Legislature(2001 - 2002)

06/20/2002 01:20 PM JUD

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Call to order at 1:20 p.m. June 20, 2002.                                                                                       
[THE FOLLOWING IS A VERBATIM TRANSCRIPT.]                                                                                       
CHAIRMAN  ROBIN TAYLOR:   …Thursday.   We have  a quorum  present,                                                              
that being  Senators Therriault,  Senator Ellis, Senator  Cowdery,                                                              
Senator Donley, and  Chair Taylor, a full Committee.   We had left                                                              
off in  the agenda having concluded  item number three,  which was                                                              
the testimony of  the Commissioners of the  Regulatory Commission,                                                              
and the next  item up was  testimony by Mr. Ron  Duncan, President                                                              
of GCI.  Senator Cowdery.                                                                                                       
SENATOR JOHN COWDERY:  Yes.  I had  talked, reading the testimony,                                                              
and if  I could,  ask, Chugach  Electric was  here last  week, but                                                              
there was a question that I would  like and Joe Griffith is in the                                                              
audience and if  he didn't have to wait, I would  like to call him                                                              
up at this time.  And it pertains to the delay.                                                                                 
CHAIRMAN  ROBIN   TAYLOR:  If  you'd  come  forward   please,  Mr.                                                              
SENATOR  COWDERY:  It  was  said   that  the  delays,  the  way  I                                                              
understood,  in reading, rereading  the testimony,  that a  lot of                                                              
the delays that were, for action,  was a request of the utilities,                                                              
so I'd like Joe to…                                                                                                             
CHAIRMAN TAYLOR:  Joe, I just remind  you that you are still under                                                              
oath before  the Committee,  and if you  can answer the  question,                                                              
please go right ahead.                                                                                                          
MR. JOE GRIFFITH:  With pleasure.   I want to stress again that we                                                              
have appeared  before you,  humble I  think [and] exasperated  and                                                              
perhaps a little  fearful of what kind of a buzz  saw we might get                                                              
into  later  for having  appeared  here  at  all, but  that  being                                                              
stated, we're  going to try to  give you a straightforward  answer                                                              
to your question.   The answer, the question, as  I understand it,                                                              
is, is  it true that most  of the delays  in the cases  that we've                                                              
encountered is  [a] product of the  utilities?  And the  answer, I                                                              
believe,  is generally,  no.   And again,  I can't  speak for  the                                                              
other utilities.   I will tell  you only about my  own experience.                                                              
It  is true  that if  the  participant asks  for  a delay,  common                                                              
courtesy in these  kind of processes is that you  would allow them                                                              
to have  that necessary  delay.  You  wouldn't come in  and oppose                                                              
the  extensions  that they  normally  ask  for because  there  are                                                              
several contenders  in these cases  like my organization has.   To                                                              
focus though upon these extensions  entirely misses the point that                                                              
we  were  trying  to  make earlier.    If  the  Commission  really                                                              
believes that the problem lies in  granting agreed-upon extensions                                                              
then we've got an even bigger problem  than I thought we had.  The                                                              
Commission,  I believe,  is in charge  of these  cases before  it.                                                              
It's their responsibility  to ensure that its  adjudications don't                                                              
go on forever  and don't get  revisited repeatedly.  I  think that                                                              
this is particularly true in these  hotly contested cases such the                                                              
rate case that we  have before them as we speak.   There is no one                                                              
other than  the Commission in this  position to keep  these things                                                              
on track.  They  must make sure that the case  is properly managed                                                              
and that these tough cases it can  be very active litigation under                                                              
way, discovery,  depositions, what have  you.  Then it must  be as                                                              
aggressively  managed,  and  we  think  this  is  the  issue:  the                                                              
management of the  cases and not the time requested  by any of the                                                              
utilities.   I can  cite chapter  and verse  of several  examples.                                                              
I'll just leave  this with you that shows that delays  as such are                                                              
really  not a  product  of the  utilities  themselves and  they're                                                              
requesting  delays for  procedural matters.   Our  belief is  that                                                              
it's  a management  issue, and  certainly couldn't  be blamed,  at                                                              
this point, on utilities.                                                                                                       
SENATOR  COWDERY:   Could  you restate  again  some  of the  delay                                                              
timeframes that you've experienced?   Has it been months, years or                                                              
MR. GRIFFITH:   I  will pick a  couple of  examples here  for you.                                                              
1998  test year,  May  10,   2001 set  for hearing.    In May  the                                                              
Commission extended the date to do  more discovery on a particular                                                              
issue.  The  due date was September  2001.  We finally  received a                                                              
decision March 15,   2002.  This then affected  the 2000 test year                                                              
rate case that we were working on  because you could never get the                                                              
final numbers on  that particular case until you  had the '98 test                                                              
year fully  adjudicated.   So, again,  it's not  the extension  of                                                              
times that  causes the delays.   So what if  you had six  or eight                                                              
weeks.  We're  talking years here  in some cases on  these things,                                                              
getting them  resolved.  It's  uncontrolled discovery.   It's slow                                                              
decisions  on the  motion and  it's,  you can't  let these  issues                                                              
recur time and time again.  Once  they are litigated we think they                                                              
should  be put  to  bed and  not  revisited.   That  was just  one                                                              
example of  several I  cited to  you in  earlier testimony  in the                                                              
case of the '96 test year.  Rightly  so, this Commission, the RCA,                                                              
can't  be  held  fully  accountable  for  the  years  it  took  to                                                              
adjudicate the  '96 test  year case, which  you may recall  I said                                                              
went on  until two months ago,  because they inherited  that case.                                                              
It had already  been, but it  was under a settlement  agreement so                                                              
had the utilities adhered to the  settlement agreement and not had                                                              
to come back down to the Commission  to resolve all the issues, we                                                              
would  have been  done with  that  one fairly  quickly and  fairly                                                              
shortly.    As it  was,  we  were required  to  virtually  provide                                                              
repeated sequential  rate cases.  We use the term  'pancaked' rate                                                              
cases.   So you  had a '96  case open, but  it's already  1999, so                                                              
what rates are you  using, the right one? Before  you get '96 done                                                              
'97 is  working there,  and '98,  the clock  is still ticking  and                                                              
progressing, so  under the circumstances  at one point in  time we                                                              
had as many as three separate cases  open trying to determine what                                                              
the real rates are.  Its an accounting  problem.  It's certainly a                                                              
staffing  problem.  And  it's something  that requires  attention.                                                              
Added  to all  that  was the  fact that  it  was under  settlement                                                              
agreement and really  didn't need much adjudication  anyway.  We'd                                                              
already signed  an agreement  among the  utilities that  said, 'We                                                              
don't have  to revisit these.   We just  had a couple  of issues.'                                                              
And  there are  many  other chapters  and I  shant  bore you  with                                                              
details unless you want to get into it further.                                                                                 
SENATOR  COWDERY:   I want  to follow  up on  another thing,  also                                                              
testimony from the  Commission last week was that  the losses, the                                                              
stated losses was not real losses.  They said that…                                                                             
MR. GRIFFITH:   No, technically,  they're not real  losses because                                                              
we  did  not  have  authority  to   charge  those  kind  of  rates                                                              
SENATOR COWDERY:  So they lost opportunities.                                                                                   
MR. GRIFFITH:  …whole picture.                                                                                                  
SENATOR COWDERY:  Yeah.  Lost opportunity is…                                                                                   
MR. GRIFFITH:   Lost opportunities.   That's  true.  It  wasn't an                                                              
actual loss of cash,  or cash out the door, it  was just rates you                                                              
didn't recover and you don't get  the right to go back and recover                                                              
CHAIRMAN TAYLOR:   That  was the number,  if I remember  right, of                                                              
$276,000 a month that Chugach was…                                                                                              
MR. GRIFFITH:  I think it was closer to $200,000 a month.                                                                       
CHAIRMAN TAYLOR:  Two hundred?                                                                                                  
MR. GRIFFITH:  Yes, Sir.                                                                                                        
CHAIRMAN TAYLOR: And  that's what's going on right  now because of                                                              
cases that are pending.                                                                                                         
MR. GRIFFITH:  If  they were to accept the longterm  rates that we                                                              
had asked  for then  that would  have been  the case.   As  it was                                                              
we're operating under, currently,  a 4% increase from that that we                                                              
had in 1994.  So it does, it is  a long period of time  before you                                                              
ever come in for a rate case first.   And we held these rates flat                                                              
for  six  or  seven  years  before we  even  asked  for  a  slight                                                              
CHAIRMAN TAYLOR:  Senator Cowdery?  Oh, Senator Therriault.                                                                     
1:30 p.m.                                                                                                                       
SENATOR THERRIAULT:   Thank you.   Were you involved with  the, on                                                              
the House side,  in deliberations that come up  with some language                                                              
trying to put into place some deadlines for decision making?                                                                    
MR. GRIFFITH:  I was aware of the  language.  I was not personally                                                              
involved in  it.  It was  forwarded to me  from some of  the folks                                                              
who were putting it together, Senator.                                                                                          
SENATOR THERRIAULT:  Was there somebody  else in your organization                                                              
that was in, kind of dialogue with the House, any House staff?                                                                  
MR. GRIFFITH:   To my  knowledge, no  one in our organization  had                                                              
any direct dialogue with any House members on that.                                                                             
SENATOR THERRIAULT:   Okay.  And looking at the  language that the                                                              
House came up with, was it a step  in the right direction?  Did it                                                              
not go  far enough as  far as some kind  of structure that  got to                                                              
decisions finality?                                                                                                             
MR. GRIFFITH:  I think any set  of requirements that  anybody were                                                              
to lay  on the Commission  would be helpful  to them and to  us as                                                              
well.   The,  I  believe  that proposal  that  you  speak of  also                                                              
suggested there  should have been  some oversight, the  group also                                                              
looked  at the  effectiveness of  their operation.   I  personally                                                              
believe that  would be helpful  as well  to the utilities  and the                                                              
SENATOR  THERRIAULT: Mr.  Chairman, a couple  of other  questions.                                                              
With  regard  to  parties  that   are  involved  in  a  rate  case                                                              
requesting extensions,  I would imagine that's very  much the way,                                                              
similar to  the way the  court system works.   If the  two parties                                                              
are  in agreement,  a  request,  an  extension is  requested,  you                                                              
agree, you wouldn't expect the RCA  to say, 'No, we're keeping you                                                              
to  the  timeline  that  we've set  out,  even  though  you're  in                                                              
agreement, we're going to keep to the original schedule.'                                                                       
MR. GRIFFITH:  Generally  they do not do that.   I think they have                                                              
the power to say that if they want to.                                                                                          
SENATOR THERRIAULT:  Okay.   Would you think  that they  should do                                                              
MR. GRIFFITH:  In some cases, perhaps.                                                                                          
SENATOR THERRIAULT:  Thank you.                                                                                                 
SENATOR COWDERY: One final question.   We also heard complaints, I                                                              
had personal  complaints, that staff makes  recommendations, final                                                              
recommendations,  to the  Commission and  then that the  utilities                                                              
are normally  not privy  to that, to  cross examine or  give their                                                              
side of it  until after the  Commission, maybe the day  before the                                                              
decision.  Is that a fair statement?                                                                                            
MR. GRIFFITH:   I think it is,  Senator.  Maybe it's  not all bad,                                                              
but it works that way. Those five people need staff support.                                                                    
SENATOR COWDERY:  Oh certainly.                                                                                                 
JOE GRIFFITH:   They  need good  talented, capable,  knowledgeable                                                              
staff that cover a broad range of  information.  Perhaps the staff                                                              
has been some source of a problem  in the past.  I don't feel that                                                              
we are  shorted by  the time  factor associated  with the  staff's                                                              
dealing  with the  Commission.   But  I have  again instructed  my                                                              
staff, you  go down and  talk to those  staff members  down there,                                                              
you find out  what they need, what they don't  understand, and you                                                              
be  sure  that  they're  clearly understanding  of  what  we  have                                                              
brought  forward  and  help  them.   Give  them  the  mathematical                                                              
algorhithms, and the  numbers, whatever it is to  ensure that this                                                              
process  moves  along  smartly.     I  think  that's  to  all  our                                                              
advantage.   I don't think  I would, I'm  aware of what  you speak                                                              
of,  but I  don't think  I would  say  it's a  major problem,  our                                                              
inability to interface  with their staff.  Sometimes  it gets to a                                                              
problem  if they  invoke ex  parte rules  on us.   Then you  can't                                                              
speak much.                                                                                                                     
SENATOR  COWDERY:  Is  that, that  ex parte,  is that  frequently,                                                              
MR.  GRIFFITH:   It  depends  on  the party.    I think  that  you                                                              
encounter  those who  fully believe  that  means you  can have  no                                                              
dialogue  with people.   I  personally  don't agree  with that.  I                                                              
believe that if,  you should, the more dialogue you  have in these                                                              
kind of cases, particularly when  you're dealing with huge amounts                                                              
of numbers  that make up a  revenue requirement for  a corporation                                                              
our size today,  you have to have  the dialogue.  And  if ex parte                                                              
contact issues stymie you something's wrong with the system.                                                                    
SENATOR COWDERY:  Thank you.                                                                                                    
CHAIRMAN TAYLOR:   As concerns ex parte contact,  does Chugach own                                                              
any facilities where  they entertain VIPs or people  that might be                                                              
beneficial to their business?                                                                                                   
MR. GRIFFITH:  Well, we have a camp  at Beluga that on occasion we                                                              
might have  VIPs attend  and we will  serve them a  meal, normally                                                              
that's the  one that supports our  facility at Beluga.  That's the                                                              
closest we can come to a camp.  Occasionally,  I take what I would                                                              
call VIPs out  there and feed them  a meal.  But that's,  we don't                                                              
have fishing camps or things of that nature.                                                                                    
CHAIRMAN TAYLOR:   Thank you.  Anything further for  this witness?                                                              
Joe, thank you for standing by on this.                                                                                         
MR. GRIFFITH:  Thank you.                                                                                                       
SENATOR COWDERY: I appreciate you…                                                                                              
CHAIRMAN TAYLOR:  Charlie, who's going to represent GCI?                                                                        
MR. CHARLIE MILLER:  Ms. Dana Tindall, Senator.                                                                                 
[LONG PAUSE]                                                                                                                    
CHAIRMAN TAYLOR:  Dana, before you  begin, raise your  right hand,                                                              
please.  Do you  swear the testimony you're going  to give to this                                                              
Committee will  be the truth, the  whole truth and do you  so aver                                                              
and swear?                                                                                                                      
MS. DANA TINDALL:  Yes.                                                                                                         
CHAIRMAN TAYLOR:   Thank you.  Go right ahead.   Give us your full                                                              
name and who you represent.                                                                                                     
MS.  TINDALL:    Hi,  I'm  Dana Tindall.    I'm  the  Senior  Vice                                                              
President of Legal,  Regulatory and Governmental  Affairs for GCI.                                                              
I am standing in for Mr. Duncan who  apologizes that he's not here                                                              
today.  He  would have liked to  be here today.  We  think that he                                                              
would have best represented the company,  and would have best been                                                              
able to  answer the broad range  of questions that  might possibly                                                              
be asked, but I will do my best.   I would also like to say that I                                                              
have  with me  members of  my staff  in case  there are  technical                                                              
questions that, with the Committee's  indulgence, I may be calling                                                              
to come up to assist me with the  answer to my questions from time                                                              
to time.   With that,  I'll begin my testimony.   I want  to thank                                                              
you - Oh,  also, one more housekeeping  item, I do have  a written                                                              
statement  by Ron  Duncan that  I would  like to  submit into  the                                                              
record at  the close  of my  testimony, unless  you would  like it                                                              
CHAIRMAN TAYLOR: That  would be fine. You can either  do it now or                                                              
then. It doesn't matter, Dana.                                                                                                  
MS. TINDALL:  Well, here.                                                                                                       
CHAIRMAN TAYLOR:  If you will just  give it to Crystal  she'll see                                                              
to it it's distributed to the Committee.                                                                                        
MS. TINDALL:  Okay.                                                                                                             
CHAIRMAN TAYLOR: Thank you.                                                                                                     
MS. TINDALL: I want to thank the  Committee for the opportunity to                                                              
testify here today, and say straight  up front that GCI supports a                                                              
four-year extension  for the  RCA.  We  do this for  four reasons.                                                              
One,  the RCA,  in  our  opinion,  is a  functional,  professional                                                              
agency.  Two,  terminating the RCA will not fix  the problems that                                                              
have been  identified in  these hearings.   Three, terminating  or                                                              
replacing  the Commission  or Commissioners  will  not change  the                                                              
outcome of telecommunications  decisions.  And  four, continuation                                                              
of the RCA is  necessary for the consumer protection  and business                                                              
stability.  The first  issue: The  RCA is  a professional  agency.                                                              
There have been two independent audits,  and only two, independent                                                              
audits of  the RCA.  One was  by the National  Regulatory Research                                                              
Institute, a  nationally known organization  that came out  with a                                                              
glowing  recommendation.    This  same  group is  the  group  that                                                              
audited the APUC  that became the reason the APUC  was terminated.                                                              
It was  this group  that labeled  APUC dysfunctional.   This  same                                                              
group re-audited the RCA and found  them to have corrected for the                                                              
most part  the problems of the  prior Commission and to  find them                                                              
to be  a functioning  efficient agency.   This was an  independent                                                              
audit.  The  other audit that  was done was by  Legislative Budget                                                              
and Audit, and it too found that  the Commission was a functioning                                                              
agency and recommended it be authorized  for four more years.  One                                                              
of the statistics by which we measure  how well an agency is doing                                                              
is  their appeal  record.   I  believe  you heard  Chair  Thompson                                                              
testify  their appeal  record  is 90%.  That's  pretty good.  This                                                              
Commission, although not perfect,  is far superior to the previous                                                              
Alaska Public Utilities Commission.   They are getting orders out.                                                              
Not everybody may  like the orders, but they are  getting them out                                                              
and  you are  free to  appeal.   Chair Thompson  is well  regarded                                                              
amongst her fellow state Commissioners  nationally.  She sits on a                                                              
national  federal/state joint  board for  universal service.   And                                                              
this position is critical for the  State of Alaska. It means a lot                                                              
of money to telephone  companies in Alaska. The  situation we have                                                              
here with  this RCA and the  possibility of not  reauthorizing the                                                              
RCA is not  even remotely similar  to when the Legislature,  in my                                                              
opinion,  decided   to  terminate   the  previous  Alaska   Public                                                              
Utilities  Commission.    That  Commission,  again,  had  negative                                                              
audits.  It had almost the entire  utility industry as detractors,                                                              
and not one entity that I can recall  stepped up to defend them or                                                              
support them.   In this  case, we don't  have that situation.   We                                                              
have a  mixed bag.  We  have apparently some timeliness  problems,                                                              
but  we  have  quite  a few  supporters  of  this  Commission,  in                                                              
particular, 13  lawyers who practice  before this  Commission, all                                                              
signed on  to a  letter and I  think that that  is the  only thing                                                              
that   those  13   lawyers  have   ever   done  together   before.                                                              
Terminating  the  RCA will  not  fix  the  problem that  has  been                                                              
1:40 p.m.                                                                                                                       
MS. DANA  TINDALL: It is not  surprising that utilities  are upset                                                              
with the RCA.   In my opinion,  if there were utilities  that were                                                              
not upset with the RCA, if everybody  was happy, the RCA would not                                                              
have been doing  its job.  The RCA's job is  to regulate utilities                                                              
in  the  consumer  interest.   Many  of  these  lost  profits  the                                                              
utilities complain about  are rate increases that the  RCA did not                                                              
permit them  to visit  upon ratepayers. It  is no more  surprising                                                              
that utilities  complain about a  regulatory agency than  it would                                                              
be if teenagers were to complain  about their parents or homework.                                                              
It  is the  nature  of  the beast.    Furthermore,  delays by  the                                                              
Commission  are often  the  result  of parties  and  also the  due                                                              
process  process itself.    Parties  don't have  to  just ask  for                                                              
delays in  order to  delay a  proceeding.   Parties can  refuse to                                                              
comply with  discovery,  which can delay  the proceedings  forcing                                                              
extra hearings where  a hearing officer or the  Commissioner tells                                                              
them they have  to comply with discovery, and then  they refuse to                                                              
comply again.  This goes on for quite  a while and can stack up to                                                              
a lot  of delays.   The parties themselves  may file a  new filing                                                              
that  substantially  changes  their  case, causing  the  need  for                                                              
further hearings,  further briefings,  and this too  delays cases.                                                              
Some of  the complaints  that I've heard  in this hearing  for the                                                              
past, I guess  we've been going two days now,  so other complaints                                                              
I've  heard,  seem   to  me  much  resulting   from  due  process.                                                              
Something that  although is a pain  to deal with if you're  on the                                                              
other side  and you're  not receiving  due process, you're  pretty                                                              
upset in that case, too.  Due process  is necessary and important.                                                              
We're dealing with a lot of money  here, and obviously the ability                                                              
to appeal  these cases,  if due process  is not followed  the case                                                              
falls  apart.     There   is  a  long   learning  curve   for  new                                                              
Commissioners.   Getting  rid of these  Commissioners will  simply                                                              
further  delay  and exacerbate  the  problems that  people  stated                                                              
here.   These Commissioners  have  been in place  I believe  three                                                              
years now, two and  a half years, three years.   You know, it took                                                              
them a  while to get up  to speed and  they're there.  Were  we to                                                              
replace these  Commissioners or not  have a Commission at  all, it                                                              
would not  fix the problems  of delay that  we heard here  in this                                                              
hearing.  Lastly, there's no need  to terminate this Commission in                                                              
order to  fix the  problem. I  encourage the  Legislature and  GCI                                                              
would be  happy to  participate in  coming up  with timelines  and                                                              
fixes  too,  that  have  been stated  to  be  problematic  to  the                                                              
Commission.  Terminating or changing  these Commissioners will not                                                              
change  the outcome  of  telecommunications  decisions. The  State                                                              
actions by the utility agency are  dictated by federal law.  There                                                              
is very  little wiggle  room.  The  Telecommunications  Act weighs                                                              
out very  clearly how the  State regulatory agency  must implement                                                              
the act. The State telecommunications  act weighs out very clearly                                                              
how models are to  be selected, and in what form  they are and how                                                              
they are  to be  arbitrated.   There is  very little wiggle  room.                                                              
Were the  Legislature to  get rid of  this regulatory  agency then                                                              
the  Telecommunications  Act would  be  enforced  by the  FCC  and                                                              
federal   court.     Were  the   Legislature   to  replace   these                                                              
Commissioners, if  the new Commissioners  were following  the law,                                                              
the outcomes would be the same.   If they were not, I would expect                                                              
that  it  would be  overturned  on  appeal.   Competition  is  the                                                              
federal  national policy  of this  country.   There  is simply  no                                                              
getting around it  at a State level.  I'd like to  talk just for a                                                              
second about a couple  of the cases that have been  brought up and                                                              
cited as the problems  of the RCA.  One is burden  of proof on the                                                              
rural exemption.   The State Commission  did not place  the burden                                                              
of  proof  on  the incumbent  local  telephone  company,  ACS,  by                                                              
itself. It  was ordered  to by a State  Superior Court  of Alaska.                                                              
Later, a different State Superior  Court judge looked at that case                                                              
again,  reaffirmed  that  and  reaffirmed   that  decision.    The                                                              
decision to use the modified FCC  model to establish the rates for                                                              
unbundled elements  was based on the recommendation  of a national                                                              
consultant  hired by the  Commission.   GCI did  not ask  for that                                                              
model.  GCI asked for a different  model.  This was the model that                                                              
we got  and we made the  best of it.   And we, like ACS,  had full                                                              
opportunity to arbitrate  all of the input of that  model.  All of                                                              
the cases  under the Telecommunications  Act that have  been cited                                                              
as a  problem, looking  at the rural  exemption, placement  of the                                                              
burden of proof,  choosing the model, all of those  decisions have                                                              
been appealed  and they have all  been upheld on appeal.   Some of                                                              
those are now  pending before a higher court.   The Supreme Court,                                                              
the United  States Supreme Court,  has now upheld models  that are                                                              
forward looking,  hypothetical, long run  in nature.  This  is the                                                              
exact same model that was used to  set rates in Alaska.  It is the                                                              
exact same  model that has been  complained about. Last  week, the                                                              
RCA was  needed for  consumer protection  and business  stability.                                                              
Last week, there  was a representative of [indisc.]  who told you,                                                              
testified  to you  that not  having,  not continuing  the RCA  was                                                              
already creating  problems.  I believe  he spoke fairly  and truly                                                              
and I believe  it is a significant issue.  The  uncertainty caused                                                              
by  terminating   the  Commission   will  be  a   disincentive  to                                                              
investment  that will affect  all utilities  in the State  whether                                                              
you're telecommunications, whether  you're a small water or sewer,                                                              
whoever you are, if you're a utility  that relies to any extent on                                                              
the public financing of capital,  not reauthorizing the RCA throws                                                              
all  that into  uncertainty. We  get  constant inquests,  constant                                                              
questions by  investors and bankers about  this very issue.   As a                                                              
matter  of fact,  I may  be late  to  tomorrow morning's  hearings                                                              
because I'm  asked to address a  group of bankers about  this very                                                              
issue.   Continuing the RCA at this  time is consistent with prior                                                              
legislative practice.  Over the  last 14 years,  the RCA  has been                                                              
routinely  extended in  Session,  prior to  its termination  date.                                                              
And the RCA does terminate June 30, 2002.  One example…                                                                         
SENATOR  COWDERY:  Ma'am,  you don't  mean  the  RCA has  been  in                                                              
existence for 14 years, do you?   You mean APUC has been extended?                                                              
MS. TINDALL:  I stand corrected.                                                                                                
CHAIRMAN TAYLOR:  Yeah.                                                                                                         
MS. TINDALL:  I apologize.                                                                                                      
CHAIRMAN TAYLOR:  You said 14 years?                                                                                            
MS. TINDALL:  The State regulatory agency.                                                                                      
CHAIRMAN TAYLOR:   You're not aware then that in  1994 APUC did go                                                              
into its  wind-down year,  and did  go through  a full grace  year                                                              
period when it was reenacted in '95?                                                                                            
MS. TINDALL:  Senator Taylor, you  took the words out of my mouth.                                                              
That was my next bullet.                                                                                                        
CHAIRMAN TAYLOR:  Okay.                                                                                                         
MS. TINDALL:  1994.   But,  I have a  little story  to tell  about                                                              
that.    I  am  embarrassed  to  admit  that  apparently  GCI  had                                                              
something to do with that.  And what  happened, I was on maternity                                                              
leave at  the time,  and folks at  GCI sought  to get a  couple of                                                              
amendments made to  the legislative, to the statutes.   And if any                                                              
of you have  watched the reauthorization of the  regulatory agency                                                              
over  the  years,  you  might  know  that  if  no  one  tries  any                                                              
amendments it usually got through  pretty clean.  If someone tries                                                              
to do a couple  of amendments things get balled up.   Well, things                                                              
got balled up in  1994, but it was worked out and  in the last few                                                              
hours of session it simply slipped  through the cracks.  It was an                                                              
accident.   No one  expected it to  happen.  And  it was  the, GCI                                                              
became  the  object  of  great  ridicule  at  the  Alaska  Telecom                                                              
Association meeting  that year and  our own Jimmy Jackson  got the                                                              
label of  'Sunset Jackson.'   He did  receive the oosik  award for                                                              
that.    So,  you're  right,  it did  happen,  but  I  think  that                                                              
everybody understood  that it was  an accident, from our  point of                                                              
CHAIRMAN TAYLOR: Do  you think people had to meet  with bankers at                                                              
the  time and  had  to  threaten  small telephone  companies  with                                                              
failures  to do  certification on  their  essential services,  $70                                                              
million?   Do  you remember  the Chairman  at the  time doing  all                                                              
MS. TINDALL:   Like  I said,  it was  pretty generally  understood                                                              
that  it   was  not  the   Legislature's  intent  to   sunset  the                                                              
Commission.  It was  simply an  accident  and it  was pretty  well                                                              
understood  that  they  would  be   quickly  reauthorized  at  the                                                              
beginning of the next legislative  session, which they were at the                                                              
beginning of the session, for four more years.                                                                                  
CHAIRMAN  TAYLOR: What's  your understanding  of what we're  doing                                                              
right now?                                                                                                                      
MS. TINDALL:  I'm not sure what we  are doing right now.  I don't,                                                              
I don't think I have a full understanding.                                                                                      
CHAIRMAN TAYLOR: Well, maybe you  weren't in attendance during the                                                              
hearings last week,  but I think I stated it very  clearly that as                                                              
far as I know there is not one single  person I've heard of in the                                                              
Legislature  that intends  to terminate  this  Commission. Nor  is                                                              
there  anyone   who  intends  that  any  Commissioner   should  be                                                              
replaced,  both  of  which  have  been the  focal  point  of  your                                                              
discussions.   And I'm asking, who  is it that's telling  you that                                                              
these things  are going  on? Because  it certainly  is not  coming                                                              
from anyone in the Legislature.                                                                                                 
MS. TINDALL:  That's good news.                                                                                                 
CHAIRMAN  TAYLOR: Well, it's  not good  news.   This has  been the                                                              
news throughout.   It's  a question  to you.   Who is telling  you                                                              
that  people  are  going,  that  Commissioners  are  going  to  be                                                              
terminated  or  replaced,   or  that  the  RCA  is   going  to  be                                                              
terminated?   Who's told  you that?   What's your source  for that                                                              
information?  Maybe you could tell us that?                                                                                     
1:50 p.m.                                                                                                                       
MS. TINDALL:  As head of the Department  for Governmental Affairs,                                                              
I employ  a number  of lobbyists  who talk  to various people  and                                                              
while I  have not had  a Legislator tell  me directly, that  is my                                                              
understanding.    In addition,  in  my judgment,  my  professional                                                              
judgment, this  is just my  opinion, based on  the fact that  I do                                                              
not  think  that you  can  change  State law  to  fix any  of  the                                                              
telecommunications  decisions, then  it made  logical sense  to me                                                              
that the next alternative would be to terminate the Commission.                                                                 
CHAIRMAN  TAYLOR: So  your source,  the answer  to my question,  I                                                              
guess, your source is your lobbyists?                                                                                           
MS. TINDALL:   Yes.  Oh, also  Mr. Duncan, and this is  hearsay, I                                                              
don't have  direct knowledge so I  have to say it's  hearsay, was,                                                              
basically that  is what he was  told by investors on  Wall Street.                                                              
It's  surprising to  think  that, and  you  know, Anchorage's  and                                                              
Alaska's business gets all the way  to Wall Street, but I guess we                                                              
had made some news here.                                                                                                        
CHAIRMAN  TAYLOR: Well, the  surprising part  to me  is that  is a                                                              
total  and complete  fabrication,  that the  only  people who  are                                                              
spreading that rumor  are you and Nan Thompson.   I've not heard a                                                              
single  person   in  the  Legislature  indicate   they  wanted  to                                                              
terminate RCA.   The only  indication was that  if we went  into a                                                              
grace period,  wind-down,  sunset year that  the next  Legislature                                                              
and governor would immediately take  up that issue and resolve it.                                                              
But apparently your source of your  information is your lobbyists.                                                              
Now that would be Mr. Kito and who else?                                                                                        
MS. TINDALL:   My lobbyists are  Sam Kito, Reed Stoops  and Ashley                                                              
CHAIRMAN TAYLOR: And  they reported this back to  you, that people                                                              
in the Legislature  - now the House had passed this  thing what 35                                                              
zip?    That  people  in  the  Legislature   wanted  to  terminate                                                              
individual  Commissioners  and wanted  to  terminate this  agency?                                                              
They reported that back to you?                                                                                                 
MS.  TINDALL:    I  think  the  report  that  that  was  what  ACS                                                              
CHAIRMAN TAYLOR: What's ACS got to  do with this?  They don't have                                                              
a vote down there any more than you do.                                                                                         
MS. TINDALL:  That's good news too.                                                                                             
SENATOR THERRIAULT: Mr. Chairman…                                                                                               
CHAIRMAN TAYLOR: I'm  just, but you honestly believe  that that is                                                              
what is  actually happening?   That somebody intends  to terminate                                                              
the Commission?                                                                                                                 
MS. TINDALL:  My opinion, I think that is a possible outcome.                                                                   
CHAIRMAN TAYLOR: Senator Therriault, go right ahead.                                                                            
SENATOR THERRIAULT:   Well, I guess I would have  to agree pushing                                                              
one step closer to the end date makes  that more of a possibility.                                                              
And, Mr.  Chairman, I  did hear  a member  of the Legislature  say                                                              
that that was a  possibility.  Perhaps, I think,  I was so shocked                                                              
at the time that I think the exact  words were, 'We have to get to                                                              
the  point  where we  just  terminate  or  replace some  of  these                                                              
Commissioners.'  So, I did hear that in the building.                                                                           
CHAIRMAN TAYLOR: Continue, I'm sorry.                                                                                           
MS. TINDALL:   In summary, the  RCA is important.   It's important                                                              
for the  consumers of  the State  of Alaska.   It's important  for                                                              
