ORDER NO. 97-030

ENTERED JAN 17 1997

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

BEFORE THE PUBLIC UTILITY COMMISSION

OF OREGON

CP 157

DISPOSITION: STIPULATION ADOPTED;

APPLICATION GRANTED

The Application

On April 9, 1996, Preferred Carrier Services, Inc. (PCS or Applicant) applied for a certificate of authority to resell local bundled telecommunications services throughout the state of Oregon. A number of incumbent carriers filed protests. On May 1, 1996, PCS amended its application to restrict its authority to exchanges served by U S WEST Communications, Inc. (USWC). All carriers but USWC withdrew their protests.

On June 7, 1996, CP 157 was bifurcated. The portion of the application dealing the Portland metropolitan area exchanges was consolidated with CP 131 et al. as CP 157. The remainder of the application was docketed as CP 179 and consolidated with CP 132 et al.

Procedural History

Parties in the CP 131 et al. consolidated dockets circulated a stipulation and filed two rounds of comments on the stipulation. This docket was removed from the consolidated dockets and put on a separate schedule. The same stipulation that was submitted in CP 131 et al. was submitted in this docket. USWC’s comments, set out below, were submitted in response to the same stipulation, but in the CP 131 et al. dockets. The stipulation is attached to this order as Appendix A.

The Stipulation

Staff and PCS signed all provisions of the stipulation. The table below sets out the provisions of the stipulation not signed by USWC.

At issue, therefore, are paragraphs 1, 3, 4, 5, 8, 9, and 17.

Paragraph 1. USWC argues that the Commission must make findings regarding the statutory requirements in ORS 759.050, the competitive zone statute, and cannot do so without evidence on the record. USWC notes that it does not oppose certifying facilities based telecommunications service providers, but believes that the Commission must require information about Applicant’s plans in order to make a finding that granting its application is in the public interest. USWC urges the Commission to require Applicant to demonstrate that they have financial, managerial, and technical capability to provide telecommunications services in the areas for which they seek certification.

Paragraphs 3, 8. USWC did not comment on these paragraphs.

Paragraphs 4, 5. USWC states that it should not be subject to any requirements not also imposed on the alternative exchange carriers (AECs).

Paragraph 9. USWC argues that the Commission may not apply to PCS the finding in Order No. 96-021 that bill and keep is an appropriate compensation mechanism. USWC argues that Sec. 252 of the Telecommunications Act of 1996 (the Act) requires originating carriers to cover terminating carriers’ costs. Moreover, USWC argues that under that same section of the Act, interconnection rates must be cost based. USWC does not contend that the Act prohibits bill and keep, but rather argues that bill and keep is an acceptable compensation mechanism under the Act, provided that 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 CP 1, 14, and 15, USWC contends that adopting bill and keep for Applicant would run counter to the Act.

USWC also argues that the Act limits the Commission’s ability to address interconnection issues. USWC asserts that the requirement of bill and keep for interconnection compensation, set forth in Order No. 96-021, is inconsistent with the Act because it circumvents the negotiation process. Section 252 of the Act, it argues, provides for a negotiation process on the terms and conditions for interconnection, mutual compensation, resale, and other issues. USWC concludes that the Commission should allow this negotiation process to unfold without dictating any particular interconnection compensation mechanism.

Paragraph 17. USWC notes on the stipulation that the conditions under which it may receive pricing flexibility have already been met.

Applicable Law

ORS 759.020 provides, in pertinent part, that:

(1) No . . . company . . . shall provide intrastate telecommunications service on a for-hire basis without a certificate of authority issued by the Commission under this section. . . . (5) . . . If the Commission finds that a successful applicant for a certificate has demonstrated that its customers or those proposed to become customers have reasonably available alternatives, the Commission shall classify the applicant as a competitive telecommunications provider[.]

ORS 759.050 provides, in pertinent part, that:

(2)(a.) Not withstanding that provisions of ORS 759.020(3) the Commission may certify one or more persons, including another telecommunications utility, to provide local exchange telecommunications service within the local exchange telecommunications service area of a certificated telecommunications utility if the Commission determines that such authorization would be in the public interest. For the purposes of determining whether such authorization would be in the public interest, the Commission shall consider:

(A.) The effect on rates for local exchange telecommunications service customers both within and outside the competitive zone.

(B.) The effect on competition in a local exchange telecommunications service area.

(C.) The effect on access by customers to high-quality, innovative telecommunications service in a local exchange telecommunications service area.

