Item: 4A Date: August 10, 1998 Docket: UT-970545 - Minimum local calling area rulemaking Company: Telecommunications General Staff: Glenn Blackmon, Assistant Director-Telecommunications Jeffrey Showman, Policy Advisor Jeff Payne, Regulatory Consultant Tim Zawislak, Policy Specialist Lori Kanz, Consumer Affairs Specialist Pam Smith, Consumer Affairs Specialist Recommendation: (1) Defer any decision on the adoption of rules in Docket No. UT-970545 until September 9, 1998. (2) Direct the Secretary to circulate to interested parties in Docket No. UT-970545 the proposed settlement attached to this memorandum. Discussion: For well over a year the Commission has been working with the public and the telecommunications industry to redefine local calling areas such that customers generally can reach basic community services as a local telephone call. On May 27, 1998 the Commission proposed a rule to define the minimum local calling area for each local exchange. That proposed rule would include a list of community services that should be accessible as a local call and a list of towns and cities, at least one of which should be accessible as a local call. The proposed rule also has provisions for companies to recover the cost and lost revenues resulting from larger local calling areas by raising local rates, and it establishes timelines for implementation of all expanded calling areas. The proposed rule has been both praised and criticized by the public and the telecommunications industry. Proponents argue it would eliminate inequitable situations where customers, primarily in rural areas, are required to pay long distance charges to reach basic community services that customers in more urban areas can reach as a local call. Critics argue that the rule is overly rigid and does not address some calling area problems, that it is overreaching and would result in excessive increases in local rates for expansions that customers do not actually want, and that it has unrealistic timelines for implementation. Beginning in early July, Staff began work on an alternative to a prescriptive rule. Under this alternative approach, local telephone companies would be ordered to implement specified expansions of local calling areas on a specific timeline. Resulting increases in local rates would be generally limited to the exchanges that received an expansion of local calling area. Staff and the companies have now agreed to such an alternative. In brief, the companies have agreed to implement the larger calling areas as an alternative to a prescriptive rule. As part of the agreement, Staff and the companies support adoption of a policy-oriented rule that states that further expansions in local calling area would be approved only under extraordinary circumstances. Staff believes that the access charge reform rule adopted in UT-970325 will increase competition among local companies based on the size of their local calling areas. Either through entry by new companies or by incumbents offering optional calling plans to broader areas, access charge reform will reduce the need for additional mandated expansions in calling areas. An important advantage of the settlement is that it does not have the implementation uncertainties of a rule. As with most other Commission rules, any affected company could have requested waiver of the minimum local calling area rule. While the rule appears to be quite specific about the services and towns that must be accessible within the local calling area, the rate increases that could be charged, and the deadlines for implementation, the Commission would have had to consider, if not grant, waivers to those specific requirements. By contrast, if the settlement is approved, the companies will move directly to implementation of broader calling areas and will do so subject to a Commission order. If accepted by the Commission, the alternative approach would result in larger calling areas for several rural areas that today are isolated from their community services or are split between two local calling areas, including Coulee City, Almira, Hunters, Lake Quinault, Snoqualmie Pass, White Pass, Rimrock, Molson/Chesaw, Loomis, Tonasket, Glenwood, Roosevelt, White Swan, Bickelton, Mattawa, Chimacum, Brinnon, western Whitman County, Onalaska, Mossyrock, Salkum, Toledo, and Crystal Mountain. It also would remedy problems where the existing local calling area no longer matches the communities, including suburban Bellingham, the Central Washington area around Wenatchee, the Kitsap Peninsula, and parts of Snohomish County. To proceed, Staff recommends that the Commission circulate the settlement for public comment and decide at the September 9 open meeting whether to accept the settlement, proceed with the proposed rule, or take other action. An alternative to the September 9 decision would be to decide on the merits of the various approaches at today’s open meeting. This alternative is has some merit, since the Commission has already received many comments on the proper scope of local calling and many consumers have expressed frustration with earlier delays in reaching a substantive decision. However, because the specific settlement has not been publicly circulated before today’s meeting, Staff recommends that the public be given additional time to comment on it. Conclusion: In defining the scope of local calling areas, the Commission must balance the interests of having wide calling areas and of having affordable basic rates, and it must do so considering the circumstances of each locality. Staff believes that this is better accomplished in the alternative approach than would be with a prescriptive rule. It greatly reduces the prospects for local rate increases for customers who do not receive an expanded calling area. It targets the expansions to areas where the current calling area is most clearly inadequate. It also addresses some problems that would not have been remedied by the prescriptive rule. Exhibit B - Proposed replacement language for minimum local calling area rule 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 and the availability and feasibility of optional calling plans. WAC 480-120-400 through 480-120-435 are repealed.