ORDER NO. 96-028

ENTERED JAN 31 1996

THIS IS AN ELECTRONIC COPY

BEFORE THE PUBLIC UTILITY COMMISSION

OF OREGON

UT 122

DISPOSITION: STIPULATION ADOPTED; TARIFF APPROVED

Introduction

On March 14, 1995, U S WEST Communications, Inc., (USWC) filed rate schedules in Advice No. 1596 to be effective April 15, 1995. The filing is primarily designed to specify conditions under which USWC will assume responsibility for telecommunications facilities located on the property owner's side of the point of demarcation. At its April 4, 1995, public meeting, the Commission found cause to investigate the propriety and reasonableness of the rates pursuant to ORS 759.180 and 759.185 and suspended the filing for investigation.

Hearing

 On August 16, 1995, Michael Grant, an Administrative Law Judge for the Commission, held a hearing in this matter in Salem, Oregon. The following appearances were entered: Michael Weirich, Assistant Attorney General, for the Commission Staff (Staff); Molly K. Hastings, attorney, for USWC; J. Rion Bourgeois, attorney, for the Oregon Manufactured Housing Association, Manufactured Housing Communities of Oregon, and ELPH Enterprises (collectively referred to as OMHA); Dave Overstreet, authorized representative, for GTE Northwest, Inc.; Glenn Harris, authorized representative, for United Telephone; and Marcia Spellman, authorized representative, for the Oregon Telecommunications Association. The parties subsequently filed opening briefs on November 6, 1995, and closing briefs on November 27, 1995.

Based on the record in this proceeding, the Commission makes the following:

FINDINGS OF FACT AND CONCLUSIONS OF LAW

Background

In 1988, USWC filed a tariff designed to revise the terms of its land development agreements (LDA) with housing developers for the extension of telephone facilities into residential subdivisions. In general, the tariff allowed the company to charge developers the full cost of extending facilities to each home-site, while allowing the developers the opportunity to be reimbursed if they developed their subdivisions and added new access lines to the network. The tariff, however, defined "residential subdivisions" as those consisting of separately deeded tax lots. Because manufactured home parks are generally made up of rental spaces and not separately deeded tax lots, they were excluded from the LDA tariff and treated as multi-tenant property. As with other multi-tenant property, USWC would install facilities to only one main point of premise (MPOP) in these developments.

In practice, USWC did not consistently follow its tariff and often treated manufactured home parks like residential subdivisions. For example, in 1988 and 1990, USWC entered into LDAs with Elph Enterprises for its Country Village Estates. Similarly, in 1988, USWC entered into an LDA with North Park Development for its Meadowland Park. In all three instances, USWC installed underground wiring up to each rental space. The developers were required to put up a performance deposit equal to the estimated cost of the installation, but were later reimbursed after homes were placed on the property and connected with the network.

In 1994, USWC began strictly enforcing its tariff and refused to enter into LDAs with single-owner manufactured home park developers. In these developments, USWC would place just one MPOP on each property, thereby requiring these developers to fund facilities that run from the MPOP to each rental space. Unlike their treatment of residential subdivisions, USWC would not reimburse these developers for the costs of the facilities as the development filled with tenants.

The costs to the developer of installing the underground wire and facilities varied from park to park. For example, the owner of the North Star Mobile Home Park in Corvallis, Oregon, paid $22,451 for installation of the wires from the MPOP to each rental space. Some developers have passed on these costs to their tenants, while others have not.

After complaints by the Oregon Manufactured Housing Association (OMHA), USWC modified its tariff in Advice No. 1577, effective January 1, 1995. USWC deleted the requirement of separately deeded tax lots and now treats manufactured home parks in the same manner as it treats residential subdivisions. As of January 1, 1995, manufactured home park developers and other multi-tenant property owners may request USWC to install facilities to: (1) one location at each building; (2) multiple points on the premises; (3) each individual customer's space or unit; or (4) one point on the premises.