business interests.   It's important  to continue the  RCA without                                                              
uncertainty, and  then do the work  to put in the timeline  to fix                                                              
any problems with the RCA.  And that  concludes my testimony.  And                                                              
again, I gave Ron Duncan's testimony to you…                                                                                    
CHAIRMAN TAYLOR: I just got some information here.                                                                              
SENATOR COWDERY: I'd just like to tell…                                                                                         
CHAIRMAN TAYLOR: Go right ahead, Senator.                                                                                       
1:55 p.m.                                                                                                                       
SENATOR  COWDERY: …the  reason I  was  late, and  I think  Senator                                                              
Taylor was using  my office, we received some  e-mails and answers                                                              
that  we requested  last hearing  by 2  o'clock.   And I think,  I                                                              
haven't read  them all  and I don't  know if  the Chairman  has or                                                              
not.   But anyway, that was  why we was  late is that some  of the                                                              
things had  come in.  I have  some questions on, we  talked about,                                                              
last week,  does GCI or any affiliate  of GCI own a lodge  here in                                                              
MS. DANA TINDALL: Yes.                                                                                                          
SENATOR COWDERY: Who is the actual owner?                                                                                       
MS. TINDALL: I believe GCI is, has ownership.                                                                                   
SENATOR COWDERY: The corporation?                                                                                               
MS. TINDALL: Let  me say I am not positive on  that, but I believe                                                              
GCI is.                                                                                                                         
SENATOR COWDERY: And where is it located?                                                                                       
MS. TINDALL: It is located on the Agulowak River.                                                                               
SENATOR COWDERY: And how does a person get out there?                                                                           
MS. TINDALL: A  person goes to Dillingham and then  gets picked up                                                              
by GCI's turbo Beaver.                                                                                                          
SENATOR COWDERY:  Oh, I see.  So  they, GCI has their  own private                                                              
plane to  ferry people to  the lodge?   Do they ferry  people from                                                              
Anchorage to there too at occasion?                                                                                             
MS. TINDALL: Have on occasion.                                                                                                  
SENATOR  COWDERY: How many  rooms, approximately,  rooms  does the                                                              
lodge have?  Is it a large lodge?                                                                                               
MS. TINDALL: No,  it's more like a large family cabin.   It is, it                                                              
has four rooms.                                                                                                                 
SENATOR COWDERY: Are there fishing guides on staff there?                                                                       
MS. TINDALL: No.                                                                                                                
SENATOR  COWDERY: No,  no fishing  guides.   Can a  member of  the                                                              
public make reservations to the lodge?                                                                                          
MS. TINDALL: No, it's not a public lodge.                                                                                       
SENATOR COWDERY:  Oh, it's  not a  public lodge.   Does  the lodge                                                              
maintain  boats  and  things  for their  guests,  things  of  that                                                              
nature, to go fishing?                                                                                                          
MS. TINDALL: We  have three boats, three small  fishing boats, you                                                              
know the little aluminum river guiders' kind of boats.                                                                          
SENATOR COWDERY:  So just  the one Beaver  is the only  floatplane                                                              
that's out at the lodge?                                                                                                        
MS. TINDALL: Yes.                                                                                                               
SENATOR COWDERY:  Are there records  kept of the guests  that stay                                                              
at the lodge?                                                                                                                   
MS. TINDALL: I don't think so.                                                                                                  
SENATOR COWDERY:  Does the, do  you have any  idea of the  cost of                                                              
the lodge when they built it?                                                                                                   
MS. TINDALL:  No.  I wasn't  directly involved in the  purchase of                                                              
the lodge.  This was, I do, and again  it's hearsay, but I'll tell                                                              
you what  I know, subject  to correction  by everybody at  GCI who                                                              
will jump on  me if I'm wrong.   It was purchased out  of the Neil                                                              
Burt [ph] [indisc.].                                                                                                            
SENATOR  COWDERY:  Oh,  I see.    Do  you  have a  handle  on  the                                                              
operational costs of the lodge per season?                                                                                      
MS. TINDALL: I don't know.                                                                                                      
SENATOR  COWDERY: Do  you know  the operating  expenses, are  they                                                              
taken as a deduction, a tax deduction of some sort?                                                                             
MS. TINDALL: I don't know.                                                                                                      
SENATOR COWDERY: Can you find that out for us?                                                                                  
MS. TINDALL: Sure.                                                                                                              
SENATOR  COWDERY:   I'd appreciate  that.   I'd like  to know  who                                                              
takes the deduction.   Is it personal?  And that  gets back to who                                                              
owns the lodge,  I suppose.  You  know, if it's just GCI.   To the                                                              
extent  that the  costs  are a  deduction,  what  extent are  the,                                                              
what's the  business purpose  of the lodge,  to your…? I  mean, if                                                              
they're deducting expenses, it's obviously a business…                                                                          
MS. TINDALL: Yeah, and I don't know  what the tax treatment of the                                                              
lodge  is.   And so,  I just,  I  don't go  there.   I married  an                                                              
account recently who's appalled at my…                                                                                          
SENATOR COWDERY: But you could find that out for us?                                                                            
MS. TINDALL: …My focus on detail. Yes.                                                                                          
SENATOR COWDERY: And could you also,  do you know what, say in the                                                              
last three  years, how many State  employees have been  out there,                                                              
made it out there to the lodge?                                                                                                 
MS. TINDALL: I do not know that.                                                                                                
SENATOR COWDERY: Can you find out for us?                                                                                       
MS. TINDALL:  I can try.   I am not  sure what kind of  records we                                                              
keep, but I will certainly try to find that out for you.                                                                        
SENATOR  COWDERY:   Well  if  it's  a  private   lodge  and  State                                                              
employees, I think that…                                                                                                        
MS. TINDALL: I assume that there have been APOC filings.                                                                        
SENATOR  COWDERY: And  could we  have a  copy of  that, if  that's                                                              
appropriate, of the  APOC or whatever.  I was just  wanting to get                                                              
a handle  on how many  State people have been  out there.   And if                                                              
you  could  distinguish   if  it's  higher,  higher   level  ones,                                                              
Commissioners or that type, or just who they were.  I would…                                                                    
MS. TINDALL: Okay, we'll try to provide the names and [indisc.].                                                                
SENATOR  COWDERY: And  also  if they've  made  multiple stays  out                                                              
there.  You know, more than just one time.                                                                                      
MS. TINDALL: Okay.                                                                                                              
SENATOR  COWDERY: And  also, do the  State employees  pay for  the                                                              
MS. TINDALL: I will find that out as well.                                                                                      
SENATOR COWDERY: And if they bring  family members, are that paid?                                                              
MS. TINDALL: I will…                                                                                                            
SENATOR COWDERY: And  what approximately rates per  day per person                                                              
that would be appropriate.                                                                                                      
MS. TINDALL:  I  do know that  under the  terms of  the, we  don't                                                              
charge for  the lodge,  the, we're  not permitted  to, it  is not,                                                              
because  it's  not a  commercial  fishing  lodge.   And  so  State                                                              
employees  I  believe, I'm  not  sure  how  that works,  who  they                                                              
reimburse, but it's all in APOC filings.                                                                                        
SENATOR COWDERY:  So, under public  disclosure rules,  that should                                                              
be some place, right?                                                                                                           
MS. TINDALL: Yes.                                                                                                               
SENATOR COWDERY: And if we could find that.                                                                                     
MS. TINDALL: Yes.                                                                                                               
SENATOR COWDERY: Do invited guests  sometimes pay, even though you                                                              
don't charge?                                                                                                                   
MS. TINDALL: They do whatever they're required by State law.                                                                    
SENATOR COWDERY: Yeah.   There's, I think they're  required to pay                                                              
under the ethics and fair…                                                                                                      
MS. TINDALL: And  that's what they do.  I don't  run the lodge and                                                              
I don't get…                                                                                                                    
SENATOR COWDERY:  And if you  could find out,  I asked for  this a                                                              
little earlier, how do you go about  calculating for the charge of                                                              
a person?  I'm a  pilot myself  and I  know that  one of my  dream                                                              
airplanes was  one of those,  but they're  up to a  million dollar                                                              
planes,  maybe even  yours is  even more.   So if  you charged,  I                                                              
suppose  it's a uniform  rate, you  would charge  everyone  at the                                                              
same price.                                                                                                                     
MS. TINDALL: Senator,  I am happy to provide you  with all of this                                                              
SENATOR COWDERY: I'd appreciate that.                                                                                           
MS. TINDALL: …but I simply don't know.                                                                                          
The  reason,  you know,  we  talked  last  week about  the  Chair,                                                              
Chairman Thompson's  spending some  stay there  in 2000.   Has she                                                              
stayed there more than one occasion?                                                                                            
MS. TINDALL: No.                                                                                                                
SENATOR  COWDERY: Just  one.   It  was stated  that  she stayed  a                                                              
couple of  days.   That was the  general thing.   Is that  to your                                                              
knowledge what it was?                                                                                                          
MS. TINDALL:  I believe she  stayed two nights.   She got  in late                                                              
the first night and stayed another night and left.                                                                              
SENATOR COWDERY: And she brought her children?                                                                                  
MS. TINDALL: Yes.                                                                                                               
SENATOR COWDERY: Is  that two children, three  children, one child                                                              
- well, I guess that children indicates more than one?                                                                          
MS. TINDALL: She has two children.                                                                                              
SENATOR COWDERY: Two children.                                                                                                  
MS. TINDALL:  At least  she brought  two children.   I don't  have                                                              
personal knowledge.                                                                                                             
SENATOR COWDERY:  Did you  know how she  got to Dillingham,  where                                                              
she was picked up?                                                                                                              
MS. TINDALL: I think she flew commercial  because she got in late,                                                              
very late.                                                                                                                      
SENATOR  COWDERY: Well,  in other  words, GCI  didn't fly her  out                                                              
from Anchorage?                                                                                                                 
MS. TINDALL: No.                                                                                                                
SENATOR COWDERY: Okay.  She said  she paid $1200. I believe that's                                                              
what we got in  the mail today, or delivered.   And that goes back                                                              
to who came up with the number?   How do you establish rates?  And                                                              
did that include  the airplane, I guess, shuttle  from Dillingham?                                                              
How  far, approximately  how  far is  Dillingham,  the lodge  from                                                              
MS. TINDALL: Half hour by Beaver.                                                                                               
SENATOR COWDERY: Floatplane, right?                                                                                             
MS.  TINDALL:  Yeah,  yeah.   It's  a  lot  longer by  the  little                                                              
SENATOR  COWDERY: I  guess we could  compare the  total charge  to                                                              
other fishing lodges, that's kind  of a high end, out in that Wood                                                              
River area.  I think a lodge is sometimes,  I had some guests that                                                              
went out to one  of them lodges, about a thousand  bucks a day per                                                              
head, I don't know  what they were doing.  Where  would we find an                                                              
invoice or receipt for the $1200 that Ms. Thompson paid?                                                                        
MS. TINDALL:  I  don't know,  when I check  and see  what kind  of                                                              
records we have, I would have to look for that.                                                                                 
SENATOR COWDERY: Could you furnish that?                                                                                        
MS. TINDALL: Sure, I can look for it, sure.                                                                                     
SENATOR COWDERY: Did Lisa Sutherland  accompany the Chairman there                                                              
on that trip?  In the summer of 2000?                                                                                           
MS. TINDALL:  Lisa got  out earlier.  She arrived  earlier  so she                                                              
didn't fly out on the same flight or anything like that.                                                                        
SENATOR COWDERY: When I asked, I  think the last, did Lisa pay for                                                              
her trip?                                                                                                                       
MS. TINDALL: I believe she did.                                                                                                 
SENATOR COWDERY: When  I asked last week on this  to the Chairman,                                                              
she said that she didn't know if  Lisa paid.  And then when I, and                                                              
then later  on she  said that  she paid  the same as  Lisa.   So I                                                              
don't know  [indisc.] question about  the amount.  It  wasn't paid                                                              
at the time.  It  was paid about a month or so  later.  Is that my                                                              
MS. TINDALL: I don't recall.                                                                                                    
SENATOR COWDERY: She went out in  July, and I think that the check                                                              
that we  got was some time  in August.   That was the date  on the                                                              
check.   And she originally  stated that  originally she  took the                                                              
trip, she thought  it was a gift  and that then later  she changed                                                              
her mind and decided that when she  paid a month later.  Did, what                                                              
was the  thought of  GCI?  Did  they consider  that a gift  or did                                                              
they just let her guess?                                                                                                        
MS. TINDALL:  It was up  to her  how she wished  to treat it.   My                                                              
immediate  thought is  that everything  needs be  above board  and                                                              
lawful and  she felt more comfortable  paying for herself  and not                                                              
charging the State fund, so that was fine.                                                                                      
SENATOR COWDERY: Occasionally,  we get invited to  the North Slope                                                              
and this  and that and some  trips, and when that  occurs, whoever                                                              
gives it has  to file a declaration  that we have.  That's  why, I                                                              
know she's not a Legislator.  But,  who else was at the lodge, can                                                              
you recall, at the time she was there?                                                                                          
MS. TINDALL: Lisa Sutherland, Jimmy Jackson, and…                                                                               
SENATOR COWDERY: Jimmy Jackson is the attorney for?                                                                             
MS. TINDALL: Jimmy  Jackson is an attorney who works  for me in my                                                              
department.   Bill Phillips, who  is an attorney  from Washington,                                                              
D.C., who works for GCI.                                                                                                        
SENATOR COWDERY: And also…                                                                                                      
MS. TINDALL: And my children.                                                                                                   
SENATOR COWDERY: Oh, your children were there too?                                                                              
MS. TINDALL: That's why her children were there.                                                                                
SENATOR COWDERY: I see, yeah.                                                                                                   
MS. TINDALL: To keep my children company.                                                                                       
SENATOR COWDERY:  Did GCI  have any dockets  pending at  that time                                                              
before the board?                                                                                                               
MS.  TINDALL:  We  always  have dockets  pending,  but  we  didn't                                                              
discuss any of them.                                                                                                            
TAPE 02-40, SIDE B                                                                                                            
SENATOR COWDERY: Do you know what the dockets were?                                                                             
MS. TINDALL:  Two years ago?  I  can't say for sure.   But I would                                                              
be happy to provide you a docket sheet from that date.                                                                          
2:10 p.m.                                                                                                                       
SENATOR COWDERY:  I'd appreciate that.   Your lobbyists,  are they                                                              
salaried or contracted or how do  you do it?  Without getting into                                                              
terms of how much or anything.  Are they on salary?  Are they …                                                                 
MS. TINDALL:  My, the…                                                                                                          
SENATOR COWDERY: Your three lobbyists.                                                                                          
MS. TINDALL: The three lobbyists we mentioned before?                                                                           
SENATOR COWDERY:  All your lobbyists.                                                                                           
MS. TINDALL:  They are all, I think, paid on a flat rate fee.                                                                   
SENATOR  COWDERY:   And they're  all  registered in  the State  of                                                              
Alaska as lobbyists.  I assume.                                                                                                 
MS. TINDALL:  Unless they're strictly a federal lobbyist.                                                                       
SENATOR COWDERY:   To your knowledge, is anyone  else lobbying for                                                              
GCI beside the three that we just talked about?                                                                                 
MS. TINDALL:  Dan Coffee [ph], I  believe, is registered under, as                                                              
a lobbyist.  However,  he hasn't lobbied for us in  Juneau, we use                                                              
him primarily for municipal lobby.  Not that I know of.                                                                         
SENATOR  COWDERY: And  you understand  that  under Alaska  Statute                                                              
24.45, I believe, 051, every lobbyist  is required to disclose any                                                              
gift over  $100, is that your  understanding, in value that  he or                                                              
she made to a public official?                                                                                                  
MS. TINDALL:  Sounds like the law.                                                                                              
SENATOR  COWDERY:   Yeah.  Has, to  your  knowledge,  has any  GCI                                                              
lobbyist  ever disclosed  a trip  to the  lodge as  a gift in  any                                                              
report filed with the APOC?                                                                                                     
MS. TINDALL:  To my knowledge, I don't believe so.                                                                              
SENATOR COWDERY:  You don't believe they've ever reported?                                                                      
MS.  TINDALL:   I  don't  believe any  of  those three  have  ever                                                              
reported a trip to the lodge.                                                                                                   
SENATOR COWDERY:   So,  it's your  understanding under  that, that                                                              
GCI is  required to  disclose also  any gifts  over $100  in value                                                              
that is made  to a public  official or in it's  lobbyists employee                                                              
report, employer report.                                                                                                        
MS. TINDALL:  We're required to disclose…                                                                                       
SENATOR COWDERY:  File, disclose.                                                                                               
MS. TINDALL:  …gifts to lobbyists?                                                                                              
SENATOR  COWDERY:   No.   You  stated earlier,  everybody's  under                                                              
MS. TINDALL:  Right.                                                                                                            
SENATOR COWDERY:  So, the question,  is it your understanding that                                                              
under  the statute  that GCI  is  required to  disclose any  gifts                                                              
exceeding  $100  in  value that  he  or  she  made to  any  public                                                              
official in its lobbying employer report.                                                                                       
MS. TINDALL:  I recently just became aware of that.                                                                             
SENATOR COWDERY: Has that been done or you don't know?                                                                          
MS. TINDALL:  I think we're probably delinquent.                                                                                
SENATOR COWDERY:   Could  we, okay.   I  would appreciate  that, a                                                              
little  bit more  depth than  that, if  you could.   You said  you                                                              
thought you had did that?                                                                                                       
MS. TINDALL:  No, I think we're delinquent on that.                                                                             
SENATOR COWDERY:  Oh, I see.                                                                                                    
MS. TINDALL:  I'm preparing to go  to APOC and do my mea culpas on                                                              
that and pay my fines.                                                                                                          
SENATOR COWDERY:  Has GCI ever disclosed  a trip to the lodge as a                                                              
gift to any APUC or RCA employee?                                                                                               
MS. TINDALL:   I don't, APUC or  RCA employee, we've only  had one                                                              
Commissioned  employee out  there, and  we did  not disclose  that                                                              
because I was not aware [indisc.].                                                                                              
SENATOR COWDERY:  And that wasn't disclosed.                                                                                    
MS. TINDALL:  But I believe Chair Thompson did that.                                                                            
SENATOR  COWDERY:   It  was, it's  your  understanding  it was  an                                                              
oversight that you should have disclosed  that, or you don't think                                                              
you have to disclose that?                                                                                                      
MS. TINDALL:   I  think it  was an  oversight and  we should  have                                                              
disclosed it.                                                                                                                   
SENATOR COWDERY: I don't want to  hold us up.  Robin, I'll let you                                                              
or someone else talk here.                                                                                                      
CHAIRMAN TAYLOR:   I'm kind of  surprised, Dana that in  answer to                                                              
Senator Cowdery's  questions, you didn't  know if any  other State                                                              
employees have  been out there in  the last three years.   If they                                                              
had how long they stayed, or if in  fact anybody else charged them                                                              
any fee.   You  couldn't remember  any of those  things.   But you                                                              
have a very specific  memory of the trip that the  Chairman of the                                                              
RCA took  with her  children out there.   Why  is that?   That you                                                              
know about what time she arrived,  what time she left, who all was                                                              
there, even naming the other parties  that were there at the time.                                                              
MS. TINDALL:   Because I was  involved with the trip  the Chairman                                                              
took out  there and  had not  been involved  with any other  trips                                                              
that State employees took out the lodge.                                                                                        
CHAIRMAN  TAYLOR:   Okay.   Who  invited the  Chairman  to go  out                                                              
MS.  TINDALL:   Well,  you know,  that is  a  very good  question.                                                              
Technically, well,  I'll tell you  what happened.   Bill Phillips,                                                              
our  attorney  from Washington,  D.C.,  called  me and  said  that                                                              
Senator  Stevens was giving  the telecommunications  issue  to his                                                              
staff  person, Lisa  Sutherland,  who was  a, had  not dealt  with                                                              
telecommunications issues  before and that the Senator  would like                                                              
us to  give her  a background  she needed  to have,  what we  call                                                              
Telecom 101.   Which, as you know,  I've provided to some  of you.                                                              
In chatting  with Bill I  thought because the  Chair and I  have a                                                              
very  arms-length  relationship  that  it  might  be,  I'm  sorry,                                                              
because Lisa and I have an arms-length  relationship, I don't have                                                              
an  arms-length relationship  with  the Chair,  that  it might  be                                                              
better to have  a neutral third-party expert give  Lisa Sutherland                                                              
the Telecom  101, and it might be  treated as less biased,  if you                                                              
will.  And  Bill thought that was  a great idea.  I  think he went                                                              
to talk to the Senator and Lisa about  it, they thought that would                                                              
be a great  idea and they said,  'Great.  Let's put  it together.'                                                              
So, who did  the invitation come from?   I guess it came  from all                                                              
of us.   It was  my idea to  have Nan give  Lisa the what  we call                                                              
Telecommunications  101.   The  purpose  of  Nan being  there  was                                                              
strictly  to provide  background  to  Lisa Sutherland  on  telecom                                                              
issues.  Just on  the basic issues of how a phone  call works, how                                                              
universal service  works, how  access charges work.   And so  I am                                                              
very well aware  that Nan was late.  We started  that morning with                                                              
our  white  board and  markers  with  Lisa,  and  Lisa is  a  very                                                              
aggressive  learner so I  wish Nan  had been there.   But  she was                                                              
late, she didn't get there until  dinnertime and by that time we'd                                                              
gone through Telecom 101.                                                                                                       
2:15 p.m.                                                                                                                       
CHAIRMAN TAYLOR:  Yeah, I'm trying  to get a handle on this.  Your                                                              
attorney, who you employ as a lobbyist  in Washington, D.C., heard                                                              
that, heard  that Ted had decided  to give Lisa this area  to work                                                              
MS. TINDALL:  I  think he was talking to Senator  Stevens and Lisa                                                              
CHAIRMAN TAYLOR:   And  your attorney decided,  how does  Lisa get                                                              
out here?  Who invites her?                                                                                                     
MS. TINDALL:  We did.                                                                                                           
CHAIRMAN TAYLOR:  Who is we?  You?                                                                                              
MS. TINDALL: GCI.                                                                                                               
CHAIRMAN TAYLOR:  Who's GCI?  Who  invited her?  Some  human being                                                              
had to pick up the phone or say something to her, I'm sure.                                                                     
MS. TINDALL:  Bill Phillips invited her on behalf of GCI.                                                                       
CHAIRMAN TAYLOR:  Okay, and then you invited the Chairman?                                                                      
MS. TINDALL:   Yes,  with the  agreement of  the Senator  and Lisa                                                              
that it was a joint effort.                                                                                                     
CHAIRMAN TAYLOR:   I want  to make that  real clear.   When you're                                                              
saying, 'With the agreement of the  Senator and Lisa that it was a                                                              
joint effort,' are you testifying  under oath that Ted Stevens set                                                              
this up so that  one of his staffers can go to  an exclusive lodge                                                              
in Alaska  and be instructed  by one company  on Telecom 101?   Is                                                              
that  what you're  saying?   Because if  it is,  I'm real  curious                                                              
about that.                                                                                                                     
MS.  TINDALL:   Subject  to  confirmation  from Bill  Phillips,  I                                                              
believed  that  Senator  Stevens   was  aware  and  condoned  Lisa                                                              
Sutherland  coming to  Alaska,  coming to  our  lodge and  getting                                                              
Telecom  101 from  us.  And  I think  he probably  thought it  was                                                              
useful because he has come out and  done the same thing and he has                                                              
brought other  Congress members  out to our  lodge to do  the same                                                              
thing as well.                                                                                                                  
CHAIRMAN TAYLOR:   Okay,  and you brought  the Commissioner?   You                                                              
invited her?                                                                                                                    
MS. TINDALL:  Yes.                                                                                                              
CHAIRMAN TAYLOR:   That was your  testimony.  And you  invited her                                                              
because she  has kids about  the age of  your kids and  they would                                                              
have somebody to play with?                                                                                                     
MS.  TINDALL:   No,  I invited  Chair Thompson  because  she is  a                                                              
neutral third-party  expert and I  thought that she could  give an                                                              
unbiased presentation  of the issues.   I happened to be  a single                                                              
mother at  the time.   I had a babysitting  problem.  I  needed to                                                              
take my  children out there  and I needed to  work.  As long  as I                                                              
was  taking  my  children  out  there  and  I  had  invited  Chair                                                              
Thompson, I invited her to bring her children along.                                                                            
CHAIRMAN TAYLOR:   When Chair Thompson testified,  she stated that                                                              
originally  she  thought  the  trip  was just  a  gift,  but  then                                                              
afterwards, some  time afterwards, apparently in  August, the trip                                                              
was apparently in  July, she changed her mind.  Did  anyone at GCI                                                              
talk with her?   Did you, in  particular, talk with her  about the                                                              
ethical  ramifications  of that  trip?   And  whether  or not  she                                                              
should report it?   And whether or not she should  pay some amount                                                              
of money?                                                                                                                       
MS. TINDALL:   My understanding of Chair Thompson's  testimony was                                                              
that she thought  she would be discussing  more telecommunications                                                              
policy issues and it was a legitimate  function for her to do.  At                                                              
the end  of the  trip she decided  it had  been more fishing  than                                                              
telecommunications  policy, which is,  of course, because  she was                                                              
late and she  missed the Telecom 101.   She asked me,  I think, to                                                              
the best  of my  recollections, she  asked me what  - I  think she                                                              
told me  that that's what  she had decided  to do and asked  me to                                                              
provide her with a number of what  would be a good estimate of the                                                              
expenses.  And I may have put that  number together, I don't know.                                                              
CHAIRMAN  TAYLOR:    When  Senator Cowdery  was  asking  you,  I'm                                                              
surprised to  hear you came up  with the number because  what was,                                                              
do you have any  idea what the number was based on  or was it just                                                              
something you picked out of the air?                                                                                            
MS.  TINDALL:   I'm  not sure  it was  me  that came  up with  the                                                              
number.  I  remember having the conversation with  Chair Thompson.                                                              
She  wanted  the number.    I  can't  remember  if I  then  called                                                              
upstairs and said to someone, 'Give  me a number,' or if I said to                                                              
Bill Phillips,  'What have  we charged other  people,' and  he got                                                              
back to Nan. I simply don't remember.                                                                                           
CHAIRMAN TAYLOR: You do believe though  that you had cases pending                                                              
at the time in front of her?                                                                                                    
MS. TINDALL:  Yes.                                                                                                              
CHAIRMAN  TAYLOR: Did  she ever  recuse  herself on  any of  those                                                              
MS.  TINDALL:   There was  never any  discussion of  any of  those                                                              
cases, or  any State  telecommunications at all.   There  was only                                                              
background, how a telephone network  worked, how universal service                                                              
funds  work, and  then  there was  discussion  of federal  subsidy                                                              
money that  Senator Stevens  wanted to  send to  the State  to the                                                              
telecommunications  industry to support  a broadband  network. And                                                              
that was, those discussions primarily  took place between Lisa and                                                              
Nan.   So, in my  opinion, and I  believe in the  Chair's opinion,                                                              
there was no need to recuse herself.                                                                                            
CHAIRMAN  TAYLOR:  Well, there  obviously  was  some need  or  she                                                              
wouldn't have come up with the phone  call to you saying, 'I don't                                                              
feel real  good about this  trip.  Give me  a number on  what size                                                              
check I  should send to  GCI because I'm  going to have  to report                                                              
MS. TINDALL: Senator Taylor…                                                                                                    
CHAIRMAN TAYLOR: Which she did.                                                                                                 
MS. TINDALL:  Your memory  of what  happened is  much better  than                                                              
mine. I think  that what she said  is, 'We didn't discuss  as much                                                              
telecommunications   policy   as   I   thought   we   would.   I'm                                                              
uncomfortable  charging the State.'  There was  never an  issue of                                                              
being uncomfortable because she had  been out there with me, to my                                                              
SENATOR COWDERY:  Do you mind if I ask…                                                                                         
CHAIRMAN TAYLOR:   Go  right ahead, Senator.   I'm sorry,  Senator                                                              
SENATOR COWDERY:  That's all right go ahead.                                                                                    
SENATOR THERRIAULT:  It seems to  me, and Mr. Chairman I thank you                                                              
for having  these proceedings  videotaped, I'm  in the  process of                                                              
going through the  tapes from the previous week.   I have not gone                                                              
over this  particular  section testimony,  but I  do have a  staff                                                              
person who  took good  notes and did  brief me  on it, and  so I'm                                                              
glad we got back  to the discussion on this.  It  seems to me that                                                              
the discussion,  and I  myself have had  this situation  where you                                                              
are invited  somewhere, you  think it's  going to  be a  matter of                                                              
legislative  education.   After  the  fact you  find  out that  it                                                              
wasn't, and you then ask, you make  a call, say, 'It wasn't what I                                                              
thought it  was. According  to the  law, I  have to reimburse  for                                                              
this because  the event's  already taken place.'   And  it doesn't                                                              
surprise me that it looks like it  was about a month later. I know                                                              
that  for  that  ourselves, Legislators,  having  to  report  even                                                              
report  the gifts,  the  values of  the gifts,  even  if they  are                                                              
legit, we  still have  to report that,  quite often we're  getting                                                              
right up  to the time  deadline and I'm  making calls back  to the                                                              
company  saying,  you know,  'I've  got  to get  that  information                                                              
because I've  got a deadline  to turn it  in.' So, it  seems like,                                                              
there really isn't any inconsistency.   Again, I haven't [indisc.]                                                              
the videotape.   But from what my staff told me  what the Chairman                                                              
said that after getting there she  determined that the educational                                                              
part  wasn't  what  she  had  originally  thought,  and  from  Ms.                                                              
Tindall's testimony, it was because  she was late, she missed that                                                              
part of the  trip.  She felt  uncomfortable and then took  it upon                                                              
herself to make a reimbursement to  the company.  That's the exact                                                              
same steps that I've taken as a Legislator  when that has happened                                                              
to  me.   And  I've  written  a  check after  calling  the  Ethics                                                              
Committee  to double-check,  and  then  verifying  that, yes,  you                                                              
probably  should reimburse.  I've  called the  company, asked  for                                                              
exactly  how much  I should  reimburse,  and then  I've written  a                                                              
check.  So I  don't, I guess I don't quite understand  where there                                                              
is  any kind  of shenanigan  going  on here.   It  seems like  the                                                              
Chairman took  the steps that any  Legislator would, and  in fact,                                                              
the very steps that I have.                                                                                                     
CHAIRMAN TAYLOR:   Did you  have a question  in there for her?   I                                                              
thought you…                                                                                                                    
SENATOR THERRIAULT:   Well,  I did.   With  regards to the  lodge,                                                              
Senator Cowdery was talking about,  well, how you came up with the                                                              
price. Who did the cooking?  Who  did the cooking at the lodge for                                                              
the two and a half, three days that…?                                                                                           
MS TINDALL:  There was a cook the lodge.                                                                                        
SENATOR THERRIAULT:  Were they gourmet meals, or…?                                                                              
MS. TINDALL:   We're usually  on diets, so  we try not to  make it                                                              
SENATOR THERRIAULT:   So, as far  as trying to estimate  the cost,                                                              
and if you're going  to compare to some of these  lodges out there                                                              
that have  chefs and  pastry chefs, I  would expect that  probably                                                              
the fare at your  four bedroom cabin doesn't quite  compare to the                                                              
fare that you'd get at a $1,000 a day lodge.  Is that correct?                                                                  
MS. TINDALL:   I don't know.   I haven't been to lodges  that I've                                                              
paid for.                                                                                                                       
SENATOR THERRIAULT:  Thank you.                                                                                                 
CHAIRMAN TAYLOR:  Could you  give us your  title again?   When you                                                              
started  off I tried  to write  it all  down, but  it was  kind of                                                              
MS. TINDALL:   Yes, it's kind of  long.  Senior Vice  President of                                                              
Legal, Regulatory and Governmental Affairs.                                                                                     
CHAIRMAN  TAYLOR:  Legal,  Regulatory  and  Governmental  Affairs.                                                              
Right?  And how long have you held that position?                                                                               
MS. TINDALL:   I've  been Senior Vice  President for  eight years.                                                              
Prior  to that  I had  the same  responsibilities but  I was  Vice                                                              
President for  a number  of years.  I've  basically done  the same                                                              
thing for 17 years but had a title change.                                                                                      
CHAIRMAN  TAYLOR: This  position requires  you to  be pretty  well                                                              
aware of  regulatory affairs and  State laws involving  regulatory                                                              
affairs.   And, in fact,  you work with  attorneys and  you're the                                                              
one that works  direct with the lobbyist on occasion,  aren't you?                                                              
For your company?                                                                                                               
MS. TINDALL:  Yes.                                                                                                              
CHAIRMAN  TAYLOR: Both  Mr.  Duncan, I  assume,  and yourself  are                                                              
