ORDER NO. 96-340

ENTERED DEC 30 1996

This is an electronic copy. Attachments/Appendices may not be included.

BEFORE THE PUBLIC UTILITY COMMISSION

OF OREGON

CP 132, CP 139, CP 149

DISPOSITION: APPLICATIONS GRANTED

SUMMARY

This consolidated proceeding involves applications of two carriers to become competitive providers of telecommunications services within local telephone exchanges located outside the Portland metropolitan area. The applications were filed pursuant to ORS 759.050, which authorizes the Commission to certify additional providers of local exchange services in the existing service areas of incumbent utilities if the proposed service is in the public interest. In making such a determination, the Commission must consider: (1) the effect on rates for local exchange customers both within and outside the competitive zone; (2) the effect on competition in the local exchange service area; (3) the effect on access by customers to high quality innovative telecommunications service in the local exchange service area; and (4) other facts the Commission deems relevant.

Based on a review of the record in these dockets and the findings and conclusions of Order No. 96-021, the Commission concludes that it is in the public interest to grant these consolidated applications. These two alternative exchange providers will now be able to compete with incumbent local exchange companies on an exchange by exchange basis in most areas throughout the state. The Commission further concludes that this action is consistent with the federal Telecommunications Act of 1996, which promotes the development of local exchange competition.

The Applications

Dockets CP 132 & 149 (Applications of SCS) On February 1, 1996, Shared Communications Services, Inc., (SCS) filed an application to provide switched intraexchange telecommunication services in areas coextensive with the following local exchange areas: U S WEST Communications, Inc. (USWC) exchanges of Portland, Milwaukie-Oak Grove, Lake Oswego, Oregon City, Bend, Medford, and Klamath Falls; and the GTE Northwest, Inc., (GTE) exchanges of Gresham, Tigard, Beaverton, Hillsboro, Sherwood, and Stafford. Both GTE and USWC filed protests to the application.

At SCS’s request, the application was subsequently bifurcated to separate out the portion of the application seeking authority to provide service in Portland-area exchanges previously designated as competitive zones under ORS 756.050. See Order No. 96-021. Accordingly, the Commission’s investigation of Docket CP 132 is limited to SCS’s request to provide local exchange and carrier access services in USWC’s exchanges of Bend, Medford, and Klamath Falls exchanges. Because GTE does not provide service in these exchanges, its protest is dismissed.

On March 27, 1996, SCS filed an additional application to provide switched intraexchange telecommunication services in areas coextensive with the following USWC local exchange areas: Albany, Ashland, Corvallis, Eugene, Grants Pass, Keizer, Newport, Pendleton, Prineville, Redmond, Roseburg, Salem, Springfield, and Woodburn. USWC filed a protest to the application.

Docket CP 139 (Application of AT&T) On February 29, 1996, AT&T Communications of the Pacific Northwest, Inc., (AT&T) filed an application to provide switched intraexchange telecommunication services in all areas of the state except those exchanges within the Portland metropolitan area designated as competitive zones under ORS 756.050. GTE, USWC, and 24 independent telephone companies filed protests to the application.

At the request of AT&T and the protesting independent telephone companies, the statewide application was bifurcated to remove all areas served by local exchanges other than USWC, GTE, United Telephone of the Northwest (United), PTI Communications (PTI) and Beaver Creek Cooperative Telephone Company (Beaver Creek). In response to the bifurcation, the independent telephone companies withdrew their protests.

Procedural History

On April 24, 1996, and May 16, 1996, Michael Grant, an Administrative Law Judge (ALJ) for the Commission, held prehearing conferences in these matters in Salem, Oregon. Appearances were entered on behalf of AT&T, SCS, USWC, United, GTE, PTI, the Oregon Independent Telephone Association (OITA), Clear Creek Mutual Telephone Company, Beaver Creek, the Monroe Telephone Company, OGC Telecomm Ltd. (OGC) and the Commission Staff.

The Commission received petitions to intervene from the Oregon Cable Telecommunications Association (OCTA), United, Beaver Creek, PTI, and OITA. The ALJ granted all petitions to intervene.

At the prehearing conference, the parties identified five tentative issues for this proceeding. USWC and GTE subsequently proposed additional issues for consideration. A complete list of issues is set forth in Appendix A. Because some issues address similar topics, the Commission has combined its discussion of issues where appropriate, and expanded others to more fully address the topic.

