ORDER NO. 98-316

ENTERED AUG 03 1998

This is an electronic copy.

BEFORE THE PUBLIC UTILITY COMMISSION

OF OREGON

Portland Region EAS Dockets

DISPOSITION: COMMUNITY OF INTEREST FINDINGS FOR

PORTLAND EAS REGION EXPANSION

SUMMARY

This case is a consolidated docket established to consider the requests by seven local exchanges for inclusion in the Portland Extended Area Service (EAS) Region. Those exchanges are Carlton, Colton, Monitor, Mt. Hood Meadows, St. Helens, Vernonia, and Woodburn. A map of the exchanges and the Portland EAS Region is attached as Appendix A.

To be included in the Portland EAS Region, the Commission requires that a "community of interest" exist between the petitioning exchange and the Portland Region exchanges. The Commission has established two methods by which an exchange can demonstrate a community of interest. The first is the objective criteria test, which primarily examines the calling patterns of customers within the petitioning exchange. The second method, which is available for those exchanges that do not satisfy the first test, allows the exchanges to establish a community of interest through demographic, economic, financial, or other evidence data.

Based on a review of calling data, the Commission has determined that one exchange, Colton, satisfied the objective criteria test for a community of interest. After conducting hearings, the Commission further concludes that the following exchanges have established a community of interest through demographic, economic, financial, or other evidence: Carlton, Vernonia, and Woodburn.

Those petitions that have established a community of interest will now enter the next phase of this consolidated EAS investigation. In Phase II, the Commission will review tariffs filed by the local exchange telephone companies for the new EAS service. Those petitions which have not established a community of interest are denied.

INTRODUCTION

In all EAS investigations, the Commission first determines whether a community of interest exists between the telephone exchanges to warrant the elimination of toll calling. The Commission has stated that a community of interest "exists where there is a social, economic, or political interdependence between two areas or where there is a heavy dependence by one area on another area for services and facilities necessary to meet many of its basic needs."

The Commission has established two methods by which a petitioning exchange can establish a community of interest. The first is the objective criteria test, which is based on an analysis of calling pattern data and geographic information. Under this test, a petitioning exchange must meet the following objective criteria for determining a community of interest in Portland EAS Region expansion dockets:

Contiguity The petitioning exchange must have a common boundary with at least one Portland Region telephone exchange.

Volume A petitioning exchange must show one of the following:

An average of one call per line per month to 25 percent of the Region exchanges, and at least four calls per line per month to two of those exchanges; or

An average of 22 calls per line per month from the petitioning exchange to the Region.

Distribution A majority of customers in the petitioning exchange must make four calls per line per month to the Region, and at least 33 percent of customers must make one call per line per month to 25 percent of the Region exchanges.

If a petition fails to meet these objective criteria, petitioners are given the opportunity to request a hearing to make an alternative showing of a community of interest through demographic, economic, financial, or other evidence. Under this second test, petitioners must show that the community of interest with the Region is diverse, and not limited to one exchange. In this alternative showing, the Commission relies on an analysis of 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.

COMMUNITY OF INTEREST DETERMINATIONS

A total of seven local telephone exchanges filed petitions seeking toll-free calling with the Portland EAS Region. Those seven exchanges are Carlton, Colton, Monitor, Mt. Hood Meadows, St. Helens, Vernonia, and Woodburn. The Commission will address each petition separately, beginning with the results from the objective criteria test, and followed, where applicable, with the results of the demographic hearing.

Carlton Exchange

Objective Criteria Results

In response to Staff’s data request, United Telephone provided six months of calling pattern data related to access lines, toll calls, and customer accounts. The data covered a time period from January through June 1997.

Staff’s testimony regarding the Carlton exchange is attached as Appendix B, attached to this order and incorporated by reference. The Commission adopts the findings contained in the appendix.

For the reasons shown in Appendix B, the Commission concludes that the Carlton petitioners failed to meet all of the community of interest requirements. The petition meets the first two objective criteria (Contiguity and Calling Volume), as the exchange is contiguous to the Portland Region, and an average of more than 22 calls per line per month are placed between the Carlton exchange and the Portland Region. However, the petition fails the third community of interest criterion, Calling Distribution. The second part of the criterion requires that 33 percent of the customers place at least one toll call per month to 25 percent (seven) of the Region exchanges. Here, a third of Carlton exchange customers placed one or more calls per month to only four of those exchanges.

B. Demographic Findings

At petitioners’ request, Administrative Law Judge (ALJ) Grant held a hearing in Carlton on May 26, 1998. The purpose of the hearing was to allow petitioners the opportunity to present demographic and other evidence of a community of interest. Approximately 200 people, many of whom testified, attended the hearing in support of the petition.

Geography and Demography

The Carlton telephone exchange lies in central Yamhill County approximately 39 miles from downtown Portland. It is located within the Yamhill River Valley, which is bordered by the Coast Range Mountains on the west, and the Red Hills of Dundee and the Chehalem Mountains on the east.

