staff.doc

CHERI C. COPSEY
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]

Street Address for Express Mail:
472 W WASHINGTON
BOISE ID 83702-5983

Attorney for the Commission Staff

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF THE PETITION OF IDAHO POWER COMPANY FOR A DECLARATORY ORDER DETERMINING THE JURISDICTION OF THE COMMMISSION OVER THE LEASING OF FIBER OPTIC AND METALLIC CONDUCTOR CABLES )
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) CASE NO. IPC-E-99-10

STAFF COMMENTS

COMES NOW the Staff of the Idaho Public Utilities Commission, by and through its Attorney of record, Cheri C. Copsey, Deputy Attorney General, in response to Order No. 28154 and submits the following comments.
On August 30, 1999, Idaho Power Company filed a Petition for Declaratory Order requesting the Commission determine that the leasing of “dark” optical fibers and “dead” metallic conductors in cable owned by Idaho Power is not the provision of telecommunications service subject to the provisions of the Telecommunications Act of 1988 (Idaho Code, Title 62, Chapter 6). The Petition states that the proposed service for the Twin Falls School District and St. Alphonsus Hospital/Intermountain Imaging Center will not include the electronic equipment which would be required to send or receive data over the communication conductors; hence the terms “dark” fiber and “dead” conductors.
BACKGROUND
Idaho Power previously filed three similar Petitions with the Commission relating to “dark fiber” services provided by Idaho Power to the state of Idaho, city of Boise, Albertsons, CSHQA and Trus Joist McMillan. In those previous cases, the Commission ruled that the provision of “dark fiber” services did not constitute telecommunications services pursuant to Title 62 of the Idaho Code. See Order Nos. 25425, 26514 and 26933.
In Case No. IPC-E-93-31, the Commission ruled that:
Given the specific facts of this case, we agree with the parties that leasing dark fiber that does not access the public switched network to a single-party is not the provision of telecommunications services as defined in Idaho Code §  62-603(9). Our determination in this matter is based strictly upon the particular facts of this case.

Order No. 25425 at p. 4.
Similarly, in Order No. 26514, issued on July 12, 1996, in Case No. IPC-E-96-9, the Commission ruled that leasing of “dark fiber” by Idaho Power to Albertsons and the city of Boise did not constitute communication services because Idaho Power “was not involved in the transmission of data, nor was it offering the service to the public.” Order No. 26514 at p. 3. The Commission further ruled that although Idaho Power was leasing its “dark fiber” to more than one customer, it would not be transmitting signals over the optic fiber and, therefore, Idaho Power was acting as a “cable installer” and did not meet the statutory definition of a telephone corporation. Id.
Finally, in Order No. 26933, the Commission again ruled that Idaho Power’s “dark fiber” offering to CSHQA and Trus Joist McMillan was similar to the services provided to the state of Idaho, city of Boise and Albertsons. As a result, it ruled that the leasing of dark fiber service to CSHQA and Trus Joist McMillan by Idaho Power, based on the facts identified in the Idaho Power’s Petition, did not constitute the providing of telecommunication services pursuant to Title 62 of the Idaho Code.
IDAHO POWER’S PETITION
According to Idaho Power’s Petition, Twin Falls School District and St. Alphonsus Hospital requested Idaho Power provide “dark” fiber and “dead” metallic conductor cable owned by Idaho Power to them. Idaho Power states that the proposed service for these customers will not include the electronic equipment which would be required to send or receive data over the communication conductors.
Idaho Power states that Twin Falls School District intends to use the “dark fiber” to link its local area network (LAN) to the Twin Falls High School data network to form a wide area network (WAN) to provide email, student administration, internet access and an educational software database. The total length of fiber to be leased would be approximately 12,900 feet.
St. Alphonsus Hospital and the Intermountain Imaging Center are requesting installation of at least a twelve (12) singlemode fiber optic cable between St. Alphonsus Hospital located on 999 N. Curtis Road, Boise, and the Intermountain Imaging Center at 927 W. Myrtle, Boise. This is a distance of approximately four (4) miles. St. Alphonsus Hospital will lease four (4) singlemode fibers as dark fibers. The fiber optic cable will be attached to Idaho Power’s distribution structures, transmission structures and pulled into innerducts inside Idaho Power’s underground conduit system. Idaho Power does not indicate whether all four (4) miles of twelve (12) singlemode fiber optic cable will be laid in Idaho Power’s right-of-way.
Idaho Power seeks a declaration from the Commission as to whether the leasing to Twin Falls School District and St. Alphonsus Hospital of one or more dark optical fibers and cable owned by Idaho Power constitutes the providing of telecommunication services under Title 62, Chapter 6 of the Idaho Code. If the Commission determines it is the provision of telecommunications services under Title 62, Chapter 6 of the Idaho Code, Idaho Power requests the Commission indicate what regulatory requirements must be met by Idaho Power. Idaho Power also requested the order not be limited to this particular transaction but be a general order determining that this type of activity is not the provision of telecommunications service, obviating the need to file future Petitions for Declaratory rulings.
STAFF ANALYSIS AND RECOMMENDATION:
1. Leasing “dark fiber” is not the provision of telecommunications services.
Simply leasing or laying “dark fiber” for Twin Falls School District or St. Alphonsus Hospital does not constitute telecommunications services for purposes of Title 62 of the Idaho Code (the Telecommunications Act of 1988). In relevant part, Idaho Code  62-603(9) defines the term “telecommunications service” as follows:
(9) “Telecommunications service” means the transmission of two-way interactive switched sign, signals, writing, images, sounds, messages, data, or other information of any nature by wire, radio, lightwaves, or other electromagnetic means (which includes message telecommunication service and access service), which originate and terminate in this state, and are offered to or for the public, or some portion thereof, for compensation. . . .

