GNRT937C.docx

Q.Please state your name and address.
A.My name is Wayne Hart.  My business address is 472 West Washington, Boise, Idaho.
Q.By whom are you employed, and in what capacity?
A.I am employed by the Idaho Public Utilities Commission (IPUC; Commission) as a Telecommunications Analyst in the Telecommunications Section.
Q.What is your educational background?
A.I received a Master's Degree in Bacteriology from the University of Wisconsin in Madison, Wisconsin, and a Bachelor's Degree in Biological Sciences from Indiana University in Bloomington, Indiana.
Q.Please outline your experience that is relevant to your testimony?
A.I served as a Utilities Compliance Investigator since May of 1994, and have handled nearly 2500 complaints, comments and inquiries, with over 1500 of those involving telecommunications issues, since joining the IPUC Staff.  I served on the Staff team that performed a service quality audit of U S WEST in 1995 and 1996 for Case No. USW-S-95-4.
Q.Have you previously testified before this Commission?
A.Yes.  I presented testimony in Idaho Power’s general rate case (IPC-E-94-5) in 1995 and in the current U S WEST rate case (USW-S-96-5).
Q.What is the purpose for your testimony?
A.My purpose is to address the petitions from customers of Citizens Telecommunications of Idaho (Citizens) in Homedale, Wilder and Parma who are requesting an expansion of their local calling area to include the exchanges of Caldwell and Nampa.  I will discuss the general history of Extended Area Service (EAS) requests in this area, identify the extent to which a community of interest exists between the communities which are included in this case, discuss the costs of providing expanded local calling areas, and identify the potential impacts on local customers’ bills should the Commission decide expanded calling areas are appropriate.
Q.What has been the history of EAS deliberations for these communities?
A.In February of 1981, the Commission received a petition from residents of the Marsing area seeking an investigation of the toll charges imposed upon residents of Marsing and Homedale for calls to the Caldwell exchange.  As a result of this investigation, and a public hearing held in Marsing, the Commission issued Order No. 16875, directing Continental Telephone Company of the West, (Contel) the local exchange company then serving Marsing, Homedale, Wilder and Parma, to provide toll-free calling from these four exchanges to the Caldwell exchange, and directing Mountain Bell, now known as U S WEST Communications (U S WEST or USWC), the local exchange company serving Caldwell and Nampa, to provide toll-free calling for those customers living in the Sunnyslope area of the Caldwell exchange, to the four Contel exchanges.
Both Contel and USWC petitioned for reconsideration and, based upon evidence presented at a subsequent hearing, in Order No. 17412, the Commission cited the high costs of providing expanded area service to all four exchanges and denied toll-free calling for Homedale, Wilder and Parma, but granted it for Marsing to the Sunnyslope area of the Caldwell exchange.  The companies were also directed to develop a calling plan to address the high toll concerns of the customers in Homedale, Wilder and Parma.  In a subsequent order, the Commission granted full EAS between Marsing and Caldwell.  On September 14, 1982, in Order No. 17564, the Commission approved U S WEST and Contel’s proposed TOLL-PAC from Wilder, Homedale and Parma to the Caldwell exchange.  
In 1988, the Commission received a formal request from students and patrons of the Vallivue School District to move the boundary line between the Caldwell and Wilder exchanges.  As a result of the investigation at that time, the Commission, in Order No. 22109, ordered the implementation of METRO-PAC service to customers in the Wilder exchange.
In March of 1993, the Commission received petitions signed by 736 people in the Wilder and Homedale exchanges requesting EAS to both the Caldwell and Nampa exchanges.  The Commission opened Case No. GNR-T-93-7 in response to that petition.  
In April of 1993, the Commission received a petition signed by 525 people in the Parma exchange, requesting EAS to Caldwell, NuAcres and Nyssa, Oregon exchanges.  This was assigned Case No. GNR-T-93-11.  An additional 381 signatures were received on subsequent petitions from the Parma area.  
In May of 1993, the Commission also received petitions requesting EAS between the Parma and Wilder exchanges.  The Commission directed that this request be addressed as part of Case No. GNR-T-93-11.  In May of 1994, Citizens applied to the Commission for the approval of the purchase from GTE of 14 exchanges, (GTE had purchased them from Contel) including the Parma, Wilder and Homedale exchanges.  In Order Nos. 25219 and 25357, the Commission tentatively approved the purchase of these exchanges from GTE, and directed Citizens to prepare a plan for the improvement of the facilities and services in these exchanges.  The plan was also to address the existing petitions for EAS between Parma and Wilder.  In November of 1994, the Commission issued Order No. 25808, which approved the implementation of EAS between Parma and Wilder.