CP 139 Stipulation

On December 12, 1996, Staff, AT&T, GTE, United and USWC submitted a stipulation intended to expedite the grant of authority sought by AT&T in docket CP 139. Staff, AT&T, and United executed all portions of the stipulation, as indicated by initial of counsel with respect to individual paragraphs. GTE and USWC, however, executed only specific provisions of the stipulation. The incumbent LECs did not initial provisions relating to the applicability of the public interest findings contained in Order No. 96-021, provision of ancillary services, bill-and-keep compensation, and other related matters.

The stipulation is similar to the one that we adopted in Order No. 96-248 and, as executed, essentially reflects the parties’ positions set forth in earlier filed comments. The Commission appreciates the parties efforts in preparing the stipulation to expedite the processing of AT&T’s application. We decline to adopt it in this proceeding, however. Inasmuch as it fails to reach a consensus among the parties on the outstanding issues, and because it relates to only one of the three applications in this consolidated proceeding, we will consider it as a statement of positions and recommendation by the parties and proceed with our review.

Before turning to the parties’ comments, however, we note that the stipulation raises one issue not previously addressed. In the paragraphs 16 (C) and (D), the stipulation notes that neither United nor PTI originally protested AT&T’s application pursuant to ORS 759.020(4). Instead, the stipulation notes, both companies became parties to this proceeding by filing a petition to intervene. Under the apparent assumption that an incumbent carrier must protest an application in order to receive pricing flexibility under ORS 759.050(5), several parties stipulate that United and PTI may convert their status from intervening parties to that of protesting carriers. Although the Commission does not oppose the parties’ reclassification, we take this opportunity to clarify that an incumbent utility need not protest an application in order to receive pricing flexibility.

The issuance of a certificate to provide competitive telecommunications services is governed by ORS 759.020. Prior to 1993, that statute afforded local exchange carriers considerable protection against competitors that sought to provide local exchange services. Under former ORS 759.020(3), the Commission could grant such an application only if the incumbent carrier consented, was unable to provide the proposed service, or failed to protest the application.

At the request of this Commission, the 1993 legislature enacted ORS 759.050 to modify the process for granting local exchange authority. Rather than allowing an incumbent carrier to block an application simply by filing a protest, the legislature adopted a new standard for local exchange competition. Under ORS 759.050(2)(a), this Commission may now certify another carrier to provide local exchange services if, after a consideration of four criteria, we determine that such authorization would be in the public interest. If another carrier is certified, ORS 759.050(5) grants pricing flexibility to allow the incumbent carrier to respond to competition.

While the competitive purpose of ORS 759.050 is clear, its relationship with ORS 759.020 is somewhat ambiguous. A literal reading of the two statutory provisions appears to require the filing of a protest to trigger the competitive zone provisions of ORS 759.050. An unopposed application for local exchange authority, it seems, could simply be granted pursuant to amended ORS 759.020(3).

In construing a statutory provision, our task is to discern the intent of the legislature. See PGE v. Bureau of Labor and Industries, 317 Or 606 (1993). We cannot ignore the plain meaning of unambiguous words in a statute; however, we must also consider the policy and purpose of the statute, and whether those policies and purposes will be achieved by a literal application of the language used. Baird v. Electro Mart Factory Direct, Inc. 47 Or App 565 (1980). Considering the history and purpose of the provision, we can think of no reason why the legislature would have intended to require an incumbent utility—who may believe competition to be in the public interest—to file a protest just to secure pricing flexibility. Such a requirement would simply delay the processing of applications, thereby frustrating the competitive purposes of the legislation.

Accordingly, we conclude that, in enacting ORS 759.050, the legislature intended to create a public interest standard for local exchange competition, regardless of the conduct of incumbent providers. The provision creates a procedure allowing this Commission to certify additional carriers despite protests of local exchange companies. We find the pricing flexibility protections contained in that process should similarly be applied to incumbent carriers who do not oppose competition.

The legislative history supports this interpretation. In testifying before the House Commerce Business Subcommittee, Commissioner Eachus was asked about the length of time that might be required to process an application under ORS 759.050. In response, he stated:

"The fact that the local exchange companies actually get some pricing flexibility may mean that the process will speed up. I don’t know if it means they won’t oppose entry, but by narrowing it to a public interest standard and considering the balance by making sure that the phone companies will get some flexibility in response, I think we narrow the issues and don’t get so involved in legal issues." House Commerce Business Subcommittee Minutes, May 18, 1993, Tape 120, Side B at 28. (emphasis added.)

