ORDER NO. 97-373

ENTERED SEP 18 1997

This is an electronic copy

BEFORE THE PUBLIC UTILITY COMMISSION

OF OREGON

CP 120

CP 191

CP 215

DISPOSITION: APPLICATIONS DENIED; DISMISSED

On December 7, 1995, Siuslaw Public Library District filed an application for a certificate to provide telecommunications service in Oregon (CP 120). On July 7, 1996, the Economic Development Alliance of Lincoln County (the Alliance) filed an application for a certificate to provide telecommunications service in Oregon (CP 191). On September 3, 1996, Lincoln County filed an application to provide telecommunications service in Oregon (CP 215). These cases were consolidated for consideration by the Commission.

U S WEST Communications, Inc., (USWC) filed protests to all three applications. GTE Northwest Incorporated (GTE) filed protests in dockets CP 120 and CP 215.

On January 31, 1997, Siuslaw Public Library District (CP 120) withdrew its application. That application is therefore dismissed in this order and not further considered.

The Applications

CP 191

The Alliance amended its application on February 20, 1997, and again on May 30, 1997. The final amended application is as follows:

Applicant will be a reseller of data communications services, utilizing a fiber optic network system known as CoastNet, which will be comprised of transport capacity contributed by the County through intergovernmental agreement with the Central Lincoln People’s Utility District, and switches and routers contributed by the Economic Development Alliance. Only interexchange authority was requested.

CP 215

Lincoln County amended its application on February 20, 1997, and again on May 30, 1997. The final amended application is as follows:

Applicant will be a reseller of data communications services, utilizing a fiber optic network system known as CoastNet, which will be comprised of transport capacity contributed by the County through intergovernmental agreement with the Central Lincoln People’s Utility District, and switches and routers contributed by the Economic Development Alliance. Only interexchange authority is requested.

The Commission interprets the applications as requesting certification to provide interexchange, point-to-point private line services in increments of T1 or greater by resale of CLPUD fiber. The Alliance will combine resold CLPUD fiber with the Alliance’s switches and routers.

Background and Purpose of the Applications

Lincoln County and the Alliance (herein "Applicants") provided a description of the purposes of their proposed services. The Alliance is a not-for-profit corporation existing for the purpose of promoting economic development and employment opportunities in Lincoln County. The Central Lincoln People’s Utility District (CLPUD) provides electric power services in Lincoln County and portions of a number of other counties. To facilitate its internal communications, CLPUD has installed a fiber optic network throughout much of its territory. The network has large amounts of capacity beyond that needed by CLPUD for its own communications.

When the Alliance became aware of CLPUD’s excess fiber-optic capacity, it and 38 other public and not-for-profit entities created a project known as CoastNet to gain access to that capacity as a means of encouraging growth and economic development. CoastNet seeks to accomplish the following objectives: 1) Arrange to lease CLPUD’s excess fiber optic capacity through an intergovernmental agreement between Lincoln County, and CLPUD, or both; 2) Purchase the equipment needed to enable that excess capacity to operate as a high-speed communications network; and 3) Make that network available to public entities and to businesses (both those existing in the County and those targeted for recruitment), particularly businesses to whom access to a high-speed fiber optic network is of significance. CLPUD has agreed to lease its excess fiber optic capacity to Lincoln County. The Alliance has obtained economic development grants for the CoastNet project.

In its May 30, 1997, filing amending its application and that of the Alliance, Lincoln County clarified the description of the legal framework for the CoastNet project as a whole as follows:

The CoastNet project

The Fiber

The Central Lincoln PUD has installed an extensive fiber optic and microwave network in Lincoln County and parts of a number of other counties. The network has significant excess capacity beyond that which the PUD will be using for its own purposes. This excess capacity affords a tremendous opportunity for economic development along the central Oregon coast. However, there is some question as to whether the PUD has the legal authority to engage in telecommunications services. Therefore, through an ORS Chapter 190 intergovernmental agreement, the PUD has agreed to share that excess capacity with Lincoln County. The effect of that agreement is a sharing of authority and powers between the County and the PUD for purposes of the excess capacity. ORS 190.030.

The Switches

The Economic Development Alliance of Lincoln County, a non-profit corporation, has obtained a grant from the Oregon Economic Development Department for the purchase and installation of a number of fiber optic routers and switches.

The Network

The County and the Alliance intend to enter into a contract to combine the PUD/County fiber with the Alliance’s switches. The contract will provide for the marketing and use of this high-speed digital data transmission network.

In a June 6, 1997, letter to protestant GTE, Lincoln County further described the operation of the CoastNet project as follows:

The contract will most likely appoint the Alliance as the entity responsible for offering the bundled CoastNet service to users. Some users will be end use customers who will contract directly with the Alliance for the bundled CoastNet service. Others will be third party resellers (who will be required to have a Certificate of Authority from the PUC), who would resell bundled CoastNet service to end use customers.

