20040305_762.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
CO MMISSI 0 NER SMITH
COMMISSIONER HANSEN
COMMISSION SECRETARY
LEGAL
WORKING FILE
FROM:DOUG COOLEY
DATE:FEBRUARY 24, 2004
RE:CABLE ONE'S SUPPLEMENTAL APPLICATION FOR BROADBAND
EQUIPMENT TAX CREDIT; CASE NO. GNR- T -03-25.
BACKGROUND
On February 3 2004, the Commission received a supplemental Application from Cable
One, Inc. asking for the approval of additional equipment for the broadband tax credit. Cable
One s initial Application (also Case No. GNR-03-25) was received by the Commission on
July 9, 2003, and subsequently approved in Order No. 29326. In that initial Application, Cable
One stated that, during calendar years 2001 and 2002, it installed coaxial cable and fiber optics
as part of its "Hybrid Fiber Coax Network" (HFC) in and around the areas of Boise, Idaho Falls
Lewiston, Twin Falls, and Pocatello. Cable One states that it offers high-speed Internet and
broadband services to homes and businesses in Idaho at upstream and downstream transmission
rates of 128 kbps to 1.5 Mbps. Cable One s network in Idaho consists of approximately 2 447
miles of aerial coax, 1 877 miles of underground coax and 524 miles of fiber optic cable and
passes by over 290 000 Idaho homes and businesses.
To be eligible for the tax credit, the taxpayer must apply for and obtain from the
Commission an Order confinning that installed equipment qualifies for the tax credit. (Order
No. 28784 and Idaho Code ~ 63-30291(4))
DECISION MEMORANDUM FEBRUARY 24, 2004
DISCUSSION
In its supplemental Application, Cable One includes the labor and materials associated
with headend equipment that was not included in its original Application of July 9, 2003. Cable
One states that this headend equipment is located on the subscriber s side of the headend in
accordance with ~ 63-30291 (3)(b )(iii) and is related to Cable Modem Tennination System
(CMTS). The supplemental Application includes $7 175 of tax credit in 2001 and $2 578 of tax
credit in 2002 related to such equipment.
Cable One also includes $35,416 of tax credit in 2001 and $38 495 of tax credit in
2002 related to drop equipment and labor that was not included in its original Application of
July 9 2003. The Company states the included drop equipment is outside of the structure in
which the subscriber is located in accordance with ~ 63-30291 (3)(b )(iii).
STAFF REVIEW
Staff has reviewed the list of proposed broadband equipment submitted by Cable One and
believes that the equipment identified qualifies for the investment tax credit pursuant to Idaho
Code ~ 63-30291. In the case of the headend equipment, the CMTS separates the digital signals
from other programming on the cable network and converts them into IP packets for routing to
an Internet Service Provider and onto the Internet in much the same way that splitters and Digital
Subscriber Line Access Multiplexers (DSLAM) do on a telephone network.
In the case of the drop equipment, Cable One keeps one account for expenses related to
the drop line between the utility pole (or pedestal) and the cable modem inside the subscriber
premises. Understanding that the broadband tax credit only applies to expenses up to the outside
of the structure in which the customer is located, Cable One estimated 60% of its expenses to be
associated with the drop line between the utility pole and the outside of the customer s structure.
Because the broadband tax credit applies to relatively new investment and considering the
number of home and businesses that are built pre-wired with coaxial cable, Staff believes Cable
One s estimate is conservative and accepts its 60% allocation. Therefore, Staff recommends
approval of the Company s supplemental Application and further recommends that the
Commission forward the approving Order along with a copy of the original Application to the
Idaho Tax Commission.
DECISION MEMORANDUM FEBRUARY 24, 2004
COMMISSION DECISION
Should the Commission approve Cable One s supplemental Application for the
broadband investment tax credit?
:::~/~
i:udmemos/cable one supplement
DECISION MEMORANDUM FEBRUARY 24, 2004