While Commissioner Eachus was not convinced that the pricing flexibility was enough incentive for incumbent carriers to embrace competition, his testimony clearly indicated the possibility of an unprotested application under ORS 759.050.

We also note that this interpretation does not render ORS 759.020(3) meaningless. In enacting the competitive zone provisions of ORS 759.050, the legislature excluded local exchange service areas of incumbent carriers with less than 15,000 access lines. See Section 4, Chapter 423, Oregon Laws 1993. Accordingly, a small telecommunications utility could file a protest under ORS 759.020(3) to effectively block competition.

In summary, this Commission interprets ORS 759.050 to apply to all applications for local exchange service, with the exception of those seeking certification in the service areas of small local exchange companies. Accordingly, we will review such applications under the public interest criteria set forth in ORS 759.050(2)(a), and, upon the designation of a competitive zone, will grant pricing flexibility to incumbent carriers—regardless of whether they filed a protest—unless it is not in the public interest to do so. Furthermore, we will also introduce legislation in the upcoming legislative session to eliminate any remaining ambiguity with the statute.

ISSUES

Issue 1 How should the Commission reconcile the applicable provisions of state and federal law, as well as Order No. 96-021, in considering these applications?

Positions of the Parties

Staff, AT&T, SCS, and United contend that state and federal law, as well as Order No. 96-021, are easily reconciled by focusing on the underlying policy shared by all three: the development of competition for the provision of telecommunications services. As noted above, Oregon’s competitive zone law, ORS 759.050 et seq, authorizes the Commission to certify additional providers of local exchange services in the existing service areas of incumbent utilities if the proposed service is in the public interest. Pursuant to those provisions, the Commission recently determined that it was in the public interest to grant three applicants authority to provide local telecommunications services in USWC and GTE Portland metropolitan area exchanges. See Order No. 96-021.

Staff, AT&T, SCS and United do not believe that the subsequent passage of the federal Telecommunications Act of 1996 (Act) preempts or otherwise limits the state’s ability to introduce competition into Oregon’s telecommunications industry. To the contrary, they note that the Act expressly protects from preemption a state law that is not inconsistent with its provisions. Section 601(c)(1) provides:

NO IMPLIED EFFECT. This Act and the amendments made by this Act shall not be construed to modify, impair, or supersede Federal, State, or local law unless it expressly so provided in such Act or amendments.

Section 261 further provides, in part:

EXISTING STATE REGULATIONS. Nothing in this part shall be construed to prohibit any State commission from enforcing regulations prescribed prior to the date of enactment of the Telecommunications Act of 1996, or from prescribing regulations after such date of enactment, in fulfilling the requirements of this part, if such regulations are not inconsistent with the provisions of this part.

 

ADDITIONAL STATE REQUIREMENTS. Nothing in this part precludes a State from imposing requirements on a telecommunications carrier for intrastate services that are necessary to further competition in the provision of telephone service or exchange access, as long as the State’s requirements are not inconsistent with this part or the Commission’s regulations to implement this part.

Neither GTE nor USWC strongly dispute the general consistency between state and federal law. Both, however, contend that the Act preempts the Commission’s ability to prescribe certain intercompany relationships and to set rules applicable to various telecom-munications competitors. Based on that and other allegations set forth in subsequent issues below, they argue that the Commission should not apply several provisions of Order No. 96-021 to the applications at issue in this consolidated docket.

Commission Findings and Decision: Issue 1

Although structured and worded differently, the Oregon competitive zone law is consistent in purpose with the federal Act. Both provide for the development of competition in the provision of telecommunications services. Furthermore, each contemplate the Commission’s involvement in promoting and overseeing the development of such competition. For example, Section 253 of the Act allows the states to impose those "requirements necessary to preserve and advance universal service, protect the public safety and welfare, ensure the continued quality of telecommunications services, and safeguard the rights of consumers." More importantly, the Act permits the states to regulate the rates, terms and conditions of interconnection between the incumbent local exchange carriers and alternative exchange carriers, provided that regulation is consistent with the pro-competitive nature of the Act.

Based on our review of the federal Act, the Commission concludes that the provisions of ORS 759.050 et seq, are consistent with the federal Act’s endorsement of competition. The Commission further concludes that the policies, findings and decisions articulated in Order No. 96-021, are equally harmonious with federal law and are pertinent to the issues under consideration in this docket. The arguments raised by GTE and USWC concerning the application of certain findings and decisions to this proceeding will be addressed below.