intimately aware of what your lobbyists  are doing.  They probably                                                              
report to you, huh?                                                                                                             
MS. TINDALL:  For the most part.   Sometimes they simply report to                                                              
CHAIRMAN TAYLOR:  Do you know if  GCI has ever disclosed in any of                                                              
their quarterly  reports on  the employment  of lobbyists,  do you                                                              
know if GCI has  every once disclosed taking a  State official out                                                              
to that lodge, any State official?                                                                                              
MS. TINDALL:  I don't know.                                                                                                     
CHAIRMAN TAYLOR: Senator Cowdery  asked you if you knew whether or                                                              
not the trip  given to the Chairman  - let me back up  on that one                                                              
first.   You  said, in  talking to  Senator  Therriault, that  you                                                              
thought that  the Chairman's  testimony had  been that  she didn't                                                              
want to charge the State for it.  Right?                                                                                        
MS. TINDALL:   And you know, I  should say, I don't know  what her                                                              
reasons are.  Nan did not discussion her reasons with me.                                                                       
CHAIRMAN TAYLOR: I'm curious though,  why would she be, you're the                                                              
one who  did apparently  come up  with the  number, the  $1200, to                                                              
tell  her to  pay the  company.   Why in  the world  would she  be                                                              
paying the  company if she  didn't want the  State to pay  for it?                                                              
Had the State paid for any part of it?                                                                                          
MS. TINDALL:  I don't understand your question.                                                                                 
CHAIRMAN  TAYLOR:   Well, shouldn't  her  check have  gone to  the                                                              
State if the State  was paying for it?  Why would  her check go to                                                              
your company?                                                                                                                   
MS. TINDALL:  I never personally received her check.                                                                            
CHAIRMAN  TAYLOR:   You know  who did,  or what  happened to  that                                                              
MS. TINDALL: No.                                                                                                                
CHAIRMAN TAYLOR: Could you find that out for us?                                                                                
MS TINDALL: Sure.                                                                                                               
CHAIRMAN TAYLOR: I  think you testified earlier  that you believed                                                              
that the lodge was a business expense owned by GCI.                                                                             
MS. TINDALL: I think I testified that I didn't know.                                                                            
CHAIRMAN TAYLOR:  I would imagine,  from your position,  as Senior                                                              
Vice President in charge of these  affairs that you would probably                                                              
know that,  because you  use the lodge  frequently in  the summer,                                                              
don't you?  Not you personally, the company.                                                                                    
MS. TINDALL: The company uses the lodge frequently.                                                                             
CHAIRMAN TAYLOR:  And what  is the purpose  for which  the company                                                              
has the lodge?                                                                                                                  
MS. TINDALL:   To  entertain customers  out there.   We  entertain                                                              
business   associates.     We  entertain   -  there've  been   FCC                                                              
Commissioners  out there.   And  there  have been  members of  the                                                              
United States Congress out there.                                                                                               
CHAIRMAN TAYLOR: And these FCC Commissioners,  while they were out                                                              
there, did you have cases pending before the FCC too?                                                                           
MS.  TINDALL:   I  don't   know.    I   think  we  were   probably                                                              
participating in [indisc.].                                                                                                     
CHAIRMAN TAYLOR:  From your position  as Senior Vice  President of                                                              
Legal  and Governmental  Affairs, you  might have  access to  that                                                              
information and  could provide it  to the Committee, that  GCI was                                                              
entertaining FCC Commissioners at  their lodge which they maintain                                                              
for business  purposes  during the  period of  time when they  had                                                              
matters pending before those FCC Commissioners.                                                                                 
MS. TINDALL:   I said  that I didn't know  whether we did  or not,                                                              
but I'd be happy to…                                                                                                            
CHAIRMAN TAYLOR:  But you could find  that out for us.  Thank you.                                                              
If you would  please.  I'd appreciate  it.  And you also  said, in                                                              
answer  to  Senator  Cowdery's  question   that  you  thought  you                                                              
probably did have, GCI had, matters  pending before the Commission                                                              
when Nan Thompson, the Chairman of  the Commission, was invited by                                                              
you to  come out to the  lodge for a  couple, three days  with the                                                              
kids.  Right?                                                                                                                   
MS. TINDALL:  Yes.                                                                                                              
2:30 p.m.                                                                                                                       
CHAIRMAN TAYLOR:  Then when  he asked you,  'Did you  report these                                                              
things?' you  said you were sure she  did.  How did you  know that                                                              
she did?                                                                                                                        
MS. TINDALL:   My understanding at that time was  it was incumbent                                                              
upon  her to  report  this.   I did  not understand  and  it is  a                                                              
failure on my part that GCI needed to report [indisc.].                                                                         
CHAIRMAN TAYLOR: And do you know who she reports to?                                                                            
MS. TINDALL:  I assume she reports to APOC.                                                                                     
CHAIRMAN TAYLOR:   No,  she reports  to her immediate  supervisor.                                                              
That's why we didn't have a copy  of it and couldn't obtain a copy                                                              
of the report  because it wasn't  public record.  She  reported to                                                              
the Governor.                                                                                                                   
SENATOR DONLEY: Under the executive ethics act.                                                                                 
CHAIRMAN  TAYLOR: Right.   And,  by  the way,  for my  colleagues,                                                              
there's a different standard, a totally  different standard within                                                              
that  statute for  public officials,  especially public  officials                                                              
that have  quasi-judicial duties  and responsibilities and  it's a                                                              
different standard,  and it's a different definition  from what we                                                              
might be  either entitled  to or not  entitled to as  Legislators.                                                              
That's  why there  is some  concern.   Senator  Cowdery, go  right                                                              
SENATOR  COWDERY:   Yeah,  I was  just following  up  on what  had                                                              
occurred  to me  that if  I heard  the testimony  right that  Nan,                                                              
Nannette or Nan  I think is the short, thought that  she was going                                                              
to be in  to more State business  but when she went out  there and                                                              
it turned out  to be somewhat less,  and so, that she  had decided                                                              
then it  wasn't really business,  so that's  why she paid  for the                                                              
assessment.  Is that a fair statement, what I am saying?                                                                        
MS. TINDALL:  That's a fair statement of my understanding…                                                                      
SENATOR COWDERY: Yeah, that's what I mean.                                                                                      
MS. TINDALL: …of what went on.                                                                                                  
SENATOR COWDERY:   So with that in mind, Mr.  Chairman, I wouldn't                                                              
expect you  to know, but  if it wasn't  on State business  I would                                                              
like to  find out if  you could, have  staff, if leave  slips were                                                              
requested for the time that she was out there.                                                                                  
CHAIRMAN TAYLOR: You want to ask staff to check that?                                                                           
SENATOR COWDERY: Yeah, we'll have to, well, send that in for…                                                                   
CHAIRMAN TAYLOR:   You mean as  a State employee whether  she took                                                              
personal leave?                                                                                                                 
SENATOR COWDERY:  Yes, something like that.                                                                                     
CHAIRMAN TAYLOR: Yeah,  I think we can check that.   I'm concerned                                                              
about  what you  said  earlier.   You  called  it a  'arms-length'                                                              
relationship  with the  Chairman.   What  exactly do  you mean  by                                                              
MS. TINDALL:   We  don't have  a personal  relationship. She  is a                                                              
CHAIRMAN TAYLOR:  Well, I  thought you said  when you went  out to                                                              
the lodge and  you were kind of  planning this trip or  putting it                                                              
together with  Bill Phillips as to  who was going to be  there and                                                              
so on, that  you said you had  a babysitting problem and  you knew                                                              
she had kids and that this would work out better.                                                                               
MS. TINDALL: Yes.                                                                                                               
CHAIRMAN TAYLOR: Do  you associate with her or  had you associated                                                              
with her in other social settings to you know these things?                                                                     
MS.  TINDALL: No.  I have  not had,  had not  had previous  social                                                              
contact. I think,  you know, occasionally before  a hearing starts                                                              
and the Commissioners are hanging  around, and everybody's hanging                                                              
around, you  know, we try to be  polite, I mean, as a  utility you                                                              
try  to  be  polite  to Commissioners.   I try  to  be  polite  to                                                              
everybody and  you introduce yourself  and you tell them  a little                                                              
bit about yourself.                                                                                                             
CHAIRMAN  TAYLOR: I  guess  that, it  just  seems to  me that  you                                                              
probably  have had, have  you ever  been out  to dinner  with her?                                                              
Have you ever taken her out to dinner?                                                                                          
MS. TINDALL: During  this legislative session, she  came to dinner                                                              
at the condo  GCI was leasing  in Juneau along with  several other                                                              
staff members  and that's  the only  other social  contact  I have                                                              
ever had with her.                                                                                                              
CHAIRMAN TAYLOR: I  requested from the Commissioner,  and she just                                                              
delivered here a few minutes before  the hearing, e-mails that she                                                              
had mailed back  and forth not only with you but  with others that                                                              
she was  recruiting to assist  her in  the early extension  of the                                                              
agency.   And  in it,  on Monday  the 18   of February  we have  a                                                              
conversation  between yourself  and Nan  where you  say, 'Nan,  we                                                              
have  a Tuesday  night dinner  scheduled with  the staff,'  that's                                                              
you're staff, I'm assuming, not her staff.                                                                                      
MS. TINDALL: Legislative staff.                                                                                                 
CHAIRMAN TAYLOR: With legislative staff?                                                                                        
MS. TINDALL: Yes.                                                                                                               
CHAIRMAN  TAYLOR:  Oh,  okay. But  these  were  legislative  staff                                                              
you've invited to dinner?                                                                                                       
MS. TINDALL: Yes.                                                                                                               
CHAIRMAN TAYLOR: So these aren't her staff?                                                                                     
MS. TINDALL: No.                                                                                                                
CHAIRMAN TAYLOR:  Okay.  'We  have Tuesday night  dinner scheduled                                                              
with the staff,  if you are interested. I am  currently waitlisted                                                              
on planes for Tuesday. Don't know  if I will get on but the dinner                                                              
will take place  anyway. I'm working on trying to  get Ron to drop                                                              
me in Juneau  on the jet on Tuesday.  If I get a ride  do you want                                                              
one?'  Is  this this  'arms-length'  relationship  you're  talking                                                              
MS. TINDALL: Yes.                                                                                                               
CHAIRMAN TAYLOR: Did you take her to Juneau?                                                                                    
MS. TINDALL: No.                                                                                                                
CHAIRMAN TAYLOR: On the jet?                                                                                                    
MS. TINDALL: No.                                                                                                                
CHAIRMAN TAYLOR: Have you at any time?                                                                                          
MS. TINDALL: No.                                                                                                                
CHAIRMAN TAYLOR: Have you taken her other places on the jet?                                                                    
MS. TINDALL: I  personally have not even invited  her at any other                                                              
time nor have taken her at any other time on the jet.                                                                           
CHAIRMAN  TAYLOR: Did  GCI  have  cases pending  in  front of  the                                                              
Commission in February?                                                                                                         
MS. TINDALL: We always have cases pending.                                                                                      
[LONG PAUSE]                                                                                                                    
SENATOR DONLEY: Mr. Chairman?                                                                                                   
CHAIRMAN TAYLOR: Yes?                                                                                                           
SENATOR DONLEY: I had a couple of questions, whenever.                                                                          
CHAIRMAN TAYLOR: Go right ahead.  No.  I'm just trying to catch up                                                              
with the paper work here.                                                                                                       
SENATOR DONLEY: Ms. Tindall, hi.                                                                                                
MS. TINDALL: Hi.                                                                                                                
SENATOR DONLEY: I think, probably  about 15 years ago, you gave me                                                              
Telecom 101  too when  I was  Chairman of  the Labor and  Commerce                                                              
Committee.  It's  been a  long  time since  then  and  I was  just                                                              
wanted, maybe  you could help me  understand some of  your earlier                                                              
testimony  on a few  issues. Number  one, the  first was  the idea                                                              
that changing the Commissioners would  make no difference. Is that                                                              
linked to your  explanation that under the federal  guidelines and                                                              
I  think what  we're talking  about  is the  access charges  here,                                                              
right? Is that what we're alluding to?                                                                                          
MS. TINDALL:  No, under the Telecommunications Act of 1990.                                                                     
SENATOR DONLEY:   Right.  But  there's very little wiggle  room on                                                              
the federal  guidelines.   Is that,  when you  were talking  about                                                              
that, I just  wanted to understand  more of what you  were talking                                                              
about there.  I  was thinking that it was somehow  related to this                                                              
issue of  what the model  that gets adopted  for the use,  for the                                                              
access.  Maybe you could explain that to me some more?                                                                          
MS. TINDALL:   Yes.   The model that  has been discussed  in these                                                              
hearings is, is  not the access rates, well, it's  to access ACS's                                                              
network, but we call them unbundled elements.                                                                                   
SENATOR DONLEY:  Well, could you…                                                                                               
MS. TINDALL: Unbundled elements.                                                                                                
SENATOR DONLEY: Unbundled elements?                                                                                             
MS. TINDALL: Yes.                                                                                                               
SENATOR DONLEY: Could you tell me again what that means?                                                                        
MS.  TINDALL:   When the  Congress  passed the  Telecommunications                                                              
Act, they wanted  to jump-start competition, and  they didn't want                                                              
to  have  new  competitors  have  to build  a  whole  new  network                                                              
[indisc.] local  [indisc.] to  come in and  compete.  And  so what                                                              
they  said is  that the  incumbent telephone  companies, the  ones                                                              
that  are  already   out  there,  that  have   been  regulated  as                                                              
monopolies,  have  to  un-bundle  their  networks  and  price  out                                                              
separately each component of the  network, like the loops, and the                                                              
switch and, you know, all of that,  so that a competitor coming in                                                              
only has to pay for what they use of that network.                                                                              
SENATOR DONELY:  Okay.  All right.                                                                                              
MS. TINDALL:   So the model  basically un-bundles the  network and                                                              
sets a price for each of the components of the network.                                                                         
SENATOR DONLEY:  Okay.                                                                                                          
MS. TINDALL:   Okay.  And it's  what type of model values  are set                                                              
by federal law.                                                                                                                 
SENATOR DONLEY:  Okay.  Now, my,  I haven't really dove into these                                                              
areas in quite a few years.  The  decision on that, obviously, the                                                              
Commission made a  decision to adopt a model, isn't  there a range                                                              
of flexibility  there  though in  how they adopt  that model  that                                                              
would still be consistent with the federal guidelines?                                                                          
MS.  TINDALL:   The  federal guidelines.    What  kind of  federal                                                              
guidelines?  Well, first of all,  the companies are required to go                                                              
through  mediation for  135 days  and if they  reach agreement  on                                                              
pricing then you don't have to do anything.                                                                                     
SENATOR DONLEY:  Oh, really?                                                                                                    
MS. TINDALL: yeah.                                                                                                              
SENATOR DONLEY: Okay.                                                                                                           
MS.  TINDALL:     That  never  happened.    So   then,  under  the                                                              
Telecommunications  Act,  you  have  135 days  arbitration.    The                                                              
Commission  is  responsible  for  the arbitration.    And  they're                                                              
SENATOR DONLEY:  Our Commission, RCA is.                                                                                        
MS. TINDALL:  The State…                                                                                                        
SENATOR DONLEY:  The State Commission.                                                                                          
MS.  TINDALL:    …under  the  Act   is  responsible.    The  State                                                              
Commission is  supposed to  select a model  that will  fit forward                                                              
looking long  run total cost, total  long run, let's  see, they're                                                              
total element long  run incremental costs. And what  that means is                                                              
[indisc.].   So, in economic terms,  what that means is  if you're                                                              
dealing with the long run then you're  dealing with a hypothetical                                                              
situation where it is assumed that  all the technology is the most                                                              
efficient  technology  possible   at  the  lowest  cost  possible.                                                              
You're not dealing  with the actual network that's  sitting in the                                                              
ground.   And so, what  you are modeling  is this long  run, total                                                              
element  long run incremental  cost,  that one.   That's what  you                                                              
price out and  that's why you need  a model.  So, yes,  as long as                                                              
the  model  complies with  those  requirements,  that is  a  total                                                              
element long run  incremental cost model, then  they have somewhat                                                              
of a range.   There's only two or three national  models out there                                                              
that  would actually  do  that, and  then if  you  don't choose  a                                                              
national model  then you have the  option of choosing  a homegrown                                                              
model that one of the parties before you developed.                                                                             
SENATOR  DONLEY:   In, on the  first day  of our  hearings we  had                                                              
testimony from  the former Commissioner who was  acknowledged, who                                                              
has acknowledged that he was frequently  in a minority position on                                                              
the issues, but  he also said that the model that  was adopted for                                                              
Alaska was  not designed  for the geography  or the topography  of                                                              
Alaska.  It's very,  it was designed for a very  different type of                                                              
landscape and density of population.   When, so I just want to get                                                              
this back to  the issue of just  how much flexibility the  RCA has                                                              
in this process.   They chose to adopt a model  that wasn't really                                                              
consistent  with, wasn't  designed for  Alaska, but  they do  have                                                              
some  flexibility under  the federal  guidelines,  right, to  make                                                              
some changes  to that  model so that  it would more  appropriately                                                              
fit our particular circumstances here?                                                                                          
MS  TINDALL:   Yes,  and  that's  exactly  what  they did.    They                                                              
modified the model to make it a TELRICd model, and…                                                                             
SENATOR DONLEY:  Wait, wait.  What was that?                                                                                    
MS.  TINDALL:     TELRIC,  I'm  sorry,  total   element  long  run                                                              
incremental cost.                                                                                                               
SENATOR DONLEY: Total…                                                                                                          
MS. TINDALL:  Element long run  incremental cost.   That [indisc.]                                                              
FCC guidelines,  and they also modified  the model to make  it fit                                                              
in Alaska.   Now the model is  just the structure.   What's really                                                              
important to  a model, one of the  inputs that go into  it, and in                                                              
that  proceeding  ACS  determined  the  input that  it  wanted  to                                                              
arbitrate  to  discuss,  and,  and   make  changes  to.    And  we                                                              
arbitrated a lot  of inputs and those inputs were  all modified to                                                              
reflect, Alaska,  Alaska costs and Alaska  situations, topography,                                                              
whatever, where it was appropriate.   Were it, someone coming into                                                              
the market in Anchorage, Alaska to  build a network would actually                                                              
face these costs and it was Alaska costs.                                                                                       
SENATOR  DONLEY:    Well  see,  this  is  different  from  what  I                                                              
understood in  the testimony  from the first  day, which  was, you                                                              
know, and  this is  all new  to me, understanding  this,  was that                                                              
they just  adopted a standard  model that  was out there  that had                                                              
been  developed  on  the  national   level,  and  it  wasn't  then                                                              
subsequently modified  for Alaska  conditions.  So  you're, you're                                                              
explaining that it was modified for some of those conditions?                                                                   
MS. TINDALL:  It was modified.                                                                                                  
SENATOR DONLEY:   Okay.   First of  all, you said  you were  in an                                                              
economist.  Are you an attorney?                                                                                                
MS. TINDALL:  No.                                                                                                               
SENATOR  DONLEY:   Okay.   All  right.   Then  some  of the  other                                                              
questions I wanted to ask you, I was hoping…                                                                                    
MS.  TINDALL:    I  can bring  up  any,  if  there  are  technical                                                              
questions, telecommunications questions, I have…                                                                                
SENATOR DONLEY:   Well, let me tell  you the question I  wanted to                                                              
get at.  In your testimony you mentioned  that the decision to use                                                              
the model, or similar models, had  been upheld by the U.S. Supreme                                                              
Court, and there had been, has there  been any State, Alaska court                                                              
upheld that  model yet, or  is that, is  that part of  the ongoing                                                              
MS. TINDALL: I believe the answer is yes and ...                                                                                
MR. MARC MODEROW: Ongoing litigation.                                                                                           
MR. JIMMY JACKSON: Ongoing litigation.                                                                                          
SENATOR DONLEY:  Okay. Right.   And I  guess, as a  lawyer myself,                                                              
one of  the things that  I've noticed, well  that we know,  is the                                                              
courts  use  pretty  high  standards   of  review  for  regulatory                                                              
decisions. When the people are sitting  in other agencies, sitting                                                              
in  quasi-judicial, they're  not  going to  usually overturn  them                                                              
just because  they think 51% says  they, you know, of  the balance                                                              
might be  against them.  They give them  a certain deference  here                                                              
and I was wondering  if somebody could articulate  for me what the                                                              
standard  of  review  for  courts  in  these  kind  of  regulatory                                                              
decisions. I  didn't know if there  was something specific  in the                                                              
federal law that  dictated that because you're  dealing, you know,                                                              
I've  never dealt  with the  federal communications  act. I  don't                                                              
know  if there's  something special  or  if it's  just a  standard                                                              
default  review standard  for an administrative  decision  here in                                                              
CHAIRMAN TAYLOR: Can you answer the question, Dana?                                                                             
MS. TINDALL: No.                                                                                                                
SENATOR DONLEY: I  wouldn't, she's not an attorney,  Mr. Chairman,                                                              
CHAIRMAN TAYLOR:  Right.  Who have  you brought to the  table with                                                              
MS. TINDALL: I have on my left Jimmy  Jackson, he's the regulatory                                                              
attorney for  GCI, and  on my right  is Marc  Moderow, who  is the                                                              
director of state regulatory and [indisc.].                                                                                     
CHAIRMAN TAYLOR: You're both attorneys?                                                                                         
MR. MODEROW: I am, your honor.                                                                                                  
CHAIRMAN TAYLOR: Both licensed to practice in Alaska?                                                                           
MR. JACKSON: Yes, sir.                                                                                                          
MS. MODEROW: Yes, sir.                                                                                                          
CHAIRMAN  TAYLOR: You  don't need  to be  sworn. You're  testimony                                                              
will be taken as under oath.                                                                                                    
SENATOR DONLEY: Gentlemen,  let me try to explain  what I'm trying                                                              
to understand here  as much as possible and that's  just because a                                                              
particular  Commission's  decision  wasn't overturned  may  not've                                                              
really made  it the, you know,  the best public policy,  you know,                                                              
because the court's going to use  a standard of review.  Depending                                                              
on the court's standard of review,  the court may, you know, first                                                              
of  all, I  don't  know  if the  court's  the  best person  to  be                                                              
deciding public policy  in the first place. That's  supposed to be                                                              
our branch  of government.   And  second, they're  going to  give,                                                              
they're going  to defer to the  expertise of the  Commission, too,                                                              
and  I wanted  to better  understand  just what  that standard  of                                                              
review is  when it comes  to these  types of regulatory  decisions                                                              
and how that's affected by the, you know, federal law.                                                                          
MR.  JACKSON: Senator  Donley, through  the Chair,  I think  maybe                                                              
that  I will  start and  Mr. Moderow  can  follow. It's  certainly                                                              
depends on  what the issue is. The  standard of the review,  if it                                                              
is   a  question   of   law,  then   there's   deference  to   the                                                              
administrative  agency by a  court.  If  it's an area  which falls                                                              
particularly within their area of  expertise, then their sort of -                                                              
if  it's supported  by  substantial evidence  I  believe it's  the                                                              
standard [indisc.] deference to the administrative agency.                                                                      
SENATOR  DONLEY: So  is  there any  modification  in the  standard                                                              
rules that  we would use  for any other  Commission caused  by the                                                              
federal  act  when it  comes  to  these  kinds of  decisions,  the                                                              
communications area?                                                                                                            
MR. JACKSON:  The decisions would  have to be consistent  with the                                                              
federal act.  The particular  issue that  you're talking  about in                                                              
regards to  the model, I believe  that that decision is  on appeal                                                              
to the federal  courts because it  is under the federal  law.  And                                                              
it's not just a model, it's the entire  result with the Fairbanks-                                                              
Juneau  arbitration, which  includes  the model  as  part of  that                                                              
whole case.  That has been on  appeal to federal court.  The other                                                              
issue we started talking about immediately  but which is on appeal                                                              
has to do with the burden of proof and the…                                                                                     
SENATOR DONLEY: Yeah, that was my next question.                                                                                
MR. JACKSON:  And that is a, of  course, a matter of law.   And as                                                              
Ms. Tindall pointed  out, that decision was initially  made not by                                                              
the  Commissioners  but  by  Superior  Court,  which  ordered  the                                                              
Commission to assign the burden of proof to ACS, the incumbent.                                                                 
CHAIRMAN TAYLOR:   Okay now, Mr.  Jackson, maybe you can  help me,                                                              
and Dana, Ms.  Tindall, feel free  to jump in here because  it was                                                              
your, in  part of  your testimony  raised this  question with  me.                                                              
You  said the  State Superior  Court  had ordered  that burden  of                                                              
proof on local  telephone companies and I don't  really understand                                                              
what all that encompasses when you  say the burden of proof was on                                                              
the, I understand the concept of  burden of proof very well, but I                                                              
just don't know how it specifically  related to your testimony and                                                              
to the telecommunications issues.                                                                                               
MS. TINDALL:  Let  me, let me take a, I'm responsible  for the 140                                                              
foot  use.  Let  me take  a stab  at that  and then  they can  get                                                              
technical with  you.  Under the Telecommunications  Act, telephone                                                              
companies  with  less  than  150,   does  that  sound  right,  are                                                              
considered rural for the purposes  of the Act.  What that means is                                                              
that they have an exemption from  having to unbundle their network                                                              
unless the State Commission decides to terminate that exemption.                                                                
SENATOR DONLEY:  Let me call that.   So, that exemption would mean                                                              
they don't have to let anybody else use their lines.                                                                            
MR. JACKSON:  Right.                                                                                                            
MS. TINDALL:  Yes.                                                                                                              
MR. JACKSON:   I'm sorry.  I'm going  to break in as a  lawyer.  I                                                              
think we need  to be very specific.   What it says is,  is that if                                                              
they  meet certain  size criteria,  and I  would need  the Act  to                                                              
verify exactly what the size criteria,  I think there are actually                                                              
several, if  they meet the size  criteria they are rural  and they                                                              
exempt  from the  unbundling requirements  until they  get a  bona                                                              
fide  request from  a  potential competitor,  at  which point  the                                                              
State  Commission shall  determine  whether or  not the  exemption                                                              
should be  revoked, ended.   Revoked  may not be  the word  in the                                                              
statute,  but it is,  the language  of the  statute which  I would                                                              
love to put in  front of you because it's actually  fairly curious                                                              
language, but  it says they  have the  exemption until there  is a                                                              
bona fide request from a particular  competitor at which point the                                                              
Commission  shall  determine whether  or  not the  exemption,  the                                                              
exemption  should continue  or  end.   At  that  point, there  are                                                              
several standards such as…                                                                                                      
TAPE 02-41, SIDE A                                                                                                            
MR. JACKSON: …the  undue economic burden on the  incumbent if they                                                              
had  to un-bundle.    And  so the  burden  of proof  question  was                                                              
whether or not it's the burden of  them to show it would be unduly                                                              
economically  burdensome on them  or whether the  burden on  us to                                                              
show it would not be unduly economically burdensome on them.                                                                    
SENATOR  DONLEY: Well,  you know,  from a public  policy point  of                                                              
view, from the Legislature's point  of view, you know, I obviously                                                              
have concerns  with some  of the  things we've  read about  in the                                                              
paper and  I think in the  record there's some issues  about, that                                                              
the reimbursement costs,  or the cost of using line  is in such a,                                                              
is at a level  that the contention's being made  that nobody wants                                                              
to build  new lines.   And  so then  that becomes  a real  concern                                                              
because we  want the  public to have  access to telephone  service                                                              
and if, you know, if this model was  the problem that's, you know,                                                              
causing that, there might be dozens  of other reasons why it would                                                              
be back and forth,  but just, I'm trying to, as  much as possible,                                                              
understand  how  we  got  to the  point  where  some  people  were                                                              
concerned that  they weren't able  to get service, you  know, wire                                                              
MS. TINDALL:   Well, there's a  couple of issues embedded  in that                                                              
question.  With  all due respect, the notion that  no one wants to                                                              
build a network,  a competitive network, is an  assertion that has                                                              
been made by our competition.  GCI  is fully, is in the process of                                                              
building  a competitive  network and  fully plans  to utilize  it.                                                              
And when we do we will no longer  pay ACS that money for the lines                                                              
'cause we  won't be using  their lines.  So, I, that  assertion is                                                              
simply not true.                                                                                                                
SENATOR  DONELY:   But,  I'm sorry.   Wasn't  there,  there was  a                                                              
recent article  I read in the Daily  News and I think  we also had                                                              
some testimony here that there was  a new subdivision somewhere, I                                                              
don't  remember exactly  where,  but they  were  upset, they  were                                                              
concerned because  they weren't getting  wire service.   You know,                                                              
the offer had been made to them for  some sort of wireless service                                                              
but not  wire service.   And I  mean, that's obviously  concerning                                                              
everybody.   I mean, we want people  to be able to  reasonably get                                                              
that kind of service to their homes.                                                                                            
MS. TINDALL:  Well, first off, let  me say that's a good reason to                                                              
keep  the RCA  because  they have  the power  to  order that,  but                                                              
secondly, GCI is in the process of  developing a network.  At that                                                              
time,  I'm not  sure what  exactly subdivision  they were  talking                                                              
about, but  I know that this issue  has come up a couple  of times                                                              
before and  we did not have  the order processing system  in place                                                              
such that  we could provide wire  telephone service to  that area,                                                              
to the  neighborhoods that I'm  aware of.   Marc, you may  want to                                                              
chime in.                                                                                                                       
MR. MODEROW:  Well, GCI, the act  was structured so that you could                                                              
buy piece parts.   And one of the scare stories was  do we want to                                                              
trench everybody's  front yard?  And  I think, going back  to your                                                              
Telephone  101, that  last mile,  the  last copper  wiring to  the                                                              
house.    In  some  states  and in  many  parts  of  the  country,                                                              
essentially,  people are,  the competitors  are [indisc.],  and so                                                              
this type of arbitrage, you've heard  the word terrible arbitrage,                                                              
is almost  100% occurring,  it's  the use of  the entire  network.                                                              
GCI has aggressively  actually entered the facilities  base in the                                                              
competitive  world.   We have deployed  all of  our own  switches.                                                              
Now, one  thing about this  that does is  we are allowed  to offer                                                              
different and varied services over  someone who just uses incoming                                                              
switch.  We very aggressively have  deployed our own transport, we                                                              
go around the  city with our own  fiber, we go into  the switching                                                              
offices with  our own fiber.  But  we do use the last  mile, we do                                                              
buy the  copper thing  that everybody is  worried about  having to                                                              
replace.   So, the  thing that  there is  no competition  and that                                                              
there is  no deployment  of facilities, is  just plain wrong.   In                                                              
fact, Gci  is aggressively  deploying its  own facilities  and has                                                              
plans  to use  its own  network to  deploy and  replace that  last                                                              
mile.   So,  the decision  by the  incumbent to  refuse to  deploy                                                              
facilities a  subdivision was entirely  theirs.  It  wasn't caused                                                              
by ours.  Maybe they didn't want  to do that.  They didn't want to                                                              
build it  because the federal  law would  the mandate that  we are                                                              
able to use it.  That was their decision.                                                                                       
SENATOR DONELY:   Yeah, that's why  I'm trying to  understand this                                                              
because if the Commission, and I  wanted to ask these questions of                                                              
the  Commission, but  because  its pending  before  them and  they                                                              
said,  'Quasi-judicial,  we're not  allowed  to  engage in  that.'                                                              
But, so I understand it, you're in  business, you know, and you're                                                              
not the  Commission,  but our concern,  I think  our, our  overall                                                              
concern has  to be that, that  Alaskans get delivery  of telephone                                                              
services.  And  if the Commission has adopted a  model here that's                                                              
so  restrictive  on  the  costs  that  it makes  it  so  that  the                                                              
companies that  they are ordering  to go provide the  wire service                                                              
don't want  to do it because its  not economical to them,  I mean,                                                              
something, it sounds  to me like there's something  wrong with the                                                              
MR. MODEROW:   There is one  differentiation, and I think  it goes                                                              
with your question.  I've been the  one who's actually tried these                                                              
cases at the factual level.  The  first thing you have to remember                                                              
is that this  TELRIC is a methodology.   It's a method  of looking                                                              
at  and [indisc.]  costs.   And the  methodology has  been set  by                                                              
Congress, it's been set by the FCC,  and that is what was recently                                                              