In June of 1993, in Order No. 24975, the Commission postponed action on all EAS cases pending at that time and initiated a comprehensive, statewide, study of EAS issues.  That study, which became Case No. GNR-T-93-13, resulted in Commission Order 26311 on February 15, 1996.  That order specifically identified a number of criteria that would be examined as it considered EAS cases, but did not establish any absolute numeric thresholds for granting EAS.  That Order indicated that the Commission “intends to expeditiously move to gather specific calling data, obtain cost information and begin its evaluation of the outstanding EAS petitions.”
Q.What were the specific criteria the Commission indicated it would consider?
A.Order No. 26311 states:
we find that many of these factors are
appropriate in evaluating the community
of interest existing between two exchanges.  
The factors may be divided into two cate-
gories.  We find that the first category
carries more significance than the second
category.  The first category of factors
includes: [1] geographic proximity
(distance between exchanges); [2] the
presence of geographic or other physical barriers (mountains, rivers, valleys)
between exchanges; [3] county seat re-
lationship (are both exchanges in the
same County); [4] the relationship to
school district (do both exchanges share
the same school district); [5] the prox-
imity to medical facilities and services;
and [6] the willingness of customers to
pay increased rates.  We believe these
factors, in addition to the calling data
shall be designated as the primary factors
or guidelines to be applied in evaluating community of interest for EAS routes.
Q.What factors are in the second category?
A.The Order goes on to state:
The second set of factors represent re-
finements or adjustments to our primary
community-of-interest factors.  The sec-
ondary set of factors include:  [1] the
number of lines in the home exchange(s)
and the target exchange(s); [2] toll-free
access to information providers (e.g.
Internet, on-line databases, distance
learning resources); and [3] the number
of foreign exchange, private line and
1-800 customers in each exchange.
Q.Does your analysis include the Parma to NuAcres or Parma to Nyssa, Oregon, routes?
A.No.  The NuAcres exchange is operated by Farmers Mutual Telephone Cooperative, which is not subject to PUC regulation.  If Farmers and Citizens were to voluntarily agree to an EAS between the two areas, as Filer Mutual and USWC have for the Filer exchange, then the Commission would have the authority to review the agreement, but it cannot order Farmers into an agreement.
An EAS to an Oregon exchange requires the approval of both the Oregon and Idaho Commissions as well as the FCC.  If the interest for EAS on the Parma-Nyssa route is sufficient, Staff recommends that it be addressed in a subsequent proceeding.
Q.Have you analyzed the routes to Boise or other routes in the new U S WEST regional EAS?
A.No.  I did not receive Boise data from Citizens in time.  We plan to address those routes in rebuttal testimony.    
Q.How do the exchanges in this case fare in relationship to “geographic proximity”?
A.As can be seen from Staff Exhibit No. 101, all three exchanges, Parma, Homedale and Wilder, share a boundary with the Caldwell exchange.  In many cases, customers of one company consider customers of the other as neighbors.
The distance between the Homedale central office and the Caldwell central office is 13 miles, while the distance between Wilder and Caldwell central offices is 12 miles.  Both are 19 miles from the Nampa central office.
Using the vertical and horizontal coordinate information and procedures for Parma, I calculated a distance of 16 miles to Caldwell, and 24 miles to Nampa.
Q.What about the presence of geographic or other physical barriers?
A.No such barriers exist.  The land between the cities of these exchanges is predominantly farmland.  Most of the exchange borders are simply imaginary lines that cut through the fields of the farmers in the area.  
Q.What about county seat relationships?
A.All of the Wilder exchange lies within Canyon County, of which Caldwell is the county seat.  The Nampa exchange is also located in Canyon County.  The Parma exchange straddles the boundary between Canyon and Payette Counties, with most of the exchange located within Canyon County.  The only incorporated city in the exchange, Parma, is also located within Canyon County. The Homedale exchange straddles the boundary between Canyon and Owyhee Counties, with a portion of the exchange in Canyon County and the larger portion, including the City of Homedale, within Owyhee County.  The section of the exchange that lies North/East of the Snake River, and therefore in Canyon County, includes a significant amount of commercial growth that has located just across the river from the City of Homedale, as well as a number of farms and residences.