(D.) Any other facts the Commission considers relevant.

(2)(b.) Upon certification of a telecommunications provider under paragraph (a) of this section, the Commission shall establish a competitive zone defined by the services to be provided by the telecommunications provider.

ORS 759.050(5)(a) further provides that incumbent utilities are granted pricing flexibility within the competitive zone for the services offered by the competitor, unless the Commission finds that granting pricing flexibility is not in the public interest.

Commission Findings and Decision

The Commission takes official notice of the record in CP 1, 14, and 15.

The Stipulation. We addressed USWC’s comments at length in the CP 131 et al. dockets. See Order No. 96-248. In the following, we summarize what we said there.

Paragraph 1. The stipulation is designed to apply the findings and decisions in Order No. 96-021 to the present application. USWC argues that the findings and conclusions in Order No. 96-021 apply to facilities based carriers. We disagree. In Order No. 96-021, the Commission made findings of general applicability on the beneficial nature of local exchange competition in the Portland metropolitan area. Our findings in that order are sufficiently broad to cover the application currently before us. Moreover, the federal Act expressly contemplates resale as a market entry device. See FCC Order 96-325 at 12 (Paragraph 18).

USWC raises a concern about unauthorized resale of telecommunications services. We have resale restrictions in place (for instance, restrictions against reselling residential service to business customers) through Order No. 96-188 (UM 351). Those restrictions will be reflected in the tariffs USWC files in compliance with that order. This docket is not the forum for addressing that issue.

USWC also asks the Commission to require more information about the current Applicant’s financial, managerial, and technical ability to provide telecommunications service. USWC’s request raises no specific concerns about the Applicant. We decline to require more information from PCS at this time.

Paragraphs 4, 5 and 8. USWC argues that it should not be subject to any requirements not also imposed on the AECs. USWC states, without providing a specific citation, that the Act requires equal treatment of LECs and AECs. We disagree. The Act does not relieve incumbent telecommunications utilities of their duties under state law. Until competition is firmly established and the incumbent LECs have a less overwhelming market share, the LECs will be subject to extra duties and obligations under Oregon law. The Act also imposes different requirements on LECs

and AECs. See, for instance, Sec. 251(b) and (c). However, as we stated in Order No. 92-021, at 24:

The LEC goal of regulatory parity requires effective competition for local exchange services. Once competition is established, we will consider whether the

. . . requirements imposed on LECs should be relaxed.

Paragraph 9. Based on its reading of Sec. 252, USWC argues that bill and keep is acceptable under the Act, but must be cost based. The Commission’s rationale for adopting interim bill and keep arrangements for the transport and termination of local and EAS traffic are discussed in Order No. 96-021 at 52 and following. See also Order No. 96-119 at 9. We will not repeat the arguments here.

USWC also argues that the bill and keep requirement for interconnection compensation is inconsistent with the Act because it circumvents the negotiation process set out in Sec. 252. USWC suggests that the Act implicitly preempts state law on the issue of interconnection. We disagree, and have set out our argument in detail in Order No. 96-248 at 15-17.

Paragraph 17. USWC has already met the conditions set forth in Order No. 96-021 at 93, Order No. 96-248 at 17, and Order No. 96-277 for gaining pricing flexibility in the Portland area competitive zones.

CONCLUSIONS

We have reviewed the stipulation submitted in this docket. We have reviewed the comments of the parties, our previous orders, and the federal Act. The stipulation contains detailed findings and conclusions regarding the statutory criteria for granting competitive provider applications. We conclude that the application meets the statutory test set out on pages 3-4 of this Order. The findings and conclusions in Order No. 96-021 (CP 1, 14, and 15) also provide a basis for concluding that this application meets the statutory provisions set out above. We conclude that the stipulation is reasonable and adopt it in its entirety. On the basis of the findings in Order No. 96-021, we conclude that granting the application in this docket is in the public interest.

ORDER

IT IS ORDERED that:

1. The stipulation, attached to and included in this order, is appropriate and is adopted.

2. The application of Preferred Carrier Services, Inc., to provide telecommunications services as a competitive telecommunications provider is in the public interest and is granted.

3. Preferred Carrier Services, Inc., may resell local bundled services in the following competitive zones: Burlington, North Plains, Lake Oswego, Milwaukie - Oak Grove, Oregon City, and Portland.

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 in 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(2). A party may appeal this order to a court pursuant to ORS 756.580.