Utah regulators are conducting a formal investigation to determine if Questar Telecom is entitled to the federal exemption from local regulation, the company says.

Questar Telecom is using a company-owned microwave relay system to provide contract telephone and telecommunications services to other companies, a practice the Utah Public Service Commission says makes Questar a public utility.Questar's contracts with Intermountain Health Care and Safeway Regional Data Center prompted the division's call for a formal investigation.

In documents filed with the commission, Questar contends it is not subject to commission regulation because the company operates as a private microwave and radio network. Questar also contends that commission jurisdiction over the use of private microwave circuits and private microwave system operators has been pre-empted by the Federal Communications Commission.

Questar said service provided IHC and Safeway is through private contract and the company has not and does not offer such service to the public generally.

Division rate engineers contend Questar is operating as a public utility without having obtained a certificate of convenience and necessity from the commission.

An order issued by the commission Wednesday directs Questar to "file information concerning its contract with Intermountain Health Care and other information disclosing all services it provides for fee or compensation to all other corporations or entities" to division investigators.

Following the investigation, the commission will decide whether to conduct formal hearings in the matter.

One issue to be resolved is whether Questar's ownership of the microwave network puts it in the same category as US WEST Communications.

In a recent case involving US WEST Communications and Zions Data Services, the commission was forced to determine whether US WEST's ownership of transmission lines and facilities gave it an unfair advantage in offering discounted contract telecommunications services to high volume customers.

Non-regulated competing companies, which purchase large blocks of time at discount rates for resale purposes from regulated companies such as US WEST, wanted assurance that regulated companies, which know the discount rate charged to the non-regulated companies, were not exercising an unfair advantage in negotiating their own special-rate contracts.

Traditional telecommunications resellers such as MCI and Contel are not subject to regulation because they do not own the transmission lines and facilities they use.

Division investigators believe Questar's ownership of the microwave network makes it subject to regulation.

Questar Telecom is a subsidiary of Questar Services Corp. which in turn is a subsidiary of Questar Corp., the parent company of Mountain Fuel Supply.