The Portland EAS Region lies to the north and east of the Carlton exchange. The city of Yamhill, located four miles north of the city of Carlton, is directly accessed via State Route 47. The city of Newberg, located approximately 15 miles from the city of Carlton, is accessed via two rural roads that connect to State Route 240, which in turn provides access to State Route 99W.

The Carlton exchange area has a total population of approximately 1,500 residents, most of whom live within the city of Carlton. Approximately 55 percent of its citizens are low to moderate income. Although Carlton is a small community, approximately 200 acres of land within city limits remain available for development. Future growth is expected given the potential for housing opportunities for individuals seeking homes in a rural setting within driving distance of the Portland area.

A majority of Carlton exchange residents work within the Portland EAS Region. A recent survey by petitioners of almost 400 households revealed that 411 household members commute to the Portland area. Most of these commuters work in downtown Portland (113), Newberg (94), Hillsboro (76), Yamhill (32), Forest Grove (29), Beaverton (20), and Tigard (18). The survey also revealed that Carlton area businesses employ numerous workers who live in the Portland area. The local businesses that responded to the survey indicated that a total of 127 of their employees live in neighboring communities within the Portland calling area.

Schools

The Carlton exchange is served by the Yamhill-Carlton School District, whose office is located in Yamhill. Children from Carlton and Yamhill attend separate elementary schools (K through 8) located in their respective local calling areas. All students, however, attend a consolidated high school located in Yamhill. Of the 400 students that attend Yamhill-Carlton High School, approximately 150 live in the Carlton exchange.

Because the high school is located outside the local calling area, parents and students in Carlton incur high toll bills when calling for rides, class assignments, school activities, or to talk to friends. The Yamhill-Carlton School District also makes a significant number of long distance calls between schools and from the Carlton Elementary School to the Portland EAS Region. From July 1997 through March 1998, the District paid almost $2,500 in calls from Carlton to the Portland area and approximately $1,400 in calls between Yamhill and Carlton.

A small number of households within the Carlton exchange live outside the boundary for the Yamhill-Carlton School District and are served by schools in the Newberg exchange. Many Carlton area children participate in recreational soccer and basketball leagues located in Newberg.

Professional and Business Services

Carlton is a small town that cannot support the commercial and professional services required to meet the basic needs of area residents. Currently, Carlton has two banks, a small grocery store and deli, a coffee shop, an auto parts and feed store, a veterinarian, a gas station, a florist, and a tavern.

Due to the lack of local services, Carlton exchange residents depend heavily on neighboring communities to meet their basic needs. The city of McMinnville, located about seven miles south of Carlton, is the closest town that offers some commercial, professional, and retail services. McMinnville offers several grocery stores, a variety of fast food restaurants, automobile dealerships, building supply stores, and other retail shops. The city also offers bookkeeping, banking, legal, insurance, and other professional services.

The selection of goods and services in McMinnville, however, is limited compared to the that available in the Portland area. As a result, many Carlton residents rely on communities within the Portland EAS Region to obtain essential goods and services. The survey conducted by petitioners of almost 400 households in Carlton showed that over 55 percent of those responding purchase a majority of their groceries in the Portland area. Similarly, over 72 percent of the respondents purchased a majority of clothing in greater Portland, while almost 74 percent bought a majority of building supplies and materials there. The degree of reliance on the Portland area was even greater for home furnishings and appliances.

Many Carlton exchange residents also prefer to use professional services located in the Portland EAS Region. The survey of households revealed that over 90 percent of respondents primarily seek legal services from attorneys located in the Portland area. Approximately 80 percent of area residents seek a majority of other professional services in the Portland calling area. Local businesses in Carlton also rely heavily on the Portland area for vendors, suppliers, and support services.

Carlton does support five wineries that make up part of Yamhill County’s growing wine trade. These wineries utilize wholesalers and distributors located in the Portland calling area and buy grapes from vineyards in Yamhill and Washington counties. The Carlton wineries attract numerous visitors and guests that live in the Portland EAS Region.

Governmental Services

The Carlton exchange lies in Yamhill County and is served by government offices in McMinnville. These include the County Sheriff’s office, District and Circuit Court offices, Department of Motor Vehicles, District Attorney’s office, and County Tax Department.

Many Carlton residents who work in the Portland EAS Region also utilize government offices in Newberg and Hillsboro.

Emergency Services

Carlton exchange residents are served by a local police department that works in conjunction with the McMinnville and Newberg police departments. The area also is served by a local volunteer fire department. Ambulance dispatch is sent from either McMinnville or Newberg.

Medical and Dental Services

The Carlton calling area offers no medical providers but does have a dentist that serves the local area. Some exchange residents seek primary medical and dental care in McMinnville, where a handful of providers practice. Most residents, however, seek primary, as well as specialized care, in the Portland calling area. A survey of 322 households showed that almost 73 percent sought medical and dental services in the Portland area. Almost 90 percent of the respondents stated that their health care insurance provider was located in the Portland EAS Region. Carlton exchange residents seek emergency care at hospitals located in either McMinnville or Newberg.

