ORDER NO 98-201

ENTERED MAY 21 1998

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

BEFORE THE PUBLIC UTILITY COMMISSION

OF OREGON

UM 189(1)

DISPOSITION: STIPULATION ADOPTED

Introduction

The Commission reopened docket UM 189(1) to further investigate the requests of two communities that desire expanded toll free calling areas. The customers of the two local exchanges, Scio and Huntington, desire extended area service (EAS) to communities located across a LATA boundary. In docket UM 751, the Scio petitioners request EAS between the Scio and Albany exchanges. The Scio exchange is located in the Portland LATA, while the Albany exchange is located in the Eugene LATA. In docket UM 760, the Huntington petitioners seek EAS to the Ontario exchange. The Huntington exchange is in the Portland LATA, while Ontario is in the Boise LATA

In Order No. 95-1168, the Commission adopted new standards and procedures for petitions for EAS across LATA boundaries. Under those guidelines, the Commission subsequently determined that a community of interest existed and that the proposed interLATA EAS routes were necessary to meet the critical needs of the Scio and Huntington petitioners. Accordingly, the Commission directed US WEST Communications, Inc. (USWC), to pursue a LATA waiver from the Federal Communications Commission (FCC). See Order Nos. 96-206 and 96-250.

USWC filed a petition for interLATA relief in November 1996. The FCC, however, denied the request in FCC Order No. 97-244. In that order, the FCC granted other LATA modifications to allow regional Bell Operating Companies (BOCs) to provide flat rate, nonoptional local calling service between specific exchanges in different LATAs. The FCC rejected USWC’s request because of the Commission’s policy of allowing customers a measured EAS option for interLATA EAS. The FCC viewed measured EAS as discounted toll, not a low cost rate option for customers who do not desire a flat rate EAS. The FCC concluded that, if granted, the LATA modification "would permit a BOC to provide what would otherwise be interLATA toll service[.] See FCC Order 97-244 at 11.

Procedural History

At its August 19, 1997 Public Meeting, the Commission granted Staff’s recommendation to reexamine its EAS policies in light of the FCC’s order. On October 23, 1997, Michael Grant, an Administrative Law Judge for the Commission, held a prehearing conference in this matter in Salem, Oregon. Lance Ball appeared on behalf of the Commission Staff. Sheila Harris appeared on behalf of USWC. Robert Shelton appeared on behalf of Scio Mutual Telephone Association. Pat Hickey appeared on behalf of AT&T Communications. Jim Stringer appeared on behalf of GVNW Inc./Management. Dave Overstreet appeared on behalf of GTE Northwest Incorporated. John Dillard appeared on behalf of Monroe Telephone Company. Gary Bauer appeared on behalf of the Oregon Telecommunications Association.

At the prehearing conference, the parties identified five primary issues for discussion:

In light of the FCC’s recent rejection of USWC’s exemption request, should the Commission modify its procedures and mandate the provision of only nonoptional, flat rate EAS service for all interLATA routes, i.e., eliminate the measured rate option?

Is flexible billing available on the Bell Operating Company end of an interLATA EAS route?

Is balloting necessary to gauge the interest of Bell Operating Company customers who would connect to independent telephone company customers in a proposed interLATA EAS expansion?

If balloting is desired, what results would indicate that Bell Operating Company customers would desire a mandatory flat rate EAS charge on a proposed Bell Independent EAS route?

Who would conduct the customer ballot? What are other logistical considerations in balloting customers?

Staff used the issues list as a framework for opening comments, which it filed on January 16, 1998. On February 6, 1998, the parties held a settlement discussion. After discussion, the parties agreed to a tentative resolution of all five issues. On February 23, 1998, the parties held a conference call to further clarify the details of the agreement and to propose a schedule for subsequent proceedings.

On April 9, 1998, the parties filed a stipulation intended to resolve all identified issues in this proceeding, subject to Commission approval. The stipulation is attached as Appendix A and incorporated by reference. The stipulation was supported by the testimony of Lance Ball of Staff. ALJ Grant admitted the stipulation and supporting testimony into the record as evidence pursuant to OAR 860-014-0085.

Based on the record in this proceeding, the Commission makes the following:

FINDINGS OF FACT AND CONCLUSIONS OF LAW

Issue 1: In light of the FCC’s recent rejection of USWC’s exemption request, should the Commission modify its procedures and mandate the provision of only nonoptional, flat rate EAS service for all interLATA routes?

All parties agree that the Commission should modify its EAS standards to allow only nonoptional, flat rate EAS on interLATA routes in Oregon. The parties propose this revised policy be applied to the interLATA routes between Scio and Albany and between Huntington and Ontario if the Commission determines that the customers desire nonoptional, flat rate EAS. The parties are hopeful that this modification will secure a LATA waiver from the FCC to allow implementation of the proposed interLATA EAS routes.

In its testimony supporting the stipulation, Staff acknowledges that the Albany and Ontario customers may oppose the interLATA expansion, as they will be required to pay flat rate EAS to the applicable petitioning exchange. For that reason, Staff and the other parties recommend that these customers be balloted to gauge their interests in the interLATA expansion. (see Issues 3-5 below.) Staff further notes, that the concerns of Albany and Ontario customers can be partially mitigated by developing interLATA EAS flat rates for these customers that identify toll losses (or costs) on a route-specific basis. Due to the unique nature of interLATA EAS, Staff believes that it is appropriate to isolate costs for each interLATA EAS route and establish a distinct EAS rate class.

