WSR 99-01-076

PERMANENT RULES

UTILITIES AND TRANSPORTATION

COMMISSION

[Docket No. UT-970545, General Order No. R-453--Filed December 15, 1998, 12:36 p.m.]

In the matter of adopting WAC 480-120-045, relating to local calling areas and repealing WAC 480-120-400 through 480-120-435, relating to extended area service.

statutory or other authority: The Washington Utilities and Transportation Commission (commission) takes this action under Notice No. WSR 98-20-104 (supplemental to WSR 98-03-011 and 98-12-071), filed with the code reviser on October 7, 1998. The commission brings this proceeding pursuant to RCW 80.01.040, 80.36.100, 80.36.140, 80.36.160, 80.36.170, and 80.36.180.

statement of compliance: This proceeding complies with the Open Public Meetings Act (chapter 42.30 RCW), the Administrative Procedure Act (chapter 34.05 RCW), the State Register Act (chapter 34.08 RCW), the State Environmental Policy Act of 1971 (chapter 34.21C [43.21C] RCW), and the Regulatory Fairness Act (chapter 19.85 RCW).

date of adoption: The commission adopted this rule on November 25, 1998.

concise statement of purpose and effect of the rule: The rule expresses a policy preference for competition and optional calling plans to meet individual customer telephone calling needs, but allows for local calling areas to be broadened to ensure that customers are able to make local calls to community medical facilities, government services, K-12 schools and a commercial center.

reference to affected rules: This rule repeals the following sections of the Washington Administrative Code relating to extended area service: WAC 480-120-400 Purpose, 480-120-405 Definition of extended area service, 480-120-410 Local calling capability, 480-120-415 Determination of extended area service routes, 480-120-420 Revenue requirements and rate design, 480-120-425 Community calling fund, 480-120-430 Impact on current compensation arrangements, and 480-120-435 Petition for waiver.

preproposal statement of inquiry and actions thereunder: The commission filed a Preproposal Statement of Inquiry (CR-101) on April 9, 1997, at WSR 97-09-023.

additional notice and activity pursuant to preproposal statement: The statement advised interested persons that the commission was considering entering a rule making clarifying the mechanisms for ensuring that telephone subscribers have minimum reasonable local calling areas and opportunities to make interexchange calls at flat rates or rates less than state-wide tariffed per minute toll rates. The commission also informed persons of the inquiry into this matter by providing notice of the subject and the CR-101 to all persons on the commission's list of persons requesting such information pursuant to RCW 34.05.320(3), by sending notice to all registered telephone companies and the commission's list of telephone attorneys, by publishing information on the commission's world wide web site, and by sending notice to interested persons of prior proceedings involving extended area service and news media in communities that had expressed concern about a need for toll-free dialing to other communities. Pursuant to the notice, the commission did engage in six workshops around the state to gather public comments on the general approach, several meetings with affected telephone companies, and developed consensus on a preferred approach.

notice of proposed rule making: The commission filed a notice of proposed rule making (CR-102) on October 7, 1998, at WSR 98-20-104. The commission scheduled this matter for oral comment and adoption under Notice No. WSR 98-20-104 at 9:30 a.m., Monday, November 16, 1998, in the Commission's Hearing Room, Second Floor, Chandler Plaza Building, 1300 South Evergreen Park Drive S.W., Olympia, WA. The notice provided interested persons the opportunity to submit written comments to the commission.

meetings or workshops; oral comments: Commission staff held workshops in six communities around the state to get public comment on the proposed rule.

At the public workshops, commenters expressed strong support for the proposed standard (i.e. local calling should meet basic community needs) and the need to expand local calling on a timely basis, but the rule should consider specific local circumstances.

commenters (written comments): The commission received written comments from the following parties:

Telephone Resellers Association (Andrew Isar) supports the rule and urges its adoption. The rule is a simple way to create local calling areas when absolutely necessary, which accomplishes two critical objectives: Leaving the door open for expanding calling areas on an ad hoc basis, and continuing to promote competition by not foreclosing competitive choice.

Public Counsel (Simon ffitch) offered two suggestions for improving the rule. First, to make it clear that customers and others may petition for expansion of local calling areas, public counsel suggested adding the following sentence to the end of subsection (1): The commission may consider expansion of a local calling area on its own motion, or upon a petition filed by customers, a local government entity, or a telecommunications company serving the existing calling area.

