ORDER NO. 95-1324








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In the Matter of the Petition for Extended Area Service by the ASH VALLEY TELEPHONE EXCHANGE. )








On January 24, 1995, customers in the Ash Valley telephone exchange filed a petition with the Commission requesting extended area service (EAS) along the following interexchange routes: Ash Valley/Scottsburg; Ash Valley/Reedsport. A map of the exchanges is attached to this order as Appendix A.


On May 1, 1995, the Commission staff (staff) filed testimony for Phase I, Community of Interest Determination. Based on a review of geographic and telephone usage information, staff concluded that neither of the proposed interexchange routes satisfied the objective community of interest criteria set forth in Orders No. 89-815 and 92-1136. Staff's testimony is summarized in Appendix B, attached to this order and incorporated by reference.


On May 25, 1995, Michael Grant, an Administrative Law Judge (ALJ) for the Commission, issued a Proposed Order in this matter recommending that the EAS petition be dismissed based on a review of staff’s testimony. Petitioners subsequently requested an opportunity to establish, through demographic, economic, financial, or other evidence that a community of interest exists between Ash Valley and Reedsport. Petitioners did not challenge the proposed finding with regard to the Ash Valley/Scottsburg interexchange route. That portion of the petition is dismissed by this order.


On August 17, 1995, ALJ Grant held a hearing on this matter in Ash Valley, Oregon. Based on a preponderance of the evidence submitted, the Commission makes the following:





Geography and Demography


The Ash Valley, Scottsburg and Reedsport telephone exchanges lie along State Route 38 in northwest Douglas County. The petitioning exchange, Ash Valley, is located south of State Route 38 and accessed via Loon Lake Road. The exchange is served by Cascade Utilities and consists of 39 access lines. The Scottsburg exchange is located northeast of the Ash Valley exchange. It is also served by Cascade Utilities and consists of 215 access lines. The Reedsport exchange, located northwest of Ash Valley, is the largest of the three exchanges. It is served by GTE Northwest, Inc., and consists of approximately 3,400 access lines.


Ash Valley is a small agricultural and logging community that offers no commercial or professional services for local residents. The area is geographically isolated within the Coast Mountains and is best known for the Loon Lake Resort, a Bureau of Land Management recreational camp. The town of Scottsburg, located 21 miles to the northeast, is the closest town to Ash Valley. That community, however, is also relatively small and offers only a small convenience store and tavern. Consequently, Ash Valley exchange residents rely exclusively on the city of Reedsport to obtain essential services to meet their basic needs. Reedsport is located approximately 27 miles from Ash Valley and is located along the Oregon Coast. It offers banking, insurance, veterinarian, and other professional services, as well as business supplies, automobile repair, hardware and building supplies, gasoline stations, sporting goods supplies, retail services, and other fundamental supplies. Moreover, Ash Valley residents must drive through Reedsport to access the other two large cities in the area: Coos Bay to the south and Florence to the north.




In the past, the Ash Valley exchange was served by a local school located within the community. That school, however, was closed last year pursuant to state education reform. As a result, children who live within the Ash Valley exchange now attend public schools located in Reedsport.




The Ash Valley exchange is served by Douglas County annex offices in Reedsport and by the post office in Reedsport.


Medical Services


Residents of the Ash Valley exchange seek primary and emergency medical and dental care in Reedsport. The nearest hospital and ambulance service is located in Reedsport. Residents who require specialized medical care seek these services in Coos Bay or Portland.





Almost 60 percent of Ash Valley residents either work in Reedsport or are self-employed loggers, farmers and/or ranchers licensed to do business in Reedsport. Approximately 25 percent of the local population is retired. The remainder of the residents either work in Florence or Elkton, at the Loon Lake Resort, or are currently unemployed.


Results of the Objective Criteria Test


Cascade Utilities and GTE provided calling pattern data for the Ash Valley and Reedsport telephone exchanges. Staff reviewed the data and determined that the Ash Valley interexchange route satisfied two of the three objective community of interest criteria. A maximum average of 9.98 toll calls per access line were placed between the exchanges, and an average of almost 65 percent of the Ash Valley customers made at least two or more calls to the Reedsport exchange.


The Ash Valley and Reedsport telephone exchanges are not contiguous, however. Although the exchanges are diagonally opposed to each other at the southwest corner of the Scottsburg exchange, they are separated by a half-mile gap at what would be adjoining corners. The area between the two exchanges is not served by any local exchange telephone company. See Appendix A.




Applicable Law


In the first phase of an EAS investigation, the Commission considers whether a so-called "community of interest" exists between the petitioning and target telephone exchange(s). A community of interest exists where "there is a social, economic, or political interdependence between two areas or where there is heavy dependence by one area on another area for services and facilities necessary to meet many of its basic needs." Forest Grove EAS Investigation, Order No. 87-309 at 8


A community of interest is not easily proved. In prior proceedings, the Commission has noted that the list of factors that could be considered in such a determination is nearly endless. Rather than attempting the difficult process of determining social, economic, or political or other forms of interdependence in each case, the Commission has adopted three objective criteria to use as a threshold determination of community of interest. Those criteria, which are based on readily available information, are as follows:


Contiguous exchange boundaries - The telephone exchanges must share a common boundary or be connected to one another indirectly by an unbroken sequence of common exchange boundaries.


