 exhibit which is not being accurately characterized for
6 what it is. And I think that this witness is not in a
7 position to speak as to the benefits that the customers
8 may or may not receive.
9 COMMISSIONER SMITH: Mr. Ward.
10 MR. WARD: Well, it's a pretty simple
11 calculation, Madam Chair. It's just a simple division.
12 COMMISSIONER SMITH: Maybe the question is
13 as to the costs and not the broader question of
14 benefits. Maybe you need to narrow the question.
15 Q (By Mr. Ward) Let me ask it this way,
16 then, Mr. Hart, and maybe this will remove the
17 objection. Assuming that these customers could get toll
18 services to the Boise region at 10 cents a minute or
19 less, do these numbers suggest that this EAS is
20 beneficial for the typical residential customers in those
21 two exchanges?
22 MS. HOBSON: I'm going to object to the
23 form of the question. I would also like the Commission
24 to inquire in aid of the objection.
25 COMMISSIONER SMITH: Ms. Hobson.
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1 MS. HOBSON: Mr. Hart, looking at first
2 column containing numbers on Exhibit 301, am I correct in
3 understanding that those numbers merely reflect the
4 originating minutes?
5 THE WITNESS: That is correct.
6 MS. HOBSON: Do you have any reason to
7 believe that any of the customers' minutes -- well, any
8 of the access lines that are reflected on Exhibit 102 are
9 access lines that are created in such a way that they do
10 not receive incoming calls?
11 THE WITNESS: I'm not sure that I
12 understand your question.
13 MS. HOBSON: Wouldn't you expect that the
14 access lines reflected on Exhibit 102 are, in fact,
15 access lines that are capable of both receiving as well
16 as placing calls?
17 THE WITNESS: For the most part, yes.
18 MS. HOBSON: So in order for Mr. Hart to
19 analyze the economic benefit of the EAS, would one not
20 have to also consider the terminating minutes that the
21 customer will receive when EAS is put into effect?
22 THE WITNESS: I certainly would agree with
23 you that terminating minutes have a value to the customer
24 on a comparative basis, so they don't pay for the
25 terminating minutes currently. So on a comparison basis,
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Wilder, Idaho 83676 Staff
1 I don't think you can discount the terminating minutes in
2 terms of the benefit, but I think the manner in which Mr.
3 Ward has suggested that it be calculated would be the
4 comparison that one would make.
5 MS. HOBSON: Madam Chairman, my objection
6 is that in looking at the economic benefit and comparing
7 it directly to toll, it is an inappropriate comparison.
8 And the customers need to look at the fact that they will
9 also be receiving minutes which are not reflected -- the
10 historic level of incoming phone calls are not
11 reflected.
12 In addition to that, they have to
13 appreciate the fact that with the elimination of a toll
14 route there will be stimulation in both directions that
15 will increase the value of granting the EAS to these
16 customers. And we object to any characterization of
17 Exhibit 301 as any analysis of the economic benefit of
18 EAS.
19 COMMISSIONER SMITH: Mr. Ward.
20 MR. WARD: Madam Chair, now that I
21 understand the basis for Ms. Hobson's objection, the
22 response is very simple. I didn't ask for a calculation
23 of the economic benefit -- of overall economic benefit of
24 EAS, as Mr. Hart had noted. I asked for the benefit of
25 the calculation -- or a calculation of the benefit on the
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Wilder, Idaho 83676 Staff
1 customers in the exchanges who, after all, only pay for
2 originating calls.
3 Now, if we want to do the overall economic
4 benefit, we can do that, too. But if you do that, then
5 you have to measure it against the 12 cents a month, the
6 400-and-some thousand customers are going to pay for the
7 terminating minutes, not against the traffic in these
8 exchanges. So I think my question is perfectly valid,
9 and the think it's perfectly appropriate
10 COMMISSIONER SMITH: Ms. Hobson, I'm going
11 to overrule your objection. I think the Commission is
12 capable of understanding the points you made as to what
13 these calculations actually reflect and making a judgment
14 as to what that reflects. So I'll overrule your
15 objection.
16 Mr. Ward, you may continue.
17
18 CROSS-EXAMINATION
19
20 BY MR. WARD (Continued):
21 Q After all that, Mr. Hart, I'm going to ask
22 the question somewhat differently. Do you have your
23 direct testimony, and, if so, would you turn to Page 13?
24 A I have Page 13.
25 Q There's a question there beginning at Line
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Wilder, Idaho 83676 Staff
1 9 asking whether the customers have indicated a
2 willingness to pay increased rates. And your answer
3 continues there at some length.
4 But going down to the middle of that,
5 starting at Line 15 you say, "Payette and Weiser area
6 customers signing the petitions were not willing to pay
7 the $5.50 difference between current out-of-region rates
8 and the in-region rates." Then you continue on "More
9 than a quarter of those petitioners only indicated a
10 willingness to pay less than a dollar. And nearly 60
11 percent only willing to pay between $1 and $3 per month."
12 Do you see that testimony?
13 A I do.
14 Q Do the calculations that you have just made
15 suggest that those customers, in fact, perceive the
16 economic benefit of EAS accurately?
17 MS. HOBSON: I'm going to object to the
18 question. I don't think that Mr. Hart is qualified to
19 talk about what the customers, in fact, receive.
20 COMMISSIONER SMITH: Mr. Ward.
21 MR. WARD: Madam Chair, I think he is
22 qualified. He's testified as a telecommunications
23 expert. And all I'm trying to find out is the
24 relationship between what the petition showed and what
25 the facts actually showed.
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1 COMMISSIONER SMITH: Maybe you could ask
2 him if he could draw the conclusions based on his
3 experience.
4 Q Mr. Hart, considering the calculations you
5 have made in 301, and considering what you've
6 seen in the petitions from the Payette/Weiser area
7 customers -- let me ask it in the negative -- do you have
8 any reason to doubt the accuracy of the statements made
9 in the petitions about willingness to pay?
10 A I would have to answer that one yes. It's
11 my experience that people answer petitions with a desire
12 of what they would like to pay, rather than what they're
13 actually willing to pay.
14 If one looks at my calculations, I think
15 the willingness to pay that the customer has indicated on
16 their petitions is somewhat similar to what they are
17 probably currently paying for toll.
18 Q And would it also be fair to say that even
19 on average, returning to my original question that
20 provoked the objections, assuming these customers could
21 get toll service on these routes for 10 cents a minute or
22 less, would you make that assumption with me?
23 A Okay.
24 Q That even at double the traffic the average
25 Weiser customer would be worse off as a result of this
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Wilder, Idaho 83676 Staff
1 EAS. Isn't that true?
2 A I guess I'm uncomfortable in answering that
3 in terms of the confidentiality of the data.
4 Q And, in fact, isn't it also true that while
5 the increase now is $5.50, that, in fact, assuming the
6 Staff and U S WEST agree on the U S WEST calculation of
7 the cost of EASs already granted and under consideration
8 in this case, that there will be another 30 cents a month
9 added to the $5.50 before this is all done?
10 A That's my understanding.
11 Q Do the numbers that we have tell us
12 anything about the call distribution in these exchanges?
13 A I think I indicated in my testimony that
14 approximately 50 percent of the customers in the three
15 exchanges, Payette, New Plymouth, and Weiser, made one or
16 more calls per month in the Treasure Valley region.
17 Q You've testified in other EAS cases, have
18 you not?
19 A I have.
20 Q Is it common for the median number of calls
21 to be less than the average; in other words, on a
22 per-customer basis? When you do a call distribution
23 report does the average customer make average calls, if
24 you know?
25 A I'm not sure I have enough information to
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CSB REPORTING HART (X)
Wilder, Idaho 83676 Staff
1 answer that.
2 Q So even though we know what the average is,
3 we don't know whether the majority of customers make --
4 isn't it possible that the majority of customers could
5 make less than the average number of calls?
6 A I think the way you phrase the question,
7 the answer would be yes, it is possible that the average
8 customer -- or a majority of the customers would make
9 less than the average number of calls. I don't think I
10 gave you the average number of calls.
11 Q That's true. Average minutes would be
12 better.
13 A Actually, we did do an average number of
14 calls. But I think the data certainly indicates that
15 that is correct. I think the calling volume was much
16 greater than one per month, and yet approximately 50
17 percent of the customers didn't, you know, make one or
18 more. So approximately 50 percent did not make one call.
19 Q One last question. Regardless of what else
20 Exhibit 301 shows, isn't it fair to say that just on the
21 basis of these calculations, the case for EAS from
22 Mountain Home/Glenns Ferry looks far stronger than the
23 other three exchanges?