An existing statute, RCW 80.04.110, specifies who can bring issues before the commission, and how such complaints will be handled. Since this section of current law is consistent with public counsel's proposal, the commission added a new subsection (3) to direct potential petitioners to this procedure.

Second, public counsel suggested adding a clause to make lack of available competition one of the criteria for exceptional circumstances by amending the last sentence of the rule to read: In evaluating such requests, the commission will consider the overall community of interest of the entire exchange, and may consider other pertinent factors such as customer calling patterns, and the availability and feasibility of optional calling plans, and the level of local and long distance competition.

The commission has adopted this suggestion to amend subsection (2) of the proposed rule as the proffered factor bears directly on whether alternatives are available through a market solution as opposed to a regulatory solution.

Washington Independent Telephone Association (WITA) (Terry Vann) and GTE support adopting the rule with a definition of exceptional circumstances ("a major shift in local calling needs, due to unusual and unforeseen circumstances, where usage and/or environment have changed"). They note a dictionary definition of "exceptional" as rare, unique, and extraordinary.

The commission agrees that major shifts in political, social, or economic factors that affect calling patterns would certainly constitute exceptional circumstances. However, despite our best efforts to solve local calling problems once and for all, there may currently be exchanges whose calling would not be considered adequate. These could be considered unique, and so support consideration of expanded local calling as an exceptional circumstance, without demonstrating any change.

City of Uniontown (Peter Holland, Mayor, and Dale Miller, Planning Commission, via electronic mail) comment that the rule proposed in May would have solved problem for most small rural communities, but the commenters fear that the substitute plan will only work in larger urban areas. Uniontown and Colton are within fifteen miles of both Pullman and Lewiston, Idaho, but calls to these medical or retail centers carry per-minute toll charges. They ask the commission to return to the concept of the May rule, perhaps restricting expansion to thirty miles of commercial or medical centers. At a minimum, they ask the commission to revise subsection (1) of the proposal by removing the phrase "only under the most exceptional circumstances," asserting that this would preserve the intent of relying on competition to solve the problem, but would allow the commission to expand local calling areas where a reasonable person could determine that competitive services were not available.

It is inappropriate to return to the prior proposal. Deference to competition as a standard is appropriate, however, and the amendment to subsection (2) of the proposal will add availability of competition to the criteria for considering whether to expand local calling. The commission rejected a provision in earlier drafts of the rule to consider a calling area size based on mileage from a commercial center, since this proved to have technical problems that would make it too difficult to enforce. Because the commission believes that EAS is inappropriate for calling convenience as opposed to true community of interest, and because of problems with EAS requests, all parties (phone companies as well as the public) should be on notice that expanding local calling will require exceptional circumstances.

City of Buckley (John Blanusa, Mayor) requests that subsection (2) be modified to include regional (rather than community) medical facilities, county (as well as city) government, and to have the commission consider "preferences expressed by local governments, citizen referendum or citizen petition."

Requiring local telephone exchanges to be able to reach regional medical facilities and county governments is inappropriate, as it would result in the commission mandating county-wide local calling, a significant change in policy direction with costly consequences for telephone ratepayers. The commission may consider preferences expressed in petitions it may receive under this rule.

Philip and Adrienne McClure (Silverdale, via e-mail), these citizens comment that there would be no need to expand local calling areas if telephone exchanges corresponded to political boundaries. They argue that phone service should fit population patterns.

The commission agrees in principle that there would be advantages if phone service boundaries matched political boundaries. Unfortunately, each telephone exchange is the product of historical accident as well as other factors and is engineered to serve its current area. Redrawing exchange boundaries would be a significant and costly undertaking whose benefits would not rise to the level of its costs.

US WEST is not opposed to adoption of a new or revised rule and it did sign the settlement agreement resulting in the current proposal. It has also submitted substantial comments which have been numbered below for ease of reference:

US WEST 1. The company argues that the proposed rule language is impermissibly vague and does not address several issues of concern to the company and its customers. US WEST shared this view at the time it signed the settlement agreement. Response: The new rule language is as specific and clear as it can be, given the unique characteristics of every community and telephone exchange in Washington. The language is sufficiently specific to guide parties' actions.