Issue 2 Should the Commission apply the findings and conclusions OF Order No. 96-021 relating to: (a) the obligations of aecs, (b) interconnection, (c) pricing flexibility, and (d) other provisions?

Positions of the Parties

(a) Obligations of Alternative Exchange Carriers

Staff, AT&T, SCS, United and GTE agree that the obligations imposed on the applicants here should be no different than those imposed on the applicants in Order No. 96-021. These obligations require applicant to contribute to the Oregon Customer Access Fund (OCAF) and provide E-911 services. Because the obligations do not have the impermissible effect of barring entry in violation of Section 253(a), and because they are consistent with those regulations that states are permitted to impose under Section 253(b), the parties assert that they are consistent with the federal Act and should be applied in this consolidated docket.

(b) Interconnection

Staff, AT&T, SCS and United assert that the Commission’s findings and conclusions with regard to interconnection are also applicable. They argue that, like the applicants in Order No. 96-021, AT&T and SCS should be allowed to interconnect with incumbent providers on the same terms and conditions that LECs use to interconnect with their own telecommunications networks. Similarly, they assert that the Commission should also adopt a "bill and keep" intercompany compensation mechanism for the termination of traffic exchanged between carriers. Citing the Commission’s earlier conclusion, the parties contend this is the "most reasonable compensation mechanism during the initial stages of competitive entry into the local exchange market." Order No. 96-021 at 52.

USWC and GTE argue that the Commission should not apply its prior interconnection findings. Because Section 252 of the Act requires that interconnection rates be cost based, both argue that bill and keep is an acceptable compensation mechanism only if the Commission's conclusion to adopt that mechanism is based on the costs of both the LECs and the AECs. Because there is no cost data in the record in Order No. 96-021, USWC and GTE contend that the Commission is not permitted to adopt bill and keep for these applications.

Both GTE and USWC also argue that the Section 252 of Act preempts the Commission’s ability to address interconnection issues, providing instead a negotiation process for the terms and conditions of interconnection, mutual compensation, resale, and other issues. Thus, they conclude that the Commission should allow this negotiation process to unfold without dictating any particular interconnection compensation mechanism.

(c) Pricing Flexibility

Staff, AT&T, SCS, United, and GTE all agree that the Commission should also apply the same pricing flexibility requirements established in Order No. 96-021 to an incumbent LEC’s provision of services to applicants. They add, however, that the requirements should be clarified to allow pricing flexibility where the resale of LEC elements at wholesale is involved. The parties further address this issue below.

(d) Other Provisions

Staff argues that the Commission’s public interest findings and conclusions in Order No. 96-021 should apply to these applications. It notes that the Commission carefully reviewed the criteria set forth in ORS 759.050(2)(a) and considered, among other things, the effect of competition in the local exchange telecommunications service area, as well as the effect on the applications of access by customers to high quality, innovative telecommunications service in the local exchange service area. Staff maintains that, because these findings and conclusions are general and broadly stated, and because they are consistent with the federal Act, they should be applied to these applications.

USWC and GTE contend that the public interest findings are not directly applicable here because the prior applicants were all facilities-based AECs, rather than resellers of local exchange services. GTE also raises concerns about the scope of the applicants’ operations, particularly that of AT&T. Due to its size and aggressive market share goals, GTE suggests that the financial impact on the incumbent LECs may be much more significant than the findings in Order No. 96-021 would indicate.

In addition, GTE contends that all competitors should be subject to the same regulatory requirements as the incumbent LECs. GTE argues that Section 253(b) of the Act specifies that state service quality requirements must be applied on a competitively neutral basis. Therefore, GTE maintains that, contrary to the Commission’s earlier findings and conclusions, service denial rules and customer protection measures currently applicable to LECs must be made applicable to these applicants, as well as the prior applicants in Order No. 96-021.

Commission Findings and Conclusion: Issue 2

(a) Obligations of Alternative Exchange Carriers

The Commission concludes that the duties and obligations imposed on AECs by Order No. 96-021 should be applied equally to these applicants. The development of a fair opportunity to compete in the local exchange and exchange access markets requires that all AECs be treated equally. Accordingly, like the applicants in Order No. 96-021, SCS and AT&T should contribute to the OCAF using applicable rates approved by the Commission on intrastate terminating carrier common line access minutes or their equivalent. Similarly, SCS and AT&T should provide E-911 service in accordance with the Commission guidelines, and shall work with the E-911 agencies to make certain that all users of their services have access to the emergency system.