Toll Avoidance

Many Carlton residents engage in a variety of toll avoidance practices. A survey of almost 400 households revealed that 192 household members make calls while at work in the Portland area. Of those responding, 155 use cell phones and pagers, while 121 rely on electronic mail over the internet. In addition, 70 respondents indicate using prepaid calling cards, while 119 travel to homes of friends in the Portland EAS Region to make calls in that area.

Local businesses also have avoided toll charges through the use of foreign exchange lines. A survey indicated over 23 local businesses use foreign exchange lines to the Portland EAS Region. Some businesses have begun to use long distance telephone services provided over the internet.

Resolution

The Carlton petitioners have demonstrated that they have become very heavily dependent on Portland and western suburban areas for commercial goods and professional services. Although some of these goods and services are available in McMinnville, a survey of local residents indicated a much heavier reliance on Portland area businesses for groceries, clothing, building supplies, and other basic necessities. Carlton exchange residents similarly look to Portland area doctors, dentists, lawyers, accountants, and other professionals for necessary services. Also, a majority of local residents work in Portland and the surrounding communities.

A large percentage of Carlton area children attend schools in the Portland EAS Region. Although an elementary school is located within the local calling area, all high school students attend school in Yamhill. The current Portland EAS Region boundary nearly divides the Yamhill-Carlton school district into two halves, complicating the lives of both high school students and their parents, as well as for the Yamhill-Carlton school district itself.

The Carlton petitioners also established that many local residents engage in numerous types of toll avoidance practices. This evidence is significant, as the Carlton petition narrowly failed the Commission’s objective community of interest criteria. The data showed both a sufficient aggregate volume (25.89 calls per month to the exchange), and sufficient calling to the Region as a whole under the Customer Distribution Criterion (77.13 percent of customers made 4 or more calls per month to the Region.) The petition failed in only one respect, the diversity requirement for distribution. Thirty-three percent of the Carlton exchange customers made at least one call to four of the required seven Region exchanges. However, on three other routes, over 24 percent of the customers made at least one call per month. The Carlton petition came reasonably close to qualifying under the objective criteria.

Based on the high level of dependency on the Portland EAS Region by Carlton exchange residents, and the narrow margin by which the petitioners failed the objective criteria test, the Commission concludes that a community of interest exists between the Carlton exchange and the Portland Region.

II. Colton Exchange

Objective Criteria Results

In response to Staff’s data request, GVNW, on behalf of Colton Telephone, provided four months of calling pattern data related to access lines, toll calls, and customer accounts. The data covered a time period from March through June 1997.

Staff’s testimony regarding the Colton exchange is attached as Appendix C, attached to this order and incorporated by reference. The Commission adopts the findings contained in the appendix.

For the reasons shown in Appendix C, the Commission concludes that the Colton petitioners have met all the objective community of interest criteria. The exchange is contiguous with the Portland EAS Region. Exchange customers place an average of one of more calls to 25 percent (seven) region exchanges and also place an average of four or more calls to two of those exchanges. Finally, a majority of customers make at least four calls per month to the Region, and 33 percent of customers make at least one call per month to 25 percent (seven) of the Region exchanges.

B. Resolution

Based on the results of the objective criteria, the Commission concludes that a community of interest exists between the Colton exchange and the Portland EAS Region.

III. Mt. Hood Meadows Exchange

Objective Criteria Results

In response to Staff’s data request, Cascade Utilities provided six months of calling pattern data related to access lines, toll calls, and customer accounts. The data covered a time period from March through August 1997.

Staff’s testimony regarding the Mt. Hood Meadows exchange is attached as Appendix D, attached to this order and incorporated by reference. The Commission adopts the findings contained in the appendix.

For the reasons shown in Appendix D, the Commission concludes that the

Mt. Hood Meadows petitioners failed to meet all of the community of interest requirements. The petition meets the first objective criteria (Contiguity), as the exchange is contiguous to the Portland Region. However, the petition fails all options under the second community of interest criterion, Calling Volume, as well as both parts of the third criterion, Calling Distribution.

Demographic Hearing

At petitioners’ request, ALJ Grant held a hearing at the Mt. Hood Meadows ski area on June 3, 1998. The purpose of the hearing was to allow petitioners the opportunity to present demographic and other evidence of a community of interest. Six people attended the hearing in support of the petition, all of whom testified.

Geography and Demography

The Mt. Hood Meadows exchange consists of a rural, unincorporated area located on the southeastern approaches of Mt. Hood. The area lies approximately 55 miles from downtown Portland and is accessed by U.S. Highway 26 via State Route 35.

The area is best known for the Mt. Hood Meadows ski area, which provides skiing and winter recreational opportunities to Portland area residents. Each year some 350,000 skiers visit Mt. Hood Meadows, 75 percent of whom live in the Portland metropolitan area. The ski facility also employs many Portland area residents. Last ski season, 40 percent of its 700 employees lived in Portland and surrounding communities. The Mt. Hood Meadows ski area also has a sales and marketing office located in Portland.