USWC subsequently filed Advice No. 1596, which is the primary subject of this proceeding. The filing is designed to extend USWC's new network termination options to existing customers and specifies conditions under which the company will take back responsibility for existing facilities located on the property owner's side of the MPOP. Some of those facilities, referred to as premises owner facility (POF), were installed by USWC's predecessor, Pacific Northwest Bell (PNB) and transferred to property owners in 1987 when the Commission deregulated inside wire. Others were installed by property owners from 1988 through 1994.

Advice No. 1596 applies to POF installed before January 1995, on private property, beyond the current MPOP, up to each individual space or unit. Such facilities are currently considered inside wire and are the responsibility of the property owner. Under the terms of the filing, the property owner may request USWC to extend the current point of demarcation from the present point to each space or unit. The company would then assume responsibility for the POF up to the new point(s) of demarcation.

The Commission found cause to investigate the reasonableness of Advice No. 1596 and suspended the filing pending this investigation. As part of the investigation, USWC agreed that the Commission also could review Rule and Regulation 2, Sheet 5, subsection F.2.b filed under Advice No. 1577, which became effective January 1, 1995. That subsection applies to multi-premises property where USWC installed facilities up to each individual space or unit after the effective date of the new tariff. If the property owner subsequently requires USWC to move the points of demarcation back toward the property line, thereby converting regulated network facilities to inside wire, section F.2.b requires the property owner to compensate USWC for the facilities.

Issues

At the prehearing conference, the parties identified eight tentative issues to be considered in this proceeding. In a subsequent ruling, Issue 8 was deleted from the list and three additional issues proposed by OMHA were added. A complete issues list is attached as Appendix A. Because some issues concern related topics, the Commission will combine its discussion of issues where appropriate, and address the others in numerical order.

Issues 1, 3 and 4(a-f): What conditions should the Commission prescribe for when USWC accepts responsibility for the facilities?

Issues 1, 3 and 4(a-f) identified various questions regarding USWC's proposed terms and conditions for accepting responsibility of POF. At the time of hearing, Staff and USWC only disagreed on two general issues related to those conditions, one of which the parties subsequently resolved through a stipulation. OMHA did not substantively address the proposed conditions in its direct testimony, but challenges portions of the stipulation between USWC and Staff. The Commission will address each separately.

A. Conditions of Acceptance - Undisputed Issues

Parties' Positions:

Both USWC and Staff agree, and OMHA does not dispute, that the company should not be required to accept responsibility for the facilities without regard to condition. They also agree that, in determining whether or not to accept responsibility for the facilities, USWC should use the following criteria outlined in its direct testimony. Those criteria include the following:

1. Type of cable and the suitability of use in that particular installation. For example, aerial cable must be used when the application is aerial.

2. Type of termination

3. Conformance Tests results with a DAVER Test Unit (Data Administration Verification Analysis Report)

4. Condition of cable and terminals: no more than 1% defective pairs total usable space around the terminal to meet OSHA specifications grounding and bonding are consistent with National Electric Code requirements

5. How cable is placed: in structure no air core direct buried cable or cable not in a reusable support structure will be accepted agreement that the cost for dig-ups required for maintenance and area restoration will be the responsibility of premises owner

6. The existence of records that show where and how the cable is placed on the premises, to include gauge, size of cable, and count of cable.

Resolution:

The Commission finds the conditions outlined above to be reasonable and adopts them. In some situations the POF, while originally installed by PNB, has been under the control of the property owner for approximately eight years. In other situations the POF was installed by independent companies or the property owners themselves. USWC should not be required to accept responsibility for these facilities without regard to whether the facilities were properly maintained or installed.

