ORDER NO. 97-267

ENTERED JUL 17 1997

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

BEFORE THE PUBLIC UTILITY COMMISSION

OF OREGON

UM 824

DISPOSITION: COMMUNITY OF INTEREST FOUND

On December 11, 1996, customers in the Sprague River telephone exchange filed a petition with the Commission requesting extended area service (EAS) to the Bonanza and Chiloquin telephone exchanges. A map of the exchanges is attached to this order as Appendix A.

On February 12, 1997, 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, attached to this order and incorporated by reference.

On March 11, 1997, Michael Grant, and Administrative Law Judge (ALJ), issued a Proposed Order adopting Staff’s findings and recommending that the Sprague River petition for EAS to the Bonanza and Chiloquin 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 three exchanges.

On May 20, 1997, ALJ Grant held a hearing on this matter in Sprague River, Oregon. Notice of the hearing was served to all parties, and was published twice in the Herald & News newspaper. Approximately 25 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 Sprague River, Chiloquin, and Bonanza telephone exchanges lie in Klamath County in south-central Oregon. The petitioning exchange, Sprague River, consists of almost 500 access lines and currently has EAS with the Klamath Falls exchange. The Chiloquin exchange lies north and west of the Sprague River exchange and consists of approximately 1,400 access lines. It currently has EAS to the Fort Klamath and Klamath Falls exchanges. The Bonanza exchange lies south of Sprague River and consists of approximately almost 1,000 access lines. It also has EAS to the Klamath Falls exchange. The Sprague River, Chiloquin, and Bonanza exchanges are all served by PTI Communications (PTI).

Sprague River is a small rural community with little or no centralized business. Currently, the exchange has only one restaurant and three small general stores. Exchange residents, therefore, seek essential goods and services in neighboring communities.

The cities of Chiloquin and Bonanza, each located approximately 25 miles from Sprague River, are the closest towns that offer these basic services. They also offer numerous employment opportunities for Sprague River exchange residents.

Residents of the Sprague River, Chiloquin, and Bonanza exchanges share common interests and programs through church and civic activities, such as the Lions Club. Some residents rely on each other for trading of agricultural commodities and belong to water user groups to address water use issues in the county.

Schools

The Sprague River exchange is served by schools located outside the local calling area in Chiloquin and Bonanza. Both neighboring communities provide public schooling for children from ages K through 12. The two schools’ boundaries split the Sprague River exchange, with the northern and western part of the exchange served by Chiloquin, and the southern and eastern part of the exchange served by Bonanza.

As a result of this arrangement, Sprague River exchange children participate in school sports and other extracurricular activities with children from the neighboring exchanges. Furthermore, several teachers and school bus drivers from the Bonanza and Chiloquin schools live in Sprague River.

Government and Jurisdictional Issues

The Sprague River, Chiloquin and Bonanza telephone exchanges are located within Klamath County and are served by the county government in Klamath Falls.

Other federal and tribal governmental offices are located in Chiloquin. The Klamath Tribal Government is located in Chiloquin and provides health and housing services to many native Americans who live in the Sprague River exchange. The Wood River Justice Court also is located in Chiloquin.

Similarly, the Winema National Forest headquarters and fish and wildlife planning offices are located in Chiloquin. These offices provide a variety of resource management services to Sprague River exchange residents.

Medical and Dental Services

No medical or dental provider is located within the Sprague River calling area. As a result, Sprague River residents rely on Bonanza and Chiloquin for such services. Chiloquin offers a medical clinic and dentist, as well as a health clinic with the Klamath Tribal Government. Bonanza offers a medical and dental practice, and also offers the nearest ambulance services.

Employment

The area within the Sprague River exchange offers few employment opportunities other than those associated with independent ranching and farming activities. Consequently, many area residents commute to neighboring cities. In Chiloquin, several area residents work at Jeld-Wen, a manufacturer of doors and specialty fiber products. Others work at offices for the forest department or the Klamath Tribal Council or at other businesses located in that city. In Bonanza, several Sprague River exchange customers work at the Bonanza High School, local restaurants, or other small businesses.

