ORDER NO. 95-1064

ENTERED OCT 4, 1995

THIS IS AN ELECTRONIC COPY

BEFORE THE PUBLIC UTILITY COMMISSION

OF OREGON

UM 745

DISPOSITION: COMMUNITY OF INTEREST FOUND BETWEEN AMITY AND SALEM; NO COMMUNITY OF INTEREST FOUND BETWEEN AMITY AND SHERIDAN OR AMITY AND DAYTON.

On March 6, 1995, customers in the Amity telephone exchange filed a petition with the Commission requesting extended area service (EAS) to the Salem, Dayton, and Sheridan telephone exchanges. A map of the exchanges is attached to this order as Appendix A.

On April 24, 1995, 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 only the proposed Amity/Salem interexchange route satisfied the Commission’s objective criteria for determining community of interest. See Order Nos. 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, a Hearings Officer for the Commission, issued a Proposed Order adopting staff's findings and recommending that the Amity/Dayton and Amity/Sheridan portion of the petition be dismissed based on the failure of those routes to meet the objective community of interest criteria. Petitioners subsequently requested an opportunity to establish, through demographic, economic, financial, or other evidence that a community of interest exists between Amity/Sheridan and Amity/Dayton.

On August 31, 1995, the Hearings Officer held a hearing on this matter in Amity, Oregon. Approximately 30 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 Amity, Sheridan and Dayton telephone exchanges lie along State Route 18 in Yamhill and Polk counties. The petitioning exchange, Amity, consists of approximately 1,400 access lines and currently has EAS to the McMinnville and Grand Island telephone exchanges. The Sheridan exchange lies west of Amity and consists of approximately 2,500 access lines. It currently has EAS to the McMinnville, Grande Ronde, and Willamina exchanges. The Dayton exchange lies northeast of Amity and consists of approximately 1,800 access lines. It has EAS to the McMinnville and Grand Island exchanges. The Amity and Dayton telephone exchanges are served by GTE Northwest, Inc., and the Sheridan exchange is served by United Telephone Company.

Amity is a rural agricultural community that offers limited professional and commercial services to its local residents. During the past few years, many local businesses have closed, leaving only a bank, small convenience store, and a tavern. Exchange residents, therefore, rely on neighboring exchanges to obtain essential goods and services. These include banking, insurance, veterinary, and other professional services, as well as automobile repair, hardware and building supplies, gasoline stations, and other retail businesses.

Many residents seek these services in McMinnville, a large self-sufficient community located approximately seven miles north of Amity. Due to proximity and traffic concerns, some residents find it more convenient to obtain these services in Sheridan, located about eight miles west of Amity. Sheridan does not offer the wide range and variety of services available within McMinnville, but does offer many services not available in Amity, including a pharmacy, a medical and dental clinic, a hardware store, gas stations, an automobile parts store, a veterinarian, and a supermarket.

Schools

Amity exchange residents are served by the Amity School District, which consists of an elementary, junior, and high school. The school district serves a large geographic area that includes portions of several other telephone exchanges, including the Salem, Dayton, McMinnville, Sheridan, and Dallas exchanges.

Government and Jurisdictional Issues

The Amity and Sheridan telephone exchanges are primarily located in Yamhill County and served by the county government in McMinnville. The southern portions of those exchanges, however, are located within Polk County. The Dayton telephone exchange lies entirely within Yamhill County.

The Perrydale Domestic Water Association is a cooperative water company that is located in Amity. It serves over 500 members, many of whom live within the McMinnville, Sheridan, and Salem telephone exchanges.

The Amity exchange is served by a post office in Amity.

Medical and Dental Services

No medical or dental facilities are located within the Amity exchange. Some local residents seek these services in Sheridan, which offers a medical clinic, a dentist, a chiropractor, and an optometrist. Other residents obtain these services in McMinnville, which offers a larger number of medical and dental services. The area’s closest hospital is also located in McMinnville.

Toll Avoidance

Some Amity residents engage in a variety of toll avoidance practices. Residents often avoid toll calls by combining a trip with their telephone activities. Others relay calls through neighbors or friends in McMinnville to make calls to the Dayton or Sheridan exchange.

OPINION

Commission Policy

The demand for EAS in Oregon is growing substantially. In many parts of the state, local telephone exchange boundaries no longer bear any relation to actual communities. Improved transportation, communications, and the general growth of cities and towns have expanded the boundaries of what local citizens view as their community. Many customers in suburban and rural areas desire toll-free calling to population centers.

The conversion of long distance traffic to EAS, however, creates new problems. Telephone companies may face significant loss of long-distance revenue, placing upward pressure on basic service rates. The conversion to EAS also shifts costs from high-volume to low-volume telephone users, creating a potential for inequity. Due to those reasons, the Commission must first find that a "community of interest" exists between the petitioning exchange and requested exchanges to justify EAS conversion.