B. Stipulation - Testing of Facilities

Parties' Positions:

Staff and USWC entered into a stipulation intended to resolve issues relating to the testing of the facilities. The stipulation is attached as Appendix B and incorporated by reference. In short, USWC and Staff agree that, at the POF owner's request, USWC will perform a visual inspection of the existing cable and wire at a cost of $50 per MPOP. If visual testing leads USWC to conclude the POF meets the company's criteria, USWC will test the POF, at its expense, for specific damage distinct from normal deterioration. If specific damage exists, the company may require the premises owner to repair the damage before acceptance. Absent specific damages, USWC will accept responsibility for the POF.

If visual inspection leads USWC to conclude that the cable and wire is not suitable, USWC will provide the POF owner with an estimate of charges for further testing. If the company determines after testing that the POF is not acceptable, then charges for the testing are charged to the premises owner. If it determines that the POF is acceptable and the property owner returns responsibility for the POF to the company, USWC will waive all testing charges.

The stipulation also contains a new offer by USWC to the POF owner. If an owner asks USWC to extend the current point of demarcation to each unit or space and provides new support structure, i.e., trenches or conduit, USWC will install new wires to the new points of demarcation. Staff explains that an owner may take advantage of this offer if the old wires are so deteriorated or damaged that they are not worth repair.

OMHA is not a party to the stipulation and asks that additional language be added to the proposed agreement. First, it contends that USWC should be prohibited from acting in a discriminatory fashion when conducting its visual inspection of the POF. Second, it argues that USWC should not be allowed to assume that the POF is unsuitable if the POF owner can show that the facilities were installed by PNB or to USWC's standards. It argues that, if a premises owner can document proper installation, then USWC should conduct acceptance testing at its own expense. Third, with regard to USWC's offer to install new wires, OMHA contends that the stipulation should be modified to prohibit USWC from refusing to install new facilities if the original facilities were installed by PNB but fails acceptance testing.

Resolution:

The Commission finds the proposed stipulation reasonable and adopts it. The Commission does not believe that the stipulation should be modified as suggested by OMHA. First, ORS 759.275 and other statutes already prohibit USWC from acting in a discriminatory manner. There is no need to add redundant language to the tariff. In its second argument, OMHA appears to seek additional language restricting USWC's ability to impose testing costs in certain situations. However, the stipulation provides that, even if an initial charge is imposed, USWC will reimburse the charge if the POF later passes inspection and the owner returns responsibility for the POF to the company. Therefore, the stipulation, as written, adequately protects the POF owner. Finally, OMHA's comments regarding the installation of new facilities are misplaced. USWC's offer to install new wire is conditioned on the premises owner providing new support structure. It is not necessarily associated with the company's testing of the existing facilities for acceptance.

C. Disputed Condition of Acceptance

Parties' Positions:

The dispute between USWC and Staff concerns the meaning of a term in the tariff. The tariff states that, if the POF meets certain criteria, USWC will assume "exclusive responsibility" for the facilities. Staff interprets that phrase to include ownership of the facilities. USWC disagrees with that interpretation and raises ratemaking concerns with obtaining ownership of the wire and cable.

Resolution:

The Commission agrees with Staff that the term "responsibility" means ownership of the facilities. In deregulating inside wire, the Commission ordered that title of the inside wire pass to the premises owner. See Investigation of the Deregulation of Inside Wire pursuant to ORS 756.515, Order No. 87-778. The converse should hold true if USWC assumes responsibility for the POF. Furthermore, ownership of the facilities in question will not present any ratemaking issues. Because the facilities over which USWC assumes responsibility will have zero capital costs to the company, they will not affect Plant in Service accounts for the rate base.

Issue 2 and OMHA Issue 3: Rule and Regulation 2, Sheet 5, Subsection F.2.b

Subsection F.2.b applies to multi-tenant premises where USWC installed facilities up to each individual space or unit after the effective date of the new tariff. If the property owner subsequently requires USWC to move the points of demarcation back toward the main point of entry (MPOE), thereby converting regulated network facilities to inside wire, the subsection requires the property owner to compensate USWC.

