20020815_235.pdf

TO:
FROM:
DATE:
RE:
DECISION MEMORANDUM
COMMISSIONER KJELLANDER
COMMISSIONER SMITH
CO MMISSI 0 NER HANSEN
JEAN JEWELL
RON LAW
LOU ANN WESTERFIELD
TONY A CLARK
DON HOWELL
DAVE SCHUNKE
RANDY LOBB
JOE CUSICK
WAYNE HART
LYNN ANDERSON
BEV BARKER
GENE FADNESS
WORKING FILE
~-~
WELDON STUTZMAN
AUGUST 13, 2002
CASE NO. QCC-02-
APPLICATION FOR A CERTIFICATE OF pUB C CONVENIENCE AND
NECESSITY FOR QWEST COMMUNICATIONS CORPORATION
On April 24, 2002, Qwest Communications Corporation (QCC) filed an Application
for a Certificate of Public Convenience and Necessity to provide basic local exchange service
within the State of Idaho. QCC is a wholly-owned subsidiary of Qwest Service Corporation
which also owns Qwest Corporation. Qwest Corporation is an incumbent local exchange carrier
in Idaho and a Bell Operating Company (BOC) as defined by the 1996 Telecommunications Act.
QCC intends to provide intra and interLATA toll service upon approval from the Federal
Communications Commission pursuant to 47 US.C. ~ 271 and ~ 272. Section 272 requires a
BOC, which includes Qwest Corporation, to provide interLA T A services through an affiliate
separate from the BOC. As initially stated in its application, QCC also intends to provide local
exchange service and vertical features to business and residential customers in the service area of
Qwest Corporation and Verizon Northwest, Inc. using both its own facilities and resold service
DECISION MEMORANDUM
or unbundled network elements. QCC's local telecommunication services would be subject to
the Commission s jurisdiction pursuant to Title 62, Idaho Code.
On June 10, 2002, the Commission issued a Notice of Application and Notice of
Modified Procedure to process QCC's Application. During the comment period, written
comments were filed only by the Commission Staff. Staff determined that QCC met the
Commission s filing requirements for approval of a CPCN, but raised concerns regarding two
issues. Staff is concerned that customers may not understand the distinction between the
regulated basic local service provided by Qwest Corporation and the relatively unregulated basic
local service provided by QCC if those services are marketed by the same entity. In reply
comments, QCC asserts joint marketing by QCC and Qwest Corporation is expressly permitted
by Section 272 ofthe Telecommunications Act. Nevertheless, QCC on August 12 2002, filed a
motion to amend its application "to exclude the Idaho service territory in which Qwest
Corporation operates as the incumbent local exchange carrier.Accordingly, QCC now seeks
authorization to provide local service only in the service area ofVerizon.
Section 272(g)(3) states that "the joint marketing and sale of services permitted under
this subsection shall not be considered to violate the nondiscrimination provisions of subsection
(c)." The joint marketing referred to and thus "permitted under this subsection " in terms of this
case, would be marketing by QCC of Qwest' s local exchange services and Qwest's marketing of
QCC's long-distance service. See 47 ~ US.c. 272 (g)(l) and (2). The section does not refer to
QCC's marketing of local service , ostensibly in competition with Qwest's local service. If QCC
and Qwest were jointly marketing local services offered by both entities, the potential for
customer confusion is great.
The joint marketing of local services also presents additional challenges for Qwest's
compliance with the separation requirements of Section 272. For example, QCC must "operate
independently" from Qwest. The companies must maintain separate records and accounts, and
have separate officers, directors and employees. Transactions between the two companies must
be conducted "on an arm s length basis " and must be reduced to writing. Qwest may provide
facilities and services to QCC only if "such services or facilities are made available to all carriers
at the same rates and on the same terms and conditions, and so long as the costs are appropriately
allocated." 47 D.C. ~ 272 (e)(4). The closer the companies work together, especially in dual
offerings of local service in the same territory, the more likely they would encounter difficulties
DECISION MEMORANDUM
in complying with the Section 272 requirements.Accordingly, Staff supports QCC'
modification to its application to limit its local service authority to Verizon s service area.
Staff in written comments also expressed concern about the financial capability of
QCC, given the current financial problems of the parent company, Qwest Communications.
With the modification to QCC's application to limit its local service authority to the
area served by Verizon, Staff supports the application and recommends the Commission issue an
order approving the Application of QCC for a Certificate of Public Convenience and Necessity
to provide basic local exchange service within the service area ofVerizon Northwest, Inc.
In a related matter QCC submitted an Application to withdraw the CPCN the
Commission previously issued to LCI International Telecom Corp. (LCI). LCI no longer exists
and Staff recommends the Commission approve the withdrawal of the CPCN issued to LCI.
Commission Decision
Should the Commission approve the Application of QCC for a Certificate of Public
Convenience and Necessity to provide basic local telecommunication service in the service area
ofVerizon Northwest, Inc.
Should the CPCN ofLCI International Telecom Corp. be revoked?
Weldon Stutzman
vld/M:QCCTO201 ws2
DECISION MEMORANDUM