(b) Interconnection

The Commission concludes that our prior findings and conclusions with regard to interconnection requirements and intercompany compensation are equally applicable to the applications before us. We have previously rejected the arguments raised by USWC and GTE in opposition to bill and keep compensation arrangements. See Orders No. 96-119 at 9 and 96-248 at 15. We need not readdress them here.

We also disagree with the assertion of USWC and GTE that the adoption of bill and keep is inconsistent with the Act because it circumvents the negotiation process. First, Section 252(d)(2)(B)(i) expressly authorizes states to adopt arrangements that afford the mutual recovery of costs through the offsetting of reciprocal obligations, such as bill-and-keep arrangements. Second, as we stated in Order No. 96-248 at 15, the Act does not require negotiation as the exclusive means of allowing competitive entry and does not preclude our processing the competitive provider applications under state law.

(c) Pricing Flexibility

The Commission will address this issue below under Issue 3.

(d) Other Provisions

The Commission concludes that the other public interest findings and conclusions of Order No. 96-021 should be applied to these applications. Our prior findings are sufficiently broad to cover all pertinent aspects of the applications currently before us. The conclusion that competition for telecommunications services is in the public interest relates to local exchange competition generally, and applies regardless of whether an applicant is a facilities-based AEC or a reseller of local service. Indeed, the federal Act expressly contemplates resale as a market entry device.

We acknowledge the concern raised by USWC and GTE that they should not be subject to requirements not also imposed on the AECs. The federal Act, however, does not relieve incumbent telecommunications utilities of their duties under state law. Until competition is firmly established and the need for regulation is diminished, the LECs will be subject to the obligations, and enjoy the related benefits, associated with public utility status.

Issue 3 should the Commission adopt a different triggering mechanism than the one it adopted for pricing flexibility in Order No. 96-021?

Positions of the Parties

As noted above, Staff, AT&T, SCS, United, and GTE agree that the Commission should apply the same pricing flexibility requirements to an incumbent LEC’s provision of services to applicants as was established in Order No. 96-021, with a clarification to address resale of services. AT&T, SCS, United and GTE suggest that the provision be amended to allow pricing flexibility where : (1) the applicants receive certificates of authority to provide local exchange service; (2) the Commission approves the tariffs filed by the affected LECs in compliance with the terms of the order or wholesale rates as mandated by the federal Act; and (3) Staff notifies the Commission that interconnection arrangements are in place and a mutual exchange of traffic exists or the incumbent LEC has received and fully satisfied an order for wholesale service. Staff, on the other hand, does not believe that the provision needs to be rewritten. It contends that the Commission should simply clarify that a mutual exchange of traffic exists when an AEC orders and receives one retail service from the LEC for resale.

Staff further states that, because these applicants seek to provide service in many exchanges that are widely distributed throughout the state, pricing flexibility should be granted on an exchange-by-exchange basis, rather than on a company-wide basis. In other words, Staff believes that there must be a mutual exchange of traffic between the LEC and AEC within each exchange before an LEC obtains pricing flexibility for that exchange. For example, Staff explains that, if there is an exchange of traffic in Bend, USWC would receive pricing flexibility for the Bend exchange, not the Medford or other USWC exchanges. AT&T supports this recommendation.

USWC contends that, rather than adopting a triggering mechanism that makes an LEC dependent upon the actions of an AEC, the Commission should simply grant pricing flexibility once the applications are approved and competitive zones are established. USWC explains that it is unnecessary to impose any other constraints on LECs such as were set forth in Order No. 96-021, because of the constraints already imposed by the checklist requirements of the federal Act.

Commission Findings and Decision: Issue 3

The Commission concludes that the pricing flexibility requirements set forth in Order No. 96-021 should be applied to these applications, with the clarification to address the resale of local telecommunications service. The Commission further agrees with Staff’s recommendation that pricing flexibility be granted on an exchange by exchange basis.

The Commission rejects USWC’s proposal that pricing flexibility be granted immediately upon certification of an AEC. As we noted in Order No. 96-021, the mere issuance of a competitive provider certificate is meaningless without an interconnection agreement to ensure effective competition. We find that reasoning equally applicable here and adhere to the pricing flexibility conditions imposed in that order, as supplemented above.

