ORDER NO. 97-116

ENTERED MAR 21 1997

This is an electronic copy.

BEFORE THE PUBLIC UTILITY COMMISSION

OF OREGON

UM 806

DISPOSITION: NO COMMUNITY OF INTEREST FOUND;

PETITION DISMISSED.

On April 30, 1995, the customers of the Oakridge Telephone Exchange (petitioners) petitioned the Commission for extended area service (EAS) to the Lowell and Eugene-Springfield telephone exchanges. A map of the affected exchanges is attached as Appendix A. The Commission docketed the request as UM 806 for investigation.

On July 25, 1996, the Commission staff (staff) filed testimony for Phase I, Community of Interest Determination. Based on a review of geographic and telephone usage information, staff concluded that the proposed Oakridge/Lowell and Oakridge/Eugene-Springfield interexchange routes did not satisfy the Commission’s objective community of interest criteria set forth in Order Nos. 89-815 and 92-1136. Staff's testimony is summarized in Appendix B, attached to this order and incorporated by reference.

On August 19, 1996, the Commission issued a Proposed Order recommending that the EAS petition be dismissed based on staff’s findings. Petitioners subsequently requested an opportunity to establish, through demographic, economic, financial, or other evidence, that a community of interest exists between the two telephone exchanges.

On October 22, 1996, Michael Grant, an Administrative Law Judge, held a hearing on this matter in Oakridge, Oregon. Approximately 30 people appeared in support of the petition. Based on a preponderance of the evidence submitted, the Commission makes the following:

FINDINGS OF FACT

Geography and Demography

The Oakridge, Lowell, and Eugene-Springfield telephone exchanges lie in southeast Lane County along the upper reaches of the Willamette River. The petitioning exchange, Oakridge, consists of approximately 2,150 access lines and currently has no EAS to any other exchange. The Lowell exchange lies northwest of Oakridge and consists of approximately 1,150 access lines. It currently has EAS to Eugene-Springfield exchange. The Eugene-Springfield exchange is the largest of the three exchanges, with approximately 127,000 access lines. It has EAS to ten neighboring exchanges. All three exchanges are served by U S WEST Communications.

The Oakridge exchange is a rural logging area that includes two incorporated cities: Oakridge and Westfir. The area was once a self-sufficient community, offering a variety of employment opportunities and business services to its residents. For example, the City of Oakridge once had three automobile dealers, two pharmacies, and a number of other businesses. However, the closure of a number of lumber mills and reduction in Forest Service activities has greatly affected the local economy. Oakridge now offers limited services to exchange residents. These primarily consist of restaurants, convenience stores, and other businesses that serve the large number of tourists who travel through the city to enjoy the recreational opportunities in the Willamette and Deschutes National Forests.

As a result, exchange residents now seek essential goods and services in neighboring communities. The cities of Lowell and Dexter, located approximately 30 miles away in the neighboring Lowell telephone exchange, are the closest towns that offers some basic services. These towns, however, serve primarily as bedroom communities to the Eugene-Springfield and offer limited services. As a result, most Oakridge residents rely on retail and commercial businesses in Eugene and Springfield to meet their basic needs.

Eugene-Springfield is a relatively large metropolitan area located approximately 45 miles from Oakridge via State Route 58. It offers a wide variety of commercial goods and services, including accounting, banking, insurance, legal, veterinarian, and other professional services, as well as business suppliers, automobile dealers and repair, hardware and building supplies, restaurants, and other retail services.

Schools

Oakridge exchange residents are served by Oakridge School District 76, which offers public education from pre-kindergarten through high school. The school relies on services provided by the Lane County Educational Service District, which is located in Eugene.

A portion of residents in the Lowell exchange are also served by the Oakridge School District 76. The Oakridge/Westfir Head Start Program and Oakridge Preschool also serve areas that include a portion of the Lowell exchange. Local residents in both exchanges also attend the Lane Community College satellite center in Oakridge.

The Lowell and Oakridge school districts are part of the same athletic league and compete against each other in various sporting events. The music departments of each school also hold combined music concerts and productions.

Government

Residents of the Oakridge and Lowell exchanges live in Lane County and are served by county and state government offices in Eugene.

Medical and Dental Services

Oakridge and Lowell exchange residents are served by the Lakeside Clinic, located in Dexter, and the Oakridge Medical Clinic, located in Oakridge. Through a cooperative arrangement, both clinics share emergency call coverage that requires an on-call medical care provider to be available to residents from both areas after hours.

A number of local dentists serve Oakridge exchange residents. None, however, participate in the Oregon Health Plan. As a result, some exchange residents seek dental care at the Hayden Dental Clinic, a participating clinic located in Lowell.

