20040112_733.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
COMMISSIONER SMITH
COMMISSIONER HANSEN
COMMISSION SECRETARY
COMMISSION STAFF
FROM:DOUG COOLEY
DATE:JANUARY 9, 2004
RE:PETITION FROM RESIDENTS OF THE THREE CREEK AREA
REQUESTING EAS INTO THE MAGIC VALLEY CALLING AREA.
CASE NO. GNR-00-41.
BACKGROUND
On November 2, 2000, the Commission received a Petition from approximately
twenty-eight residents of the Three Creek area requesting extended area service (EAS) into the
Magic Valley Calling Area. Customers in Three Creek have local calling only within the
exchange. The Three Creek exchange is served by Rural Telephone Company and consists of
approximately forty residential and ten business customers. The exchange borders Nevada and
covers areas of southern Owyhee and Twin Falls counties. At the time ofthe petition, these
customers had no local Internet service provider. If approved, EAS into the Magic Valley
Calling Area would allow local calling to Twin Falls, Jerome, Richfield, Bliss, Buhl, Castleford
Hollister, Dietrich, Eden, Gooding, Hagerman, Hazelton, Kimberly, Murtaugh, Shoshone
Wendell, and Filer.
In January 2001 , the Commission opened Case No. GNR-00-41 to investigate local
calling into the Magic Valley Calling Area. In 2001 , Rural Telephone submitted its estimates to
implement the requested EAS. With estimates that exceeded $600 000, Staff believed the
prospect ofEAS for approximately 50 customers would be too expensive. The largest portion of
Rural Telephone s cost involved replacing 17 miles of cable between the Three Creek central
office and the Signal Butte microwave facility that sends and receives all telephone traffic in and
out of the exchange. The existing cable was at capacity and could not be expanded to handle
increased traffic ifEAS were granted or if local internet service were made available.
DECISION MEMORANDUM JANUARY 9, 2004
Staff visited the Three Creek exchange and met with Rural Telephone to explore
other alternatives in October 2001. During this time, Staffmade Rural Telephone aware ofa
grant opportunity from the u.S. Department of Agriculture s Rural Utilities Service to install
dial-up Internet access facilities in rural areas. Rural Telephone was eventually awarded the
maximum amount of $400 000 in July 2002. Construction to increase capacity along the 17-mile
route was completed in late 2003 and Rural Telephone recently began offering local Internet
access via dial-up and DSL.
With traffic capacity increased as a result of the RUS grant, Staffhas repeatedly
asked Rural Telephone since December 2002 to submit a revised cost estimate for providing
EAS from Three Creek into the Magic Valley Calling Area. In the absence of a Company
estimate, Staff informed both Rural Telephone and its attorney in December 2003 that Staff
would recommend the Commission adopt an estimate of $7 667 to approximate the Company
cost to provide EAS. This estimate is based on the annual lost revenue portion of Rural
Telephone s EAS estimate submitted in 2001. Staff presumes that other capital costs and
expenditures associated with increasing traffic capacity were covered by the $400 000 RUS
grant. There is not shift in separations due to the FCC's current five-year freeze.
Customers in Three Creek currently pay $21.63 per month for telephone service.
the EAS were granted and rates were increased to $24.10 (the rate paid by other rural Idaho
customers with EAS), approximately $1 482 of the annual $7 667 cost would be recovered. To
make Rural Telephone whole, the Company s Idaho Universal Service Fund draw would need to
be increased by the remaining $6 185 per year.
Petitioners principally wanted EAS into the Magic Valley Calling Area because dial-
up Internet access was only available to Three Creek customers via a toll call. With local
Internet access now available, Staff would like to determine if petitioners from Three Creek are
still interested in EAS into the Magic Valley Calling Area and whether or not they are willing to
pay a monthly rate of $24.10. To do so, Staff is considering conducting an informal meeting in
Three Creek, a customer survey, or a combination thereof. To proceed, Staff would need to
know whether the costs, rates, and USF increase mentioned above are realistic options
acceptable to the Commission so that these options can be conveyed to the Three Creek
customers. In the alternative, Staff seeks direction on how the Commission wishes this case to
proceed.
DECISION MEMORANDUM JANUARY 9, 2004
COMMISSION DECISION
1. Does the Commission accept Staffs estimate of $7 667 in annual costs to Rural
Telephone Company to implement EAS from Three Creek into the Magic Valley Calling Area?
2. In the event that EAS is eventually granted to Three Creek customers, is the
estimated $6 185 annual increase in Idaho Universal Service Fund disbursements to Rural
Telephone Company acceptable to the Commission?
3. Ifso, does the Commission wish to proceed with this case by allowing Staff to
conduct an informal inquiry into the willingness of Three Creek customers to go from $21.63 per
month to $24.10 for EAS into the Magic Valley Calling Area?
p;::;C
D6ug COOley
DC:gdk:i:udmemos/three creek dec memo
DECISION MEMORANDUM JANUARY 9, 2004