ORDER NO. 99-464

ENTERED AUG 02 1999

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

OF OREGON

UA 73

DISPOSITION: APPLICATION GRANTED

On June 11, 1999, the Pine Telephone System, Inc., (Pine) filed an application with the Public Utility Commission (Commission) requesting an order pursuant to ORS 759.535 and OAR 860-034-0470, allocating rights to exclusively served territory. The area Pine Telephone seeks to have allocated to it includes the town of Granite and adjoining rural areas (hereafter referred to as the "Granite area"). Appendices A and B of this order illustrate the area Pine seeks to serve. Appendix C is a legal description of the proposed territory. The Granite area has never received land-line telecommunications service.

Pine is a small telephone utility headquartered in Halfway, Oregon. It has been owned and operated by the Huff family since 1945 and currently serves approximately 800 customers in Baker and Wallowa Counties.

The town of Granite, Oregon, is located in the Blue Mountains approximately 45 miles west of Baker City. Once a prosperous mining town, the Granite area is today used primarily for recreational activities and second homes. The area supports approximately 85 homes and businesses, including a general store and café, a new lodge and the Tillicum mine. Commercial power is available in town and a new water system is in the planning stages. A paved county road extends to Granite from its primary communities of interest, Sumpter and Baker City. According to Pine, several new homes have been built in the area in recent years and the prospects for growth are good.

Granite residents have expressed interest in obtaining telephone service from Pine on numerous occasions. In response, Pine has conducted studies to determine the feasibility of providing service to the Granite area. An engineering study commissioned by Pine esimates that the cost of constructing facilities to provide one-party service is approximately $1,058,000. The plan includes a central office building, a digital switch equipped with SS7 and equal access functionality, a fiber optic toll cable between the Granite central office and the U S WEST central office in Sumpter, and loop plant capable of high speed data services. Financing for this project has been secured through the Rural Utilities Service (RUS). Upon Commission approval of the filing, the initial phase of construction will begin in July 1999 and will focus on building facilities in the town of Granite. Barring any unforseen circumstances, service should be available to the town by November 1999. The second phase of construction is scheduled for the summer of 2000 and will include the remaining facilities required to serve outlying areas.

Pine has performed a cost recovery analysis which confirms that existing cost recovery mechanisms, including access charges, the Oregon Customer Access Fund, federal universal service support and local rates will be adequate to support the construction of facilities in the Granite area. Appendix D shows Pine’s proposed rates for basic single party service. Rates for residential and business service are proposed at $10.00 and $15.00, respectively. There will be no charge to customers for construction of facilities. Pine does not intend to offer extended area service at this time to customers in the Granite area.

PUC Staff reviewed Pine’s application and agrees that it should be granted. Staff concurs that the construction project will be economic for Pine because of the availability of RUS loans and other financial support available to small telecommunications utilities. Staff does not object to the proposed rates for Granite, even though they are slightly higher than those paid by Pine customers in the Halfway exchange. Staff points out that Pine’s proposed rates are still less than the one-party residential and business rates paid by U S WEST customers.

Staff states that Section 253 of the Telecommunications Act of the 1996 preempts state commissions from granting exclusive franchises to provide telecommunications services. Although Staff recommends that the Commission allocate the Granite area to Pine, it observes that the Commission could authorize another carrier to provide service in the area pursuant to ORS 759.020 and 759.050.

Public Notice of Pine’s application was published in the Baker City Herald and the LaGrande Observer, two newspapers of general circulation, for two consecutive weeks during June 1999. No objections to the application have been registered with the Commission.

Based on the foregoing, the Commission concludes that Pine’s application to serve the Granite area should be granted subject to the limitations on Commission authority to grant exclusive franchises noted above.

ORDER

IT IS THEREFORE ORDERED that:

1. The application of Pine Telephone Company for authority to provide telecommunications services in the unserved territory referred to in this order as the Granite area, is hereby granted.

2. Within 30 days of the date of this order, Pine Telephone Company shall file a tariff map of the Granite exchange including an effective date and title page information.

Made, entered, and effective ____________________________.

A party may request rehearing or reconsideration of this order pursuant to ORS 756.561. The request must be filed with the Commission within 60 days of the date of service of this order and 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 also appeal this order to a court pursuant to ORS 756.580.