DE 98-147
KEARSARGE TELEPHONE COMPANY,
CHICHESTER TELEPHONE COMPANY, MERIDEN TELEPHONE COMPANY
Consolidation,
Implementation of 2-Way Home and Contiguous EAS,
Expansion of EAS Between Boscawen and Concord
Order Nisi Approving Stipulation
O R D E R N O. 23,147
February 18, 1999
APPEARANCES: Murray Plumb & Murray by John C.
Lightbody, Esq. for Kearsarge Telephone Company, Chichester
Telephone Company, Meriden Telephone Company, William Homeyer
for the Office of the Consumer Advocate on behalf of residential
ratepayers, E. Barclay Jackson, Esq. for the Staff of the New
Hampshire Public Utilities Commission.
I. PROCEDURAL HISTORY
By Order No. 22,861, on March 9, 1998, the Commission
approved 2-Way Home and Contiguous Extended Area Service (EAS)
for all of Bell Atlantic's territory and ordered that independent
local exchange carriers (ICOs) meet with the Staff of the
Commission (Staff) and the Office of the Consumer Advocate to
determine what rate changes, if any, would be necessary to
implement 2-Way Home and Contiguous EAS in ICO territories.
Kearsarge Telephone Company (Kearsarge), Chichester Telephone
Company (Chichester), and Meriden Telephone Company (Meriden) are
all ICOs and all subsidiaries of TDS Telecom. Collectively,
Kearsarge, Chichester, and Meriden are hereinafter referred to as
the TDS Companies. The TDS Companies, Staff, and the OCA held
technical discussions as ordered.
On August 19, 1998, the TDS Companies filed a Petition
to consolidate into a single company, Kearsarge, that would
continue to provide local exchange service, doing business under
the name TDS Telecom, in all of the exchanges and territories
previously served by the TDS Companies. The petition to
consolidate also included a proposal for the implementation of
2-Way Home and Contiguous EAS for the merged company.
On September 18, 1998, in response to Staff's on-going
inquiry into the earnings of the TDS Companies, the Commission
opened Docket Nos. DR 98-157, 98-158, and 98-159 to investigate
possible over-earnings. By Order No. 23,092 (December 21, 1998),
the Commission established temporary rates for each of the TDS
Companies at current rates.
On May 18, 1998, subscribers of Kearsarge filed a
petition with the Commission, pursuant to N.H. Admin. Rules
Chapter Puc 410, for 2-Way EAS service between the Boscawen and
Concord exchanges. The Commission assigned docket number DE
98-086 to the petition. After a duly noticed public hearing on
DE 98-086, the Commission issued Order No. 23,039 (October 7,
1998) finding that Concord is the community of interest for at
least a sizable group of the residents of Boscawen and ordering
Staff and Kearsarge to develop a cost proposal for balloting of
the Boscawen subscribers pursuant to N.H. Admin. Rule Puc 410.0.
Staff, the OCA, and Kearsarge agreed that, in the context of the
consolidation, implementing Boscawen to Concord EAS could occur
at a cost to ratepayers of $4.22 for residential ratepayers and
$8.23 for business ratepayers. If approved by Boscawen voting
customers, the residential rate of $4.22 will result in a total
amount no greater than the Bell Atlantic rate, when added to the
agreed upon cost to implement Home and Contiguous EAS. By Order
No. 23,115 (January 26, 1999), the Commission ordered Staff to
commence the balloting of the customers in the Boscawen Exchange
for EAS expansion to Concord (a Bell Atlantic exchange) at those
rate levels. By motion filed February 4, 1999, Kearsarge
requested that the Commission stay Order No. 23,115 until after
the Commission's decision in this Docket No. DE 98-147.
On January 14, 1999, the TDS Companies, Staff, and the
OCA filed a Stipulation and Agreement (Stipulation) purporting to
resolve all the issues pertaining to consolidation and to
implementation of 2-Way Home and Contiguous EAS for the TDS
Companies' territories, including a process for resolving the
Boscawen to Concord EAS question. A public hearing on the
Stipulation was held at the Commission on February 2, 1999, at
6:30 p.m.
