ORDER NO. 97-485

ENTERED DEC 16 1997

This is an electronic copy. Appendices may not be included.

BEFORE THE PUBLIC UTILITY COMMISSION

OF OREGON

UM 852

DISPOSITION: COMMUNITY OF INTEREST FOUND

On May 30, 1997, customers in the Bly telephone exchange (Bly exchange or petitioners) filed a petition with the Commission requesting extended area service (EAS) to the Bonanza and Klamath Falls telephone exchanges. A map of the exchanges is attached to this order as Appendix A.

On August 21, 1997, the Commission Staff (Staff) filed testimony in this proceeding for the Phase I, Community of Interest Determination. Based on a review of geographic and telephone usage information, Staff concluded that the requested interexchange routes did not satisfy the objective community of interest criteria set forth in Order Nos. 89-815 and 92-1136. Staff's testimony is summarized in Appendix B.

On September 25, 1997, Michael Grant, an Administrative Law Judge (ALJ) for the Commission, issued a Proposed Order adopting Staff's findings and recommending that the Bly petition for EAS to the Bonanza and Klamath Falls exchanges be dismissed. Petitioners subsequently requested an opportunity to establish, through demographic, economic, financial, or other evidence that a community of interest exists between the Bly and Bonanza exchanges.

On November 19, 1997, ALJ Grant held a hearing on this matter in Bly, Oregon. Notice of the hearing was served to all parties, and was published twice in the Herald & News newspaper. Approximately 85 people attended the hearing in support of the petition.

Based on the evidence submitted in this matter, the Commission makes the following:

FINDINGS OF FACT

Geography and Demography

The Bly, Bonanza, and Klamath Falls telephone exchanges lie in Klamath County in south central Oregon. The Bly and Bonanza exchanges are served by PTI Communications (PTI) and consist of approximately 250 and 990 customers, respectively. The Klamath Falls exchange is served by U S WEST Communications, Inc., (USWC) and consists of approximately 24,600 customers.

The Bly exchange serves a rural logging and ranching community with little or no centralized business. The exchange area contains only a gas station, two small country stores, and a post office. Because the area offers limited professional and commercial services, many exchange residents seek essential goods and services in neighboring communities.

Many residents rely on the city of Bonanza, located approximately 35 miles from Bly. Bly area ranchers call the Bonanza exchange looking for feed, pasture, ranch dogs, and employees. Local logging companies also seek workers from the Bonanza area. Other Bly businesses obtain package goods from Bonanza, and rely on delivery drivers and towing services located in Bonanza.

The residents of the Bly and Bonanza exchanges both rely on the city of Klamath Falls to obtain other essential goods and services. Klamath Falls is a relatively large metropolitan area located approximately 54 miles from Bly via State Route 140. It offers a wide variety of commercial goods and services, including banking, insurance, veterinarian, and other professional services, as well as, hardware and building supplies, and other retail services.

Residents of the Bly and Bonanza telephone exchanges share common interests and programs through church and civic activities, such as the Lions Club and the 4-H Club. Furthermore, the two communities recently received a grant from the Oregon Arts Commission to hold an "Arts in the Park" program, a weeklong arts festival linking two annual summertime events in Bly and Bonanza.

Schools

Bly exchange children attend the Gearhart Elementary and Junior High School located in Bly, but must travel to Bonanza for high school. Approximately 30 children who live in the Bly calling area attend high school in Bonanza.

Many children compete in sports leagues that include both the Bly and Bonanza areas. Other Bly children travel to Bonanza to participate in other activities, including the Future Business Leaders of America (FBLA), Future Farmers of America (FFA), Honor Society, school dances, and student council. The Bly and Bonanza communities share strong ties through these and other extracurricular activities.

Government and Jurisdictional Issues

Customers of the Bly and Bonanza telephone exchanges live within Klamath County and are served by the county government in Klamath Falls.

Medical and Dental Services

A newly opened Health Clinic in Bonanza provides family medical care for area residents, including those located in the Bly exchange. Bly and Bonanza exchange residents seek emergency and specialized medical care in Klamath Falls, where the nearest hospital is located. They also seek dental care in the larger city, which offers a variety of dental providers.

Business and Commercial Dependence

Many businesses in Bly rely heavily on the Bonanza exchange. For example, a local construction business and pole-building contractor each work regularly for Bonanza residents. An antique store in Bly has several regular customers from Bonanza. Local ranching and logging businesses also deal with other businesses and sub-contractors in the Bonanza area. Many businesses have employees who live in Bonanza.

Toll Avoidance

An overwhelming number of Bly exchange residents engage in a variety of toll avoidance practices. Many will "save" calls and place them when they are in the Bonanza exchange on business or while visiting friends and family. Most residents also use alternative carriers when calling the Bonanza exchange. All but a couple of the 85 residents who attended the hearing indicated that they "dial-around" their local exchange carrier when placing long distance calls. Many testified that they place calls through AT&T, MCI, Sprint, Excel, and other competitive toll carriers. Furthermore, there are 85 cellular phones registered to customers of the Bly exchange. Approximately half of these cellular phone customers primarily use the wireless service to place calls to the Bonanza exchange.

