On September 22, 1997, the Commission Staff (Staff) filed testimony for Phase I, Community of Interest Determination. Based on a review of geographic and telephone usage information, Staff concluded that none of the interexchange routes satisfied the objective community of interest criteria set forth in Order Nos. 89-815 and 92-1136. Staff's testimony is summarized in Appendix B, attached to this order and incorporated by reference.

On October 1, 1997, Michael Grant, an Administrative Law Judge (ALJ) with the Commission, issued a Proposed Order recommending that the EAS petition be dismissed based on a review of the objective community of interest criteria. Petitioners subsequently requested an opportunity to establish, through demographic, economic, financial, or other evidence that a community of interest exists between Madras and Bend, Redmond, and Prineville.

Geography and Demography

The Madras, Bend, Redmond and Prineville telephone exchanges lie east of the Cascade Mountains in central Oregon. The petitioning exchange, Madras, consists of approximately 6,400 access lines and currently has EAS to the Culver and Antelope exchanges. The target exchanges, Redmond, Bend, and Prineville, all lie south of the Madras exchange and serve relatively large population areas. The Redmond, Bend, and Madras exchanges consist of approximately 15,750, 53,000, and 8,150 access lines, respectively. All exchanges are served by U S WEST Communications, Inc. (U S WEST).

The city of Madras has many appearances of a self-sufficient community. As the county seat of Jefferson County, it offers many essential governmental services to local residents. These include the county sheriff, health department, district attorney, and treasurer. The city also offers some primary goods and services, including banking, insurance, groceries, and hardware.

Madras exchange customers, however, rely on the larger cities of Redmond, Bend, and—to a lesser extent—Prineville, to meet many of their basic needs. Many local residents are engaged in ranching and farming activities. These residents rely on numerous federal and state agencies in Redmond. Other residents commute to work in Bend and Redmond, where there is a greater number of employment opportunities. Most residents travel to larger cities to obtain specialized items and services not offered in Madras. Many simply prefer to shop there due to the larger selection and variety of businesses.

In turn, many Redmond exchange customers rely on Madras for county services. A portion of the Redmond exchange lies in Jefferson County. Within this area sits the Crooked River Ranch, a rapidly growing housing community of over 3,500 residents. These residents, many of whom are retired, look to Madras for essential government services. The Ranch also receives police services from the Jefferson County Sheriff.

Most Madras exchange residents consider themselves part of the larger central Oregon community. This belief is supported by the fact that phone numbers from the Madras exchange are listed jointly with those from Bend, Redmond, and Prineville in the Central Oregon telephone directory published by U S WEST.

Schools

The Jefferson County School District 509-J provides local schooling for children in the Madras exchange. The district relies on the Crook/Deschutes Educational Service District, which is located in Redmond.

Many Madras exchange customers attend classes at the Central Oregon Community College (COCC) campus in Redmond. COCC recently located its one-stop training center at the Redmond campus. This center is designed to provide skilled workers to major employers in central Oregon, including the 20 manufacturing businesses located in the Madras Industrial Park.

Government

As noted above, the Madras exchange is located in Jefferson County and served by governmental offices in city of Madras. Madras exchange residents, however, rely on Redmond and Bend for other state and federal services. Three agricultural agencies—the Farm Services Agency, Offices of Rural Development, and the Natural Resources Conservation Service—recently closed offices in Madras and relocated to Redmond. In addition, two primary Oregon State extension programs based in Madras are served through Redmond offices—home economy and forestry. Other state and federal services, including social security, Oregon Department of Transportation, and State Police, are located in Bend.

Medical Services

A total of nineteen primary care providers practice in the Madras exchange, many of whom work at Mountain View Hospital. Eight of those physicians live in Redmond or Bend and commute to Madras.

The Mountain View Hospital provides primary and limited emergency care to Madras exchange residents. The hospital is managed by the St. Charles Medical Center in Bend, where most residents seeks specialized care (i.e., chemotherapy, neonatal care, neurology, physical therapy, etc.).

A handful of dentists also practice in the Madras exchange. Residents seeking specialized dental care, such as oral surgery, must travel to Redmond or Bend, however.

Business Dependence and Interdependence

The Madras – Jefferson County Chamber of Commerce represents over 200 businesses in the Madras calling area. Virtually every business has at least one supplier, one or more employees, or a professional services provider located in the Bend, Redmond, or Prineville exchanges. Fifty-one of the businesses are affiliated as a franchise or satellite shop with a regional or headquarters presence in Redmond, Bend, or both.

