ORDER NO. 99-393

ENTERED JUN 25 1999

This is an electronic copy. Appendices and Footnotes may not appear.

OF OREGON

UM 806

DISPOSITION: COMMUNITY OF INTEREST FOUND BETWEEN OAKRIDGE AND EUGENE-SPRINGFIELD;

EAS ROUTE NECESSARY TO MEET CRITICAL NEEDS OF CUSTOMERS

SUMMARY

In this order, the Commission finds that a community of interest exists between the Oakridge and Eugene-Springfield telephone exchanges. The Commission further finds that extended area service (EAS) between the exchanges is necessary to meet the critical needs of the Oakridge petitioners due to the lack of basic and essential services in their own exchanges or a neighboring exchange. Accordingly, the Commission concludes that the petition for EAS should proceed to Phase II, the rate and cost phase.

Based on these findings, the Commission also finds that a community of interest exists between the Oakridge and Lowell exchange. The Lowell exchange lies between the Oakridge and Eugene-Springfield exchanges. Because petitioners have qualified for EAS to the Eugene-Springfield exchange, the Commission concludes that an additional EAS route should also be implemented to the intervening exchange to avoid customer confusion as to toll-free calling areas.

Petition

On April 30, 1996, the customers of the Oakridge telephone exchange (petitioners) petitioned the Commission for extended area service (EAS) to the Lowell and Eugene-Springfield telephone exchanges. A map of the affected exchanges is attached as Appendix A.

After testimony and hearings, the Commission concluded that the Oakridge petitioners had failed to meet qualifying criteria for EAS and dismissed the petition in Order No. 97-116. At that time, Commission criteria limited EAS expansion to neighboring exchanges. Thus, while establishing an overwhelming reliance on businesses and services located in the Eugene-Springfield exchange, the Oakridge petitioners could not obtain EAS to that exchange without first establishing similar reliance on Lowell, an intervening exchange. Given the relatively small size of the Lowell exchange, petitioners were only able to establish that both exchanges—Oakridge and Lowell—are dependent upon the Eugene-Springfield exchange, not each other.

Modification of Standards

Following the similar failure of other rural exchanges to obtain EAS to communities on whom they rely for essential goods and services, the Commission initiated a generic investigation to further examine the problem. After comment from industry representatives, rural customers, and other interested parties, the Commission modified EAS standards to allow these rural exchanges the ability to qualify for EAS if certain criteria are satisfied. See Order No. 99-038. These new standards are designed to permit EAS between non-contiguous exchanges if the EAS route is necessary to meet the critical needs of the customers in the petitioning exchange.

In adopting new standards, the Commission also allowed petitioners who previously failed to obtain EAS due to the presence of a small intervening exchange to request the reopening of their respective docket for further proceedings. Shortly thereafter, the Oakridge petitioners requested a hearing to establish that their respective petitions satisfy the new standards for non-contiguous EAS.

Hearing

On May 18, 1999, Michael Grant, an Administrative Law Judge, held a hearing on this matter in Oakridge, Oregon. Approximately 40 people appeared in support of the petition. Based on a preponderance of the evidence submitted, the Commission makes the following:

The Oakridge, Lowell, and Eugene-Springfield telephone exchanges lie in southeast Lane County along the upper reaches of the Willamette River. The petitioning exchange, Oakridge, consists of approximately 2,400 access lines and currently has no EAS to any other exchange. The Lowell exchange lies northwest of Oakridge and consists of approximately 1,800 access lines. It currently has EAS to Eugene-Springfield exchange. The Eugene-Springfield exchange is the largest of the three exchanges, with approximately 153,000 access lines. It has EAS to 13 neighboring exchanges. All three exchanges are served by U S WEST Communications, Inc. (U S WEST).

The Oakridge exchange is a rural logging area that includes two incorporated cities: Oakridge and Westfir. The area was once a self-sufficient community, offering a variety of employment opportunities and business services to its residents. For example, the City of Oakridge once had three automobile dealers, two pharmacies, and a number of other businesses. However, the closure of a number of lumber mills and reduction in Forest Service activities has greatly affected the local economy. Oakridge now offers limited services to exchange residents. The exchange has one market, a couple of restaurants, and a small variety of businesses that serve the large number of tourists who travel through the city to enjoy the recreational opportunities in the Willamette and Deschutes National Forests.

As a result, exchange residents now seek essential goods and services in neighboring communities. The cities of Lowell and Dexter, located approximately 30 miles away in the neighboring Lowell telephone exchange, are the closest towns that offers some basic services. These towns, however, serve primarily as bedroom communities to the Eugene-Springfield and offer limited services. The Lowell exchange has two gas stations, a mini-mart, auto parts store, and a pizza shop. As a result, most Oakridge residents rely on retail and commercial businesses in Eugene and Springfield to meet their basic needs.

Eugene-Springfield is a relatively large metropolitan area located approximately 45 miles from Oakridge via State Route 58. It offers a wide variety of commercial goods and services, including accounting, banking, insurance, legal, veterinarian, and other professional services, as well as business suppliers, automobile dealers and repair, hardware and building supplies, restaurants, and other retail services.