upheld by  the United States Supreme  Court.  No matter  what this                                                              
Legislature does, you can't change that methodology.                                                                            
SENATOR DONELY:  Right.                                                                                                         
MR. JACKSON:   Now, the  model is a subset  of that, the  model is                                                              
the actual mechanic of implementing  the methodology.  And as Dana                                                              
I   think  correctly   testified,   there   are  several   generic                                                              
hypothetical  models  that  operate  [indisc.].    And  then  some                                                              
Commissions,  some other  State Commissions,  have used what  they                                                              
call homegrown model.   But really, the most important  part of it                                                              
is the  inputs, and that  is that the  inputs have to  reflect the                                                              
conditions within your jurisdiction.   And the thing that the, the                                                              
kind  of misconception  that  everybody has  been  hearing in  the                                                              
press from,  obvious, wherever  you hear  it is  that we  are only                                                              
using  a national  model.   That's not  true.  The  model was:  a)                                                              
modified  to  particularly  cost  elements  as opposed  to;  b)  a                                                              
universal  service.  It was  particularly  modified  to reflect  a                                                              
network  that would  be built  in Alaska.   Several  of these  key                                                              
components  were modified based  on profiles  [indisc.] ACS.   And                                                              
then finally the cost inputs were  modified.  A) ACS, as being the                                                              
only other party  that's really arbitrated, one  of those, they're                                                              
the only company  that's had one of these take  place, chose which                                                              
cost components  they  wanted to  contest.  They  were allowed  to                                                              
contest  them.   And  many,  in fact,  almost  all  of these  were                                                              
changed to reflect  Alaska's conditions.  They b)  the most easily                                                              
understood  is   for  instance,   nationally  certain   pieces  of                                                              
telecommunications  gear are put  in small portable  cabinets, and                                                              
in  Fairbanks,   they  actually   build  buildings   around  these                                                              
particular pieces  of equipment because  it gets too cold  to work                                                              
on  them in  the winter.    You can't  just  go and  open a  metal                                                              
cabinet and  work on them there.   So, those kinds of  things were                                                              
made and  the input was actually  tailored to the  Alaska specific                                                              
conditions.   Nearly every  one that was  tested was  modified for                                                              
Alaska  labor,  for  Alaska  shipping,   which  were,  everybody's                                                              
experts  agreed,   those  were  the  major  components   of  price                                                              
differences  other   than  just  the  component  cost.     So  the                                                              
methodology  is cast  in stone.   It's  the FCC  rule that's  been                                                              
upheld by the United States Court.   The model decision is allowed                                                              
some leeway by  the State Commission and the State  Commission did                                                              
as Ms. Tindall said.  It didn't choose  what we wanted.  It didn't                                                              
choose  what  ACS  wanted.    I  chose  what  its  own  consultant                                                              
recommended.  It was actually then  modified by the parties in the                                                              
arbitrations and used by the Commission.                                                                                        
3:02 p.m.                                                                                                                       
MS. TINDALL:   And let,  let me just add  to that.   The resulting                                                              
rates from  the model, the  rates were set  as a result,  that GCI                                                              
paid to ACS for their loops, just  their loops, as a percentage of                                                              
embedded costs  are higher  that the nationwide  average.   And we                                                              
have the [indisc.] that we would be happy to provide you with.                                                                  
CHAIRMAN TAYLOR: Alaskans…                                                                                                      
MR. MODEROW:   And I can make  one small factual.  The  model that                                                              
we [indisc.]  about a lot and  you're talking about  the situation                                                              
in Anchorage,  I'd like to point  out the model has not  been used                                                              
in  Anchorage.   The model,  this  infamous model,  that has  been                                                              
complained   about  was   used  in   the   Fairbanks  and   Juneau                                                              
arbitration.   The Anchorage  UNE rates predate  that and  did not                                                              
come from that  model.  They came from an arbitration  between APU                                                              
and GCI,  and at that  time even APUs  requested rate was  I think                                                              
only $14  and some  odd cents, and  it ended up  $13.85.   That is                                                              
now,  the  Anchorage  arbitration  is  now being  redone  and  the                                                              
modeling  question is  now coming  up in  Anchorage to  set a  new                                                              
rate.   But this rate  that allegedly  lets people not  installing                                                              
the copper facility - we did, in  fact, install some coaxial cable                                                              
facilities,  which will  be used  for telephone  in the future  in                                                              
those subdivisions.    But ACS declined  to install  copper.   But                                                              
that rate  did not come  out of this model  is what I'm  trying to                                                              
clarify.  The actual  adjudication  where this  model  was in  the                                                              
arbitration  for Fairbanks and  Juneau.   Now, the Anchorage,  the                                                              
actual the  Anchorage interim rate,  which is only in  the interim                                                              
right now until the Commission finishes its current procedure.                                                                  
CHAIRMAN  TAYLOR: Let me  interrupt you  there.   How long  has it                                                              
been an interim rate?                                                                                                           
MR. MODEROW:  The current interim  rate was established  I believe                                                              
in, in  October 25,   2001.   That was, the  model because  it had                                                              
been  previously  approved  by the  Commission,  was  utilized  to                                                              
establish that interim rate.                                                                                                    
SENATOR COWDERY: In October?  Oh, excuse me.                                                                                    
SENATOR DONELY:  I think I have  a much better  understanding now.                                                              
I mean, the first,  you know, the first day of  testimony we heard                                                              
a lot of  discussion about this  model.  I wasn't  really familiar                                                              
with  it.   I'm  starting  to  learn, starting  to  understand  it                                                              
MR. MODEROW:  We're well into Telecom 202 at this point.                                                                        
SENATOR DONLEY: Yeah, yeah.  No.                                                                                                
SENATOR ELLIS:   Mr. Chairman, I don't remember  from listening to                                                              
a videotape of Mr. Roth, was it?                                                                                                
CHAIRMAN TAYLOR:  Um-hmm.                                                                                                       
SENATOR ELLIS:  That he gave any  indication that he knew that the                                                              
model had been modified.                                                                                                        
SENATOR DONELY:   Yeah, I didn't,  I just, I don't  remember that.                                                              
I didn't get that impression.  That's  how I'm trying to figure it                                                              
MR. MODEROW:   In its original format it was  utterly incapable of                                                              
producing   unbundled   network   prices,  because   it   averaged                                                              
everything, and  it just dumped it  into a big basket.   It didn't                                                              
parse  them out  completely.   Those types  of modifications  were                                                              
made by  the parties  in front of  the Commission  as part  of the                                                              
CHAIRMAN TAYLOR: Okay.  Oh, go ahead.                                                                                           
SENATOR DONELY:   The  other, I  mean, we're  coming down  to, you                                                              
know, some pretty  fundamental questions about the  functioning of                                                              
the  RCA  and  one  of  the  other  questions  that  has  come  up                                                              
throughout all these hearings is  this, is the level of regulatory                                                              
burden that  currently exists in Alaska.   We've got a  lot of the                                                              
small utilities  saying, it's  just, you  know, excessive  for us,                                                              
you know,  small water and sewer  and other even  large electrical                                                              
co-ops saying that, you know, 'It  hurts us because we're a co-op.                                                              
We're not in it to make money in  the first place.  We're supposed                                                              
to be serving.'  From the telephone  point of view, GCI's point of                                                              
view, are  there, how do  you feel about  the level  of regulation                                                              
that's occurring?  Is it too much?   Too little?  Just right?  You                                                              
MS. TINDALL:  Let me, let  me make a  generic statement  about the                                                              
level of regulation and then apply  it specifically to GCI's point                                                              
of  view.   Regulation  in a  utility's case  that  does not  face                                                              
competition and  is, in essence,  quid pro quo because  they don't                                                              
face  competition.   That is,  instead  of having  to compete  and                                                              
worrying  about competing  and  losing customers  to  competition,                                                              
these utilities, the  electric utility, the water  and waste water                                                              
utilities  instead have  a  different business  environment  where                                                              
they have  the opportunity  to earn a  guaranteed rate  of return,                                                              
and  with that  comes regulatory  oversight.   So,  from a  policy                                                              
point of view, you might consider  that when you're thinking about                                                              
these things.   Obviously, if you've  got, in our  economic system                                                              
in this country,  we don't really believe in monopoly  as the best                                                              
way to offer  goods and services.   We believe in  the competitive                                                              
system.  But when you have a situation  where you have a monopoly,                                                              
it has  to be  regulated to  protect the  public  and that is  the                                                              
purpose of the state  regulatory agency and that was  a lot of the                                                              
burden you  hear the beefing  about.  You  know, hey, I'd  like to                                                              
have  a monopoly  and not  be regulated,  too.   Wouldn't we  all?                                                              
But, but  in our system  we don't believe  that's the best  way to                                                              
offer these services.                                                                                                           
CHAIRMAN  TAYLOR: That  was a generic  statement.   Would you  now                                                              
please apply that to GCI's cable system?                                                                                        
MS. TINDALL:  GCI's  cable system, I was just going  to get to the                                                              
competitive model and I think GCI's  cable system would fall under                                                              
the competitive  model.  In,  under, in telecommunications  and in                                                              
cable,  I'll   deal  with  telecommunications  first,   with  your                                                              
indulgence, Senator.                                                                                                            
CHAIRMAN TAYLOR: Go ahead.                                                                                                      
MS.  TINDALL:   In  telecommunications you've  don't  have a  pure                                                              
monopoly situation,  you have competition.   And in  that instance                                                              
the regulator, State regulator, and  the FCC has done this, try to                                                              
make a determination  on who has market power and  who doesn't and                                                              
regulate  accordingly.   You are  only  theoretically supposed  to                                                              
regulate to  the amount necessary  for the amount of  market power                                                              
you have.   Okay.  GCI and  ACS are, for local  purposes regulated                                                              
the same with one exception, well,  maybe two exceptions, and that                                                              
is that  ACS is  free to lower  rates, free  to modify  its rates.                                                              
But  if  it  raises  it  rates,  it  has  to  file  a  rate  case.                                                              
Theoretically,  ACS is  not supposed  to use its  market power  to                                                              
bundle  services, but  that  has  not been  enforced  by the  RCA,                                                              
something [indisc.].  However, the  RCA made a provision with this                                                              
idea of  you only regulate  as much as there  is needed to  be for                                                              
market power,  and that  is that  the utility can  come in  at any                                                              
time and  petition to  be deregulated  as a non-dominant  carrier.                                                              
ACS has not  done that in Anchorage.  I'm not sure why.  GCI would                                                              
probably not oppose  that if they were to do that.   But they have                                                              
not done  that.   And they  have the  ability to  come in  and get                                                              
deregulated in  any of the  [indisc.] if  it can make  the showing                                                              
that its  market power has  decreased.  I  don't feel, I  guess at                                                              
GCI   we  get   disappointed   with  the   Commission   [indisc.].                                                              
Occasionally we think  they're too slow.  We'd like  to, you know,                                                              
you know, our marketing department  is always ticked off that they                                                              
have to  wait two  weeks or whatever  before we  can get  a tariff                                                              
approved, that don't let them go  out and market tariffs 'til they                                                              
get approved.   They're  always ticked  off about  that.   That we                                                              
have to, you know, there is some  regulatory burden.  This is not,                                                              
telecommunications  is still not  a fully competitive  market such                                                              
that there's no need for regulatory  oversight and it may not ever                                                              
be, given the  fact that networks  need to connect.  If  you're an                                                              
ACS customer  and I'm a GCI customer,  we have to be  able to call                                                              
each other.   And  unless there  is some  oversight to force  that                                                              
interconnection and  the charges that  go back and forth  for that                                                              
interconnection  the  public  will  suffer,  no  matter  how  much                                                              
competition there is.   And so, likely just because  of the nature                                                              
of  telecommunications   networks,  we   will  always   need  some                                                              
regulation, but this Commission has  made provisions for lessening                                                              
that  regulation  and over  time  and  is always  reviewing  these                                                              
decision.   As far  as cable  regulation goes  our cable  business                                                              
does face  competition, but  once again  unfortunately, this  is a                                                              
federal issue.  Under the Telecommunications  Act the no tele…, no                                                              
cable but basic  may be regulated.   I think that the  numbers you                                                              
cited on  Wrangell, the  amount you pay,  you have a  full package                                                              
complete  with HBO  and Showtime  and all  of that,  and that,  by                                                              
federal law, may not be regulated  by a state jurisdiction at this                                                              
time.  Now, every once in a while, I have to…                                                                                   
CHAIRMAN TAYLOR:  Which means you're  a monopoly in this  State on                                                              
cable systems by any, almost any definition.                                                                                    
MS. TINDALL:   No, Senator.  I  don't believe that's what  I said.                                                              
We do face competition…                                                                                                         
CHAIRMAN TAYLOR: Well, that's what  I said.  Maybe you can explain                                                              
what  kind of  competition  you do  face  in cable  networks  that                                                              
you're operating in Alaska.                                                                                                     
MS.  TINDALL:    We  face  competition  from  satellite  networks,                                                              
[indisc.],  satellite  dishes.   We've  face, there's  a  wireless                                                              
provider, I believe.                                                                                                            
CHAIRMAN TAYLOR: Because  of the RCA, and because  of State law, I                                                              
cannot go out and start a cable company  and put in fiber optic in                                                              
Wrangell and compete with you, can I?                                                                                           
MS. TINDALL:  That is not my understanding.  You can.                                                                           
MR. JACKSON: If  you apply for a certificate and  get one the same                                                              
way we applied.                                                                                                                 
CHAIRMAN  TAYLOR: Yeah,  I apply  for a certificate  and get  one.                                                              
The certificates  are limited geographically.  There  are specific                                                              
areas  within  which   you  are  allowed  to  operate.     It's  a                                                              
certificate of need and necessity.                                                                                              
MR. JACKSON:  Yes,  Senator.  You would need to  get a certificate                                                              
just as  we have to  have a certificate  and as  we had to  have a                                                              
certificate to  compete with the  local phone competition  against                                                              
ACS.  But if  you come and apply for a certificate,  there's every                                                              
reason to  believe you would  be granted it  even if it was  in an                                                              
area that we already serve.                                                                                                     
CHAIRMAN TAYLOR: Um-hmm.                                                                                                        
MS. TINDALL:  If they're not branches [indisc.].                                                                                
MR. JACKSON:  They're not exclusive certificates.                                                                               
MS. TINDALL:  They're not exclusive certificates.                                                                               
CHAIRMAN TAYLOR:  How many  have, how  many new certificates  have                                                              
been applied for the last 20 years in competition with you boys?                                                                
MR. JACKSON:  Senator,  we have not had it for 20  years but as to                                                              
any of the companies, I…                                                                                                        
CHAIRMAN TAYLOR:  Well, no,  but you bought,  you guys  bought out                                                              
every single company in the state  that did have cable system from                                                              
what I can tell.                                                                                                                
MR. JACKSON:   At one point in  the fairly distant past  I believe                                                              
there were  some competition in  Anchorage for different  systems,                                                              
I'm not  positive of  that, but other  than that, you're  correct.                                                              
There have been  no other applications for competing  systems, not                                                              
because  they  can't  do  it but  because  it's  probably  not  an                                                              
economical thing for them.                                                                                                      
CHAIRMAN  TAYLOR:  Well, not  economical,  to get  in  competition                                                              
against someone  who holds a monopoly  position in that  field and                                                              
is not regulated due to federal law.                                                                                            
MR. JACKSON:  We  are, Senator, we are regulated  as basic rate in                                                              
CHAIRMAN  TAYLOR: That's  the only  place because  a petition  was                                                              
taken up against  you by the citizens of Juneau.   That's the only                                                              
town in the whole State that applies to.                                                                                        
MR.  JACKSON:   Yes,  Senator.    It  was taken  up  against  Cook                                                              
CHAIRMAN TAYLOR: Right                                                                                                          
MR. JACKSON:  …before GCI owned it,  it was not taken against GCI.                                                              
But monopoly  is usually  associated with  monopoly power  and the                                                              
ability  to  raise  rates  above  normal levels.    When  we  most                                                              
recently had to,  when we wanted to raise the rates  in Juneau for                                                              
the  basic  package,  under  the  federal  guidelines,  which  are                                                              
mandatory,  the rate  which  we were  allowed  to  increase to  in                                                              
Juneau was well above the rate that  we felt market forces allowed                                                              
us to charge.   In other words,  we justified as the  Commission a                                                              
rate well  above what  we were  asking to  charge because  we knew                                                              
that if we  raised all the rates,  we would lose customers  and it                                                              
would not be a desirable thing to  do.  Cable does compete against                                                              
satellite.  Cable also competes against  Blockbuster Video and any                                                              
other form of entertainment that  you might chose to do on a given                                                              
CHAIRMAN  TAYLOR: Understood.   But  you aren't  regulated by  the                                                              
Regulatory  Commission of  Alaska except  for a  rate increase  in                                                              
Juneau.  Right?                                                                                                                 
MS. TINDALL:  That's correct.                                                                                                   
MR. JACKSON: Under federal…                                                                                                     
3:16 p.m.                                                                                                                       
CHAIRMAN TAYLOR:   That's correct.   Good.  And under  federal law                                                              
you are  exempt and the statement  that Senator Donley  was making                                                              
to you  was, explain  to me  how this  competition works,  and you                                                              
gave us  a generic  answer on  competition and  then tell  me that                                                              
you're competing on the cable side with satellite.                                                                              
MS. TINDALL: I don't understand.                                                                                                
CHAIRMAN  TAYLOR: That's,  that's  hardly a  responsive answer,  I                                                              
think.  You  are not, in fact,  you are under  investigation right                                                              
now by the Justice Department for  compliance with the Clayton and                                                              
Sherman Acts.                                                                                                                   
MR. JACKSON:  That is not correct, Senator.                                                                                     
CHAIRMAN TAYLOR:  When did that cease?                                                                                          
MR. JACKSON:  There was never an…                                                                                               
MS. TINDALL:  Down, down.                                                                                                       
CHAIRMAN TAYLOR:   Let me, are you aware of  an investigation that                                                              
did take place?  And apparently one that's been concluded?                                                                      
MR. JACKSON:  I  would be happy to answer your  question.  I think                                                              
Ms. Tindall is the appropriate person to address your question.                                                                 
CHAIRMAN TAYLOR:  Ms. Tindall.                                                                                                  
MS. TINDALL:  The investigation was  for the potential acquisition                                                              
of undersea  fiber optic cable in  the WCI bankruptcy case.   As a                                                              
standard title of what they were  investigating with the [indisc.]                                                              
to  acquire this  cable  that would  come  under  the Clayton  and                                                              
Sherman  Acts.    In  no  way  were  the  being  investigated  for                                                              
[indisc.] antitrust violation.                                                                                                  
SENATOR THERRIAULT:  The sale of that, those [indisc.]  to another                                                              
entity, has that sale gone through?                                                                                             
MS. TINDALL:  That  bankruptcy is, is still open.   We expected it                                                              
will be closed this week.                                                                                                       
SENATOR THERRIAULT:   Okay, and so the case or  docket or whatever                                                              
the Justice Department  has open, that remains open  until sale to                                                              
another  entity is  concluded because,  in fact,  you could  renew                                                              
your attempt  to purchase or you  could partner with  another firm                                                              
to purchase.                                                                                                                    
MS. TINDALL:  That's correct.                                                                                                   
SENATOR  THERRIAULT:    So, this  ongoing  investigation  is  just                                                              
keeping that  open just in case  GCI reasserts an interest  in the                                                              
MS. TINDALL:  That is correct.                                                                                                  
SENATOR THERRIAULT: Thank you.                                                                                                  
CHAIRMAN  TAYLOR: Its  interesting  that the  Justice  Department,                                                              
Nancy   M.  Goodwin,   Chief  of   Telecommunications  and   Media                                                              
Enforcement  wrote back to  me on  June 18   and said,  'Thank you                                                              
for  your  letter   dated  May  21,   2002   requesting  that  the                                                              
antitrust  division  expand an  existing  investigation  involving                                                              
GCI,   Inc.'  They   also  referred   to  it   as  an   'existing'                                                              
investigation, not  a concluded one, not one that  has terminated,                                                              
but an existing investigation.                                                                                                  
MS. TINDALL:   I believe, Senator Therriault just  clarified that.                                                              
Until the  bankruptcy is closed, which  we expected it to  be this                                                              
week, but is now  delayed due to a secret deal  between two of the                                                              
bidders that just came to light,  actually, one of the bidders had                                                              
an outside deal  that just came to light, the judge  had not fully                                                              
decided to  approve the closure, but  the, as soon as  the bidding                                                              
procedure is closed,  the investigation at the  Justice Department                                                              
will be closed.  It is in a [indisc.] state right now.                                                                          
CHAIRMAN TAYLOR: Who's assured you  that the investigation will be                                                              
closed within the,  which member or officer in  Justice Department                                                              
has  told GCI  that  this  investigation  will conclude  with  the                                                              
MS. TINDALL:  Parker Erkman [ph].                                                                                               
CHAIRMAN TAYLOR: Parker who?                                                                                                    
MS. TINDALL:  Erkman.                                                                                                           
CHAIRMAN TAYLOR: What's that person's title or position?                                                                        
MS. TINDALL:   He is, I'm not  sure of the exact title,  but he is                                                              
head of the investigation.                                                                                                      
SENATOR DONLEY:  Mr. Chairman, before we lose the…                                                                              
CHAIRMAN TAYLOR:  Yes.                                                                                                          
SENATOR DONLEY:   …two gentlemen who  are attorneys here.   I just                                                              
want to make  a note.  So  the burden of proof, the  standard for,                                                              
regarding local telephone companies.   What's that standard again?                                                              
You said it was undue hardship or what was it?                                                                                  
MR. JACKSON:  One  of the standards is whether or  not there would                                                              
be an undue economic burden on…                                                                                                 
SENATOR DONLEY: Undue economic burden.                                                                                          
MR. JACKSON: …the incumbent and that is not the only standard.                                                                  
MR. MODEROW:  That is one.  The  second one would be  whether it's                                                              
technically   feasible,  whether   the   request  is   technically                                                              
feasible.  And the last one is whether  it would, it's  consistent                                                              
with the universal services principles  that are listed elsewhere.                                                              
MR. JACKSON: And then you said the standard of review.  That…                                                                   
SENATOR DONELY:  The burden's  on the  local companies  to contest                                                              
and say that it doesn't meet one of these standards?                                                                            
MR. JACKSON:  Right, according to  our Superior Court judge.   And                                                              
that  was reviewed  and the  standard  review was  a total  review                                                              
under the law.   It was a  legal question so they didn't  have any                                                              
deference to the Commission…                                                                                                    
SENATOR DONELY:   And our State  Superior Court was  utilizing the                                                              
federal act in making this determination?                                                                                       
MR. JACKSON:   And  State law.   It  was, it  was appealed  on two                                                              
grounds, both under the federal act  and under State law.  And the                                                              
decision was under State law.  [Indisc.].                                                                                       
SENATOR DONELY:  And then back to  this standard, the  standard of                                                              
review  to RCA decisions?   Mr.  Jackson, what  was that  standard                                                              
MR. JACKSON:  If it is something  which is in their expert area of                                                              
technical expertise,  it is,  I should  have the Attorney  General                                                              
answer  this  question, actually  it's  whether  or not  there  is                                                              
substantial evidence to the records to support their decisions.                                                                 
SENATOR DONLEY: Substantial evidence.                                                                                           
CHAIRMAN TAYLOR:  Isn't that abuse of discretion?                                                                               
MR. JACKSON:  It's not precisely  an abuse of discretion standard.                                                              
I think it is somewhat higher than that, but it…                                                                                
CHAIRMAN TAYLOR:  It's even higher than that.                                                                                   
MR. JACKSON:   No, meaning, Senator,  I think I use higher  in the                                                              
opposite sense than  you are.  There must be  substantial evidence                                                              
in the  record to  support it.   I believe  that means  that there                                                              
needs to  be more than evidence  than, to support  their decisions                                                              
than there would be under an abuse  of discretion standards.  But,                                                              
you may well be right.                                                                                                          
CHAIRMAN TAYLOR:  These subtleties within the definition is so…                                                                 
SENATOR DONLEY:  And then they audit.                                                                                           
CHAIRMAN TAYLOR:  …and get lost in our Supreme Court I think.                                                                   
SENATOR DONLEY:   Let me explain what I think.   This is important                                                              
to me  as an  attorney to understand.   I  want to understand  the                                                              
review that  takes place  so I understand  how much the  court was                                                              
deferring to the judgment rather than, you know, basing it on…                                                                  
MS. TINDALL: Oh, oh, oh.  Let me clarify something.                                                                             
SENATOR DONLEY:  Sure.                                                                                                          
MS. TINDALL:  At the time the Superior  Court made this ruling the                                                              
APUC had placed  the burden of proof  on us to make  this showing.                                                              
We appealed that and the justice  was, in remanding it back to the                                                              
APUC, stated that  the State regulatory Commission  must place the                                                              
burden of proof on the incumbent.                                                                                               
SENATOR DONLEY: Let me, what that…                                                                                              
MS. TINDALL: It was very bold.                                                                                                  
SENATOR DONLEY:  Was, part of that  was based on federal  act, but                                                              
was  part  of  it based  on  preference  in  Alaska  statutes  for                                                              
competition  when  anything,  there's   something  in  the  Alaska                                                              
MR. JACKSON:   I  actually, the  Superior Court  judge ordered  on                                                              
remand that the,  at that point, the APUC apportion  the burden of                                                              
proof on the incumbent.  So, it wasn't  their decision.  The court                                                              
imposed it.   At  the time, the  federal law  was still  in uproar                                                              
because  it was  still being  debated  hotly and  the federal  law                                                              
wasn't settled.  So, he made his  decision based on State law, and                                                              
so the original decision on remand  was made on the basis of State                                                              
MR. MODEROW:   If  I can  clarify that  a little  bit further.   I                                                              
think what  the State  judge did  is first of  all, looked  at the                                                              
federal law  to determine  whether or not  within the  language of                                                              
the federal law  there was a clear indication of  where the burden                                                              
of proof  should lay.   And he found that  there was, that  in the                                                              
federal law, there was no clear indication  as to where the burden                                                              
of proof on this issue should fall.   Having determined that they,                                                              
having determined that federal law  didn't give them an answer, at                                                              
that point, he looked at general  principal of the burden of proof                                                              
under State law  and determined that the burden of  proof ought to                                                              
be on the incumbent.                                                                                                            
SENATOR DONLEY:   Okay, thanks for  letting me…  I'm  still trying                                                              
to understand the testimony we heard the first day of hearings.                                                                 
CHAIRMAN TAYLOR:  Well, I'm trying to understand the 8 Circuit.                                                                 
SENATOR DONLEY:   Yeah, and that's  where I just wanted  to go to.                                                              
We heard something the  first day of these hearings about  this 8                                                               
Circuit decision.   I  didn't fully understand  that at  the time.                                                              
Can you  give me you  all's opinion,  understanding of  that, what                                                              
your spin on that is?                                                                                                           
MR. JACKSON:   When the decision  that I just described  was made,                                                              
there was,  the 8   Circuit decision  had not  yet come out.   And                                                              
let me reiterate what I just said,  that our State Court judge had                                                              
looked at the Act  and found that it did not give  an answer as to                                                              
who the  burden of proof ought  to be on.   He remanded it  to the                                                              
Commission.  The Commission was making  its decision.  During this                                                              
time  period, the  8   Circuit  decision came  out.   And  the  8                                                               
Circuit looked at  the Act and came to the opposite  conclusion of                                                              
our Superior Court judge, and they  said, 'Yes, the Act intends to                                                              
assign the  burden of  proof to the  potential competitor.'   This                                                              
happened  during  the   time  it  was  back  on   remand,  so  the                                                              
Commission, at  that point,  made its decision.   It went  back to                                                              
Superior  Court,  to  a  different  Superior  Court  judge.    The                                                              
separate Superior Court judge had  specifically decided that, one,                                                              
the  8   Circuit  opinion  was nuts,  and  two,  that it  was  not                                                              
binding on courts in Alaska.                                                                                                    
CHAIRMAN TAYLOR: At whose recommendation?                                                                                       
MR. JACKSON:  That was the appeal…                                                                                              
MR. MODEROW:  Attorney General's.   I mean it was an appeal by ACS                                                              
against  the  Commission's  decision   defended  by  the  Attorney                                                              
General into which we were interveners, of course.  [Indisc.].                                                                  
CHAIRMAN  TAYLOR:    So  you intervened  and  the  State  attorney                                                              
general who represents the RCA…                                                                                                 
MR. MODEROW:  Correct.                                                                                                          
CHAIRMAN  TAYLOR:   …these people  with whom  we have  arms-length                                                              
relationships, they're the ones who  made that decision.  Correct?                                                              
MR. MODEROW:  A Superior Court judge made the decision.                                                                         
CHAIRMAN TAYLOR:   On the  appeal of their  decision to accept  8                                                               
Circuit decision.                                                                                                               
MR. JACKSON: When  they made their decision they  were under order                                                              
to  assign the  burden of  proof to  the incumbent.    And the  8                                                               
Circuit decision happened in this,  it did not change the order of                                                              
the Superior Court of Alaska that they were operating under.                                                                    
CHAIRMAN TAYLOR: No, I understand.                                                                                              
MR. MODEROW:  And this is  based, and  we can furnish  you volumes                                                              
and  volumes  of rates,  this  is  based  on the  well  enumerated                                                              
principal of the law of the State  of Alaska, which Alaska is more                                                              
extreme, that  the State  is not bound  to follow a  Circuit Court                                                              
opinion, a  Circuit Court of Appeals  opinion, until it's  been to                                                              
the Supreme  Court.  I think  the, the subsistence appeals  is one                                                              
of  the great  examples on  that,  you know,  as a  State we  must                                                              
follow,  even the  9   Circuit which  we're  [indisc.] in.   So  I                                                              
think it's well founded in the law.                                                                                             
SENATOR  DONLEY:   Well, I'm  trying  to remember  the first  day,                                                              
right?    And the  point  was  made that  somehow  many  different                                                              
circuits had this  issue before them and it had  been consolidated                                                              
in  the 8   Circuit,  and that  the Supreme  Court, subsequent  to                                                              
this 8   Circuit decision,  did not take  it up.  In  other words,                                                              
gave its tacit approval to it.                                                                                                  
MR. JACKSON:  Senator, the Supreme  Court denied cert, and I think                                                              
we all learned in  law school denial of cert is  not an indication                                                              
on the  decision on  the merits.   If  we want  to suggest  that a                                                              
denial of cert is an indication on  the merits, the Alaska Supreme                                                              
Court  has twice  denied  ACS its  petitions  for  review on  this                                                              
issue. If  that's an indication of  cert the Alaska  Supreme Court                                                              
agrees with the  Superior Court judges.  But I'm  not saying it is                                                              
anymore  than  I'm saying  it  isn't.   [Indisc.]  Supreme  Court,                                                              
federal Supreme Court [indisc.].                                                                                                
CHAIRMAN TAYLOR: That issue is currently on appeal?                                                                             
MR. JACKSON:  To the Alaska Supreme Court, yes.                                                                                 
CHAIRMAN TAYLOR:  The  8  Circuit?  Or, I mean  the question about                                                              
burden of proof?  That is on appeal?                                                                                            
MR. JACKSON:   It's on appeal  to the Alaska State  Supreme Court,                                                              
SENATOR DONLEY:  Thank you, Mr. Chairman.                                                                                       
CHAIRMAN TAYLOR:  We've just got a couple…                                                                                      
SENATOR DONLEY: I think…                                                                                                        
CHAIRMAN TAYLOR: I don't know…                                                                                                  
SENATOR  DONLEY: …got  a better,  much better,  sense of what  the                                                              
heck's going on now.                                                                                                            
CHAIRMAN  TAYLOR:  Dana,  you said,  and your  folks indicated,  I                                                              
guess, that  you own  some switch  gear?   What is your  telephone                                                              
company?  Can you tell me what your telephone company is?                                                                       
MS. TINDALL:  I don't understand the question.                                                                                  
CHAIRMAN TAYLOR:   Well,  I mean, the  telephone company I  got in                                                              
Wrangell that's owned by my, I think  it was owned by GTE, and I'm                                                              
not  sure, Bob  Grimm  I think  owns  it now.    It's a  telephone                                                              
company.   It's got an office  with switchboards.  Its  got wires.                                                              
The wires run out  to my house.  I pick up the  phone. I use their                                                              
telephone  company. They  hook up  to someone  else for long  line                                                              
services to get  me out of the State and hook  me up with somebody                                                              
in California.  What is your telephone  company?  Do you have such                                                              
MS. TINDALL: We  have lines all the way to the  last, what we call                                                              
copper  loop.   So we  have, yeah,  we have  cable throughout  the                                                              
service area.                                                                                                                   
CHAIRMAN TAYLOR:  You're not running  the telephone over cable are                                                              
MS. TINDALL:  In some cases.  But we have - go ahead.                                                                           