In addition, Idaho Code  62-603(10) defines a “telephone corporation” as “every corporation . . . providing telecommunication services for compensation within the state.” Idaho Code  62-604 provides that a telephone corporation which does not provide basic local exchange service shall be exempt from the provisions of Title 61 of the Idaho Code. Furthermore, Idaho Code  62-605(3) permits competition as to those services which have been excluded from regulation under Title 61 of the Code.
The Commission has already ruled that “leasing dark fiber that does not access the public switched network to a single-party is not the provision of telecommunications services as defined in Idaho Code  62-603(9).” Order No. 25425 at p. 4 (emphasis added). Similarly, in Order No. 26514, issued on July 12, 1996, in Case No. IPC-E-96-9, the Commission ruled that leasing dark fiber by Idaho Power to Albertsons and the city of Boise did not constitute “telecommunication service” because Idaho Power “was not involved in the transmission of data, nor was it offering the service to the public.” Order No. 26514 at p. 3. The Commission ruled that even though
Idaho Power was leasing its dark fiber to more than one customer, this fact was not determinative because it was undisputed that Idaho Power would not be transmitting signals over the optic fiber. Consequently, the Company fell into the category of a “cable installer” and did not meet the statutory definition of a telephone corporation.
Id.
Nothing in the Petition indicates that the services being proposed to be furnished to Twin Falls School District or St. Alphonsus Hospital by Idaho Power are significantly different from those described in earlier cases.
Staff recommendation: Staff recommends the Commission issue a generic declaratory Order finding that leasing or laying “dark fiber” and “dead” metallic conductor cable is not a telecommunications service subject to Titles 61 or 62 of the Idaho Code provided the service does not include the electronic equipment which would be required to send or receive data over the communication conductors. Staff recommends that the declaratory Order be generic to obviate the need to create a new case for each additional provision of dark fiber. As discussed below, Staff further recommends that the Order make clear that it does not constitute formal approval of rate base treatment for dark fiber services provided by Idaho Power either in this Petition or in future activities nor does it obviate the need for an Application pursuant to Idaho Code § 61-328 in appropriate cases.
2. Leasing Idaho Power’s “dark fiber” or the use of its right-of-way is subject to the Application requirements of Idaho Code § 61-328.

Idaho Power also requested the Commission establish a generic reporting procedure by which it could easily address Staff’s concern that the provision of “dark fiber” is properly accounted for by Idaho Power. Such reporting is necessary to ensure that rent revenue from the provision of “dark fiber” more than covers the return on investment and the fully allocated yearly expenses (including depreciation and overheads) associated with the plant-in-service investment. Where Idaho Power merely acts as a contractor and lays fiber for a customer on a customer’s own property or in that customer’s right-of-way, such activity could be treated with a reporting mechanism.
However, according to the Petition, Idaho Power is using its own right-of-way and its own fiber. Therefore, a reporting process will not meet the requirements of Idaho Code § 61-328. Idaho Code § 61-328 provides, in relevant part, as follows:
No electric public utility or electrical corporation as defined in chapter 1, title 61, Idaho Code, owning, controlling or operating any property located in this state which is used in the generation, transmission, distribution or supply of electric power and energy to the public or any portion thereof, shall sell, assign or transfer, directly or indirectly, in any manner whatsoever, any such property or interest therein, or the operation, management or control thereof, . . . except when authorized to do so by order of the public utilities commission of the state of Idaho. . . .