II. POSITIONS OF THE PARTIES AND STAFF
The TDS Companies, Staff, and the OCA agree that upon
completion of the consolidation, Kearsarge would assume all the
rights and obligations of the other TDS Companies to provide
local exchange telephone service throughout the exchanges
currently served, in accord with the terms and conditions of the
current tariffs, as modified by the EAS provisions of the
Stipulation. As a result of consolidation, intrastate access
rates would be averaged on a revenue neutral basis, and non-basic
and non-recurring rates would be uniform for all exchanges.
The TDS Companies, Staff and the OCA agree that the
merger would enhance the management and operation of the
companies by permitting closer integration of activities such as
customer billing, plant records systems, and repair service,
among others. In support, the TDS Companies aver that
efficiencies will occur because of combining books and records,
simplifying planning for growth and plant deployment. No
consolidation of offices or reductions in staff would now be
necessary because of consolidations undertaken previously when
each company was acquired by the TDS parent company. However,
the merged company would prepare a single set of financial
statements, audits would occur for a single entity, and
inter-company billing would be eliminated. The merger would
result in no changes in the operation or personnel of local
offices in New Hampshire. Customers of the merged company, TDS
Telecom, would not experience name change confusion because the
TDS Companies each discontinued using their individual company
name over the last few years. Furthermore, billing format would
not change; office telephone numbers, fax numbers, and e-mail
addresses would remain in place.
In order to protect against cross-subsidization by
existing individual company customers, the Stipulation prohibits
TDS Telecom from averaging any of the basic residential or
business rates for any of the exchanges of the consolidated
company. The Stipulation also provides a two year moratorium
during which TDS Telecom may not seek rate increases except for
exogenous changes such as federal access rate changes or local
number portability.
The Stipulation directs Staff and TDS Telecom to
jointly develop a program of customer education about the
consolidation. The panel of witnesses presenting the Stipulation
at hearing testified that the consolidation will cause no net
harm and in fact may result in benefits to customers.
Under the Stipulation, the rates proposed for polling
Boscawen subscribers about the EAS expansion to Concord would be
$4.22, considerably less than the full cost of implementing the
change, should Boscawen subscribers vote favorably. The Home and
Contiguous EAS provisions of the Stipulation create Home and
Contiguous EAS for all exchanges of TDS Telecom, with a rate
increase of $1.95 in the basic residential rates of each exchange
and various increases in the business rates of each exchange.
The cost of implementing Home and Contiguous EAS,
according to Staff and the parties, consists of additional plant
and of lost toll and access revenues. The costs are $170,500
more than the additional revenues generated by the rate
increases. TDS Telecom will not seek recovery of those costs.
III. COMMISSION ANALYSIS
In recent years, since enactment of the
Telecommunications Act of 1996, New Hampshire's competitive
telecommunications carriers have implemented numerous mergers and
acquisitions. In Re Eastern Utilities Associates, 76 NH PUC 236,
252(1991), we confirmed that the "no net harm" test, articulated
as the public good standard in Grafton County Electric Light and
Power Co. State, 77 N.H. 539, (1915) is the standard to be
applied to a proposed merger or acquisition. In essence, the "no
net harm" test requires approval of a proposed merger if the
public interest is not adversely affected. Re Eastern Utilities
Associates at 241, cited in Re CCI Telecommunications of New
Hampshire, Inc. 81 NH PUC 844, 845 (1996).
We have reviewed the testimony and the Stipulation of
the parties and Staff and will approve the proposed merger
between Kearsarge, Meriden, and Chichester. Based upon the
representations of TDS Telecom and the totality of the
circumstances, there is no net harm to the public as the result
of the Stipulation. Furthermore, the consolidation appears to
produce benefits for the merged company and, potentially, for
customers in the increasingly competitive environment.