Q.What about school district boundaries?
A.School district boundaries are also shared by these exchanges.  In fact, the petition the Commission received in 1988 originated among customers living within the boundaries of the Vallivue School District.  This district straddles the boundary between the Wilder and Caldwell exchanges.  Customers of Contel who lived within the Vallivue School District requested that the exchange boundaries be changed so that they might become customers of U S WEST, the same company that served a majority of the residents in the school district.
In Case No. GNR-T-93-13, the Staff report indicated that the Notus School District, which is primarily in the Caldwell exchange, also had a significant number of students located in the Parma exchange.  A few of the letters from residents in this area also identify this as one of the reasons for their support of this EAS.  The Parma exchange boundary is less than a mile from the Notus city limits.  
In addition, the Wilder School District indicated that it had students whose homes were located in the Caldwell exchange.  A private school, the Caldwell Alternative School, identified that nearly a third of its students lived outside the Caldwell exchange, with students coming from all three of these exchanges.  The other private schools in the area, including the Greenleaf Friends Academy which is located near the boundary between the Wilder and Caldwell exchanges, and Gem State Academy, located south of Caldwell, both indicated they had a significant number of students from the Citizens’ exchanges, and that toll charges did influence communication with the students and families from these exchanges.
A number of area schools indicated that teachers lived outside of the exchange in which the school was located, and that parents often worked in the Caldwell and Nampa exchanges.
Q.What medical care is available locally?
A.Access to medical facilities and providers was cited by a number of the petitioners as evidence of the community of interest.  There are no doctors or hospitals listed in the 1996 phone book in either of the three petitioning exchanges, and the yellow pages includes a number of advertisement listings for providers located in the Caldwell and Nampa exchanges.  
Both Homedale and Parma have rural clinics, which are staffed by nurse practitioners or physician assistants, and provide basic and emergency care.  The Parma clinic is aligned with the West Valley Medical Center, a major regional hospital in Caldwell.  The Homedale clinic is operated by Terry Reilly Health Services and has outreach efforts to the Hispanic and migrant farm worker communities.
A pharmacy is located in Parma and one in Homedale.  A veterinary clinic is listed for Homedale, and both Homedale and Parma have funeral parlors.
Q.Have the customers indicated a willingness to pay increased rates?
A.The petitions for EAS on these routes were submitted prior to the Commission’s decision in Case No. GNR-T-93-13 that future EAS petitions include a quantification of the amount the customers were willing to pay.  These petitions simply indicated a willingness to pay a “reasonable” increase.
Q.Turning to the secondary criteria, what are the number of lines in the home and target exchanges?
A.Staff Exhibit No. 102, which contains data
U S WEST has identified as confidential, contains the average number of lines, both business and residential, for the affected exchanges.  It also includes information on the number of foreign exchange (FX) customers.  Homedale is the largest of the three Citizens exchanges, with just over 1800 lines.  Parma is somewhat smaller, with nearly 1700 lines.  Wilder is the smallest, with just under 1000 lines.
The three Citizens exchanges are all considerably smaller than either Caldwell or Nampa.  Wilder has slightly more than 10% of the number of lines that are in Caldwell, and about 7% of the number of lines in Nampa.  As a whole, the three Citizens exchanges have 4460 lines, which is just over 10% of the combined number of lines in the Caldwell and Nampa exchanges.  Citizens identified a total of ten FX lines from these exchanges to Caldwell and eight FX lines to Nampa.
Q.What about access to information providers?
A.This is an area that is improving.  Micron Internet Services now has a local point of presence in Wilder which, because of the existing EAS between Parma and Wilder and Homedale and Wilder, provides local
dial-up access to the Internet for all three of these exchanges.
I am not aware of any other information providers that provide a local dial-up access.
Q.What does the calling data indicate?
