ORDER NO. 99-396

ENTERED JUN 25 1999

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

OF OREGON

UM 841 and UM 851

DISPOSITION: COMMUNITY OF INTEREST FOUND; EAS ROUTES NECESSARY TO MEET CRITICAL NEEDS OF CUSTOMERS

SUMMARY

In this order, the Commission finds that the Long Creek and Monument telephone exchanges share a community of interest with the John Day telephone exchange. The Commission further finds that extended area service (EAS) between the exchanges is necessary to meet the critical needs of the Long Creek and Monument petitioners due to the lack of basic and essential services in their own exchanges or a neighboring exchange. Accordingly, the Commission concludes that both petitions 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 among the Long Creek, Monument, and the Mt. Vernon exchange. The Mt. Vernon exchange lies between the petitioning exchanges and the John Day exchange. Because petitioners have qualified for EAS to the John Day exchange, the Commission concludes that additional EAS routes should also be implemented to the intervening exchange to avoid customer confusion as to toll-free calling areas.

Petitions

In February and April 1997, the customers of the Long Creek and Monument telephone exchanges petitioned the Commission for EAS to the John Day telephone exchange. In the petitions, the Long Creek and Monument customers also requested EAS to the Mt. Vernon exchange, and to each other. A map of the exchanges is attached to the order as Appendix A.

After testimony and hearings, the Commission concluded that both the Long Creek and Monument petitioners had failed to meet qualifying criteria for EAS and dismissed the petitions in Orders No. 97-301 and 97-439. At that time, Commission criteria limited EAS expansion to neighboring exchanges. Thus, while establishing an overwhelming reliance on businesses and services located in the John Day exchange, the Long Creek and Monument petitioners could not obtain EAS to that exchange without first establishing similar reliance on Mt. Vernon, an intervening exchange. Given the relatively small size of the Mt. Vernon exchange, petitioners were only able to establish that all three exchanges—Long Creek, Monument, and Mt. Vernon—are dependent upon the John Day 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 Long Creek and Monument petitioners requested a hearing to establish that their respective petitions satisfy the new standards for non-contiguous EAS.

Hearing

On April 29, 1999, Michael Grant, an Administrative Law Judge, held a consolidated hearing in this matter in Long Creek. Approximately 20 customers of the Long Creek and Monument exchange attended the hearing in support of both petitions.

Based on the evidence presented at that hearing, and on the information contained in this record, the Commission enters the following:

FINDINGS OF FACT

The Monument, Long Creek, Mount Vernon, and John Day telephone exchanges lie in Grant County in North Central Oregon. The Monument, Long Creek, and John Day exchanges are served by Century Tel of Eastern Oregon, and consist of approximately 301, 360, and 2,305 customers, respectively. The Mount Vernon exchange is served by the Oregon Telephone Corporation (OTC) and consists of approximately 691 customers.

Geography and Demography

Grant County is a large rural county that covers 4,528 square miles and has a population of approximately 8,100 people. About one-third of its residents live in Canyon City, the county seat, (pop. 705) and the adjoining city of John Day (pop. 1,940). The remaining residents are dispersed throughout the county among six incorporated cities, including Monument, Long Creek, and Mt. Vernon, and four unincorporated towns.

The cities of Long Creek (pop. 240) and of Monument (pop. 185) lie in northwest Grant County. Both cities are rural agricultural and logging communities with little centralized business. Long Creek has a gas station, post office, motel, two cafes, and two small groceries stores. Monument has two small grocery stores, a tavern, a café, and a mechanic shop. Both areas also lack employment opportunities. Aside from independent logging and agriculture activities, jobs are limited to the local schools, forest service, and electric company. Some local residents run part-time businesses from their homes.

Due to the lack of local services and employment opportunities, residents of Long Creek and Monument depend heavily on other communities to meet their basic needs. Mt. Vernon, located some eight miles west of John Day, is the nearest city to Monument and Long Creek. That city, however, is also a small rural community (pop. 645) with limited commercial and business services. It has a motel, gas station, and a laundromat.

Due to the limited services available in Monument, Long Creek, and Mt. Vernon, the residents of all three exchanges almost exclusively rely on John Day and Canyon City for professional and commercial services. These two cities, located within the John Day telephone exchange, offer a significant variety of commercial goods and services, as well as employment opportunities. Local businesses include grocery stores, hardware and building supplies, office supplies, and clothing stores. The John Day/Canyon City area also offers banking, legal, insurance, tax preparation, and other professional services.

Schools

Residents of the Monument and Long Creek exchanges are served by local school districts that offer educational services for children from kindergarten through grade 12. Both districts engage in cooperative programs, through which students travel between exchanges to share facilities and instructional staff.

Both school districts rely on the Grant County Educational Service District, located in Canyon City. Children throughout Grant County also use the public library in John Day.