U S WEST provided monthly telephone usage data for the Oakridge, Lowell, and Eugene-Springfield telephone exchanges. That data, summarized in Appendix B and adopted as fact, shows that an average of 12.31 calls per access line per month were placed between the Oakridge and Eugene-Springfield exchanges, and that 69.71 percent of the Oakridge customers made at least two toll calls per month to the Eugene-Springfield exchange.

Applicable Law

In order to establish a community of interest with a non-contiguous exchange, petitioners must meet two primary criteria:

1. Community of Interest. Petitioners seeking EAS to a non-contiguous exchange must first establish that a community of interest exists with that exchange. The Commission has established two methods by which a petitioning exchange can establish a community of interest. The first is an objective test based on telephone usage information. This test requires that an average of 4 or more toll calls per line per month be placed between the petitioning and target exchange, and that at least 50 percent of customers in the petitioning exchange make at least 1 toll call per month to the target exchange. See Order Nos. 89-815 and 92-1136.

The second method, available to those exchanges that fail the calling pattern requirements of the objective criteria test, is the demographic showing test. Under this test, a hearing is held to give the petitioning exchange the opportunity to demonstrate a community of interest by reference to demographic, social, economic, and other factors. See Order No. 89-815.

2. Critical Needs. Petitioners seeking EAS to a non-contiguous exchange must also make a showing of "critical needs." Under this showing, petitioners must demonstrate that the proposed EAS is necessary to meet the critical needs of customers because of the lack of essential goods and services in their own exchange or in a contiguous exchange. In evaluating the critical needs of customers, the Commission will consider the customers’ access to emergency, dental, medical, professional, business, educational, and governmental services. See Order No. 99-038,

Community of Interest Determination

Based on a review of calling pattern data, the Commission concludes that a community of interest exists between the Oakridge and Eugene-Springfield telephone exchanges. The calling pattern data reveals that an average of 12.31 toll calls per access line per month were placed between the exchanges, and 69.71 percent of Oakridge exchange customers made at least two calls to the Eugene-Springfield exchange. These calling pattern figures exceed the Commission’s objective criteria for establishing a community of interest.

Critical Needs Determination

The Commission further concludes that the EAS routes between Oakridge and Eugene-Springfield is necessary to meet the critical needs of the Oakridge customers. Once self-sufficient, Oakridge is now a relatively small community with insufficient resources to support the needs of local residents. As a result, local residents have become heavily dependent on the businesses and services available in the Eugene-Springfield exchange. The cities of Eugene and Springfield are relatively large urban communities that offer Oakridge residents reasonable access to a variety of professional and business services, as well as retail and other commercial activities.

In addition, Eugene is the county seat of Lane County and, as such, provides essential governmental services to residents of the Oakridge exchange. These services include all aspects of county government, including the County Sheriff, District Attorney, and Circuit Court, as well as a number of state agencies such as Senior Services Division, Employment Division, and the Department of Motor Vehicles. While some of these agencies have offices in Oakridge, many are open just a few hours a week and cannot, by themselves, provide all services required by local residents.

The Commission further concludes that the critical needs of the Oakridge residents are not reasonably met by services in their own exchange or a neighboring exchange. As stated above, the Oakridge exchange serves a relatively small and isolated community with little centralized businesses. The few services that are available are extremely basic in nature and, most often, limited to a part-time basis. As such, local residents must rely on neighboring communities to meet their basic needs. While the Lowell exchange is nearby, it serves an even smaller community that is, essentially, a bedroom community to Eugene-Springfield. Consequently, residents from both exchanges almost exclusively rely on the Eugene-Springfield exchange for emergency, dental, medical, professional, business and governmental services.

CONCLUSION

The Commission concludes that a community of interest exists between the Oakridge and Eugene-Springfield telephone exchanges. The Commission further concludes that the EAS route is necessary to meet the critical needs of the customers of the Oakridge exchange.

Based on these conclusions, the Commission further finds that a community of interest exists among the Oakridge and the intervening Lowell exchange. In cases where petitioners establish a community of interest with a non-contiguous exchange and demonstrate that the EAS route is necessary to meet their critical needs, the Commission will also declare that a community of interest exists between the petitioning and intervening exchange(s). Establishing new EAS routes to both the target and intervening exchanges will avoid customer confusion as to long distance calling areas. Otherwise, a call to a neighboring exchange would be more expensive that a call to a distant one. See Order No. 99-038 at 5 and 11.

ORDER

IT IS ORDERED that:

The petitioners served by the Oakridge telephone exchange has established a community of interest with the Eugene-Springfield exchange, and that the Oakridge/Eugene-Springfield interexchange route is necessary to meet the critical need of the petitioners because of the lack of essential goods and services located in their own exchanges or an intervening exchange

The Commission finds that a community of interest exists among the Oakridge and Lowell telephone exchanges.

3. This completes Phase I of this docket. It is now ready to enter Phase II, the rate and cost phase. For Phase II, the Oakridge petition will be grouped will all other EAS dockets that complete Phase I by August 2, 1999. The telephone companies serving the Oakridge, Lowell, and Eugene-Springfield telephone exchanges shall file proposed rates and supporting cost information by October 15, 1999.

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.