A.Staff Exhibit No. 103 contains data that each company identified as confidential and shows the calling data provided by Citizens and U S WEST for these exchanges.  In Case No. GNR-T-93-13, the various intervening parties recommended that, in order to show a community of interest, the number of calls per line per month should range from between five and eight calls.  However, the Commission refused to endorse any specific number in that case, partially due to the general unreliability of calling data.  The number of calls per line per month from each of these exchanges to Caldwell exceeds the highest number recommended by any of the intervenors, which clearly indicates a community of interest.  The call volume to Nampa is somewhat lower, but approaches the low end of the recommendations in Case
No. GNR-T-93-13.  As is to be expected, the calling volumes from the larger communities to the smaller communities is not as large.
I consider these numbers to be more than sufficiently high enough to indicate a strong link between these communities.
Approximately 40% of the customers in the Citizens exchanges make at least two calls per month into the Caldwell exchange, and more than 20% make two or more calls to locations in the Nampa exchange.  Slightly more than 40% of the Wilder customers were identified as not making any calls to Caldwell, and approximately half of the Homedale and Parma lines did not make any calls to Caldwell during each of the months for which data was provided.  Two thirds of the lines in Wilder and Homedale did not make any calls to Nampa during the test months, while nearly three quarters of the lines in Parma did not make calls to Nampa in each month.  
More than 10% of the Caldwell customers made two or more calls to Homedale, and only a slightly smaller percentage made two or more calls to the Wilder and Parma exchanges.  
As is usual, those making four or more calls (1/4 to 1/3 of the users) accounted for nearly 90% of the minutes between these exchanges and Caldwell.  
For calls to Nampa from these exchanges, those making four or more calls comprise only about 10% of the lines, and this 10% of the lines account for more than 80% of the total minutes to Nampa from these exchanges.
The pattern for residential users did not seem to vary significantly from the pattern for business users.
Q.What do you conclude about the community of interest?
A.There is no question that a strong community of interest exists between these communities.  As the Commission stated in 1981 in Order No. 16875:
We find that Caldwell is the commercial
center for the four Continental exchanges
in question.  We further find that if these
four exchanges and Caldwell were served by
the same telephone company then it would be appropriate to order extended area service
from these exchanges to Caldwell and vice
versa.
More than fifteen years have passed since that decision, and these rural communities are more dependent upon the larger metropolitan cities today than they were then.  More businesses have closed their rural branch offices, and centralized their operations in the metropolitan cities.  Others have simply not been able to compete with the high volume the businesses located in the regional malls are able to attract.  The business districts in the towns of the three Citizens exchanges show the same kinds of changes that are occurring to small towns throughout the country.  Many of the goods and services that were once available locally are now only available from Caldwell or Nampa.
The changes that have occurred in the workforce have also strengthened the dependencies of these exchanges on Caldwell and Nampa.  An increasing percentage of the population in these rural communities is now employed outside the community and in the regional businesses located in Caldwell, Nampa and beyond. Census data for the Parma and Wilder census tracts show relatively flat growth between 1980 and 1990 in the number of persons reporting a commute time of ten minutes or less, which would be consistent with working within the local community, but significant increases for those reporting fifteen to thirty minute commutes, which would be consistent with the time to travel to the Caldwell and Nampa areas.   
Q.What did the companies identify as the costs of the facilities needed to implement EAS?
A.Both companies indicated in response to Staff’s data request that they did not believe any additional facilities, other than those already planned for, would be necessary to implement EAS.
Q.Did U S WEST report toll revenues for these routes?
A.Yes, U S WEST’s reported revenues, which they submitted as confidential, are identified in Staff Exhibit No. 104.
Q.Does U S WEST incur costs which offset these revenues?
A.Yes.  In addition to whatever operational costs U S WEST incurs, it also pays Citizens and imputes to itself what are known as access charges.  Because Citizens’ access charges are relatively high, I don’t believe these short routes are profitable to U S West.  My calculations indicate that at Citizens current access rates of approximately 16 cents per minute for either originating or terminating ends of a call over the distances between these exchanges, U S WEST is charged nearly three times as much for carrying calls between these exchanges as they reported in toll revenues.  The toll revenues reported by U S WEST would have been reduced by time-of-day and other discounts, and my estimate of access charges does not reflect the time of day discounts that would have been applicable, so the actual loss would not have been as great as indicated by my calculations.  However, there still would have been a loss.
Q.Is this loss consistent with the rates charged for these calls?
