ORDER NO.99-513

ENTERED AUG 20 1999

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

OF OREGON

UM 929

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

SUMMARY

In this order, the Commission finds that a community of interest exists between the Ukiah and Pendleton telephone exchanges. The Commission further finds that extended area service (EAS) between the exchanges is necessary to meet the critical needs of the Ukiah 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 Ukiah and Pilot Rock exchanges. The Pilot Rock exchange lies between the Ukiah and Pendleton exchanges. Because petitioners have qualified for EAS to the Pendleton 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 March 1, 1999, the customers of the Ukiah telephone exchange (petitioners) petitioned the Commission for extended area service (EAS) to the Pilot Rock and Pendleton telephone exchanges. A map of the affected exchanges is attached 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 Ukiah exchange and the Pilot Rock and Pendleton telephone exchanges.

On July 28, 1999, ALJ Grant held a hearing on this matter in Ukiah. Approximately 35 people appeared in support of the petition. Based on a preponderance of the evidence in this record, the Commission makes the following:

Geography and Demography

The Ukiah, Pendleton, and Pilot Rock telephone exchanges lie in Umatilla County in northeastern Oregon. The petitioning exchange, Ukiah, consists of approximately 180 access lines and currently has no EAS to any exchange. The Pilot Rock exchange lies north of Ukiah and consists of approximately 1,070 access lines. It has EAS to the Pendleton exchange. The Pendleton exchange lies further north and consists of approximately 11,100 access lines. It currently has EAS to the Pilot Rock and Athena-Weston exchanges. CenturyTel of Eastern Oregon, Inc. (CenturyTel), serves the Ukiah and Pilot Rock exchanges. U S WEST Communications, Inc. (U S WEST) serves the Pendleton exchange.

The Ukiah exchange is a remote rural ranching and agricultural area that offers few commercial and business services to its local residents. Currently, the exchange only has a restaurant, tavern, gas station, laundromat, and small market. Consequently, most seek essential goods and services in neighboring communities.

The city of Pilot Rock, located approximately 34 miles north of Ukiah, is the closest town that offers some basic services. Pilot Rock offers a small grocery store, hardware supply store, restaurant, gas station, and an automotive repair shop. With a population of just 1,500, however, Pilot Rock serves primarily as a bedroom community to Pendleton. As a result, most Ukiah residents rely on retail and commercial businesses in Pendleton to meet their basic needs.

Pendleton is a relatively large metropolitan area located approximately 45 miles north of Ukiah. It offers a wide variety of commercial goods and services, including accounting, banking, insurance, legal, veterinarian, and other professional services, as well as business supply stores, automobile dealers and automotive repair shops, hardware and building supply stores, restaurants, and other retail services.

The only other neighboring community is Starkey, located some 35 miles east of Ukiah. That community, however, has less than 100 residents and offers only a small convenience store, tavern, and gas station.

Schools

Ukiah area children attend schools within the local exchange. Most teachers, however, commute from Pendleton to teach. As a result, parents and children in Ukiah incur high toll bills calling for class assignments or school activities.

Government

The Ukiah exchange lies in Umatilla County and is served by county and state government offices in Pendleton. As a result, local businesses and citizens must make long distance calls to obtain a variety of governmental and social services. These include calls to the Circuit Courts, Services to Children and Families, Adult and Family Services, Senior Services Division, Employment Division, Division of Motor Vehicles, Highway Department, District Attorney, and Umatilla County Sheriff’s office.

Medical and Dental Services

The Ukiah calling area offers no medical and dental providers. A small medical clinic offers basic care in Pilot Rock. However, most Ukiah exchange residents rely on Pendleton for primary and specialized medical and dental care. Pendleton offers a hospital and a sizable number of medical and dental providers.

Commuting Patterns

Due to the lack of centralized businesses in Ukiah, many residents commute to Pendleton to work at the large number of businesses located there.

Results of the Objective Criteria Test

U S WEST and CenturyTel provided telephone usage information for the Ukiah, Pendleton, and Pilot Rock telephone exchanges. That data is summarized in Appendix B and adopted as fact. With regard to the proposed Ukiah/Pilot Rock interexchange route, the usage information shows that an average of 1.05 toll calls per month were placed between the exchanges and 16.39 percent of Ukiah exchange residents made at least two or more toll calls to the Pilot Rock exchange. With regard to the proposed Ukiah/Pendleton interexchange route, the calling data shows that an average of 4.94 toll calls per month were placed between the exchanges and 47.53 percent of Ukiah exchange residents made at least two or more toll calls to the Pendleton exchange. The Ukiah exchange is contiguous with the Pilot Rock exchange, but not the Pendleton 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 the customers in the petitioning exchange make at least 2 toll calls 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 Ukiah and Pendleton telephone exchanges. Although petitioners failed to meet the Commission’s objective criteria, they successfully established that a community of interest exists with the Pendleton 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 a sufficient dependence by the Ukiah exchange on the Pendleton exchange to warrant EAS conversion.

The Ukiah exchange offers virtually no business or professional services for its residents. Pendleton, located approximately 45 miles north from the city of Ukiah, is a relatively large urban center that offers Ukiah exchange residents reasonable access to a variety of professional and business services, as well as other commercial activities. The city of Pendleton also serves as the county seat for Umatilla County and, as such, provides essential governmental services to Ukiah exchange residents.

This evidence, combined with the results of the objective criteria test, convinces the Commission that a community of interest exists between the Ukiah and Pilot Rock telephone exchanges. Indeed, the Ukiah petitioners made an average of almost 5 toll calls per month to the Pendleton exchange, and 47.5 percent—of a required 50 percent—of the customers made at least two calls per month to the target exchange.

Critical Needs Determination

The Commission further concludes that the EAS route between Ukiah and Pendleton is necessary to meet the critical needs of the Ukiah customers because of the lack of essential goods and services in their own exchange or a neighboring exchange. As stated above, Ukiah is a relatively small community with insufficient resources to support the needs of local residents. As a result, local residents rely on other areas for basic goods and services.

Two neighboring exchanges, Pilot Rock, and Starkey cannot reasonably meet these needs. The Pilot Rock exchange, while slightly larger in size, offers similar services as Ukiah. The Starkey exchange is considerably smaller and offers almost no goods and services. Under the circumstances, the Commission concludes that neither exchange can readily satisfy the critical needs of Ukiah exchange customers.

CONCLUSION

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

Based on these conclusions, the Commission further finds that a community of interest exists among the Ukiah and the intervening Pilot Rock 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:

1.    A community of interest exists between the Ukiah and Pendleton telephone exchanges.

2.    The extended area service route between the Ukiah and Pendleton exchanges is necessary to meet the critical need of the Ukiah petitioners because of the lack of essential goods and services located in their own exchange or an intervening exchange.

3.    A community of interest exists between the Ukiah and Pilot Rock telephone exchanges.

4. This completes Phase I of this docket. It is now ready to enter Phase II, the rate and cost phase. For Phase II, the Ukiah petition will be grouped with all other EAS dockets that complete Phase I by August 1999. The telephone companies serving the Ukiah, Pilot Rock, and Pendleton 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.