COMMISSION _______________________________________________________ ) THE WASHINGTON UTILITIES AND ) TRANSPORTATION COMMISSION, ) ) Complainant, ) ) vs. ) Docket No. UT-970766 ) U S WEST COMMUNICATIONS, INC., ) Volume 7 ) Respondent. ) Page 290 - 333 _______________________________) A Public Hearing in the above matter was held on November 19, 1997 at 6:00 p.m., at 100 Columbia Street, Vancouver, Washington, before Administrative Law Judge TERRY STAPLETON, and Commissioners WILLIAM R. GILLIS and ANNE LEVINSON. The parties were present as follows: U S WEST COMMUNICATIONS, INC., by LISA A. ANDERL, Corporate Counsel, 1600 7th Avenue, Room 3206, Seattle, Washington 98191; and THERESA JENSEN, speaker for U S WEST. THE PUBLIC, by SIMON J. FFITCH, Assistant Attorney General, 900 4th Avenue, Suite 2000, TB-14, Seattle, Washington 98164-1012. THE WASHINGTON UTILITIES AND TRANSPORTATION COMMISSION, by GREGORY J. TRAUTMAN, Assistant Attorney General, 1400 South Evergreen Park Drive Southwest, Olympia, Washington 98504-0128; and DIXIE LINNENBRINK, Staff speaker. Kathryn T. Wilson, CCR Court Reporter P R O C E E D I N G S MR. STAPLETON: Let's be on the record. This is a public hearing in the matter of the Washington Utilities and Transportation Commission versus U S West Communications, Incorporated, Docket No. UT-970766. We are convened in Vancouver, Washington before Chairwoman Anne Levinson, Commissioner William R. Gillis, and Administrative Law Judge Terry Stapleton. Today's date is Wednesday, November the 19th, 1997. I'll ask Public Counsel to call the first witness, please. MR. FFITCH: Thank you, your Honor. First witness I'll call is Mark Hemmert. MR. HEMMERT: From what I've heard, I think I'll pass tonight. I'm sorry. I thought I might have something to say, but I found out that this really doesn't concern me in this case. I'm just here for information. MR. FFITCH: That's fine. There is no obligation to testify. Next person on the list is E.E. Van Valkenberg. MR. VAN VALKENBERG: Pass at this time. MR. FFITCH: Next, I believe it's Larry Tofte. MR. TOFTE: Pass. MR. FFITCH: The next sign-up is two people, Charlie and Marge Colton. Mr. Colton, would you like to step forward to the witness chair there, and could you give your name for the court reporter? MR. COLTON: Charlie Colton, C-O-L-T-O-N. MR. FFITCH: I see it's correct that you've signed the sign-up sheet; is that correct? MR. COLTON: That's right. MR. FFITCH: Can you just tell us if you're testifying today as a residential customer or as a business customer. MR. COLTON: Residential customer. MR. FFITCH: Are you testifying on behalf of yourself as an individual? MR. COLTON: As an individual and in general, I would say. MR. FFITCH: Are you representing any organization? MR. COLTON: No. MR. FFITCH: How do you come to be here in terms of getting information and deciding to come to the hearing? MR. COLTON: I found out about the rate increase and have been in touch with the members of the Commission and have already sent a formal protest of rate increases. MR. FFITCH: Thank you. At this time, you may go ahead and give your statement to the Commission. MR. COLTON: I see this increase as corporate welfare. U S West has the sole right to furnish telephone service for this area, and the increased number of people moving into the area will more than supply U S West with adequate income to cover expenses. I had a recent experience with a neighbor, one of whom is physically handicapped, and their phone was out of service, and I made a couple of calls for them. I sat on the phone for 20 minutes waiting for an answer as to when their service would come back, and I discovered -- or eventually, somebody came on the line and said, "If you'd like to make a call, please hang up and redial," and I did this twice in a row, 20 minute waits in between times, and I had some other experiences recently with that sort of thing, and I don't think U S West is providing the service to people that they claim to provide. I would like to see a rate decrease in place of increase because the increased population is going to provide U S West with more than adequate revenue to provide the service, and I believe that's the basis on which I would suggest it be a decrease rather than increase. MR. FFITCH: Okay, thank you very much. MR. STAPLETON: Thank you, Mr. Colton, for your testimony tonight. MR. FFITCH: Marge Colton, do you wish to testify? MS. COLTON: No. MR. FFITCH: JoAnn Davich? Good evening. Could you please state your name for the court reporter. MS. DAVICH: JoAnn Davich. MR. FFITCH: Could you just tell the Commission what city you're from. MS. DAVICH: I'm from Vancouver. MR. FFITCH: You have signed the appropriate section on the sign-up