ORDER NO. 98-343

ENTERED AUG 19 1998

This is an electronic copy.

BEFORE THE PUBLIC UTILITY COMMISSION

OF OREGON

CP 191

CP 215

DISPOSITION: APPLICATIONS GRANTED

Note: By issuing this certificate, the Commission makes no endorsement or certification regarding the certificate holders’ rates or service.

INTRODUCTION

Background

On July 2, 1996, the Economic Development Alliance of Lincoln County (the Alliance) filed an application for a certificate of authority to provide telecommunications service in Oregon (CP 191). On September 3, 1996, Lincoln County filed an application for a certificate of authority to provide telecommunications service in Oregon (CP 215). The two applications were consolidated for consideration by the Commission. Both entities are referred to as the applicants.

U S WEST Communications, Inc. (USWC), filed protests to both applications. GTE Northwest Incorporated (GTE) filed a protest in docket CP 215. After investigation, written comments and briefs, the Commission denied both applications. See Order No. 97-373, dated September 18, 1997. In brief summary, the reason for denial was that the applicants proposed to obtain telecommunications service from Central Lincoln People’s Utility District (CLPUD), and CLPUD did not have and did not apply for authority to provide such service.

On June 1, 1998, the Commission staff filed a motion, pursuant to ORS 756.568, for an order reopening dockets CP 191 and CP 215 and rescinding Order No. 97-373. Staff’s motion stated that staff and applicants had tentatively reached resolution of all issues. On June 3, 1998, the Commission issued Order No. 98-226, which rescinded the denial of applications in CP 191 and CP 215 and reopened the dockets.

On July 15, 1998, the Commission staff distributed a proposed order for review by the parties. No exceptions were filed.

The Commission has reviewed the proposed order and the record in this matter. Based on a preponderance of the evidence, the Commission makes the following:

FINDINGS

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 service, 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 service, 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.

Both applicants requested authority to provide interexchange service in Lincoln, Lane, and Douglas counties. The Commission interprets the applications as requesting certification to provide only point-to-point private line service, i.e., dedicated transmission service. This order will not authorize applicants to provide switched service, either toll or local dial tone, and this order will not authorize applicants to provide intraexchange (local exchange) service.

Originally both applicants planned to resell telecommunications service provided by CLPUD. This became a legal issue and led to our denial of the applications. See Order No. 97-373. After that order was issued the applicants modified their agreements with CLPUD. The Commission staff’s motion to reopen these dockets included a copy of the draft Memoranda of Understanding (MOU), which the applicants intend to execute with each other and with the CLPUD. We consider the MOUs to be additional amendments to the applications.

Pursuant to the amended applications, Lincoln County will lease dark fiber from CLPUD. CLPUD will transfer to Lincoln County non-cancelable rights to the exclusive use of one pair of dedicated dark fiber strands, with right of first refusal to a second pair of dark fiber strands, for a period of ten years.

The lease agreement will remain in effect for succeeding periods of ten years each, unless canceled by written notice from either party to the other twenty-four months prior to expiration of any term of the agreement. As a substitute for dark fiber strands for an interim period, pending completion of fiber links between existing CLPUD fiber rings, Lincoln County will lease from CLPUD exclusive use of a dedicated portion of CLPUD’s microwave links connecting existing CLPUD fiber rings. CLPUD expects to complete fiber links between its fiber rings within two years.

The leased optic fiber strands will be "lit" by multiplexer equipment, which will be owned, operated, and maintained by the applicants. The applicants will direct and control the operation and maintenance of a communications network consisting of equipment provided by the Alliance and fiber strands provided by Lincoln County.

Operator services are not part of dedicated transmission service. A statement of compliance with Commission rules and with state law, including ORS 759.690 and OAR 860-032-0005 (regarding operator services), was included in the application.

The protests of USWC and GTE were concerned with legal authority of various parties involved in dockets CP 191 and CP 215. The Commission discussed those protests in Order No. 97-373, and they have been resolved. However, USWC and GTE will remain parties to these dockets.

Applicable Law

Applications to provide telecommunications service and for classification as a competitive telecommunications services provider are filed pursuant to ORS 759.020. ORS 759.020 provides that:

(1) No person [or] corporation * * * shall provide intrastate telecommunications service on a for-hire basis without a certificate of authority issued by the commission under this section.

