DE 97-193
BELL ATLANTIC
PETITION TO EXPAND THE NORTHWOOD (942) EXCHANGE
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.
I. PROCEDURAL HISTORY
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.
II. POSITIONS OF THE PARTIES AND STAFF
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.
III. COMMISSION ANALYSIS
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