ORDER NO. 96-041

ENTERED FEB 14 1996

THIS IS AN ELECTRONIC COPY

BEFORE THE PUBLIC UTILITY COMMISSION

OF OREGON

UM 745

DISPOSITION: APPLICATION FOR RECONSIDERATION GRANTED; ORDER NO. 95-1064 UPHELD.

Introduction

In Order No. 95-1064, the Commission found that the Amity petitioners had failed to establish a community of interest with either the Sheridan or Dayton telephone exchanges. Based on that finding, the Commission dismissed the petitions for extended area service (EAS) between those exchanges.

On December 1, 1995, petitioners filed a request for reconsideration of Commission's finding that no community of interest exists between the Amity and Sheridan exchanges. Pursuant to a subsequent ruling by an Administrative Law Judge, petitioners submitted additional evidence on January 15, 1996.

The Commission finds good cause exists to further examine the issue of whether a community of interest exists between the two exchanges. See OAR 860-14-095(3). Based on petitioner's newly submitted evidence and the record in this matter, the Commission issues the following order on reconsideration.

FINDINGS OF FACT

Petitioners offer new evidence relating to numerous factors. The Commission will address each separately:

Petition in Support

In an effort to demonstrate that a majority of residents within the Amity exchange desire EAS to the Sheridan exchange, petitioners submitted a petition signed by over 800 customers. Because the Amity exchange has approximately 1,400 access lines, petitioners argue that this petition signed by a majority of the exchange residents establishes a community of interest between Amity and Sheridan.

Cellular Telephone Usage

Petitioners contend that the Commission's objective calling data criteria does not reflect the recent increase in the use of cellular telephones. Petitioners cite evidence that shows approximately 27 percent of Yamhill County residents now use cellular telephones

Internet Access

Petitioners note that the Sheridan Library will soon become the server site for the Open Electronic Community Network, a project headed by the Salem Public Library to provide internet access to residents of southern Yamhill county. Petitioners contend that it is crucial that toll charges be eliminated between Amity and Sheridan so local residents will be able to participate in this program.

Business and Commercial Interdependence

Petitioners submitted additional information intended to establish a strong business relationship between the Amity and Sheridan exchanges. This information includes petitions and letters of support signed by Sheridan businesses, as well as evidence of ties within the farming communities. Petitioners explain that farmers in the Sheridan exchange primarily rely on grain/grass holding and cleaning facilities located within the Amity exchange.

Petitioners also contend that many local residents rely on employment opportunities in Sheridan, particularly at the Federal Prison in Sheridan. Petitioners further point out that Amity residents may soon desire EAS to Grand Ronde, as more and more local residents go to work for the new casino located in that exchange. Petitioners note that this new EAS route would not be possible unless contiguous exchange boundaries were established first with the intervening Sheridan exchange.

Emergency Services

Petitioners submitted letters from the Amity and Sheridan Fire Departments to show that both work together closely to serve each community.

Schools

Petitioners note that the two school districts located within the local calling area, Amity and Perrydale, interact with the Sheridan School District.

Medical Providers

Petitioners contend that, while medical providers and the county hospital are located within the McMinnville exchange, many Amity residents prefer the smaller, slower paced practice of the Western Yamhill Medical Center located in Sheridan.

Essential Services

Petitioners submitted a copy of a bill for electric service in Amity provided by Portland General Electric. Petitioners note that the bill provides two numbers for local residents to call for service information: one with a Sheridan prefix, the other with a toll-free 1-800 prefix.

Petitioners also point out that, while Amity residents have reasonable access to businesses in McMinnville, many prefer the smaller, slower paced atmosphere that the City of Sheridan offers.

OPINION

Applicable Policy

In Order No. 93-1045, the Commission 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.

In the challenged order, the Commission reiterated that the existence of a community of interest is not easily proved. See Order No. 95-1064 at 5. It noted that the 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 Commission added, EAS conversion may result in unfair cost shifts from high-volume to low-volume telephone users. The Commission further explained that, upon EAS conversion, telephone companies may face significant loss of long-distance revenues, placing upward pressure on basic service rates. As a result, 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 and other exchanges around the state that are served by the affected local exchange companies.

In light of those considerations and a review of the record before it, the Commission concluded that petitioners had failed to establish a sufficient dependence or interdependence between the Amity and Sheridan exchanges to establish a community of interest. The issue now before the Commission is whether the new evidence submitted by petitioners establishes such a relationship to justify EAS conversion.

Discussion

Citing newly submitted information, petitioners make numerous arguments in support of EAS conversion. First, petitioners contend that the new petition signed by a majority of Amity residents establishes that a community of interest exists with the Sheridan exchange. The Commission previously relied on customer balloting and surveys in reviewing EAS requests. See In the Matter of the Service Arrangements in the Elgin Exchange, Order No. 41880 (1965). Under current procedures, the Commission requires a petition signed by at least 25 percent of exchange customers to initiate a formal EAS investigation. This helps the Commission ensure that adequate interest exists within the exchange.

