BILL ANALYSIS C.S.H.B. 2128 By: Seidlits (Sibley) Economic Development 05-10-95 Senate Committee Report (Substituted) BACKGROUND The Public Utility Commission of Texas (PUC) was created in 1975 and is responsible for regulating electric and telephone utilities in Texas. The key functions of the PUC include certifying a utility's initial operation, reviewing any new construction or changes to existing facilities, setting rates, and monitoring and auditing the operations of utilities under its jurisdiction. Currently, the PUC has oversight of investor-owned utilities, electric cooperatives, river authorities, and local telephone companies. Cities have retained original ratemaking authority for electric utilities and cooperatives operating within their boundaries, but the commission reviews these rates on an appellate basis. The commission also reviews on appeal the rates of city utilities serving customers outside of city limits. The Office of Public Utility Counsel (OPUC) was created in 1983 to represent residential and small business consumers before PUC. OPUC participates in many proceedings before PUC but concentrates its efforts on telephone and electric utility rate cases having the greatest impact on residential and small business consumers. OPUC has participated in major rate cases, but only a percentage of all cases before PUC since 1983. The PUC and OPUC are subject to the sunset act and will be abolished September 1, 1995, unless continued by the legislature. S.B. 319, Acts of the 74th Legislature, Regular Session, 1995, nonsubstantively recodifies the Public Utility Regulatory Act of 1995. This bill makes substantive changes to that recodification. PURPOSE As proposed, C.S.H.B. 2128 continues the Public Utility Commission of Texas and the Office of Public Utility Counsel for a six-year period. Among other statutory modifications, H.B. 2128 grants more rate flexibility to small telephone companies; partially deregulates telephone cooperatives; creates a certificate of operating authority and a service provider certificate of operating authority for new entrants to the telecommunications market to provide more flexibility in regulation; establishes an incentive regulatory structure for electing local exchange companies that regulates price net cost of telecommunications services in three baskets of competitive regulation in return for $1.4 billion in infrastructure commitments to benefit schools, libraries, and hospitals; requires the Public Utility Commission of Texas to establish competitive safeguards to ensure fair competition and to accelerate improvement of telecommunications; establishes requirements for the use of specific customer proprietary network information; establishes requirements for audio and video programming, and for audio and video carriage; limits the involvement of local exchange companies in electronic publishing; creates the Telecommunications Infrastructure Fund Board to administer the Telecommunications Infrastructure Fund to award grants and loans for the purchase of equipment for educational programs; and requires the delivery of certain exchange company monies to rural and urban scholarship funds. RULEMAKING AUTHORITY It is the committee's opinion that rulemaking authority is granted to the Public Utility Commission of Texas under SECTIONS 6, 20, 24, 38, 43, 45, 48 (Sections 3.001, 3.213(j), 3.2135(i), 3.2531(c) and (j), 3.2625(f) and (h), 3.304(a), 3.309(c), 3.354(a), 3.452(c), 3.454(a), 3.455(a), 3.456(a), 3.457(a), 3.458(f), 3.460(b), 3.461, 3.463, 3.501(c), 3.601, 3.605, 3.608(b), and 3.658, Public Utility Regulatory Act of 1995), and to the Texas Higher Education Coordinating Board, the Central Education Agency, and the Texas State Library Archives Commission under SECTION 48 (Section 3.606(r), Public Utility Regulatory Act of 1995) of this bill. SECTION BY SECTION ANALYSIS SECTION 1. Amends Section 1.002, Public Utility Regulatory Act of 1995 (PURA), to provide that the legislature finds that traditionally public utilities are by definition monopolies in the areas they serve. SECTION 2. Amends Section 1.003(14), PURA, to make a nonsubstantive change. SECTION 3. Amends Section 1.004, PURA, to make a nonsubstantive change. SECTION 4. Amends Section 1.022, PURA, to declare that, unless continued in existence by Chapter 325, Government Code, this Act expires September 1, 2001. SECTION 5. Amends Section 1.353, PURA, as follows: (a)-(c) Make no change. (d) Requires 50 percent of the assessment due August 15, 1997, to be paid by August 15, 1996, and 50 percent to be paid by February 15, 1997, rather than August 15, 1997. (e) Requires 50 percent of the assessment due August 15, 1998, to be paid by August 15, 1997, and the remainder to be paid by August 15, 1998. (f) Makes a conforming change. (g) Redesignates existing Subsection (f). Declares that this subsection expires September 1, 1998, rather than 1997. SECTION 6. Amends Title IIIA, PURA, as follows: SUBTITLE A. GENERAL PROVISIONS Sec. 3.001. POLICY. Sets forth the findings of the legislature concerning the telecommunications industry. Sec. 3.002. DEFINITIONS. Defines "basic local telecommunications service," "incumbent local exchange company," "least cost technology," "local exchange telephone service," "long run incremental cost" or "LRIC," "pricing flexibility," "telecommunications