We have reviewed the testimony and the Stipulation
regarding expansion of EAS to include Home and Contiguous
exchanges. Consistent with our findings in Docket No. 97-180, we
find that New Hampshire customers will benefit from clear, easily
understood, reasonably equitable EAS. Home and Contiguous 2-way
EAS is in the public good where it can be achieved (1) without
increasing monthly rates for customers who receive no benefit
from the EAS change, and (2) without hindering the federally
mandated objective of a competitive telecommunications market.
Home and Contiguous 2-way EAS permits customers to make calls
within their home exchange and every other exchange that is
contiguous to the home exchange without incurring toll charges.
Any non-contiguous exchange which was formerly included in the
local calling area would remain in the local calling area.
According to the proposal, in order to achieve Home and
Contiguous 2-way EAS, basic residential rates will increase by
$1.95 and basic business rates will increase by an amount that
keeps them at or below the rates charged by Bell Atlantic.
The proposed EAS expansion affects six exchanges:
Chichester, Meriden, New London, Andover, Boscawen, and
Salisbury. In order to allow for the expansion to occur, if
approved, concurrently with the Bell Atlantic exchange expansions
so as to minimize confusion, the public notice of the hearing on
February 2, 1999, was relatively short. Furthermore, icy weather
conditions on the night of the hearing made travel to the hearing
difficult. Nonetheless, we heard from numerous members of the
public. We made special arrangements for three residents of New
London to participate via conference call; approximately ten
people attended the hearing; and we received a total of 99
comments both before and after the hearing via telephone, regular
mail and e-mail. Of those comments, favorable comments
outnumbered negative comments by a wide margin for Meriden,
Salisbury, New London, and Andover. Favorable comments regarding
Boscawen and Chichester were only slightly more numerous than
negative comments. Although, we do not decide EAS cases upon a
majority vote, we note that it appears more interested consumers
believe this EAS expansion will benefit them than not. Taking
this in account, along with our finding that a uniform, equitable
EAS is in the public good, we will approve the proposed EAS
expansion.
We have not acted upon Kearsarge's Motion for Stay of
our Order No. 23,115 directing balloting of Boscawen customers
regarding expansion of EAS to include the Concord exchange. That
motion requested a stay until after our final decision in this
docket. Because the rate increase upon which Boscawen customers
will be polled is defined by the Stipulation, we will grant the
motion.
Based upon the foregoing, it is hereby
ORDERED NISI, that the proposed merger of Kearsarge,
Meriden, and Chichester as outlined above and in the Stipulation
is Approved; and it is
FURTHER ORDERED NISI, that the proposed expansion to
Home and Contiguous 2-way EAS is Approved; and it is
FURTHER ORDERED NISI, that the temporary rates
currently in effect for Kearsarge, Meriden, and Chichester shall
be revised pursuant to Schedules C, D, and E in the Stipulation;
and it is
FURTHER ORDERED, that The TDS Companies' Motion for
Stay of Order No. 23,115 is granted; and it is
FURTHER ORDERED, that the TDS Companies shall cause a
copy of this order nisi to be published once in a statewide
newspaper of general circulation or of circulation in those
portions of the state where operations are conducted, such
publication to be no later than March 2, 1999 and to be
documented by affidavit filed with this office on or before March
10, 1999; and it is
FURTHER ORDERED, that all persons interested in
responding to this order be notified that they may submit their
comments on this matter before the Commission no later than March
10, 1999; and it is
FURTHER ORDERED, that this Order nisi shall be
effective March 17, 1999, unless the Commission provides
otherwise in a supplemental order issued prior to the effective
date; and it is
FURTHER ORDERED, that the TDS Companies shall file a
compliance tariff with the Commission on or before March 24,
1999, in accordance with N.H. Admin. Rules, Puc 1603.02(b).
By order of the Public Utilities Commission of New
Hampshire this eighteenth day of February, 1999.
Douglas L. Patch Susan S. Geiger Nancy Brockway
Chairman Commissioner Commissioner
Attested by:
Thomas B. Getz
Executive Director and Secretary