MR. JACKSON:   I think,  if I understand  your questions,  what do                                                              
you physically own to provide local service.                                                                                    
CHAIRMAN TAYLOR:  Yeah.  Switches or…                                                                                           
MR. JACKSON:  We,  as does, as do the incumbents,  have a business                                                              
office with customer service reps.   We have directory assistance.                                                              
We have operators.  We have, going  on from there, we have our own                                                              
switching  centers which  connect basically  our local service  to                                                              
the rest of the world.  So we have  our own switch, which provides                                                              
unique services  from those  of ACS.   We also  have what  we call                                                              
remote switching  centers or remote  switches that  are positioned                                                              
right next  to the ACS meter switching  centers.  And we  have our                                                              
own cabling  or our own fiber  optic cable that  interconnects all                                                              
of those.                                                                                                                       
CHAIRMAN  TAYLOR:     Okay,  you've  got  the   fiber  optic  that                                                              
interconnects your switchgear.                                                                                                  
MR. JACKSON:  And… That's true.                                                                                                 
CHAIRMAN TAYLOR:   But you don't  have a, you don't have  a copper                                                              
line hanging in this town, do you?                                                                                              
MR. JACKSON:  Yes, we do unfortunately.                                                                                         
CHAIRMAN TAYLOR:  Where?                                                                                                        
MR. JACKSON:   We have, well,  let me finish my  description here.                                                              
We  have  the connectivity  to  our  switches  and then  the  vast                                                              
majority of places  we utilize the last mile of  the copper that's                                                              
buried in your front yard.  To replace  that we'd have to dig your                                                              
front yard up.                                                                                                                  
CHAIRMAN TAYLOR:  Now, who owns that?   You don't own that do you?                                                              
MR. JACKSON:   In the  vast majority of  cases, no, ACS,  ACS owns                                                              
that.  Now in…                                                                                                                  
CHAIRMAN  TAYLOR:     So,  you're  a  telephone   company  without                                                              
telephone lines.   You've got a  central office.  You've  got some                                                              
switchgear,  and that  hooks  you up  to  the existing  incumbent.                                                              
Right?  And you use the existing  incumbent's lines pursuant to an                                                              
order from the RCA.                                                                                                             
MR. MODEROW:  Pursuant to  an act of  Congress.  That  is correct.                                                              
Now, we  do have one,  your statement that  we don't own  a single                                                              
copper  line  is  slightly  in  error.    I  don't  know  why  the                                                              
subdivider  decided  not to  deal  with ACS.    There  were a  lot                                                              
developers  who  were  having  trouble  getting,  getting  ACS  to                                                              
install wires in their subdivisions.                                                                                            
CHAIRMAN TAYLOR:  Well, I read the same article you did.                                                                        
MR. MODEROW:  We have installed one subdivision…                                                                                
CHAIRMAN TAYLOR:  Oh, you have?                                                                                                 
MR.  MODEROW:    …and  we  did install  copper  wires.    We  have                                                              
independent to ACS the…                                                                                                         
CHAIRMAN TAYLOR:   So, that's your, that's your  telephone system,                                                              
so to  speak, within  Anchorage, is  one subdivision where  you've                                                              
got copper wire and the rest of it is switchgear, right?                                                                        
MR. MODEROW:  And trans, what is normally…                                                                                      
CHAIRMAN TAYLOR:  And transformers.                                                                                             
MR. MODEROW:  …known in the industry is transformer gear.                                                                       
CHAIRMAN TAYLOR:   Right,  right.   And the actual  infrastructure                                                              
out there belongs  to someone else  that you then lease  at a rate                                                              
set by RCA, and as you said, federal law.  Right?                                                                               
MR. MODEROW: That's correct.                                                                                                    
CHAIRMAN TAYLOR:  Okay.  And can  you tell me who owns  Alaska dot                                                              
MR. JACKSON:   Excuse  me, Senator.   What is  Alaska dot net?   I                                                              
CHAIRMAN TAYLOR:  It's a partnership  between your company and the                                                              
Alaska, or  the Anchorage  Daily News.   That's  how you  read the                                                              
newspaper over the computer in the morning.                                                                                     
MS. TINDALL:  I think Alaska dot net…                                                                                           
CHAIRMAN TAYLOR:  Maybe it's Alaska dot com.                                                                                    
MS. TINDALL:  …is owned by ACS.                                                                                                 
MR. MODEROW:  Alaska dot net is owned by ACS.                                                                                   
CHAIRMAN  TAYLOR:  Well,  what do  you call  the network  that you                                                              
guys  are operating  under with,  I mean,  I've got  it here  some                                                              
place.  You made a…                                                                                                             
MS. TINDALL:  GCI dot net.                                                                                                      
CHAIRMAN TAYLOR:   GCI dot  net?  Or ADN  dot net, or what  is it?                                                              
You announced  you were  partners with  the Anchorage Daily  News.                                                              
And that's appeared  pretty obvious to me from  the coverage we've                                                              
been getting around here, but…                                                                                                  
MR.  JACKSON:   Senator,  I, I  did,  there is,  you,  there is  a                                                              
partnership  for  GCI,  I  don't know  whether  partnership  is  a                                                              
correct legal  term, and  I know very  little about this  subject,                                                              
but there is some sort of service  for information which is, which                                                              
involves both  GCI and Anchorage  Daily News.   I don't  know that                                                              
any of the three of us know much about that.                                                                                    
CHAIRMAN TAYLOR:   Well, maybe Dana could that out  for us and let                                                              
us know  what the  profit was  just last  year, and  how much  was                                                              
shared between the  Anchorage Daily News, because  that's what the                                                              
announcement said  was that you both would be  selling advertising                                                              
and you both would  be recruiting other people to  use it and that                                                              
you would split the profits.                                                                                                    
MS. TINDALL:  We'd be happy to provide you with that.                                                                           
CHAIRMAN TAYLOR: Good.  Thank you.  Senator Cowdery.                                                                            
SENATOR  COWDERY:  We've got  other  ones  sitting here  and  some                                                              
public people  but, earlier  on you  said that  you were  going to                                                              
file with APOC,  whatever, for not reporting these  lodge trips or                                                              
something  to that  effect.   So  you, GCI  understands it's  been                                                              
violating these  laws, now understand  that you've  been violating                                                              
Alaska's laws by not reporting these  trips of public officials to                                                              
your lodge. Do you understand that?                                                                                             
MS. TINDALL:  My attorney just tells  me that we are  looking into                                                              
the law  on that.  If there is  a requirement  for us to  file and                                                              
we've been in error, we will make a full disclosure to...                                                                       
SENATOR COWDERY: I understand that.   But you don't, so you're not                                                              
convinced yet until  you look into it that you  we're required to.                                                              
Is that what you're saying?                                                                                                     
MR.  JACKSON:  We're  not denying  we  are.  We  just, it  is  not                                                              
something that we've  adequately had advice on, I  don't think, at                                                              
this point.                                                                                                                     
MS.  TINDALL: The  only  person I  had  look into  it  was not  an                                                              
SENATOR COWDERY: That's  all. I don't want to belabor  it. I would                                                              
hope that you comply if you need to be.                                                                                         
CHAIRMAN TAYLOR: Questions?  Senator Therriault?                                                                                
SENATOR  THERRIAULT: A  little  bit of  follow-up.  If I  remember                                                              
Senator  Cowdery's  line  of  questioning   and  whether  you  had                                                              
lobbyists and whether  lobbyists had filed reports,  the lobbyists                                                              
don't own the facility though.  So  if there was to be a report, a                                                              
required  report,  it wouldn't  be  on  the lobbyist  because  the                                                              
lobbyist can't  give away  something he doesn't  own. It  would be                                                              
perhaps a requirement of the company, not the lobbyist.                                                                         
MS. TINDALL: That's  what we're looking into. Let  me clarify that                                                              
I said  to my  knowledge no  lobbyists are  required to  report on                                                              
that.  Sam Kito,  Reed Stops and Ashley Reed, to  my knowledge, he                                                              
may have  been out with  another member of  the company but  to my                                                              
knowledge none of [indisc.] them have had, I'm not…                                                                             
SENATOR THERRIAULT: I wouldn't think  there'd be a requirement but                                                              
that they  as an individual file  anything because they  don't own                                                              
the property.                                                                                                                   
MS. TINDALL: We, we…                                                                                                            
CHAIRMAN TAYLOR: Senator Therriault,  there's confusion there. The                                                              
form that's actually required is  a employer of lobbyist form, not                                                              
the  lobbyist, but  the,  actually  GCI has  to  file a  quarterly                                                              
report on  what they pay lobbyists  and how those  lobbyists break                                                              
out those costs  as a public record.  So it isn't  any report that                                                              
Mr. Kito or Mr.  Stoops would have to file. It's  the actual owner                                                              
of the lodge  and the owner  who is employing these  lobbyists and                                                              
once you've employed a lobbyist,  you then have to fill this stuff                                                              
out and  the provision  provides, 'Report the  date and  nature of                                                              
any gift of  more than $100 in  value made to any  public official                                                              
during this reporting  period.'  And that's the form  I think that                                                              
you were  not talking  about, going  to APOC and  doing a  few mea                                                              
culpas on and  getting it cleared  up again. You see, I  think, if                                                              
forms like  that are filled out  and your competition is  aware of                                                              
the fact  that you're entertaining  certain public  officials like                                                              
Commissioners  from the RCA,  then they have  notice and  they can                                                              
step up and  ask people who have  gone to your lodge  for whatever                                                              
purpose, a business  purpose apparently, to recuse  themselves and                                                              
to step down. We have that right  with judges and these people are                                                              
acting as  judges. And  sadly, because you  didn't file  the form,                                                              
and because the  forms that were filed by Ms.  Thompson were never                                                              
made available publicly, no one else  in the world knew this and I                                                              
don't know  how many decisions  have been  made by her  since then                                                              
involving your  company.  So I hope  you will comply with  the law                                                              
and go in and do these filings in  the future because it's through                                                              
that disclosure that people will  learn whether or not they should                                                              
be disqualifying people from sitting on certain cases.                                                                          
MS. TINDALL: It  is my intention that GCI be  fully compliant with                                                              
the law.                                                                                                                        
CHAIRMAN TAYLOR: I  appreciate that Dana. Thank you  very much and                                                              
I appreciate  your candor  on it too.  Are there other  questions?                                                              
Senator Cowdery.                                                                                                                
SENATOR DONLEY: I just hand one more.                                                                                           
CHAIRMAN TAYLOR: Go right ahead, Senator Donley.                                                                                
SENATOR DONLEY:  This 8   Circuit  decision - was  the 9   Circuit                                                              
consolidated into that?                                                                                                         
MR.  MODEROW: I  believe there  was  a 9   Circuit  case that  was                                                              
consolidated into that issue.                                                                                                   
MR. JACKSON: There  were multiple Circuits that  got consolidated.                                                              
I do not know  if there was a 9   Circuit, I guess.   I, if I were                                                              
taking an  exam and  had to give  an answer, I  would say  I don't                                                              
think they were but that would be largely a guess.                                                                              
SENATOR DONLEY: If you don't know, you don't have to…                                                                           
MR. JACKSON: If there  was a 9  Circuit decision  consolidated in,                                                              
it was on another issue within the  Act. There was not one on that                                                              
SENATOR DONLEY: Okay.                                                                                                           
CHAIRMAN TAYLOR: Senator Cowdery.                                                                                               
SENATOR  COWDERY: I'd  just  like  to, this  was  handed, I  think                                                              
delivered in my office about one minute before the meeting.                                                                     
CHAIRMAN TAYLOR: We've had several things handed to us.                                                                         
TAPE 02-41, SIDE B                                                                                                            
SENATOR COWDERY: Anyway, these are  just, these are handwritten, I                                                              
think they're probably  [indisc.]  and they're concerned about the                                                              
rulings  of  RCA and  some  of  them are  pretty  salty  [indisc.]                                                              
straightforward but,  I was sitting  here when I was  listening to                                                              
the others ones reading them but this came in today, just for…                                                                  
CHAIRMAN TAYLOR:  I've got to have  the secretary make  copies and                                                              
get them distributed.                                                                                                           
SENATOR COWDERY: …make that available to all…                                                                                   
MR. JACKSON:  Senator,  if we can  save you  some copying  there's                                                              
already about  30 copies of Mr.  Duncan's statement here  if you'd                                                              
CHAIRMAN  TAYLOR: Fine.    If you'll  just  give  that to  Crystal                                                              
she'll just  put it  in all our  packets as  part of the  official                                                              
record.  Are there further questions?                                                                                           
SENATOR COWDERY: No.                                                                                                            
CHAIRMANT TAYLOR:  Thank you very much.  I know we've asked  for a                                                              
whole series of things and hopefully  our staff have notes for you                                                              
Dana.  To the  extent we  could it  would  be nice  to have  those                                                              
before the special session starts.                                                                                              
MS. TINDALL: We will do our best.                                                                                               
CHAIRMAN TAYLOR:  We start up next  Monday about 11 o'clock  or so                                                              
and I'm sure we  can't hold a hearing prior or  won't be holding a                                                              
hearing prior  to 11 o'clock  but I would  assume that  because of                                                              
the work we've done, we'll probably  end up with this thing and be                                                              
holding  hearings on  it  during  the special  session  so if  Mr.                                                              
Duncan wishes  to supplement his  testimony or if  there's further                                                              
information  that we  need or you've  offered  to provide,  if you                                                              
could get it to  us as soon as possible we'd  appreciate it. Thank                                                              
SENATOR  ELLIS: Mr.  Chairman,  on  the subject  of  things to  be                                                              
included in the  public record, there was a packet  from last week                                                              
that included  a letter  from Don Scherer  [ph]. I wanted  to make                                                              
sure that  gets into the public  record. It may have  already been                                                              
submitted or could you make sure that's included?                                                                               
CHAIRMAN TAYLOR: I think it is John.  I've tried to put everything                                                              
that's come in here…                                                                                                            
SENATOR ELLIS: I'm  saying that also for the benefit  of staff who                                                              
are following up on these things.                                                                                               
CHAIRMAN TAYLOR:  Sure, sure.   Right. Well,  like here's  a whole                                                              
pile of these  things too. We've got two from  Homer Electric. ACS                                                              
was up next. Who is here to represent them?                                                                                     
MR. WES  CARSON:   Mr. Chairman,  I'm  Wes Carson.   And with  the                                                              
Committee's  permission, I'd  like to have  Leonard Steinberg  and                                                              
Ted Moninski with me.                                                                                                           
CHAIRMAN TAYLOR: Sure.                                                                                                          
MR. CARSON: Thank you.                                                                                                          
SENATOR COWDERY: Grab another Chair there someplace.                                                                            
CHAIRMAN TAYLOR:  Yeah.   Gentlemen, our time  will be  limited in                                                              
that I've  already told  staff and  everybody  else they could  go                                                              
home about 4:30 so we'll take what  we can today and then take you                                                              
up, finish  you up tomorrow, if  necessary.  Would you  all please                                                              
raise your right  hand?  Do you solemnly swear  that the testimony                                                              
you are about  to give to be  truth, the whole truth,  and nothing                                                              
but the truth before this Committee  and do you so swear and aver?                                                              
ALL:  We do.                                                                                                                    
CHAIRMAN TAYLOR: Thank you.                                                                                                     
3:43 pm                                                                                                                         
MR. CARSON: Mr. Chairman, members  of the Committee, we appreciate                                                              
this  opportunity to  testify  before  you and  we  would like  to                                                              
express our appreciation  for the initiative you've  taken to hold                                                              
these hearings.  We think these are  important issues that need to                                                              
be aired.   We have  a concern that  the regulatory status  quo is                                                              
not  acceptable.   And this  is based  on  basically four  issues.                                                              
They  relate   to:  first,  the   public  interest;   second,  the                                                              
regulatory process  itself; third,  is telecommunications  law and                                                              
policy; and  then finally,  financial and investment  implications                                                              
of our regulatory policy of the State.   With regard to the public                                                              
interest, we believe…                                                                                                           
SENATOR DONLEY: Could you, I lost  number three.  I was writing as                                                              
fast as I could.                                                                                                                
MR. CARSON:  Number three is telecommunications law and policy.                                                                 
SENATOR DONLEY:  And number four was?                                                                                           
MR. CARSON:   Financial and investment implications  of regulatory                                                              
policy on the State.                                                                                                            
SENATOR DONLEY:  That's a mouthful isn't it?                                                                                    
CHAIRMAN TAYLOR: Go right ahead.                                                                                                
SENATOR DONLEY: Sorry to interrupt you.                                                                                         
MR.  CARSON:   That's  all  right.    With  regard to  the  public                                                              
interest,  we  believe that  in  order  to protect  the  long-term                                                              
interests of  the State and  its citizens, regulatory  policy must                                                              
foster  both   fair  competition   and  continued  investment   in                                                              
telecommunications   infrastructure.   We   recognize   that   the                                                              
regulatory  challenge  is  daunting   and  the  industry  is  very                                                              
complex, but that  doesn't excuse the Commission  from competently                                                              
exercising  their authority  to regulate  and to  deregulate in  a                                                              
manner that properly  serves the long-term public  interest.  With                                                              
regard to  the regulatory  process, the process  must be  fair and                                                              
open, impartial and the Commission  must render decisions that are                                                              
consistent  with   the  law.    Ted  Moninski,   our  Director  of                                                              
Regulatory Affairs will address these  issues in some detail.  The                                                              
Commission  should be required  to hold  evidentiary hearings  and                                                              
we'll talk  about some of the  issues with the Open  Meetings Act.                                                              
They need to  establish fair rules and follow them,  and they need                                                              
to abide by the law, and be accountable for their decisions.                                                                    
With regard to telecommunications  law and policy, interconnection                                                              
agreements  and  rates,  which  we've  heard  quite  a  bit  about                                                              
already, are  the drivers of  local telephone competition  in this                                                              
State.   If the  terms and the  rates are  not properly  set there                                                              
will be a  long-term consequence for Alaskans.   Leonard Steinberg                                                              
will  focus   his  remarks  on   this  issue  of   interconnection                                                              
agreements  and other  matters.   Basically,  a regulatory  regime                                                              
that  subsidizes  competition  and encourages  the  competitor  to                                                              
'game the system'  may result in some short-term  price advantages                                                              
for the consumers,  but will effectively destroy  any incentive to                                                              
invest in  the long-term. Competition  is good, but  the providers                                                              
of telecom  services must  operate in  an environment where  their                                                              
viability is not called into question.                                                                                          
In  terms of  the finance  and investment,  ACS  has the  invested                                                              
substantial amounts along with its  predecessor companies to build                                                              
and upgrade  the network  that serves  about 75%  of this  State's                                                              
population.  We connect those people  with each other and the rest                                                              
of the world.  These companies have  invested to provide State-of-                                                              
the-art technology  to Alaska, and  in return for  that investment                                                              
we should be able to generate adequate  returns.  This will insure                                                              
that  ACS  is a  financially  sound  organization  with  continued                                                              
access  to capital  so  that we  can  continue  our investment  in                                                              
facilities  to serve Alaskans.   While  competition has  been good                                                              
for  the consumer,  particularly  in the  short-term  in terms  of                                                              
rates and  choice, the  ramifications of  the kind of  competitive                                                              
policy we  believe our  regulators are  pursuing are resulting  in                                                              
ACS  suffering  long-term, negative  financial  consequences  that                                                              
will affect  our ability in the  long-term to serve  Alaskans, and                                                              
to attract  investment.  And a  natural consequence of that  is it                                                              
will affect the ability of the State  in its businesses to attract                                                              
The  ACS family  of companies  includes a  long distance  company,                                                              
which  in fact,  is  regulated  by  the Regulatory  Commission  of                                                              
Alaska with regard to intrastate  long distance, or in other words                                                              
point-to-point within the State.   We have a wireless company.  We                                                              
have an Internet company and others.   But the companies we'd like                                                              
to  focus the  Committee's attention  on  today are  the ACS  four                                                              
local exchange companies, or the  local telephone companies, often                                                              
referred to  as LECs, L-E-C.   They build and maintain  the Public                                                              
Switched  Telephone Network  in the  State and  serve about  three                                                              
quarters of the  State's population.  And these  are the companies                                                              
that  are subject  to  the most  intense  regulation  by the  RCA.                                                              
Specifically, they are: ACS of Anchorage,  Inc., that's the former                                                              
ATU; ACS of Fairbanks, Inc., that's  the former FMUS, or Fairbanks                                                              
Utility,  Municipal Utility  Service; ACS  of Alaska, Inc.,  which                                                              
serves  Juneau  and several  other  communities;  and ACS  of  the                                                              
Northland, Inc.,  which serves our highest cost  properties around                                                              
the  State.    It's  very  important   to  distinguish  these  ACS                                                              
telephone companies  from the  Regional Bell Operating  Companies,                                                              
or the RBOCs,  that provide service  in every one of the  other 49                                                              
states in the  Union.  Alaska is  the only state not  served by an                                                              
RBOC, and  it has never  been served  by an RBOC.   We at  ACS are                                                              
very  different  from  these  RBOCs.   The  Telecom  Act  of  1996                                                              
recognized that  RBOCs were to  be treated differently  from other                                                              
companies,  recognizing  that they  are  significant  in terms  of                                                              
their resources,  their market power  and their size.   The United                                                              
States  Telecom  Association reports  that  there  are nearly  200                                                              
million   telephone  lines   in   the  company.     Verizon   owns                                                              
approximately  one-third  of  those and  SBC  Communications  owns                                                              
almost another  one-third.  Together, the  RBOCs control  about 87                                                              
percent  of  the  country's  telephone  lines.    The  Telcom  Act                                                              
specifically   imposes   certain   obligations   on   the   RBOCs,                                                              
recognizing their size and power.                                                                                               
SENATOR DONLEY:   When you say  'telephone lines' do you  mean the                                                              
wires that like come into my house?                                                                                             
MR. CARSON: Exactly.   The copper loop that's been  referred to as                                                              
the last  mile, and it  is the connection  from your house  to the                                                              
central office switch.                                                                                                          
SENATOR DONLEY:  Okay.                                                                                                          
MR. CARSON:  The Telecom Act  specifically provides  the mechanism                                                              
to exclude  from certain obligations  under the Act  for companies                                                              
that own  less than two  percent, 2/100ths  of the total  lines in                                                              
the  company recognizing  the  lack  of size  and  power of  these                                                              
companies.  These are the so-called  2% companies, all four of the                                                              
ACS companies taken together represent  less than 2/1000ths of the                                                              
total access lines, or telephone lines in the nation.                                                                           
A  related  concern  relates  to the  authority  to  provide  long                                                              
distance  services.     The  Telecom  Act  authorized   all  local                                                              
telephone companies  to provide long  distance within  their areas                                                              
with  the exception  of the  RBOCs.  Again, a  recognition of  the                                                              
market power  of the RBOCs.   They were prohibited  from providing                                                              
instate long distance service until  they opened their networks to                                                              
competition, and  they have to meet  all 14 points of  a checklist                                                              
that was developed  for that purpose.   And this was for  them the                                                              
quid pro  quo, opening  their networks  was the  quid pro  quo for                                                              
providing  long distance  service.   Another specific  distinction                                                              
between  the RBOCs  and any  of the  larger companies  is the  so-                                                              
called rural  exemption that  you've heard  some about  today, and                                                              
that was discussed during the earlier  sessions of this Committee.                                                              
This relates to companies that operate  in high cost areas.  Three                                                              
of  the four  ACS  telephone companies  were  designated as  rural                                                              
under  the  Telecom  Act  and were  exempted  from  this  kind  of                                                              
competition   that  involves   interconnection.     The  RCA   has                                                              
terminated  that status  for all  or part  of all  three of  those                                                              
companies.   The  Telecom Act's  goal was  to balance  competition                                                              
with preservation  of affordable  universal  service.  Service  to                                                              
everybody at an affordable price,  no matter how cost the area was                                                              
that they  lived in.   We have read the  RCA's goal to  be forcing                                                              
competition at any cost to ACS and ultimately to the consumer.                                                                  
Finally, I  would note  that the RBOCs  and major independents  as                                                              
well  operate  in multiple  states.    So  if  they have  a  state                                                              
commission  that  is issuing  adverse  rulings,  it affects  their                                                              
business in that  one state.  We operate only in  Alaska.  So this                                                              
Commission by its rulings can make or break ACS.                                                                                
Today we will direct many of our  comments to ACS of Anchorage, as                                                              
this the company  that has experienced the greatest  economic harm                                                              
to date from the  regulatory policies and directs of  the RCA.  As                                                              
we consider  the long-term  interests of  consumers in  Alaska, we                                                              
believe it is  instructive to view Alaska as the  test environment                                                              
for  these  regulatory impacts.    The  economics of  serving  the                                                              
higher cost  areas, and  that includes  Juneau and Fairbanks,  and                                                              
now, certain of  the so-called Glacier State study  area companies                                                              
that Leonard will discuss somewhat,  where the rural exemption has                                                              
also  terminated are  much more  complex  and fragile.   As  these                                                              
regulatory policies  roll out  in the higher  cost areas,  as they                                                              
are now doing, we believe the results  would be even more damaging                                                              
to both ACS and ultimately, to the  public interest for the State.                                                              
Just a  brief comment,  if I could,  on the historical  regulatory                                                              
policy  in  the  U.S.   The  economics  of  telephone  regulations                                                              
developed  in part  to support  an important  social policy  which                                                              
still has  a basis in  current Congressional  policy, and  that is                                                              
that  residential   customers  should   have  access   to  modern,                                                              
affordable  service, no  matter where  they  live.   Its still  an                                                              
important public policy,  one that must be reconciled  with modern                                                              
reality,  because in  a rational  competitive  market, price  must                                                              
bear a relationship to cost.                                                                                                    
Prior to the enactment of the Telecom  Act, this social policy was                                                              
implemented through a number of mechanisms.   The most relevant to                                                              
our  situation  being  averaged  retail  rates so  that  low  cost                                                              
customers in service  territory pay more than their  fair share so                                                              
that  high cost  customers can  have  a lower  rate.   This is  in                                                              
[indisc.] place  of subsidy.   Similarly,  business rates  are set                                                              
artificially high  so that residential  rates can  be artificially                                                              
low.  That's another implicit subsidy  to support a social policy.                                                              
Then there's an explicit subsidy  and that's the Universal Service                                                              
Fund that brings federal dollars  into the State of Alaska to help                                                              
keep  costs low  where the  cost  of the  loop is  extraordinarily                                                              
high.   And finally,  long distance  companies pay access  charges                                                              
for being  able to  access the  telephone network  to pick  up and                                                              
deliver long distance calls.                                                                                                    
These  mechanisms worked  in the  old  days by  shifting costs  to                                                              
those most  able to  pay it  through these  implicit and  explicit                                                              
subsidies.    And   these  mechanisms  and  the   rate  of  return                                                              
regulation   assured  that   when  you   made  an  investment   in                                                              
telecommunications  plant  you  could  return  on it.    So  local                                                              
telephone companies  knew that over time they  would recover their                                                              
investment on  that plant.  So  whether the telephone  company was                                                              
investing lower  cost customers,  serving downtown businesses  for                                                              
example, or building very expensive  facilities to serve up on the                                                              
hillside  by  Flat Top,  we  knew that  over  time  there'd be  an                                                              
opportunity to  earn on the investment.   You already heard  a lot                                                              
about the Telecom  Act.  It was aimed at changing  the paradigm to                                                              
achieve  more efficient  and innovative  telecommunications  while                                                              
continuing to  insure access to  affordable service.   It promoted                                                              
the development of efficiencies and  innovations, but Congress was                                                              
encouraging  achievement of  these goals  through competition  and                                                              
market forces, not  by more and abusive regulation.   Deregulation                                                              
was clearly a desired direction.   What we see from the Regulatory                                                              
Commission  of Alaska,  as an  example,  ordering a  rate case  in                                                              
Anchorage that has  cost us almost $2 million already  in the most                                                              
competitive  market   in  the  United   States  is   anything  but                                                              
deregulatory.    And,  in  fact,   the  Chair  of  the  Commission                                                              
indicated  to  me when  I  requested  the opportunity  to  discuss                                                              
deregulation  for  Anchorage route,  not  a  rate case,  that  she                                                              
preferred to  see the data generated  by this rate case  before we                                                              
discussed that approach.                                                                                                        
With   regard   to  preserving   affordable   universal   service,                                                              
particularly in high cost areas,  I've mentioned, and Leonard will                                                              
elaborate  on,  the rural  exemption,  which provides  that  these                                                              
small companies  serving rural  areas will  be exempted  from some                                                              
forms of  competition.   And the  purpose of  the exemption  is to                                                              
insure  access   to  affordable   services  in  high   cost  areas                                                              
characterized  by  fragile and  complex  economics  that would  be                                                              
jeopardized in a competitive environment.                                                                                       
The Alaska Legislature has empowered  the Regulatory Commission of                                                              
Alaska to regulate  the State's local exchange  markets, but there                                                              
has to be a  recognition of a larger telecom market.   It would be                                                              
foolish  to think  that in  regulating this  one service  segment,                                                              
local  exchange, that  regulators  can ignore  the  impact on  the                                                              
market of cable  television, internet and wireless  providers.  In                                                              
fact, perhaps  more here  in Alaska than  any other market  in the                                                              
country, the  effective bundling  of these  various services  in a                                                              
creative, and I  might add, cross-subsidizing manner,  is a driver                                                              
of the competitive markets.                                                                                                     
This makes for  regulatory complexity, but these  market realities                                                              
can't be ignored.   It's one thing  for a regulator to  say, 'It's                                                              
not in  my charter to  regulate cable  television.'  It  was quite                                                              
another  to suggest  that the regulators  should  be blind  to the                                                              
market impact of these non-regulated  but competing services.  For                                                              
example,  we  find it  interesting  that  the RCA  recently  filed                                                              
comments with  the Federal  Communications Commission  encouraging                                                              
continued  regulation  of broadband  services  over the  telephone                                                              
network, but have  made no effort to regulate cable  modems. As of                                                              
year-end,  we  believe  GCI  has  about  27,000  cable  modems  in                                                              
operation to  our 7,000 DSL  installations.  Regulators  cannot be                                                              
blind  to market  realities  because they  view  their charter  as                                                              
narrow.   They  need to  be able  to  connect the  dots when  they                                                              
regulate a local telephone company  in a market characterized by a                                                              
blurring of technologies and bundling of services.                                                                              
So  why do  we suggest  the  regulatory policies  of  the RCA  are                                                              
failing the consumer, the public interest and the…                                                                              
SENATOR DONLEY:  Can I understand  that better?  So,  because they                                                              
regulate telephone, RCA, but not  cable TV, they're regulating the                                                              
costs of having a dialup computer  connection, but not the cost of                                                              
using a modem computer connection?                                                                                              
MR.  CARSON:     In  effect,  but  they're   advocating  continued                                                              
regulation  of accessing  high speed  Internet  services over  the                                                              
telephone  network.   But they are  not advocating  that over  the                                                              
cable network.                                                                                                                  
SENATOR DONLEY: RCA'S doing that?                                                                                               
MR.  CARSON:   Um-hmm.    They  filed comments  with  the  Federal                                                              
Communications Commission to that effect.                                                                                       
MR. CARSON:   We would suggest that our submission  in the current                                                              
rate case  for ACS of Anchorage,  that we're not  earning anything                                                              
on our investment in Anchorage.   This is now a matter of disputed                                                              
results  where a  recent  RCA order  that  we'll  talk about  just                                                              
briefly  in a  few moments.   I've  been  known to  say in  public                                                              
settings that  we greatly admire Anchorage's  not-for-profits, but                                                              
we  just  don't  wish to  be  one  of  them.   And  based  on  our                                                              
submission we're  about $18 million  short of what  the regulators                                                              
in  the  past  have  deemed  to be  a  reasonable  return  on  our                                                              
investment.    Yet, because  we're  the  carrier of  last  resort,                                                              
meaning that the Commission can require  us to build facilities to                                                              
serve  customers within  our service  territory, we  have to  keep                                                              
investing even without  the assurance of any return.   And I would                                                              
ask  you to  keep in  mind that  this  is the  kind of  regulatory                                                              
impact that's  been in place  for some  time in Anchorage,  but is                                                              
only  starting to  roll  out in  Juneau  and Fairbanks  where  the                                                              
economics are  much more complex and  fragile.  I would  note that                                                              