provider," "and Tier 1 local exchange company." Redefines "dominant carrier," "local exchange company," "public utility" or "utility," and "separation." SECTION 7. Amends Section 3.051, PURA, by amending Subsections (a), (c)-(f), (j), and (l)-(q), and adding Subsections (r) and (s), as follows: (a) Declares that the legislature finds that the telecommunications industry through legislative actions, among others, does not lend itself to traditional public regulatory rules. (c) Grants the commission the jurisdiction to conduct investigations necessary to identify dominant carriers in the local telecommunications, rather than exchange, industry; to require that every local exchange area have access to local and interexchange telecommunications service, except that a telecommunications utility, rather than an interexchange carrier, must be allowed to discontinue service to a local exchange area under certain circumstances; and to require adequate quality of telecommunications service in each exchange if the commission determines that service, rather than long distance service, is not reliable. Makes conforming and nonsubstantive changes. (d) Makes conforming and nonsubstantive changes. (e) Grants the commission all necessary power and authority to promulgate rules and procedures applicable to incumbent local exchange companies, rather than local exchange companies, for determining the level of competition in specific telecommunications markets. Makes conforming changes. (f) and (j) Make conforming changes. (l) Authorizes the commission to enter into such orders as necessary to protect the public interest, including the imposition of services of its full regulatory authority under this subtitle, Subtitles C-F of this Title and Subtitles D-I of Title I, but not Subtitles H and I of this title, if the commission finds that an interexchange telecommunications utility has engaged in, or attempted to engage in, predatory pricing. (m) and (n) Make conforming changes. (o) Authorizes the commission to require information from local exchange companies, rather than local exchange carriers, as necessary to enforce the provision under this subsection. Makes conforming changes. (p) Makes conforming changes. (q) Deletes reference to Subsection (l) of this section. Makes a conforming change. (r) Authorizes the commission, only as necessary to enforce its limited jurisdiction, to prescribe forms of books, accounts, records, and memoranda to be kept by a company that has a certificate of operating authority (COA) or service provider certificate of operating authority (SPC) under Subtitle F of this title that in the judgment of the commission may be necessary to carry out the limited jurisdiction over those companies that this Act provides to the commission. (s) Grants the commission, except as otherwise specifically provided by this Act, only the following authority over a holder of a COA or SPC: to enforce the applicable provisions of this Act as provided by Subtitle I, Title I, of this Act; to assert jurisdiction over a specific service in accordance with Section 3.2572 of this Act; to require co-carriage reciprocity; and to regulate condemnation and building access. Prohibits the commission from imposing on a telecommunications utility that has a COA or SPC a rule or regulatory practice under this section that imposes a greater regulatory burden on that telecommunications utility than is imposed on a certificate of convenience and necessity (CCN) holder serving the same area. SECTION 8. Amends Title IIIB, PURA, by adding Section 3.053, as follows: Sec. 3.053. SALE OF PROPERTY. (a) Requires the commission to complete an investigation under Section 1.251 of this Act that relates to a public utility and enter a final order within 180 days after the date of notification by the utility. Considers the utility's action consistent with the public interest if an order is not entered. (b) Declares that Section 1.251 of this Act does not apply to an incumbent local exchange company (LEC) electing under Subtitle H or I of this title or to a company that receives a COA or SPC under Subtitle F of this title. SECTION 9. Amends Title IIIC, PURA, by adding Section 3.1015, as follows: Sec. 3.1015. MUNICIPAL FEES. Prohibits anything in this Act from being construed as in any way limiting the right of a public utility to pass through municipal fees. Requires a public utility that traditionally passes through municipal fees to promptly pass through any reductions. SECTION 10. Amends Section 3.151(a), PURA, to require the commission, on application of a utility, to fix depreciation rates that promote deployment of new technology and infrastructure, and to consider depreciation practices of nonregulated telecommunications providers in setting those rates. Authorizes a company electing under Subtitle H of this title to determine its own depreciation rates and amortizations, but shall notify the commission of any changes. SECTION 11. Amends Title IIID, PURA, by adding Section 3.1545, as follows: Sec. 3.1545. RECORDS. Authorizes books, accounts, records, or memoranda of a public utility, notwithstanding Section 1.204 of this Act, to be removed from the state so long as those books, accounts, records, or memoranda are returned to the state for any inspection by the commission that is authorized by this Act. SECTION 12. Amends Title