The Mt. Hood Meadows ski facility is, by far, the largest customer served by the Mt. Hood Meadows exchange. During the ski season it has 16 access lines. Other customers are primarily located in Wapinitia, a small development of some 24 private homes within the Mt. Hood National Forest. Most of the homes are seasonal residences, although the community has five full-time residents. A few of these full-time residents commute to work in the Portland calling area.

Wapinitia also has four businesses: an excavating company, a summer ski camp, a log home manufacturer, and a mini-market/gas station. The area has potential for future growth, as there are currently 60 undeveloped acres within federal land.

Professional and Business Services

Because of the limited commercial and business services located within the local calling area, Mt. Hood Meadow exchange residents rely on neighboring communities to meet their basic needs. The city of Welches, located in the Hoodland exchange on U.S. Highway 26, is the closest town to offer some of these services. Residents also seek goods and services in Sandy, Gresham, and Portland.

The Mt. Hood Meadows ski area relies heavily on the Portland area for supplies and support services. Over 60 percent of its vendors are located in the Portland calling area, which take in over 75 percent of the ski area’s business expenditures.

Schools

The Mt. Hood Meadows exchange is served by the Oregon Trail School System. Elementary school children attend classes in Welches. High School students attend classes in Sandy.

Governmental Services

The Mt. Hood Meadows ski area lies in Hood River County and is served by government offices in Hood River. Wapinitia lies in Clackamas County and is officially served by government offices in Oregon City.

Emergency Services

The Mt. Hood Meadows exchange is served by the Hoodland Fire Department in Welches, the state police based in Milwaukie, and the Clackamas County Sheriff in Oregon City. All 911 calls are routed to Hood River, which must be transferred to Clackamas County for residents of Wapinitia. Mt. Hood Meadows ski area provides its own fire department.

Medical and Dental Services

The Mt. Hood Meadows ski area houses a seasonal medical clinic staffed and supported by Legacy Health Systems. Most Wapinitia residents seek primary medical and dental care in Welches, Sandy, or Gresham. Exchange residents seek emergency care at hospitals located in either Gresham or east Portland.

Toll Avoidance

The Mt. Hood Meadows ski area utilizes six-feature group A lines to help reduce communication costs. During the ski season from December through March, the ski facility places thousands of calls over these lines to the Portland EAS region. For example, during the month of January 1998, it placed over 2,500 calls to exchanges located in the Portland EAS Region. A summary of those calls is as follows:

Resolution

The Mt. Hood Meadows petition presents difficult issues. The telephone exchange is isolated up on the approaches of Mt. Hood, some 55 miles from Portland. Due to its remoteness, there are few if any business or commercial services available locally to the full-time residents of Wapinitia. Consequently, these residents must obtain essential goods and services in Portland and neighboring communities along U.S. Route 26. The Mt. Hood Meadows ski area, a large seasonal business in the exchange, provides some of these services for itself, including housing a medical clinic and maintaining its own fire department. By virtue of its location in Hood River County, it also receives many governmental services from the City of Hood River. It too, however, seeks many goods and services in Portland and surrounding communities.

Those attending the hearing all expressed a strong desire to be added to the Portland EAS Region. Much of the testimony was clearly focused on financial savings, i.e., lower toll bills. The Commission, however, cannot allow the addition of an outlying exchange simply based on the financial needs of customers within that exchange. When an exchange is added to the Region, not only will EAS rates be established for the new exchange, but existing EAS rates will increase for exchanges currently in the Region. Exchanges located in other parts of the state that are served by the same local telephone companies may also experience higher rates. Any decision must recognize the interrelationship between the petitioning exchange and the Region as a whole so as to avoid an undue cost shift to the Region’s current exchanges and statewide ratepayers in general.

The Commission must assess the relative value of adding an exchange to the Region. A finding of broad-based support and need for calling to a substantial portion of the Region exchanges will ensure a positive result for both the petitioning exchange and the Portland EAS Region. Adding an exchange to the Region where there is only a need by a few customers to call a limited number of Region exchanges would only be valuable to a limited number of customers and exchanges. There would be little value to the Region as a whole.

This petition was initiated and primarily supported by the Mt. Hood Meadows ski area. Like many businesses, Mt. Hood Meadows is a high volume toll customer. Although these high toll charges create a legitimate business concern, the Commission is reluctant to rely on such evidence for EAS expansion. As the Commission earlier stated:

Relief from high toll charges is not grounds for EAS where businesses have voluntarily chosen to locate in non-EAS exchanges. Presumably, such businesses evaluated transportation, communication, local taxes, and other costs. Although economic development may be given some consideration, the Commission must balance this goal with the needs of other customers. The primary statutory role of the Commission is the protection of all utility customers, not the creation of economic development incentives for individual companies. Order No. 89-815 at 14.

