MAY BEFORE THE CORPORATION COMMISSION OF OKLAHOMA COURT

Transcription

1 F ILE MAY BEFORE THE CORPORATION COMMISSION OF OKLAHOMA COURT 'OKC AtftN 00MM40ION OF OKLAHOMA APPLICATION OF COX OKLAHOMA TELCOM, L.L.C. TO EXPAND LOCAL ) Cause No. PUD EXCHANGE SERVICE TERRITORY ) ) ) HEARING: July 21, 2011 In Courtroom B 2101 N. Lincoln Blvd, Oklahoma City, OK Before Jacqueline T. Miller, Administrative Law Judge APPEARANCES: Marc Edwards Phillips Murrah P.C., Attorney representing Cox Oklahoma Telcom, L.L.C. Judith L. Johnson, Senior Attorney, representing Public Utility Division, Oklahoma Corporation Commission Ron Comingdeer, Kathy Kunc Ron Comingdeer & Associates, Attorneys representing BTC Broadband REPORT AND RECOMMENDATION OF THE ADMINISTRATIVE LAW JUDGE This cause comes before the Oklahoma Corporation Commission ("Commission") on the Application of Cox Oklahoma Telcom, L.L.C. ("Cox Oklahoma" or "Applicant", "Cox Oklahoma Telcom", or "Cox") to expand its local exchange service territory. SUMMARY The ALJ recommends that the request of Cox Oklahoma Telcom be granted. PROCEDURAL HISTORY On February 11, 2011, Cox Oklahoma filed this Application pursuant to OAC 165: to expand its local exchange service territory to include the exchanges listed as Exhibit A to the Application which are all served by the incumbent AT&T Oklahoma. [Exhibit A, Exchanges; Exhibit B, tariff page no. 8] In the Application, Cox Oklahoma stated it sought expansion of its

2 ALJ Report, Cause No. PUD Page 2 U local exchange service territory for the purpose of provisioning internet and telemedicine services to schools, libraries and eligible healthcare entities in the exchanges listed in Exhibit A. Notice of the Application was provided to General Counsel for the Public Utility Division ("PUD") of the Commission and the Office of the Attorney General. Tariff sheets reflecting this addition of the proposed expanded service territory were filed as an exhibit to the Application. [Exhibit B, tariff page no. 8] Cox Oklahoma filed its Motion for Procedural Schedule in this Cause on February 11, By Order No , issued on March 17, 2011, the Commission adopted the procedural schedule agreed to by the parties. On February 18, 2011, BTC Broadband ("BTC") filed a Motion for Intervention, contending it had an interest in this proceeding arising out of the issue of Commission authority to regulate broadband services. By Order No , issued on March 17, 2011, the Commission granted the Motion for Intervention of BTC. On February 28, 2011 Cox Oklahoma filed its Pre-filed Testimony of Curt Stamp. The PUD Staff filed Pre-Filed Direct Testimony of Glenda Buchanan on March 21, BTC filed its Statement of Position on March 21, 2011 raising certain issues in the proceeding. On March 23, 2011, Cox Oklahoma filed its Brief in support of territory expansion. BTC filed its Prehearing Brief and Exhibit List on March 23, The PUD Staff filed its Summary Testimony of Glenda Buchanan on March 25, Cox Oklahoma filed its Summary Testimony of Curt Stamp, Rebuttal Testimony of Curt Stamp, Notice of Filed Amended Exhibits and Exhibit List on March 25, On March 25, 2011 oral arguments regarding briefs including prehearing conference were continued by agreement of the parties. On March 30, 2011, the hearing on the merits was continued by agreement of the parties until April 28, The parties entered settlement negotiations. On April 29, 2011, Cox Oklahoma filed its Amended Application with Amended Exhibit A and B attached.' Settlement negotiations 'Following the Amended Application which was filed to address concerns raised by BTC Broadband regarding 2