Business and Commercial Dependence or Interdependence

Many Sprague River residents rely on Chiloquin and Bonanza for business services not available within their local calling area. These services include a full service hardware store, feed and supply stores, automobile parts and repair store, farm exchange services, a day care, coin-operated laundry, butcher shop, and card-lock gasoline services. Residents also frequent restaurants, retail shops, and grocery stores located in the neighboring exchanges.

Most Sprague River residents seek professional services in Klamath Falls. However, many rely on realtor and title services offered in Chiloquin, and look forward to using a bank that will soon open in the area. Furthermore, most residents in need of veterinarian services seek assistance from a veterinarian who practices in Chiloquin.

Toll Avoidance

Most Sprague River 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 who live in Sprague River but work in Chiloquin or Bonanza. Many residents also try to reduce telephone bills by using alternative toll carriers.

OPINION

Issue

For the reasons shown in Appendix B, the Commission Staff determined that the Sprague River exchange petitioners failed to meet the calling volume and customer distribution requirements for the proposed Sprague River/Chiloquin and Sprague River/Bonanza interexchange routes. The question presented in this proceeding, therefore, is whether the petitioners have established, through demographic, economic and other evidence, that a community of interest exists between those exchanges.

Applicable Law

In Phase I of an EAS investigation, the Commission determines whether there is a "community of interest" between the petitioning exchange and the target exchange(s). The Commission has adopted the following test for "community of interest" in cases where petitioners rely on demographic evidence:

A community of interest exists where there is social, economic, or political dependence or interdependence between the petitioning and requested exchange(s) sufficient to justify conversion to EAS. In making this determination, the Commission will review the following 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 the Commission can conclude that the record as a whole establishes sufficient interdependence or dependence between the exchanges. In the Matter of the Consolidated Applications For Expansion of the Portland Extended Area Service Region, Order No. 93-1045 at 12.

Resolution

The Commission concludes that the Sprague River petitioners have established, through demographic and other evidence, that a community of interest exists with the Chiloquin and Bonanza telephone exchanges. The evidence presented at hearing establishes a sufficient degree of dependence by the Sprague River exchange residents on the Chiloquin and Bonanza areas.

The Sprague River area is a rural ranching and agricultural community that offers virtually no business or professional services for its residents. Chiloquin and Bonanza are the closest cities where a sizable number of businesses and professional services are available. Each city lies approximately 25 miles from the city of Sprague River and, together, provide the necessary services to meet the basic needs of Sprague River exchange residents. These include educational, governmental, medical and other professional services, as well as a variety of commercial services such as automotive repair, hardware and building supplies, feed and supply stores, and retail shopping. A majority of Sprague River exchange residents also commute to Chiloquin and Bonanza to work.

The Sprague River petitioners also established that a large majority of customers engage in a variety of toll avoidance activities. Many residents who work in Chiloquin or Bonanza simply save calls and make them in the neighboring exchanges. Some commuters even place calls for neighbors while in Chiloquin or Bonanza. These activities, combined with the use of alternative toll carriers, explain the fact that the Sprague River calling pattern data failed the Commission’s objective criteria for a community of interest despite the strong demographic showing of dependence.

In summary, the Sprague River petitioner’s demographic evidence showed strong ties to both Chiloquin and Bonanza. The Commission concludes that such evidence persuasively establishes that a community of interest exists between the Sprague River, Chiloquin, and Bonanza exchanges. The EAS petition should proceed to Phase II (tariff analysis).

ORDER

IT IS ORDERED that:

1. The Sprague River telephone exchange has established a community of interest with the both the Chiloquin and Bonanza telephone exchanges based upon demographic, economic, financial, and other evidence.

2. This completes Phase I of this docket. The petition is now ready to enter Phase II, the rate and cost phase of this proceeding. For Phase II, the Sprague River petition will be grouped with other EAS dockets that complete Phase I by August 1. The serving telephone companies shall file proposed rates and supporting cost information by October 15, 1997.

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.