Staff supports the provision, with the minor suggestion that USWC amend the tariff for clarification. Staff suggests that USWC replace the phrase "installed after the effective date of this tariff" with "installed after January 1, 1995." OMHA does not object to the provision, but argues that a similar one should be adopted for the converse situation. OMHA contends that, if a premises owner is required to reimburse USWC when the points of demarcation are moved outwards towards the MPOE, then the company should be required to reimburse the property owner if the owner had installed the POF at its own expense and later requests USWC to move the point of demarcation forward.

Resolution:

The Commission finds subsection F.2.b reasonable and adopts it, as modified by Staff's suggestion. The section protects USWC from being obligated to install facilities only to have them taken over by the property owner. The Commission is not persuaded by OMHA's argument that USWC should compensate the premises owner when moving the demarcation point forward. At the request of the premises owner, USWC will either move the demarcation point outward towards the MPOE, or inward towards each space or unit, providing the conditions of the facilities are acceptable. In both situations, the initiative lies with the property owner. No converse situation exists where USWC can initiate the move.

Issue 4(g-j): Should USWC compensate the property owners for the facilities if the company is required to accept responsibility for them?

Parties' Positions:

The primary issue in this docket is whether USWC should compensate the POF owner if it accepts responsibility for the facilities. Staff and the company agree that no compensation should be paid. Both point out that, under the proposed tariff, the property owner will not be required to return responsibility for the POF to USWC. Rather, both view the tariff as an offer by the company to assume maintenance responsibility for the POF, with its accompanying costs and risks. Staff and USWC explain that the owner will have two options: (1) to retain responsibility for the POF if there is a net value in keeping the wires and cables; or (2) to transfer the facilities to USWC if there is a net value in eliminating the expense of maintaining the POF.

Both Staff and USWC acknowledge that some property owners installed the POF at their own expense. Nonetheless, neither recommends that USWC pay compensation upon a transfer of those facilities. They argue that these property owners made business decisions to install the POF in light of tariffs that required USWC to install facilities to only one MPOP on the property. Staff and USWC add that, like laws and regulations, utility tariffs sometimes change and, as a result, some people may benefit while others may not. Because these POF owners are also not required to return the facilities to USWC, Staff and the company believe that these owners should be treated the same as other POF owners.

OMHA disputes Staff's and USWC's recommendation insofar as it would apply to certain POF owners. OHMA points out that manufactured home park developers who installed POF before 1992 and after 1995 were generally reimbursed by USWC for such costs. It adds, however, that USWC refused to reimburse these developers in 1993 and 1994 and, as a result, they were required to fund the installation of the facilities. OMHA argues that these developers were victims of a "window of discrimination" and that fairness requires that USWC reimburse these developers upon a transfer of the facilities.

Resolution:

The Commission agrees with Staff and USWC and concludes that the company should not be required to compensate the POF owner if the company accepts responsibility for the facilities. As noted above, the POF owner is under no obligation to return the POF to USWC. Should USWC accept the POF when offered, the company will incur the obligation to maintain the POF at its own expense. The Commission is not persuaded by OMHA's argument that USWC's prior practice was not fair to manufactured park developers. The company's practice was effected pursuant to lawful tariffs. The fact that a tariff has changed is not a sufficient reason to retroactively reimburse a select group of individuals for expenses incurred under a prior lawful tariff.

Issue 5: How should USWC notify customers of the new, tariffed policy?

Parties' Positions:

USWC and Staff agree that the company should notify all multi-premise property owners of the new tariff. Both note, however, that there are practical problems with identifying these individuals, who may or may not be USWC customers. Furthermore, USWC has stated that it is reluctant to generally notify end-users of the tariff. Because the end-users are often tenants who most likely do not have the authority to relinquish responsibility for the POF, USWC believes that a general notification would not be beneficial and may, in fact, cause confusion.

USWC proposes to provide information to its sales channels and network organizations that are most likely to come into contact with the owners of multi-tenant premises. USWC believes that these company representatives could then inform such owners on a need to know basis. OMHA does not strongly disagree with USWC's suggestion, but states that the Commission should require USWC to publicize the new tariff to all owners of multi-tenant premises, not just those its sales force selects.