3 AU Report, Cause No. PUD Page 3 resumed. The PUD Staff filed its Responsive Testimony of Glenda Buchanan on May 25, BTC broadband raised issues regarding impacts on the OUSF. On July 12, 2011, Staff filed its brief regarding OUSF. On July 14, 2011, Cox Oklahoma filed its brief and BTC Broadband filed its post hearing brief regarding OUSF. On July 21, 2011, oral arguments were heard and all matters were taken under advisement. On August 19, 2011, parties filed proposed final orders and proposed findings of fact and conclusions of law addressing certain issues raised. SUMMARY OF THE EVIDENCE Cox Oklahoma Telcom Mr. Stamp testified that in order to better serve the needs of schools, libraries and eligible healthcare entities throughout the state, Cox Oklahoma is seeking this service territory expansion for the limited purpose of providing internet and telemedicine services to these entities. Mr. Stamp further testified that the schools, libraries and eligible healthcare entities in the rural parts of Oklahoma will have access to a competitive choice for internet and telemedicine services. This choice may mean more robust services, better prices, or both. With the introduction of a competitive choice in these areas, schools, libraries and eligible healthcare entities could see lower prices for internet and telemedicine services. As a result, these entities could seek less of a reimbursement from the OUSF than they are receiving today. Mr. Stamp stated these services are not regulated services pursuant to 17 O.S , which prohibits the Commission from "entering any order, adopting any rule, or otherwise taking any agency action, impose any regulation upon a provider of high speed Internet access service controversial language, BTC Broadband raised additional concerns that the testimony of Cox Oklahoma Telcom also contained controversial language. 3

4 ALJ Report, Cause No. PUD Page 4 or broadband service in its provision of such service, regardless of technology or medium used to provide such service". The Commission will not have any jurisdiction over these unregulated services. Of course, to the extent the Commission has a role under the OUSF in determining the eligibility and appropriateness of Special Universal Service funding for service providers participating in that funding, it would have the same role with respect to evaluating Cox's Special Universal Services. The services Cox Oklahoma plans to offer with this service territory expansion are limited to those services that may be eligible for reimbursement as Special Universal Services under the Oklahoma Universal Service Fund. As such, Cox Oklahoma is seeking this expansion to clarify its eligibility to receive OUSF reimbursement in these areas. Mr. Stamp concluded in his direct testimony that because of increased customer choice and the potential for more robust services and/or lower prices, it is in the public interest to grant this application. On rebuttal, in response to the Direct Testimony of Glenda Buchanan, Mr. Stamp stated that Cox Oklahoma is "certificated" statewide. Cox provided further in its Amended Application that Cox Oklahoma's initial local service territory did not coincide with the complete boundaries of any incumbent carrier's exchanges, but was generally limited to certain exchanges within the local exchange service territories of Southwestern Bell Telephone, L.P. d/b/a AT&T Oklahoma ("SWBT") and Valor Communications ("Valor"). Cox Oklahoma further stated that it believed its local exchange service territory has subsequently been expanded on different occasions. 4

5 ALJ Report, Cause No. PUD Page 5 Mr. Stamp testified that Cox Oklahoma concurs with the list of exchanges subject to this Application, Attachment GB-2. In response, Cox Oklahoma has prepared an Amended Exhibit A to the Application, which contains the revised list of exchanges Cox Oklahoma seeks to expand in this Cause, consistent with Attachment GB-2. Mr. Stamp also has prepared Amended Exhibit B to the Application which is the Local Exchange Service Tariff, page no. 8, with the revised list of exchanges consistent with Attachment GB-2. In response to Ms. Buchanan's statement concerning the number of potential schools, Mr. Stamp stated that the latest information he had received was that Cox Oklahoma has an opportunity to provision internet access to 36 public schools in the exchanges listed in Amended Exhibit A, and that these 36 public schools all have internet services that are receiving OUSF support. Mr. Stamp concluded that at least with regard to these 36 school districts, the net impact on the OUSF will be zero. [pgs. 2-3, rebuttal testimony of Curt Stamp] Mr. Stamp testified the services Cox Oklahoma intends to provision to schools, libraries and eligible healthcare entities are the same supported services Cox Oklahoma provisions to eligible recipients in its current approved service territory exchanges, and currently receives reimbursement. Cox Oklahoma responded to data requests that the services Cox Oklahoma intends to provision in the expanded service territory are broadband services eligible for support under Commission Rules, OAC 165: and OAC 165: These services qualify for reimbursement from the OUSF as Special Universal Services pursuant to 17 O.S. Section (N)(2) and (C). These services meet the definition of "Special Universal 5