sheet; that's correct, is it not? MS. DAVICH: Uh-huh. MR. FFITCH: What type of customer are you testifying as? MS. DAVICH: Residential. I'm testifying as kind of a blond residential customer, and it may come across that way too. MR. FFITCH: I stand corrected, and are you testifying on behalf of yourself or of a group? MS. DAVICH: Myself. MR. FFITCH: How did you come to decide to come to the hearing? MS. DAVICH: I received a notice from U S West talking about this rate increase a couple of months ago, and so I contacted the Attorney General's office, and they sent me some information about the hearing. MR. FFITCH: Thank you. You may give your statement to the Commissioners. MS. DAVICH: I didn't have time to write something out or have something very formal, but I want to share my perspective. I've lived in Vancouver for almost 10 years. I work in Portland, and as you know and as U S West stated in their information, Vancouver is part of the Portland, Vancouver standard metropolitan statistical area. Every month though to call my office, because I frequently telecommute, I spend anywhere between $60 and $100 more just to call Portland. U S West also pointed out that Vancouver is right across the river from the airport. Well, that's long distance also to call the airport. One of the concerns I had was in the Attorney General's statement. It says, other rates: U S West has not proposed any increase to local long distance. Well, that's not correct, because I also received -- on October 15th it was mailed -- a notice from U S West talking about changes to local long distance, and right now, for peak time, I pay 21 cents, and their new rate system would increase it to 25, which is like a 19 percent increase, and I currently pay 10 cents for evening, and they're looking to increase that to 21, and so I do think -- I mean to 12 cents, and that's a 20 percent increase. So overall they're looking at increasing the local long distance by about 20 percent. So I'm concerned about why that's not being addressed in all of this issue, because if this rate change is approved, then that also increases revenues dramatically. Generally, I support the Public Counsel recommendations. The increase, the proposed increase just for the flat rate is 30 percent. Well, as just a single head of household worker, I don't have a utility commission to go to to ask for a salary increase of 30 percent every few years or so, so I think it's out of line with inflation, and I feel the same way about directory assistance, especially because that's a 71 percent increase. It's frustrating to pay -- for people who have internet access, you can get the information for free. It's not really free because you're paying for your internet access. I think it's especially bad to pay for directory assistance when you get a wrong number or you get no number, so I do support the Commission's idea that if we are paying, we only pay when we get the correct number. The other thing that I think exacerbates the local long-distance issue is the fact that sometimes you get charged more than once for the same minute. Sometimes when I work at home, I'll be calling colleagues, and if I get their voice mail I'll hang up and immediately redial. So it seems to me that even if that happens several times a month, when you multiply that extra 10 or 20 cents for that minute, it's a lot of money when you multiply it by the people in Washington. I guess that's it. MR. STAPLETON: Thank you very much for your testimony tonight. MR. FFITCH: Your Honor, Ms. Davich did raise a point about the Company's other toll rate proposal. Would it be appropriate to make a brief clarifying statement, and perhaps the Company could also say something just to clear up the confusion that people might have? I just have in mind something brief. Ms. Davich has spoken correctly that there is another Company toll proposal that people have received notice of. It is correct that we did not mention that in our handout because that is under separate consideration by the Commission. At this point, we don't have a position on how that relates to or haven't taken a formal position with the Commission about how that relates to the requests in this case, but Ms. Davich has accurately pointed out that there is another proposal out there on telephone rates. The trouble with getting into this is it can potentially get quite complicated very quickly, but I'll just leave it at that and perhaps the Company could comment. MS. JENSEN: I'll keep it simple. We have a proposal that is a different issue before the Commission, and some long-distance rates go up and others go down. Some of you have that letter with you tonight. There is a place where you can write the Commission and