ORDER NO. 96-139

ENTERED JUN 6 1996 

THIS IS AN ELECTRONIC COPY

BEFORE THE PUBLIC UTILITY COMMISSION

OF OREGON

UM 751

SUMMARY

In this order, the Commission adopts the finding that a community of interest exists between the Scio and Albany telephone exchanges, and further finds that the interLATA EAS route is necessary to meet the critical needs of customers in the Scio exchange. These findings convince the Commission that U S WEST Communications, Inc., (U S WEST) should pursue a waiver of the LATA restriction to allow the interexchange route. Uncertainty exists, however, as to how the Federal Communications Commission (FCC) will process such waiver requests in light of the recently enacted Federal Telecommunications Act of 1996. Accordingly, the Commission reopens docket UM 189(1) for further input from the parties on this issue.

BACKGROUND

The Petition

On March 22, 1995, the Scio Mutual Telephone Association (Scio or petitioners) petitioned the Commission for extended area service (EAS) across the LATA boundary to the Albany telephone exchange. At the time of the filing, the Commission’s EAS policy did not express specific guidelines relating to the provision of EAS between LATAs. Consequently, the Commission held Scio’s petition in abeyance while it initiated a separate investigation in docket UM 189(1) to examine issues surrounding interLATA EAS.

Commission Policy

As a result of the UM 189(1) investigation, the Commission adopted new standards and procedures for interLATA EAS petitions in Order No. 95-1168. In that order, the Commission recognized that requests for interLATA EAS pose different problems than intraLATA requests. First, the Commission noted that the interLATA toll market is much more competitive than the intraLATA toll market, and that new interLATA EAS routes will eliminate a toll service provided by numerous, unregulated carriers. Second, the Commission added that U S WEST and GTE are generally prohibited from carrying telephone calls across LATA boundaries and that, under policies in effect at that time, new interLATA EAS routes required approval from Judge Harold Greene, a federal judge who presided over the AT&T divestiture litigation.

Because of these unique characteristics, the Commission adopted a two-part procedure for processing interLATA EAS petitions. As with other EAS requests, the Commission first determines whether a community of interest exists between the exchanges to warrant the elimination of toll calling. To determine a community of interest, the Commission uses three objective criteria that rely on readily available geographic and telephone usage information. These criteria require that: (1) the petitioning exchange and target exchange(s) have contiguous exchange boundaries; (2) an average of four toll calls per access line per month be placed between the contiguous exchanges; and (3) more than 50 percent of customers in the petitioning exchange make at least two toll calls per month to the target exchange(s). See Orders No. 89-815 and 92-1136.

In addition to meeting those criteria, petitioners seeking interLATA EAS must also demonstrate that the proposed interLATA route is necessary to meet the critical needs of the customers because there is no adequate intraLATA alternative. The Commission adopted this additional requirement in part to reflect the competitive nature of the interLATA toll market and to help preserve competitive markets whenever possible. In evaluating the critical needs of customers, the Commission considers the customers’ access to emergency, dental, medical, professional, business, educational and governmental services.

If a petition satisfies those two tests, the Commission will then issue an order directing U S WEST or GTE to pursue a waiver from Judge Greene. To support the request, the order will contain information explaining the Commission’s policy regarding its measured EAS option and an assessment of the impact the new interLATA EAS route will have on competition.

Federal Legislation

Shortly after the Commission adopted the new interLATA EAS procedures in Order No. 95-1168, the United States Congress passed the Telecommunications Act of 1996. The Act, signed into law on February 8, 1996, supersedes the obligations and restrictions brought about by the AT&T divestiture. 47 USC Sec. 601(a)(1), (e). Consequently, the interLATA EAS waiver procedures before Judge Greene, as described in Order No. 95-1168, no longer exist.