Issues

A prehearing conference was held on January 29, 1997, before Administrative Law Judge Allen Scott. The following issues list was adopted:

Do the remaining applicants need a certificate to do what they intend?

Does the CLPUD need a certificate to provide the service proposed to applicants?

If applicants or CLPUD need certificates, should the Commission grant them?

The parties agreed to address the issues in written comments. No party requested an evidentiary hearing.

CLPUD’s Status

CLPUD is on the service list for these cases but is not a party. It became apparent during the proceeding that a question exists as to whether CLPUD needs a certificate to provide the proposed service to applicants. In a prehearing conference memorandum issued on February 6, 1997, the Administrative Law Judge invited CLPUD to become a party in the case. It did not do so. In its written comments, PUC Staff argued that CLPUD needs a certificate to provide the service and suggested that CLPUD be given time to respond to Staff’s comments. On March 18, 1997, the Administrative Law Judge issued a memorandum giving CLPUD an opportunity to respond to Staff’s arguments. CLPUD filed no response.

Issue 1—Do applicants need a certificate?

Position of the Parties. Staff argues that both applicants need a certificate to provide the proposed service. Staff claims that the service is a "telecommunications service" under ORS 759.005(2)(g), which states as follows:

"Telecommunications service" means two-way switched access and transport of voice communications but does not include:

(A) Services provided by radio common carrier.

(B) One-way transmission of television signals.

(C) Surveying.

(D) Private telecommunications networks.

(E) Communications of the customer which take place on the customer side of on-premises equipment.

Staff’s position is based on the Commission’s prior holding that the definition of telecommunications service in ORS 759.005(2)(g) includes facilities which are capable of voice transmission, whether or not they are used for that function. See Application of Electric Lightwave, Inc., Order 92-345 at 8-9. The dark fiber to be used for the proposed service is capable of voice transmission, according to Staff. Staff then asserts that because the applicants will provide telecommunications service, they come within the reach of ORS 759.020(1), which requires that anyone providing intrastate telecommunications service on a for-hire basis have a certificate.

GTE and USWC agree that Staff’s position is supported by prior Commission cases. USWC argues, however, that the term "telecommunications service" should be interpreted more narrowly than the Commission has done in the past. USWC asks that if the Commission adopts a more narrow interpretation, it be applied to all other entities who provide services of the same kind as those proposed by applicants.

Applicants disagree with Staff. They first claim that the Commission’s past interpretation of the definition of "telecommunications service" is too broad. The statutory definition of telecommunications service as "two-way switched access and transport of voice communications" is, in applicants’ view, clear and unambiguous and does not include data communications. They also claim that the Commission’s broad interpretation of "telecommunications service" is not consistent with the Commission’s actual practice. In their view it would, for example, require Internet service providers to obtain certificates because the Internet is capable, and in fact is being used, for digital voice communication. Applicants also argue that their proposed service is not being offered on a "for-hire" basis. They claim that the "for-hire" requirement in ORS 759.020 is intended to encompass only "those that provide or offer telecommunications service to the general public." Applicants argue also that even if facilities capable of voice transmission are telecommunications services, their proposed service is not within the definition because the fiber optic system they will use is not "independently capable" of voice communication (emphasis added).

Applicants also claim that adoption of Staff’s position would violate 47 USC Sec. 253 (a) of the 1996 Telecommunications Act (the Communications Act of 1934, 47 USC 151 et seq., as amended by the Telecommunications Act of 1996, herein called the Act), which provides as follows:

No State or local statute or regulation, or other State or local legal requirement, may prohibit or have the effect of prohibiting the ability of any entity to provide any interstate or intrastate telecommunications service.

According to applicants, Staff’s broad interpretation of "telecommunications service," when read together with the "entry barrier" elements in ORS 759.020 and OAR 860-032-0005 (our administrative rule relating to applications for certificates of authority), violates the Act. Applicants acknowledge that the Act sets out several exceptions to the above provision (discussed below) but claim that none is applicable to the present case.

Issue 1—Disposition. We conclude that applicants need certificates. Our prior decisions have explicitly held that the term "telecommunications service" includes the provision of facilities that have the capability of voice transmission, regardless of their actual use. Electric Lightwave, Order No. 92-345. We considered in Order No. 92-345 the same issues presented here. Applicants have provided no convincing reason for modifying that position. We conclude from the record that the facilities both applicants intend to provide will be capable of voice transmission and that applicants therefore intend to provide telecommunications service. They need a certificate to do so under ORS 759.020.