let them know your comments, and Penny is in the back of the room, and I would also like your comments on it. We are considering delaying that issue a few months, but I would encourage you if you have comments to get to Penny or write to the address or call the number on the form. Vickie is here also. MR. STAPLETON: I would just point out that Vickie and Penny are employees of the Commission and would be happy to take whatever comments you may want them to take back to Olympia on that filing made by U S West on its local long-distance rates. Next witness, please? MR. FFITCH: Andrew Smith. Good evening. Would you state your name for the court reporter, please? MR. SMITH: My name is Andrew Smith. I live here in the city of Vancouver. MR. FFITCH: Are you a residential or business customer? MR. SMITH: I'm a residential customer. MR. FFITCH: Are you testifying on your own behalf or on behalf of an organization tonight? MR. SMITH: My sole behalf. MR. FFITCH: How did you come to hear about the hearing and decide to attend? MR. SMITH: I believe I received a message in my phone bill that specified that U S West desired a rate increase, and also at this time, I read that the meeting was going to be held here at the Quay Hotel at 6:00 this afternoon, and so that came from the Columbian newspaper, a local newspaper, very informative paper. MR. FFITCH: Thank you, and you may go ahead and give your testimony to the Commission. MR. SMITH: All right. I have thought about the rate increase that I have heard about and been informed about in mailings, and I believe that U S West is a little bit overeager to make too much money. Now, I'm retired. I'm not destitute. I'm not starving to death. That's not my point. The point is that I did not get a raise on my Social Security this year. So I hear things about guaranteeing corporations like U S West a certain amount of money, but they don't guarantee the fact that I may not get any money. It's my opinion that I think that if this rate for this service is increased, I believe approximately 20 percent of the customers will give up their telephone because I see a huge amount of public telephones going in, people standing in line and so forth because I don't believe they can afford the basic rate. My rate is around $35 a month. That's what I pay for long distance and so forth. I think that's a little bit expensive for me. I try to limit my calls. I call in the evening when it's very convenient for people that I want to talk to and to save money. I believe that I do save money, but I believe also that if we don't turn this gullibility around for these corporations, we're going to be the sad ones and the losers in the long run. If we get an increase on our residential rate and a reduction, which I understand this article in the Columbian, for a business concern, the business concern is able to deduct that amount of money from their operating expenses, but if I file my federal income tax, there's no place for me to do that. So I'm ending up paying the same amount twice to a corporation that does not pay as much income tax, percentage of income tax that I do. I believe that I'm right, and I'd very much like to see -- I like to see things like this go on. I'd very much like to see the rate denied. MR. STAPLETON: Mr. Smith, thank you for coming to the hearing tonight and giving your testimony. You may step down. MR. FFITCH: Ruth Scarborough? Good evening. Would you please give your name for the court reporter? MS. SCARBOROUGH: Ruth Scarborough from Vancouver. MR. FFITCH: Thank you. Are you a residential or business? MS. SCARBOROUGH: Residential. MR. FFITCH: Are you testifying on your own behalf? MS. SCARBOROUGH: On my own behalf. MR. FFITCH: How do you come to be here this evening? MS. SCARBOROUGH: I think this has been well publicized. I think it is an issue that is very important to particularly seniors who are living on fixed incomes, and a rate increase for many of them, of this size, is going to be a real burden for them. MR. FFITCH: Very well. Please give your testimony for the Commissioners. MS. SCARBOROUGH: For one thing, I don't believe that service has been improving in any way. At least four times during the past year and a half, our service has been interrupted. My home phone has been interrupted at least four times for a period of two to four days. No explanation. We finally were able to get service back again, didn't seem to be any intervention on the part of anybody. Magically we were connected again. This is common in my neighborhood, and I don't know why this is so. It would seem to me that improved service should certainly be a criteria for making any kind of a rate increase. Stating my own personal opinion, I agree pretty well