ORDER NO.99-511

ENTERED AUG 20 1999

This is an electronic copy and appendices and footnotes may not appear.

OF OREGON

UM 933

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

SUMMARY

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

PROCEDURAL HISTORY

On April 5, 1999, the customers of the Starkey telephone exchange petitioned the Commission for EAS to the La Grande telephone exchange. A map of the exchanges is attached to the order as Appendix A.

On June 11, 1999, the Commission Staff filed testimony for Phase I, Community of Interest Determination. Based on a review of geographic and telephone usage information, Staff concluded that the petition failed the Commission’s objective criteria for a community of interest. See Order Nos. 89-815 and 92-1136. Staff’s testimony is summarized in Appendix B and incorporated by reference.

On June 16, 1999, Michael Grant, an Administrative Law Judge (ALJ), issued a proposed order adopting Staff’s findings and recommending that the petition be dismissed. Petitioners subsequently requested an opportunity to establish, through demographic and other evidence, that a community of interest exists between the Starkey and La Grande telephone exchanges.

On July 27, 1999, ALJ Grant held a hearing in this matter in Starkey, Oregon. Approximately 28 customers attended the hearing in support of the petition. Based on the evidence presented at that hearing, and on the information contained in this record, the Commission makes the following:

FINDINGS OF FACT

The Starkey and La Grande telephone exchanges lie in Union County in northeastern Oregon. The Starkey exchange is served by Century Tel of Eastern Oregon (CenturyTel) and consists of approximately 40 customers. The La Grande exchange is served by GTE Northwest Incorporated (GTE) and consists of approximately 10,000 customers.

Geography and Demography

Starkey is a rural forest and agricultural area bordered by the Wallowa-Whitman National Forest. Although the area offers many recreational and scenic opportunities, it has few centralized businesses to support the needs of local residents. Currently, Starkey has one business that serves as a convenience store, tavern, and part-time gas station.

Due to the lack of local services, Starkey exchange residents almost exclusively rely on La Grande for goods and services to meet their basic needs. La Grande, located approximately 23 miles east from Starkey, is a relatively large metropolitan area that offers a significant variety of commercial goods and services, as well as employment opportunities. Local businesses include grocery stores, hardware and building supply stores, office supply stores, and clothing stores. La Grande also offers banking, legal, insurance, tax preparation, and other professional services.

The only other nearby town is that of Ukiah, located about 35 miles to the west. Ukiah, however, is also a small rural community (pop. 280) with limited commercial and business services. It has a restaurant, gas station, laundromat, small market, and tavern.

Schools

All children who live in the Starkey exchange attend schools in La Grande. Because these schools are located outside the local calling area, Starkey parents and students incur high toll bills when calling for rides, class assignments, school activities, or to talk to friends.

Government and Jurisdictional Issues

Residents of the Starkey telephone exchange are served by county government services located in La Grande, the county seat of Union County. These include offices for the County Sheriff, District and Circuit Courts, and District Attorney. A number of state and federal offices are also located in La Grande, such as Services to Children and Families, Adult and Family Services, Senior Services Division, Employment Division, Department of Motor Vehicles, Highway Department, and Department of Forestry.

Starkey residents are also served by the post office in La Grande. In fact, Starkey exchange customers have a La Grande address.

Medical and Dental Services

The Starkey area offers no medical or dental services. Consequently, local residents seek basic and specialized medical and dental care in La Grande, where a relatively large number of dentists and physicians practice. The county hospital is also located in the La Grande exchange.

Employment and Commuting Patterns

Starkey offers limited employment opportunities. Most residents are engaged in independent farming activities or work for the forest service. Some operate Camp Elkanha, which hosts numerous church and other groups during the summer season. Other residents commute to La Grande to work.

Toll Avoidance

A majority of Starkey exchange customers engage in a variety of toll avoidance practices. All of the residents who attended the hearing use alternative long distance carriers to place calls to La Grande. Some use cellular phones, while others simply save calls and make them while in La Grande.

CenturyTel and GTE provided monthly telephone usage data for the Starkey and La Grande telephone exchanges. That data, summarized in Appendix B, shows that the petition met one of the three objective criteria for a community of interest. The petition satisfied the calling volume criteria, as an average of 5.03 toll calls per line per month were placed between the exchanges. However, the petition narrowly failed the customer distribution criterion, which requires that at least 50 percent of the customers in the petitioning exchange make at least two toll calls per month to the target exchange. Only 39.92 percent of the Starkey customers made at least two or more toll calls to the La Grande exchange. In addition, the two exchanges are not contiguous, as they are separated by a two-mile gap of unserved territory.

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

The Commission concludes that a community of interest exists between the Starkey and La Grande telephone exchanges. Although petitioners failed to meet the Commission’s objective criteria, they successfully established that a community of interest exists with the La Grande exchange through demographic information.

A community of interest exists "where there is a social, economic, or political interdependence between two areas or where there is a heavy dependence by one area on another area for services and facilities necessary to meet many of its basic needs." Order No. 87-309 at 8. The evidence presented in this docket establishes an overwhelming dependence by the Starkey exchange on the La Grande exchange to warrant EAS conversion.

The Starkey exchange offers virtually no business or professional services for its residents. La Grande, located approximately 23 miles east from Starkey, is a relatively large urban center that offers Starkey exchange residents reasonable access to a variety of professional and business services, as well as other commercial activities. Furthermore, children who live in the Starkey exchange attend schools in La Grande.

The Starkey 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 La Grande. A large number rely on the use of cellular phones, while almost all use the services of alternative toll carriers. Had these uncounted toll calls been capable of measurement and been included in Staff’s analysis, it is possible that the Starkey customers would have satisfied the Commission’s objective criteria for a community of interest with the La Grande exchange.

In summary, the Starkey petitioners’ demographic evidence showed an overwhelming reliance on the La Grande exchange. That reliance, with the amount of toll avoidance, persuades the Commission that a community of interest exists between the Starkey and La Grande exchanges.

Critical Needs Determination

The Commission further concludes that the EAS route between Starkey and La Grande is necessary to meet the critical needs of the Starkey customers. As noted above, Starkey is a small community 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 La Grande exchange to meet their basic needs. La Grande offers Starkey exchange customers 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, the city of La Grande serves as the county seat for Union County and, as such, provides essential governmental services to Starkey exchange residents. 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 the Senior Services Division, Employment Division, and Department of Motor Vehicles.

The Commission further concludes that the critical needs of the Starkey exchange residents are not reasonably met by services in their own exchange or a neighboring exchange. As stated above, there are almost no services available in Starkey itself. The only other neighboring town, Ukiah, is located farther away than La Grande and cannot provide essential services to support its own residents, let alone those that live in Starkey.

CONCLUSION

The Commission concludes that a community of interest exists between the Starkey and the La Grande telephone exchanges. The Commission further concludes that the non-contiguous EAS routes between the exchanges is necessary to meet the critical needs of the customers of the Starkey exchange.

ORDER

IT IS ORDERED that:

1.    The Starkey exchange petitioners have established that: (1) a community of interest with the La Grande exchange; and (2) the Starkey/La Grande interexchange route is necessary to meet the critical need of the Starkey petitioners because of the lack of essential goods and services located in their own exchanges or an intervening exchange.

2. This completes Phase I of this docket. The petition is now ready to enter Phase II, the rate and cost phase. For Phase II, the Starkey petition will be grouped with all other EAS dockets that complete Phase I by August 1999. The telephone companies serving the Starkey and La Grande 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 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 to a court pursuant to ORS 756.580.