BEFORE THE WASHINGTON UTILITIES AND TRANSPORTATION COMMISSION

         
In the Matter of the Supplemental Application and Petition of

MCLEODUSA TELECOMMUNICATIONS SERVICES, INC.,

For an Amendment to its Registration as a Telecommunications Company and 
Classification as a Competitive Telecommunications Company.  
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		DOCKET UT-961647
		
		
		FIRST SUPPLEMENTAL
		ORDER AMENDING REGISTRATION, COMPETITIVE CLASSIFICATION, AND APPROVING PRICE 
LIST TO
		INCLUDE LOCAL EXCHANGE
		SERVICES
  

BACKGROUND

  By supplemental petition filed September 21, 1999, in Docket UT-961647, 
McLeodUSA Telecommunications Services, Inc., (McLeodUSA) seeks to amend its 
registration authority as a telecommunications company, classification as a 
competitive telecommunications company, and approval of its proposed price list 
pursuant to RCW 80.36.350 and 80.36.320.  The supplemental application for 
registration, competitive classification petition, and initial price list were 
brought before the Commission at its regularly scheduled open public meeting of 
October 13, 1999.

DISCUSSION
               McLeodUSA proposes to amend its registration authority with the 
Commission as a telecommunications company to offer local exchange, long 
distance, private line, calling cards, Wide Area Telecommunications Service 
(WATS), directory assistance, prepaid calling cards, and ancillary services.  
In support of its petition, McLeodUSA asserts that its services compete with 
other switched intraexchange and interexchange carriers’ telecommunication 
services.  McLeodUSA states that customers have readily available equivalent 
alternatives and that there are no captive customers of the Company’s 
services.  

  McLeodUSA is an Iowa corporation, headquartered in Cedar Rapids, Iowa, and is 
owned by McLeodUSA Incorporated.  Rates, terms, and conditions set forth in the 
proposed price list are structured similarly to rates filed by other switched 
intraexchange and interexchange carriers for calls placed in the relevant 
market.

  McLeodUSA has provided information showing that it meets the requirements of 
RCW 80.36.350.  Pursuant to statutes and rules governing registration 
applications and advance payment proposals, McLeodUSA has proposed a 
satisfactory bond agreement for protection of those advance payments.  
Initially, the bond agreement will be for $1,000 and will increase 
proportionally as the outstanding amount of advance payments increases.  
McLeodUSA will notify the Commission at least 30 days prior to terminating its 
operations, and provide the insurer and the Commission notice in writing and 
within 48 hours of ceasing its operations with its list of all outstanding 
account numbers and customer balances.

  Within 15 days after December 31, 1999, and each calendar quarter thereafter, 
McLeodUSA will be required to submit to the Commission a report containing the 
following information specific to its state of Washington operations: (a) total 
outstanding debit card balance at the beginning of the reporting period; (b) 
dollar amount of debit cards sold during the reporting period; (c) depleted 
usage of debit cards during the reporting period; and (d) total outstanding 
debit card balance at the end of the DOCKET UT-961647
reporting period.  Statements shall continue to be filed within 15 days after 
each 3-month period thereafter until the applicant is notified in writing by 
the Commission that such reports are no longer required.  Based upon this 
information, McLeodUSA will adjust the amount of the bond to assure compliance 
with WAC 480-120-058.  In addition, Commission Staff may request current 
company financial information.  After one year’s administration of the bond 
agreement, the reporting requirement may be modified to a semi-annual level, 
upon request by McLeodUSA and authorization by the Commission, if the company 
demonstrates that it has maintained adequate levels in the bond agreement 
during the previous 12-month period.

  McLeodUSA shall state an unconditional money back guarantee on the debit card 
or in supplemental materials provided at the time the debit card is purchased, 
and include a statement warning customers to safeguard their cards.  If 
McLeodUSA ceases its operations, it must provide refund information to its 
customers through the company’s “800" phone number for a minimum of six months 
after ceasing operations. McLeodUSA will provide a free call detail report to 
customers upon request.