The Act does not expressly provide any procedures for the waiver of that restriction to allow interLATA EAS. See 47 USC Sec. 271(a). The Act does allow Bell operating companies to seek FCC approval to modify LATA boundaries. See 47 USC Sec. 153(r)(43). It is unclear, however, whether the FCC will allow a limited waiver of the new interLATA restriction for EAS purposes without actually changing the LATA boundary.

Due to this federal legislation, the Commission is unsure as to if and how the FCC will process a LATA waiver request for EAS. Rather than further delay these proceedings, however, the Commission will proceed with its community of interest and critical needs determinations. To address the procedural uncertainties, the Commission also reopens UM 189(1) for further investigation. The parties to that proceeding are invited to submit comments, within three weeks from the date this order is issued, on the following topics:

Under the Telecommunications Act of 1996, do U S WEST and GTE need FCC approval to provide interLATA EAS services?

 

Assuming U S WEST and GTE must obtain some form of FCC approval, are there FCC procedures currently in place that would allow the processing of a request for such approval?

 

If such FCC procedures exist, what are they?

 

If no such FCC procedures currently exist, may they exist in the near future?

 

Assuming such FCC procedures do not currently exist, what would be the consequence of the Commission directing U S WEST immediately to seek any FCC approval necessary for providing services on the Scio- Albany route proposed in UM 751?

 

Parties may submit reply comments within one week after the opening comments are served.

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

FINDINGS OF FACT

The Scio and Albany telephone exchanges lie in the northwest corner of Linn County. Scio, the petitioning exchange, consists of approximately 1,500 customers and is located in the Portland LATA. It currently has EAS to the Lyons and Stayton telephone exchanges and is scheduled to receive EAS to the Salem exchange in October 1996. The target exchange, Albany, consists of slightly more than 25,000 access lines and lies in the Eugene LATA. It is served by U S WEST.

Professional and Business Services

The Scio exchange is a rural logging and agricultural area served by the Scio Mutual Telephone Association. The exchange area lies south of the lower reaches of the Santiam River and includes one incorporated city, Scio, population 650.

Scio is a small town that cannot support the commercial and professional services required to meet the basic needs of area residents. Currently, Scio has a bank, two small grocery stores, a hardware store, and a tavern. The area also lacks employment opportunities. Aside from independent farming and logging activities, jobs are limited to the Scio High School, Best Heating and Cooling, Powell Scales, and Mid-Willamette Precut.

Due to the lack of local services and employment opportunities, Scio exchange residents depend heavily on neighboring communities to meet their basic needs. The city of Stayton, located about eight miles north of Scio and within the Portland LATA, is the closest town that offers some commercial, professional and retail services, as well as employment opportunities. Stayton offers several grocery stores, video rental shops, a sporting goods store, a variety of fast food restaurants, and other retail shops. The city also offers some bookkeeping, banking, legal, and other professional services. With a population of just 5,500, however, Stayton is also a relatively small city with limited offerings for area residents.

As a result, most Scio residents rely on larger surrounding communities. Within the Portland LATA, Scio residents can obtain essential goods and services in Salem. Salem is a large metropolitan area that offers a wide variety of professional, commercial and retail services. Given its size, it also offers numerous employment activities. Many Scio exchange residents, however, do not consider Salem to be part of their extended community. Salem lies almost 30 miles from Scio and is not directly accessible by road. Scio residents must either drive northeast through Stayton before heading west on U.S. Route 22, or head due west to Jefferson before turning north on Interstate Route 5. Salem also lies in a different county than Scio.

Due to those reasons, Scio exchange residents more heavily rely on Albany, located approximately 12 miles from Scio. Like Salem, Albany is also a relatively large city that offers a wide variety of services and employment opportunities. However, it also serves as the county seat for Linn County. Therefore, many Scio residents prefer to use Albany not only for its proximity, but also because of the essential governmental services offered in the city.

Albany also offers some goods and services not available in Salem. As a rural farming and logging community, Scio depends heavily on a variety of agriculturally related businesses. Two major farm implement dealers are based in Albany, and do not have offices in Salem. Similarly, farm extension agents for the Scio area are located only in Albany.