24 A I think I could support that.
25 MR. WARD: That's all I have.
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Wilder, Idaho 83676 Staff
1 COMMISSIONER SMITH: Thank you,
2 Mr. Ward. Do we have questions from the Commission?
3 Commissioner Nelson.
4 COMMISSIONER NELSON: Thank you. A couple,
5 Mr. Hart.
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Wilder, Idaho 83676 Staff
1 EXAMINATION
2
3 BY COMMISSIONER NELSON:
4 Q When you were responding to Mr. Ward about
5 a petitioner's willingness to pay more than he actually
6 puts on the petition, can I assume that he's willing to
7 pay that money rather than to forego service, is that
8 what you mean?
9 A I'm not the sure I understand how you mean
10 forego service.
11 Q Well, if a customer is making $3 a month in
12 toll calls into the area and EAS is granted and his bill
13 gets raised $5.50, he's willing to pay the $5.50 rather
14 than give up his phone service?
15 A I didn't have that in mind. I think you're
16 probably right. I think that their actual willingness to
17 pay would be a little bit higher than what they sign on
18 the petitions. But there's a natural tendency to put,
19 well, I would really rather have it be $1 than $3, so
20 I'll mark "$1".
21 COMMISSIONER NELSON: Thank you. That was
22 my question.
23 COMMISSIONER SMITH: Commissioner Hansen.
24
25
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Wilder, Idaho 83676 Staff
1 EXAMINATION
2
3 BY COMMISSIONER HANSEN:
4 Q Mr. Hart, on some of our previous EAS cases
5 we had discussion on the stimulation factor of what it
6 might be. Anywhere from two to five, I think, has been
7 estimated in some areas. What do you estimate that would
8 be in the Payette area?
9 A I would not expect as high a stimulation as
10 we have had in some of the other areas, because of the
11 number of basic services that are available in these
12 communities. I don't think they're going to change to a
13 Boise bank just because EAS is granted. And I think a
14 lot of the businesses that they're going to frequent are
15 still going to be their local businesses, and their local
16 calls will still cover those. So I would not expect the
17 same sort of stimulation in this calling that we have had
18 in some of the others. I think it's going to be closer
19 to the two range, rather than the three or higher.
20 Q In your testimony on Page 18, starting with
21 Line 14, you say the Staff questions whether the majority
22 of customers in these exchanges would still support the
23 expanded area of calling at the rates that would be
24 required. And I assume you're taking that from the
25 survey that you talked about back on Page 13; is that
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Wilder, Idaho 83676 Staff
1 correct?
2 A That would be correct.
3 Q When that survey was done, do you think the
4 people understood the strong likelihood of a EAS cost of
5 at least $5.50 a month?
6 A Let me clarify that this was not a survey.
7 This was a petition that was circulated and they
8 identified the amounts on the petition.
9 Q Excuse me. When they circulated the
10 petition, do you think those people understood that it
11 would probably at least be a minute of $5.50 for EAS
12 cost?
13 A No, I don't, because at the time that
14 petition was circulated it was prior to the conclusion of
15 the rate case, and I think the differential at that time
16 was either zero or $3. So I don't think the customers
17 had an understanding that it was $5.50.
18 Q So based on that, would you say that you
19 really don't, or the Staff really doesn't, have any
20 indication whatsoever whether the public would support
21 $5.50 or not? Is that what you're saying, you really
22 don't know?
23 A That's correct.
24 Q You're saying, as you go on in here, if the
25 Commission determines that there's public support for
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CSB REPORTING HART (Com)
Wilder, Idaho 83676 Staff
1 that, then the Staff supports that; is that correct?
2 A That's correct.
3 Q I guess my question is: Would you say that
4 probably the only way that we're going to find out is in
5 a public hearing whether they will support that or not?
6 A A public hearing or a survey.
7 Q So what you say, then, for the Commission
8 to determine whether or not the public would support that
9 kind of rate, that we're putting just about the major
10 emphasis on a public hearing?
11 A I think so.
12 Q My last question, then: Do you have any
13 suggestions to make the people aware of how important the
14 public hearing then would be? If that's really going to
15 have such a major impact on this decision, should there
16 be press releases or should the Staff hold some type of
17 an informational prehearing to let the people know that
18 it's this kind of a rate they're going to face?
19 A I think that both of those would be good
20 suggestions, and at a minimum. I think the experience
21 we're having in the -- I believe it's the Malad area
22 where we're actually conducting a survey. And from the
23 comments we received from the customers in Richfield, who
24 in that area felt that a survey was more appropriate than
25 an actual public hearing, it may be more appropriate to
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CSB REPORTING HART (Com)
Wilder, Idaho 83676 Staff
1 actually do a survey. You get a more broad range of
2 response.
3 COMMISSIONER HANSEN: Thank you.
4 COMMISSIONER SMITH: Redirect,
5 Ms. Copsey.
6
7 REDIRECT EXAMINATION
8
9 BY MS. COPSEY:
10 Q I just have a few questions, because I
11 think it's important that the record be clear. What
12 we're talking about here is not simply a $5.50 increase;
13 is that correct? That's the minimum; isn't that right?
14 A It would be $5.50 plus whatever other
15 results of this case.
16 Q That would also include the other EASs that
17 have already been ordered by the Commission; isn't that
18 correct?
19 A That's correct.
20 Q So it wouldn't be 12 cents additional, but
21 it would be 30 cents?
22 A If they approve these as well, yes.
23 Q So it would be a total of $5.80?
24 A Yes.
25 Q You indicated that the stimulation factor,
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CSB REPORTING HART (Di)
Wilder, Idaho 83676 Staff
1 you would suggest in this case that it be more around two
2 times; is that correct?
3 A I think that -- I mean, we don't have good
4 information on what stimulation factors might be. I'm
5 merely using informed judgment to estimate that it would
6 be on the low end of the range for this case.
7 Q If stimulation was two times, that would
8 mean that the number of minutes per customer would
9 increase by two times; is that correct?
10 A I would anticipate that.
11 Q So that the cost per minute would reflect
12 that or should reflect that, is that correct, those
13 increased minutes?
14 A I'm not going to say the cost per minute,
15 I'm going to say the value per minute.
16 Q In what's been marked as proprietary
17 Exhibit 301, there is no stimulation factor assumed in
18 the minutes for customers; is that right?
19 A That would be correct.
20 Q If you were to assume that there was a
21 stimulation factor, that would result in an adjustment to
22 the cost per minute that's shown in your last column on
23 that exhibit; is that correct?
24 A That would be correct.
25 Q We can all assume that that would be -- it
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CSB REPORTING HART (Di)
Wilder, Idaho 83676 Staff
1 would be a reduction in that cost per minute; isn't that
2 right?
3 A I think that's correct.
4 Q More along the lines of half?
5 A Yes.
6 Q If you used a two times stimulation?
7 A Yes.
8 MS. COPSEY: I don't have any other
9 questions.
10 COMMISSIONER SMITH: Does that conclude
11 your case, Ms. Copsey?
12 MS. COPSEY: Yes, it does.
13 Thank you, Mr. Ward.
14 (The witness left the stand.)
15 MR. WARD: Thank you, Madam Chairman. We
16 would call Ray Hendershot to the stand.
17 Madam Chairman, before we stand on
18 Mr. Hendershot, Ms. Hobson has suggested we need to
19 resolve the status of Exhibit 301. Obviously, I would
20 like it admitted into evidence. It is based on
21 proprietary information, and I assume it should be
22 submitted in accordance with the Commission's procedures
23 for handling that information. No party other than the
24 parties to this case has this information. So I assume
25 it would be held under seal by the Commission, and I
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CSB REPORTING HART (Di)
Wilder, Idaho 83676 Staff
1 would so request.
2 COMMISSIONER SMITH: If there is no
3 objection --
4 MS. COPSEY: No objection.
5 MS. HOBSON: Madam Chairman, our only
6 possibility here is that this exhibit be admitted under
7 seal, which I think Exhibit 102 was also submitted.
8 U S WEST has not have the opportunity to review these
9 calculations. We are accepting them subject to that. So
10 if we find a mathematical error we will so advise the
11 Commission.
12 COMMISSIONER SMITH: We will order that
13 Exhibit 301 be admitted into the record and be held under
14 seal using procedures in place for dealing with
15 proprietary exhibits.
16 (Idaho Telephone Association Exhibit
17 No. 301 was admitted into evidence and held under seal.)
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Wilder, Idaho 83676 Staff
1 RAYMOND A. HENDERSHOT
2 produced as a witness at the instance of Idaho Telephone
3 Association, having been first duly sworn, was examined
4 and testified as follows:
5
6 DIRECT EXAMINATION
7
8 MR. WARD:
9 Q Mr. Hendershot, would you state your name
10 and address for the record.