A.Somewhat.  The tariffed rate for calls of the distance to Caldwell from these exchanges is 19.1 cents for the initial minute and 9.1 cents for all additional minutes.  With the average call exceeding three minutes, the average rate would be 12.7 cents per minute, which is well below the 16 cents charged by Citizens.  There are also off-peak and other discounts available for these calls, which roughly correspond to the off-peak discounts for access.  
Q.What revenues did Citizens identify for these routes?
A.Citizens also claimed this information was confidential.  The specific data reported by the company is also identified on Staff Exhibit No. 104.
Q.If Citizens were to recover the lost access revenues, what would be the additional costs per line per month, if the charges are spread among the Citizens’ lines?
A.The additional costs per line for the Caldwell routes would exceed $10, and the additional costs for the Nampa routes would be nearly $4, for a total per line additional cost of more than $14.
Q.Would the majority of customers support the EAS if costs were that high?
A.I do not believe so.  Nearly 40% of the customers did not make any calls to Caldwell in each of the months in the test period, and an even larger percentage did not make any calls to Nampa each month.  The average toll bill that customers pay for calls on Caldwell routes is less than $4, and just over $2 for calls to Nampa.  I do not believe an increase of $10 or $14 would have widespread community support.
Q.Are there discounts or other options that might address the concerns of those with high toll charges?
A.There is a discount plan, TOLL-PAC currently identified in both the Citizens’ and U S WEST’s tariffs that provides thirty minutes of calls per month for $1.70, with all minutes over thirty minutes at five cents a minute.  This option provides a combined cost of just over five cents a minute, if one always uses their first thirty minutes.  For $2.80, customers can get sixty minutes of calls, with all additional minutes at five cents.  The combined cost of this plan, for those who always use the full sixty minutes or more, is slightly less than five cents a minute.  Callers from Homedale and Parma may use this option for calls to Caldwell.  Callers from the Wilder exchange may use this option for calls to both Caldwell and Nampa.
Q.Do you have any concerns about the availability of the TOLL-PAC option?
A.Yes.  In a previous proceeding, Staff called both companies and inquired about the availability of a discount package, and was told it was no longer available.  When I inquired of Citizens’ sales office this March about the availability of such discounts, I was told that a discount plan was available, but the rates and terms that were quoted to me were significantly higher than the five cents a minute options included in the tariff that is currently on file with the Commission and identified above.
Q.Could this TOLL-PAC option be viewed as a long term solution to the needs of the customers in these communities?
A.Probably not.  As I understand the billing and credit arrangements between Citizens and U S WEST,
U S WEST collects the toll charges between these exchanges and pays Citizen’s access charges to originate or terminate the calls.  This means that on a five cent per minute call, USWC must pay Citizens sixteen cents per minute in access charges.  Additional usage of this discount option would only exacerbate the loss that      U S WEST already takes on these routes.  This discount option is now a Title 62 service for U S WEST.  The company may increase the rates for TOLL-PAC without PUC approval.  If usage of the option were to increase significantly, like any other prudent company U S WEST would simply raise the rates.
Q.Do you have a recommendation at this time.
A.My recommendation is to deny an EAS between Citizen’s exchanges of Wilder, Parma and Homedale and the U S WEST exchanges of Caldwell and Nampa.  Although a definite community of interest does exist, implementing a traditional EAS, with full cost recovery for the companies involved, would place an undue burden upon the majority of the ratepayers in these Citizen exchanges.  My analysis does indicate that some form of toll relief is appropriate, and it may be possible to structure an optional calling plan to address this need.
Q.Are there changes or developments expected in the near future that may cause you to reconsider your recommendation?
A.Yes.  Among the changes that are expected due to the Federal Telecommunications Act of 1996 are changes to the access charges local exchange companies impose for interstate long distance calls.  It is reasonable to assume that access charges for intrastate calls will be restructured at that time as well.  The lost revenue from Citizens’ access charges is the primary reason that the cost of EAS for these exchanges is so high.  That cost was the sole reason for recommending against EAS for these routes.  If the restructuring of access charges results in a decrease in the amount of revenue that Citizens would lose if EAS were granted for these routes, it might lead to a change in my recommendation.  While the final decisions on the access issue are sometime away, the Federal Communication Commission is expected to release an order in May of 1997, and that decision and the responses of companies to that order, should provide an indication of the direction and scope of the changes that can be expected.
Q.Does that conclude your testimony?
A.Yes.