After review, the Commission agrees with the parties’ recommendation and adopts it. In prior proceedings, we have determined that a community of interest exists between the Scio and the Albany exchanges and between the Huntington and the Ontario exchanges, and that the proposed interLATA EAS routes are necessary to meet the critical needs of the Scio and Huntington petitioners. A modification of the Commission’s interLATA EAS policies is appropriate to allow these two dockets to proceed toward implementation. Furthermore, Staff’s proposal to establish a separate rate class for each interLATA EAS route, as well as flexible billing discussed in Issue 2, will help balance the interests of customers in both the target and petitioning exchanges.

Issue 2. Is flexible billing available on the Bell Operating Company end of an interLATA EAS route?

The parties agree that the two Bell Operating Companies involved in this proceeding, USWC and Malheur Bell, can provide flexible billing to their customers. Under this billing method, the BOCs would provide customers both flat rate and measured rate options on intraLATA EAS routes, and nonoptional, flat rate service on the proposed interLATA EAS routes. The parties note, however, that this flexibility comes at a cost. USWC estimates that adapting the current Customer Record Information System (CRIS) to allow flexible billing for the Albany and Ontario customers would cost approximately $130,000 or more. The parties agree that the BOCs should be remunerated for these billing costs through existing cost recovery mechanisms used in the annual downstate EAS cost and rate investigation (Phase II EAS investigation).

The Commission has reviewed the parties’ stipulation and Staff’s supporting testimony on this issue and adopts them. Flexible billing will enable the BOCs to provide optional measured EAS on intraLATA routes, thus maintaining the Commission’s customer choice EAS billing policy for non-interLATA routes for customers in the target exchanges.

Issue 3. Is balloting necessary to gauge the interest of Bell Operating Company customers who would connect to independent telephone company customers in a proposed interLATA EAS expansion?

The parties further agree that BOC customers should be balloted to gauge the level of interest for the proposed nonoptional, flat rate interLATA EAS routes. This would require balloting of all Albany exchange and Ontario exchange customers. The parties add that non-BOC customers are not subject to the mandatory interLATA flat rate EAS restriction imposed by the FCC. Accordingly, they note that non-BOC customers would not need to be balloted.

The Commission agrees that BOC customers should be balloted prior to any interLATA EAS expansion. If the proposed interLATA EAS rates are implemented, these customers will not be able to select a measured EAS rate option available to non-BOC customers. A balloting of BOC customers will help provide an indication of the level of support for the EAS expansion in the target exchange.

Issue 4. If balloting is desired, what results would indicate that Bell Operating Company customers would desire a mandatory flat rate EAS charge on a proposed Bell Independent EAS route?

While the parties agree that BOC customers should be balloted, they believe that the ballot result be only advisory in nature. The parties do not believe that this Commission should be bound by any particular balloting result. Rather, they contend that the ballot result would be one of many factors the Commission should consider in determining the appropriateness of an interLATA expansion.

The Commission agrees and adopts the parties’ recommendation. While customer ballots and surveys can be helpful in EAS proceedings, the Commission must base its EAS decision on the entire record—not upon some inflexible voting standard. Allowing the determination to be based on a ballot would constitute an impermissible delegation of Commission authority. Furthermore, the Commission previously recognized the "veto" power of larger target exchanges and declined to adopt rigid voting criteria. See In the Matter of an Investigation into Extended Area Service in the State of Oregon, Order No. 89-815 at 33. Accordingly, the Commission will retain the discretion after customer balloting to determine, based upon the entire record, whether the interLATA EAS conversion is in the public interest.

Issue 5. Who would conduct the customer ballot? What are other logistical considerations in balloting customers?

The parties agree that the Commission should conduct the balloting process. They believe that the Administrative Hearings Division (AHD) would best fulfill this function by counting, certifying, and reporting the outcome to parties in an interLATA EAS proceeding.

The Commission agrees that AHD should conduct the balloting. The impartiality of the AHD would lend greater credibility to the results than if an outside party conducted the balloting. The Commission does not believe, however, that AHD should be responsible for mailing the customer ballots. AHD does not have the ability to coordinate such a mailing to over 34,000 BOC customers. The Commission believes that AHD should be responsible for the drafting of the customer ballot and counting, certifying, and reporting the ballot results to the parties. The BOCs, however, should perform the mailing of the ballots. The BOCs have the capability to perform the task and would be able to include the ballots in a bill-stuffer with a regular mailing.

Proposed Schedule

In addition to resolving all identified issues, the stipulation contained a proposed schedule for the future processing of dockets UM 751 (Scio EAS) and UM 760 (Huntington EAS). The Commission agrees that both dockets should be processed jointly and expedited to allow possible implementation in October 1999. The Commission need not address the details of the schedule at this time, however, as a more exact schedule will be finalized at an upcoming prehearing conference in dockets UM 751 and UM 760.

ORDER

IT IS ORDERED that:

1. With the clarification that U S WEST Communications, Inc., and Malheur Bell will mail the customer ballots, the stipulation attached as Appendix A is adopted in its entirety.

2. A prehearing conference shall be scheduled in dockets UM 751 and UM 760 for further investigation.

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.