The Commission recognizes that, as a ski facility, Mt. Hood Meadows had little choice but to locate far from EAS exchanges. The Commission doubts, however, that few ski operators expect to operate within the local calling area of a major metropolitan city. Given the nature of the skiing business, high communication costs are to be expected. As high volume customers, these businesses can take advantage of special packages, such as feature group A lines, to reduce toll charges. Although Mt. Hood Meadows would undoubtedly benefit from the inclusion of the local exchange in the Portland Region, the Commission will not allow EAS conversion to become an avenue for unfairly shifting cost burdens from high volume users to low volume users.

Other support for this petition came from the full-time residents of Wapinitia. Although the Commission recognizes that these residents rely upon the Portland Region for many of their needs, it cannot ignore the fact that this dependency, to a certain extent, is self-imposed. Wapinitia is located near the Pacific Crest Trail in the Mount Hood National Forest. The small percentage of residents who have chosen to live there year-round have obviously made conscious, voluntary decisions to live many miles from basic amenities. Some even commute to Portland to work. The Commission does not criticize these decisions to live in such natural settings that provide other benefits. It does not believe, however, that other telephone customers should be required to share some of the resulting costs of those decisions.

After a review of the evidence presented, the Commission concludes that the Mt. Hood Meadows exchange petitioners have failed to establish a community of interest with the Portland EAS Region. As stated above, the inclusion of a new exchange to the Portland EAS Region can have significant consequences for customers within the Region. The Commission cannot justify the imposition of these burdens on the Region to simply provide toll relief to a handful of customers in an outlying exchange.

In reaching this decision, the Commission acknowledges petitioners’ concerns that the calling pattern data used under the objective criteria analysis did not include peak months of activity on the mountain. While the results may have been more favorable to petitioners had the data included the months of December through February, there is no evidence to establish that such data would have been sufficient to meet all requirements under the calling volume and customer distribution criteria. Furthermore, the Commission recognizes the large number of calls placed by the Mt. Hood Meadows ski facilities over its feature group A lines. Even if such calls had been included in the objective criteria analysis, they would not have altered the petition’s failure of the customer distribution criterion.

Based on the calling pattern data and information submitted at the demographic hearing, the Commission concludes that a community of interest does not exist between the Mt. Hood Meadows exchange and the Portland EAS Region. The Mt. Hood Meadows’ petition for toll-free calling to the Portland EAS Region should be dismissed.

IV. Monitor Exchange

Objective Criteria Results

In response to Staff’s data request, GVNW, on behalf of Monitor Cooperative Telephone Company, provided six months of calling pattern data related to access lines, toll calls, and customer accounts. The data covered a time period from March through August 1997.

Staff’s testimony regarding the Monitor exchange is attached as Appendix E, attached to this order and incorporated by reference. The Commission adopts the findings contained in the appendix.

For the reasons shown in Appendix E, the Commission concludes that the Monitor petitioners failed to meet all of the community of interest requirements. The petition meets the first two objective criteria (Contiguity and Calling Volume), as the exchange is contiguous to the Portland Region, and an average of more than 22 calls per line per month are placed between the Monitor exchange and Portland Region. However, the petition fails the third community of interest criterion, Calling Distribution. The second part of the criterion requires that 33 percent of the customers place at least one toll call per month to 25 percent (seven) of the Region exchanges. Here, a third of Monitor exchange customers placed one or more calls per month to only four of those exchanges.

Resolution

The Monitor petitioners did not request a demographic hearing, and the time for doing so has passed. Based on the calling pattern data, the Commission concludes that a community of interest does not exist between the Monitor exchange and the Portland EAS Region. The Monitor petition for toll-free calling to the Portland EAS Region should be dismissed.

V. St. Helens Exchange

Objective Criteria Results

In response to Staff’s data request, U S WEST Communications, Inc., provided six months of calling pattern data related to access lines, toll calls, and customer accounts. The data covered a time period from February through July 1997.

Staff’s testimony regarding the St. Helens exchange is attached as Appendix F, attached to this order and incorporated by reference. The Commission adopts the findings contained in the appendix.

For the reasons shown in Appendix F, the Commission concludes that the St. Helens petitioners failed to meet all of the community of interest requirements. The petition meets the first objective criteria (Contiguity), as the exchange is contiguous to the Portland Region. However, the petition fails all options under the second community of interest criterion, Calling Volume, as well as the second part of the third criterion, Calling Distribution.

Resolution

The St. Helens petitioners did not request a demographic hearing, and the time for doing so has passed. Based on the calling pattern data, the Commission concludes that a community of interest does not exist between the St. Helens exchange and the Portland EAS Region. The St. Helens petition for toll-free calling to the Portland EAS Region should be dismissed.

VI. Vernonia Exchange

Objective Criteria Results

In response to Staff’s data request, GTE Northwest Inc. provided six months of calling pattern data related to access lines, toll calls, and customer accounts. The data covered a time period from January through June 1997.

Staff’s testimony regarding the Vernonia exchange is attached as Appendix G, attached to this order and incorporated by reference. The Commission adopts the findings contained in the appendix.