IIID, PURA, by adding Section 3.1555, as follows: Sec. 3.1555. MINIMUM SERVICES. (a) Requires the commission to require all holders of CCNs and COAs to provide at the applicable tariff rate to all customers not later than December 31, 2000, single party service, tone-dialing service, basic custom calling features, equal access for interLATA interexchange carriers upon bona fide request, and certain digital switching capability on customer request. (b) Requires an electing incumbent LEC serving as of January 1, 1995, more than 175,00 but fewer than 1,500,000 access lines to install digital switches in its central offices serving exchanges of less than 20,000 access lines before December 31, 1998, notwithstanding Subsection (a) of this section. (c) Authorizes the commission to temporarily waive these requirements on a showing of good cause. Prohibits the commission from considering the cost of implementing this section in determining whether an electing company is entitled to a rate increase under Subtitle H or I of this title or increased universal service funds under Section 3.608 of this Act. (d) Declares that this section does not affect the requirement prescribed by 16 T.A.C. Section 23.69 that, not later than July 1, 1996, each LEC shall make Integrated Services Digital Network (ISDN) available to all customers in exchange areas of the company that have at least 50,000 access lines. SECTION 13. Amends Title IIID, PURA, by adding Section 3.1556, as follows: Sec. 3.1556. RECONNECTION FEE. Requires the commission to establish a reasonable limit on the amount that a LEC may charge a customer for changing the location at which the customer receives service. SECTION 14. Amends Sections 3.201 and 3.202, PURA, to make nonsubstantive and conforming changes. SECTION 15. Amends Section 3.204, PURA, to place the burden of proof that an incumbent LEC's, rather than a LEC's, rates are just and reasonable on the incumbent LEC. SECTION 16. Amends Section 3.208(b), PURA, to require a finding under this subsection to include, among others, a finding that the price to the utility is no higher than prices charged by the supplying affiliate to its other affiliates or divisions for the same item or class of items, or to unaffiliated persons or corporations within the same market areas or having the same market conditions. Declares that, if the supplying affiliate has calculated its charges to the utility in a manner consistent with the rules of the Federal Communications Commission (FCC), no finding shall be required as to the price charged by the supplying affiliate to its other affiliates or divisions. Requires the commission, in any case in which the commission finds that the test period affiliate expense is unreasonable, to determine the reasonable level of the expense and to include such expense in determining the utility's cost of service. SECTION 17. Amends Section 3.210, PURA, by adding Subsection (c), to declare that this section, except as provided by Subtitles H and I of this title, does not apply to a company electing under Subtitle H or I of this title. Requires the commission to retain jurisdiction to hear and resolve complaints regarding an electing company's compliance with obligations imposed by this Act. SECTION 18. Amends Section 3.211, PURA, by amending Subsections (f) and (h), and adding Subsection (j), as follows: (f) Declares that this subsection, except as provided by Subtitles H, I, and J of this title, does not apply to a company electing into Subtitle H or I of this title. Requires rates established under this section after a company's election to comply with Subtitle H or I of this title. (h) Requires the schedule of rates finally approved by the commission, if the commission does not make a final determination concerning an incumbent LEC's, rather than a LEC's, schedule of rates prior to the 150-day suspension period, to become effective from the date the suspension period expired. Makes a conforming change. (j) Authorizes an incumbent LEC to file with the commission tariffs for switched access service that have been approved by the FCC, provided that the tariffs include all rate elements in the company's interstate access tariff other than end user charges. Requires the commission, if on review the filed tariffs contain the same rates, terms, and conditions, excluding any end user charges, as approved by the FCC, to order the rates to be the intrastate switched access rates, terms, and conditions for the incumbent LEC within 60 days of filing. SECTION 19. Amends Sections 3.212(a) and (c), PURA, to authorize an incumbent LEC, rather than a LEC, to make changes in certain tariffed rules, regulations or practices by filing the proposed changes at least 35 days prior to the effective date of the changes. Makes a conforming change. SECTION 20. Amends Title IIIE, PURA, by amending Section 3.213 and adding Section 3.2135, as follows: Sec. 3.213. New heading: SMALL INCUMBENT LOCAL EXCHANGE COMPANIES. (a) Sets forth the findings of the legislature concerning regulatory policy. (b) Authorizes an incumbent LEC that is a cooperative corporation, or that, together with all affiliated incumbent LECs, has fewer than 31,000 state access lines in service in this state, to offer extended local calling or new services on an optional basis or make minor changes in rates or tariffs if the