Commuting Patterns

Due to the increasing dependence of local residents on Eugene-Springfield for employment and essential goods and services, there has been a dramatic increase in the number of vehicles commuting up and down the Highway 58 corridor between the two areas. In 1985, the average commute to work for an Oakridge exchange resident was 18 minutes. Now, following the closure of lumber mills and Forest service offices, that average has increased to approximately 50 minutes. Historical traffic studies from the Oregon Department of Transportation document this increase, as the number of vehicles commuting to and from Oakridge has increased significantly during this time period.

Toll Avoidance

Some Oakridge exchange residents engage in a variety of toll avoidance practices. Residents often avoid toll calls by combining a trip with their telephone activities. Others relay calls through neighbors or friends.

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).

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 petitioners 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.

Resolution

In this case, we adopt Staff’s conclusion that neither of the proposed interexchange routes satisfied the objective community of interest criteria. While the Oakridge and Lowell exchanges are contiguous, only a maximum average of 0.98 calls per line per month were placed between the exchanges, and only 8.88 percent of Oakridge customers made at least 2 calls per month to the Lowell exchange. Further, the proposed Oakridge/Eugene-Springfield interexchange route satisfied the calling volume and calling distribution requirement; however, the two exchanges are not contiguous.

Accordingly, we turn to the demographic evidence presented at hearing. The Oakridge exchange residents presented information in an attempt to show a community of interest between the Oakridge and the Lowell exchanges. All witnesses showed a strong desire for the proposed EAS. They presented evidence that some children who live in the Lowell exchange attend school or preschool in Oakridge. They also demonstrated that Lowell and Oakridge have medical clinics that work cooperatively to serve residents of both exchanges.

The majority of the testimony, however, indicated a heavy reliance on the Eugene-Springfield area. Most of those testifying indicated that Lowell was a smaller town with almost no businesses available to provide jobs, goods or services for their own community, let alone Oakridge. Like their neighbors in Lowell, Oakridge residents travel to Eugene-Springfield to purchase items ranging from clothing to hardware, automobiles to furniture, and to obtain other basic goods and services. In addition, many Oakridge residents now commute to the Eugene-Springfield metropolitan area, where a greater number of employment opportunities exist.

Due to this heavy reliance, there is little evidence to establish strong community ties between the Lowell and Oakridge exchanges. Both are dependent upon the larger Eugene-Springfield exchange, rather than each other. This is reflected in the calling patterns demonstrated by the objective analysis above. Nonetheless, petitioners ask that the Commission make an exception to the contiguity requirement and grant EAS to the Eugene-Springfield exchange. They believe 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 Nos. 95-1324 and 96-229. 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 Oakridge and Eugene-Springfield telephone exchanges are not contiguous. The Lowell 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 Oakridge 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.

In making this decision, we acknowledge petitioner’s contention that the local exchange boundaries in Oakridge appear to be antiquated and should be changed. In our generic investigation into EAS, we acknowledged that many local exchange boundaries no longer bear any relationship to community boundaries due to growth and settlement patterns. See Order No. 89-815 at 8. Modifying local exchange boundaries, however, presents many difficulties, from both a technical and regulatory standpoint. To avoid such problems, the Commission adopted an EAS process to, in effect, realign exchange boundaries based on a community of interest between exchanges. We have concluded that the Oakridge petitioners failed to establish a community of interest with the Lowell and Eugene-Springfield exchanges.

We also note the petitioner’s concern that the Cottage Grove exchange was able to obtain EAS to the Eugene-Springfield exchange without first establishing a community of interest with the apparently intervening Creswell exchange. Such concern, however, is resolved by a review of the exchange map for the Cottage Grove exchange. That map reveals that, while the Creswell exchange lies between the Cottage Grove and Eugene-Springfield exchanges to the east, the Eugene-Springfield exchange actually wraps south around the west portion of the Creswell exchange to share a common boundary with the Cottage Grove exchange. See Appendix C. Accordingly, given that configuration and Commission standards, there was no need for the Cottage Grove petitioners to establish a community of interest with Creswell in order to establish a community of interest with the Eugene-Springfield exchange.

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 Oakridge exchange and the Lowell exchange. Furthermore, no good cause exists to create a "leapfrog" EAS arrangement to the Eugene-Springfield exchange. Accordingly, the petition for EAS should be dismissed.

ORDER

IT IS ORDERED that:

1. The petitioners served by the Oakridge telephone exchange have failed to established a community of interest with the Lowell and Eugene-Springfield exchanges.

2. The petition for EAS between the Oakridge exchange and the Lowell and Eugene-Springfield 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.