* * * * *

(5) The commission may classify a successful applicant for a certificate as a * * * competitive telecommunications services provider. If the commission finds that a successful applicant for a certificate has demonstrated that its customers or those proposed to become customers have reasonably available alternatives, the commission shall classify the applicant as a competitive telecommunications services provider. * * * For purposes of this section, in determining whether there are reasonably available alternatives, the commission shall consider:

(a) The extent to which services are available from alternative providers in the relevant market.

(b) The extent to which services of alternative providers are functionally equivalent or substitutable at comparable rates, terms, and conditions.

(c) Existing economic or regulatory barriers to entry.

(d) Any other factors deemed relevant by the commission.

OAR 860-032-0015(1) authorizes the Commission to suspend or cancel the certificate if the Commission finds that (a) the holder made misrepresentations when it filed the application, or (b) the applicant fails to comply with the terms and conditions of the certificate.

Resolution

(a) Telecommunications Facilities and Service

In our Order No. 97-373 we analyzed the original applications. We concluded that "dark fiber" is a telecommunications service. See Order No. 97-373, page 6, footnote 2. Based on that conclusion, we determined that CLPUD’s proposed provision of "dark fiber" would constitute provision of telecommunications service for which CLPUD would need a certificate of authority. See Order No. 97-373 at 8, 10.

Certificates of authority will be issued to the applicants because they have amended their applications, through their MOUs, in several important respects. First, we observe that the use of the term "dark fiber" oversimplifies the nature of the applications before us. Prior to the most recent amendments, the applicants proposed to lease capacity from CLPUD, and CLPUD retained significant control over the applicants’ use of the leased capacity. See Order No. 97-373 at 1-4.

Now, per the amended applications, the applicants propose to lease from CLPUD, on an exclusive basis, a specific pair of fiber strands which have not been electronically activated for transmission of information, i.e., dark fiber. CLPUD will not electronically activate, or "light" the fiber strands, or be involved in the transmission of signals.

Instead, the applicants will light the fiber by multiplexer equipment, which they own. The multiplexers also incorporate laser generating equipment that lights the fiber strands. The applicants will be responsible for the maintenance and operation of its own equipment and facilities. Most importantly, the applicants will control all relevant aspects of the transmission of signals and traffic over their leased fiber strands.

The determination of whether "dark fiber" provided by a non-incumbent utility provider is a telecommunications service depends on careful review of each application. This review includes an inquiry into whether the applicant will electronically activate and/or control the transmission of information over the fiber. Based on the applications, as amended by the MOUs, we conclude that CLPUD is not providing telecommunications service to these applicants. Accordingly, CLPUD need not obtain a certificate of authority to provide the proposed facilities.

(b) Existence of Alternatives

AT&T Communications of the Pacific Northwest, MCI Telecommunications Corporation, Sprint Communications Company, L.P., U S WEST Communications, Inc., and others provide similar services in the service area requested by the applicants.

(c) Suitability of Alternatives

Applicants’ customers or those proposed to become customers have reasonably suitable alternatives to applicants’ services. Subscribers to applicants’ services can buy comparable services at comparable rates from other vendors.

(d) Barriers to Entry

The level of competition in the market shows that both economic and regulatory barriers to entry into the market are relatively low.

CONDITIONS OF THE CERTIFICATES

1. Applicants shall not take any action that impairs the ability of other certified telecommunications service providers to meet service standards specified by the Commission.

2. Applicants shall comply with all conditions listed in the applications.

3. Applicants shall comply with laws, Commission rules, and Commission orders related to provision of telecommunications service in Oregon.

CONCLUSIONS

Applicants have met the requirements for certificates to provide telecommunications service as competitive telecommunications providers. The applications should be granted.

ORDER

IT IS ORDERED that:

1. The application of Economic Development Alliance of Lincoln County to provide interexchange, point-to-point, private line service, i.e., dedicated transmission service, as described in its application, is in the public interest and is granted with conditions described in this order.

2. Economic Development Alliance of Lincoln County is designated as a competitive telecommunications provider for interexchange service in Lincoln, Lane, and Douglas counties in Oregon.

3. The application of Lincoln County to provide interexchange, point-to-point, private line service, i.e., dedicated transmission service, as described in its application, is in the public interest and is granted with conditions described in this order.

4. Lincoln County is designated as a competitive telecommunications provider for interexchange service in Lincoln, Lane, and Douglas counties in Oregon.

5. Both applicants shall comply with conditions of the certificates.

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 pursuant to ORS 756.580.