company files a prescribed statement of intent with the commission and the office before a specified time, provides prescribed notice, and files with the commission affidavits verifying the provision of notice prescribed. (c) Requires the statement of intent to include specific information. (d) Requires the incumbent LEC to provide notice to affected customers not later than the 61st day before the effective date of the proposed change. Sets forth the required contents of the notice. (e) Requires the commission to review a proposed change filed under this section if the commission receives complaints relating to the proposed change signed by a certain number of the affected local service customers; the commission receives a complaint from an affected intrastate access customer, or group of such customers, that in the preceding 12 months accounted for more than 10 percent of the company's total intrastate gross access revenues; the proposed change is not a minor change; the company does not comply with the procedural requirements of this section; or the proposed change is inconsistent with the commission's substantive policies as expressed in its rules. (f) Authorizes the commission, on review, to suspend the proposed tariff during the pendency of review. (g) Provides that this section does not prohibit a incumbent local exchange company from filing for new service or rate change under another applicable section of this Act, or the commission from conducting a review under Section 3.210 of this Act. (h) Defines "minor change." Deletes existing Subsections (a)-(f). (i) Authorizes companies under this section to provide to their board members, officers, employees, and agents free or reduced rates for services. (j) Requires the commission, within 120 days of the effective date of this section, to review its policies, rules, and requirements relating to rural and small incumbent LECs and cooperatives to eliminate or revise those that place unnecessary burdens on those companies. Sets forth required considerations of the commission. (k) Redesignates existing Subsection (h) and makes conforming changes. (l) Provides that this section may not apply to an incumbent LEC that is a cooperative corporation partially deregulated under Section 3.2135 of this Act, except as provided in Subsection (j). Sec. 3.2135. COOPERATIVE CORPORATIONS. (a) Authorizes an incumbent LEC that is a cooperative corporation to vote to partially deregulate the cooperative by sending a ballot to each cooperative member providing for voting for or against the proposition. (b) Considers the cooperative to be partially deregulated if a majority of the ballots, returned before a specific time, favor deregulation. (c) Authorizes the cooperative, after balloting, to offer extended local calling services, new services on an optional basis, or changes in its rates or tariffs if the cooperative provides notice, files with the department affidavits verifying the provision of notice, and files a statement of intent. (d) Sets forth requirements for the statement of intent. (e) Requires the cooperative to provide to all affected customers and parties at least two notices of the proposed action. Sets forth requirements for the notice. (f) Requires the cooperative to file, before a specific time, with the commission affidavits verifying that the cooperative provided each notice under Subsection (e). (g) Requires the commission to review a proposed action if the commission receives by a certain date, complaints relating to the proposed action signed by at least five percent of the affected local service customers or from an affected intrastate access customer, or group of such customers, that in the preceding 12 months accounted for more than 10 percent of the company's total intrastate gross access revenues; the cooperative does not comply with the procedural requirements of this section; or the proposed change is inconsistent with the commission's substantive policies as expressed in its rules. (h) Authorizes a cooperative that is partially deregulated under this section to vote to reverse the deregulation by sending a ballot to each cooperative member. Sets forth provisions for a reballot. (i) Requires the commission, by rule, to prescribe the voting procedures required for a cooperative. (j) Provides that this section does not prohibit a cooperative from filing for a new service or rate change under another applicable section of this Act or affect the application of other provisions of this Act. (k) Authorizes the commission to conduct a review in accordance with Section 3.210 of this Act. SECTION 21. Amends Title IIIE, PURA, by adding Section 3.219, as follows: Sec. 3.219. INTRALATA CALLS. (a) Requires LECs in this state designated or de facto authorized to receive "0+" and "1+" dialed intraLATA calls to be exclusively designated or authorized to receive those calls, except as provided by Subsection (b) and while federal law prohibits any company in this state from providing interLATA services. (b) Provides that a telecommunications utility operating under a COA or SPC to the extent not restricted by Section 3.2532(f), is de facto authorized to receive "0+" and "1+" dialed intraLATA calls on the date on which the utility receives its certificate. (c) Requires the commission, effective as of the time the LEC is allowed by federal