6 ALJ Report, Cause No. PUD Page 6 Services" found in 17 O.S. Section (24) and OAC 165: These services meet the definition of "telecommunications services" but not the definition of regulated telecommunications services in OAC 165: [Hearing Exhibit 2 (HE-2)] Cox also responded to data requests that it has limited facilities in place today, outside the proposed service territories, for provisioning internet and telemedicine access services in the proposed service territories. Cox Oklahoma has no facilities in place today in the proposed service territories for provisioning these services and intends to lease facilities in the proposed service territories necessary for provisioning services. [Hearing Exhibit 2 (HE-2)] In conclusion, Mr. Stamp stated Cox Oklahoma seeks to expand its service territory for the limited purpose of provisioning internet access pursuant to OAC 165:59-7-8, and telemedicine access pursuant to OAC 165: like Cox Oklahoma currently does through its current service territory. Public Utility Division Staff. On March 21, 2011, Glenda Buchanan, Public Utilities Regulatory Analyst, filed prefiled testimony. She stated that her method of analysis in processing the application consisted of reviewing the Applicant's compliance with the rules and regulations stated in Chapter 55 of Oklahoma's Administrative Code and applicable state statutes. She also stated that OAC 165: requires that the Commission must determine whether a territory expansion is in the public interest, and that in making that determination, the Commission shall consider factors, including but not limited to, the existence and location of the competitive Local Exchange Carrier's facilities, the number of potential customers to be served and the potential impact on

7 ALJ Report, Cause No. PUD Page 7 universal service. Ms. Buchanan further testified that she believes that Cox has fulfilled the requirements for expansion of its service territory. In addition, Ms. Buchanan testified that a proposed expansion of territory may result in an impact on either the Federal Universal Service Funds (FUSF), the Oklahoma Universal Service Funds (OUSF), or both. She asserted that because Cox did not plan to provide traditional local exchange services in the requested exchanges, Cox would be ineligible for either federal Low Income Program support or OUSF funding for provision of Primary Universal Services. She also stated that all the requested exchanges fell within AT&T Oklahoma's boundaries and AT&T Oklahoma's exchanges were not considered eligible for federal High Cost Fund (HCF) support, except for Interstate Access Support (las), and that therefore, Cox would be ineligible for federal HCF funding, except for las support. She also stated that the services Cox proposed in the requested exchanges may qualify for support from the OUSF as Special Universal Services, to the extent that Cox is successful in finding subscribers to its services. Ms. Buchanan testified that for these reasons, PUD expects the impact on the universal service funds to be minimal. Ms. Buchanan testified that Cox Oklahoma seeks to expand its local exchange service territory to include all of AT&T Oklahoma's exchanges in which Cox is currently uncertificated, excluding the few partial exchanges located on the Oklahoma border with another state that are served primarily from that other state. Those exchanges are Chetopa, Ft. Smith, Meade, Mena and Van Buren. In its application, Cox Oklahoma stated that it requests the expansion for the "limited purpose of provisioning internet and telemedicine services to schools, libraries and eligible healthcare entities in the exchanges listed in Exhibit A". These are broadband services and, as Cox noted, are not regulated by the Commission pursuant to Title OA. On 7

8 ALJ Report, Cause No. PUD Page 8 February 18, 2011, BTC filed a Motion for Intervention alleging that it is a party of interest and its operations could be impacted if the relief requested by Cox Oklahoma is granted. The parties are in agreement that the exchange list contained in Attachment GB-2 is correct, but at the time this testimony was filed, Cox had not yet filed its Amended Application. Ms. Buchanan also testified that PUD Staff did not oppose Cox's application and that granting of the application would be in the public interest. On May 25, 2011, Glenda Buchanan filed Responsive Testimony. She stated that the purpose of this testimony was to describe the PUD's analysis of the impact of Cox Oklahoma's Amended Application and provide the Commission with PUD's recommendation. She testified that in Cox Oklahoma's Amended Application, Cox Oklahoma had removed the offending references to expanding its territory "for the limited purpose of provisioning internet and telemedicine services to schools, libraries and eligible healthcare entities" contained in the initial application. In the Amended Application, Cox Oklahoma's request is simply for an expansion of its service territory under OAC 165: and now the territory expansion Cox Oklahoma is requesting is clearly within the Commission's jurisdiction and authority. 2 Regarding the impact on universal service, Staff asserted that the definition of "universal service" "is an evolving level of telecommunications services that the Commission shall establish periodically"... "taking into account advances in telecommunications and information technologies and services." 47 U.S.C. Section 254 (c)(1). Staff also cited 47 U.S.C. Section 254(b) which indicates that the preservation and advancement of universal service is based on cited enumerated principles. In contrast, Staff argued that the potential impact on the OUSF requires an analysis of how the funding of universal service will be affected. Staff cited OAC 2 See footnote 1. 8

