20040602_856.pdf

DECISION MEMORANDUM
TO:CO MMISSI 0 NER KJELLAND ER
COMMISSIONER SMITH
CO MMISSI 0 NER HANSEN
COMMISSION SECRETARY
LEGAL
WORKING FILE
FROM:DOUG COOLEY
DATE:MAY 28, 2004
RE:BROADBAND TAX CREDIT APPLICATIONS
CASE NOS. IZ2-04-2; GNR-04-10; VZN-04-06; QWE-04-08;
AND CUS- T -04-01.
BACKGROUND
In April and May 2004, the Commission received several Applications asking for
approval of equipment for the broadband tax credit pursuant to Order No. 28784 and Idaho Code
g 63-30291(4). To be eligible for the tax credit, the taxpayer must obtain from the Commission
an Order confirming that installed equipment qualifies for the tax credit.
ST AFF ANALYSIS
IDACOMM - IDACOMM's Application states that the Company installed fiber optic
cable, line cards, supporting power supply and electronics during 2003 in expanding its optical
transport network. The Company offers high-speed Internet and other point-to-point data
services to customers in Idaho s Treasure Valley. IDACOMM indicated that it offers high-speed
access to customers at transmission rates from 1.544 Megabits per second (Mbps) up to 1000
Mbps. All of IDACOMM' s customers are Idaho subscribers. The Company also included right
of way fees related to broadband projects as part of its investment. IDACOMM's 2003
broadband investment was approximately $840 000.
Velocitus stated that, during calendar year 2003 , it installed various components as part
of its wire line and wireless broadband network for the provision of high-speed Internet access
and other point-to-point data services to customers in Idaho s Treasure Valley and other
communities in Idaho. Such components include transmitting/receiving antennae, data traffic
DECISION MEMORANDUM MAY 28, 2004
concentrators, switches and routers. VELOCITUS also included in its Application such items as
installation and labor as part of its investment cost. The Application for calendar year 2003 is for
approximately $161 000 of broadband investment. VELOCITUS indicated that it began offering
high-speed access to customers in 2001 at transmission rates from 256 kilobits per second (kbps)
up to 45 megabits per second (Mbps).
Verizon Northwest states in its Application that during calendar year 2002 the Company
installed equipment used to provide DSL and high-speed data (e.g. T -1) services to customers in
the exchanges of Bayview, Bonners Ferry, Coeur d' Alene, Clark Fork, Hayden Lake, Hope
Kellogg, Moscow, Mullan, Oldtown/ Albeni, Orofino, Pinehurst, Plummer, Priest Lake, Priest
River, Rathdrum, Spirit Lake, Wallace, Sandpoint, and St. Maries. Such components include
digital access platforms, long-range digital transport, line cards, access ports, fiber optic cable
fiber terminals, and supporting software. Verizon states that transmission rates range from 128
Kbps to well beyond 6 Mbps. The Application states that Verizon invested approximately
300 000 in qualifying broadband equipment during 2002.
Owest's Application states that, during calendar year 2002, it installed various
components as part of its wire line broadband network for the provision of high-speed Internet
access to customers in many of the Company s respective Idaho service areas. The Company
also stated that the equipment was installed in 2002 that is capable of offering high-speed access
to customers at transmission rates from 256 kilobits per second (kbps) to more than 100 megabits
per second (Mbps).
Specifically, Qwest stated that it installed Digital Subscriber Line (DSL) switches, fiber
optic and copper cable, supporting line cards, power and racks. In addition, Qwest installed
Asynchronous Transfer Mode (A TM) switches and Frame Relay switches at various locations
throughout its southern Idaho service area. Qwest included in its Application interoffice trunks
and facilities that are necessary for connecting customers to the Internet. The interoffice
facilities "do not constitute specific individual broadband services that are offered to subscribers.
Rather, these assets comprise part of the network that provides the means by which the above
services are offered." Consistent with Part 32 of Federal Communications Commission Rules
and Regulations, Qwest also capitalized such items as labor, engineer, transportation, and other
overhead costs associated with the installation of this equipment amounting to a total broadband
investment of approximately $8 000 000 for 2002.
DECISION MEMORANDUM MAY 28, 2004
Custer Telephone Co-op, Inc.stated in its Application that during 2003, it installed
various components as part of its wire line broadband network for the provision of high-speed
Internet access to customers in its Idaho service area. Some of these components included fiber
optic and copper cabling, a Fujitsu optical transport platform, digital line cards, cabinets, power
supply, software and batteries. Custer also included in this Application the supporting
engineering and overhead costs associated with these broadband projects. The Company
indicated that it began offering high-speed Internet services in 2001 at transmission rates
between 128 kilobits per second upstream and 1.5 Megabits per second downstream. Custer
states that its broadband investments for 2003 were approximately $3.7 million.
STAFF REVIEW
Staff has reviewed the lists of proposed broadband equipment submitted by the
Companies and believes that the equipment identified qualifies for the investment tax credit
pursuant to Idaho Code g 63-30291. Staff recommends approval of the Applications and further
recommends that the Commission forward the approving Orders along with a copy of the
original Applications to the Idaho Tax Commission.
COMMISSION DECISION
Should the Commission approve the Applications for the broadband investment tax
credits?
DC:udmemos/group broadband memo 3
DECISION MEMORANDUM MAY 28 , 2004