law to provide interLATA telecommunications services, to ensure that customers may designate a provider of their choice to carry their "0+" and "1+" dialed intraLATA calls and that equal access in the public network is implemented such that the provider may carry such calls. SECTION 22. Amends Section 3.251, PURA, by adding Subsections (c) and (d), as follows: (c) Prohibits a person from providing local exchange telephone service, basic local telecommunications service, or switched access service without a CCN, COA, or SPC. (d) Prohibits a municipality from receiving a CCN, COA, or SPC under this Act, and from providing a service for which a certificate is required. SECTION 23. Amends Section 3.252, PURA, as follows: Sec. 3.252. New heading: EXCEPTIONS. Provides that a telecommunications utility, rather than a public utility, is not required to secure a CCN, COA, or SPC for an extension into territory contiguous to that already served by it and not receiving similar service from another telecommunications utility and not within the certificated area of another telecommunications utility; an extension within territory already served by it under a COA or SPC; or interexchange telecommunications service, non-switched private line service, shared tenant service, specialized communications common carrier service, commercial mobile service, or operator service as defined by Section 3.052(a) of this Act. Makes a conforming change. SECTION 24. Amends Title IIIF, PURA, by adding Section 3.2531, as follows: Sec. 2.2531. CERTIFICATE OF OPERATING AUTHORITY. (a) Authorizes an applicant, in lieu of a CCN, to apply for a COA. (b) Requires an application for a COA to specify whether the applicant is seeking a facilities based COA under this section or an SPC under Section 3.2532. Requires the commission, when an application for a COA or SPC is filed, to give notice of the application to interested parties and, if requested, fix a time and place for a hearing and give notice of the hearing. Authorizes any person interested in the application to intervene at the hearing. (c) Requires an applicant, if seeking a facilities based COA, to include in the application a proposed build-out plan demonstrating how the applicant will deploy its facilities throughout the geographic area of its certificated service area over a six-year period. Authorizes the commission to issue rules for a holder of a COA with respect to the time within which the holder must be able to serve customers, except that a holder must serve customers within a build-out area within 30 days of the date of a customer request for service. Prohibits the commission from requiring a holder to place "drop" facilities on every customer's premises or to activate fiber optic facilities in advance of customer request as part of the build-out requirements. Requires the plan required by this subsection to meet certain conditions. (d) Authorizes the build-out plan to permit not more than 40 percent of the applicant's service area to be served by resale of the incumbent LEC's facilities under the tariff required to be approved in Section 3.453. Provides a specific exception. Declares that the 40-percent resale limitation applies to incumbent local exchange facilities resold by a holder of a COA as part of the provision of local exchange telephone service. Prohibits an applicant from using commercial mobile service to meet the build-out requirement imposed by this section. Authorizes an applicant to use personal communications services wireless technology licensed by the FCC after January 1, 1995, to meet the build-out requirement. (e) Requires COAs to be granted within 60 days after the date of application on a nondiscriminatory basis after commission consideration of certain factors. Authorizes the commission to extend the 60-day period on good cause shown. Requires the commission to make additional considerations in an exchange of an incumbent LEC serving fewer than 31,000 access lines. (f) Requires the commission to consider the adequacy of the applicant's build-out plan in determining whether to grant the application. Authorizes the commission to administratively and temporarily waive compliance with the six-year build-out plan on a showing of good cause. Requires the holder of a certificate to file periodic reports with the commission demonstrating compliance with the plan. (g) Authorizes an application for a COA to be granted only for an area or areas that are contiguous and reasonably compact and cover at least 27 square miles. Makes certain exceptions. (h) Prohibits the commission, before September 1, 1998, from granting a COA in an exchange of an incumbent LEC serving fewer than 31,000 access lines. Requires the commission to require that the applicant meet the other appropriate certification provisions of this Act. (i) Authorizes the commission, six years after an application for a COA has been granted for a particular area or when the new applicant has completed its build-out plan required by this section, to waive the build-out requirements of this section for additional applicants. Requires the build-out requirements of this section, in service areas served by an incumbent LEC having more than five million access lines which, as of September 1, 1995, is subject to any prohibition under federal law on the provision of interLATA service, to