Minimum calling volume - There must be an average of four toll calls per access line per month between the contiguous exchanges; and


Minimum calling distribution - More than 50 percent of customers in the petitioning exchange must make at least two toll calls per month to the contiguous exchange. See Orders No. 89-815 and 92-1136


In adopting the objective criteria, the Commission recognized that calling patterns may not always reflect the existence of a community of interest. Accordingly, the Commission concluded that, if a petition fails to meet the objective criteria, petitioners should be given the opportunity to establish that a community of interest exists through the use of demographic, economic, financial, or other evidence. See Order No. 89-815 at 35.




Several petitioning telephone exchanges have relied on this alternative, demographic showing of a community of interest to overcome a failure to meet the calling volume or calling distribution criterion. See, e.g., Blue River EAS, Order No. 93-1547; Bellfountain EAS, Order No. 94-1129. The issue presented here is whether a petitioning exchange may use demographic and other evidence to establish a community of interest between two non-contiguous telephone exchanges.




The Commission has previously stated its reluctance to grant EAS between non-contiguous exchanges. In Order No. 90-1556, the Commission held:


If granted, "leapfrog" EAS arrangements would give rise to unlimited and chaotic EAS expansion, a condition the Commission has already determined to avoid. Order No. 89-815 at 33. The Commission will not grant any EAS request that leapfrogs an intervening exchange.


Despite this apparent prohibition, however, subsequent Commission orders appear to indicate that the geographic proximity requirement is appealable under the alternative, demographic showing process. This is reflected in staff’s testimony in this docket:


Q: If the petitioning exchange does not meet all three objective criteria, could the exchange still qualify for EAS?


A: Yes. If one or more of the three objective criteria are not met for a particular interexchange route, the PUC will issue a proposed order which dismisses that portion of the EAS petition. However, Order No. 89-815 states, "Petitioners will be given an opportunity to establish through demographic, economic, financial, or other evidence that a community of interest exists. See Staff/1, HARI/3.


After consideration of this issue, the Commission concludes that, as a general rule, it will not grant EAS between non-contiguous exchanges. As stated above, so-called "leapfrog" EAS arrangements, if allowed, would give rise to unlimited and chaotic EAS expansion. To insure the integrity of the EAS process, and to allow for an orderly expansion of EAS routes, the Commission will only approve EAS between contiguous telephone exchanges. The Commission considers exchanges to be contiguous if they either share a common exchange boundary or if they are connected to one another indirectly via one or more intervening exchanges. In the latter instance, the exchanges must be connected by an unbroken sequence of exchange boundaries, and there must be a community of interest between each intervening pair of exchanges. See Order No. 90-1556.




Turning to the fact of this case, however, the Commission will make an exception to its policy and find a community of interest between the Ash Valley and Reedsport exchanges. As noted above, the Ash Valley and Reedsport exchanges are not contiguous. The exchanges are diagonally opposed to each other at the southwest corner of the Scottsburg exchange, but are separated by a half-mile gap at what would be adjoining corners. Moreover, the exchanges are separated by unserved territory.


This physical arrangement of exchanges is not an ordinary "leap-frog" situation where the petitioning, intervening, and target exchanges lie in a linear configuration. Indeed, it is doubtful that any Ash Valley residents view the Scottsburg exchange as an intervening exchange given the roads and settlement patterns in the area. At the junction of Loon Lake Road and State Route 38, Ash Valley residents either turn right to Scottsburg or left to Reedsport. There is no settlement at that junction. Accordingly, the road between Ash Valley and Reedsport does not go through the town of Scottsburg.


Given the unique circumstances presented in this case, the Commission finds that no public interest would be served by denying this petition. The Ash Valley exchange residents have established, both through calling pattern data and demographic evidence, an overwhelming amount of dependence on the Reedsport exchange. The half-mile gap in exchange boundaries is inconsequential.


Accordingly, the Commission finds that a community of interest exists between the Ash Valley and Reedsport telephone exchanges, notwithstanding the fact that the exchanges are not contiguous. In reaching this decision, the Commission notes that its decision is limited to the specific situation prevailing in this proceeding. The Ash Valley-Reedsport interexchange route should proceed to Phase II (tariff analysis).







The Ash Valley telephone exchange has established a community of interest with the Reedsport telephone exchange.


This completes Phase I of this docket. The Ash Valley/Reedsport interexchange route is now ready to enter Phase II, the rate and cost phase of this proceeding. For Phase II, this docket will be grouped with other EAS dockets that complete Phase I by August 1. The serving telephone companies shall file proposed rates and supporting cost information by October 15, 1996.


The Ash Valley/Scottsburg interexchange route does not meet the community of interest requirements of Orders No. 89-815 and 92-1136. The portion of the EAS petition for that route is dismissed.



Made, entered, and effective ________________________.



Roger Hamilton



Ron Eachus




Joan H. Smith



A party may request rehearing or reconsideration of this order pursuant to ORS 756.561. A party may appeal this order pursuant to ORS 756.580.