9 ALJ Report, Cause No. PUD Page 9 165: , which states that the OUSF was established to preserve and advance "universal service" in Oklahoma. Furthermore, Staff argued that in other expansion cases, such as Cause Nos. PUD , , , and , Staff performed an analysis of the potential impact on universal service which required an examination to determine whether the goals of universal service were preserved and advanced. Staff also argued that the orders in prior expansion cases regarding potential impact on universal service entailed a finding that the universal service goals were advanced. She testified that she recommended that the Commission find that Cox Oklahoma's proposed local exchange service territory expansion to include the AT&T Oklahoma exchanges listed in Cox Oklahoma's amended exhibit falls within the Commission's jurisdiction and serves the public interest, and recommended that the application be granted. Barbara Mallett, Public Utilities Regulatory Analyst, adopted Glenda Buchanan's pre-filed testimony and testified at the hearing on the merits. BTC Broadband Statement of Position. 3 BTC Broadband stated concerns that it appeared that Cox Oklahoma's Application in this Cause is intended for the sole purpose of bringing competitive choice to customers of special universal services, thus making the Oklahoma Universal Service Fund a motivator for competition when BTC does not believe it was intended for that purpose. BTC Broadband asked BTC Broadband referenced Enrolled House Bill No during the hearing. See original Application (paragraph 6) in Cause No. PUD , "While Cox Oklahoma seeks to expand its service territory into these exchanges, this expansion is for the sole purpose of seeking special universal service reimbursement for eligible services." This paragraph was not set forth in the Amended Application of Cox Oklahoma Telcom. "While Cox Oklahoma seeks to expand its service territory into these exchanges, this expansion is for the sole purpose of putting Cox on a level playing field with its competitors by allowing Cox to seek special universal service reimbursement for eligible services." Brief of Cox Oklahoma In Support of Application for Service Territory Expansion, pg. 2.

10 ALJ Report, Cause No. PUD Page 10 this Commission to be mindful of the growth in Special OUSF, and as projected for June 30, 2011, Special OUSF is calculated to be $26,369,521 or approximately 74% of the OUSF. (Prefiled Testimony of Chris Herbison in Cause No. PUD ). BTC Broadband believed that the Application raises legal issues which it intends to address fully in its brief. Moreover, BTC Broadband believed that Cox has presented no factual evidence to support its request and thus, has failed to satisfy its burden of proof under Commission rules. Intervenor BTC did not present testimony in this matter. FINDINGS OF FACT AND CONCLUSIONS OF LAW The Commission finds that it is vested with jurisdiction in this Cause pursuant to Article IX, Section 18 of the Oklahoma Constitution, 17 0.S Notice of the Application was provided to General Counsel for the Public Utility Division ("PUD") of the Commission and the Office of the Attorney General. 1. OAC 165: Designation of service territory (a) The Commission shall determine whether a competitive LEC ' s service territory is in the public interest at the time the competitive LEC seeks certification or proposes changes to its service territory. In determining whether the proposed service territory meets the public interest, the Commission shall consider factors, including but not limited to, the existence and location of the competitive LEC' S facilities, the number of potential customers to be served and the potential impact on universal service. (b) No service territory shall be changed except by Order of the Commission after such notice and hearing, if any as directed by the Commission. Applications for change to an existing service territory shall be accompanied by revised tariff pages reflecting the proposed new service territory. See expansion cases which cite Article IX, Section 18 and 17 O.S. Section 131, et seq., ie. Cause No. PUD , Order No ; Cause No. PUD , Order No ; Cause No. PUD , Order No ; and Cause No. PUD , Order No