with the  exception of one  subdivision that  we're aware of  on a                                                              
military base,  a smaller  subdivision, that  neither GCI  nor ATT                                                              
Alascom has  stepped up  to build  telephone facilities  in places                                                              
where they can't,  where they're not required to  and can't make a                                                              
business case.   Why should they risk their own  capital when they                                                              
get use  our network for  less that it costs  us or them  to build                                                              
it?  The  bottom line is what  we believe is quid pro  quo for the                                                              
regulation imposed  on ACS by  regulators, including  this carrier                                                              
of last resort  obligation, is that  the RCA makes certain  we can                                                              
earn  a reasonable  return.   That would  be fair.   We invest  in                                                              
facilities  and we have  an opportunity  to earn on  it.   But the                                                              
reality is  they can compel  us to build  facilities and  we don't                                                              
have any way to sure we can earn  on those investments.  This is a                                                              
Commission that claimed sovereign  immunity when we sought to have                                                              
a matter  that was governed by  federal law reviewed by  a federal                                                              
district  court.  They  didn't want  to be  accountable for  their                                                              
decision.   Where's the justice  when the Commission  doesn't have                                                              
to  be held  accountable?   Why wouldn't  the State  Commissioners                                                              
want to  be absolutely  certain that  in implementing the  federal                                                              
law they were doing the right thing  under the law and in terms of                                                              
the public interest?   And yet they've done everything  they could                                                              
to avoid that kind of review.                                                                                                   
This leads  us to Mr.  Moninski to talk  about issues  of process.                                                              
Ted is uniquely  qualified in that he's had  responsibility during                                                              
his  career for  regulatory affairs  of ATU,  our predecessor,  at                                                              
ACS, and at Alascom  as well.  He served as  executive director of                                                              
the  APUC from  1986  to 1991,  and  served previously  as  deputy                                                              
director  from  1991,  '81  to '86.    So,  with  the  Committee's                                                              
permission I'll turn the time over to Ted.                                                                                      
CHAIRMAN TAYLOR: Go ahead, Ted.                                                                                                 
4:00 pm                                                                                                                         
MR. MONINSKI: Thank you.  Mr. Chairman,  members of the Committee,                                                              
and I hope  you will forgive me.   I have a bit of a  frog and may                                                              
wind up needing a sip of water.   The comments that I want to make                                                              
to you this afternoon go back to  some of the processing procedure                                                              
issues that  you, you've heard testimony  on already.  And  I will                                                              
try, given the lateness of the hour  and length of the proceedings                                                              
to not spend time repeating things  that you've already heard, but                                                              
I would  like to fill in  some blanks for  you.  As I  think about                                                              
procedural  matters,   they  sometimes  don't  appear   to  be  as                                                              
consequential  as sustentative  matters, as  policy matters,  that                                                              
you've heard GCI talk about and you  will hear ACS talk about, but                                                              
they do form the foundation for fair  and open decision making and                                                              
they are  critically important.   When I  think about that  I also                                                              
think  in terms  of  due process,  which is  a  term that  lawyers                                                              
understand.  I'm not a lawyer, but  I've worked with lawyers for a                                                              
number of years.   I think I understand the term.   And I think of                                                              
it with these concepts in mind and  I'll ask you to share them.  I                                                              
think of it  in terms of fundamental  fairness.  I think  of it in                                                              
terms of the right  to be heard in a meaningful  way, the right to                                                              
a fair and impartial  decision maker, the right  to have decisions                                                              
made based on [indisc.] record.   And these are some of the things                                                              
that we've heard talked about earlier  and some of the things that                                                              
I'd like to discuss  with you further.  I have  four points that I                                                              
want to  make to  you this afternoon,  but before  I do  that, I'd                                                              
like  to  address  something  that   the  Committee  members  have                                                              
expressed a  great deal of interest  in as we've gone  through the                                                              
proceedings  so  far,  and  that  has to  do  with  timeliness  of                                                              
decision making.  You heard other  witnesses who have talked about                                                              
that  issue.     You've  heard  people  talk  to   you  about  the                                                              
difficulties that  they've encountered in terms of  late cases and                                                              
expensive proceedings and burdens  of discovery and I think you're                                                              
going  to  find that  we  have  similar  comments  to make.    Mr.                                                              
Steinberg will  be speaking to that  more specifically.   In terms                                                              
of,   excuse  me,   standards   of  timeliness   the   Legislature                                                              
specifically  did direct, when  it created the  RCA in  1999, that                                                              
the RCA undertake a rulemaking and  adopt regulations dealing with                                                              
standards of timeliness.  The RCA  complied with that requirement,                                                              
and  regulations were  adopted in,  shortly  after the  Commission                                                              
came on board  in December of  1999.  The interesting  thing about                                                              
those regulations is that in each  and every instance, as far as I                                                              
know, for  every regulation that  was adopted there is  a failsafe                                                              
clause.  There's a failsafe mechanism  that allows deadlines to be                                                              
extended  for good cause.   So,  there, there  really weren't  any                                                              
absolute time  standards that  flow from  those regulations.   But                                                              
there is one absolute time standard  that is on the books.  That's                                                              
a standard  that the Legislature  created back when  long distance                                                              
competition was  first entering  the market in  Alaska.   And it's                                                              
found in Alaska  Statute 42.05.810 (b).  As far as  I know, it may                                                              
be the only  absolute time standard  that exists.  I  can't recall                                                              
whether this  was a  proposal of  GCI, but I  do believe  that GCI                                                              
supported it at  the time.  The standard is for  how long the then                                                              
APUC, now  RCA, has to evaluate  an application  for certification                                                              
for a competitive long distance company.                                                                                        
SENATOR DONLEY:   Do you got that  statute in front of  you there?                                                              
What's the year it was adopted?                                                                                                 
MR. MONINSKI: I'm sorry, Senator.  I don't have that with me.                                                                   
SENATOR DONLEY:  It's all right.                                                                                                
MR. MONINSKI: …gift wrapped for you.                                                                                            
SENATOR DONLEY:  Sounds like something I might have done.                                                                       
MR. MONINSKI:  Thank  you, if,  in fact,  it was  the case.   This                                                              
particular  statute  requires  that the  Commission  complete  its                                                              
review  and make  a decision  either to  approve or  to reject  an                                                              
application within 90 days after  having the application complete.                                                              
To  the  best  of  my  knowledge,  the  APUC,  the  former  Public                                                              
Utilities Commission,  and the RCA had in each  and every instance                                                              
complied  with this  statute.  The  interesting  thing to note  is                                                              
that there appears  to be no negative results as  a result of that                                                              
compliance.  Applications are filed.   They are made complete over                                                              
some  period of  time.  They  are processed  and  90 days later  a                                                              
decision gets made and I don't believe  that there's ever been one                                                              
that  missed a  deadline.    Absolute time  standards,  reasonable                                                              
absolute  time standards  do work  and  I would  encourage you  to                                                              
consider,  to think  about that  as, as  you move  along the  path                                                              
concerning  reauthorization.   When  the  RCA testified,  it  also                                                              
indicated that some  of the prior witnesses have  presented to you                                                              
some anecdotal  evidence.   I'm not sure  I completely  agree with                                                              
that.   I think  what you heard  from Chugach  and from  ARECA and                                                              
from  others  were  experiences that  those  witnesses  have  with                                                              
specific rate  cases.  But, if,  if by that the  Commission meant,                                                              
we don't  have any  statistics in  front of the,  in front  of the                                                              
Committee, I would like to offer a few as we go along.                                                                          
One  of the  ones that  I'd like  to offer  is one  that I  pulled                                                              
together fairly recently.  And I'll  take just a moment to explain                                                              
it to you because  its definition is kind of important.   I wanted                                                              
to go back and take a look at all  of the adjudicatory proceedings                                                              
and those are  the proceedings where, where the  regulator acts in                                                              
a quasi-judge capacity,  look at all the  adjudicatory proceedings                                                              
that  the  Commission  opened  up  that  were  related  to  tariff                                                              
filings.   And  I think  you heard  from  other witnesses,  tariff                                                              
filings are filings  that are made by companies when  they want to                                                              
do  something with  the  rates and  the  terms  and conditions  of                                                              
[indisc.]  that they  are.   I wanted  to look  at tariff  filings                                                              
because they  are the most  easy filings  to evaluate in  terms of                                                              
when cases are actually opened and  when they close.  There is not                                                              
a  complexity  even of  a  process  of matters  going  before  the                                                              
Commission,  but  tariff  filings  have  pretty  clear  points  of                                                              
delineation.   So, you  know when  they open,  you know  when they                                                              
close.   I also didn't  want to look at  any cases that  were open                                                              
for  less than  six months  because we  know by  the statute  that                                                              
that's sort of the default time standard  that we're working from.                                                              
About six months  is how long these  cases were intended  to be in                                                              
existence.   So I looked  at only cases  that were older  than six                                                              
months,  and then  only tariff  cases  because they  were easy  to                                                              
define.   And I  aged those  cases.   And I  aged those cases  and                                                              
counted them.   And I counted from  1999 until now, 63  cases that                                                              
have,  tariff  filings that  have  been  open  for more  than  six                                                              
months.  Then I  determined when the case was either  closed or if                                                              
they were still open, I used today's  date as the, as the point of                                                              
measure.  And I  averaged them.  And of those  cases, for those 63                                                              
cases, the aveage age for those cases  was 504 days.  So, there's,                                                              
there's a statistic and I'll be happy  to leave copy of my listing                                                              
with you  for you to take  a look, and  again I need to  point out                                                              
that I  chose this  category of  cases for  a reason, the  reasons                                                              
that  I state.   They're  not  all cases.    They certainly  don't                                                              
include, I don't  believe, any cases that were open  by the former                                                              
APUC, so I didn't  want to hold the RCA accountable  for cases the                                                              
APUC may have held open for an extended period of time.                                                                         
CHAIRMAN TAYLOR: The average was 500 and some days?                                                                             
SENATOR COWDERY:  Five hundred and how many?                                                                                    
MR.  MONINSKI: I'm  sorry.   Five  hundred  and four  days is  the                                                              
average age of those tariff dockets  that have been open more than                                                              
six months.                                                                                                                     
CHAIRMAN TAYLOR:  Senator Cowdery.                                                                                              
SENATOR COWDERY:   Yeah.  You know, we heard  testimony, and since                                                              
you're kind of  in that zone there that we're  talking about, the,                                                              
about the  interim rates that are  established and, and  they said                                                              
the last  interim rate, I thought,  was in October, 2001,  or what                                                              
we're  dealing with  now.   How  long,  I mean,  interim,  interim                                                              
rates, in your opinion, how long  should a person have to wait for                                                              
before  adjudication and  why, why  the wait?   And  you know,  it                                                              
seems  to  me  pretty  important  that that  interim  rate  is  an                                                              
accurate reflection  of, of the  time.  So,  if you could  talk, I                                                              
don't want  to divert  you from  your testimony  but I thought  we                                                              
were talking about in that area.                                                                                                
MR.  MONINSKI: Senator,  I appreciate  that.   I  don't know  that                                                              
there's  an  absolute  answer  to your  question.    You've  heard                                                              
testimony,  and  you'll  hear  it  from  me  as  well,  cases  are                                                              
different.   The category  of cases that  I just reported  to you,                                                              
specifically defined  and narrowed as  I suggested it was.   There                                                              
are other cases  that move much more quickly.   And the complexity                                                              
of the  case is  going to  drive how  long it's  going to  take to                                                              
resolve  the case.   There are  certainly some  cases that  should                                                              
easily be  resolved within  six months and  many that are.   There                                                              
are  other  cases that  probably  need  to  last longer  than  six                                                              
months.  The question  is do they need to last  a year, two years,                                                              
five  years?   My personal  opinion is  even a  complex rate  case                                                              
ought to get  resolved between a  year and 18 months.   And again,                                                              
that's just a rule of thumb, there's  no rule that I'm quoting to.                                                              
SENATOR COWDERY: Thank you.                                                                                                     
MR. MONINSKI: Next I was going to…                                                                                              
SENATOR COWDERY:  If I could  just say,  say the delay  of getting                                                              
into  the, and  setting a  permanent rate,  is that,  that can  be                                                              
sometimes expensive  or where is it disruptive  besides, you know,                                                              
or without having a permanent answer?                                                                                           
MR. MONINSKI:  And Mr.  Steinberg  reminds me  that he's going  to                                                              
address those…                                                                                                                  
SENATOR COWDERY: Oh, okay, I'm sorry.                                                                                           
MR. MONINSKI: …in his testimony as well.                                                                                        
SENATOR COWDERY: Yeah, go ahead.                                                                                                
MR. MONINSKI: Okay,  thank you.  I had mentioned  that I wanted to                                                              
bring four points  to your attention and again I  think, as I look                                                              
at them, three of them have already  been mentioned to you and one                                                              
of them will be new.  The four points  that I'd like to talk about                                                              
briefly are  the RCA's use  of its advisory  staff and  its public                                                              
advocacy section,  the lack of codified  ex parte rules,  and what                                                              
might appear to  be violations of the open meetings  act.  I think                                                              
you've heard  some testimony  about those three.   The  other item                                                              
that I  wanted to mention to  you also is  new and has to  do with                                                              
our perception,  ACS's perception,  of the RCA's  unwillingness to                                                              
conduct evidentiary proceedings.                                                                                                
Just as a  sort of a brief recap,  the RCA uses its  staff in sort                                                              
of two components, advisory staff  that communicate and report and                                                              
advise  directly  to the  Commissioners  and the  public  advocacy                                                              
section  that you  created in  1999 as  part of  the statute  that                                                              
created the  RCA.   Public Advocacy,  at least  my reading  of the                                                              
statute is, it was intended to be  the public interest advocate in                                                              
adjudicatory  matters that  the Commission  conducts.   The  rules                                                              
associated with how  the advisory staff are used,  is used and how                                                              
those members  are used is sort of  unclear.  You seem  to use the                                                              
advisory staff in  different ways at different  times in different                                                              
proceedings and the rules seem to  be rather ad hoc.  And I had an                                                              
experience  just recently  where  there was  a  dialogue that  was                                                              
commenced by the advisory staff and  it came to my attention and I                                                              
called  the advisory  staff  back  and said,  'This  seems like  a                                                              
different kind  of communication than  we have been having  in the                                                              
past.'  And  I asked for clarification.   The advisory  staff said                                                              
they couldn't answer  my question, they'd have to  refer it to the                                                              
Commission and I'm still waiting  for an answer back on that.  The                                                              
point being  that there  aren't real clear  rules in terms  of the                                                              
use of the  advisory staff.   There haven't been real  clear rules                                                              
in terms of  the use of the  public advocacy section, either.   In                                                              
fact, your  auditor as it  performed the  sunset audit of  the RCA                                                              
pointed  that out  and  having brought  that  to the  Commission's                                                              
attention,  a rulemaking  has been  opened now  that will  address                                                              
that.   We do  know this,  though, that  when the public  advocacy                                                              
section, both  in the  current version that  comes out  of statute                                                              
and in  the former version  back before  they, the APUC,  when the                                                              
staff advocacy group  was named to party, then  party rules tended                                                              
to apply  to the  staff.   The staff  was expected  to act  like a                                                              
party,  to function  like  a party  and was  subject  to the  same                                                              
obligations  and rights of  the other  parties in the  proceeding.                                                              
In this docket that I mentioned that  was opened recently, there's                                                              
a quote  that I'd like  to share  with you.   It's not mine  and I                                                              
hope my friends at the Alaska Telephone  Association won't mind my                                                              
borrowing their words.  This was  filed in the docket dealing with                                                              
the public  advocacy section.   And the  ATA indicated  that, 'The                                                              
main problems  inherent in the  current regulatory scheme  are the                                                              
Commission,  through  its  various   sections,  continues  to  act                                                              
simultaneously   as  investigator,   inquisitor,  prosecutor   and                                                              
adjudicator in its own dockets.'   And I think that is the essence                                                              
of the  issue that we're  trying to  get our hands  on.  And  I do                                                              
believe that  the rulemaking that's open  is going to help  us get                                                              
there.   And I think  that further  guidance from the  Legislature                                                              
will help us get there.                                                                                                         
I told you I'd share a couple of  numbers with you and I'd like to                                                              
share one now.   I went back  and took a look at  the adjudicatory                                                              
dockets, all  of the adjudicatory  dockets that were  opened since                                                              
the  RCA came  into existence.    And again,  the public  advocacy                                                              
section came  into existence  at the  same time.   There  were 498                                                              
formal  adjudicatory dockets  that were  opened since  July 1   of                                                              
1999.  Of that number, the public  advocacy section has been named                                                              
a party of 59 of those cases.  And  my calculator shows that to be                                                              
something a little bit less than  12%.  Which means that in 88% of                                                              
the  cases, it's  unclear  who's  performing the  public  interest                                                              
advocacy function.   It might  be that the  case is so  simple, so                                                              
straightforward  that that's  unnecessary.   There are cases  that                                                              
are like that.  My guess though…                                                                                                
CHAIRMAN TAYLOR: Let  me interrupt you for just a  second.  Though                                                              
Steve Kohn  was somewhat rambling  in his presentation  because he                                                              
didn't know  that he was going to  be called upon and  he probably                                                              
would have prepared  something more formal, Steve  Kohn of AkPIRG,                                                              
he was echoing  your very comments  before us and that  was at the                                                              
first hearing we held, is that he  felt they had been left out far                                                              
too often and that they had a significant  public advocacy role to                                                              
play but were  not really being allowed  to play that role.   So I                                                              
appreciate hearing your comments.                                                                                               
MR. MONINSKI: And  it, ACS's position is, I don't  want to suggest                                                              
to you  that we  don't find the  public advocacy  section to  be a                                                              
formidable advocate  and adversary in proceedings that  we are in.                                                              
It's  the  structure  that we're  talking  about.    It is,  as  I                                                              
mentioned before,  having decisions based evidence  in the record,                                                              
being able  to confront  adverse witnesses,  being able  to cross-                                                              
examine testimony, those are the  kinds of things we're interested                                                              
in pursuing.                                                                                                                    
SENATOR DONLEY: Are you not allowed to do that?                                                                                 
MR. MONINSKI: In  those cases where the advisory  staff is, is the                                                              
participant  as  opposed  to  the  public  advocacy  section,  the                                                              
Commission has told  us that we were not allowed  to cross-examine                                                              
the  advisory  staff.   And  if you  don't  have  the PAS  in  the                                                              
proceeding, to the  extent that the advisory staff  is engaging in                                                              
advocacy's  functions, advocacy  activities: a)  you don't  always                                                              
know it  because those things  are not  done on the  record, we're                                                              
going to talk in a moment about ex  parte, whatever ex parte rules                                                              
exist in this  jurisdiction don't seem to apply  to communications                                                              
between the advisory staff and the Commissioners.  So…                                                                          
SENATOR  DONLEY: Okay,  so you  do get  to do it  when the  public                                                              
advocate  section  is  involved because  they're  treated  like  a                                                              
party.   But you don't  get to do  it when  the staff is  doing it                                                              
instead  of the public  advocacy  section.  I  remember there  was                                                              
some discussion  the first  day, I  didn't fully understand  this,                                                              
now I  think I'm starting  to understand  the concern  that people                                                              
before the Commission have.                                                                                                     
MR. MONINSKI: And I would agree with your characterization.                                                                     
SENATOR DONLEY: Okay, thank you.                                                                                                
MR. MONINSKI: The next item that  I wanted to mention, and I won't                                                              
spend  a lot  of time  on it,  is  the issues  regarding ex  parte                                                              
communications.  And  again, ex parte tends to be  sort of a legal                                                              
judicial  term.   When I  think about  it, I  think about  parties                                                              
having off-record  kinds of  communications with decision  makers,                                                              
with judges or  quasi-judges, communications that  are outside the                                                              
scope of all the parties and again  are maybe not on the record at                                                              
all.   Depending on  the rules, however,  ex parte  communications                                                              
may or may not be improper.  The  rules define whether or not they                                                              
are or  they are not  improper.  And  you heard testimony  earlier                                                              
that in Alaska, other than what we  might find in case law, in the                                                              
common law,  we don't  have any ex  parte rules that  specifically                                                              
apply to  practice before the  former APUC and  the RCA.   This is                                                              
not a new  issue.  The former  APUC considered this  issue several                                                              
years ago.   There was some  movement along the lines  of adopting                                                              
regulations, but that did not happen  and it hasn't happened since                                                              
the RCA  has come  into office.   Ex  parte creates  an issue  for                                                              
parties because,  and I  think you  may have  heard this  from Mr.                                                              
Gordon  when  he  testified,  it's   difficult  to  interact  with                                                              
Commissioners  given concerns about  ex parte.   And in  fact, ACS                                                              
has   been,   I   think,   discouraged   from   interacting   with                                                              
Commissioners off-the-record because of concerns about ex parte.                                                                
CHAIRMAN TAYLOR:  Well, to  give you an  example of how  concerned                                                              
the Attorney  General's  office is,  I had asked  Bernie Smith  to                                                              
show  up over  here at  four o'clock.   Fortunately,  we got  that                                                              
matter of discovery  taken care of.  He merely walked  in the room                                                              
and sat  down and we  got an Assistant  Attorney General  jumps up                                                              
and runs  over and runs  him out of  the room because  he's afraid                                                              
some  of the  generic discussions  being given  to this  Committee                                                              
might  somehow impact  him.   Nobody  seems  to care  about it  if                                                              
you're flying out to a fishing lodge  for a couple of days, but if                                                              
he's going to sit  here and listen to public testimony  given at a                                                              
public hearing that somehow that  is too sensitive.  I mean, there                                                              
seems to be a heck of a different  standard apparently between the                                                              
Attorney  General's  office  and  their concerns  about  ex  parte                                                              
communication and  the concerns apparently either  being raised or                                                              
not being raised  at the RCA.   I don't know what  those standards                                                              
are and if you  have any suggestions you can give to  us on how we                                                              
might set as a matter of public policy,  better standards that are                                                              
more  easily enforced  and  maybe more  easily  understood by  our                                                              
Commissioners, we  would certainly  be grateful of  any assistance                                                              
you can give us.  Thank you.                                                                                                    
MR. MONINSKI:  I appreciate  that opportunity,  Mr. Chairman.   In                                                              
fact, I have one that I just want  to briefly mention to you.  But                                                              
I guess, given  the time constraints of these  proceedings, of the                                                              
proximity of  the special session, I  for one was finding  it hard                                                              
to try and come up with really good  well-thought-out solutions to                                                              
many of these issues.                                                                                                           
CHAIRMAN TAYLOR:  You've got to understand something,  Wes, nobody                                                              
gives a  damn about  really good  or well-thought-out.   We  got a                                                              
Governor yanking us  back to Juneau on the 24.    He wants to cram                                                              
a bill  down the throat  of this  Legislature that says  four-year                                                              
extension and maybe he'll add in  some of the stuff left over from                                                              
the House bill last time around.   Nobody cares about whether this                                                              
is well thought  out, whether this  is good public policy  or not.                                                              
We're being  told we  have to  accomplish it  within a very  brief                                                              
period  of  time  and that's  why  we're  holding  these  hearings                                                              
because I want to  get the most on the record we  can and the most                                                              
suggestions we can so that when we  are forced to make a decision,                                                              
we  will have  the  very  best recommendations  from  the  experts                                                              
within  this industry  that  we can  get.   And  that's why  we've                                                              
wasted,  or taken  up,  a lot  of your  time  and a  lot of  other                                                              
peoples' time here and we're going  to continue to do that so that                                                              
the Legislature may be better prepared  than they would have been.                                                              
That's why I'm sitting  here today and that's why  the rest of the                                                              
people are  here too is to come  up with the very best  product we                                                              
can if we're going to be forced to address it.                                                                                  
MR. MONINSKI: I'll take you up on  your invitation and make my one                                                              
brief suggestion.  And that is, is  to bring to your attention the                                                              
approach that's  used at the FCC.   The FCC routinely  allows what                                                              
is even called ex parte discussion  with Commissioners.  People go                                                              
to  Washington   and  they  have   an  opportunity  to   meet  FCC                                                              
Commissioners from other parts of  the country and they are, given                                                              
the application  of specific  rules, allowed  to communicate  with                                                              
FCC  Commissioners.   But  the  most  significant aspect  of  this                                                              
though is that there is a requirement  within a specific period of                                                              
time that  those communications be  disclosed in  writing, entered                                                              
in the  record, with an  explanation of  what was discussed.   And                                                              
that  certainly would  be one  thing that  I would,  that I  would                                                              
recommend  to the  Legislature as  a possible  alternative to  the                                                              
current situation where  we really don't know where  the lines are                                                              
drawn and it  makes it very difficult to know  when you've crossed                                                              
it.    There  could  be, I'm  sure  there  could  be  an  improper                                                              
communication, it's just awfully hard to tell when they occur.                                                                  
SENATOR DONLEY:  And you  this is not  an isolated issue  with the                                                              
RCA.  It runs  throughout State and local government  where you've                                                              
got  commissions  or  groups,  and the  Anchorage  Assembly  is  a                                                              
perfect example when  they sit as a quasi-judicial  group but they                                                              
go into some  community council meetings, the issues  come up, and                                                              
there really isn't a good consistent  approach to how to deal with                                                              
this and its  something that ought  to be dealt with, not  just on                                                              
RCA, but  from a bigger  picture also.   Probably it'd be  good to                                                              
have some sort of statutory guideline on this issue.                                                                            
CHAIRMAN   TAYLOR:    Barbara   Craver    came   up    with   some                                                              
recommendations.   There's  about three  pages which  were in  the                                                              
beginning of  all of our  packets and  she submitted those  to the                                                              
Committee  at  my  request  just  so  we  would  have  some  other                                                              
standards on  how other  states are doing  this and how  are other                                                              
regulatory  commissions and  so on  doing  it and  what are  those                                                              
standards.  And  so if you get a chance, Wes, we  can get you guys                                                              
a copy  of that and anybody  else in the  room that would  like to                                                              
have a copy, we can certainly provide  that for you through staff.                                                              
But I'm very  serious about this.   I think it's a  very important                                                              
element that  many people have discussed  with us and if  we could                                                              
possibly  find  a  better  standard  and a  better  way  of  doing                                                              
business in the future, I think it  benefits the Commission and it                                                              
benefits all the consumers at the same time.                                                                                    
SENATOR DONLEY: It's a tricky thing though.                                                                                     
CHAIRMAN  TAYLOR: Oh,  it's very  delicate.   There's no  question                                                              
about it.   But with, with your  good help and the  Committee's, I                                                              
think we could  probably come up with something,  so…  Continue, I                                                              
didn't mean to interrupt.                                                                                                       
MR. MONINSKI: Thank  you, Mr. Chairman.  The other  item I want to                                                              
mention is  something that you heard  in prior testimony.   It has                                                              
to  do with  the open  meetings  act.   And  I'm going  to try  to                                                              
clarify something  for you  if it hasn't  already been.   The, the                                                              
RCA and it's predecessor agency,  the APUC, is covered by the open                                                              
meetings  act  and  in fact  for  its  rulemaking  proceedings  is                                                              
covered by  the administrative procedures  act.  It's only  in its                                                              
rule  as quasi-judge  in  its  adjudicatory proceedings  that  the                                                              
administrative  procedures act  doesn't  apply.   Over the  years,                                                              
I've  witnessed  that  the Department  of  Law,  having  routinely                                                              
advised  the  Commission  that,   except  where  there's  a  clear                                                              
exception  to the  open meetings  act, such  as adjudications,  or                                                              
maybe when  the Commission's  talking about  personnel matters  or                                                              
pending litigation, those kinds of  things that are spelled out in                                                              
the  statute, other  than  that, all  other  matters that  require                                                              
deliberation  or require voting  has to  be done  in public.   And                                                              
that advice was  relayed to the Commission as recently  as May 24                                                               
of 2002, this is when the Attorney  General again said, 'If you're                                                              
going to deliberate,  if you're going to take a vote  and it's not                                                              
any, in  any of  those exception  categories, it  must be  done in                                                              
public.'  I became concerned not  too long ago because I was doing                                                              
some research  and I  was researching  the Federal  Communications                                                              
Commission proceedings  and came upon a filing that  had been made                                                              
by the RCA  at the FCC.  And  because I attend most  of the public                                                              
meetings that the  RCA holds, I couldn't remember  this one having                                                              
been discussed.   And  I went back  and checked  the record  and I                                                              
couldn't find anything  that indicated that it was  discussed.  So                                                              
then I went back and checked the  record more thoroughly.  In that                                                              
checking, I found 14 comment filings  that were made at the FCC by                                                              
the RCA since 1999, eight of which  I could not find any record of                                                              
their being a  public meeting discussion.  And again,  I find this                                                              
a  little bit  confusing.   Either  I'm  not reading  the  records                                                              
properly or sometimes  these things are being  discussed in public                                                              
meetings but other times they're  not.  And I don't understand why                                                              
it would be one way or the other.  If there is a clear…                                                                         
TAPE 02-42, SIDE A                                                                                                            
MR. MONINSKI: …seeing them split  up about 50/50 did cause me some                                                              
confusion.  Some other issues that  are public meeting-type issues                                                              
having  to do  with contracting  and procurement,  you heard  some                                                              
testimony about that.  I did go back  and double-check the statute                                                              
regarding  the signature  authority  of the  Chair.   It's  pretty                                                              
clear that it's limited to $5000  and the next sentence after that                                                              
in the statute  implies that anything that's greater  than a $5000                                                              
procurement  would  require action  by  the  full Commission.    I                                                              
believe  that that  would  be covered  by  the  open meetings  act                                                              
rules.  The other  thing, too, is perhaps this  proceeding itself.                                                              
I  don't  recall  that  the  Commission  had  any  public  meeting                                                              
discussion   of   House  Bill   333,   which  was   the   original                                                              
reauthorization bill.  There have  been numerous public statements                                                              
that  have been  made, website  postings,  correspondence to  this                                                              
Committee, and again,  I haven't seen or participated  or observed                                                              
any discussions of that.                                                                                                        
CHAIRMAN  TAYLOR:  No,  in  fact we  had  a  couple  Commissioners                                                              
specifically  say  on  the  record under  oath  that  that  letter                                                              
written by Nan to the Chair of this  Committee was not brought up,                                                              
it was not  shared to them and  that they did not vote  on it, did                                                              
not have an opportunity  to vote on it.  Yet it  was stated as the                                                              
position of the Regulatory Commission.                                                                                          
MR. MONINSKI:  I think that's the  distinction.  If  an individual                                                              
Commissioner were  to make a position  statement like that  and it                                                              
were  so characterized,  I  think  that would  not  have a  public                                                              
meeting or open meeting section impact.   But if it's the position                                                              
of the Commission then I would presume  that it would be discussed                                                              
in  a  public  meeting.    And  again,  the  reason  why  this  is                                                              
important, and  I think  you heard one  of the Commissioners  last                                                              
week indicate the  open meetings act makes  communications between                                                              
the  Commissioners cumbersome  and  difficult.   I  can tell  you,                                                              
having been  at the Commission,  that that's  true.  It's  a tough                                                              
thing to  stay in compliance with  the open meetings act  and have                                                              
continued and meaningful  dialogue going on.  But  the simple fact                                                              
is it is the law.  And it's the law  and it goes back to a comment                                                              
that Mr. Carson made, it's a law  that creates accountability.  We                                                              
don't have  elected officials  sitting on  the RCA  or nor  did we                                                              
have them on the former APUC.  And  in order for the citizens, the                                                              
regulated industry to be able to  bring issues to you, the elected                                                              
officials who  do have that  accountability, then these  actions I                                                              
believe do have  to take place in a public setting  as the statute                                                              
requires.  The last thing I want  to mention to you this afternoon                                                              
is  a  new  item,  which  you  didn't   hear  discussed  by  other                                                              
witnesses.   You  did  hear Mr.  Griffith and  Mr.  Buell and  Mr.                                                              
Gordon talk  about their  experiences with rate  cases.  And  as I                                                              
told you,  ACS's experience, as Mr.  Steinberg will tell  you, has                                                              
been  quite  similar.    You might  have  walked  away  from  that                                                              
testimony thinking,  you know, that's  all that ever  happens over                                                              
at the  Commission, is we have  all these lengthy  proceedings and                                                              