ISSUE 4 Should the Commission apply the same interim period for bill and keep as it adopted in Order No. 96-021?

Position of the Parties

AT&T and SCS agree that if bill and keep is adopted for these applications, the interim period should run concurrently with the interim period established in Order No. 96-021.

Commission Findings and Conclusion: Issue 4

The Commission concludes that the interim period previously established for the bill and keep mechanism should apply here. Accordingly, compensation for the exchange of local and EAS traffic between applicants and the LECs in the new competitive zones shall be based on bill and keep arrangements for a period of not more than 24 months from the service date of Order No. 96-021.

Issue 5 How should the Commission address the assignment of prefixes with multiple competitors?

Positions of the Parties

Staff, AT&T, SCS, GTE and United agree that the Commission’s method for the assignment of prefixes, established in Order No. 96-021, should be applied to these applications. That method requires USWC, as the administrator of the North American Numbering Plan, to apply existing guidelines for assigning numbers to the AECs in a nondiscriminatory manner. The Commission also concluded that AECs should limit each of their prefixes (NXX codes) to a given exchange. Staff is concerned, however, that the continued application of this policy to present and future applications will rapidly exhaust the NXX codes, perhaps requiring the introduction of additional area codes. For that reason, several parties suggest that the Commission open a generic NXX docket to further consider the issue.

Commission Findings and Decision: Issue 5

The Commission concludes that the method for the assignment of prefixes, as set forth in Order No. 96-021 should be applied to these applications. Staff is directed to monitor this issue and, if it deems necessary, initiate a formal docket to address the exhaustion of prefixes under the current number of area codes in this state.

ISSUE 6 HOW WOULD A COMPETITOR RATE A TOLL CALL?

Positions of the Parties

All parties agree that these applicants should rate toll calls in the manner established in Order No. 96-021. They also assert that applicants should conform their EAS routes and boundaries to the existing LEC structure and establish rate centers proximate to that of the existing LECs.

Commission Findings and Conclusion: Issue 6

The Commission concludes that the toll call provisions, set forth in Order No. 96-021 at 65, should be applied to these applications.

ADDITIONAL USWC AND GTE ISSUES

USWC 2 What enforcement mechanism should the Commission put in place to ensure that AT&T does not violate the Joint Marketing restrictions of the federal Act?

Positions of the Parties

USWC contends that the Commission should develop an enforcement mechanism to ensure that AT&T does not violate the joint marketing restrictions contained in Section 271(e)(1) of the Act. Citing a promotional brochure, USWC contends that AT&T is already engaging in an aggressive campaign to jointly market its services. USWC offers no guidelines or suggestions for such an enforcement mechanism. Rather, it simply claims that, because AT&T is a large company with tremendous marketing resources, the potential for abuse is obvious.

AT&T objects to the adoption of any enforcement mechanism. It contends that there is no basis to believe that AT&T will violate federal law. It states that USWC’s reference to a marketing brochure is misplaced, explaining that the brochure simply addressed interLATA and intraLATA toll services. It further explains that the mailing of the brochure to Oregon customers was accidental, and that, upon discovering the error, the company contacted the Commission Staff and mailed a letter to Oregon consumers explaining that the intraLATA toll services were not available on a pre-subscription basis in Oregon. Finally, it concludes that any party aggrieved by a violation of federal law has a federal forum for redress.

Commission Findings and Conclusion: USWC 2

The Commission rejects USWC’s proposal to adopt a separate enforcement mechanism to ensure AT&T’s compliance with the joint marketing restrictions in the Act. After a review of the promotional brochure, we accept AT&T’s explanation and find nothing to suggest that AT&T will not comply with the law. Furthermore, any party aggrieved under those provisions will have a federal forum for redress.

USWC 4 What conditions should the Commission impose on an applicant who resells LOCAL service?

Positions of the Parties

USWC acknowledges that resale of local exchange service is permitted under the federal Act. It argues, however, that the Commission should impose the restriction that basic exchange telecommunications may be resold only for its intended or disclosed use, under the same terms and conditions applicable to LEC end users, and only to the same class as to which the company sells local basic exchange telecommunication service. GTE shares USWC’s concerns, but believes that the Commission should address them in another docket.