11 ALJ Report, Cause No. PUD Page 11 The Oklahoma Telecommunications Act of 1997 (the "Telecommunications Act") enacted by the Oklahoma Legislature contains various provisions, 17 O.S , which defines certain words and terms instructive to this cause, 17 O.S , which creates the OUSF ("Oklahoma Universal Service Fund"), and 17 O.S , which designates certain services as Special Universal Services. As a result of the Telecommunications Act, the Commission's jurisdiction includes, among other things, implementation and administration of the OUSF and the Special Universal Services portion of the OUSF. Words and terms instructive to this cause are defined as follows in 17 O.S of the Telecommunications Act: 26. "Telecommunications" means the transmission, between or among points specified by the user, of voice or data information of the user's choosing, without change in the form or content of the information as sent and received; (emphasis added) 27. "Telecommunications carrier" means a person that provides telecommunications service in this state; "Telecommunications service" means the offering of telecommunications for a fee The words and terms set out above are defined in precisely the same language in OAC 165: of the Commission's Oklahoma Universal Service Rules. 7 Order No set forth the following provisions in Cause No. PUD : 6 See OAC 165:55-14 (a telecommunications carrier or Company means a telecommunications service provider ("TSP") or an interexchange telecommunications carrier ("IXC")); OAC 165:55-3-1(a). OAC 165: "The Oklahoma Corporation Commission has jurisdiction to enact this Chapter by virtue of Article IX Section 18 of the Constitution of the State of Oklahoma, the Oklahoma Telecommunications Act of 1997 and the Federal Telecommunications Act of 1996." 11

12 ALJ Report, Cause No. PUD Page 12 OAC 165: (g) provides that "any telecommunications carrier may seek reimbursement from the OUSF for the provision of Special Universal Services consistent with 17 O.S OAC 165: defines "Telecommunications Carrier" as a person that provides telecommunications service in this state. OAC 165: defines "Telecommunications Service" as the offering of telecommunications for a fee. OAC 165: defines "Telecommunications" as the transmission, between or among points specified by the user, of voice or data information of the user's choosing, without change in the form or content of the information as sent and received. (emphasis added) OAC 165: defines "Telecommunications Carrier" as a telecommunications service provider ("TSP") or an interexchange telecommunications carrier ("IXC"). OAC 165: defines a "Telecommunications service provider ("TSP")" as an authorized provider of local exchange service, whether an incumbent LEC or a competitive LEC. OAC 165:55-3-1(a) states: "No telecommunications service provider or IXC shall furnish telecommunications service to any end-user in the State of Oklahoma without first having secured a Certificate of Convenience and Necessity from the Commission." The Telecommunications Act provides at 17 O.S (N)(2) that "any telecommunications carrier may seek reimbursement from the OUSF... for the provision of Special Universal Services consistent with Section 9 [ ] of this act." Insofar as relevant to this cause, Section 9 of the Telecommunications Act, 17 O.S (C)(4), describes the following as a Special Universal Service: Each public school building wherein classrooms are contained and each public library in the state shall, upon written request, receive one access line, free of charge, with the ability to connect to an internet service provider at 1.5Mbps, in the most economically efficient manner for the carrier... for the purpose of accessing the Internet. Pursuant to the provisions of the Telecommunications Act and the provisions of the Commission's Universal Service Rules, a provider of Special Universal Services, such as Cox 12

13 ALJ Report, Cause No. PUD Page 13 Oklahoma Telcom, may seek reimbursement from the OUSF for its provision of Special Universal Services. Based on the circumstances presented in this cause and the provisions cited herein, the Commission's grant of an expansion of service territory to Cox Oklahoma Telcom is not contrary to the statutory provisions of 17 O.S Because Cox Oklahoma filed an Application requesting that the Commission grant it an expansion of service territory and approve its tariff, it can be argued that by granting such Application, the Commission will not violate the provisions of 17 O.S by imposing regulations on Cox Oklahoma Telcom and the services it provides. 17 O.S does not remove this matter from Commission jurisdiction due to the provisions cited herein. Necessarily, it can be argued that the statute only concerns Commission action that affects the manner in which a broadband provider renders its service and as the CCN territorial expansion procedure entirely precedes the provision of service, the statute does not apply to this matter. Further it can be argued that if the Oklahoma State Legislature intended the statute to govern broadband providers broadly or as a whole, the legislature would not have included the phrase "in its provision of such service." Notwithstanding, the Commission is exercising its jurisdiction pursuant to the provisions cited herein and not 17O.S Cox Oklahoma was granted a certificate of convenience and necessity to provide telecommunications services throughout the State of Oklahoma, including local exchange telecommunications services, toll services and CAP services, pursuant to Commission Order No , Cause No. PUD , issued February 28, Cox Oklahoma has been 8 The Certificate of Convenience and Necessity proceedings are governed by Oklahoma Corporation Commission rules and state statute. OAC 165:55-3-1(a) provides that "No telecommunications service provider or 13