US WEST 2. It is not clear why the proposed rule must limit future local calling area expansions to exceptional circumstances. Response: Mandatory expansion of local calling areas, and mandating rate increases to pay for such expansion, are not consistent with competition and customer choice. Customers who want expanded local calling, and who will use this rule to seek it, should be on notice about the commission's policy priorities and expectations.

US WEST 3. US WEST argues that the proposed rule is in conflict with the Governor's Executive Order 97-02 because [it] is not clear and concise. It merely alludes to the standards considered, without giving clear direction and procedures to establish these standards, so is not consistent with the standards required by the Governor's order. Response: The proposed rule replaces seven sections of rules with one. Although the current EAS rule provides standards which appear to be clear, these criteria were often not relevant to a given community's situation, and often did not result in a solution to calling problems. EAS standards require data which are increasingly difficult to obtain, given changes in long distance competition. The rule identifies appropriate factors to consider and provides a sufficient means of dealing with the exercise of judgment in very complex situations.

US WEST 4. US WEST argues that subsection (1) of the proposed rule does not set forth clear standards and procedures under which the commission will consider the creation of new EAS routes, compared with the existing rule. "Exceptional circumstance" is not defined and is therefore impermissibly vague. Response: Subsection (1) of the proposal must be read in conjunction with subsection (2), which sets out criteria for considering petitions. In addition, we discussed the meaning of "exceptional circumstances" above, in conjunction with WITA's comments, as having the readily available dictionary definition of unique, unusual, extraordinary.

US WEST 5. US WEST argues that subsection (2) makes the proposed rule even more vague, because no process is described for determining whether customers have or do not have the required local calling capability. It is not clear how the determination of a route deemed necessary due to "exceptional circumstance" occurs. If a customer petitions for additional EAS, stating that they cannot call their city government offices, what process will be utilized to determine if this situation meets the rule criteria? Response: RCW 80.04.110 outlines procedures for considering petitions. The commission will compare the facts against the criteria in subsection (2) of the proposed rule, apply its expertise and its judgment, and reach a decision.

US WEST 6. US WEST argues that "commercial center" should be defined, and that the proposed rule should also include specific definitions of each community service. It argues that decisions as to a given area's qualification for expanded area calling will be less arbitrary if all parties agree at the start on the definition of each community service. Response: Our experience dealing with this rule over the past eight months has led us to believe that it is not possible to define these terms precisely since they depend on the nature of each exchange and each community. Discretion is required in applying the terms, based on the facts of each request.

US WEST 7. The proposed new rule does not contain a method for recovery of new costs imposed by this rule. The commission ordered US WEST to implement state-wide average basic calling rates for its business and residential customers in Docket No. UT-950200. If this proposed rule becomes effective as written, and future EAS charges are assessed only to participating customers, US WEST would be required to return to various rate group pricing structures. Response: Each of the twenty or so local exchange companies may wish to take a different approach to recovering any costs of expanded local calling areas. Mandating one single recovery mechanism is not consistent with competition, or providing decision-making flexibility to companies.

rule-making hearing: The rule proposal was considered for adoption, pursuant to the notice, at 9:30 a.m. on November 16 before Chairwoman Anne Levinson and Commissioner William R. Gillis. The meeting was continued on the record until 1:30 p.m. November 16, and was further continued on the record until 9:30 a.m. on November 25, 1998, before Chairwoman Anne Levinson and Commissioners Richard Hemstad and William R. Gillis. The commission heard oral comments from Jeffrey Showman, representing commission staff. At 9:30 a.m. on November 16, Mr. George Astler of Birch Bay made oral comments in support of expanded local calling at reasonable rates through optional calling plans rather than mandatory calling expansions. On November 16 at 1:30 p.m., Joyce Morris of US WEST reiterated US WEST's written comments, discussed above. On November 25, Terry Vann of the Washington Independent Telephone Association (WITA) and Simon ffitch of the Public Counsel section of the Attorney General spoke in favor of adopting the rule.

suggestions for change that are rejected: The commission discussed above the changes that it rejected, and explained the reasons for its action.

commission action: After considering all of the information regarding this proposal, the commission repealed WAC 480-120-400 through 480-120-435, inclusive, relating to extended area service, and adopted the proposed rule.

changes from proposal: The commission adopted the proposal with the following changes from the text noticed at WSR 98-20-104: Subsection (2) of the rule was amended to add the following factors to be considered in deciding whether to grant a petition for extended area service: and the level of local and long distance competition.

