DE 97-193
                               BELL ATLANTIC
                Order Granting Opportunity to Poll Citizens
                         O R D E R   N O.  22,831
                             January 12, 1998
         APPEARANCES: William A. Johnson for the Petitioners,
     Victor D. Del Vecchio, Esq. for New England Telephone & Telegraph
     Company; James A. Anderson, Esq. for the Office of the Consumer
     Advocate; and E. Barclay Jackson, Esq. for the Staff of the New
     Hampshire Public Utilities Commission.
               On August 28, 1997, the New Hampshire Public Utilities
     Commission (Commission) received a petition from William A.
     Johnson and three co-petitioners (Petitioners) requesting
     expansion of the 942 local calling area, also known as Extended
     Area Services (EAS), to include Concord.  On October 3, 1997, the
     Commission received a letter from Mr. Johnson detailing the
     anticipated rate increase caused by the proposed EAS expansion
     and including a petition signed by 149 Northwood residents
     supporting the expansion.
               On October 24, 1997, the Commission issued an Order of
     Notice scheduling a hearing for December 2, 1997.  The Order of
     Notice indicated that EAS petitions are subject to a standard
     established by Order No. 22,204 issued June 18, 1996 which
     includes consideration of community of interest, the effect on
     telecommunications competition within New Hampshire, and
     consistency with state and federal law.
               On December 2, 1997, the Commission heard comments from
     members of the public, from the New England Telephone & Telegraph
     Company d/b/a Bell Atlantic and hereinafter referred to as Bell
     Atlantic, the Office of the Consumer Advocate (OCA) and the Staff
     of the Commission (Staff).  The Commission accepted written
     comments until December 9, 1997.
          A.   Petitioners
               A number of Northwood residents submitted comments,
     both written and oral, in support of expanding the Northwood
     exchange to include Concord.  In addition, the Commission
     received a number of letters from Northwood residents who did not
     attend the hearing.  The primary argument put forth is that a
     community of interest exists between Northwood and Concord.  The
     commenters supported their argument with information about the
     percentage of Northwood residents who work in Concord, the town's
     participation in the Capital Area Mutual Fire Compact, the use of
     Concord medical and educational facilities, inclusion in the
     Concord telephone directory, and the inability to call a business
     center without incurring a toll charge.  In addition,
     representatives from the Board of Selectmen and the Northwood
     Chamber of Commerce indicated that expanding the local calling
     area would enhance the economic future of Northwood.  The
     commenters also pointed to other towns, such as Deerfield, that
     are part of calling areas that have a community of interest that
     extends to noncontiguous municipalities.
          B.   Bell Atlantic
               Bell Atlantic argued that expansion of Northwood's EAS
     to include Concord is unnecessary and inappropriate at this time. 
     In support of its argument Bell Atlantic pointed out that
     Northwood currently has the ability to call, toll free, essential
     services such as schools, police, fire protection, local
     government offices, and medical services.  Further expansion,
     according to Bell Atlantic, should occur as a result of market
     forces rather than regulatory decree, especially in light of the
     increasingly competitive toll market.  Competition in the toll
     market could be harmed as a result of expanding EAS beyond the
     essential services test for community of interest which the
     Commission has relied on in recent EAS cases.
               Northwood's EAS currently includes Barrington,
     Deerfield, Epping, Epsom and Pittsfield.  If the Commission
     approves Bell Atlantic's proposal to uniformly increase EAS for
     every exchange to home and contiguous exchanges, Northwood's EAS
     will add the towns of Durham and Center Barnstead.
               If the Commission decides nonetheless to expand the
     Northwood local calling area to include Concord, Bell Atlantic's
     witness testified, Northwood customers would move from their
     current rate group to a higher rate group.  The monthly rates for
     unlimited residential calling will rise from $13.52 to $14.39
     (calculated using Bell Atlantic's proposed rate group structure).
     Hence, the added expense for Northwood residents will be slight. 
     The cost to Bell Atlantic, the company indicates, will include a
     $48,000 net lost toll revenue plus probable costs for increasing
     network capacity as a result of usage stimulation.  Therefore,
     Bell Atlantic argues, any EAS expansion beyond "home and
     contiguous" should include a cost recovery mechanism for lost
     toll revenues and increased investment costs.  Such a cost
     recovery mechanism, Bell Atlantic asserts, is consistent with the
     rate of return regulation under which Bell Atlantic operates in
     New Hampshire.  One such cost recovery mechanism, used in the
     past, would impose a surcharge on Northwood customers over and
     above the rate group charge, to cover Bell Atlantic's anticipated
     toll revenue losses.  Another would raise local rates for all New
     Hampshire customers.  However, Bell Atlantic points out that a
     surcharge would not guarantee recovery of its losses because
     current customers are able to choose an alternate toll carrier. 