14 AW Report, Cause No. PUD Page 14 providing a full range of telecommunications services to both business and residential subscribers throughout Oklahoma, primarily in the Oklahoma City and Tulsa metropolitan areas. 2. Cox Oklahoma Telecom seeks in this Cause to expand its local exchange service territory to include those exchanges listed on Amended Exhibit A attached to Cox Oklahoma's Amended Application, which are all currently served by the incumbent AT&T Oklahoma. [Amended Exhibit B, tariff page no. 8] Cox Oklahoma seeks expansion of its local exchange service territory for the limited purpose of provisioning unregulated internet and telemedicine services to schools, libraries and eligible healthcare entities in these exchanges. The services being offered by Cox Oklahoma in these exchanges are unregulated services but are eligible for special universal service reimbursement. While Cox Oklahoma seeks to expand its service territory into these exchanges, this expansion is for the purposes of allowing Cox to seek special universal service reimbursement for eligible services. IXC shall furnish telecommunications service to any end-user in the State of Oklahoma without first having secured a Certificate of Convenience and Necessity from the Commission." OAC 165:55-3-1(b) provides that "an application for a certificate to provide service in the State of Oklahoma shall be made pursuant to and in conformance with the requirements of Oklahoma law and any additional requirements set forth in this Chapter." 17 O.S. 131(A) provides, "No person, firm, association, corporation or cooperative shall provide telecommunications services, as defined by the rules of the Corporation Commission, to any end-user in this state without having first obtained from the Corporation Commission a Certificate of Convenience and Necessity" (emphasis added); 17 O.S. 132 states, "The application for a Certificate of Convenience and Necessity pursuant to Section 131 of this title shall be under such rules as the Corporation Commission may, from time to time, prescribe." 17 O.S. 133 provides, "The Commission shall have power to issue said certificate as prayed for or to refuse to issue the same or to issue it for the construction, operation or acquisition of a portion only of the contemplated territory." Therefore CCN procedure is clearly under the ambit of the Commission. In Order No , Cause No. PUD , the Commission ordered: It is therefore the order of the Corporation Commission of the State of Oklahoma that Cox Oklahoma Telcom, Inc.'s Application for a Certificate of Public Convenience and Necessity to provide telecommunications services throughout the state of Oklahoma, including local exchange telecommunications services, toll services and CAP services, is hereby approved. It is further the order of the Corporation Commission of the State of Oklahoma that Cox file a new cause(s) of action and pursuant to OAC 165:55, submit is proposed local exchange service tariffs and proposed service territory designation for consideration by the Commission. 14

15 ALJ Report, Cause No. PUD Page Expansion of service territory is governed by OAC 165: (a), which provides: OAC 165: Designation of service territory (a) The Commission shall determine whether a competitive LEC' s service territory is in the public interest at the time the competitive LEC seeks certification or proposes changes to its service territory. In determining whether the proposed service territory meets the public interest, the Commission shall consider factors, including but not limited to, the existence and location of the competitive LEC's facilities, the number of potential customers to be served and the potential impact on universal service. (b) No service territory shall be changed except by Order of the Commission after such notice and hearing, if any as directed by the Commission. Applications for change to an existing service territory shall be accompanied by revised tariff pages reflecting the proposed new service territory. The Application of Cox Oklahoma Telcom complies with the standards set forth by this Rule. Expansion of Cox Oklahoma's service territory is in the public interest. Cox responded to data requests that it has limited facilities in place today, outside the proposed service territories, for provisioning internet and telemedicine access services in the proposed service territories. [HE-2] Cox Oklahoma has no facilities in place today in the proposed service territories for provisioning these services and intends to lease facilities in the proposed service territories necessary for provisioning services. In response to Ms. Buchanan's statement concerning the number of potential schools, Mr. Stamp stated that the latest information he had received was that Cox Oklahoma has an opportunity to provision internet access to 36 public schools in the exchanges listed in Amended Exhibit A, and that these 36 public schools all have internet services that are receiving OUSF support. Stamp further testified that to better serve the needs of schools, libraries and eligible healthcare entities throughout the state, Cox Oklahoma is seeking this service territory expansion for the limited purpose of providing unregulated internet and telemedicine services to these entities. The schools, libraries and eligible healthcare entities in 15