with the Washington State Attorney General's Public Counsel on their position, but maybe a compromise between the two might be between the proposal and U S West is making, something that would be a little bit more in line with people's incomes rather than what U S West sees as might be their due for their investment in their product. MR. STAPLETON: Thank you, Ms. Scarborough, for your testimony tonight. MR. FFITCH: Thank you. Richard Lang? MR. LANG: Decline to comment. MR. FFITCH: Bob Levin? Good evening. Would you please state your name for the court reporter? MR. LEVIN: My name is Bob Levin. MR. FFITCH: You are from Vancouver? MR. LEVIN: That's correct. MR. FFITCH: Are you a business or residential customer? MR. LEVIN: I'm a residential customer and a business customer. MR. FFITCH: Are you speaking on your own behalf or that of a group? MR. LEVIN: Right now, I'm speaking on my own behalf. MR. FFITCH: How do you come to be here this evening? MR. LEVIN: I received notices from both the WUTC and my office and also U S West as a residential customer. MR. FFITCH: Thank you. You may make your statement. MR. LEVIN: Just to share with you an observation and a discussion I had today. It's really not a comment on the rate increase, so I apologize for not commenting directly, but an observation that I had today, and I had this discussion with another representative from a competitor of U S West this afternoon over lunch, and they were talking about a capital investment as a telecommunications company in our state, and they happen to be a large provider in the Northwest and are expanding other markets outside of the Northwest. They were talking to us about their corporate headquarters, and that's the kind of thing our organization is interested in because the Economic Development Counsel is interested in stimulating investment and job developement in this region of the state. We think we've been doing a good job for the last seven years. We've been keeping pace with growth rates in Puget Sound, elsewhere. Of course, our infrastructure hasn't necessarily been keeping pace, and many of us are concerned about transportation infrastructure, and many of our corporate customers are concerned about telecommunications infrastructure. The one that I met with this afternoon suggested that they were giving consideration to looking at making some capital investments outside of this area that would lead to job developement outside of Washington State and also outside of Clark County. Again, that concerns me as an economic developement professional because I'd like to see those jobs remain here for myself and for my children and my children's children. I just hope that as the Utility Commission reviews the process you're going through and the way you establish rates that you take a careful look and careful consideration to the depreciation schedules of telecommunications equipment. I know when our Governor requested review of the sales tax on manufacturing machinery and equipment, a very thorough analysis was done by the Department of Revenue, and it came up that our state was discouraging forward capital investment by manufacturers, not the least of which are a number of small businesses. Not just big businesses, but many small businesses where that 7.6 percent sales tax was pretty significant for a small business investment. After a careful review, we found out that we ranked near the bottom of the 50 states we looked at, and the state legislature and the Governor reviewed it and repealed that sales tax on machinery and equipment for manufacturers of all sizes, not just large companies or just new companies coming to the state, but for all existing companies that were manufacturers, regardless of their size, and I hope that you'll take a careful look at your depreciation schedules and make sure that they're competitive with other states across the nation. Thank you very much. MR. FFITCH: Just a question for clarification, Mr. Levin. Are you aware that the actual depreciation amount in this case has been agreed to by all the parties and already approved by a Commission order, so that piece of this has already been agreed to by the Company and other parties? MR. LEVIN: I understand. MR. STAPLETON: Any question? Mr. Levin, thank you for your testimony. MR. FFITCH: Sarah Heldman or Feldman? MS. HELDMAN: Heldman. Is it possible to yield my time? MR. FFITCH: Yes, it is. Lou -- come forward to the witness standard, and you threw me a curve there because it says, no, you don't want to testify, but clearly you've had a change of heart. Could you state your name for the court reporter? MR. SELGA: My name is Rico Selga (phonetic.) MR. FFITCH: And you are from Vancouver? MR. SELGA: That is