we have discovery going on all the  time and we lock up people for                                                              
weeks on end in hearings.  That's  not exactly the case.  In fact,                                                              
and I  believe that  the RCA had  the best  of intentions,  but in                                                              
fact we have somewhat the opposite  going on.  I think as a result                                                              
of the  emphasis that the Legislature  placed on creating  the new                                                              
Commission  that  we've got  to  get in  there  and  clean up  the                                                              
backlog and clear  out old cases and be concerned  about standards                                                              
and  time  limits,  I  think the  Commission  created  what  I  am                                                              
referring to as  its diversion procedure.  It is  a procedure that                                                              
was  not adopted.    It was  not  publicly noticed.    It was  not                                                              
adopted by regulation.  It was simply  introduced back in February                                                              
of 2000.  The diversion procedure  applies to tariff filings.  And                                                              
an  entity,  the  Alaska Exchange  Carriers  Association,  made  a                                                              
tariff filing  in the year 2000.   And instead of  suspending that                                                              
tariff, which  means the  Commission takes a  look at  the tariff,                                                              
maybe they approve  it, but if they think they need  to spend some                                                              
more  time with  it after a  very brief  review,  either 30  or 45                                                              
days, it  then goes  into a  period of  suspension, which  is that                                                              
initial   six-month  period   that  we've   been  talking   about.                                                              
Typically, historically,  what happens is, when you  have a tariff                                                              
suspended  like that,  during that  six-month  period some  things                                                              
occur.   Other  interested parties  have a  right to  come in  and                                                              
petition to intervene.   You do conduct some discovery  if that is                                                              
appropriate for the case.  You give  the parties an opportunity to                                                              
file  some  written  testimony.    And  you  hold  an  evidentiary                                                              
proceeding  if there  are  disputed factual  issues.   And  what's                                                              
happened  with this  new diversion  procedure is  we're trying  to                                                              
short circuit that, again perhaps  well intended, but having rough                                                              
results.  The short-circuiting is,  the tariff gets suspended, the                                                              
advisory staff,  having provided  some advocacy to  the Commission                                                              
about suspending that  tariff, has a memorandum  that then becomes                                                              
public.   That  memorandum  becomes  public on  the  day that  the                                                              
Commission makes  its decision to suspend.   You don't see  it any                                                              
sooner.  You don't have an opportunity  to respond to it.  But you                                                              
do  get  to see  it  in  the  morning  of the  meeting  where  the                                                              
Commission would actually suspend  these tariffs.  The new part of                                                              
the procedure is  now we go into suspension and  instead of having                                                              
all of  these due process safeguards  out there, the  filing party                                                              
gets to respond to that advisory  staff memorandum within 30 days.                                                              
After the Commission gets that response  the Commission might make                                                              
a permanent  decision.   There may  be no  further process  beyond                                                              
that.   In the  case of  that AECA tariff,  that's what  happened.                                                              
The  Commission  made  a  permanent decision.    It  rejected  the                                                              
tariff.  The AECA then appealed that  decision, because it now had                                                              
a final  order, to  the Superior  Court.   The Superior  Court, in                                                              
March of this year…                                                                                                             
SENATOR DONLEY: I got a little behind there, the ACEA?                                                                          
MR.   MONINSKI:   I'm   sorry,  the   Alaska   Exchange   Carriers                                                              
Association.  It's  a group of companies that is  required to have                                                              
a tariff  in effect for charging  access charges and I  don't know                                                              
how much detail you want to get into.                                                                                           
SENATOR DONLEY: Okay, all right.                                                                                                
MR. MONINSKI:  But this  entity is  required to  have a  currently                                                              
approved tariff.                                                                                                                
SENATOR DONLEY: Okay.                                                                                                           
MR. MONINSKI:  And it  made a tariff  revision that was  suspended                                                              
subject to  this new diversion program.   The AECA had  30 days to                                                              
respond to the  advisory staff memorandum and  then the Commission                                                              
summarily rejected the  filing.  That was appealed.   The Superior                                                              
Court of  Alaska, in  March of  this year,  reversed and  remanded                                                              
because  no evidentiary,  no  evidentiary  hearing was  conducted.                                                              
And so, and  so now the case  is back in front of  the Commission.                                                              
But  since the  diversion  process began  and  the Superior  Court                                                              
ruled,  in that  period of  time,  ACS has  had 19  of its  tariff                                                              
filings that have been the subject  of this diversion process.  In                                                              
one of  those cases,  we did file  a petition for  reconsideration                                                              
raising some  of the same  issues I'm talking  to you about.   The                                                              
Commission denied the petition.                                                                                                 
SENATOR  DONLEY: Okay,  now this  is going back  to your  original                                                              
point   number   four,  unwillingness   to   conduct   evidentiary                                                              
MR. MONINSKI: Yes.                                                                                                              
SENATOR DONLEY: Okay.                                                                                                           
MR. MONINSKI: And again, when you  hear about rate cases, you hear                                                              
about all of this process.  But there  are numerous other kinds of                                                              
cases that  are moving  in front  of the Commission.   And  in the                                                              
case  of tariff  filings, it's  the lack  of process  that we  are                                                              
concerned  about.   And  it's not  clear yet  whether  or not  the                                                              
Commission in  response to the Superior  Court remand is  going to                                                              
change the procedure.  We'll…                                                                                                   
SENATOR DONLEY: Can I ask you a question?                                                                                       
MR. MONINSKI: Sure.                                                                                                             
SENATOR  DONLEY: I  mean,  If their  rule  making  is outside  the                                                              
administrative procedures  act, I mean, the rule  making's inside,                                                              
their judicial function is not within,  but still they're going to                                                              
be subject to  some basic fairness requirements,  I would imagine,                                                              
and  some court-made,  you know,  decision  laws to  how you  make                                                              
decisions as a quasi-judicial agency  and be fair.  And that would                                                              
just seem  to me to require  some sort of evidentiary  proceedings                                                              
just on  a basic due  process standard.   Is this,  this diversion                                                              
process  you're  talking about  here,  other  than this  one  case                                                              
you're  talking about  where the  court  rejected it  and sent  it                                                              
back, where  did this standard  come from?   You know,  what's the                                                              
experience  with this?   Has  any other  quasi-judicial agency  in                                                              
Alaska  been   successful  using,  making  decisions   without  an                                                              
evidentiary hearing?                                                                                                            
MR. MONINSKI: Senator, I wish I could  answer that question, but I                                                              
cannot.  The  term diversion is mine.   I labeled it  that because                                                              
that's what it looks  like to me.  I believe what  we're trying to                                                              
do is move  cases faster, which is  a good objective.   But in the                                                              
process, I believe  we may have lost sight of  some very important                                                              
due process issues.   And I'm hoping that the  court's remand will                                                              
increase  the Commission's  sensitivity to  that.   But right  now                                                              
that's not  clear.   And to the  extent, again,  as we  talk about                                                              
things   that  the   Legislature   might   consider  through   the                                                              
reauthorization process,  this is certainly one that  I would hope                                                              
would be  undertaken.  Those conclude  my remarks and if  you have                                                              
any  other questions,  I'd be  happy to  answer them.   The  other                                                              
thing  I  wanted to  let  the  Legislature  know  and I  hope  the                                                              
Commission understands,  and that is  we really want to  work with                                                              
the process  in order  to improve it,  both by participating  here                                                              
and continuing  to work  in these rulemakings  and we  offer those                                                              
types of input and that assistance wherever we can offer.                                                                       
CHAIRMAN TAYLOR: Thank  you.  [Indisc.] had Leonard  yet to go and                                                              
we've run out of time at this point.   I'm willing to give Leonard                                                              
another half hour  if we can get wrapped up within  that period so                                                              
you wouldn't  have to come  back tomorrow.   And we could  take up                                                              
public testimony tomorrow.                                                                                                      
SENATOR DONLEY: Can I just ask one more thing?                                                                                  
CHAIRMAN TAYLOR: Sure.                                                                                                          
SENATOR  DONLEY: This thing  you've labeled  diversion only  takes                                                              
place  where there  isn't the  public  advocate section  involved,                                                              
MR.  MONINSKI: If  I  may, Senator.   Again  we've  got, in  every                                                              
tariff adjudication  you have a front-end piece  and then possibly                                                              
a  further piece.   The  front-end  piece is  that the  Commission                                                              
within  either  30 or  45  days  depending  upon which  rules  you                                                              
operate under must  make a preliminary decision  either to approve                                                              
the tariff  or to suspend it.   If the tariff's approved,  it goes                                                              
into effect and you move on.  If  the tariff is suspended, then it                                                              
moves into the  six-month statutory suspension period.   And it is                                                              
that period that  has now been impacted by what  I've been calling                                                              
this diversion process.                                                                                                         
CHAIRMAN  TAYLOR: But  his question  was: if  the public  advocacy                                                              
enters as a party, then you do get a hearing?                                                                                   
MR. MONINSKI: That's correct.  And  in this diversion process, one                                                              
of the things the  Commission has said to us in  one of its orders                                                              
is it doesn't  necessarily end after the filing  party responds to                                                              
the  advisory  memorandum.   Maybe  we'll  have  more  proceedings                                                              
beyond that.   If that were  to happen and the  Commission thought                                                              
that it was appropriate,  it would and could designate  the public                                                              
advocacy  section to  participate  at that  point.   But up  until                                                              
then, the public advocacy section has not participated.                                                                         
CHAIRMAN TAYLOR: And you may not  be receiving any opportunity for                                                              
a hearing?                                                                                                                      
MR. MONINSKI:  That was  certainly true  in the  case of  the AECA                                                              
tariff and in fact so far in some other tariffs as well.                                                                        
CHAIRMAN TAYLOR: Okay.  Did you have anything further, David?                                                                   
SENATOR DONELY: I  can see why the court sent this  back.  I mean,                                                              
you didn't  even get a hearing?   I mean, you just got  here's our                                                              
decision now  you can respond to  it and we might change  our mind                                                              
based on your  response.  But you  don't really get a  hearing.  I                                                              
mean, that's, there's  some fundamental questions  there, I think.                                                              
I,  this is  really  getting complex  and I'm  trying  my best  to                                                              
understand what's  going on  here.  I  do have some  experience in                                                              
the area  of administrative law,  and on something  that important                                                              
that does  seem real, it  just seems unusual.   And I'm  trying to                                                              
figure out where  this process got developed versus  what I'm used                                                              
to in administrative law.  Right.   So I'm sorry, I'm just kind of                                                              
talking, thinking it out here…                                                                                                  
CHAIRMAN TAYLOR: Senator Therriault had a question too.                                                                         
SENATOR THERRIAULT: I think you mentioned  though that you believe                                                              
that this is a  process developed out of a desire  to try and move                                                              
things quickly.                                                                                                                 
MR. MONINSKI: That is my belief, yes.                                                                                           
CHAIRMAN TAYLOR:  Thank you.   Leonard, if  you could in  about 20                                                              
MR. STEINBERG:  I will try  to be as prompt  as I can.   I realize                                                              
some of  my comments may  raise questions  and to the  extent that                                                              
you would like anything responded  to, I would be happy to respond                                                              
as soon  as we can within  the time allowed.   I apologize  for my                                                              
voice.   I've got  the remnants  of my  two-year-old's cold.   But                                                              
I'll move  forward as best  as I can here.   I'd like to  begin by                                                              
alluding to something  that Wes said during his  opening comments.                                                              
And that  goes to the notion  that interconnection  agreements and                                                              
rates are  the drivers of  local telephone competition  in Alaska.                                                              
If terms  and rates are  not properly set,  there will be  a long-                                                              
term, there  will be  long-term consequences  that jeopardize  the                                                              
ability   of    Alaskans   to   enjoy   modern    and   affordable                                                              
telecommunications services.   Now my comments are  going to focus                                                              
on  just a  few of  the legal  and policy  calls of  the RCA  that                                                              
concern us.  I'm going to talk a  little bit about interconnection                                                              
agreements, a little bit about the  rural exemption and some about                                                              
rate cases.   In all these matters, the RCA's  positions generally                                                              
reflect an activist Commission making  policy according to its own                                                              
vision  and  implementing  it  through  existing  or  new  utility                                                              
regulations.      Before   we  jump   into   our   discussion   of                                                              
interconnection  agreements  and rates,  it  might  be helpful  to                                                              
consider and  abstract and [indisc.]  simplified example.   Please                                                              
imagine  a  gas station.    The  proprietor  has invested  in  the                                                              
business  by  building  and maintaining  a  building,  putting  in                                                              
tanks, installing gas  pumps and the like.  The  gas station owner                                                              
buys gas from  a distributor for  $1.50 a gallon and sells  it for                                                              
$1.65 a gallon.  Of the 15-cent margin,  10 is required to recover                                                              
his  investment, leaving  5 for  profit.   Now imagine  government                                                              
stepping  in and  telling the  gas station  owner that  he has  to                                                              
permit a  competitor to use  one of his sets  of pumps and  oh yes                                                              
sell him  the gasoline for  $1.00 a gallon.   The competitor  then                                                              
decides to sell  his gas for $1.50 a gallon.  It  will be 15 cents                                                              
cheaper than  the original proprietor's  gas.  And  the competitor                                                              
will have a  margin of nearly 50  cents a gallon as nearly  all of                                                              
his margin  goes to  profit because  the competitor  has not  made                                                              
substantial investments  of his own.  In the short-term,  this may                                                              
look god for  consumers.  They are  paying 15 cents a  gallon less                                                              
for their gas.  But how long do you  think the original proprietor                                                              
will stay in business? Moreover,  how many new gas stations is the                                                              
original proprietor  likely to build?  Well, with  that example in                                                              
mind,  let's turn  specifically to  telecommunications  agreements                                                              
that  are known  as interconnection  agreements.   What are  they?                                                              
Well,  they  permit  competitors  to lease  facilities  through  a                                                              
mechanism  known as  unbundled network  elements, or  UNEs.   They                                                              
establish UNE rates competitors pay  to use ACS facilities and the                                                              
processes  used for  the companies  to interact  with each  other.                                                              
The rates  directly account for most  of our competitors'  cost of                                                              
goods  sold  and  therefore  indirectly  establish  the  range  of                                                              
possible market  prices.   Now incumbent  carriers in urban  areas                                                              
are    obligated   to    execute   these    agreements   of    the                                                              
Telecommunications  Act  of 1996,  where  carriers  are unable  to                                                              
negotiate  mutually acceptable  terms.   State Commissions  are in                                                              
power to establish  the rates and conditions  through arbitration.                                                              
Turning  now  specifically  to  Anchorage.    The  interconnection                                                              
agreement between  GCI and ATU  was one of  the very first  in the                                                              
nation.   It was  approved by the  APUC in  January 1997  in order                                                              
U96-89-9.   In that  order, the APUC  established a temporary  UNE                                                              
loop rate  of $13.85  a month.   This  rate was  intended to  be a                                                              
short-term substitute  for and  be replaced by  prices based  on a                                                              
cost study in compliance with federal law.                                                                                      
SENATOR DONLEY:  I'm sorry to interrupt  you.  But can  I, I heard                                                              
this  $13.85 before  and I  don't really  understand, what's  that                                                              
MR. STEINBERG:  Senator, that  is a monthly  rate for  leasing the                                                              
local loop.                                                                                                                     
SENATOR DONLEY: You mean like just to somebody's house?                                                                         
MR. STEINBERG: That  is the connection between  the central office                                                              
and somebody's telephone,  be it in the house or  a business.  But                                                              
it is the loop between the central office and the telephone.                                                                    
SENATOR  DONLEY:  So  if  somebody,  so if  this  wire  line  into                                                              
somebody's house  is owned  by ACS and  somebody else wants  to do                                                              
the service, then they would pay  ACS $13.85 a month to rent or to                                                              
use your wire line into somebody's house.                                                                                       
MR. STEINBERG: That is correct.                                                                                                 
SENATOR DONLEY:  I'm trying  to, you know,  I just don't  remember                                                              
exactly, you know, what the rate  we're paying for home service is                                                              
MR. STEINBERG:  Well, I can tell  you that that is below  our cost                                                              
for that, to  go out and build  the loop like that on  average.  I                                                              
mean these are averages.  But on  average our cost of a local loop                                                              
is several  dollars higher than that,  quite a few  dollars higher                                                              
than that.                                                                                                                      
SENATOR THERRIAULT:  Is that  the cost  to build  that loop  or is                                                              
that the  cost that  you purchased  the loop  for?  Your  business                                                              
entity is comprised of businesses that you purchased.                                                                           
MR. STEINBERG: I  understand, Senator.  Regardless  of whether you                                                              
look  at it  either  a historical  or  a prospective  basis,  that                                                              
$13.85 is considerably below our  cost, either way you look at it.                                                              
SENATOR THERRIAULT:  So, if  you build a  new loop, it's  going to                                                              
cost you more than that?                                                                                                        
SENATOR  DONLEY:  And  it's  what  we're  talking  about,  Senator                                                              
Therriault and  I, right  now, this is  somehow the TELRIC,  total                                                              
element long run incremental costs.                                                                                             
MR. STEINBERG: There are different  ways of measuring cost.  There                                                              
are actual costs, which frankly are  the costs that we have to pay                                                              
out of pocket for  all the [indisc.] we have in  the ground and on                                                              
the  pole today.    Some  people refer  to  those as  historic  or                                                              
embedded  costs.   There  are also  forward  looking  costs.   The                                                              
TELRIC costs  that you are  referring to  which are the  costs for                                                              
determining  the  rates  for  unbuckled   network  elements  under                                                              
federal law are  forward-looking rates, which would  be the rates,                                                              
not  the same  as,  exactly  the same  as  the rates  that  you've                                                              
already  paid for,  but the  rates  you would  pay going  forward.                                                              
Now, as  a practical  matter, you  would expect  those, you  would                                                              
never  expect those  rates to  be  exactly the  same, but  neither                                                              
would you  expect them to  be grossly  different either.   I mean,                                                              
what  you  build  today  tomorrow  becomes  historical.    So  the                                                              
difference between  history and prospective is not  that great and                                                              
you would expect them to be different, but not grossly so.                                                                      
SENATOR THERRIAULT: So what was the rate that you requested?                                                                    
MR. STEINBERG: The  rate that we requested, and I'll  get to that,                                                              
if you  give me  just a moment,  Senator.  The  point I  wanted to                                                              
make on this is  in the words, going back to where  we started and                                                              
I'll get  to your  question.   In the  words of  the APUC  back in                                                              
1997, all prices  in the arbitrated interconnection  agreement are                                                              
temporary  in nature, this  is a  quote, and  will require  a full                                                              
study  based upon  a cost  methodology  to be  determined by  this                                                              
Commission at a  later date.  And if you bear  with me, Senator, I                                                              
think I may  answer your question.   ACS sought but was  unable to                                                              
obtain an  agreement with GCI for  new cost-based rates.   The ACS                                                              
then asked  the RCA to  set new rates  in compliance  with federal                                                              
law in January of 2000.  The RCA  granted ACS's request to set new                                                              
forward-looking  rates  in March  of 2000,  expressly  recognizing                                                              
that the existing  rates were both temporary and  quote, not based                                                              
upon  an accepted  forward-looking  cost methodology,  end  quote.                                                              
Nevertheless, neither the APUC nor  the RCA has ever established a                                                              
cost-based rate in  compliance with federal law for  Anchorage.  A                                                              
year and a half after we requested  new rates, in January of 2000,                                                              
ACS  asked  for at  least  a new  temporary  rate.   And  the  new                                                              
temporary rate sought  by ACS was $24 a month.   Now, ACS provided                                                              
the  RCA  with substantial  cost  studies  supporting  this  rate,                                                              
copies  of  which  we  are  willing  to  make  available  to  this                                                              
Committee if  it desires.  The  RCA rejected ACS's  suggested rate                                                              
and ordered  a new temporary and  refundable rate of $14.92.   And                                                              
there was no  cost study supporting  that number.  This  is only a                                                              
small increase  over the old temporary  rate of $13.85.   And it's                                                              
prudent to look closely at where this number came from.                                                                         
SENATOR DONLEY: Did you say $14.90?                                                                                             
MR  STEINBERG: $14.92  was the  new temporary  rate.   As I  said,                                                              
there's no  cost study supporting  that number.   The rate  was in                                                              
fact provided to  the Commission by one of GCI's  lawyers.  That's                                                              
where  the basis  for that  rate came  from.  Well,  where are  we                                                              
today for Anchorage UNE rates?                                                                                                  
CHAIRMAN TAYLOR: Leonard, Let me interrupt you.                                                                                 
MR. STEINBERG: Yes.                                                                                                             
CHAIRMAN TAYLOR:  That's a pretty  dramatic statement.   There was                                                              
no other evidence  provided with it.  One of  their attorneys just                                                              
kind of called up and said here's a good sounding number.                                                                       
MR. STEINBERG:  One of their attorneys,  who is here  today, stood                                                              
up and  said, 'Gee, if  you do the  same thing for  Anchorage that                                                              
you did  in Fairbanks  and Juneau,  we think it  would come  in at                                                              
about $14.92.'  And that was the  rate that the Commission ordered                                                              
as  the new  temporary  rate.   There  was  no evidence  put  into                                                              
record.  There were no studies that  anyone could look at.  It was                                                              
without representation.    Well, where are  we today?   Two  and a                                                              
half years after  requesting new rates in compliance  with federal                                                              
law and five and a half years after  initiating facilities leases,                                                              
ACS still has  never had an Anchorage UNE rate  in compliance with                                                              
federal rules.  In fact, today ACS  has been unable to obtain even                                                              
a schedule for  resolving this.  We have asked  for hearing dates.                                                              
We have  asked for a schedule.   So far  we have not been  able to                                                              
get either of those.  There is no  schedule for this matter to get                                                              
resolved.  Well,  the RCA claims it does not make  law, but rather                                                              
implements the law.                                                                                                             
SENATOR  DONLEY:  Leonard, I'm  sorry,  we're interrupting  a  lot                                                              
here.   But  I'm trying  to relate  that  back to  what we  talked                                                              
earlier about  AS 42.05.810  (b), which says  they have to  make a                                                              
decision,  and I believe  this applies  specifically to  telephone                                                              
issues, within  90 days  after the information  is complete.   How                                                              
does the  fact that they've never  made a decision on  this tariff                                                              
issue, I guess it's  a tariff issue, maybe it's not,  I don't know                                                              
all the magic words that apply to telecommunications law, right?                                                                
MR. STEINBERG: Senator,  I can answer that very briefly.   810 (b)                                                              
applies  specifically to  certificates of  public convenience  for                                                              
inter-exchange  carriers.  It's  a different kind  of matter.   We                                                              
wish there was some  kind of rules on this.  We  think there ought                                                              
to be.  But so far the Commission  has not established a schedule.                                                              
SENATOR DONLEY: Let me ask you this.   Have they, if 42.05.810 (b)                                                              
did apply  to these  kinds of  tariff matters  or these  unbundled                                                              
network  elements  questions,  would  all,  would  the  Commission                                                              
currently have all the information  needed to trigger it.  I mean,                                                              
that  statute only  kicks in  after the  information is  complete.                                                              
The evidentiary proceedings and pleadings and all that…                                                                         
MR. STEINBERG: Senator,  we have provided a full  cost study, with                                                              
all supporting  documentation  and inputs  both to the  Commission                                                              
and to GCI for their review.  So I believe the answer is yes.                                                                   
SENATOR DONLEY: Okay. Thanks.                                                                                                   
CHAIRMAN TAYLOR: Go right ahead.                                                                                                
MR. STEINBERG:  Now as  I mentioned,  the RCA  claims it  does not                                                              
make law,  but rather  implements  it.  Well,  in this  particular                                                              
case, we  haven't even  seen much  implementation.  The  situation                                                              
introduces a  considerable amount  of uncertainty to  our business                                                              
plan.  Anchorage UNE rates are not  only temporary but refundable.                                                              
It makes it very  difficult for us to plan for  the future in this                                                              
environment.   Moreover,  this standard  perpetuates  artificially                                                              
low wholesale  prices for  facilities.   It benefits consumers  in                                                              
the  short   run,  but  harms  consumers   in  the  long   run  by                                                              
discouraging  investment.   Now,  I'd  like  to briefly  turn  the                                                              
situation in Fairbanks where we have  grave concerns about the UNE                                                              
rates that the RCA  promptly set in response to a  request by GCI.                                                              
In that case, ACS's actual costs  for an average loop in Fairbanks                                                              
is about  $33.50.  Going to  the question that  Senator Therriault                                                              
asked  earlier,  that is  a  historical  cost, that's  what  we've                                                              
actually had  to pay to have loops  in Fairbanks.  If  you want to                                                              
know  what  our  forward-looking  cost  is  in  that  area,  we've                                                              
calculated it to be about $36.                                                                                                  
SENATOR DONLEY: Leonard…                                                                                                        
MR. STEINBERG:  In the  neighborhood of the  actual cost,  in that                                                              
case just a little bit more.  Yes, Senator Donley?                                                                              
SENATOR DONLEY: I'm sorry, I don't  know you well enough to really                                                              
call you Leonard, I'll call you Mr. Steinberg.                                                                                  
MR. STEINBERG: It doesn't matter to me.                                                                                         
SENATOR DONLEY:  You say  its $33.00.   I  imagine the other  side                                                              
contests that.                                                                                                                  
MR. STEINBERG: This rate of $33.50.   We have to file cost support                                                              
documents with the  federal, with this case the  universal service                                                              
administrative  company, in order  to get  federal subsidies.   We                                                              
have  to support  our  request  for  federal subsidies  with  cost                                                              
documentation.  This $33.50 number  is absolutely supported by all                                                              
the  cost studies  that  are going  to go  to  obtain our  federal                                                              
SENATOR DONLEY:  Well, if  that's the case,  and is that  the same                                                              
situation as with the $24 you say you wanted for the Anchorage?                                                                 
MR. STEINBERG:  I apologize,  Senator, I  know this is  confusing.                                                              
The $24  is actually  a forward-looking  cost.   It turns  out the                                                              
rules  are inconsistent.    And the  rules  for federal  subsidies                                                              
require that  cost be based  on actual  costs, that is  what we've                                                              
actually paid  out.   The rules for  UNE say  that they  should be                                                              
based on what you think it's going to cost you.                                                                                 
SENATOR DONLEY:  So the $24 is what  you think it's going  to cost                                                              
MR. STEINBERG: That's correct.                                                                                                  
SENATOR DONLEY: It's not the same  as the harder dollar number for                                                              
the Fairbanks example…                                                                                                          
MR. STEINBERG: That's correct.  In  the Anchorage case, we believe                                                              
that  the actual  cost number  is  probably in  the 18,  19-dollar                                                              
SENATOR DONLEY:  You say you believe  it, but has it  gone through                                                              
that same federal process?                                                                                                      
MR. STEINBERG: There  are no federal subsidies for  Anchorage.  So                                                              
it's not the same type of cost documentation.                                                                                   
CHAIRMAN  TAYLOR:  Remember, the  rest  of  them were  rural,  but                                                              
Anchorage wasn't.                                                                                                               
SENATOR DONLEY: Right.                                                                                                          
CHAIRMAN TAYLOR: Over a 150,000 lines.                                                                                          
MR. STEINBERG: The  point I'd like to make in this  case though is                                                              
that  ACS's  actual cost  for  an  average  loop in  Fairbanks  is                                                              
$33.50.  The  RCA however, set a  UNE loop price for  Fairbanks of                                                              
$19.19.   That is  57% of ACS's  actual costs.   And again,  if we                                                              
used  the forward-looking  numbers  that we  think are  legitimate                                                              
there it would be even a smaller percentage.  Now…                                                                              
CHAIRMAN  TAYLOR: What  did they  have for evidence  to make  that                                                              
MR. STEINBERG: If  you can hold your questions for  just a moment,                                                              
Senator Taylor…                                                                                                                 
CHAIRMAN TAYLOR: Go right ahead.                                                                                                
MR. STEINBERG:  I'll try  to get  to that.   Before I answer  that                                                              
question, let me explain.  This is  our version of, frankly of the                                                              
gas station example.  Or if you prefer,  consider the fact that in                                                              
biological terms,  the relationship between  GCI and ACS  as local                                                              
phone businesses would be described  as parasitic.  Now here's the                                                              
definition of  parasite I found in  one biology textbook.   Quote,                                                              
organisms  that  live  in,  with  or on  another  organism.    The                                                              
parasite  benefits from  the association  without contributing  to                                                              
the host.   Usually they cause some  harm to the host,  end quote.                                                              
Now in that  same text, I noticed  that there was a  definition of                                                              
parasitism.  And that is, quote,  a form of symbiosis in which the                                                              
population of one species benefits  at the expense of a population                                                              
of another  species.   Similar to predation,  but differs  in that                                                              
parasites act  more slowly than predators  and do not  always kill                                                              
their host, end  quote.  Well, is state-sponsored  parasitism good                                                              
for  the people  of Alaska?   Well,  perhaps it  allows for  lower                                                              
prices in the  short-term.  But it  begs the question of  who will                                                              
be here to  provide service in  the long-term?  GCI's  local phone                                                              
business has not made the kinds of  investments needed to maintain                                                              
and  upgrade the  facilities needed  to provide  service and  ACS,                                                              
sufficiently harmed,  will be unable to  do so.  Now, how  did the                                                              
RCA arrive at  these rates for Fairbanks?  Well,  the RCA rejected                                                              
ACS's detailed cost  study for Fairbanks.  Again,  a copy of which                                                              
we can make  available to this  Committee if it desires.   Rather,                                                              
the RCA relied  on an improper economic model and  the RCA largely                                                              
ignored ACS's costs  and elected to set Fairbanks  prices based on                                                              
lower-48 costs.   Now, I can answer questions about  that if you'd                                                              
like, but I, let me, I'm trying to get through this.                                                                            
CHAIRMAN TAYLOR: Go ahead.                                                                                                      
MR.  STEINBERG: Now,  the model  relied upon  by the  RCA was  the                                                              
synthesis  model used  by the  FCC to  allocate universal  service                                                              
funds.   This is  the same  model criticized  last week  by Harold                                                              
Furchtgott-Roth.  I  will say in very brief, that  there were some                                                              
slight  modifications to  the model  to be used  for this  setting                                                              
because it was never  intended to be used for UNEs.   However, the                                                              
criticisms that have  been made of the model, broadly,  all of the                                                              
fundamental  flaws that exist  in the  model, were not  corrected,                                                              
none  of those  really were  corrected in  the modifications  that                                                              
were made to use  the model for UNE pricing.  I  would like to say                                                              
with the FCC…                                                                                                                   
SENATOR  DONLEY: I'm  sorry to  interrupt you  again.   I mean  my                                                              
memory of the  GCI testimony was that the Commission  went out and                                                              
hired an  expert and  that the expert  recommended this  national,                                                              
modified national model.   What kind of a back and  forth were you                                                              
allowed  in that  proceeding  as far  as  contesting the  expert's                                                              
MR.  STEINBERG: Well,  that whole  issue is  currently on  appeal,                                                              
Senator.  But  I will say that what the expert  actually concluded                                                              
was that  the ACS model  was difficult  to understand.   He didn't                                                              
understand it.  So, he basically  wanted to recommend something he                                                              
did understand.  And that's essentially what was used.                                                                          
SENATOR DONLEY: And  it's your contention that that  model was not                                                              
heavily  modified, but  it was,  you acknowledge  it was  somewhat                                                              
modified, but not…                                                                                                              
MR. STEINBERG:  It was somewhat  modified because in  its original                                                              
form  it  was never,  it  could  not  predict  UNE prices  in  its                                                              
original form.   So it  was modified to  enable it to  predict UNE                                                              
prices. However, the  fundamental flaws that were  inherent in the                                                              
model that were criticized by former  Commissioner Furchtgott-Roth                                                              
and others were never corrected.                                                                                                
SENATOR  DONLEY: Well,  what the  heck good  was it  if it  didn't                                                              
protect UNE prices, I mean project  UNE prices, because that seems                                                              
to be the whole question the model was…                                                                                         
MR. STEINBERG:  That was the question.   Of course this  model was                                                              
developed for  an entirely different purpose.   And if I  can read                                                              
you  the quote  that I've  got in  front  of me  from the  Federal                                                              
Communications  Commission.   They said  in one  of their  orders,                                                              
quote, the  federal cost  level was developed  for the  purpose of                                                              
determining federal  universal service  support and it may  not be                                                              
appropriate to  use nationwide values  for other purposes  such as                                                              
determining  prices for  unbundled  network  elements, end  quote.                                                              
Now, the FCC recently reiterated  this position just this month in                                                              
another order.  And they said, quote,  the Commission is cautioned                                                              
against using the results of the  synthesis model to set rates and                                                              
we emphasize  we are not doing  so in this proceeding,  end quote.                                                              
Now, it's worth  noting that the rural task force  of the federal-                                                              
state joint  board on  universal service, this  is the  same board                                                              
that   Commissioner   Nan   Thompson   co-chairs,   reviewed   the                                                              
reliability of the  FCC synthesis model and concluded,  quote, the                                                              