16 AU Report, Cause No. PUD Page 16 the rural exchanges of Oklahoma may have better access to competitive choices for internet and telemedicine services, which may mean more robust services and better prices. "...With the introduction of a competitive choice in these areas, schools, libraries and eligible healthcare entities could see lower prices for internet and telemedicine services. As a result, these entities could seek less of a reimbursement from the OUSF than they are receiving today... for the reasons stated above, specifically customer choice and the potential for more robust services and/or lower prices, it is in the public interest to grant this application. See Stamp Testimony, Page 6. The record in this cause contains substantial evidence to grant the relief requested in this Cause. Substantial evidence is more than a scintilla of evidence; it possesses something of substance and of relevant consequence that is fit to induce conviction and may lead reasonable men fairly to differ on whether it establishes a case. 9 At least two factors referenced in OAC 165: refer to "potential" customers and potential impact, the information presented by Cox Oklahoma Telecom in this Cause is enough to meet the requirements of expansion of territory. 4. OAC 165: was first adopted by the Commission in 1996, at the beginning of telecommunications competition in the local exchange market in Oklahoma. Subchapter 17 attempts to address various competitive issues; for example, obligations of TSPs to facilitate competition (OAC 165: ), negotiation, arbitration and approval of agreements (OAC 165: ), unbundling of ILEC networks (OAC 165: ) and interconnection of Turpen v. Oklahoma Corp. Corn 'n, 1988 Ok 126, 769 P. 2d 1309, 1369 (Ok!. 1988). 16

17 ALJ Report, Cause No. PUD Page 17 networks (OAC 165: ). In adopting Subchapter 17, the Commission addressed the underlying principle of "universal service". "Universal service is a paramount goal of the Commission's telecommunications policy. The purpose of universal service is to ensure that all end-users have access to basic residential intrastate voice and/or relay service at a reasonable and affordable price." OAC 165: Promoting the goal of universal service while the local exchange market expands through competition is found in the reference to "universal service" in OAC 165: (a). 5. Expansion of Cox Oklahoma's local exchange service territory is both in the public interest and consistent with the universal service goals of the Commission. The addition of Cox Oklahoma into the expanded service area will likely provide access to quality telecommunications services at just, reasonable and affordable rates. It will also likely provide access to advanced telecommunications services and service opportunities consistent with those services currently provided by Cox Oklahoma elsewhere. Further "internet" is defined in OAC 165: as "the international research-oriented network comprised of business, government, academic and other networks." "Telemedicine" is defined in OAC 165: as "the practice of healthcare delivery, diagnosis, consultation, treatment, transfer of medical data or exchange of medical education information by means of audio, video or data communications." Cox Oklahoma seeks to expand its service territory for a limited purpose of provisioning telemedicine access pursuant to OAC 165: and internet access pursuant to OAC 165: This reading of OAC 165: (a), that the Commission shall consider the impact on universal service, makes sense in the context of service territory expansion. A new entrant into an exchange may not know how many consumers it can attract and may have no way 17

18 ALJ Report, Cause No. PUD Page 18 of knowing the impact on the OUSF. The question of impact on the OUSF is better suited in a context other than the requirements for service territory expansion, the context of the rule confirms this. 7. A telecommunications carrier can be reimbursed from the OUSF for telemedicine circuits to eligible healthcare entities and internet access to schools and libraries. Cox Oklahoma has identified approximately 36 schools as potential customers for internet access services. To the extent, possible, however, eligibility for supported special universal services should be addressed when application is made for reimbursement, and not in this cause. 8. Subchapter 17, at OAC 165: , references the establishment of the OUSF "to preserve and advance universal service in Oklahoma." 10 This reference is distinguishable from the requirement in OAC 165: (a) that the Commission consider the potential impact on universal service. If the Commission had desired to consider the impact on the OUSF due to the service territory expansion, it could have used the term "OUSF". Instead, the term "universal service" was adopted by the Commission. Strong consideration should be given to the fact both terms are defined. In fact, a separate chapter, Chapter 59, was adopted by the Commission to further define the OUSF program. This distinction clearly buttresses the conclusion the Commission intended to address the impact on universal service and not on the OUSF. 9. OAC 165: (a) requires the Commission to determine whether the service territory of a competitive local exchange carrier (LEC) is in the public interest at the time the 10 The Oklahoma Universal Service Fund ("OUSF") was established to preserve and advance universal service in Oklahoma. Every entity which provides intrastate telecommunications services shall contribute, on an equitable and nondiscriminatory basis, for the preservation and advancement of universal service in Oklahoma, in a manner established by the Commission pursuant to OAC 165:59. (OAC 165: ) 18