Idaho Code § 61-328 (emphasis added). Where the right-of-way and “dark fiber” are property owned by the utility, the lease or transfer of that property is subject to Idaho Code § 61-328. Therefore, where a utility is using its own property in order to provide “dark fiber” services, it can only proceed after the Commission authorizes the use of utility property. Furthermore, the statute is specific.
Such authorization and order shall be issued only following public notice and hearing, upon verified application of the parties setting forth such facts as the commission shall prescribe or require, and if the commission shall find that the public interest will not be adversely affected, that the cost of and rates for supplying service will not be increased by reason of such transaction, and that the applicant for such acquisition or transfer has the bona fide intent and financial ability to operate and maintain said property in the public service; provided, that no such order or authorization shall be issued or granted to any applicant or party coming within the prohibitions set forth in this act. . . .

Id. (emphasis added).
Moreover, Staff notes that at least one other power company has created a subsidiary to provide telecommunications services in Idaho. There is no indication that it has applied to the Commission to transfer or lease utility property pursuant to Idaho Code § 61-328. This statute requires all utilities to make Application to the Commission for approval before using their power utility right-of-ways or fiber for any purpose other than providing power.
The use of utility property, including utility right-of-ways, to promote the development of telecommunications carriers either through a subsidiary or otherwise is a growing phenomena. See Ex. 1. For example, Exhibit 1 is a news article concerning Boston Edison’s transfer of its “dark fiber” to a joint venture created to provide cable, Internet and telephony. While competitors complained about the potential anti-competitive impact the use of utility right-of-ways for other ventures may have on competition in telecommunications and cable, the real issue for utility regulatory commissions is the potential unfair impact on utility rate payers who may have paid for the infrastructure or the property. Ensuring that rate payers are being fairly compensated for the use of utility assets is the basis for Idaho Code § 61-328.
Staff recommendation: Staff recommends that any order in this case make clear that all utilities should comply with the Application process imposed by Idaho Code § 61-328. In addition, if the Commission issues an order, Staff will send a copy of the order to all utilities.
3. The financial analysis supports granting Idaho Power authority to lease its “dark fiber” and right-of-way.

Staff reviewed Idaho Power’s analysis regarding these projects. A group within Idaho Power’s Utility Operations Division responds to customer requests for “dark fiber.” This group is called the Idaho Power Solutions group. When a customer contacts Idaho Power requesting “dark fiber” or other non-tariffed activity, the Solutions group analyzes the request. The financial analysis examines profitability to assure a profit is made after direct and indirect loaded costs are covered. The Solutions group also completes and tracks the paperwork, including contracts. A Guiding Council comprised of Idaho Power management and officers oversee the Solutions group. The Guiding Council meets approximately every six weeks.
Staff reviewed the analysis associated with the Twin Falls School District and St. Alphonsus Hospital/Intermountain Imaging Center requests. Staff concludes that these contracts require lease payments sufficient to covers costs including a return.
Staff recommendation: Staff recommends that the Commission authorize Idaho Power to contract provide “dark fiber” and other services as outlined in its Petition.
DATED at Boise, Idaho, this day of October 1999.

_______________________________
Cheri C. Copsey
Deputy Attorney General

Technical Staff: Joe Cusick
Terri Carlock
Randy Lobb

M:ipce9913_cc

“Spokane, Wash., based Avista Communications, the C-LEC arm of Avista Corp. and formerly known as One Eighty Communications, plans to use GVN Technologies’ D’Lite 440 access platform to terminate voice and data offerings along its C-LEC systems in Lewiston, Idaho, and Billings, Mont. The D’Lite 440 units are part of a larger relationship Avista has with Harris Corp.” CLEC.com, 31 August 1999

“CLEC firm, Avista Communications of Spokane, Wash., today announced a pact with Touch America, the telecommunications arm of The Montana Power Company, to grow Avista's long-haul network footprint. Specifically, Avista will lease capacity on Touch America's fiber network stretching from Spokane to Clarkston, Washington. Avista has built its own seven-mile link from Clarkston to Lewiston, Idaho, where the firm is installing its C-LEC architecture” CLEC.com, 30 August 1999

“Washington Water Power, a $3-billion-a-year utility operator, plans to buy 51 percent of emerging Spokane, Wash., based C-LEC firm One Eighty Communications and rename it Avista Communications. Terms of the purchase agreement were not disclosed. Gregory Green, the former NEXTLINK executive who founded One Eighty, will serve as president and CEO of Avista Communications. Washington Water Power, which plans soon to change its overall corporate name to Avista Corp., also owns Avista Fiber, a provider of dark-fiber services throughout the Northwest. One Eighty Communication currently has C-LEC projects underway in Lewiston, Idaho, and Billings, Mont.” CLEC.com, 23 November 1998.

http://www.clec.com/newsclec.cfm.

STAFF COMMENTS 7 OCTOBER 8, 1999