Scio residents also rely on the Albany area for employment. A majority of local working residents commute to that town to work at county government offices, the Albany Hospital, the Target Distribution Center, the Willamette Industries plant, or other industrial and commercial businesses.

Educational Services

The Scio School District 95-C is served by the Linn County Educational Service District (ESD) in Albany. The ESD provides support for educational, technical, and business services. Seventy percent of the Scio School District’s phone calls are placed to Albany.

Many Scio exchange residents attend classes at the Linn-Benton Community College in Albany. Young children in Scio attend the Scio Preschool Co-op, which is a program sponsored by the Linn-Benton Community College.

Governmental Services

As stated above, the Scio exchange lies in Linn County and is served by county government offices in Albany. These include the County Sheriff’s office, District and Circuit Court offices, District Attorney’s office, Planning and Building Departments, County Tax Department, County Clerk’s office, and the Public Health Department, including the Women, Infant and Children (WIC) program.

Scio exchange residents also rely on state government offices in Albany. These include the Children Services Division, Department of Motor Vehicles, and the State Police.

Emergency Services

Scio exchange residents are served by the Scio Rural Fire Protection District. The District is comprised of three stations, one of which is located within the Albany exchange. The District’s dispatch center is also located in Albany, and most medical emergencies are transported to the Albany Hospital. The District is also a participating member of the Linn County Fire Defense Board and the Linn County Fire Defense System.

The city of Scio has contracted with the Linn County Sheriff’s office to provide local police service. As a result, 911 dispatches and other calls for police service are dispatched to Albany.

Medical and Dental Services

The Scio calling area offers no medical and dental providers. Some exchange residents seek primary medical and dental care in Stayton, where a handful of providers practice. Most residents, however, seek primary, as well as specialized care in either Salem or Albany, where a greater number of physicians and dentists practice. Both cities also offer a hospital; however, most residents obtain emergency medical care in Albany due to its much closer proximity.

Calling Pattern Data

On February 14, 1996, Michael Grant, an Administrative Law Judge (ALJ) for the Commission, issued a ruling that a community of interest exists between the Scio and Albany telephone exchanges. Based on Staff’s testimony, the ALJ found that: (1) the exchanges are contiguous, in that they share a common boundary; (2) an average of 9.70 toll calls per line per month were placed between the exchanges; and (3) 65 percent of the customers in the Scio exchange made at least two toll calls per month to the Albany exchange. A copy of Staff’s testimony is attached as Appendix A and incorporated by reference.

OPINION

Community of Interest

The Commission adopts the conclusions of the ALJ that a community of interest exists between the Scio and Albany telephone exchanges. The calling pattern data and geographic information submitted in this docket satisfy the Commission’s objective criteria for a community of interest.

Critical Needs

The Commission concludes that the interLATA route is necessary to meet the critical needs of the Scio exchange customers. Because of geographic proximity and direct road access, the Scio area has become heavily dependent on the city of Albany for essential goods and services. Albany, located just 12 miles from the city of Scio, is a relatively large urban center that offers Scio exchange residents reasonable access to a variety of professional and business services, as well as retail and other commercial activities. It also offers some goods and services not available in other neighboring communities, such as the major farm implement dealers.

In addition, Albany is the county seat of Linn County and, as such, provides essential governmental services to Scio exchange residents. These services include aspects of all levels of education, from pre-school to college, social and welfare programs, building permits, county inspectors, court offices, property tax, and county health. Albany also provides emergency and medical services to Scio. The Sheriff’s Department in Albany provides local police service for the city of Scio under contract. The Scio Rural Fire Protection District has a station located within the Albany exchange and works cooperatively with other fire protection districts in Linn County. Medical emergencies are routinely dispatched to the county hospital in Albany, and a large percentage of Scio exchange residents seek medical and dental services from the numerous providers that practice in Albany.