Commuting Patterns

The largest private employer in central Oregon, the Bright Wood Corporation, is based in Madras. Of its approximately 1,100 employees, over half commute from Redmond or Bend. Other employers in Madras rely on employees who live outside the local calling area. For example, a third of the 23 employees at a local automobile dealer live in Bend or Redmond. Similarly, a quarter of the non-professional staff at Mountain View Hospital live in Bend or Redmond. Many Madras exchange residents, in turn, commute outside the local calling area to work at the large variety of businesses in Redmond, Bend, or, to a lesser extent, Prineville.

Toll Avoidance

Many Madras residents engage in a variety of toll avoidance practices. Residents often avoid toll calls by combining a trip to Bend or Redmond with their telephone activities. Others relay calls through neighbors and friends, or make calls after commuting to Bend or Redmond. Others rely on the use of cellular phones.

A large majority of local businesses use alternative long distance providers. For example, The Bright Wood Corporation uses AT&T for its toll calls placed between its Madras and Redmond plants. It is estimated that 75 to 100 calls are placed daily between the offices. The Jefferson County School District 509-J relies on Sprint to handle up to 350 calls placed monthly during the school year to Redmond. A survey of 20 local businesses revealed that all but two used carriers other than U S WEST from intraLATA calls to Redmond and Bend.

The Commission concludes that the Madras petitioners have established, through demographic and other evidence, that a community of interest exists with the Redmond and Bend telephone exchanges. While Madras maintains a degree of self-sufficiency by offering basic services to meet the needs of its local residents, the evidence establishes a sufficient interdependence with Redmond and Bend to warrant EAS conversion.

All three exchanges draw residents from each other to work in local businesses. Those living in Redmond and Bend commute to Madras to work at the Bright Wood Corporation, Mountain View Hospital, or other area businesses. In turn, Madras exchange customers commute to Redmond and Bend to work at the numerous businesses located in those exchanges. Moreover, many businesses have facilities or stores in two or all three calling areas.

This interdependence between telephone exchanges is particularly emphasized in Redmond and Madras with regard to essential governmental services. Farmers and ranchers in Madras must call Redmond to obtain information and support from three federal agricultural agencies based there. Similarly, the Crooked River Ranch residents in the Redmond exchange seek essential county services in Madras. Madras exchange residents also frequent retail and service businesses located in the Redmond and Bend exchanges, where a larger variety of goods and services are available. These factors demonstrate that Madras residents view Redmond and Bend as part of their extended community.

The Madras petitioners also established that an overwhelming majority of customers engage in a variety of toll avoidance activities. Many residents simply save calls and make them in the Bend or Redmond exchanges. Others rely on the use of cellular phones. Most businesses use alternative toll providers to carry calls to Redmond and Bend. Had these calls been capable of measurement and been included in Staff’s analysis, it is likely that the Madras customers would have satisfied the Commission’s objective criteria for a community of interest. Indeed, the petitioners satisfied the calling volume criterion with the Bend exchange, and failed the customer distribution criterion by less than one percent. While the numbers were not as large for the proposed Madras/Redmond interexchange route, the inclusion of this uncounted toll activity—combined with the increased calling due to the relocation of federal agricultural offices to Redmond—may be sufficient to exceed the Commission’s objective standards.

The Commission further concludes, however, that the Madras petitioners have failed to establish a sufficient community of interest with the Prineville exchange. Geographically, the city of Prineville lies approximately the same distance as Redmond from Madras. For this reason, some Madras exchange customers seek services and goods in that exchange. The evidence of such reliance, however, was not as strong as it was for Redmond and Bend. While some petitioners offered evidence of ties to Prineville and Crook County, all testified to stronger ties to the cities in Deschutes County. This decreased reliance is also reflected in the objective criteria test. The calling pattern data showed that an average of only 1.56 calls were placed per line per month between the Madras and Prineville exchanges, and that less that 18 percent of the Madras customers made at least two toll calls per month to the Prineville exchange. Both figures were considerably lower than those for the Redmond and Bend exchanges. See Appendix B.

In summary, the Commission concludes that the Madras petitioners have established a community of interest with the Redmond and Bend telephone exchanges. The EAS petition should proceed to Phase II (tariff analysis). The Commission further concludes that the petitioners have failed to establish a community of interest with the Prineville exchange. That portion of the EAS petition should be dismissed.

ORDER

IT IS ORDERED that:

1.  The Madras exchange petitioners have established a community of interest with the Redmond and Bend exchanges based upon demographic, economic, financial, and other evidence. That portion of the petition shall enter Phase II, the rate and cost phase of this proceeding. For Phase II, the Madras/Bend and Madras/Redmond portion of this docket will be grouped with other EAS dockets that complete Phase I by August 1. The serving telephone companies shall file proposed rates and supporting cost information by October 1, 1999.

2.  The Madras exchange petitioners have failed to establish a community of interest with the Prineville exchange. That portion of the EAS petition is dismissed.