For the reasons shown in Appendix G, the Commission concludes that the Vernonia petitioners failed to meet all of the community of interest requirements. The petition meets the first two objective criteria (Contiguity and Calling Volume), as the exchange is contiguous to the Portland Region, and an average of more than 22 calls per line per month are placed between the Vernonia exchange and Portland Region. However, the petition fails the third community of interest criterion, Calling Distribution. The second part of the criterion requires that 33 percent of the customers place at least one toll call per month to 25 percent (seven) of the Region exchanges. Here, a third of Vernonia exchange customers placed one or more calls per month to only four of those exchanges.

Demographic Hearing

At petitioners’ request, ALJ Grant held a hearing in Vernonia on May 20, 1998. The purpose of the hearing was to allow the petitioners the opportunity to present demographic and other evidence of a community of interest. Approximately 120 people attended the hearing in support of the petition, many of whom testified. The Commission also received numerous letters in support, as well as the results of a community survey conducted after the hearing.

Geography and Demography

The Vernonia exchange lies in southwest Columbia County approximately 40 miles from downtown Portland. The city of Vernonia is located on the Nehalem River, isolated within the Coast Range Mountains.

The Portland EAS Region lies to the south and east of the Vernonia exchange. Most local residents access the Portland area via State Route 47, which connects to the U.S. Highway 26 corridor. From U.S. Highway 26, Vernonia residents easily access the cities of Forest Grove, Hillsboro, and Beaverton. The only other road out of the Vernonia exchange is a county road that splits and connects to Rainier to the north, or Scappoose to the east.

The Vernonia exchange area has a total population of approximately 2,500 residents, most of whom live in and around the city of Vernonia. Almost 48 percent of the residents are low income, many of whom are retired. Of those who work, a majority commute to the Portland EAS Region. A survey of 674 local households revealed that 614 residents work in the greater Portland area.

Most residents of Vernonia consider themselves part of the Portland Metropolitan area. They note that Vernonia is included in the Portland Metropolitan Statistical Area (PMSA). They also point out that the Vernonia exchange is included in the Washington County-Portland West Hills telephone directory published by GTE Northwest Inc.

Professional and Business Services

Vernonia is a small rural town that offers few commercial and professional services. Currently, the city has two gas stations, a small market, one bank, an autoparts and hardware store, and five taverns.

Due to the lack of local services, Vernonia exchange residents depend heavily on communities within the Portland calling area to obtain essential goods and services. These include groceries, clothing, building supplies, home furnishings, and other retail goods, as well as banking, insurance, and legal services. Local businesses in Vernonia also rely heavily on the Portland area for vendors, suppliers, and support services.

Schools

The Vernonia exchange is served by the Vernonia School District, which offers K through 12 education to local school children. Because many of the children’s parents work in the Portland EAS Region, however, the school must make a long distance call to contact them during school hours and vice versa. Furthermore, over half of the 100 school district employees live in the Portland area, thus, again requiring a long distance call between parents and teachers in the evening. Moreover, the school district relies on an Education Service District (ESD) located in Hillsboro. The Vernonia High School also competes in sports with many schools located in the Portland area.

The city of Vernonia is also a supporting member of Portland Community College but its residents must make a long distance call to access its services.

Governmental Services

The Vernonia exchange lies in Columbia County and is officially served by government offices in St. Helens. Given the area’s proximity to Washington County, however, many residents obtain these services in Hillsboro. These include the Department of Motor Vehicles and the Employment Division. For this same reason, Vernonia received disaster relief during the flood of February 1996 from emergency response services from Washington County.

Emergency Services

Vernonia exchange residents are served by local police and a volunteer fire department. It receives ambulance service through Metro, which transports patients to Portland area hospitals.

Medical and Dental Services

The Vernonia calling area offers limited medical and dental services. The city has a local medical clinic staffed by a nurse practitioner; however, most local residents seek primary, as well as specialized medical care, in the Portland calling area. Vernonia exchange residents seek emergency care at hospitals located in either Hillsboro or west Portland. Because there is no pharmacy in Vernonia, all residents rely on Portland area pharmacies to get prescriptions filled.

Vernonia also has a part-time dentist. Again, however, due to the greater number of practitioners, most Vernonia exchange residents seek dental care in the Portland EAS Region.

Toll Avoidance

Many Vernonia exchange residents engage in a variety of toll avoidance practices. A survey of almost 700 households revealed that over 300 save calls and make them while at work in the Portland area and 188 of those responding also use electronic mail over the internet to reduce toll bills. Even though there is no reliable cellular phone coverage in the Vernonia area, over 200 residents have cellular telephones to place calls between the Portland area and the Vernonia exchange, often at rates less than toll. Some residents also use prepaid calling cards.

Resolution

As a rural community with little centralized business, the Vernonia area is heavily dependent on Portland and neighboring communities for commercial goods and professional services. Most residents seek food, clothing, household supplies, and retail items in Forest Grove, Hillsboro, Beaverton, and Portland. They also seek medical and dental care almost exclusively in these communities as well.