be eliminated in any service where all prohibitions on that company's provision of interLATA services are removed such that the company can offer interLATA service together with its local and intraLATA toll service. (j) Authorizes the commission, on an application filed after September 1, 1997, to conduct a hearing to make certain determinations concerning the build-out requirements. Sets forth requirements for the commission, including rulemaking authority, if the commission determines that the existing build-out requirements have created barriers to facilities based local exchange competition. (k) Authorizes the commission, if the holder of a COA fails to comply with any requirement of this Act, to revoke the certificate, or impose administrative penalties or take other action under Subtitle I, Title I, of this Act. SECTION 25. Amends Title IIIF, PURA, by adding Section 3.2532, as follows: Sec. 3.2532. SERVICE PROVIDER CERTIFICATE OF OPERATING AUTHORITY. (a) Authorizes the commission, in order to encourage innovative and entrepreneurial businesses to provide telecommunications services, to grant SPCs. Requires an applicant to demonstrate that it has the financial and technical ability to provide its services and show that the services will meet the requirements of this section. (b) Declares that a company is eligible for an SPC under this section unless the company, together with affiliates, had in excess of six percent of the total intrastate switched access minutes of use as measured by the most recent 12-month period preceding the filing of the application for which data is available. Requires the commission to obtain from the incumbent LECs such information as is necessary to determine eligibility, and to certify such eligibility within 10 days after the application is filed. Requires an SPC to be granted within 60 days after the date of the application on a nondiscriminatory basis after consideration by the commission of certain factors. Authorizes the commission to extend the 60-day period on good cause shown. (c) Requires an applicant for an SPC to file with its application a description of the services it will provide and to show the areas in which it will provide those services. (d) Authorizes a holder of an SPC to obtain services under the resale tariffs ordered by the commission as specified by Section 3.453 of this Act; obtain for resale the monthly recurring flat rate local exchange telephone service and associated nonrecurring charges of an incumbent LEC as a five percent discount to the tariffed rate; sell the flat rate local exchange telephone service only to the same class of customers to which the incumbent LEC sells that service; obtain services offered by or negotiated with a holder of a CCN or COA; and obtain for resale single or multiple line flat rate intraLATA calling service when provided by the LEC at the tariffed rate for online digital communications. Prohibits a holder of an SPC from using a resold flat rate local exchange telephone service to avoid the rates, terms, and conditions of an incumbent LEC's tariffs; terminate both flat rate local exchange telephone service and services obtained under the resale tariff on the same end user customer's premises; use the resold flat rate local exchange telephone services to provide access services to other interexchange carriers, cellular carriers, competitive access providers, or other retail telecommunications providers. (e) Prohibits the holder of a COA or CCN from being granted an SPC as to the same territory. Requires a holder of an SPC who applies for a COA or CCN as to the same territory to include a plan to relinquish its SPC. (f) Authorizes an incumbent LEC that sells flat rate local exchange telephone service to a holder of an SPC to retain all access service and "1+" intraLATA toll service originated over the resold flat rate local exchange telephone service. (g) Prohibits an incumbent LEC from delaying provisioning or maintenance of services provided under this section; degrading the quality of access provided to another provider; impairing the speed, quality, or efficiency of lines used by another provider; failing to fully disclose in a timely manner upon request all available information necessary for the holder of an SPC to provision resale services; or refusing to take any reasonable action to allow efficient access by a holder of an SPC to ordering, billing, or repair management systems of the LEC. (h) Defines "affiliate" and "control." SECTION 26. Amends Sections 3.255(a) and (b), PURA, as follows: (a) Grants all telecommunications utilities, rather than public utilities, certified under this Act to provide service or operate facilities in an area to be included in certain boundaries prior to the inclusion to continue service in its area of certification within the annexed or incorporated area. (b) Grants a certificated telecommunications utility, rather than a public utility, the right to continue service within its area of certification under certain circumstances. Makes conforming changes. SECTION 27. Amends Sections 3.256 and 3.257, PURA, to make conforming changes. SECTION 28. Amends Title IIIF, PURA, by adding Section 3.2555, as follows: Sec. 3.2555. DISCRIMINATION. (a) Requires an applicant for a COA or SPC to file with its application a sworn statement that it has applied for any