In conjunction with classification, the Company is seeking waiver of: 
  
 RCW 80.04.300  Budgets to be filed by companies--Supplementary budgets
 RCW 80.04.310   Commission’s control over expenditures
 RCW 80.04.320  Budget rules
 RCW 80.04.330  Effect of unauthorized expenditure--Emergencies
 RCW 80.04.360  Earnings in excess of reasonable rate--Consideration in fixing 
rates
 RCW 80.04.460  Investigation of accidents
 RCW 80.04.520  Lease of utility facilities
 RCW 80.36.100  Tariff schedules to be filed and open to public
 RCW 80.36.110  Tariff changes--Statutory notice--Exception
 Chapter 80.08 RCW  Securities (except RCW 80.08.140)
 Chapter 80.12 RCW  Transfers of Property
 Chapter 80.16 RCW  Affiliated Interests
 Chapter 480-80 WAC Tariffs
 Chapter 480-140 WAC Budgets
 Chapter 480-143 WAC Transfers of Property
 Chapter 480-146 WAC Securities and Affiliated Interests
 WAC 480-120-026  Tariffs 
 WAC 480-120-031  Accounting
 WAC 480-120-032  Accounting-Political information and political education 
activities

 WAC 480-120-036  Finance--Securities, affiliated interests, transfer of 
property
 WAC 480-120-046  Services offered
 WAC 480-120-131  Reports of accidents
                  
  Rules invoked include WAC 480-120-022, WAC 480-120-023, 
WAC 480-120-024, and WAC 480-120-025.  Statutes invoked include RCW 80.36.320, 
and RCW 80.36.350.  The ultimate issues are whether the proposed amendments to 
McLeodUSA’s registration, competitive classification, and proposed price list 
should be approved.

  Based upon the entire record and the file in this matter, the Commission 
makes the following findings of fact and conclusions of law.
 
FINDINGS OF FACT
  1. McLeodUSA filed a supplemental application to amend its 
registration authority as a telecommunications company and classification as a 
competitive telecommunications company pursuant to the provisions of RCW 
80.36.350 and 80.36.320, to provide local exchange, long distance, private 
line, calling cards, Wide Area Telecommunications Service (WATS), directory 
assistance, prepaid calling cards, and ancillary services.

  2. As to form, the supplemental application and petition meet the 
requirements of RCW 80.36.350 and 80.36.320, and comply with the Commission’s 
rules and regulations.

  3. The amendment of the registration of McLeodUSA to include switched 
intraexchange and interexchange telecommunications services as a 
telecommunications company is not inconsistent with the public interest.

  4. In this proceeding, the Commission in no way endorses the financial 
viability of applicant nor the investment quality of any securities it may 
issue.

  5. Alternative providers of service to that of McLeodUSA include, but are not 
limited to, GTE Northwest Incorporated, MCIWorldCom, Inc., and Sprint 
Communications Company.  All services are fully available from alternative 
providers in the relevant market. 

  6. The relevant market is the state of Washington.

  7. McLeodUSA has no captive customer base.

  8. The services offered are subject to effective competition.

  9. McLeodUSA should be permitted to provide services under its proposed  
price list.

  10. McLeodUSA requested waivers of certain laws and rules relating to 
telecommunications services.  The laws and rules for which waivers should be 
granted are listed in Appendix A, incorporated by this reference and made a 
part of this Order.

CONCLUSIONS OF LAW

  1. The Washington Utilities and Transportation Commission has jurisdiction 
over the subject matter of this classification proceeding and McLeodUSA.

  2. McLeodUSA should be authorized to provide switched intraexchange and 
interexchange telecommunications service as a telecommunications company 
pursuant to RCW 80.36.350 and classified as a competitive telecommunications 
company pursuant to RCW 80.36.320(1).

  3. McLeodUSA should be permitted to provide services under price lists 
promulgated under RCW 80.36.320 (2).  These services will not include operator 
services as defined in WAC 480-120-021.

  4. McLeodUSA should be granted waivers of the laws and rules listed in 
Appendix A; waivers of laws and rules requested that are not included in 
Appendix A should be denied.

ORDER

  THE COMMISSION ORDERS:

  1. After the effective date of this Order and subject to any conditions 
imposed, the supplemental application of McLeodUSA Telecommunications Services, 
Inc., requesting an order amending registration authorization as a 
telecommunications company to provide service to the public in this state is 
approved.

  2. The petition of McLeodUSA Telecommunications Services, Inc., for 
classification as a competitive telecommunications company is approved; waiver 
of the laws and rules listed in the attached Appendix A is granted.

  3. The proposed price list of McLeodUSA Telecommunications Services, Inc., 
for rates and services is approved.

  4. Registration of McLeodUSA Telecommunications Services, Inc., as a 
telecommunications company shall not be construed as an endorsement of 
financial viability nor of the investment quality of any securities it may 
issue.

  5. As a telecommunications company providing service to the public in this 
state, McLeodUSA Telecommunications Services, Inc., is subject to the 
jurisdiction of this Commission under the provisions of Title 80 RCW and all 
rules and regulations adopted by the Commission. 