Resolution:

The Commission agrees that USWC should notify all multi-premise property owners of the new tariff, as approved by this order. OMHA, however, fails to present any concrete ideas as to how this could be accomplished. USWC has indicated that it does not have the ability to contact all such property owners because these persons are not necessarily USWC customers. The Commission directs the company to actively seek to notify the proper persons through its sales channels and network organizations. Furthermore, USWC should provide notification of the tariff in trade journals or industry newsletters related to property ownership and management. Staff should keep track of the company's efforts and report back to the Commission if it determines that additional notification requirements are necessary.

Issue 6: Does the proposed tariff implicate constitutional principles of due process and equal protection?

OMHA contends that USWC's tariff discriminates against manufactured home parks in two respects. The Commission will address each argument separately.

A. Trenching Costs

Parties' Positions:

OMHA notes that USWC provides street excavation for underground facilities in residential developments. It adds, however, that USWC will not provide excavation under streets in manufactured home parks because the streets are privately, not publicly owned. OMHA argues that there is no rational explanation for this policy. It also contends this policy is inconsistent with USWC's prior commitments in LDAs to provide trenching under private streets in certain manufactured home parks, such as Country Village Estates. Finally, OMHA asserts that under the language in the new tariff USWC agrees to be responsible for future excavation of underground facilities installed in conduit.

USWC defends its policy and contends that site-built residential developers have the same responsibilities for trenching costs as manufactured home park developers. It explains that the company's tariff simply provides that any trenching performed on private property is the responsibility of the property owner. Staff also defends the company's trenching policy, but does not believe that the issue is within the scope of this docket.

Resolution:

In its proposed revisions in Advice No. 1596, USWC refers to excavation costs in two subsections. Accordingly, the Commission finds OMHA's argument to be within the scope of this docket. The Commission concludes, however, that USWC's trenching policy is reasonable and does not implicate any constitutional principles of due process and equal protection. For all USWC customers, the company places the responsibility for trenching costs upon the owner of the property. The fact that streets within manufactured home parks may be privately owned is a distinction due to the nature of manufactured home parks, not USWC's tariff. The Commission also has reviewed the company's LDA tariffs cited to support OHMA's second argument and finds no obligation on behalf of USWC to provide trenching of facilities under private streets in certain parks. Furthermore, as staff points out, any such commitment would be inconsistent with the company's tariff, which ultimately controls. Finally, OMHA misinterprets USWC's reference to excavation in the new tariff. The references in subsections E(2) and (3) simply refer to the property owner's obligation to pay for excavation costs, particularly where conduit was not used.

B. Placement of Demarcation Equipment

Parties' Positions:

OMHA states that USWC refuses to install demarcation equipment, such as a standard network interface box, on or in a mobile home. OMHA argues that as a result of this policy a manufactured home owner must incur additional expense to install inside wire from the termination post to the home.

USWC responds that its MPOP placement policy is based on the concern that a mobile home might be moved, taking the termination jack and possibly damaging the network. Staff contends that OMHA argument is beyond the scope of this docket.

Resolution:

The Commission agrees with Staff that USWC's equipment placement policy is not properly before us. The docket was initiated to investigate Advice No. 1596 and, with the company's consent, one subsection of Advice No. 1577. USWC's placement policy is contained in a company policy guideline and is not under investigation in this docket. The Commission declines to address, in this contested case proceeding, provisions of a company policy not subject to investigation.

Issue 7: Sale of intra-premises facilities

Parties' Positions:

All parties agree that there are no legal restrictions to the sale of POF on the open market. OMHA, however, asks the Commission to consider whether USWC would be required to replace the facilities at its own expense if the current owners sold them to entities other than USWC and later requested USWC to move the demarcation point to each tenant's space. OMHA asks the Commission to consider the issue to more fully inform POF owners of their options and responsibilities under the new tariff.