necessary municipal consent, franchise, or permit required for the types of services and facilities for which it has applied. Prohibits a municipality, notwithstanding Section 1.103 of this Act, from discriminating against a telecommunications utility in relation to the authorization or placement of telecommunications facilities within public right-of-way, access to buildings, or municipal utility pole attachment rates, terms, and conditions to the extent not addressed by federal law. (b) Prohibits a municipality, in the granting of consent, franchises, and permits for the use of public streets, alleys, or rights-of-way within its corporate municipal limits, from discriminating in favor of or against a telecommunications utility that holds or has applied for a CCN, COA, or SPC all in relation to certain factors. (c) Prohibits a public or private property owner from taking certain actions whenever a telecommunications utility holds a consent, franchise, or permit as determined to be the appropriate grants of authority by the municipality, and holds a certificate, where required by this Act. (d) Authorizes a public or private property owner to take certain actions whenever a telecommunications utility holds a municipal consent, franchise, or permit as determined to be the appropriate grants of authority by the municipality, and holds a certificate, where required by this Act. (e) Grants the commission the jurisdiction necessary to enforce this section. (f) Prohibits anything in this Act from restricting or limiting a municipality's historical right to control and receive reasonable compensation for access to its public streets, alleys, or rights-of-way or other public property. (g) Provides that Subsection (c) of this section does not apply to an institution of higher education. Defines "institution of higher education." (h) Grants the holder of a CCN, COA, or SPC the right to collect the fee imposed by a municipality under this section through a pro rata charge to customers within the boundaries of the municipality imposing the fee, which may be shown as a separate line item on the customer bill. SECTION 29. Amends Title IIIF, PURA, by adding Section 3.2571, as follows: Sec. 3.2571. FLEXIBILITY PLAN. Requires the commission, after an application for a CCN, COA, or SPC is granted or the commission determines that a certificate is not needed for the services to be provided by the applicant, to conduct the proceedings it determines appropriate to establish a transitional flexibility plan for the incumbent LEC in the same area as the new certificate holder. Prohibits a basic local telecommunications service price of the incumbent LEC from being increased until four years following the grant of the certificate to the applicant, except as provided by this Act or when the new applicant has completed its build-out plan under Section 3.2531 or when the build-out requirements have been eliminated. SECTION 30. Amends Title IIIF, PURA, by adding Section 3.2572, as follows: Sec. 3.2572. MARKET POWER TEST. (a) Authorizes the commission, on notice and hearing, to grant price deregulation of a specific service in a particular geographic market if the commission determines that the incumbent LEC or COA holder that is a dominant provider is no longer dominant as to that specific service in that particular geographic market. Authorizes the incumbent LEC or COA holder that is a dominant provider, once a service is price-deregulated under this section, to set the rate for the deregulated service at any level above the service's long-run incremental cost (LRIC). (b) Requires the commission, in order to determine that an incumbent LEC or COA holder that is a dominant provider is no longer dominant as to a particular service in a particular geographic market, to find that an effective competitive alternative exists and that the incumbent LEC or COA holder that is a dominant provider does not have sufficient market power to control the price of the service within a specified geographic area in a manner that is adverse to the public interest. (c) Sets forth the factors for the commission to consider in determining whether the incumbent LEC or COA holder is dominant as to a specific service in a particular geographic area. (d) Grants the commission all necessary power to assert or reassert regulation over a specific service in a particular geographic market if the incumbent LEC or COA holder that is a dominant carrier is found to again be dominant, or the provider of services under a COA or SPC is found to be dominant as to that specific service in that particular geographic market. (e) Requires the commission, on request of an incumbent LEC or COA holder that is a dominant carrier in conjunction with an application under this section, to conduct investigations to determine the existence, impact, and scope of competition in the particular geographic and service markets at issue. Authorizes the commission to call and hold hearings and issue subpoenas. Grants the commission all powers necessary and convenient to the investigation, and authorizes the commission to make findings of fact and decisions with respect to those markets. (f) Entitles the parties to the proceeding to use the results of the investigation under Subsection (e) in an application for pricing flexibility. (g) Authorizes the commission to collect