costs generated by  the synthesis model are likely  to vary widely                                                              
from reasonable estimates of forward-looking  costs.  As a result,                                                              
it is the opinion of the task force  that the current model is not                                                              
an appropriate  tool for determining  the forward-looking  cost of                                                              
rural  carriers,  end quote.    Finally,  the U.S.  Supreme  Court                                                              
recently  rejected  a  Verizon  argument,   which  relied  on  the                                                              
synthesis model  to challenge  the FCC's UNE  pricing rules.   The                                                              
court described  Verizon's argument  as spurious, noting  that the                                                              
synthesis models numbers are quote, clearly wrong.                                                                              
SENATOR DONLEY: Now  wait, you said the 'synthesis,'  is that what                                                              
this model has, is called?                                                                                                      
MR. STEINBERG:  This model  has gone by  various names, but  it is                                                              
referred to as the FCC synthesis model.                                                                                         
SENATOR DONLEY: The FCC synthesis model.                                                                                        
SENATOR THERRIAULT:  At the  time the model  was adopted,  you had                                                              
proposed a model, did GCI have a model?                                                                                         
MR. STEINBERG:  GCI did propose another  model.  That  is correct.                                                              
Now,  the RCA  represents again  that it  does not  make law,  but                                                              
rather  implements   it.     In  this   case,  we  question   that                                                              
representation  and  we  invite  the  Legislature  to  investigate                                                              
whether  the  RCA's  activist  policies  such  as  state-sponsored                                                              
parasitism reflect the  will of the people and this  body.  And if                                                              
not, we recommend  enacting statues which establish  policies such                                                              
as  competition being  on a  level playing  field.   There were  a                                                              
number  of questions  raised,  Senator, about  cost  inputs and  I                                                              
could address  those but  I know we're  running short on  time and                                                              
with your  permission, I'd  like to  just try  to run through  the                                                              
rest of this quickly.                                                                                                           
CHAIRMAN TAYLOR: Sure.                                                                                                          
MR. STEINBERG: I'd like to briefly  talk about the issues of rural                                                              
exemption.  Well,  first of all, what is the rural  exemption?  As                                                              
noted earlier, certain incumbent  carries were classified as rural                                                              
by the  Telecommunications Act  of 1996, excuse  me, and  they are                                                              
exempt from  the obligation  to lease  facilities to  competitors.                                                              
state  commissions  may  terminate  a rural  exemption  but  only,                                                              
according to  the act, if the  state commission finds that  is not                                                              
unduly   economically   burdensome,   technically   feasible   and                                                              
consistent with universal service.                                                                                              
SENATOR DONLEY: Okay, hang on just  a second.  [Long pause] Sorry,                                                              
Mr. Chairman, I just want to…                                                                                                   
SENATOR ELLIS: Mr. Chairman.                                                                                                    
SENATOR  DONLEY:   Consistent  with  universal   service,  whether                                                              
technically feasible and undue economic burden.                                                                                 
MR. STEINBERG: Those are the same standards.                                                                                    
SENATOR DONLEY: Right, okay.                                                                                                    
CHAIRMAN TAYLOR: Senator Ellis.                                                                                                 
SENATOR ELLIS:  Chairman, are you  planning to cut this  off after                                                              
Mr. Steinberg finishes his presentation?                                                                                        
CHAIRMAN TAYLOR:  Just recess and  take it up tomorrow  morning at                                                              
10, yeah.                                                                                                                       
SENATOR ELLIS:  Okay, so these folks  will be back with  us in the                                                              
CHAIRMAN TAYLOR: I'm assuming so.                                                                                               
MR. CARSON:  Mr. Chairman, my son  Benjamin is getting  married in                                                              
Portland tomorrow  and with the  Committee's permission,  I'd like                                                              
to attend.                                                                                                                      
CHAIRMAN TAYLOR: No  problem.  You're not subpoenaed  here nor was                                                              
anyone else except one witness, so…                                                                                             
SENATOR  ELLIS:  And  I  think  there   are  questions  after  Mr.                                                              
Steinberg is finished.                                                                                                          
CHAIRMAN TAYLOR: Okay.                                                                                                          
MR. STEINBERG: I would be happy to respond to those.                                                                            
CHAIRMAN  TAYLOR: Ted,  you'll  be  here, and  so  will you,  Wes?                                                              
Excuse me, Wes is going.  Ted Moninski.                                                                                         
MR. MONINSKI: Yes.                                                                                                              
CHAIRMAN TAYLOR: Good, good.  Is  that all right with you, Senator                                                              
Ellis?  If…                                                                                                                     
SENATOR ELLIS: I had a question for  Mr. Carson, not for the other                                                              
folks after Mr. Steinberg is finished.                                                                                          
CHAIRMAN TAYLOR:  Okay, we'll take that  up then as soon  as we're                                                              
done.  Thank you.  Go ahead.                                                                                                    
SENATOR DONLEY: I'm caught up, thanks.                                                                                          
MR. STEINBERG: Why  did Congress create the rural  exemption?  The                                                              
Telecommunications  Act of 1996  recognized the fragile  economics                                                              
of most rural telephone companies  and frankly the folly of trying                                                              
to  bring   market  economics   to  high-cost   telecommunications                                                              
services  that cannot exist  without significant  subsidies.   The                                                              
rural exemption  then is not to  be terminated lightly,  for doing                                                              
so threatens the  essence of universal service.   The provisioning                                                              
of  modern  telecommunications   services  to  all   consumers  an                                                              
affordable rate, a  policy which ACS supports.   Nevertheless, the                                                              
RCA  terminated  the  exemption of  ACS's  three  rural  telephone                                                              
companies.   Well,  what our  concern  is the  RCA's decisions  to                                                              
terminate  a  rural exemption.    First,  the  RCA has  ignored  a                                                              
federal judicial  decision placing  the burden  of proof  in rural                                                              
exemption  proceedings  on  the  competitive  carrier  seeking  to                                                              
terminate the  exemption.   But it's also  important to  note that                                                              
the  RCA  also  terminated  the exemption  for  ACS's  most  rural                                                              
company, ACS  of the  Northland, despite  GCI's testimony  in 1997                                                              
and again  in 1999  that it  was seeking  interconnection only  in                                                              
North Pole,  and not  anywhere else  in the  ACS of the  Northland                                                              
service territory.                                                                                                              
SENTOR DONLEY: I'm  sorry, but I gotta ask this.   I gotta keep up                                                              
here.   How  does  this  relate to  the  testimony  that you  gave                                                              
earlier about, I  was trying to understand the  significance of it                                                              
at the time, but  I think this somehow links to  it, that it's two                                                              
one-thousandths of a percent of the  total lines in the U.S.A. and                                                              
there's some, I didn't fully understand  this 2% standard that you                                                              
talked about earlier.                                                                                                           
MR. CARSON:  One of the mechanisms  under the Act is  for carriers                                                              
with 2% or  fewer of the access  lines in the country  to petition                                                              
the state  commission  to be exempted  from these  exact kinds  of                                                              
obligations.  So with both the rural  exemption mechanism and this                                                              
2%  petitioning of  the State  Commission  to avoid  this kind  of                                                              
SENATOR DONLEY: And this rural exemption  was, I didn't get a good                                                              
note on that, but you said it was 150,000 lines or less?                                                                        
MR. STEINBERG: Companies with 50,000  lines or, there are multiple                                                              
standards, Senator,  but generally the ones that  we can [indisc.]                                                              
is companies  with 50,000  lines or fewer  qualify as  rural under                                                              
the Telecommunications Act.                                                                                                     
SENATOR DONLEY: 50,000 lines or fewer?                                                                                          
MR. STEINBERG: Correct.                                                                                                         
SENATOR DONLEY: Okay, thank you.                                                                                                
SENATOR  THERRIAULT:   And  the  2%  applies  to   state  entities                                                              
petitioning to turn the exemption on?                                                                                           
MR. CARSON:  It means that a  company, whether it's rural  or not,                                                              
who has  fewer than 2%  of the line may  petition the state  to be                                                              
excluded from this kind of competition.                                                                                         
MR. STEINBERG: In other words, be  excluded from the obligation to                                                              
lease facilities.                                                                                                               
SENATOR THERRIAULT: …turn the exemption on.                                                                                     
CHAIRMAN TAYLOR:  You're both  saying the same  thing.   Go ahead,                                                              
MR.  STEINBERG:  Sorry, let  me  back up  just  a moment  or  two.                                                              
[Indisc.] about  what we're speaking  about.  With regards  to the                                                              
ACS and the Northland  rural exemption that was  terminated by the                                                              
Commission, GCI  testified both  in 1997 and  in 1999 that  it was                                                              
seeking interconnection  only in North Pole and  not anywhere else                                                              
in the ACS of  the Northland service territory.   Now, given GCI's                                                              
position and the  absence of a dispute concerning  most of the ACS                                                              
of  the  Northland  territory,  we do  not  believe  any  specific                                                              
evidence  was  introduced of  the  impact  of competition  on  the                                                              
economic  burden   or  universal  service  in   Northland's  small                                                              
communities  such  as  Seldovia,  Ninilchik,  Delta  Junction  and                                                              
Nenana.   Given this, we  do not understand  how the RCA  can make                                                              
the required statutory findings when  there really was no evidence                                                              
in the record.   Now, why should the Legislature  care about this?                                                              
Well, because of all consumers outside  of Anchorage have been put                                                              
at  risk of  losing the  benefits of  universal service.   And  we                                                              
invite  you as the  Legislature to  come to  your own  conclusions                                                              
about whether the  RCA makes law or just implements  it.  Now, I'd                                                              
like to  address a few  concerns regarding  the RCA's  handling of                                                              
the ACS rate cases.  We are concerned,  excuse me, about the level                                                              
of effort  and resources that are  required and the time  to reach                                                              
resolutions for these  cases.  The ACS rate cases  are Commission-                                                              
mandated proceedings.   As a condition  of transferring to  ACS in                                                              
1999 the  certificates  of public convenience  and necessity  that                                                              
are required  to operate local  telephone companies, the  old APUC                                                              
required  ACS  to file  rate  cases for  each  of its  four  local                                                              
exchange  companies on  July 1,  2001.   We  now anticipate  rates                                                              
sometime  in  2003  based  on  data from  the  year  2000.    This                                                              
proceeding  before  the RCA  has  already  cost ACS  roughly  $1.8                                                              
million and  we expect the  full proceeding to  cost approximately                                                              
$3  million.   And this  does not  include the  loss of  [indisc.]                                                              
costs  associated with  operating  a business  without the  proper                                                              
CHAIRMAN TAYLOR:  Now, Leonard, you  were, as a company,  you were                                                              
required by the RCA to file new rate filings…                                                                                   
MR. STEINBERG: That is correct.                                                                                                 
CHAIRMAN TAYLOR:  …with the  RCA?  You  weren't, you didn't  go in                                                              
there on your  own asking for new  rate filings, they told  you to                                                              
come in and file rate filings?                                                                                                  
MR. STEINBERG: That is correct, Senator.                                                                                        
CHAIRMAN TAYLOR: And now it's taken how long, a year and a half?                                                                
MR. STEINBERG:  Well, the rate case  was, the data year,  the test                                                              
year was 2000.   We filed them in July of 2001.   We do not expect                                                              
a final decision until sometime in 2003.                                                                                        
SENATOR DONELY: Now,  and this was the type, I  imagine the public                                                              
advocacy section  is involved in this  one so you get  full cross-                                                              
examination and everything.                                                                                                     
MR. STEINBERG: That  is correct.  Although I have  to say that one                                                              
of our  concerns about  case management  has to  do with  the fact                                                              
that our primary  competitor GCI was allowed to  intervene and, in                                                              
our  view,  propounded  burdensome  discovery,  they  delayed  and                                                              
interfered with the process.                                                                                                    
SENATOR DONLEY:  The Commission, the  last time we had  them here,                                                              
testified they  had streamlined the  discovery process.   Was this                                                              
before or after this streamlining?                                                                                              
MR.  STEINBERG:   Senator,  if  I may  continue  with  some of  my                                                              
comments,  I think I  will address  this.   ACS has produced  more                                                              
than 13,000 documents  in these rate cases today  and has provided                                                              
more  that 2500  responses  to more  that  850 separate  discovery                                                              
requests, the bulk  of which came from our chief  competitor, GCI.                                                              
I hope that addresses your question.                                                                                            
SENATOR DONLEY:  Sounds like it  happened before they  limited the                                                              
number of interrogatories.                                                                                                      
MR. STEINBERG: I do not believe…                                                                                                
CHAIRMAN TAYLOR: Well, they haven't limited them.                                                                               
MR. STEINBERG: I  do not believe that the RCA  effectively managed                                                              
the case and effectively did limit  the discovery in this case, in                                                              
this matter.   There were several  times when we asked  for limits                                                              
on discovery  and they were  not granted.   And if you'd  like the                                                              
record on that, I  can dig that up for you.  If I  may go on.  All                                                              
of this…                                                                                                                        
SENATOR DONLEY: I don't understand  this jives with what we heard,                                                              
how this is  consistent with what  we heard the last time  we were                                                              
here was  that they had limited  them to 60 questions.   Remember,                                                              
it  was  that  testimony  that  we  heard  that  discovery  at  60                                                              
interrogatories, if you can't make  your point in that tough luck…                                                              
MR. STEINBERG: We  wish that were the case, Senator,  that's all I                                                              
can  say.   And if  you  would like,  I can  give  you a  detailed                                                              
listing of all  the discovery requests and all  the responses that                                                              
we had to provide.                                                                                                              
CHAIRMAN TAYLOR: Chugach  has provided over 600,000  copies on one                                                              
MR.  STEINBERG:    This  13,000 documents  does  not  reflect  the                                                              
multiple copies  of each that we  are required to provide.   Which                                                              
multiplies it significantly.                                                                                                    
CHAIRMAN  TAYLOR: The  number  I  was using  for  Chugach was  the                                                              
number  that they  had,  of copies  that they  had  to provide  to                                                              
others.   Their actual discovery  I think  was about 100  and some                                                              
thousand copies originally.                                                                                                     
MR. STEINBERG:  And the  13,000 documents,  that's documents,  not                                                              
pages.   If we  went to  pages, it would  be considerably  greater                                                              
than that.                                                                                                                      
CHAIRMAN TAYLOR: Go right ahead, Leonard.                                                                                       
MR.  STEINBERG:  All of  this  effort  is  paid for,  frankly,  by                                                              
consumers  either directly  or indirectly.   The  RCA's costs  for                                                              
these  proceedings are  collected via  the RCC  charge on  utility                                                              
bills.   The utility's  cost for  these proceedings are  generally                                                              
recoverable through  rates.  Now,  one decision that  recently was                                                              
issued by the RCA  in this matter had to do  with depreciation for                                                              
our rate cases.  And that decision  appears to be in conflict with                                                              
the  U.S.  Supreme  Court's  recent decision  in  Verizon  v.  FCC                                                              
decided in  May of this year.   The U.S. Supreme  Court criticized                                                              
attempts  to minimize  depreciation and  slow depreciation  rates.                                                              
Yet that  is precisely what  the RCA has  ordered here.   In fact,                                                              
the  depreciation  rates  established   by  the  RCA  for  ACS  of                                                              
Anchorage  are not  only  lower than  the  rates  employed by  its                                                              
competitors,  but these  rates appear  to  be significantly  lower                                                              
than any other telephone utility  in Alaska.  In fact, they appear                                                              
to be  lower than any  known depreciation  rate for any  telephone                                                              
utility, big or  small, anywhere in the country.   This is exactly                                                              
the  opposite  result from  what  one  would  expect in  the  most                                                              
competitive marketplace  in the nation  where there  is heightened                                                              
pressure to  modernize equipment or  lose customers.  In  light of                                                              
this dramatic decision…                                                                                                         
TAPE 02-42, SIDE B                                                                                                            
MR. STEINBERG: Yes, that's correct, Senator.                                                                                    
SENATOR DONLEY:  And there were  portions of  what the 8   Circuit                                                              
ruled  the  Supreme Court  then  subsequently  also ruled  on  and                                                              
portions they didn't…                                                                                                           
MR. STEINBERG: That is correct.                                                                                                 
SENATOR DONLEY: …grant cert on?                                                                                                 
MR. STEINBERG: That is correct.                                                                                                 
SENATOR DONLEY: But  the depreciation, they did grant  cert on the                                                              
depreciation issue?                                                                                                             
MR. STEINBERG:  It was actually a  comment that the  Supreme Court                                                              
made in the  context of rendering  a decision on the  FCC's TELRIC                                                              
forward-looking economic cost rules.                                                                                            
CHAIRMAN TAYLOR: So, it was a different one.                                                                                    
SENATOR DONLEY: Yeah.                                                                                                           
MR. STEINBERG:  But it  was not a  main part  of the U.S.  Supreme                                                              
Court case, but they did make this  note in the context of looking                                                              
at  the FCC's  rules  that they  criticized  efforts  to slow  the                                                              
depreciation rates.                                                                                                             
SENATOR DONLEY:  Well, you know,  sometimes courts say  things in,                                                              
you know,  [indisc.]  that it was  not controlling,  is this,  was                                                              
this a…                                                                                                                         
MR.  STEINBERG: I  would say  this was  probably not  controlling,                                                              
Senator.   But it  was very  interesting that  what the  Court was                                                              
actually  doing in  that case  was  it was  criticizing what  they                                                              
thought  were Bell  operating company  acts  to slow  depreciation                                                              
rates to  keep their rate  base high.   And they were  criticizing                                                              
the Bell  operating companies  for the  very same act  essentially                                                              
that the RCA  has now implemented  with regards to ACS.   That was                                                              
the only point I was trying to make.                                                                                            
SENATOR TAYLOR: Go ahead.                                                                                                       
MR. STEINBERG:  Now, one  has to  ask in  thinking about  the rate                                                              
cases is  what are the  relevance of  rates set by  the government                                                              
based  on  three-year-old  data   in  a  competitive  marketplace?                                                              
Because  that's  exactly what  we  have.    And this  question  is                                                              
particularly  irrelevant  in a  competitive  markets where  retail                                                              
markets today are  driven by artificially low UNE  rates.  And one                                                              
also should be  asking, well, why is ACS still  being treated like                                                              
a regulated monopoly  when consumers have a choice  of carriers in                                                              
areas served  by three of the  four ACS local  exchange companies?                                                              
Now before  closing,  let me note  that there  are numerous  other                                                              
examples of the  RCA's pro-regulatory and activist  policies.  For                                                              
example, as was previously noted,  in the comments filed with FCC,                                                              
the RCA  continues to  advocate regulation  of broadband  services                                                              
provided by telephone companies while  allowing other providers of                                                              
broadband such as  cable companies to be unregulated.   Similarly,                                                              
in another  FCC proceeding,  the RCA advocates  having a  right on                                                              
it's own to add to the FCC's list  of facilities and services that                                                              
companies  such  as  ACS  are  obligated   to  make  available  to                                                              
competitors.  And earlier this year,  the RCA agreed to new inter-                                                              
exchange  carrier  regulations that  significantly  increased  the                                                              
regulatory  burden  on long  distance  providers.   All  of  these                                                              
issues  lead to the  question of  whether the  RCA's policies  and                                                              
procedures  reflect the  will of  the  Legislature.   If not,  the                                                              
Legislature  should  provide  the  RCA  with  guidance  concerning                                                              
specific case regulatory policies.                                                                                              
CHAIRMAN TAYLOR: Thank you.                                                                                                     
MR. CARSON: Senator,  if I could take 60 seconds  just to conclude                                                              
all of this.                                                                                                                    
CHAIRMAN TAYLOR: Sure.                                                                                                          
MR. CARSON: And  that there were some comments  or questions about                                                              
what ACS's position was and I'd like  to state that if I might.  I                                                              
was able to hear  you speak at Commonwealth North  last week where                                                              
you talked  about the problems  with the four-year  clean approach                                                              
to reauthorizing this  Commission.  We agree.  There  are too many                                                              
issues  and our  story is  only one  small  part that  need to  be                                                              
addressed before the Commission's  reauthorized.  So we would say,                                                              
one,  establish an  oversight  Committee to  monitor  the RCA,  to                                                              
assure that  regulatory  policy is aligned  with long-term  public                                                              
interest, that processes  are completed in a timely  fashion, that                                                              
due process is afforded  to everyone and that there  is in fact an                                                              
incentive to invest in telecommunications  in Alaska.  And then we                                                              
would recommend that the information  derived from these hearings,                                                              
which we think have been very valuable,  by an oversight committee                                                              
and  by   the  telecommunications   study   be  provided   to  the                                                              
Legislature in the next session as  they deliberate the regulatory                                                              
future of this State.  That's the ACS position.                                                                                 
CHAIRMAN TAYLOR:  We heard testimony,  even earlier today,  when I                                                              
inquired  as to  who  was telling  people that  we  were going  to                                                              
terminate the RCA,  that ACS may have said these  things.  Is that                                                              
your position, that we should terminate the RCA?                                                                                
MR.  CARSON: That  has  not been  our  position.   But  it is  our                                                              
position  that reauthorizing  for  a long  term now  is a  mistake                                                              
because this  is the opportunity  to shine  the light on  this and                                                              
study it  and make sure that  what's happening is in  the interest                                                              
of the Alaskan consumer.                                                                                                        
CHAIRMAN TAYLOR: Thank you.  John, you had a question.                                                                          
SENATOR  ELLIS: Yeah,  thank you,  Mr. Chairman.   Mr. Carson,  by                                                              
oversight committee,  who did you mean?   Did you mean  a bunch of                                                              
MR.  CARSON:   Legislators,  or   individuals  appointed   by  the                                                              
Legislature,  perhaps.  We  are open  as to  what form that  might                                                              
SENATOR ELLIS:  Okay.  Thank  you.  I  came across your  letter in                                                              
                        th                  th                                                                                  
our packet, the July  11letter,   or June 11   letter of this year                                                              
about, to the Chairman where you  said that, you contend that 'ACS                                                              
has suffered greater economic harm  that any other Alaskan utility                                                              
as a direct result  of the policies and orders  of the Commission.                                                              
Frankly, we're  convinced that  ACS will  be in serious  financial                                                              
jeopardy.' And  you went  on, and it's  pretty much reflective  of                                                              
the statement  you made today about  the trouble that you  all are                                                              
in  having been  punished  by the  RCA  through  process or  their                                                              
orders  that  it's financially  hurt  your  corporation.   So  I'm                                                              
trying to reconcile that with the  things that you've been telling                                                              
the financial advisors,  people on Wall Street,  your investors in                                                              
conference calls and  other communications.  And  there are direct                                                              
quotes  from you  that  are very  upbeat  and  positive about  the                                                              
financial situation  of the company.   On April 30  of  this year,                                                              
'We're please  with our results  for the quarter,  particularly in                                                              
local  telephone where  we  saw solid  performance.   Further,  we                                                              
experienced  our 4   quarter  in the  role of  positive free  cash                                                              
flow  as  we  generated  over  $13 million  in  cash  even  as  we                                                              
continued  to establish  our technology  leadership.'   And  just,                                                              
there's a  whole bunch of  these.  But just  one other was  from a                                                              
little  earlier this  year,  February 20,   'We  had a  strong  4                                                               
quarter,  reporting   revenues  that  were  the   highest  in  the                                                              
company's history.'   So I'm trying to reconcile  the rosy picture                                                              
to  Wall  Street  and  the investors  with  the  charges  or  your                                                              
contention that you're  in financial trouble because  of the RCA's                                                              
5:20 p.m.                                                                                                                       
MR.  CARSON:  Senator, if  I  might  go  back to  my  introductory                                                              
comments.    Within  the  ACS family  of  companies,  we  have  an                                                              
Internet company, a wireless company,  a long distance company and                                                              
we have  four local exchange telephone  companies.  Those  are the                                                              
four pieces of  our broader ACS family of companies  that are most                                                              
intensely regulated  by the Regulatory  Commission of Alaska.   Of                                                              
those  four  companies,  I  then  focused  this  down  to  ACS  of                                                              
Anchorage because we are now basically  five and a half years into                                                              
the regulatory policies  of competition in Anchorage.   That said,                                                              
we  would  wish to  focus  on  this  because  we believe  it  will                                                              
portends what  will happen to the  other three ACS  companies, two                                                              
of which  are now engaged in  competition with GCI and  the fourth                                                              
which has had their rural exemption  terminated.  I think you will                                                              
also find  in our press  releases and  our other comments  that we                                                              
say  that  our  results  are in  part  encouraging  because  we're                                                              
dealing with  very difficult situations.   So we're pleased  to be                                                              
able to have done  as well as we have with the  entire company and                                                              
with  the four  telephone  companies when  we  have these  adverse                                                              
regulatory  situations  [indisc.].   I  didn't bring  those  press                                                              
releases with me, but I'd be happy  to submit them because we talk                                                              
specifically about  how we feel we're  not dealing with  the level                                                              
of [indisc.]  and  that is  a difficulty  for us.   So the  simple                                                              
answer is, we have  focused on ACS of Anchorage,  which in fact by                                                              
our estimation is  not earning anything on its investment.   It is                                                              
not earning a profit.  And we're  saying, by implication, if these                                                              
regulatory policies  are allowed to continue, we  will see similar                                                              
and perhaps  worse results  in Fairbanks,  Juneau and the  Glacier                                                              
Estate  properties.   Because those  economics  are more  complex,                                                              
involving as they do, quotability [ph] of explicit subsidies.                                                                   
SENATOR ELLIS:  So you think  it's clear  to the investors  and to                                                              
the financial analysts that you're  segmenting the success and the                                                              
problem  with  RCA?    To  a  layperson,   just  looking  at  your                                                              
materials, it  seemed like gloom  and doom to the  Legislature and                                                              
then things are great with the other folks.                                                                                     
MR. CARSON: We  have very carefully segmented  operational results                                                              
between  telephone   and  non-telephone.    And   particularly  in                                                              
investor conferences, we've talked  about the regulatory situation                                                              
existing and  the challenges that  we have legally because  of our                                                              
concerns  about this  regulatory [indisc.].   So,  yes, I  believe                                                              
we've been clear.                                                                                                               
CHAIRMAN TAYLOR: Senator Therriault, did you have a question?                                                                   
SENATOR  THERRIAULT:  With  regards,  you started  out  with  your                                                              
comments today saying you were thankful  to have an opportunity to                                                              
get this,  this information  out.   Did you  make requests  of any                                                              
Committee  that heard  the extension  bill in  the Legislature  to                                                              
have such  a hearing  and bring this  information during  the last                                                              
legislative session?                                                                                                            
MR. CARSON: I did not personally,  although I did send a letter to                                                              
Senator Taylor that's  part of the packet in which  we indicated a                                                              
desire to be able to share our concerns.                                                                                        
SENATOR THERRIAULT:  Okay, and during  the Session, did  you, were                                                              
you backing a hearing?                                                                                                          
MR.  CARSON: I  have not  personally  been involved  in backing  a                                                              
hearing although I think…                                                                                                       
SENATOR  THERRIAULT:  Okay.   And  then  the, Senator  Taylor  has                                                              
talked about the  four years and clean that the  Governor's likely                                                              
to request and that's probably likely  to be the bill that he puts                                                              
in.  GCI has indicated that they'd  like to see a four-year as was                                                              
recommended  by  the auditors.    I  think  that's not  likely  to                                                              
happen.   I've told GCI's lobbyists  that's not likely  to happen.                                                              
Do you see any  problem with the one- or two-year  extension while                                                              
the Legislature?   Because  this  is quite a  bit of  information,                                                              
bringing all  the Legislators  up to speed  could take  some time.                                                              
Do you see a  problem with a one- or two-year  extension while the                                                              
Legislature  deals  with  the  public  advocacy  section  and  the                                                              
timelines issue and the oversight?                                                                                              
MR.  CARSON:  If  I  might,  Senator,   answer  in  explaining  it                                                              
differently.   And that is that I  see a benefit of being  in this                                                              
wind-down situation  because it  adds urgency.   We believe  these                                                              
are  issues  that  require  urgency.   So  we  believe  this  next                                                              
legislative session  is the right time to hear these  issues.  And                                                              
so whatever situation arises, if  it encourages dealing with these                                                              
issues  in a  timely  fashion,  and for  us  that means  the  next                                                              
legislative session, we think that's a positive thing.                                                                          
SENATOR THERRIAULT: Okay, so being  able to link that to do-or-die                                                              
gotta-have legislation or else RCA  is gone is in your view a good                                                              
thing.   But  I think  there  was some  testimony  with regard  to                                                              
personnel, if we get into the legislative  session, it's basically                                                              
six  months  from it  going  out  of  existence.   So  you've  got                                                              
personnel, and as we go to the end  of the legislature, you've got                                                              
personnel that  potentially see  their jobs  going away  in three,                                                              
two or three  months.  I think  that's a negative and  it seems to                                                              
me than an extension of a year while  the Legislature looks at all                                                              
this information, a minimum of a  year, maybe a year or two, which                                                              
is being  supported by Mr. Gordon  out of Fairbanks,  the electric                                                              
out of Fairbanks.  I guess I don't  really see a compelling reason                                                              
why that's not, that's not reasonable.                                                                                          
MR. CARSON: On  the one hand, the four years  and clean absolutely                                                              
puts no pressure on…                                                                                                            
SENATOR THERRIAULT: I understand that.                                                                                          
MR. CARSON:  …urgency.   So as you  ratchet that  back.   How much                                                              
time is  enough time?   I  guess I  don't have  an answer  for you                                                              
today.   We will watch  with great  interest what's developing  in                                                              
the  special session.    But some  sense of  urgency  we think  is                                                              
required  because  these matters  are  so  serious, not  just  for                                                              
telecom, but as we've heard from  electric and sewer and water and                                                              
others, there  needs to be a sense  of urgency to deal  with these                                                              
issues.   You asked a question  if there's some place  in between.                                                              
I guess we're not prepared to make  a comment on that until we saw                                                              
what that was.                                                                                                                  
SENATOR THERRIAULT:  Well, back in the previous session,  it was a                                                              
year.   We were arguing  over three months,  no one year.   The we                                                              
had offers for six  months, no a year.  We were  talking about, at                                                              
one point, 90 days difference.  It  just seemed to me that a year,                                                              
the Governor was  reluctant, the House was reluctant,  but I think                                                              
that we  could have settled  on that.   To my understanding  there                                                              
was an offer that  was not brought back to the  Senate caucus.  It                                                              
seems to me that a year is very reasonable.                                                                                     
CHAIRMAN TAYLOR:  We need  to clarify that  a little  bit, Senator                                                              
Therriault.   There was  additional qualifications  on that  bill.                                                              
There was a task  force attached to it.  There  was also the House                                                              
amendments  that  had  been  placed   on  it  which  provided  for                                                              
significant  deadlines.    And to  be  real  frank with  you,  the                                                              
information I have is, that bill  wasn't killed in the Senate.  It                                                              
was killed over on the House side  when they were told by GCI that                                                              
one year was not acceptable, that  they had to have four years and                                                              
it didn't  matter what we were  hanging on it, they  weren't going                                                              
to accept any things  that were hanging on it, whether  it was the                                                              
task force  or whether it  was wait for  the study.   Every person                                                              
that we have got  on record so far that has testified  in favor of                                                              
an extension  has said,  'I want  the extension,  but with…'   And                                                              
then  they  have  always  added   something.    Whether  it's  the                                                              
timelines, the study to be done by  someone, the task force group,                                                              
they've all  seemed to have  some additional thing  they've hooked                                                              
on to it.   And I think that's what we were facing,  too.  Because                                                              
the one  we moved out  of Committee had  that, even though  it was                                                              
only three months.  It had a task  force attached to it, too.  And                                                              
that was not  acceptable over on the other side,  apparently.  I'd                                                              
like to take credit for killing that  rascal, but I didn't do 'er.                                                              
She died on  her own over there.   Guys, we went over  a half hour                                                              
beyond where I,  an hour actually [indisc.] I told  staff I'd keep                                                              
them hanging around  here.  The two of you can  come back tomorrow                                                              
because Senator  Ellis has some  additional questions and  I think                                                              
Senator  Donley  has  too,  on  some   technical  matters.    We'd                                                              
appreciate  that.  As  soon as  we have  concluded tomorrow  and I                                                              
would hope  that we  could do that  in probably  an hour,  we will                                                              
start taking  up public  testimony and we  will continue  until we                                                              
have  exhausted the  last of  the  public testimony.   Thank  you,                                                              
gentlemen,  very much.    We are  in  recess until  10:00  o'clock                                                              
tomorrow morning.                                                                                                               

Document Name Date/Time Subjects