11 A Raymond A. Hendershot. I work for GVNW,
12 Suite 2270 La Montana Way, Colorado Springs, Colorado.
13 Q In preparation for this proceeding, did you
14 have cause to propose prefiled company?
15 A Yes, I did.
16 Q And you did not have any exhibits to that
17 testimony, did you?
18 A There's no exhibits attached to that
19 testimony.
20 Q If I were to ask you the questions
21 contained in that testimony today, would your answers be
22 as given?
23 A Yes, they would.
24 MR. WARD: Madam Chair, I request that
25 Mr. Hendershot's testimony be spread on the record as
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CSB REPORTING HENDERSHOT (Di)
Wilder, Idaho 83676 ITA
1 it's read.
2 COMMISSIONER SMITH: If there is no
3 objection, it is so ordered.
4 MR. WARD: Do you have any corrections or
5 changes to make to that testimony?
6 THE WITNESS: Not that I'm aware of.
7 (The following prefiled testimony of
8 Mr. Raymond A. Hendershot is spread upon the record.)
9
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CSB REPORTING HENDERSHOT (Di)
Wilder, Idaho 83676 ITA
1 Q PLEASE STATE YOUR NAME AND BUSINESS
2 ADDRESS.
3 A My name is Raymond Hendershot. My
4 business address is 2270 La Montana Way, P.O. Box 25969,
5 Colorado Springs, Colorado 80936.
6 Q BY WHOM ARE YOU EMPLOYED AND IN WHAT
7 POSITION?
8 A I am a Vice President with GVNW,
9 Inc./Management ("GVNW").
10 Q PLEASE SUMMARIZE YOUR EDUCATIONAL
11 BACKGROUND AND QUALIFICATIONS IN THE TELECOMMUNICATIONS
12 INDUSTRY.
13 A I graduated from Brigham Young University
14 with a Bachelor's Degree in Accounting and a Masters
15 Degree of Accounting in 1973. I have a CPA Certificate
16 from Texas. Upon graduation, I was employed by General
17 Telephone and Electronics ("GTE"). I served in a variety
18 of positions within the financial area of the company.
19 In 1985, I joined the firm of GVNW, Inc./Management. The
20 firm provides a wide variety of management services
21 within the communications industry. My primary areas of
22 responsibility have included the development of rates and
23 tariffs, preparation of toll cost separation studies,
24 filing of rate cases, depreciation rate studies,
25 acquisitions and sales of telephone properties, and
129
R. Hendershot Di 1
Idaho Telephone Assoc.
1 various other management services. I was promoted to my
2 present position in July, 1994.
3 Q HAVE YOU PREVIOUSLY TESTIFIED BEFORE THE
4 IDAHO PUBLIC UTILITIES COMMISSION?
5 A Yes, on numerous occasions.
6 Q ON WHOSE BEHALF ARE YOUR TESTIFYING IN
7 THESE PROCEEDINGS?
8
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R. Hendershot Di 1A
Idaho Telephone Assoc.
1 A My testimony is presented on behalf of the
2 member companies of the Idaho Telephone Association
3 ("ITA"). The ITA is comprised of 19 Idaho local exchange
4 telephone companies ("LEC"). Five members are
5 cooperatives that are not subject to this Commission's
6 jurisdiction.
7 Q WHY IS THE ITA INTERESTED IN THIS MATTER?
8 A The petitions for extended area service
9 ("EAS") under consideration in this case were filed on
10 behalf of seven exchanges served by U S WEST, all of whom
11 are seeking inclusion in the Boise EAS area. Although
12 there is minimal direct impact on the independent LECs,
13 the Commission's decision may result in significant
14 indirect consequences for a number of ITA members.
15 Q WHAT ARE THE INDIRECT CONSEQUENCES YOU ARE
16 CONCERNED ABOUT?
17 A There are three major issues that I wish to
18 bring to the Commission's attention. The first is that
19 at least some of these communities do not qualify for EAS
20 to Boise under any reasonable community of interest test.
21 Consequently, if the Commission grants all these
22 petitions, it will announce the complete abandonment of
23 the traditional community of interest test for extended
24 area service. This has obvious implications for all
25 Idaho LECs.
131
R. Hendershot Di 2
Idaho Telephone Assoc.
1 My second concern is that granting these
2 petitions, particularly those from Weiser, Payette and
3 New Plymouth, forecloses the option of devising new EAS
4 areas that may make more geographic and economic sense
5 than inclusion in the Boise calling area.
6
7 /
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9 /
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11 /
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132
R. Hendershot Di 2A
Idaho Telephone Assoc.
1 Finally, and perhaps most important, granting
2 these petitions will force a number of independents to
3 provide EAS from their exchanges to the Boise toll free
4 calling area. This will, in turn, result in an increase
5 in local rates and/or an increase in Idaho universal
6 service fund ("USF") by the affected independents.
7 Q TURNING TO THE FIRST ISSUE, WOULD YOU
8 PLEASE EXPLAIN THE "TRADITIONAL COMMUNITY OF INTEREST
9 TEST FOR EAS"?
10 A Historically, the Commission has considered
11 many factors in EAS cases, but they have a common thread
12 in that they tend to establish the presence or absence of
13 a "community of interest" between the affected
14 communities. Calling volumes are an important part of
15 this analysis, and many Commission's require an average
16 of ten or more calls per access line per month as a
17 precondition for EAS. Some Commission's supplement the
18 average call test with a requirement that the majority of
19 customers make a minimum number of calls per month on the
20 proposed EAS route.
21 In addition, most Commission's consider the
22 ability of the customers seeking EAS to reach essential
23 or important services without a toll charge. The case
24 for EAS is greatly strengthened if toll charges apply to
25 calls to schools, public safety agencies, county
133
R. Hendershot Di 3
Idaho Telephone Assoc.
1 government, and/or medical facilities.
2 Q WHY IS THIS COMMUNITY OF INTEREST TEST
3 RELEVANT?
4
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R. Hendershot Di 3A
Idaho Telephone Assoc.
1 A The community of interest test is important
2 because it insures that there is a reasonable
3 relationship between the benefits and burdens of EAS.
4 EAS generally imposes rather significant costs on the
5 local exchange provider. In addition to the impact of
6 lost toll revenue, there is a direct investment cost for
7 additional trunking capacity and other facilities
8 necessary to serve the increases in traffic that occur
9 when toll routes are converted to "free" EAS. The local
10 exchange company has to recover these costs somehow, and
11 in the ordinary case it will do so by increasing the
12 local exchange rate. This type of rate increase
13 obviously impacts all customers. But if there is a
14 strong community of interest it is reasonable to assume
15 that virtually all of the customers will receive some
16 benefit from EAS that is reasonably commensurate with the
17 increased cost of local exchange service. Conversely, if
18 the community of interest is weak, EAS benefits a
19 minority at the expense of all customers. This situation
20 can be particularly unjust to those of limited means who
21 have little or no interest in greater use of the routes
22 converted to EAS.
23 Q WHY DO YOU BELIEVE SOME OF THESE
24 COMMUNITIES DO NOT MEET THE COMMUNITY OF INTEREST TEST?
25 A I have not seen the traffic studies for the
135
R. Hendershot Di 4
Idaho Telephone Assoc.
1 affected routes, so I cannot discuss the relevant calling
2 volumes. But I am familiar with the petitioning
3 communities because of my many trips to Idaho over the
4 past two decades, and I feel qualified to make some
5 observations about their community of interest, or lack
6 thereof, with Boise.
7
8 /
9
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12 /
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R. Hendershot Di 4A
Idaho Telephone Assoc.
1 In the case of the petition by the Elmore County
2 communities (Mountain Home, Glenns Ferry, Hammett, and
3 King Hill), the first observation that occurs to me is
4 their distance from Boise. Mountain Home is
5 approximately 40 miles from the capitol city, with the
6 other communities another 20 to 30 miles further away.
7 All the petitioning communities have EAS to each other.
8 The regional economy is dominated by agriculture and the
9 Mountain Home AFB. Mountain Home is the county seat, and
10 it has a hospital and other medical facilities, as well
11 as the usual complement of businesses expected in a town
12 of roughly 10,000 people. There are local high schools
13 at both Mountain Home and Glenns Ferry. The Air Force
14 Base, of course, has most of its essential facilities on
15 site.
16 In short, the residents of these communities
17 already have toll free calling to most, if not all,
18 essential facilities and services. The real community of
19 interest hub for these exchanges appears to be Mountain
20 Home itself. I would therefore be surprised if the
21 calling volumes showed a significant and widespread
22 traffic pattern to Boise. Unless the traffic study
23 reveals something unexpected, it appears that all these
24 communities would fail the traditional test for EAS to
25 Boise.
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Idaho Telephone Assoc.