correct. MR. FFITCH: Are you testifying as a residential or business customer? MR. SELGA: Resident. MR. FFITCH: How do you come to be here tonight? MR. SELGA: I was invited by my friend just yesterday. MR. FFITCH: Are you testifying on your own behalf or that of a group? MR. SELGA: On my own behalf. MR. FFITCH: You may give your statement. MR. SELGA: I have one basic statement to provide today, and I thought I wasn't going to be speaking, but after listening to what I've heard, I've decided to come and share my opinion. The telephone is a very important medium for me. It keeps me in touch with my friends, my loved ones, my family, and it provides me a way to communicate. I am a working student. I am a full-time student at Clark College, and I also work when I have free time, so I don't get to see a lot of my family. I don't get to see a lot of my friends, and I take advantage of using the telephone, and I think that a few cents increase here and there adds up to a lot of money that I cannot afford to pay for telephone services. Also, I agree with the statement that was given earlier that the percent of increase that's being asked for is incongruent with the percent of increase of inflation, as well as the increase in wages of people, and so the few cents that are being added onto the different services is just a few cents that students like myself cannot afford. Thank you. MR. STAPLETON: Thank you, Mr. Selga. MR. FFITCH: The next witness -- I'm sorry. I can't read the name. The name is Lou? LOU: Pass. MR. FFITCH: The next is Chuck Cushman. Good evening. Could you please state your name for the record? MR. CUSHMAN: Yes. I'm Chuck Cushman, C-U-S-H-M-A-N. MR. FFITCH: You're from Battle Ground, Washington. MR. CUSHMAN: I am. MR. FFITCH: Testifying as a residential or business customer? MR. CUSHMAN: Both. MR. FFITCH: All right. How do you come to be here this evening? MR. CUSHMAN: I guess I've been watching -- you can't help but watch in the newspaper articles recently of U S West's -- the unique public relations campaign now being carried out by U S West to influence its customers, and I'm speaking in a negative way. All the complaints, and how many weeks go by is there an article about U S West in the paper, and just recently we have experienced a significant reduction in service. You're talking about service, and it seems to be service turning on, turning off. How about those of us who have service? I've got lines. I just can't use them. I can't get out. I couldn't make a long-distance call out of my office on Monday afternoon. I have ten lines: one Portland, two personal -- and my home is on the same property -- and seven business. I pay an extra fee for living in a rural area. I moved -- one of the contingencies when I bought the property was it would be good phone service. I have 25,000 fax numbers. 1500 in Washington State. Right now, I'm in the process of sending a fax nationwide, and I can't get it out, simply because when I dial, I get a fast dial tone which says that the system is overloaded and we're unable to go forward, so my machine simply cycles. I'm not able to get my work done, and U S West initially guaranteed me service to put in some sort of computerized line, found it wouldn't work with fax's, so they replaced it. They put a trench in and put some additional service in and that's worked pretty well up to this point. But now our service is degraded. The reason I'm speaking here is because I guess I've gotten concerned, and what got me going this week was the announcement in the paper, in the Oregonian, that U S West has come out with this fancy new access service. Obviously, they've been putting a lot of money and investment in looking forward and trying to reach out to those of us in the telecommunications industry. What about those of us that have to use it today? Their ability to provide service and to put money into keeping up standards and services is -- by what I can tell and by the runarounds I've gotten in the last few days -- is just pathetic. So if somebody could say to me, "We're going to take the extra money we're going to get and put it into taking care of those customers we've got. We're going to be putting it into new trunk lines." For example, we complained to repair, and they called us back on Saturday and said, "You're right. We've checked your lines. Your lines are fine. It's not your long-distance problem." This is brutally frank -- and I saved the tape. I thought I might need it later -- that they left a message that it was U S West's responsibility; that, in fact, they were not providing enough trunk lines to the long-distance carrier, and they were not able to, apparently, provide the level of service that we needed. I