The Commission further concludes that the critical needs of Scio exchange residents are not reasonably met by the two intraLATA alternatives, the Stayton and Salem telephone exchanges. The Stayton exchange is much smaller than Albany and has limited dental, medical, professional, business, and retail services. The Salem exchange is larger, but is located some 30 miles from Scio and is not directly accessible to area residents. Moreover, these two exchanges lie in another county and, as a result, cannot provide many of the essential services required by Scio exchange residents. Under the circumstances, the Commission finds that neither exchange can readily satisfy the critical needs of Scio exchange customers.

CONCLUSIONS

The Commission concludes that a community of interest exists between the Scio and Albany telephone exchanges. The Commission further concludes that the proposed interLATA route is required to meet the critical needs of the Scio exchange customers due to the lack of an intraLATA alternative.

Supporting Information

As noted above, the Commission concluded in Order No. 95-1168 that any order directing U S WEST to seek a waiver should also contain additional information to support the request. While the interLATA EAS waiver procedures before Judge Greene no longer exist, and it is unclear as to what standards of procedures the FCC may adopt for handling such requests, the Commission nonetheless provides the following information in the event that the FCC adopts similar standards for review.

Measured EAS Service:

In its generic investigation into the provision of EAS in Oregon, the Commission concluded that EAS must be mandatory, two-way service with a seven-digit dialing pattern, to be offered as part of local service. The Commission also concluded that EAS rate tariffs must conform with certain rate design criteria, including the availability of a measured EAS rate for all routes. See Order No. 89-815. When investigating the provision of EAS across LATA boundaries, Staff noted that the Commission’s measured rate option requirement may create a potential problem, as the United States District Court may consider it to be the equivalent to the prohibited "optional EAS." Judge Greene described "optional EAS" as follows:

These arrangements give customers the option of paying an additional flat fee to obtain an extended local calling area, thus enabling those who opt for this service to make what otherwise would be toll calls without incurring an additional charge. Unlike non-optional EAS, optional EAS is provided primarily over toll switching routes instead of direct end office trunks. Thus, because these services are provided though the use of essentially interexchange facilities, interexchange carriers are in as good a position efficiently to carry these calls as are Operating Companies. United States v. Western Elec. Co. Inc., 569 F Supp 990, 1002 (D.D.C. 1983)

 

The Commission does not believe that its measured-service policy is the equivalent of "optional EAS," as Judge Greene has defined that phrase. First, Oregon EAS is mandatory local service, and a customer cannot opt out of EAS service and use inter-exchange carriers. While EAS in Oregon often involves the use of indirect tandem switched circuits rather than direct end office trunks, it is not provided over toll switching routes. Because no interexchange carrier is used, EAS in Oregon is not a toll service.

Second, the measured service option was not designed to allow price shopping between local flat rate service and interexchange carriers. Rather, it was designed to avoid the potential inequity created by flat rate EAS whereby low-volume users support the high volume EAS users. Accordingly, the measured EAS option was created to address the inequity of flat rate EAS.

Impact on Competition:

In reviewing a waiver request, the United States District Court considered, among other things, whether the proposed route would have an adverse impact on interexchange competition. The Commission acknowledges that all EAS conversion reduces interexchange toll calling and, at least, theoretically impacts interexchange competition. Given the small size of the Scio exchange, however, the Commission concludes that a new EAS route realistically would have little adverse impact on interexchange competition between the Portland and Eugene LATAs.

ORDER

IT IS ORDERED that:

A community of interest exists between the Scio and Albany telephone exchange sufficient to warrant the elimination of toll calling.

 

The proposed interLATA route is necessary to meet the critical needs of the Scio exchange customers due to the lack of an intraLATA alternative.

 

The Commission reopens UM 189(1) for the limited purpose of addressing LATA waiver procedures for interLATA EAS under the Telecommunications Act of 1996. The parties are directed to submit comments in accordance 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 this order. The request must comply with the requirements of 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(2). A party may appeal this order to a court pursuant to ORS 756.580.