Applicants’ argument that the fiber optic is not "independently capable" of voice transmission is not persuasive. Applicants do not explain their position. Our prior discussion of this issue in Order No. 92-345 did not limit the definition of "telecommunications service" to facilities which by themselves, without aid from other mechanisms, could carry voice transmissions. We decline to do so here. Such a limitation would make the definition so narrow as to all but disappear. All media used for modern telecommunications need electronics and other apparatus before voice transmissions can actually occur. That fact does not render them incapable of voice transmission. We conclude that the fiber optics to be used by applicants have the capability of voice transmission.

Applicants’ argument relating to the "for-hire" requirement is also not persuasive. They argue that the legislative history of ORS 759.020, the statute requiring certification, "makes clear" that a certificate is required only "for those that provide or offer telecommunications service to the general public." As applicants will contract with a limited number of other providers, the service will not, in applicants’ view, be offered to the general public.

We are not persuaded by this argument. ORS 759.020 says nothing about the "public" or the "general public." The only authority cited by applicants for engrafting that concept onto the statute is a memorandum to a legislative committee by the then Commissioner of the PUC. That slender piece of evidence is not sufficient to establish a meaning that is not suggested by the actual wording of the statute. The term "for-hire" simply means for remuneration of some sort. That term does not carry with it an implicit designation of the source of the remuneration. In any event, applicants acknowledge that the service will be made available to various customers. Even if we did read the concept of service to the public into ORS 759.020, applicants’ proposed service would meet that standard. Applicants presented no other basis for their argument on this point. The argument fails.

We next consider applicants’ argument that the 1996 Telecommunications Act prevents the Commission from requiring them to have a certificate. We conclude that the anti-barriers provision in 47 USC 253(a) does not prohibit the Commission from applying the provisions of ORS 759.020. The federal Act specifically guarantees continued State Regulatory Authority in 47 USC 253 (b) by providing broad exceptions to the anti-barriers statute:

State Regulatory Authority.--Nothing in this section shall affect the ability of a State to impose, on a competitively neutral basis and consistent with section 254, 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.

The purposes behind our statutes and regulations requiring that providers of telecommunications service be certified are within the scope of these exceptions. Those statutes and regulations protect the public safety and welfare and ensure the quality of the service. They are also designed to protect the rights of consumers and to further our goal of ensuring universal service, the subject of section 254 of the Act. We note additionally that ORS 759.015 sets out the goals of the State of Oregon regarding telecommunications services and directs the Commission to administer statutes in accordance with that policy:

The Legislative Assembly finds and declares that it is the goal of the State of Oregon to secure and maintain high-quality universal telecommunications service at just and reasonable rates for all classes of customers and to encourage innovation within the industry by a balanced program of regulation and competition. The commission shall administer the statutes with respect to telecommunications rates and services in accordance with this policy.

Those goals guide us in our interpretation and application of relevant statutes and regulations. For the most part, the goals set out above, such as the maintenance of high-quality service and the encouragement of innovation, fit into the "exceptions" provision of 47 USC 253 (b), which allow state requirements that provide for universal service, protect the public safety and welfare, ensure quality of service, and safeguard consumer rights. We conclude that ORS 759.020 comports with the goals established in ORS 759.015 and is thus not in conflict with the anti-barrier provisions of the Act.

Issue 2—Does CLPUD need a certificate?

Position of the Parties. The parties here repeat some of the arguments they made with respect to Issue 1. Staff believes that the proposed provision of excess capacity fiber (also known as "dark fiber") by CLPUD is the provision of telecommunications service on a for-hire basis and that CLPUD must therefore have a certificate. GTE agrees that the Commission’s prior holdings lead to the conclusion that CLPUD needs a certificate.

CLPUD, as noted above, has not applied for a certificate and has chosen not to actively participate in this proceeding. Applicants argue that CLPUD does not need a certificate. They repeat their argument that the provision of fiber optics is not the provision of telecommunications service. In addition, they argue that the fiber optic to be leased is not "switched" and thus does not fit within the definition of telecommunications service in ORS 759.005(2)(g). Applicants also claim that CLPUD’s provision of dark fiber to Lincoln County will not be on a "for-hire" basis.

Issue 2—Disposition. The Commission concludes that CLPUD needs a certificate to provide the service it proposes, the leasing of dark fiber to the Applicants. Under ORS 759.020(1), any person must have authority from the Commission to provide services capable of voice communications for hire. For the reasons cited above in our discussion of Issue 1, we conclude that CLPUD’s provision of dark fiber as proposed is the provision for hire of facilities that have the capability of voice transmission. Applicants’ argument that the service is not "switched" is unpersuasive. As we have noted before (See, e.g., Electric Lightwave, Inc., Order No. 92-345), the phrase "transport of voice communications" in the definition of telecommunications service in ORS 759.005(2)(g) is separate from the phrase "two-way switched access." Thus, it is of no consequence whether or not the service proposed by CLPUD is switched.