  6. McLeodUSA Telecommunications Services, Inc., is authorized to offer rates 
and services pursuant to the price list in the format prescribed by the 
Commission.  The price list approved in this proceeding, and subsequent changes 
to that price list, become effective only after ten days notice to the 
Commission and to customers.  In the event of a price list reduction or of a 
change in terms and conditions which do not have rate impact, personal notice 
to customers is not required.  To comply with the statutory notice requirement, 
McLeodUSA Telecommunications Services, Inc., may publish notice of price 
reductions or changes in terms and conditions of service that do not have rate 
impact by a display advertisement in such newspaper(s) as are geographically 
situated to be circulated over the Company's service area.

  7. McLeodUSA Telecommunications Services, Inc., is not authorized to provide 
operator services as defined in WAC 480-120-021.

  8. The bond agreement filed by McLeodUSA Telecommunications Services, Inc., 
in the amount of $1,000 is sufficient to initiate operations.  McLeodUSA 
Telecommunications Services, Inc., will adjust the amount of the bond to assure 
compliance with WAC 480-120-058.  As part of the bond agreement and in the 
event the company ceases operations, McLeodUSA Telecommunications Services, 
Inc., is required to provide notice, in writing and within 48 hours, to the 
insurer and the Commission to include a list of outstanding account numbers and 
balances.

  9. Within 15 days after December 31, 1999, and each calendar quarter 
thereafter, McLeodUSA Telecommunications Services, Inc., will be required to 
submit to the Commission a report containing the following information specific 
to its state of Washington operations: (a) total outstanding debit card balance 
at the beginning of the reporting period; (b) dollar amount of debit cards sold 
during the reporting period; (c) depleted usage of debit cards during the 
reporting period; and 
(d) total outstanding debit card balance at the end of the reporting period.  
Statements shall continue to be filed within 15 days after each 3-month period 
thereafter until the applicant is notified in writing by the Commission that 
such reports are no longer required.  Based upon this information, McLeodUSA 
Telecommunications Services, Inc., will adjust the amount of the bond to assure 
compliance with WAC 480-120-058.  In addition, Commission Staff may request 
current company financial information.  After one year’s administration of the 
bond agreement, the reporting requirement may be modified to a semi-annual 
level, upon request by McLeodUSA Telecommunications Services, Inc., and 
authorization by the Commission, if the company demonstrates that it  has 
maintained adequate levels in the bond agreement during the previous 12-month 
period.

  10. McLeodUSA Telecommunications Services, Inc., shall state an unconditional 
money back guarantee on the face of the debit card or on supplemental material 
that will be provided at the time the debit card is purchased with a statement 
warning customers to safeguard their cards.
 
    11. In the event the Company ceases operations, McLeodUSA 
Telecommunications Services, Inc., is required to provide refund information to 
its customers on the company’s “800" phone number for a minimum of six months.

  12. McLeodUSA Telecommunications Services, Inc., shall provide a free call 
detail report to customers upon request.

  13. The Commission retains jurisdiction over the subject matter and the 
parties to effectuate the terms of this Order.

  DATED at Olympia, Washington, and effective this 13th day of
October, 1999.

  WASHINGTON UTILITIES AND TRANSPORTATION COMMISSION



       CAROLE J. WASHBURN
       Secretary


APPENDIX A

RCW 80.04.300  Budgets to be filed by companies--Supplementary budgets
RCW 80.04.310   Commission’s control over expenditures
RCW 80.04.320  Budget rules
RCW 80.04.330  Effect of unauthorized expenditure--Emergencies
RCW 80.04.360  Earnings in excess of reasonable rate--Consideration in fixing 
rates
RCW 80.04.460  Investigation of accidents
RCW 80.04.520  Lease of utility facilities
RCW 80.36.100  Tariff schedules to be filed and open to public
RCW 80.36.110  Tariff changes--Statutory notice--Exception

Chapter 80.08 RCW Securities (except RCW 80.08.140, State not obligated)
Chapter 80.12 RCW Transfers of Property
Chapter 80.16 RCW Affiliated Interests

Chapter 480-80 WAC Tariffs
Chapter 480-140 WAC Budgets
Chapter 480-143 WAC Transfers of Property
Chapter 480-146 WAC Securities and Affiliated Interests

WAC 480-120-026  Tariffs 
WAC 480-120-031  Accounting
WAC 480-120-032  Accounting-Political information and political education 
activities
WAC 480-120-036  Finance--Securities, affiliated interests, transfer of property
WAC 480-120-046  Services offered
WAC 480-120-131  Reports of accidents