A new subsection (3) was added to identify a process for seeking extended area service: (3) Requests for expanded local calling areas shall be made pursuant to RCW 80.04.110 (the commission's complaint statute).

Both of these suggestions are clarifying statements that would make the rule easier to understand and merely make explicit what was already implicit in the rule's language. This order discusses the reasoning for the changes, above.

statement of action; statement of effective date: In reviewing the entire record, the commission determines that WAC 480-120-400 through 480-120-435 should be repealed, and WAC 480-120-045 adopted, to read as set forth in Appendix A, as a rule of the Washington Utilities and Transportation Commission, to take effect pursuant to RCW 34.05.380(2) on the thirty-first day after filing with the code reviser.

order

the commission orders That:

1. WAC 480-120-400 through 480-120-435 are repealed, and WAC 480-120-045 is adopted, to read as set forth in Appendix A, as a rule of the Washington Utilities and Transportation Commission, to take effect on the thirty-first day after the date of filing with the Code Reviser pursuant to RCW 34.05.380(2).

2. This order and the rule set out below, after being recorded in the register of the Washington Utilities and Transportation Commission, shall be forwarded to the Code Reviser for filing pursuant to chapters 80.01 and 34.05 RCW and chapter 1-21 WAC.

3. The commission adopts the commission staff memoranda, presented when the commission considered filing a preproposal statement of inquiry, when it considered filing the formal notice of proposed rule making, and when it considered adoption of this proposal, as supplemented by the text of this order, as its concise explanatory statement of the reasons for adoption and for rejection of proposed changes, as required by RCW 34.05.025.

Number of Sections Adopted in Order to Comply with Federal Statute: New 0, amended 0, repealed 0; Federal Rules or Standards: New 0, amended 0, repealed 0; or Recently Enacted State Statutes: New 0, amended 0, repealed 0.

Number of Sections Adopted at Request of a Nongovernmental Entity: New 1, amended 0, repealed 8.

Number of Sections Adopted on the Agency's own Initiative: New 1, amended 0, repealed 8.

Number of Sections Adopted in Order to Clarify, Streamline, or Reform Agency Procedures: New 1, amended 0, repealed 8.

Number of Sections Adopted using Negotiated Rule Making: New 0, amended 0, repealed 0; Pilot Rule Making: New 0, amended 0, repealed 0; or Other Alternative Rule Making: New 0, amended 0, repealed 0.

dated at Olympia, Washington, this 15th day of December 1998.

Washington Utilities and Transportation Commission

Anne Levinson, Chair

Richard Hemstad, Commissioner

appendix "a"

OTS-1923.4

NEW SECTION

WAC 480-120-045  Local calling areas. (1) The commission may expand local calling areas only under the most exceptional circumstances. The commission will generally rely on long distance competition, local competition, and optional calling plans that assess additional charges only to participating customers to meet customer demand for alternate or expanded calling.

(2) In evaluating requests for expanded local calling, the commission will consider whether the local calling area is adequate to allow customers to call and receive calls from the following community services: Community medical facilities, police and fire departments, city or town government, elementary and secondary schools, libraries, and a commercial center. In evaluating such requests, the commission will consider the overall community of interest of the entire exchange, and may consider other pertinent factors such as customer calling patterns, the availability and feasibility of optional calling plans, and the level of local and long distance competition.

(3) Requests for expanded local calling areas shall be made pursuant to RCW 80.04.110 (the commission's complaint statute).

[]

REPEALER

The following sections of the Washington Administrative Code are repealed:

WAC 480-120-400 Purpose.

WAC 480-120-405 Definition of extended area service.

WAC 480-120-410 Local calling capability.

WAC 480-120-415 Determination of extended area service routes.

WAC 480-120-420 Revenue requirements and rate design.

WAC 480-120-425 Community calling fund.

WAC 480-120-430 Impact on current compensation arrangements.

WAC 480-120-435 Petition for waiver.

© Washington State Code Reviser's Office