SCS and AT&T object to the adoption of any restrictions on resellers. Staff contends that the appropriate forum for considering such restrictions is in the LEC tariff review process.

Commission Findings and Conclusion: USWC 4

The Commission concludes that this issue is not appropriate for consideration in this proceeding. USWC’s proposed restrictions are similar to use and user restrictions that are traditionally set forth in tariffs. The Commission has already established subscriber restrictions in docket UM 351, Order No. 96-188 at 93. Those restrictions will be reflected in the tariffs USWC files in compliance with that order.

USWC 5 and 6 Should the applicantS enhance universal service? Should applicants be designated as Eligible Telephone Companies?

Positions of the Parties

USWC contends that the Commission should require the applicants to contribute to the continued availability of affordable telephone service in high cost areas by contributing to a universal service support charge. It also contends that, under Section 214(e) of the federal Act, the Commission is required to designate one or more new carriers of last resort in all areas not served by a rural telephone company.

Staff, AT&T, GTE and SCS note that applicants will contribute to OCAF fund, consistent with the findings and conclusions of Order No. 96-021. Any further discussion of related issues, they maintain, should be addressed in the Commission investigation of universal service reform in docket UM 731. AT&T and SCS also contend that the adoption of any additional universal service obligations at this time would constitute an impermissible barrier to entry.

Commission Findings and Conclusion: USWC 5 and 6

In this order, the Commission requires these applicants to make contributions to the OCAF Plan as prescribed in Order No. 96-021. The Commission reserves other issues related to universal service reform, including the designation of "eligible telephone companies" for consideration in Docket UM 731.

USWC 7 What affiliated interest requirements should the applicants be required to meet?

Positions of the Parties

USWC contends that the Commission should reexamine the extent to which USWC and GTE should be subject to affiliated interest requirements when no comparable requirements are imposed on competitors. GTE agrees that the federal Act’s competitive neutrality provisions require that the applicants and incumbents have the same obligations in this regard.

Staff and AT&T respond that the legislature, not the Commission, has differentiated between requirements on telecommunications utilities and competitive telecommunications providers in ORS 759.020(5). SCS points out that it has no affiliated relationships. Therefore, it maintains that there is no need to address this issue in connection with the approval of its application in this proceeding.

Commission Findings and Conclusion: USWC 7

The Commission concludes that this issue cannot be resolved in this proceeding. As Staff and AT&T note, the legislature has differentiated between telecommunications utilities and competitive telecommunications providers, imposing affiliate transaction requirements only on the latter. See ORS 759.390. The Commission cannot alter this legislative mandate.

GTE 1 Are there special circumstances when the applicant conducts Shared Tenant Services (STS) operations?

Positions of the Parties

GTE notes that, in its application, SCS intends to conduct STS operations in addition to its interexchange and proposed local exchange service operations. GTE believes that the STS operations should be isolated from other operations because: (1) the STS authority is subject to different statutory and regulatory parameters; (2) intercompany relationships are different for STS operations; (3) certain tax, surcharge and contribution obligations differ from STS operations. USWC concurs with GTE’s recommendation.

Staff states that, while there is no prohibition against an entity operating concurrently as an STS provider and an AEC, the Commission should take steps necessary to ensure that the operations are conducted separately. Staff recommends that a STS provider, which also operates as an AEC, should limit its STS operations to those geographic areas and users groups for which it has a STS certificate of authority. Staff also believes a STS provider should be required to obtain services from LECs for its operation by means of trunks that are separate from other trunks or facilities used to interconnect its AEC operations. Furthermore, with respect to telephone number assignments, Staff contends that a dual provider should assign NXX codes obtained for its AEC operations only to their AEC customers and use the numbers it obtains from LECs for its STS operation solely for its STS customers. Finally, Staff suggests that a dual provider should separately account for and maintain records reflecting its distinct AEC and STS operations. Staff concludes that these precautions will help ensure that an STS provider that also operates as an AEC will not be able to take unfair advantage of its dual operations.

Commission Findings and Conclusion: GTE 1

From a review of the applications and information contained in the Commission files, it does not appear that SCS will be providing STS services in the areas for which they have requested certification. Nonetheless, the Commission agrees with GTE and Staff that conditions should be imposed on any entity operating concurrently as an STS provider and an AEC to ensure that such operations are conducted separately. The Commission will impose such conditions on an certificate granted to an AEC that also provides STS services in the proposed service area.