1 Q WHAT IS THE SITUATION FOR THE OTHER
2 PETITIONING COMMUNITIES?
3 A It is very similar. New Plymouth and
4 Payette are located approximately 50 miles from Boise,
5 and Weiser is another 20 plus miles distant. Payette is
6 the county seat for Payette County and
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R. Hendershot Di 5A
Idaho Telephone Assoc.
1 Weiser for Washington County. All three communities have
2 toll free access to public safety agencies, county
3 governments, schools, medical facilities, etc. Payette
4 also has EAS to Ontario, Oregon. Again, while there are
5 undoubtedly individuals who call the Boise area
6 frequently, I would be surprised if the traffic study
7 indicated a strong community of interest on the part of
8 the general public.
9 Q WHAT CONCLUSIONS DO YOU DRAW FROM THIS
10 ANALYSIS?
11 A In the absence of a compelling traffic
12 study with contrary evidence, I conclude that none of
13 these communities meet the traditional community of
14 interest test for EAS. This leads me to the further
15 conclusion that EAS will benefit a minority of (primarily
16 business) customers in the affected communities, but the
17 cost will be spread to a much wider customer base. At a
18 minimum, the residential customers in these communities
19 will experience an automatic $5.50 increase in their
20 monthly local exchange bill by virtue of being included
21 in the larger Boise calling area. I am skeptical that
22 the majority of customers will receive a benefit equal to
23 this increase in cost.
24 Q YOU EARLIER STATED THAT GRANTING EAS IN
25 THESE CASES MAY FORECLOSE BETTER OPTIONS IN THE FUTURE.
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R. Hendershot Di 6
Idaho Telephone Assoc.
1 PLEASE EXPLAIN.
2 A If one looks at the situation in western
3 Idaho with an eye only to the geography of the area, it
4 seems obvious to me that Payette, Washington, and
5 portions of Adams county form a natural community of
6 interest that has only a tenuous relationship to Boise.
7 I believe the
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R. Hendershot Di 6A
Idaho Telephone Assoc.
1 Commission should consider whether an EAS area extending
2 from New Plymouth to Council, and hubbed on Payette and
3 Ontario, makes more sense than EAS to Boise. But once
4 EAS is granted to Payette and Weiser, this option is
5 foreclosed for practical reasons. Thereafter, the only
6 EAS option for the rest of Washington and Adams counties
7 will be inclusion in the Boise calling area. At the very
8 least, I submit that the respective merits of these two
9 options should be examined before the Commission acts
10 precipitously.
11 Q PLEASE EXPLAIN YOUR CONCERN ABOUT THESE
12 PETITIONS FORCING INDEPENDENT LECS TO GRANT EAS FROM
13 THEIR EXCHANGES TO BOISE.
14 A The Elmore County petitions are obviously
15 of considerable interest to Rural Telephone Company,
16 which provides local exchange service to several remote
17 areas of Elmore County. If the existing petitions are
18 granted, there will almost certainly be pressure to
19 include Rural's customers in the Boise EAS. This is
20 particularly true for the Tipanuk exchange, which lies
21 between Mountain Home and Boise. We have not analyzed
22 the traffic situation yet, but it is reasonable to assume
23 that the cost to Rural of EAS to Boise for its Elmore
24 County exchanges will be substantial. Even if rates are
25 increased to the previously stipulated levels for
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R. Hendershot Di 7
Idaho Telephone Assoc.
1 independents that participate in the U S WEST expanded
2 calling areas, I suspect there will be a residual revenue
3 requirement that must come from the Idaho USF.
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R. Hendershot Di 7A
Idaho Telephone Assoc.
1 Q DOES A SIMILAR SITUATION EXIST WITH RESPECT
2 TO THE WESTERN IDAHO PETITIONS?
3 A Yes. Farmers Mutual Telephone Company
4 ("Farmers"), which serves the Fruitland area, already has
5 EAS to Payette and Ontario, Oregon, but it is closer to
6 Boise than either Payette or Weiser. Unless it chooses
7 to be viewed as a second class service provider, it will
8 have little choice but to offer EAS to Boise if these
9 petitions are granted. Farmers' preliminary estimate is
10 that this EAS will result in a 22 percent reduction in
11 revenue.
12 Moreover, I am relatively confident that the
13 traffic to the Boise calling area from Midvale Telephone
14 Exchange, Cambridge Telephone Company and Council
15 Telephone Company is reasonably comparable to Weiser's.
16 Consequently, if the Commission grants the Weiser
17 petition, it must be prepared to accept the consequences
18 of advancing the same EAS throughout the Weiser River
19 drainage. I have no estimates of the cost involved, but
20 I am sure it will be substantial. I also suspect that it
21 will result in a significant increase in the impacted
22 companies' Idaho USF draws.
23 Q DO YOU HAVE ANY ADDITIONAL THOUGHTS THAT
24 THE COMMISSION SHOULD CONSIDER IN THIS CASE?
25 A Yes. In the past few years, Farmers,
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R. Hendershot Di 8
Idaho Telephone Assoc.
1 Midvale and Cambridge have all reported instances of
2 insufficient U S WEST trunking capacity to carry the
3 area's toll traffic, and additional installations have
4 often taken an inordinately long time to accomplish. If
5 these petitions are granted,
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R. Hendershot Di 8A
Idaho Telephone Assoc.
1 this situation will be exacerbated unless U S WEST takes
2 steps to install sufficient capacity to carry the
3 increased traffic. The Commission should monitor this
4 situation to insure that granting EAS does not result in
5 a deterioration of service for independent company
6 customers.
7 Q PLEASE SUMMARIZE YOUR TESTIMONY.
8 A I am skeptical whether EAS is warranted in
9 these cases. With regard to the western Idaho petitions
10 in particular, I believe a new EAS area for Payette,
11 Washington and Adams counties may be a more cost
12 effective alternative that will meet the needs of the
13 vast majority of customers. In any event, if the
14 Commission grants these petitions, it must be prepared to
15 accept the consequences that will surely follow as the
16 result of additional petitions.
17 Q DOES THIS CONCLUDE YOUR TESTIMONY?
18 A Yes, it does.
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Idaho Telephone Assoc.
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Wilder, Idaho 83676
1 (The following proceedings were had in
2 open hearing.)
3 MR. WARD: With that, Mr. Hendershot is
4 available for cross-examination.
5 COMMISSIONER SMITH: Ms. Copsey, do you
6 have questions?
7 MS. COPSEY: Yes, Madam Chairman.
8
9 CROSS-EXAMINATION
10
11 BY MS. COPSEY:
12 Q You have testified at Page 8 of your
13 prefiled testimony that Midvale, Farmer's, and Cambridge
14 have all experienced quality of service problems with U S
15 WEST. Can you indicate what those specific problems are?
16 A That difficulty has been due to the lack of
17 facilities of calling traffic out to the interexchange
18 carrier connected with the network.
19 Q I didn't hear the first part. Did you say
20 it has been?
21 A Yes.
22 Q Isn't it true that the Commission
23 determines the appropriateness of whether to order EAS on
24 a case-by-case basis?
25 A That's correct.
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Wilder, Idaho 83676 ITA
1 Q Are petitions regarding EAS for Midvale
2 customers, or rural customers, Cambridge customers, or
3 Council at issue in these dockets?
4 A Not in these indicated dockets, but there
5 is a petition out there from Washington County, as your
6 witness has testified.
7 Q But they're not at issue in these specific
8 dockets?
9 A Not in these.
10 Q It's not before the Commission at this
11 time. Shouldn't the issue of costs for EAS for each of
12 these companies be determined in their own cases, if part
13 of the Commission's process involves balancing projected
14 costs and their impact on rates with the benefits to
15 petitioners?
16 A That's the issue we're trying to identify.
17 If you extend EAS to this large column area, to these
18 surrounding areas, then our customers in Cambridge,
19 Midvale, and Farmers Mutual also feel they have to have
20 the same calling area, which would be significant when we
21 impact those companies and those costs would be
22 significantly greater.
23 Q All of those companies are rate
24 regulated -- fully rate regulated?
25 A Two of them are.
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Wilder, Idaho 83676 ITA
1 Q And that means that before the Commission
2 would order it, they clearly would ensure that the
3 revenue requirement would be met?
4 A Well -- and I'm glad you mention that,
5 because not all of it would come from local revenues.
6 There would probably be a significant deficiency that
7 would have to come from the State Universal Service Fund.
8 Q I want to explore that just a moment. What
9 is 125 percent of the statewide average rate as of May 1,
10 '98?