USWC does not address this issue in its briefs. In its testimony, however, it acknowledges that it would be required to replace the POF if the property owner had removed the original facilities, assuming that the owner would provide all supporting structure and pay for trenching costs. Staff agrees with USWC, but believes that OMHA raises much more complex issues about possible ramifications arising from a park owner's sale of POF to a competitive provider.

Resolution:

The Commission agrees with USWC and Staff that the company would be required to replace the POF at its own expense, subject to existing construction tariffs, if an owner removed existing facilities. The Commission is reluctant, however, to further address the issue as requested by OMHA. Rather than making a determination based on a hypothetical scenario, the Commission concludes that it would be more appropriate to wait for an actual case, with more specific facts, to develop and address the issue at that time.

OMHA 1: Does the tariff apply to POF installed prior to 1/1/95, but placed in service thereafter?

Parties' Positions:

OMHA raises an issue relating to the effective date of USWC's Advice No. 1577. Specifically, OMHA asks whether the tariff filing, which entitles multi-tenant property owners to reimbursement through LDA agreements for new facilities installed to each tenant's unit or space, applies to POF installed prior to January 1, 1995, but placed into service after January 1, 1995.

While USWC does not address OMHA's question, Staff interprets the provision as applying only to agreements between USWC and the premises owner entered into after the effective date of the tariff. Staff does not believe that it was meant to be applied retroactively to an "installation of facilities" date prior to the effective date of the tariff.

Resolution:

The Commission concludes that OMHA's question is not within the scope of this proceeding. OMHA asks a specific question relating to the applicability of tariff filing Advice No. 1577, which became effective January 1, 1995. As noted above, this proceeding primarily addresses Advice No. 1596, with the exception of one subsection of Advice No. 1577 not related to the tariff's effective date.

OMHA 2: Does USWC's treatment of Manufactured Home Parks under the proposed tariff constitute unjust discrimination, unequal treatment, undue preference or an illegal practice under ORS 759.260, 759.270, 759.275, or other statute?

Parties' Positions:

OMHA alleges that residents of manufactured home parks developed in 1993-1994 may be subject to discriminatory treatment by USWC. OMHA explains that these tenants might, in effect, pay more for telephone service than residents of site-built homes if a park developer decided to increase rent to recover the costs of installing the POF. OMHA contends that the increased rent could be construed as an "indirect device" by USWC to discriminate against these customers in violation of ORS 759.260.

USWC and Staff dispute OMHA's assertion, noting that the company will be charging the end-user customers in the parks the same rates as other similarly situated customers. Both contend that the actions of manufactured home park operators cannot be attributed to USWC in the context of utility discrimination.

Resolution:

The Commission is not persuaded by OMHA's argument. There is no evidence in this record that USWC has charged any of its customers more or less for similar telecommunications service. While any multi-premises property owner may recoup its costs of inside wire by raising the rent of its tenants, those actions are independent of USWC and, therefore, cannot be viewed as discriminatory conduct by the company.

ORDER

IT IS ORDERED that:

The stipulation attached as Appendix B is adopted in its entirety.

The other adjustments the Commission has made in the body of this order are adopted.

Advice No. 1596 is permanently suspended. Within 15 days from the service date of this order, U S WEST Communications, Inc., shall file revised tariffs consistent with the stipulation and findings of fact and conclusions in this order, to be effective 15 days thereafter.

U S WEST Communications, Inc., shall notify interested persons of the tariff according to the terms of this order.

Made, entered, and effective ________________________.

A party may request rehearing or reconsideration of this order pursuant to ORS 756.561. A request for rehearing or reconsideration must be filed with the Commission within 60 days of the date of service of this order. The request must comply with OAR 860-14-095. A copy of any such request must also be served on each party to the proceeding as provided by OAR 860-13-070. A party may appeal this order to a court pursuant to ORS 756.580.