Although located in Columbia County, most Vernonia exchange residents more readily associate themselves with Washington County due to its proximity to the western suburbs of Portland. A majority of local residents work in Portland and communities in Washington County along U.S. Highway 26. Vernonia is included in the Portland Metropolitan Statistical Area and part of Portland Community College district. Indeed, the Vernonia exchange is included in the Washington County-Portland West Hills telephone directory.

The Vernonia petition narrowly failed the Commission’s objective community of interest criteria. The petition met the calling pattern criterion and established that over 82 percent of the customers make at least four toll calls per month to the Portland EAS Region. Like the Carlton exchange, the Vernonia petition failed in only one respect, the diversity requirement for customer distribution. Despite this failure, the data showed a large amount of calling between Vernonia and four Region exchanges. Almost 50 percent of the exchange customers made at least one call to the Beaverton exchange, while over 55 percent and 65 percent of the customers made at least one call to the Forest Grove and Hillsboro exchanges, respectively. Over 75 percent of the exchange customers made at least one call to the Portland exchange. In addition, almost 32 percent of the customers placed one call per month to the Tigard exchange. This calling data reflects a sufficient pattern of diverse ties to the Portland Region.

In summary, the Vernonia petitioner’s demographic evidence established not only a high level of dependency on the Portland EAS Region, but integration into the Region as well. Based on the evidence presented, the Commission concludes that a community of interest exists between the Vernonia exchange and the Portland Region.

VII. Woodburn Exchange

A. Objective Criteria Results

In response to Staff’s data request, U S WEST Communications, Inc., provided six months of calling pattern data related to access lines, toll calls, and customer accounts. The data covered a time period from March through August 1997.

Staff’s testimony regarding the Woodburn exchange is attached as Appendix H, attached to this order and incorporated by reference. The Commission adopts the findings contained in the appendix.

For the reasons shown in Appendix H, the Commission concludes that the Woodburn petitioners failed to meet all of the community of interest requirements. The petition meets the first objective criteria (Contiguity), as the exchange is contiguous to the Portland Region. However, the petition fails all options under the second community of interest criterion. Woodburn exchange residents placed an average of one call per line per month to only six Region exchanges, and averaged only 17.60 calls per month to the Region. With regard to the Calling Distribution criterion, a majority of the Woodburn exchange customers made at least four calls per line per month to the exchange. However, 33 percent of the customers made one call per line per month to just one Region exchange.

B. Demographic Hearings

At the petitioners’ request, ALJ Grant held a hearing in Woodburn on May 13, 1998. The purpose of the hearing was to allow the petitioners the opportunity to present demographic and other evidence of a community of interest. Approximately 100 people attended the hearing in support of the petition, many of whom testified. The Commission also received numerous letters in support of toll-free calling to the Portland area.

Geography and Demography

The Woodburn exchange lies in northern Marion County in the Willamette Valley, approximately 30 miles from downtown Portland. The exchange has a total population of over 18,000 residents and includes two incorporated cities: Woodburn, population 15,780, and Hubbard, population 2,185. The Portland EAS Region lies to the north and east of the Woodburn exchange. Local residents readily access the Portland area via Interstate 5 and State Route 99E, both of which dissect the exchange.

The Woodburn exchange is included in the Portland Metropolitan Statistical Area (PMSA) for the gathering of community information by the United States Census Bureau. The northern part of the exchange is also included in Portland’s Air Quality Maintenance Area.

Traditionally, the Woodburn/Hubbard area was a light industrial and agricultural area. The dominant employers included the largest west coast manufacturer of fertilizer, a nationally recognized nursery, and three manufactured home builders. Other area businesses were small, service-oriented companies that served other companies or individuals up the Interstate 5 corridor.

Recently, however, both Woodburn and Hubbard have been experiencing tremendous growth and change. As the Portland Metropolitan area has expanded, the area has evolved into a bedroom community for commuters. This transition has particularly affected the city of Woodburn, whose population has increased some 20 percent since 1990. The area also has been the site of recent industrial and commercial expansion, particularly along Interstate 5. The addition of a Walmart store, a large grocery distribution center, and other growth has put extreme pressure on existing roads and city infrastructure.

The Woodburn area’s population has also been changing over the past few years. The area is becoming a popular retirement community, with some 2,500 senior citizens currently living in the Woodburn Senior Estates. Another growing segment of the population is the Hispanic population. Currently, over 50 percent of the local school children are Hispanic. The Woodburn/Hubbard area also has a sizeable Old Russian population, comprising some 17 percent of the area’s residents.

Professional and Business Services

Woodburn and, to a lesser extent, Hubbard, are fairly self-sufficient communities that provide local residents with a variety of retail goods and commercial services. There are a limited number of professional services offered within the local calling area, however. Consequently, many Woodburn exchange residents obtain accounting, legal, insurance, and other similar services in the Portland EAS Region. Some local residents obtain these services in Salem.