11 A I'm assuming the rate we would be talking
12 about for these customers in EAS, as far as calling area,
13 would probably follow a similar rate that's been
14 established in the Rockland, Silverton, and Fremont
15 cases, $24.10 for the residential customers.
16 Q That's not quite my question. I understand
17 your assumption.
18 A I realize what your question is. I don't
19 remember the exact amount as of May 1.
20 Q Would it surprise you that it's
21 approximately $19.14 for residential and $38.22 for
22 business?
23 A It would not.
24 Q You are apparently familiar with the
25 stipulation that was filed in those cases that you just
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CSB REPORTING HENDERSHOT (X)
Wilder, Idaho 83676 ITA
1 mentioned in support of a $24.10 rate?
2 A Yes.
3 Q Are you familiar with the part of the
4 stipulation that indicates that no additional USF funding
5 would be requested?
6 A That was only in those unique situations.
7 When you talk about this situation here with these
8 companies, you're talking probably in the range of about
9 90 percent of their intraLata access revenues would be
10 lost, and those would have to be recovered. When you
11 talk about stimulation, you're talking about a
12 significant shift in the revenue requirement to the
13 locals.
14 Q That's not really the question, however.
15 The question is much more precise than that. That is
16 that the mere fact that there are additional costs
17 associated with EAS that might require the rate to be in
18 excess of the 125 percent of statewide average rate does
19 not necessarily mean that the Commission is going to
20 order that that be funded by USF funds; is that correct?
21 A Your earlier question mentioned that they
22 would get the revenue requirement. Your assumption is
23 here that they would sell it for a rate less than a
24 regular requirement, and that's not necessarily going to
25 be the case in those cases.
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Wilder, Idaho 83676 ITA
1 Q I'm not making that assumption. I'm asking
2 you just a very philosophical question. And, I guess,
3 let me repeat that question. There is nothing that
4 requires the Commission to adjust the revenue requirement
5 by using USF funds in order to fund EAS; is that not
6 right?
7 A Well, there's nothing that binds them on
8 that, but just that they would have to come up with the
9 revenue requirement. If you don't use the USF, you're
10 talking about increased local rates far in excess of that
11 rate, the $24.10.
12 Q But the $24.10 is already in excess of 125
13 percent; isn't that right?
14 A Well, it was established on the basis of
15 several different things; based on the projection that
16 this one is going to be there and probably the rates
17 would be close to that number.
18 MR. WARD: Madam Chair, I'm going to
19 object. I wanted to let Mr. Hendershot answer reasonable
20 questions in this area, but I'm going to object to going
21 any farther in this area. We do have a legal question of
22 some significance lurking in the implicit assumption of
23 this question. I would rather leave that to the lawyers,
24 and I will object to any further questions on this line.
25 COMMISSIONER SMITH: I'm confused by your
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Wilder, Idaho 83676 ITA
1 objection, Mr. Ward. So if Ms. Copsey goes into an area
2 that you believe the question is inappropriate, then
3 please renew your objection, because the question has
4 been and asked and answered.
5 MS. COPSEY: I think the Commission can
6 certainly take official notice of its own orders in case
7 Nos. ROK-T-97-1, GNRT-96-5, GNRT-97-7, in which that
8 stipulation that we're referring to was approved by the
9 Commission.
10 Q (By Ms. Copsey) I have one more question,
11 just to sum up. I want to make sure we understand this.
12 That with respect to the issue of cost for EAS for any
13 particular company, especially -- well, for that matter,
14 a rate-regulated company, fully regulated company, that
15 is one of the issues that the Commission weighs in
16 determining whether EAS should be granted; isn't that
17 right?
18 A That's my understanding. That's what we
19 want you to understand in this case. That's what we want
20 them to realize.
21 MS. COPSEY: I have no further questions.
22 COMMISSIONER SMITH: Thank you.
23 Ms. Hobson.
24 MS. HOBSON: Thank you.
25
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Wilder, Idaho 83676 ITA
1 CROSS-EXAMINATION
2
3 BY MS. HOBSON:
4 Q Mr. Hendershot, you've made the assertion
5 that the customers in Cambridge and outlying Midvale and
6 similar companies, those customers are going to want EAS
7 into the region if this EAS is granted, is that your
8 position?
9 A Yes.
10 Q Why are they going to want that?
11 A Well, you have a petition already before
12 the Commission for Washington County. That's for all of
13 Washington County and all of Payette. That's their
14 calling area. If those customers in Weiser and Payette
15 have a calling into the Boise area, and then the
16 potential has been brought up before in another case, but
17 it has stipulated out, is that the customers in McCall
18 would hit the Boise area possibly. I mean, that is a
19 point of discussion.
20 Then, in turn, you would have -- these
21 customers would want the same calling area. You just
22 can't give them part of a calling area and then create a
23 bridging situation.
24 Q My question is: Why is it that customers
25 want the Boise region? If, in fact, they have either
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CSB REPORTING HENDERSHOT (X)
Wilder, Idaho 83676 ITA
1 said that or you're speculating they will want it, why
2 will they want it?
3 A Well, we're speculating -- I mean, we're
4 saying that the best way to do this is to create a Weiser
5 Valley calling area.
6 Q Let me interrupt you right there. I want
7 you to tell me what you know about what the customers in
8 the companies that you represent want?
9 A Those primary customers are interested in
10 the Weiser Valley calling area.
11 Q So your customers are not telling you they
12 want the Boise region?
13 A They haven't at this point.
14 Q So if this Commission were to attempt to
15 factor in their concerns, they don't need to be concerned
16 about your customers stating they want the Boise region,
17 because they haven't told you that's what they want, is
18 that true?
19 A One of the things we find about the
20 customers is, they sit there and watch what's happening
21 around them. They read the newspapers and are aware of
22 what's going on on TV. Once a decision is made, then
23 they turn and evaluate. We don't know at this point,
24 traditionally, what's happened in the past. When someone
25 else gets nearby there is an interest expressed to have
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Wilder, Idaho 83676 ITA
1 the same.
2 Q What can you tell me about what that
3 interest is? Why would those people have that interest?
4 A Well, we're not saying that they do want it
5 at this point. We don't believe the numbers show that
6 they do. But ones in Weiser and Payette really do want
7 calling into Boise.
8 Q I'm talking about the customers in Midvale
9 and Cambridge?
10 A What do they want at this point?
11 Q Why do you think that if Weiser and Payette
12 get Boise that they will want it?
13 A Well, are you going to give a partial area
14 of EAS? They have expressed an interest, and some of
15 those customers have signed a petition for the Washington
16 County/Payette calling area, Ontario, and also Farmers
17 Mutual.
18 Q So again, I'm just trying to get at the
19 customers that you're representing. Do you believe that
20 if Payette and Weiser get Boise, then they're going to
21 suddenly want Boise when they don't want it now?
22 A I can't speak for them, but that's what has
23 happened in the past.
24 Q Why has that happened in the past?
25 A Well, if we take the customers in Rockland,
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Wilder, Idaho 83676 ITA
1 their primary calling area is Pocatello, but yet they
2 didn't want to be excluded from the rest of the eastern
3 Idaho calling area.
4 Q What did they tell you about why that
5 exclusion was a problem for them?
6 A They didn't want to be second-class
7 citizens. You were at those hearings, I believe, public
8 hearings.
9 Q Is EAS bridging a concern for your
10 companies? Is that something you're worried about?
11 A Farmers Mutual is concerned about it.
12 Q Why is that?
13 A Well, they're located in an area that does
14 have EAS into Ontario, and they're a potential candidate.
15 Q Does that impact your company?
16 A It impacts Farmers Mutual. That is one of
17 the companies we're representing today.
18 Q How does that impact Farmers Mutual?
19 A They're one of the hubs, if you want to
20 call it, in the area.
21 Q But how does it impact them?
22 A How does it impact them?
23 Q Yes.
24 A Obviously, they're going to be surrounded
25 by this large, mega calling area, EAS calling area,
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Wilder, Idaho 83676 ITA
1 that's naturally going to be for their customers.
2 Q Does Farmers Mutual lose revenue because of
3 that?
4 A Yes.
5 Q Does Farmers Mutual have a tariff similar
6 to that U S WEST tariff that was reflected in Staff
7 Exhibit 103?
8 A I don't know what their current tariff is
9 like, but when you talk about a financial impact,
10 approximately 90 percent of their intraLata access
11 revenues would be lost if they had EAS in a large, mega
12 calling area.
13 Q But we're talking about EAS bridging area
14 right now, not EAS itself?
15 A Right.
16 Q Is there anything that would prevent
17 Farmers Mutual from taking the same steps that
18 U S WEST has taken in filing its tariff to attempt to
19 project itself from EAS bridging?