While customer preference carries much weight, however, the Commission has determined that it should not be relied upon solely to determine whether a community of interest exists between exchanges. In its generic investigation, the Commission noted that the veto power of a larger, target exchange could limit EAS conversions. In the Matter of the Investigation into Extended Area Service in the State of Oregon, Order No. 89-815 at 33. Due to these and other concerns, the Commission adopted objective community of interest criteria that primarily relies on telephone usage information. The Commission determined that calling patterns between exchanges reliably measures customer interest and can reflect the existence of a community of interest. In this case, however, a review of calls placed between the Amity and Sheridan exchanges did not establish a community of interest. As stated in the previous order, calling data submitted by the local telephone companies serving the exchanges showed that less than 30 percent of Amity customers placed at least two toll calls per month to the Sheridan exchange, while a maximum average of only 2.75 toll calls per access line were placed between the exchanges. Both of those figures fall short of the Commission's objective criteria for a community of interest.

Petitioners also challenge the Commission's objective calling criteria, asserting that they fail to reflect the recent increase in the use of cellular telephones. Petitioners appear to argue that if the objective criteria were revised to account for the increased number of calls that bypass the toll-network, the Amity exchange would meet the calling volume and customer distribution requirements

In adopting the objective criteria, the Commission acknowledged that the number of calls placed between exchanges may be higher than is represented by direct dialed toll. This additional volume may include Foreign Exchange (FX) and Feature Group "A" (FGA) lines, as well as calls made via cellular telephones. Because most of this additional volume cannot be accurately measured, the Commission adopted criteria that are appropriate for direct dial toll. Petitioners' claims of increased cellular phone use in Yamhill County is insufficient for the Commission to reconsider adjusting those criteria. Assuming petitioners' figures are correct, the data does not specify to what extent callers are using cellular phones to avoid toll charges. In general, most customers use cellular phones for convenience rather as a means to save on toll charges. Furthermore, rates for cellular phones are generally significantly higher than ordinary toll charges. Petitioners' figures also fail to establish whether these cellular phones are used to place calls between the Amity and Sheridan exchanges, as opposed to calls from and to other parts of Yamhill County or other parts of the state.

Petitioners next argue that EAS conversion is necessary to allow Amity residents toll-free access to the internet. Toll-free access to the internet is important to many Oregonians. The denial of EAS from Amity to the Sheridan exchange will not, however, preclude such access for local residents. The Commission has previously found that a community of interest exists between the Amity and Salem telephone exchanges. When that EAS route is implemented, Amity exchange residents will be able to connect with the internet via a node in Salem.

Petitioners further argue that new evidence of business and commercial interdependence establishes a community of interest. They point to letters of support submitted by businesses located in Sheridan that favor EAS for customers who live in the Amity exchange. The Commission, however, previously addressed the business testimony in support of EAS, noting that it was primarily based on a desire for future economic development and job creation. These economic factors are legitimate concerns. Nonetheless, the Commission's role is to protect all utility customers, not create economic development incentives for local businesses. See ORS 756.040(1). For that reason, the Commission will 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. Furthermore, with regard to the possibility that Amity may soon desire EAS to the Grand Ronde exchange, the Commission requires that a community of interest be established with evidence of existing community ties and relationships. Accordingly, it does not consider evidence of prospective employment as a persuasive factor to establish a community of interest.

Finally, petitioners rely on additional evidence showing that Amity exchange residents rely on the Sheridan exchange for essential needs. Petitioners acknowledge that these residents have reasonable access to McMinnville businesses and medical facilities. They argue, however, that many prefer the smaller, slower paced atmosphere that Sheridan offers. The Commission recognizes the importance of customer choice in obtaining essential services, especially when seeking medical or dental care. A few exchange customers' preference for services offered by smaller, more relaxed businesses is not, however, persuasive evidence that a community of interest exist between exchanges as a whole.

Disposition

As the Commission previously recognized, this is a difficult case. The Amity petitioners have shown a strong desire for the proposed EAS to the Sheridan exchange. After a review of the new evidence submitted in this matter with the other evidence of record, however, the Commission is not persuaded that the prior conclusion in Order No. 95-1064 should be rescinded or changed. In these cases, the petitioners have the burden to establish that there is a social, economic, or political dependence or interdependence between the petitioning and target exchange sufficient to justify conversion to EAS. While the petitioners have made a commendable effort to present new factual evidence, the Commission is compelled to conclude that the evidence offered, in the final analysis, confirms its prior conclusion. After careful consideration, the Commission is 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.

CONCLUSION

The new evidence submitted by petitioners, together with the evidence of record, has failed to establish that a community of interest exists between the Amity and Sheridan telephone exchanges. The Commission declines to rescind or change Order No. 95-1064.

ORDER

IT IS ORDERED that the Commission declines to alter, modify, amend, or rescind Order No. 95-1064.

Made, entered, and effective ________________________.

A party may appeal this order to a court pursuant to ORS 756.580.