Schools

The Woodburn exchange is served by two school districts. The southern half is served by the Woodburn School District, which provides local K through 12 education for area children. Because of the growth in the area, the Woodburn High School will soon be moving from class 3A to 4A and will be joining the Pacific-7 Athletic Conference. There, it will compete in sports with many schools located in the Portland EAS Region, including Newberg, Canby, and Tualatin.

The northern part of the exchange is served by the North Marion School District, located in the Portland EAS Region in Aurora. Of the school districts, 1,600 students, about half, live within the Woodburn exchange. Because the elementary, middle, and high schools are located outside the local calling area, parents and students in the northern part of the Woodburn exchange incur high toll bills when calling for rides, class assignments, school activities, or to talk to friends.

Governmental Services

The Woodburn exchange lies in Marion County and is officially served by government offices in Salem. Because of the area’s demographics, many social services are available locally.

Emergency Services

Woodburn exchange residents are served by local police and fire department. It also has a local ambulance service, which transports patients to hospitals in Tualatin, Portland, or Silverton.

Medical and Dental Services

The Woodburn calling area offers limited medical and dental services, as a few doctors and dentists practice locally. However, most Woodburn residents, seek primary, specialized, and emergency medical care in neighboring communities. Many insurance plans require residents to utilize medical facilities, including pharmacies, located in Portland. In addition, many of the medical and related services needed by area senior citizens are not available within the local calling area. Due to these reasons, and because of the large number of specialists who practice there, many Woodburn exchange residents obtain medical and dental care in the greater Portland area. They also seek emergency care at Oregon Health Sciences University in Portland or Meridan Park Hospital in Tualatin.

Some Woodburn residents seek medical and dental care in Salem, where a sizable number of practitioners are located. Some also seek emergency care at the Salem Hospital or the Silverton Hospital.

Toll Avoidance

Many Woodburn exchange residents engage in a variety of toll avoidance practices. Those commuting to the Portland simply save calls and make them while at work. Many use electronic mail over the internet to reduce toll bills. A growing number rely on cellular telephones. Several businesses subscribe to feature group A lines, or obtain 1-800 numbers for their customers to call. Some residents also use prepaid calling cards.

Resolution

Because of its proximity to Portland and easy access to the growing communities along the Interstate 5 corridor, Woodburn is quickly transforming from a rural area to a bedroom community to many Portland area commuters. This is reflected by the residents’ commuting patterns, which are similar to other Portland area suburbs. A significant number of Woodburn exchange residents look to the southern metropolitan area stores and businesses for retail shopping and services. Local residents also seek emergency and specialized medical care in the Portland area. The Woodburn/Hubbard area is also treated as part of the metropolitan area by a number of entities. It is included in the Portland Metropolitan Statistical Area and the DEQ Air Maintenance area.

The Woodburn area schools will soon be competing with other Portland area schools in athletics. Moreover, a large percentage of Woodburn exchange students, particularly those that live in Hubbard, attend schools in the Portland EAS Region. These students attend elementary, middle, and high schools located in Aurora.

Although Woodburn retains some identity and a degree of self-sufficiency, it is comparable in character and location to Newberg, Forest Grove, and Hillsboro, metropolitan area cities already included in the Portland EAS Region. Like these cities, it also evidences economic interdependence with the greater Portland area, providing goods and services to residents and businesses located along the Interstate 5 corridor. It also provides employment opportunities to Region workers.

The Woodburn exchange also demonstrated diverse ties to the Portland Region as a whole. Although the calling pattern data showed that 33 percent of exchange customers made at least one call to only one exchange (Portland), it established a significant amount of calling to six other area exchanges. Approximately 20 percent or more customers made at least one call per month to the Aurora, Beaverton, Molalla, Oregon City, Stafford, and Tigard exchanges. Furthermore, such data did not include calls between the Woodburn exchange and Canby, with whom it currently has EAS. As noted above, the inclusion of such data would have conceivably allowed the petition to meet the calling volume requirements under the objective criteria.

Based on a review of the calling pattern data and the demographic evidence, the Commission concludes that a community of interest exists between the Woodburn exchange and the Portland EAS Region. The Woodburn petitioners have established a sufficient interdependency with and integration with the Portland Metropolitan area.

ORDER

IT IS ORDERED that:

The following exchanges have established a community of interest with the Portland EAS Region, pursuant to the objective criteria set forth in Order No. 92-1271: Colton. This petition will now enter Phase II (tariff analysis).

The following exchanges have established a community of interest with the Portland EAS Region based on demographic, economic, financial, or other evidence: Carlton, Vernonia, and Woodburn. These petitions will now enter Phase II (tariff analysis).

The following exchanges have not established a community of interest with the Portland EAS Region: Monitor, Mt. Hood Meadows, and St. Helens. These petitions are dismissed.

The local exchange companies serving the exchanges listed in ordering paragraphs 1 and 2 above shall prepare and submit tariffs and supporting documentation for the new EAS routes on or before October 15, 1998.

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.