Objective Criteria

In our statewide EAS investigation, Docket No. UM 189, we adopted three objective criteria for determining the existence of a community of interest between exchanges. These criteria, which make use of readily available geographic and telephone usage information, require: (1) that the petitioning exchange and target exchange(s) have contiguous exchange

boundaries; (2) that an average of four toll calls per access line per month be placed between the contiguous exchanges; and (3) that more than 50 percent of customers in the petitioning exchange make at least two toll calls per month to the target exchange(s).

In this case, GTE and United provided calling pattern data for the three exchanges involved in this case. Staff reviewed the data and determined that the Amity/Sheridan interexchange route failed two of the three objective community of interest criteria. Although the two exchanges are contiguous, a maximum average of only 2.75 toll calls per access line were placed between the exchanges, and an average of only 29.73 percent of the Amity customers made at least two or more calls to the Sheridan area. Staff made similar determinations with respect to the Amity/Dayton interexchange route. The two exchanges also share a common boundary; however, a maximum average of only 1.65 toll calls per access line were placed between the exchanges, and an average of only 22.80 percent of the Amity customers made at least two calls to the Dayton exchange.

Demographic Evidence

In adopting the three objective criteria, we acknowledged that calling pattern data may not always reflect the presence of a community of interest. For that reason, if an EAS petition fails to met the objective criteria, a petitioning exchange has the opportunity to establish a community of interest through demographic, economic, financial, or other evidence. We adopted the following test for "community of interest" in cases where petitioners rely on such 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

In our examination of EAS, we have recognized that the existence of a community of interest is not easily proved. See Order No. 89-815 at 10. The objective criteria and demographic standards are designed to ensure that there is a sufficient calling relationship between the petitioning exchange and the target exchange(s). If such a relationship does not exist, the EAS conversion may result in unfair cost shifts from high-volume to low-volume telephone users. When an EAS route is implemented, not only will a new EAS rate be established for the petitioning exchange, but rate increases may occur in target exchanges as well. If there is a community of interest between the telephone exchanges, we believe that a rate increase will be justified. Otherwise, rate increases may not be fair or equitable. For that reason, our analysis must take into account the unique impact of the high volume user upon the low volume telephone user.

Amity/Sheridan

This is a difficult case. Those residents of Amity who attended the hearing presented information in an attempt to show a community of interest with Sheridan through demographic, geographic, and economic evidence. All witnesses showed a strong desire for the proposed EAS. Many witnesses referenced high toll bills and outlined various methods of toll avoidance. The evidence presented also established that school children who live within the Sheridan exchange attend schools in Amity and that Amity residents, particularly those located near the western exchange boundary, rely on Sheridan for certain medical and business services.

The majority of the testimony, however, failed to establish a sufficient dependence or interdependence between the Amity and Sheridan exchanges to warrant EAS conversion. It is clear that many Amity residents who live along the exchange boundary view Sheridan as part of their community. Indeed, for these residents, the telephone exchange boundaries bear little relationship to their daily activities. We must balance the desires of these residents, however, with the needs of other exchange customers. In this regard, there was little evidence offered of strong community ties between Amity and Sheridan as a whole. This is perhaps due to the availability of the wide range of professional and commercial services available in McMinnville, located just eight miles from downtown Amity and within the exchange’s present extended area calling area. Consequently, Amity exchange residents currently have reasonable access to emergency, dental, medical, professional, business, educational and governmental services.

In addition, most of the business testimony in support of EAS was based on a desire for future economic development, job creation and job preservation. While these economic factors are legitimate concerns, our role is to protect all utility customers, not create economic development incentives for local businesses. See ORS 756.040(1). For that reason, we do not consider prospective economic development as a factor to support EAS implementation. See In the Matter of the Investigation into Extended Area Service in the State of Oregon, Order No. 89-815 at 13.

After careful consideration, we are unable to find a sufficiently strong dependence by the Amity exchange on the Sheridan area, or to conclude that these two exchanges have become integrated to such an extent that it is no longer appropriate to require toll calling between them.

Amity/Dayton

We further conclude that the customers of the Amity exchange failed to establish a sufficient community of interest with the Dayton exchange. Like Amity, Dayton is a small exchange that offers limited business services to its residents. Due to this reason, there was little evidence offered of strong community ties between Amity and Dayton.

Conclusion

On this record, the Commission concludes that the demographic and other evidence presented in this matter, when viewed with the results of the objective criteria test, does not make a sufficiently strong showing to establish that a community of interest exists between the Amity exchange and either the Sheridan or Dayton exchange. Accordingly, those portions of the petition for EAS should be dismissed.

ORDER

IT IS ORDERED that:

The Amity telephone exchange has failed to establish a community of interest with either of the following exchanges: Sheridan and Dayton.

 

The petition for EAS between Amity exchange and the Sheridan and Dayton exchanges is dismissed.

 

 

The following interexchange route has met the community of interest requirements of Order Nos. 89-815 and 92-1136: Amity and Salem. This completes Phase I of this docket as to this route. The Amity/Salem 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, 1996. The serving telephone companies shall file proposed rates and supporting cost information by October 15, 1996.

 

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.