20 A No problem at all.
21 Q You were the witness for the Lakeside
22 Communications Company; is that correct?
23 A Yes.
24 Q And the Lakeside customers wanted EAS into
25 the eastern Idaho region; is that correct?
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CSB REPORTING HENDERSHOT (X)
Wilder, Idaho 83676 ITA
1 A That's correct.
2 Q You were present this morning just a few
3 minutes ago when Mr. Hart went through making the
4 calculations that are on Exhibit 301?
5 A Yes.
6 Q Did you make calculations like that for the
7 Lakeside customers prior to filing testimony on behalf of
8 Lakeside?
9 A No, I didn't.
10 Q Do you think that those calculations would
11 have been beneficial to you in advising Lakeside
12 customers as to whether or not EAS was in their interest?
13 A Lakeside didn't have any EAS calling to any
14 other customers in Idaho.
15 Q I don't think you have answered my
16 question.
17 A Well, there's a difference there. I didn't
18 have those numbers. I didn't prepare this similar type
19 exhibit for them. But the customers in Lakeside didn't
20 have any other EAS calling anywhere in Idaho.
21 Q But it's true that you knew the number of
22 access lines for Lakeside customers?
23 A I did.
24 Q You knew the number of minutes that they
25 were currently --
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Wilder, Idaho 83676 ITA
1 A I could have performed this calculation,
2 but I didn't.
3 Q So that was not a useful tool in helping
4 your analyze their situation?
5 A Well, we were in the middle of a rate case
6 at that point in time.
7 Q For Lakeside?
8 A It was part of the Rockland case, what was
9 rolled into it.
10 Q Is it your testimony that Lakeside was in a
11 rate case?
12 A No, it's not my testimony.
13 Q What were the rates in Lakeside prior to
14 the EAS being granted to those customers?
15 A I can't remember exactly. Some were in the
16 $11-to-$14 range.
17 Q What were they after?
18 A $24.10.
19 Q Is it possible, do you think, that had you
20 performed this kind of calculation, that the numbers in
21 the last column on Exhibit No. 301 would have been much
22 higher for Lakeside customers than they are reflected on
23 this exhibit?
24 A I couldn't say that. It could be less.
25 Q You don't know?
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Wilder, Idaho 83676 ITA
1 A I don't know.
2 Q Do you remember what the average calls per
3 line, per month for Lakeside customers into the eastern
4 Idaho region was?
5 A I don't remember. But I saw what
6 John Souba said.
7 Q What did he say?
8 A He was like five or six or something like
9 that.
10 Q For Lakeside?
11 A Yes.
12 Q Isn't it true that customers that want EAS
13 tell you that they like to receive calls from the EAS
14 area as well make calls to that EAS area?
15 A There's a variety of reasons.
16 Q Customers do that, do they not?
17 A Some customers do, yes.
18 Q You have seen, have you not, in your
19 experience with EAS, that despite the fact that the
20 exchanges are oftentimes very different in size, that
21 there are roughly the same amount of minutes on a toll
22 basis going into a small community as coming out of that
23 small community? Have you seen that phenomenon?
24 A In some communities, but not in all
25 communities.
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1 Q Did you make any analysis of the outgoing
2 calls or the calls received by the Payette, Weiser, and
3 New Plymouth customers in this case?
4 A To which communities?
5 Q The calls received by those communities
6 from the Boise region?
7 A The only exhibit I had is this one right
8 here that reflects the originating minutes, which is
9 Exhibit 102.
10 Q You don't know whether or not this is the
11 case where the minutes, the terminating minutes, if you
12 will, from the Boise region into these exchanges is
13 roughly equivalent or not?
14 A That's an assumption that's used in the
15 industry, typically.
16 Q You wouldn't have a problem, based on your
17 experience, assuming they were roughly the same?
18 A No. But then that's the cost. That was
19 the amount meant to recover. That's the cost for those
20 terminating calls that customers would pay for.
21 Q I'm sorry?
22 A On Exhibit 102, if we look at that --
23 MR. WARD: Mr. Hendershot, I want to
24 caution you about going into the numbers before
25 Ms. Hobson objects to the answer to her own question.
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1 MS. HOBSON: I'm not even sure I have a
2 question pending.
3 MR. WARD: I was afraid he was about to
4 give you the numbers off Exhibit 102.
5 Q All I'm trying to get at, so maybe we can
6 clear this up, all I'm trying to get at is that customers
7 today in Payette, Weiser, and New Plymouth receive calls
8 from the Boise region?
9 A That's correct.
10 Q You're willing to assume, based on your
11 experience, that the number of people receiving is
12 roughly equivalent to the number of minutes that they're
13 currently calling out?
14 A Right. But those calls aren't for free,
15 those terminating calls.
16 Q Those terminating calls are not for free to
17 whom?
18 A Mr. Hart, through an analysis of Exhibit
19 103, represents a projected cost for originating calls on
20 an average basis.
21 Q To Payette customers?
22 A Well, to Payette, Weiser, the areas in the
23 Boise calling area.
24 On Exhibit 102 there is a remaining amount
25 there that has to still be recovered. That's basically,
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Wilder, Idaho 83676 ITA
1 in theory, the cost for the terminating calls that would
2 be spread across those customers.
3 Q That would be the amount that's reflected
4 in the --
5 A 30 cents.
6 Q -- 30 cents? Not the 30 cents, but that
7 portion of the 30 cents that relates to this calling
8 area?
9 A Right. And then they share in the cost for
10 other calling areas, too, and come to that 30 cents we're
11 talking about.
12 Q If they were to join this region, they
13 would, for example, share in the cost of providing EAS to
14 Lakeside?
15 A Everybody. All of the U S WEST customers
16 are going to share in those costs.
17 Q And Teton?
18 A Correct.
19 Q And Silverton?
20 A Right. Then what we ought to do is just go
21 statewide EAS and pool the revenues and share them. We
22 wouldn't be opposed to that approach.
23 Q Once these routes go EAS, you would expect
24 to see stimulation of these routes, would you not?
25 A Yes.
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Wilder, Idaho 83676 ITA
1 Q And that stimulation would occur both in
2 originating and terminating minutes, would it not?
3 A Generally, that's the assumption.
4 Q Isn't it also true that your customers have
5 experienced the phenomenon of having additional calling,
6 additional business, and so on take place, that's why
7 they want EAS; isn't that true?
8 A That's the assumption. That's why we're
9 concerned about the facilities and having to get those
10 additional facilities for the interconnection with
11 U S WEST, and we know how timely that is.
12 Q Wouldn't you have to say to any customer
13 who simply looks at the number in this last column and
14 says, "That's it. That's the only number that I need to
15 know," wouldn't you have to tell him he's only looking at
16 part of the equation?
17 A Most of that stimulation that you're
18 talking about probably would be for Weiser Valley, and
19 that's probably where the majority of that calling is.
20 That's why you ought to just have a Weiser Valley calling
21 area and not have this mega Boise calling area.
22 Q I don't think you answered my question. My
23 question is: Any customer that tells you "The only thing
24 I want to know is how my rate increase compares to my
25 toll rate," is a customer that's not looking at the
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1 benefits he's going to receive from stimulated calling
2 coming into him and from the economic growth that takes
3 place in this community and so on and so forth; isn't
4 that true?
5 A What you're pointing out there is what the
6 information on Exhibit 103 illustrates --
7 Q Is the answer to my question yes or no?
8 A -- in the last column on the right side.
9 So if you use the stimulation that Mr. Hart talked about,
10 and in turn you can see that economic analysis which he
11 clearly answered about Payette and Weiser.
12 Q I'm sorry, Mr. Hendershot, I didn't
13 understand what that has to do with the customer's
14 analysis of how EAS benefits?
15 A Well, what you said is take their toll
16 bill, look at the number of minutes they have, and then
17 have that compared to what the EAS calling is. We did
18 that. That was done by Mr. Hart on Exhibit 301. If you
19 turnaround and take that stimulation factor
20 Mr. Hart used and turnaround and compare that for Payette
21 and Weiser, it's not economical, based on what you just
22 said and asked me to do.
23 Q I don't believe that that was my question
24 at all.
25 A Well, then ask me another question.
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1 Q My question is simply that the customer who
2 merely looks at his rate increase for local calling --
3 A The $5.50.
4 Q -- the $5.50 or the $5.80, he merely looks
5 at the $5.80 and doesn't look at the fact that he's going
6 to receive more calls and that he is going to be,
7 perhaps, placing more calls than he previously was
8 placing, and is not looking at the whole picture; isn't
9 that true?