19 ALJ Report, Cause No. PUD Page 19 competitive LEC proposes changes to its service territory. In determining whether the proposed service territory meets the public interest, the Commission should, in addition to other factors, consider the potential impact on universal service. An analysis of the potential impact on universal service requires an examination to determine whether the goals of universal service are preserved and advanced. Staff asserted that the definition of "universal service" "is an evolving level of telecommunications services that the Commission shall establish periodically" "taking into account advances in telecommunications and information technologies and services." 47 U.S.C. Section 254 (c)(l). Staff also cited 47 U.S.C. Section 254(b) which indicates that the preservation and advancement of universal service is based on cited enumerated principles." In contrast, Staff argued that the potential impact on the OUSF requires an analysis of how the funding of universal service will be affected. Staff cited OAC 165: , which states that the OUSF was established to preserve and advance "universal service" in Oklahoma. Furthermore, Staff argued that in other expansion cases, such as Cause Nos. PUD , , , and , Staff performed an analysis of the potential impact on universal service which required an examination to determine whether the goals of universal service were preserved and advanced. Staff also argued that the orders in prior 11(1) Quality services should be available at just, reasonable, and affordable rates; (2) Access to advanced telecommunications and information services should be provided in all regions of the Nation; (3) Consumers in all regions of the Nation, including low-income consumers and those in rural, insular, and high cost areas, should have access to telecommunications and information services, including interexchange services and advanced telecommunications and information services, that are reasonably comparable to those services provided in urban areas and that are available at rates that are reasonably comparable to rates charged for similar services in urban areas; (4) All providers of telecommunications services should make an equitable and non discriminatory contribution to the preservation and advancement of universal service; (5) There should be specific, predictable and sufficient Federal and State mechanisms to preserve and advance universal service; (6) Elementary and secondary schools and classrooms, health care providers, and libraries should have access to advanced telecommunications services as described in subsection (h) of this section; (7) Such other principles as the Joint Board and the Commission determine are necessary and appropriate for the protection of the public interest, convenience, and necessity and are consistent with this chapter. 47 U.S.C. 254(b) 19

20 AW Report, Cause No. PUD Page 20 expansion cases regarding potential impact on universal service entailed a finding that the universal service goals were advanced Notwithstanding interpretations of 17 O.S , the Commission does have jurisdiction over OUSF such as special universal services and related issues such as disbursement of support from the OUSF. 11. The Commission finds that proper notice was given in this Cause. 12. Retail offerings, Carrier of Last Resort, Eligible Telecommunications Carrier designation 13, wholesale service, associated revenues, retail billing, intrastate retail revenues and other issues are not required to be addressed in an application for CCN expansion. Unless addressed herein, the Commission therefore defers such issues to a proper cause. 13. The Commission further finds that the local exchange service territory of Cox Oklahoma should be expanded to include the exchanges listed in Amended Exhibit A and Amended Exhibit B tariff page no. 8 to the Amended Application. RECOMMENDATION It is the recommendation of the Administrative Law Judge that the local exchange service territory of Cox Oklahoma should be expanded pursuant to the record in this Cause to include the exchanges listed in the Amended Exhibit A and Amended Exhibit B tariff page no. 8 to the Amended Application and therefore the Applicant's request for relief should be granted. 12 See footnote See filings in Cause No. PUD

21 ALJ Report, Cause No. PUD Page 21 Respectfully Submitted this 2nd day of May, ML it JLLI JACQUELINE T. MILLER Administrative Law Judge 21