Agenda Date: July 31, 2000 Item No.: Docket: UT-003070 Company: CTC-Idaho Staff: Bob Shirley, Telecommunications Analyst Recommendation : Grant the Petition of CTC-Idaho for Eligible Telecommunications Carrier designation for the Clarkston Exchange. Background CTC-Idaho, a wholly-owned subsidiary of Citizens Telecommunications Company, Stamford, Connecticut, petitioned on July 12, 2000, for designation as an eligible telecommunications carrier (ETC) for the Clarkston exchange to be effective upon transfer of ownership of the telecommunications assets of U S WEST (now Qwest) to CTC-Idaho. Citizens Telecommunications Company operates over 3,000,000 access lines in states around the country. The number of access lines operated in Washington is less than 10,000. CTC-Idaho, U S WEST and Commission Staff entered into a stipulation concerning the sale of the Clarkston exchange. In the stipulation, the parties agreed "Staff will recommend that CTC- Idaho be designated as an eligible telecommunications carrier (ETC) for the Exchange."Stipulation at 4. CTC-Idaho does not have a study area in Washington. On July 11, 2000, CTC-Idaho and U S WEST petitioned the Federal Telecommunications Commission (FCC) for a waiver of the definition of "study area" contained in the C.F.R. Part 36 Appendix-Glossary of the FCC rules. A study area is generally the entire area served in a given state, but CTC-Idaho's petition is for Clarkston to be included in a study area with its Idaho exchanges. When the Commission approved the sale of the exchange it stated it does not object to the study-area waiver. ETC designation of a non-rural company can be made at any geographic level. The Act requires designation of a rural telephone company at the study area geographic level unless and until the state and the FCC agree on another designation (e.g. exchange geographic level). There is no guidance in the Act for designations exchanges that are not in the carrier's study area. In its petition for ETC designation, CTC-Idaho stated it is a "predominantly" rural telephone company. Whether it is a rural or non-rural telephone company affects the ETC service area designation process and geographic area (study area or exchange) for CTC-Idaho. It may also affect the manner in which state universal service support will be calculated and translated into terminating access for the support of high-cost service. There is no consensus on the application of the definition of rural telephone company in the Act with respect to companies like CTC and CTC-Idaho that, on the one hand operate in excess of three million access lines, but in a given state operate a much smaller number through a subsidiary. The Minnesota PUC has reportedly opined that it is the total activity of the parent company that is intended to be considered in evaluating the application of the definition to the company. (Staff is attempting to obtain a copy of the order in which this opinion was rendered.). Others have expressed the view that 47 U.S.C. ' 3(37) applies to the subsidiary company. The choice of geographic service area has competitive implications. Because support for high- cost service will be provided based upon the characteristics of the ETC service area, fair competition requires that ETCs compete over the same geographic service area. If not, one ETC could be responsible for serving a geographic area that is far less densely populated and therefore more expensive to serve than an area that is smaller and includes a more densely populated and less expensive to serve area. Washington, and other states, are without guidance from the FCC with respect to ETC designation of carriers that may be rural telephone companies and do not have a study area. There is no guidance on the interpretation of 47 U.S.C. ' 3(37) when a carrier is owned by a much larger operating entity. Discussion The Commission must decide whether to designate CTC-Idaho as an ETC for the Clarkston exchange or for the company's study area. The decision to designate at the exchange or study area level turns on a determination of whether a company is rural or non-rural. In this case, the status of the company is unclear, and the Clarkston exchange is not contained in CTC-Idaho's study area. As a practical matter, with just one exchange in Washington, choosing the exchange over the study area, or the opposite, will not make a difference in the near-term. There will be a substantial difference, however, should CTC-Idaho purchase another Washington exchange, particularly if it is far-flung in relation to Clarkston. Under a circumstance in which the two exchanges are far apart, a competitor would have to go to both areas to fulfill the obligation to serve the entire ETC service area if a study area designation rather than an exchange area designation has been bestowed upon CTC-Idaho. If a new competitor had to serve two far-flung exchanges to receive its ETC designation equal to CTC-Idaho's, that would be a burden upon competition, if not a barrier to it. Staff's view is it is not necessary for the Commission to determine the rural or non-rural status of CTC and CTC-Idaho in order to make an ETC designation. Because the FCC is in a better position than the Commission to evaluate the activities of CTC nationally, it will be better if the FCC makes the determination that CTC and its subsidiaries are or are not rural telephone companies under 47 U.S.C. § 3(37). Staff proposes the Commission designate CTC-Idaho as an ETC for the Clarkston exchange rather than for its study area. Since the Clarkston exchange is not in a study area operated by CTC or CTC-Idaho, it is therefore not possible to designate the study area as the ETC service area. In addition, in the Stipulation concerning the sale of the exchange, CTC-Idaho agreed to an exchange level designation. The ETC designation at the exchange level will secure for CTC and CTC-Idaho whatever benefits flow immediately from such a designation regardless if it is ultimately determined that CTC should be treated as a rural company and the designation made at the study area level unless the FCC and the Commission establish a different (i.e. exchange level) ETC service area. Staff also proposes that CTC-Idaho be required to state to the Commission with particularity that it is or is not a rural telephone company as defined in 47 U.S.C. § 3(37) and to do so within 45 days of the order issuing. It should also state its view of the application of the definition to the parent company, CTC. If CTC-Idaho states that it is not a rural company, the exchange level designation will stand without anything more required of the Commission. If CTC-Idaho states it is a rural telephone company, then staff proposes the Commission petition the FCC to concur with the Commission in the exchange level designation of CTC-Idaho rather than the study area designation (as the FCC has done with respect to all other rural companies in Washington), or determine that CTC and CTC-Idaho are not rural telephone companies and dismiss the Commission's petition because no agreement between the Commission and the FCC would be required. Conclusion The petition should be granted and the ETC service area designation should be for the exchange rather than the study area. CTC-Idaho should be required to state with particularity that it is or is not a rural telephone company as defined in the Act. In the event CTC-Idaho states it is a rural company, the Commission should petition the FCC for agreement with the exchange level ETC service area designation just as the FCC has done with respect to all other rural telephone companies in Washington.