10 A That's correct.
11 MS. HOBSON: Thank you. That's all I have.
12 COMMISSIONER SMITH: Thank you,
13 Ms. Hobson.
14 Do we have questions from the Commission?
15 Commissioner Hansen.
16
17 EXAMINATION
18
19 BY COMMISSIONER HANSEN:
20 Q Mr. Hendershot, I guess if some of the
21 smaller companies that you represent were required to
22 lower their access rates because they were determined
23 that they were too high -- we have some companies in the
24 state right now like GTE and Citizens that are lowering
25 access rates, and there's pressure from the toll
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1 companies for these companies to lower their access
2 rates.
3 I guess the question that I would like to
4 ask you is, if the companies that you're representing
5 here today, in the future, were required to lower their
6 access rates, then the revenue loss that you're
7 projecting due to EAS really would be a lot different
8 than we're projecting right now today; is that right?
9 A It would be higher, yes. In other words,
10 the three of those companies, Midvale, Cambridge, and
11 Rural are already in the State Universal Service Fund,
12 and their access rates are at the statewide average. So
13 as those access rates go down, there's an increase in the
14 State Universal Service Fund payments to those three
15 companies. Farmers Mutual is approximately in that same
16 range.
17 Now, the local, as -- what you would have
18 in those three companies -- and if we use Farmers Mutual,
19 they have -- approximately 90 percent of their minutes,
20 intraLata access minutes, are called in to this mega
21 Boise calling area. If they lost that, that's 90 percent
22 of those access revenues on the intraLata side that they
23 would have lost and that they would have to make up
24 through local rate increase and other sources.
25 If you use that 90 percent for Cambridge
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1 and Midvale and Rural, that would be 90 percent revenues
2 which would be in excess of increasing the local rates up
3 to the $24.10.
4 COMMISSIONER HANSEN: That's all I have.
5 COMMISSIONER SMITH: Commissioner Nelson.
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1 EXAMINATION
2
3 BY COMMISSIONER NELSON:
4 Q In your jousting with Ms. Hobson, when you
5 were talking about the inclusion of Midvale and Cambridge
6 in an EAS and what they wanted, I had the impression,
7 from reading your original testimony, that what those
8 folks might want was EAS in the Payette and Weiser, not
9 necessarily all the way into Boise?
10 A That's correct. That's why we think it.
11 Q In my own mind, I'm thinking, well, if we,
12 in this case, grant EAS to Payette and Weiser into Boise,
13 and we follow our formula of making everything
14 region-wide, then we can't grant EAS peitions for Midvale
15 and Cambridge unless we also include Boise?
16 A That's our assumption.
17 Q I have the impression here that what Weiser
18 and Payette want is EAS into Boise, not to Midvale?
19 A I can't speak for -- I believe that the
20 petition that you have from Washington County, which
21 includes Weiser, Cambridge, and Midvale, that they were
22 asking for EAS into Payette County, Ontario, and to
23 Farmers Mutual. That's really the economic center on
24 that side of the state.
25 Q Okay. But in the petition before us --
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1 A In the petition before you -- the petition
2 before you says EAS into Boise, in addition to Payette
3 and that whole area.
4 Q If we create the EAS area that you
5 envision, for simplicity I'll call it a Highway 95 EAS --
6 A That's probably a good explanation.
7 Q -- and we were to set something like that
8 up, we haven't really answered the concerns of the Weiser
9 and Payette people, have we? We have answered maybe the
10 concerns of the Midvale and Cambridge people?
11 A You haven't answered their concern relative
12 to the Boise area, which is a later petition than the one
13 Mr. Hart mentioned.
14 Q Have you done any analysis as to how costs
15 would compare for your clients with your
16 Highway 95 EAS, as compared to the proposal before us?
17 A Due to the short time frame, we haven't had
18 the time to gather that data to do that analysis.
19 Q All of the questions you have dealt with,
20 the EAS petition from the west side, we haven't talked
21 about Mountain Home at all, can I assume that your
22 concerns with Mountain Home are not nearly as great as
23 the concerns you have about the Weiser/Payette petition?
24 A I would say that's a fair assumption.
25 Q Are you supporting the Mountain Home
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1 petition, or are you just ambivalent, or are you opposing
2 it?
3 A We don't have a strong position on that.
4 Q I guess what I'm wondering is, do you see
5 anything that we're missing in this Weiser/Payette
6 petition that hasn't come out here?
7 A The only thing is maybe you need to do a
8 survey, as Commissioner Hansen was kind of indicating,
9 and getting a broader basis of it, maybe giving customers
10 a broader chance to respond.
11 COMMISSIONER NELSON: Okay. Thank you.
12 COMMISSIONER SMITH: I think Ms. Copsey has
13 another question before I get to mine.
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1 CROSS-EXAMINATION
2
3 BY MS. COPSEY (Continued):
4 Q Just a follow-up question to something
5 Commissioner Nelson asked you. It's more along the lines
6 of a philosophical question, I guess.
7 Is there anything that precludes the
8 Commission from granting EAS to specific exchanges; for
9 example, from the Midvale customers into Payette and
10 Weiser, as opposed to granting EAS to the Boise region,
11 is there any reason they can't do that?
12 A A philosophical question gives the right to
13 answer philosophically. And the Commission could do
14 whatever they want.
15 Q There's nothing that you're aware of that
16 would preclude them from doing that, to answer some of
17 your concerns?
18 A Not at all. But then what you have is, you
19 may have customers coming back petitioning, you have to
20 look at all the facts, you have to evaluate it. Our
21 feeling is if you're going to have EAS, have EAS in the
22 whole calling area and not just slice it up into pieces.
23 What I mean by that is, let me just say, you don't have
24 the customers in Midvale only have EAS in Weiser, and
25 customers in Weiser have the entire Boise calling area.
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1 MS. COPSEY: I have no other questions.
2
3 EXAMINATION
4
5 BY COMMISSIONER SMITH:
6 Q It's always dangerous to take on someone
7 else's question, but I'm going to take on Commissioner
8 Hansen's question about access charges. Let me see if I
9 can get at what I think happens.
10 If a local exchange company -- as you
11 indicated, your companies have reduced their intrastate
12 access charges. Then for companies in USF, that meant a
13 corresponding increase in USF after all?
14 A That's correct.
15 Q If that's the case, then those reduced
16 access minutes aren't part of the revenue that's used if
17 you're calculating revenue efficiency on the granting of
18 EAS?
19 A That little piece of it.
20 Q So to the extent that access charges have
21 been reduced and taken care of by the USF, they're not
22 part of what we look at if we're determining a revenue
23 deficiency for EAS? That's yes or no?
24 A That's not a complete question, what you're
25 asking there. Let's say we have $100 in revenue
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1 requirement for the company. And that's the state
2 revenue requirement. $10 comes from local and $90 comes
3 from intraLata state access.
4 If we drop the access rate -- well, let's
5 say -- let's just keep it $10 and $90 --
6 Q I'm just talking intrastate. Are you
7 trying to talk interstate?
8 A Intrastate only. We drop the access rate.
9 And let's say it has an impact of $10. We have $10 for
10 local, $10 from state USF, $80 from state access. Then
11 let's say we have an EAS calling area. What you're going
12 to have is $80 left in access. There's going to be a
13 piece of that that's converted to local. If it's 90
14 percent, that's $72 that shifts over to local, in
15 addition to the $10.
16 Q But my point was that you're talking $80
17 instead of $90. And if Commissioner Hansen's question is
18 that to the extent the local exchange companies have
19 already reduced their intrastate access that is not part
20 of --
21 A For piece settle.
22 Q I have a couple of questions regarding
23 Farmers. Do you know what their local rates are today?
24 A Their local rates are $9.75.
25 Q For that they get Fruitland. Do you know
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1 what their local calling area is? Do you know if they
2 have EAS?
3 A Yes, they do have EAS to New Meadows,
4 New Plymouth, Payette, and Ontario.
5 Q They're a co-op, they're a customer-owned
6 utility?
7 A Customer-owned, customer-oriented.
8 Q I recall in past cases dealing with co-ops,
9 they get payments back from the company maybe annually if
10 they have collected too much money?
11 A That's called capital credits. They do get
12 some capital credits if they're stockholders in that
13 company.
14 Q So they pay $9.75 a month. Once a year
15 they might get some of that back?
16 A They're paying for prior years. As time
17 passes on, costs change and the federal government
18 shifts, FCC shifts costs down and those things change. I
19 don't have those numbers and don't know those.
20 Q I was confused by your answers to some of
21 Ms. Hobson's questions about the bridging. So my simple
22 question is: If a bridging situation were to occur would
23 Farmers lose revenue?
24 A If a bridging situation occurred?
25 Q Yes.
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1 A Under today's scenario, they would not.