          C.  OCA
               The OCA voiced concern about the effect of Bell
     Atlantic's lost toll revenues on residential customers throughout
     New Hampshire.  The OCA is against charging higher local rates to
     customers in Marlboro and Plaistow so that customers in Northwood
     can include Concord in its local calling area.  In addition, the
     OCA raised a general concern that expanding EAS to non-contiguous
     exchanges could chill the newly competitive toll market.
          D.   Staff
               Staff did not support expansion of Northwood's EAS
     because, it argued, enlarging the calling area would reduce
     significantly six of the potential toll markets and thus
     discourage competition.  Staff cited to the Commission's three
     recent EAS decisions for the appropriate standard for allowing a
     poll of citizens on the question of expanding EAS.  Staff argued
     that the Northwood circumstances do not meet the standard.  In
     addition, Staff averred that the cost of expansion would be more
     than the increased rate group charges because of the impact on
     Bell Atlantic of lost toll revenues.
               This petition is before us for analysis in light of our
     prior decisions regarding expansion of EAS, the
     Telecommunications Act of 1996 (TAct) and the actual changes in
     telecommunications markets in New Hampshire.
               Our Orders in DE 97-046, DR 97-038 and DR 97-075,
     recounted the lengthy EAS investigation, DE 94-001, in which we
     rejected imposition of a statewide change to EAS, finding instead
     that increased competition in the toll market as a result of
     intraLATA presubscription and other changes mandated by the TAct
     would effectively expand EAS by creative offerings of competing
     carriers.  Order No. 20,107 (April 15, 1996).  By Order No.
     22,204, issued June 18, 1996, we also found that carriers and
     communities retained the right to petition for EAS expansion and
     articulated the standard for assessing an EAS petition.  The
     standard applies a community of interest approach as defined in
     FCC Docket No. 96-45, In the Matter of Federal-State Joint Board
     on Universal Service, Report and Order, FCC 97-157, released May
     8, 1997 and hereinafter referred to as the Universal Service
     Order.  In the FCC's opinion, a calling area which reflects the
     community of interest is one which "allows subscribers to call
     hospitals, schools and other essential services without incurring
     a toll charge."  Further elaborating on the issue of
     affordability, the FCC states in its Universal Service order that
     "...affordability is affected by the amount of toll charges a
     consumer incurs to contact essential service providers such as
     hospitals, schools, and government offices that are located
     outside of the consumers local calling area...".
               We use the FCC definitions to facilitate examination of
     the Northwood petition.  From the comments made by customers in
     the Northwood exchange at the public hearing on December 2, 1997,
     the exchange does not encompass their community of interest.  We
     are convinced that Concord is the community of interest for at
     least a sizeable group of residents of Northwood for the purposes
     of meeting their medical, educational, and business needs.  We
     will therefore grant the petitioners' request that there be a
     poll of their fellow residents on the issue of expanding EAS one
     way from the 942 exchange to Concord.  No ballot of Concord
     customers is necessary because expansion of the Concord EAS to
     include Northwood will not result in a rate group change. In
     order to reflect accurate costs of the proposed expansion, the
     poll of Northwood residents will not occur until after completion
     of our docket DR 97-180 considering Bell Atlantic's proposal to
     compress its rate group structure from 21 groups to 5.  A hearing
     in that docket is scheduled for January 29, 1998.
               The question upon which residents will be polled will
     involve a rate increase limited to that caused by the change in
     rate group determined by the increased number of lines reachable
     without paying a surcharge.  We do not find inclusion of
     surcharges for lost revenues to be appropriate at this time.  As
     we stated in Order No. 22,675 in DR 97-046, given the advent of
     competition in the toll market the goal of revenue neutrality,
     that is, determining lost toll revenues, is very elusive.
               As in our decisions in DR 97-046, DR 97-075 and      
     DE 97-038, in order to insure maximum effective participation,
     the polling ballot will be designed, distributed, and tabulated
     by the Commission.  The ballot question shall include a statement
     of the increased rate necessitated by the expanded calling area. 
     The poll shall be considered valid if ballots are returned by 25%
     or more of the customer base.  The outcome of a conclusive vote
     will be determined by a simple majority of the returned ballots. 
     As in the Danbury, Chester and Franklin proceedings, we consider
     the polling procedure used in this docket to be an experiment
     that will assist us in developing a generic approach to resolving
     these kinds of problems. 
               Based upon the foregoing, it is hereby 
               ORDERED, that a vote on the EAS issue shall be
     conducted as noted above for expansion of the Northwood exchange
     to include Concord based on the price of the rate group
     determined to be appropriate after the conclusion of DR 97-180;
     and it is
               FURTHER ORDERED, that Bell Atlantic shall provide the
     Commission with a list of Northwood exchange customers, names,
     addresses and telephone numbers, and to the extent technically
     possible, in mailing label or PC format after the conclusion of
     DR 97-180.
               By order of the Public Utilities Commission of New
     Hampshire this twelfth day of January, 1998.
        Douglas L. Patch    Bruce B. Ellsworth        Susan S. Geiger
            Chairman           Commissioner            Commissioner
     Attested by:
     Thomas B. Getz
     Executive Director and Secretary