Effect of the Intergovernmental Agreement

Lincoln County filed with the Commission a copy of the intergovernmental agreement it has entered into with CLPUD pursuant to ORS 190.030. Although Lincoln County does not explicitly state its view on the importance of this agreement to this case, the Commission assumes that the County believes the agreement is relevant.

The County may be asserting that its intergovernmental agreement with CLPUD eliminates the need for CLPUD to have a certificate. ORS 190.030 provides that when an agreement is entered into between two units of local government, the unit "designated therein to perform specified functions or activities is vested with all powers, rights and duties relating to those functions and activities that are vested by law in each separate party to the agreement, its officers and agencies." Thus, Lincoln County may believe that if it is granted a certificate, it can share that authority with CLPUD, who will thus need no certificate.

Staff and GTE filed comments which did not change their prior position that CLPUD needs a certificate to provide the service.

We have little in the record relating to the impact of the intergovernmental agreement on CLPUD’s need for a certificate. Lincoln County did not provide any argument on the point. CLPUD provided none. As we noted above, under ORS 759.020 CLPUD needs a certificate to provide the service. We have not been shown that the intergovernmental agreement changes that fact.

Issue 3—Should the Certificates be Granted?

Position of the Parties. Staff argues that applicants cannot be granted a certificate because they will lease or purchase the telecommunications services involved from CLPUD, which is not an authorized provider. Staff states that except for this impediment, it would recommend approval of the certificates.

GTE argues that applicant Lincoln County does not have the legal authority to provide the service. GTE points out that Oregon counties are creations of statute and argues that a County’s powers are limited to those specifically established by the legislature. According to GTE, those enumerated powers do not include operation as a telecommunications provider. GTE claims that where the legislature has intended for counties to engage in utility-type operations, it has expressly authorized that function, as in the operation of railroads under ORS 271.007-271.540.

Applicants, as noted above, aver that they do not need certificates. If the Commission determines that they do need certificates, however, they argue that their applications should be granted because the service they will provide is in the public interest. They argue that the service would serve the purposes of ORS 283.500, for example, which encourages the development of information technology in government and other services as a way of improving economic opportunities and the quality of life.

Lincoln County disputes GTE’s claim regarding the County’s authority to perform the proposed service. It cites authority for the proposition that Oregon counties have broad general powers over matters of general concern. It avers that economic development and employment opportunities fit within the ambit of its authority.

Issue 3—Disposition. CLPUD has not applied for a certificate and there is, of course, no basis for granting one to it in this proceeding.

Lincoln County and the Alliance argue that the certificates should be granted because the service they propose is in the public interest. They point to the benefits to the local economy and quality of life that would follow from development of information technology.

ORS 759.020(4) provides as follows, in pertinent part:

After hearing, the Commission shall issue the certificate only upon a showing that the proposed service is required by the public interest.

The issues in this case have been thoroughly argued by the parties through written comments and briefs. No party requested an evidentiary hearing. The Commission concludes that the proposed service has not been shown to be in the public interest. The applications of Lincoln County and the Alliance involve purchase or leasing of facilities from CLPUD. As we have noted above, CLPUD must have a certificate to provide that service. It does not have a certificate and has not applied for one. It is thus not an authorized seller of that service. CLPUD would violate ORS 759.020(1) if it provided the proposed service to Lincoln County and the Alliance. It is not in the public interest to grant an application which will involve purchase of service from an unauthorized seller. To do so would be to sanction unlawful acts. We will therefore deny the applications of Lincoln County and the Alliance.

CONCLUSIONS

1. The services proposed by Lincoln County and the Economic Development Alliance of Lincoln County have not been shown to be required by the public interest.

2. The applications for a certificate of Authority to Provide Telecommunications Service in Oregon and Classification as a Competitive Provider by Lincoln County and the Economic Development Alliance of Lincoln County should be denied.

3. The application for a certificate filed by the Siuslaw Public Library District should be dismissed.

ORDER

IT IS ORDERED that:

1. The application by Lincoln County for a certificate of Authority to Provide Telecommunications Service in Oregon and Classification as a Competitive Provider is denied.

2. The application by the Economic Development Alliance of Lincoln County for a certificate of Authority to Provide Telecommunications Service in Oregon and Classification as a Competitive Provider is denied.

3. The application for a certificate filed by Siuslaw Public Library District is dismissed.

Made, entered, and effective ________________________. 

A party may request rehearing or reconsideration of this order within 60 days from the date of service pursuant to ORS 756.561. A party may appeal this order pursuant to ORS 756.580.