ORDER NO. 96-229 

ENTERED SEP 4 1996

THIS IS AN ELECTRONIC COPY

BEFORE THE PUBLIC UTILITY COMMISSION

OF OREGON

UM 785

DISPOSITION: NO COMMUNITY OF INTEREST FOUND;

PETITION DISMISSED

On January 25, 1996, 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 April 5, 1996, 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 April 23, 1996, Michael Grant, an Administrative Law Judge (ALJ), 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 June 8, 1996, 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 50 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 900 customers, respectively. The Klamath Falls exchange is served by U S WEST Communications, Inc., (USWC) and consists of approximately 23,000 customers.

The Bly exchange serves a rural logging and agricultural 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.

The city of Bonanza is located approximately 35 miles from Bly. It too, however, is a small rural city that offers few commercial services. Consequently, most residents rely almost exclusively on Klamath Falls to obtain essential services to meet their basic needs. 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 business suppliers, automobile repair, hardware and building supplies, and other retail services.

Schools

Bly exchange children attend a combined elementary and middle school in Bly, but must travel to Bonanza for high school. Many children compete in sports leagues that include both the Bly and Bonanza areas.

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

Bly and Bonanza share a small medical clinic, whose staff splits time between the two cities. Most Bly exchange residents, however, seek basic and specialized medical care in Klamath Falls. They also seek dental care in the larger city, which offers a variety of dental providers.

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, we must first find that a "community of interest" exists between the petitioning exchange and requested exchanges to justify EAS conversion.

Applicable Law

This Commission has established two methods by which a petitioning exchange can establish a community of interest. The first is an objective criteria test--based on readily available geographic and telephone usage information--that requires a petitioning exchange to show:

Contiguous exchange boundaries - The telephone exchanges must share a common boundary;

 

Minimum calling volume - There must be an average of four toll calls per access line per month between the contiguous exchanges; and

 

Minimum calling distribution - More than 50 percent of customers in the petitioning exchange must make at least two toll calls per month to the target exchange(s).

 

All three criteria must be met to pass the objective criteria test.

The second method, which is available to those exchanges that fail either or both the minimum calling volume or minimum calling distribution criteria, is the demographic showing test. Under that test, a hearing is held to give the petitioning exchange the opportunity to demonstrate a community of interest by reference to eleven 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 we can conclude that the record as a whole establishes sufficient interdependence or dependence between the exchanges.

Objective Criteria Determination

In this case, PTI and USWC provided calling pattern data for the three exchanges involved in this proceeding. The Bly/Bonanza interexchange route failed to meet two of the three objective criteria. While the two exchanges are contiguous, a maximum average of only 2.06 toll calls per access line were placed between the exchanges, and an average of only 20.11 percent of the Bly exchange customers made at least two calls to the Bonanza exchange.

The Bly/Klamath Falls interexchange route also failed to meet all three objective criteria. While a maximum average of 16.40 toll calls per access line were placed between the exchanges, and over 75 percent of Bly exchange customers made at least two calls to the Klamath Falls exchange, the two exchanges are not contiguous.

Demographic Showing Determination

Those residents of Bly who attended the hearing presented information in an attempt to show a community of interest between the Bly and the Bonanza exchanges. All witnesses showed a strong desire for the proposed EAS. They presented evidence that Bly exchange children attend high school in Bonanza, and that the two towns share a small medical clinic.

The majority of the testimony, however, indicated a heavy reliance on the Klamath Falls area. Most of those testifying indicated that Bonanza was a small town just like Bly that similarly lacked the professional and commercial services to support their basic needs. Due to that reason, they acknowledged that there was little evidence they could present to establish strong community ties between the two exchanges. They asked that the Commission make an exception to the contiguity requirement and grant EAS to the Klamath Falls exchange. They believed that they had established, through both calling pattern data and demographic evidence, an overwhelming dependence on that exchange to warrant the elimination of toll calling.

This Commission has previously stated its reluctance to grant EAS between non-contiguous exchanges. In Order No. 90-1556, the Commission held:

If granted, "leapfrog" EAS arrangements would give rise to unlimited and chaotic EAS expansion, a condition the Commission has already determined to avoid. Order No. 89-815 at 33. The Commission will not grant any EAS request that leapfrogs an intervening exchange.

 

We recently reaffirmed that policy in Order No. 95-1324. After consideration of that issue, we concluded that, as a general rule, we will not grant EAS between non-contiguous exchanges. As stated above, so-called "leapfrog" EAS arrangements would give rise to unlimited and chaotic EAS expansion. Such arrangements, if allowed, also would cause customer confusion as to long distance calling areas by creating a situation where a call to a neighboring exchange would be more expensive than a call to a more distant one. Accordingly, to insure the integrity of the EAS process, and to allow for an orderly and rational expansion of EAS routes, we will only approve EAS between contiguous telephone exchanges. We consider exchanges to be contiguous if they either share a common exchange boundary or if they are connected to one another indirectly via one or more intervening exchanges. In the latter instance, the exchanges must be connected by an unbroken sequence of exchange boundaries, and there must be a community of interest between each intervening pair of exchanges. See Order No. 95-1324 at 5.

In this case, the Bly and Klamath Falls telephone exchanges are not contiguous. The Bonanza exchange lies between the two exchanges, and we find that petitioners have failed to establish a community of interest with that intervening exchange. We also find that petitioners have failed to establish good cause to make an exception to our rule prohibiting "leap-frog" EAS. We are sympathetic to the needs and concerns of the customers of rural exchanges, especially those who must rely on distant populations centers to meet many of their basic needs. Due to an unfortunate combination of geography, local economics and other factors, residents of Bly and many other outlying communities must make long distance calls to providers of many essential goods and services. While we do not believe that granting "leap-frog" EAS is a viable solution to these problems due to other policy considerations, we are determined to continue our efforts to further examine and pursue policies to lower the costs of rural customers’ access to essential services and the public switched network.

Conclusion

On this record, the Commission concludes that the demographic and other evidence presented in this matter does not make a sufficiently strong showing to establish that a community of interest exists between the Bly exchange and the Bonanza exchange. Furthermore, no good cause exists to create a "leapfrog" EAS arrangement to the Klamath Falls exchange. Accordingly, the petition for EAS should be dismissed.

ORDER

IT IS ORDERED that:

1. The petitioners served by the Bly telephone exchange have failed to established a community of interest with the Bonanza and Klamath Falls exchanges.

 

2. The petition for EAS between the Bly exchange and the Bonanza and Klamath Falls exchanges is dismissed.

 

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.