CONCLUSION

Pursuant to the findings and conclusions above, the Commission takes official notice of the record in Dockets CP 1, 14, and 15, and Order No. 96-021. Based on a review of that record and order, comments from the parties, and the federal Act, the Commission concludes that it is in the public interest to grant the applications of Shared Communications Services, Inc., and AT&T Communications of the Northwest, Inc. for authority to provide local telecommunications services in Oregon. The exchanges of USWC, GTE, United, PTI and Beaver Creek listed below should be designated as competitive zones under ORS 759.050.

ORDER

IT IS ORDERED that:

1. The applications of Shared Communications Services, Inc., (SCS) and AT&T Communications of the Northwest, Inc., (AT&T) to provide local exchange telecommunications services are in the public interest and are granted. SCS and AT&T are authorized as alternative exchange carriers within the entire geographic area designated in their respective applications.

2. The following exchanges are designated as competitive zones:

Beaver Creek Cooperative Telephone Company (Beaver Creek)

 

Beaver Creek

GTE Northwest (GTE)

PTI Communications (PTI)

Sprint/United Telephone - Northwest (United)

U S WEST Communications, Inc. (USWC)

3. Unless otherwise provided pursuant to an interconnection agreement adopted pursuant to Section 252 of the Telecommunications Act of 1996, Beaver Creek, GTE, PTI, United and USWC shall offer ancillary services to the AT&T and SCS as set forth in Order No. 96-021. SCS and AT&T shall offer Enhanced 911 service as described in Order No. 96-021.

4. Unless otherwise provided pursuant to an interconnection agreement adopted pursuant to Section 252 of the Telecommunications Act of 1996, compensation for the exchange of local and EAS traffic between the AECs and the LECs in the competitive zones shall be based on bill-and-keep arrangements for a period to run concurrently with the interim period established in Order No. 96-021.

5. Existing local exchange boundaries and EAS routes established by the Commission shall apply to AECs as well as incumbents for the purpose of distinguishing between local and toll calling and for intercompany compensation, until otherwise ordered. AT&T and SCS shall limit each of their NXX codes to a given exchange and establish rate centers in those exchanges that are proximate to existing LEC rate centers.

6. Unless otherwise provided pursuant to an interconnection agreement adopted pursuant to Section 252 of the Telecommunications Act of 1996, SCS and AT&T shall be permitted to interconnect with the incumbent providers on the same terms and conditions that LECs have used to interconnect their telecommunications networks. SCS and AT&T shall not take any action that impairs the ability of the incumbent LECs to meet the service standards specified by the Commission.

7. For such time as it remains the numbering plan administrator for Oregon or is otherwise responsible for carrying out such duties, USWC shall apply existing guidelines for assigning numbers to SCS and AT&T in a nondiscriminatory manner.

8. Beaver Creek, GTE, PTI, United, and USWC and shall receive pricing flexibility under ORS 759.050(5) in an exchange when: (a) an authorized AEC has received a certificate of authority to provide local exchange service; (b) the LEC files a tariff that satisfies the Commission’s requirements regarding the provision of interim number portability, as set forth in Order No. 96-021; and (c) Staff notifies the Commission that interconnection arrangements are in place and a mutual exchange of traffic exists between the LEC and an authorized AEC. For purposes of this provision, "mutual exchange of traffic" means a mutual exchange of traffic between the LEC and the AEC within each exchange on an exchange-by-exchange basis. Furthermore, for an AEC who is a reseller of services, "mutual exchange of traffic" exists when an AEC orders and receives one service, at a wholesale rate, from the LEC for resale pursuant to a certificate granted under ORS 759.050.

9. As a condition of authority to provide local exchange service, SCS and AT&T shall comply with any universal service requirements imposed by the Commission pursuant to ORS 759.050(2)(c).

10. SCS, AT&T, Beaver Creek, GTE, PTI, United and USWC shall conduct and submit periodic traffic studies of local and EAS traffic exchanged with other carriers in accordance with ordering paragraph 7.e. at page 84 of Order No. 96-021, or as subsequently modified by the Commission.

11. Beaver Creek, GTE, PTI, United and USWC shall provide to SCS and AT&T interim number portability service consistent with state and federal requirements.

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 the requirements of OAR 860-014-0095. A copy of any such request must also be served on each party to the proceeding as provided by OAR 860-013-0070. A party may appeal this order to a court pursuant to ORS 756.580.

Appendix A

Issues List