20020924_271.pdf

TO:
FROM:
DATE:
RE:
DECISION MEMORANDUM
COMMISSIONER KJELLANDER
COMMISSIONER SMITH
COMMISSIONER HANSEN
JEAN JEWELL
RON LAW
LOU ANN WESTERFIELD
LYNN ANDERSON
RANDY LOBB
JOE CUSICK
DOUG COOLEY
BEVERLY BARKER
TONY A CLARK
GENE FADNESS
WORKING FILE
DON HOWELL
SEPTEMBER 18, 2002
PETITION FOR A DECLARATORY ORDER REGARDING THE USE OF
VIRTUAL NXX CALLING, CASE NO. GNR-02-
On August 27, 2002, several small incumbent LECs filed a petition urging the
Commission to declare that the use of "virtual" prefixes (calling NXX) or virtual NXX-like services
are not in the public interest and are prohibited in Idaho. Virtual NXX calling converts what would
be a long-distance toll or MTS call to a toll-free local call by the assignment of a telephone prefix
(NXX) that make it appear to be a local call. In the alternative, the petitioners seek an Order from
the Commission declaring that the use of virtual NXX's or like services are MTS or toll services
and are subject to the assessment and payment of originating and terminating access charges. The
petitioners also seek an Order from the Commission declaring that the use of VNXX prefixes are an
inappropriate use of: (1) numbering services; (2) violate number portability standards; (3) violate
the contribution standards for state USF, TRS and high cost fund requirements. Petition at 2.
The Petition for Declaratory Order was filed jointly by Potlatch Telephone, Centurytel of
Idaho and Centurytel of the Gem State (collectively referred to as Century); and the Idaho
Telephone Association (ITA).
I The ITA has 14 members including Albion Telephone, Cambridge Telephone, Midvale Telephone, Direct
Communications Rockland, Silver Star Telephone, Rural Telephone, and Inland Telephone. These listed companies
receive financial support from the Idaho USF. Petition at 4.
DECISION MEMORANDUM
THE PETITION
In its simplest terms, the petitioners urge the Commission to prohibit the assignment of
telephone prefixes (NXX) to telephone customers with no physical presence in the exchange
assigned to a particular NXX prefix (i., virtual NXX). What the petitioners wish to prohibit is
intrastate telephone calls between locations that are not within the same local calling area being
rated as local rather than toll" calls. Petition at 6. If a call that would otherwise be a long-distance
call is rated as a local call, then the caller avoids paying toll charges and, in turn, the originating and
terminating LECs do not receive access charges.
According to the petition, there are several ways in which virtual NXX calling may
occur. First, the customer may be assigned an NXX code that is associated with another local
exchange or local calling area where a call between the point of origin and the point of termination
would not constitute a local call. For example, if a customer in Riggins were assigned a Boise NXX
prefix, then that call might be rated as a local call because the Riggins caller is calling from a
telephone prefix assigned to the Boise exchange. In this case, the caller would avoid paying toll
charges and the originating and terminating LEC might not receive their appropriate access charges.
Another example of virtual NXX calling would be the assignment of a NXX prefix that covers
multiple local rate centers or calling areas. For example, since the Commission allowed Qwest to
discontinue the time-of-day, the 844 prefix that use to be employed for LATA-wide calling might
be used to avoid paying toll charges and access charges.
The petitioners assert that the use of virtual NXX prefixes have occurred in other states
where competitive LECs have requested virtual NXX codes. Petition at 5. In addition, the
petitioners "believe that at least one or more CLECs that provide VNXX or VNXX -like services in
other states are now certified in Idaho.!d. at 6.