Two large telephone users located within the Bly exchange also use alternative carriers. The Gearhart Elementary and Junior High School places toll calls to Bonanza through U.S. Long Distance. The school makes over 20 calls to Bonanza each week. The Bly Ranger Station, which employs 32 full-time and approximately 20 seasonal workers, transacts business by means of a privately held telephone system owned and operated by the Forest Service. Thus, while the 40 telephones located in the Bly Ranger Station are registered to the Bly exchange, all non-local calls are placed on the private network to join the commercial network in Klamath Falls or Lakeview. The Ranger Station places an average of 25 calls per month to the Bonanza exchange.

Results of the Objective Criteria Test

A review of geographic and telephone usage information reveals that the Bly petition narrowly failed the Commission’s objective community of interest criteria for the two proposed interexchange routes. While the Bly exchange is contiguous with the Bonanza exchange, a maximum average of 3.54 of a required 4.0 calls per line per month were placed between the exchanges. Similarly, with regard to calling distribution, 43.24 of a required 50 percent of the Bly customers made at least 2 calls per month to the Bonanza exchange.

With regard to the proposed Bly/Klamath Falls interexchange route, a maximum average of 15.83 calls per line per month were placed between the exchanges, and 82.08 percent of the Bly customers made at least 2 calls per month to the Klamath Falls exchange. These figures easily exceed the Commission’s calling pattern requirements. The two exchanges, however, are not contiguous.

OPINION

Issue

For the reasons shown in Appendix B, the Commission Staff determined that the Bly exchange petitioners failed to meet the calling volume and customer distribution requirements for the proposed Bly/Bonanza interexchange routes. Staff also determined that, although both calling pattern criteria were met for the proposed Bly/Klamath Falls interexchange route, the route failed to meet the geographic proximity requirement.

The question presented, therefore, is whether the petitioners have established, through demographic, economic and other evidence, that a community of interest exists between the Bly and Bonanza exchanges. If that is established, the geographic proximity requirement will be met for the proposed Bly/Klamath Falls interexchange route, since the Bly exchange will be connected to the Klamath Falls exchange by an unbroken sequence of exchange boundaries with a community of interest between each exchange in that sequence.

Applicable Law

In Phase I of an EAS investigation, the Commission determines whether there is a "community of interest" between the petitioning exchange and the target exchange(s). The Commission has adopted the following test for "community of interest" in cases where petitioners rely on demographic evidence:

A community of interest exists where there is social, economic, or political dependence or interdependence between the petitioning and requested exchange(s) sufficient to justify conversion to EAS. In making this determination, the Commission will review the following factors: (1) geographic and demographic information; (2) location of schools; (3) governmental and jurisdictional issues; (4) emergency services; (5) social services; (6) medical and dental providers; (7) employment and commuting patterns; (8) business and commercial dependence or interdependence; (9) transportation patterns; (10) the results of the objective criteria test; and (11) other factors deemed relevant by the Commission. The record need not contain evidence on each factor so long as the Commission can conclude that the record as a whole establishes sufficient interdependence or dependence between the exchanges. In the Matter of the Consolidated Applications For Expansion of the Portland Extended Area Service Region, Order No. 93-1045 at 12.

Resolution

The Commission concludes that the Bly petitioners have established, through demographic and other evidence, that a community of interest exists with the Bonanza telephone exchange. The evidence presented at hearing establishes a sufficient degree of dependence between the residents of the Bly and Bonanza exchanges.

Bly and Bonanza are rural ranching and agricultural communities that rely heavily on each other and share common interests, concerns, and pursuits. Perhaps the most obvious link between the areas, especially for parents of school-aged children, is the Bonanza High School that serves both exchanges. School related functions, including FFA, FBLA and sports, bring children and family from both exchanges together for numerous events and activities. A traditional link between the areas is the common interests shared by the ranchers and logging companies of the area. These businesses comprise a large part of the region’s economy, and family-owned businesses in both Bly and Bonanza rely on each other for supplies and information.

New links are further strengthening the ties between these communities. A recently opened family medical clinic serves residents of both Bly and Bonanza. The two communities also have successfully obtained funding for an "Arts in the Park" program that will provide educational and recreational opportunities for the area residents. These developments and other evidence submitted at hearing show that the Bly and Bonanza areas are becoming integrated to such an extent that it is no longer appropriate to require toll calling between the exchanges.

The Bly petitioners also established that an overwhelming majority of customers engage in a variety of toll avoidance activities. Many residents simply save calls and make them in the Bonanza exchange. Almost all residents dial around their primary toll carrier and use the services of other carriers. Numerous residents place calls to Bonanza on cellular telephones. Had these calls been capable of measurement and been included in Staff’s analysis, it is likely that the Bly customers would have satisfied the Commission’s objective criteria for a community of interest.

In summary, the Bly petitioners’ demographic evidence showed strong ties to the Bonanza exchange. The Commission concludes that such evidence persuasively establishes that a community of interest exists between the Bly and Bonanza exchanges. This conclusion, in turn, establishes the missing geographic proximity requirement for the Klamath Falls route. The Commission concludes that a community of interest also exists between the Bly and Klamath Falls exchanges. The Bly EAS petition should proceed to Phase II (tariff analysis).

ORDER

IT IS ORDERED that:

The Bly telephone exchange has established a community of interest with the both the Bonanza and Klamath Falls telephone exchanges.

This completes Phase I of this docket. The petition is now ready to enter Phase II, the rate and cost phase of this proceeding. For Phase II, the Bly petition 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, 1998.

Made, entered, and effective ________________________.

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.