Government and Jurisdictional Issues

Residents of the Monument, Long Creek, and Mt. Vernon telephone exchanges are served by county government services located in the John Day/Canyon City area. These include offices for the Grant County Sheriff, District and Circuit Courts, Justice of the Peace, and the District Attorney. A number of state and federal offices are also located in John Day/Canyon City, such as Services to Children and Families, Adult and Family Services, Senior Services Division, Employment Division, Department of Motor Vehicles, Highway Department, and Forestry Department.

Medical and Dental Services

The city of Long Creek offers no medical or dental services. The Monument and Mount Vernon exchanges offer minimal medical and dental services. For example, a physician assistant provides primary medical care one day a week at the Senior Center in Monument. Local residents, however, must call the John Day exchange to make an appointment.

Consequently, residents of Monument, Long Creek and Mt. Vernon seek basic and specialized medical and dental care in John Day and Canyon City, where a relatively large number of dentists and physicians practice. The county hospital is also located in the John Day exchange.

Emergency Services

The cities of Monument and Long Creek each have a local EMT and Ambulance Service. Each city also has a volunteer fire department. Long Creek and Monument exchange residents located outside the volunteer fire districts are served by the State Forestry Department located in John Day.

Employment and Commuting Patterns

The cities of Monument and Long Creek offer limited employment opportunities. The county’s economic base is heavily dependent on timber, and has declined with the losses in that industry. As a result, Grant County often leads the state in unemployment.

Most residents who are employed are engaged in independent farming and logging activities. Some operate part-time businesses from their homes, or commute to John Day and Canyon City for work.

CenturyTel and OTC provided monthly telephone usage data for the Long Creek, Monument, Mt. Vernon, and John Day telephone exchanges. That data, summarized in Appendices B and C and adopted as fact, shows that an average of 6.54 toll calls per access line per month were placed between the Long Creek and John Day exchanges, and that 56.68 percent of the Long Creek customers made at least two toll calls per month to the John Day exchange. Similarly, the calling data shows that an average of 5.93 toll calls per access line per month were placed between the Monument and John Day exchanges, and that 63.11 percent of the Monument customers made at least two toll calls per month to the John Day 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 John Day exchange and the Long Creek and Monument exchanges. With regard to the Long Creek/John Day route, a maximum average of 6.54 toll calls per access line per month were placed between the exchanges, and 56.68 percent of Long Creek customers made at least two calls to the John Day exchange. With regard to the Monument/John Day route, a maximum average of 5.93 toll calls per access line per month were placed between the exchanges, and 63.11 percent of Monument exchange customers made at least two calls to the John Day 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 John Day and the Long Creek and Monument exchanges are necessary to meet the critical needs of the Long Creek and Monument customers. Both Long Creek and Monument are small communities with almost no businesses available to provide jobs, goods, or services for their own residents. As a result, local residents have become heavily dependent on the businesses and services available in the John Day exchange. The cities of John Day and Canyon City, located in the John Day exchange, are relatively large urban communities that offer Grant county residents reasonable access to a variety of professional and business services, as well as retail and other commercial activities. These include a number of medical and dental providers, as well as the county hospital.

In addition, Canyon City is the county seat of Grant County and, as such, provides essential governmental services to residents of the Long Creek and Monument 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.

The Commission further concludes that the critical needs of the Long Creek and Monument exchange residents are not reasonably met by services in their own exchange or a neighboring exchange. As stated above, the Long Creek, Monument, and Mt. Vernon exchanges are all small communities with little centralized businesses. Due to the decline of the timber industry and other factors, all three have essentially become bedroom communities to John Day and Canyon City. Residents from all three exchanges almost exclusively rely on the John Day exchange for emergency, dental, medical, professional, business and governmental services.

CONCLUSION

The Commission concludes that a community of interest exists between the John Day exchange and the Long Creek and Monument telephone exchanges. The Commission further concludes that the non-contiguous EAS routes are necessary to meet the critical needs of the customers of the Long Creek and Monument exchanges.

Based on these conclusions, the Commission further finds that a community of interest exists among the two petitioning exchanges—Long Creek and Monument—and the intervening exchange, Mt. Vernon. Under modified EAS standards, 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 Long Creek and Monument telephone exchanges have established a community of interest with the John Day exchange, and that the Long Creek/John Day and Monument/John Day interexchange routes are 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 Long Creek, Monument, and Mt. Vernon telephone exchanges.

3. This completes Phase I of these two dockets. Both petitions are now ready to enter Phase II, the rate and cost phase. For Phase II, the Long Creek and Monument petitions will be grouped with all other EAS dockets that complete Phase I by August 2, 1999. The telephone companies serving the Long Creek, Monument, Mt. Vernon, and John Day 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.