The petitioners assert that the primary analysis used by the FCC and this Commission to
determine whether a call is local or long-distance is to determine the point of origination to the point
of termination or an "end-to-end analysis.!d. at 7. The petitioners assert that Idaho Code ~ 62-
603(1) defines "basic local exchange service as "two-way interactive switched voice
communication within a local exchange calling area." (Emphasis added). Idaho Code ~ 62-603(7)
defines "local exchange calling area" as a "geographic area encompassing one (1) or more local
communities as described in maps, tariffs, rate schedules, price lists, or other descriptive material
filed with the commission by a telephone corporation, within which area basic local exchange rates
DECISION MEMORANDUM
rather than message telecommunication service rates apply." The petitioners allege that the use of
virtual NXX codes would be discriminatory because some customers would be allowed to use NXX
code to avoid toll charges while other customers would not.
The petitioners also noted that on at least one prior occasion, this Commission has found
that services or network configurations, which allow callers to avoid toll charges, are unlawful and
not in the public interest. In what is commonly referred to as the Upper Valley Case the
Commission found that a "bridging service" that allowed toll-free calling between Caldwell and
Boise (before the Commission implemented the Treasure Valley calling area) was inappropriate.
essence, calls between N amp a and Meridian and between Meridian and Boise were extended area
service (i., local) call by using the EAS bridge in Meridian, callers from Nampa could call Boise
without incurring toll charges. In Order No. 25933, the Commission found that
Upper Valley s EAS bridging services are either MTS or the functionally
equivalent ofMTS. We further find that Upper Valley s use of the EAS route is
unfair because Upper Valley is using aLEC's EAS plant and facilities without
justly compensating the LEC for such use. Transporting what would otherwise
be an MTS call over EAS routes also unfairly disadvantages all other
interexchange carriers. Upper Valley is not purchasing the appropriate wholesale
service for resale to its customers. Failure to compensate U S West for its
originating and terminating access charges and use of its EAS trunks is
inappropriate; it is discriminatory to other long-distance companies that purchase
and impute the correct access charges; and it is not in the public interest.
Order No. 25993 at 2, quoting Order No. 25885 at 14.
The petitioners also observed that a number of other states are considering this very
Issue. These states include New York, Ohio, South Carolina, Maine, Georgia, Tennessee, and
Missouri.In addition to denying local exchange company access charges and interexchange
companies toll charges, the petitioners claim that use of virtual NXX services adversely affects the
Idaho USF, the TRS , and the high cost universal service fund. What would otherwise be MTS
traffic is diverted or converted to local traffic. Consequently, the total number of MTS minutes is
reduced. Because the USF and TRS are funded in part by a surcharge on MTS minutes, any
reduction in MTS minutes directly reduces the level of funding for these public programs. At such
time as the high cost universal service fund is implemented (Idaho Code ~ 62-610F), the petitioners
claim that a similar adverse effect might occur. Petition at 13.
Based on the foregoing, the petitioners urge the Commission to issue an Order declaring
that the use of virtual NXX prefixes or NXX-like services are prohibited in Idaho and authorize
DECISION MEMORANDUM
immediate termination and disconnection of (such) services by any Idaho LEC.Id. at 13-14.
They also propose that the Commission s Order contain findings that such MTS calls are subject to
toll charges, access charges, and all other applicable laws and regulations. Finally, petitioners
request that the Order declare that such virtual service arrangements are inappropriate and find that
a single NXX assigned to a multiple local rate center should be prohibited where it violates
standards necessary to implement local number portability.
STAFF RECOMMENDATION
As a fundamental proposition, Staff believes that intrastate telephone calls should be
rated depending upon their points of origination and termination within this state. However, the
Staff is also aware that some "local" service areas for other types of telecommunication providers
(cellular, PCS, paging) do not necessarily coincide with the demarcation of local calling areas for
wire line services.
The Commission s Procedural Rule 102 provides that notice of petitions for declaratory
rulings will be issued to all affected utilities. Consequently, the Staff recommends that the Petition
for Declaratory Order be processed under Modified Procedure. Staff recommends that a deadline
for intervention date be established so that persons submitting comments may serve other interested
persons.
COMMISSION DECISION
Does the Commission wish to process this matter under Modified Procedure? Should a
deadline for intervention be established and should the Order require that commentors file their
comments with other interested persons?
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Don Howell
Vld/M:GNRTO216
DECISION MEMORANDUM