don't know what's going to happen out of it. I've been trying to track them down working through their maze of telephone systems, and I've talked to a bunch of other people recently that feel same way. I don't know where these business people are tonight. They ought to be here, but they're not, and maybe I'm going to do something about that to turn them out because this has got to stop. We've got to get -- I would oppose any fee increase at all, period, and get others to support to do the same thing, unless we can be assured that the money is going to be committed to help fix existing service, as well as providing for additional customers. I don't think an existing level of service has been mentioned here tonight, and yet everybody I talk to, particularly in the Battle Ground area -- my staff says they can't get calls out on their personal line from home. Neighbors said they can't get calls out. We're talking about the blockage here of a service. We're not talking about putting in new lines. We're talking about a basic shutdown of the system. What are we going to do about that? We've got a serious problem. I, for one, am just getting started. I've bounced around a little bit on my comments tonight because I hadn't really planned on this. I just came to learn a little bit, but this is a serious problem not just affecting us in Battle Ground but the whole economics of Washington State and Vancouver. I'm seriously considering putting in more lines to Vancouver, which is very expensive, so that I can get the service. I have to have the service. MR. STAPLETON: Mr. Cushman, have you contacted the Commission's consumer affairs staff? MR. CUSHMAN: No. This is all a new thing to me. Believe me, I'm going to do it. MR. STAPLETON: Vickie Elliott, our consumer affairs director, is in the back of the room if you'd like to speak to her. MR. CUSHMAN: She's been pointed out to me, and I will most certainly be in touch, and I mean, I started looking around for one of these grass roots groups down in California. There's an outfit called TURN that's a grass roots group that deals with helping rate payers and others deal with the phone system. I don't know if there's that kind of grass roots system up here, but if there's not, there clearly ought to be, and I for one am experienced in grass roots activity. If there's not one, maybe we'll organize one. MR. FFITCH: You indicated on your sign-up sheet that you're representing an organization? MR. CUSHMAN: I represent the American Land Rights Association, and we are a business customer of U S West. MR. FFITCH: And that's the business you're speaking of? MR. CUSHMAN: Right. I don't mean to knock down the employees of U S West. A lot of good people work there. They've been very cordial on the phone, but they've always got somebody else for me to talk to, and somebody else can fix it, and they'll tell me, and they've got an idea, and maybe this will work and this will work, but it doesn't look like -- it looks like I'm in for a long pull trying to figure out just how to get a phone call out of my office. Something is wrong with that. MR. STAPLETON: Mr. Cushman, thank you for coming tonight. MR. FFITCH: That completes the names that I have on the sign-up sheet. Your Honor, I may inquire if there's anyone else that would wish to speak, with your permission? MR. STAPLETON: Certainly. MR. FFITCH: This gentleman here. Would you please step forward. MR. ISAACS: Sorry. I didn't realize I needed to put my name on the right side there. MR. FFITCH: Could you state your name for the record, please? MR. ISAACS: My name is John Isaacs. MR. FFITCH: Are you a business or residential customer? MR. ISAACS: I'm a residential customer, and I am representing a group. MR. FFITCH: What's the group? MR. ISAACS: Washington Citizen Action. MR. FFITCH: Are you a resident of Vancouver? MR. ISAACS: I'm a resident of Vancouver. MR. FFITCH: You may give your statement. MR. ISAACS: My name is John Isaacs, and I'm a resident of Vancouver. I'm also a member of Washington Citizen Action, which I think you're aware is a statewide consumer organization with over 2000 members in Vancouver, in southwest Washington, and 50,000 members statewide. Vancouver Washington Citizens Action, we have strong commitment along with the statewide organization to universal basic telephone service for all state residents. Our interests in the case are as follows: To keep basic residential rates affordable for low and moderate income families and seniors and to improve the quality of service to both residential and business customers. We are here today in opposition to any rate increase for U S West, including 37 million dollars to cover depreciation, unless we can receive a guarantee from the