2 Q And finally, you mentioned the short time
3 frame for this case. And I just wanted to point out
4 these petitions were filed in November of 1994. So is
5 this a case of your companies didn't decide this was
6 important for them until last month?
7 A I would say we probably have been
8 monitoring, but we were also anticipating there was going
9 to be an EAS calling area on the western side of the
10 state which probably was something we didn't realize
11 getting involved in until just recently.
12 Q You don't consider the Boise calling area
13 to be -- this EAS you were anticipating on the western
14 side of the state?
15 A Well, we were thinking of a Weiser Valley
16 calling area.
17 COMMISSIONER SMITH: Something more west,
18 something further west.
19 Mr. Ward, do you have Redirect?
20 MR. WARD: Well, at great risk, as you
21 said, Madam Chair, I'm going to take a crack at seeing if
22 I can get the answer to Mr. Hansen's question.
23
24
25 REDIRECT EXAMINATION
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1
2 BY MR. WARD:
3 Q I think, Mr. Hendershot, you answered
4 literally correct, but not in the spirit of the
5 question. As I understood the question, let's assume
6 that the companies we represent have access charges on
7 the order of five cents a minute.
8 A Okay.
9 Q I think all the question was intended to
10 show is that let us assume that prior to EAS -- now no
11 EAS is involved -- the Commission ordered those access
12 charges reduced to two cents a minute.
13 A Okay.
14 Q Now, doesn't it follow that in that case if
15 the subsequent EAS comes up, the cost of that EAS is
16 reduced by 60 percent?
17 A Correct.
18 Q Ms. Hobson asked you some questions about
19 whether we could prevent EAS arbitrage in this
20 situation. Let me ask you this: You're familiar, are
21 you not, with the prior proceedings regarding the EAS
22 arbitrage and the Boise Valley and in the Upper Snake
23 River Valley?
24 A Yes.
25 Q Now, in those cases, to put it crudely,
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1 what I understand happened is that the arbitrager set up
2 a mini switch in an exchange with overlapping EAS
3 territories, and they're provided essentially a toll
4 service without access charge payment?
5 A That's correct.
6 Q Now, in this case I want you to keep in
7 mind that Payette and Ontario are basically two
8 communities separated by the Snake River, by the width of
9 the Snake River about three miles. Do you have that in
10 mind?
11 A Yes.
12 Q Now, while you may be able to detect
13 arbitrage when someone is using a mini switch between
14 overlapping EAS communities, would that necessarily be
15 the way a party would implement arbitrage between
16 communities that lie so close together?
17 A Well, in that close proximity they could
18 easily just request a foreign exchange line or FX into
19 that neighboring community.
20 Q Or they could plow or lease cable
21 facilities?
22 A Those are another option. And get dial
23 tone from a neighbor's community.
24 Q Do you know, by the way, whether there
25 are -- well, I know you don't know so I don't want to
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1 ask.
2 A I don't want to know.
3 Q So isn't it possible that when communities
4 lie that close together that, in fact, regardless of what
5 this Commission does about whether the Boise area would
6 have EAS to Ontario, it would be pretty easy for an
7 arbitrager to provide it, would it not?
8 A Yes.
9 Q Without much chance of detection?
10 A That's correct.
11 Q One more question: Ms. Hobson asked you,
12 with regard to Exhibit 301, that if a person simply
13 looked at the calculations we made as to the cost per
14 minute of EAS, she asked you, in essence, to agree that
15 that's not the whole story.
16 Now, while we can agree to that, isn't it
17 also true that no matter how much stimulation you assume,
18 what percentage you assume, whether it be 2X, 3X, 5X,
19 whatever, that for those, roughly, 50 percent of the
20 customers who made one call or less to the Boise region,
21 no amount of stimulation makes this economic for them;
22 isn't that true?
23 A That's correct.
24 MR. WARD: Thank you. That's all I have.
25 COMMISSIONER SMITH: I just have one more,
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1 Mr. Hendershot.
2
3 EXAMINATION
4
5 BY COMMISSIONER SMITH:
6 Q Maybe you can help me understand this. I'm
7 thinking about Farmers and being a customer-owned system,
8 so maybe I'm too simplistic. I just don't understand the
9 level of their concern. Because it seems to me that if
10 you're a customer, all you need to do is say, "Weiser and
11 Payette are getting calling to the Boise area. If we
12 want to do that, your monthly bill will move from $9.75
13 to $20, $25, $30, whatever the number is."
14 And the customer could say, "Yes, I think
15 that is a good deal. Let's do it." Or "No, that's a
16 terrible deal. We don't want to follow in their path."
17 So what am I missing?
18 A The missing piece is that they can do that
19 from their side. The customers can say "Yes." But then
20 they also have to file petitions to come to the
21 Commission so that U S WEST can grant it.
22 Q I disagree, because, I mean, yes, we will
23 do the U S WEST side, but it just seemed to me that we
24 had one in the Magic Valley where the co-op members
25 themselves determined, yes, we want Twin Falls, and they
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1 determined what they're going to pay for it. I guess I'm
2 just -- I'm missing something.
3 COMMISSIONER NELSON: Can I ask a question
4 after you're through?
5 COMMISSIONER SMITH: Commissioner Nelson.
6
7 EXAMINATION
8
9 BY COMMISSIONER NELSON:
10 Q I don't know if I'm on to what maybe she's
11 missing, but if we go into Weiser and those people stand
12 up one after another and say, "We're willing to pay $5.80
13 more for EAS," or "We're willing to pay $25," then why
14 are you still opposed to this?
15 If those customers want to pay it, are you
16 opposed because your companies that you represent will
17 want it and there's no way that for $25 or $26 or $27
18 that they can provide it for their customers, is that the
19 reason that you're concerned? Whether it even goes
20 beyond those customers in Weiser saying, "We want it",
21 you would still be against it because the customers you
22 represent, you don't think can have it for that rate, is
23 that it?
24 A Our first preference would be that if you
25 create this Boise mega calling area, you are, in turn,
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1 precluding the opportunity for a calling area on the
2 western part of the state, Weiser Valley. If you, in
3 turn, do the Boise mega calling area then, in turn, the
4 risk runs that our customers in Cambridge, Midvale, and
5 so forth are going to want to have the same calling
6 area. In turn, that revenue requirement may exceed the
7 $24.10 that's been established on the eastern Idaho side
8 of the state.
9 Q That's your concern?
10 A If that's the case, that, in turn, means
11 they're going to have to additional revenues from some
12 other source which the State USF would be a potential for
13 that and which should be aware of that.
14 COMMISSIONER SMITH: Ms. Hobson.
15 MS. HOBSON: Thank you.
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1 RECROSS EXAMINATION
2
3 BY MS. HOBSON:
4 Q Mr. Hendershot, when you talk about a
5 western side of the state EAS, Weiser Valley, are you
6 then talking about the Citizens Exchange in McCall and
7 New Meadows, as well?
8 A I'm not speaking for those, but it would
9 seem logical that they would fall in there also, the
10 McCall -- those Citizen exchanges.
11 MS. HOBSON: That's all I have.
12 COMMISSIONER SMITH: All right. Thank you,
13 Mr. Hendershot. We appreciate your help.
14 (The witness left the stand.)
15 COMMISSIONER SMITH: Is there anything else
16 that needs to come before the Commission?
17 MS. COPSEY: Nothing, Madam Chairman.
18 COMMISSIONER SMITH: That being the case,
19 we appreciate all the help of the parties. In these
20 cases we will be in recess until Wednesday, October 7, at
21 7:00 p.m., where we will meet again at the Payette High
22 School auditorium. With that, we will adjourn.
23 (All exhibits previously marked for
24 identification were admitted into evidence.)
25 (Hearing adjourned at 11:35 a.m.)
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1 AUTHENTICATION
2
3 This is to certify that the foregoing
4 proceedings held in the matter of the petition from
5 Elmore County residents requesting extended area service
6 between Mountain Home and Boise and between Glenns Ferry,
7 Hammett, King Hill, and Boise.
8 And in the matter of the petition from
9 Weiser, Payette and New Plymouth residents requesting
10 extended area service between Weiser, Payette,
11 New Plymouth, and Boise, commencing at 9:30 a.m., on
12 September 24, 1998, at the Public Utilities Commission,
13 Boise, Idaho, is a true and correct transcript of said
14 proceedings and the original thereof for the file of the
15 Commission.
16 Accuracy of all prefiled testimony as
17 originally submitted to the Reporter and incorporated
18 herein at the direction of the Commission is the sole
19 responsibility of the submitting parties.
20
21
22
23
24
JEANNE M. HIRMER
25 Certified Shorthand Reporter #318
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