reports from a holder of a COA or SPC. Requires the information to be confidential. Requires the commission to aggregate the information to the maximum extent possible considering the purpose of the proceeding to protect the confidential nature of the information. SECTION 31. Amends Section 3.258(a), PURA, to require, except as provided by this Section, Section 3.259, or Section 3.2595, a telecommunications utility that is granted a CCN or COA to be required to offer to any customer in its certificated area all basic local telecommunications services. Places provider of last resort obligations on the holder of a CCN or COA. SECTION 32. Amends Section 3.259, PURA, to require the holder of a COA or SPC to refuse to serve a customer within its certified area if the certificate holder is prohibited from providing the service under Section 212.012 or 232.0047, Local Government Code. SECTION 33. Amends Title IIIF, PURA, by adding Section 3.2595, as follows: Sec. 3.2595. DISCONTINUATION OF SERVICE. (a) Authorizes a telecommunications utility that holds a COA or SPC, notwithstanding Section 3.258 of this Act, to discontinue an optional service that is not essential to the provision of basic local telecommunications service or cease operations within its certificated area. (b) Requires such telecommunications utility, before it discontinues an optional service or ceases operations, to provide notice of the intended action to the commission and each affected customer in the manner required by the commission. (c) Entitles such telecommunications utility to discontinue an optional service on or after the 61st day after the date on which the utility provides the notice required by Subsection (b) of this section. (d) Prohibits such telecommunications utility from ceasing operations within its certificated area unless another provider of basic local telecommunications services has adequate facilities and capacity to serve the customers of the certificated area and the commission authorizes the utility to cease operations. (e) Prohibits the commission from authorizing such telecommunications utility from ceasing operations under Subsection (d) of this section before the 61st day after the date on which the utility provides notice under Subsection (b). Authorizes the commission to enter an order administratively unless the commission receives a complaint from an affected person. SECTION 34. Amends Section 3.260, PURA, to authorize, under certain conditions, a telecommunications utility to sell a COA. SECTION 35. Amends Section 3.261, PURA, to make conforming changes. SECTION 36. Amends Title IIIF, PURA, by adding Section 3.2615, as follows: Sec. 3.2615. DIRECTORY LISTINGS AND ASSISTANCE. (a) Requires companies providing local exchange telephone service to negotiate the terms and conditions of printed directory listings and directory assistance within overlapping certificated areas. (b) Authorizes the commission, on complaint by the incumbent LEC or holder of the CCN, COA, or SPC, to resolve disputes between the parties and issue an order setting the terms and conditions of the directory listings or assistance. (c) Declares that this section does not affect the authority of an incumbent LEC to voluntarily conduct negotiations with an applicant for a CCN, COA, or SPC. SECTION 37. Amends Section 3.262, PURA, as follows: (a) Authorizes the commission, after notice and hearing, to order one or more telephone companies to provide optional extended area service within a specified calling area if provision of the service is jointly agreed to by the representatives of each affected telephone company and the representatives of a political subdivision within the proposed common calling area, provided that the proposed common calling area has a single, continuous boundary. (b) Declares that the agreement of each political subdivision is not required if more than one political subdivision is affected by a proposed optional calling plan. Prohibits the commission from adopting rules that diminish the ability of a political subdivision or affected telephone company to enter into joint agreements for optional extended area calling service. Defines "political subdivision." SECTION 38. Amends Title IIIF, PURA, by adding Section 3.2625, as follows: Sec. 3.2625. PAY TELEPHONES. (a) Limits by this section the right of a provider of pay telephone service to set the provider's rates and charges and the commission's authority over the pay telephone services rates of an incumbent LEC. (b) Prohibits a provider of pay telephone service from imposing on pay phone end users any charge for local directory assistance or calls made under Chapter 771 or 772, Health and Safety Code. (c) Requires the commission to establish a limit on the charge that may be imposed for a pay telephone coin sent-paid call within the LEC's toll-free local calling area. Authorizes the commission to establish a statewide ceiling on the charge that may be imposed by a provider of pay telephone service for local calls which are collect or operator-assisted or paid by credit card or calling card, provided that the commission shall not establish the ceiling at less than the applicable local rates for such calls of any of the four largest interexchange carriers operating in Texas. (d) Authorizes a provider of pay telephone service, under certain conditions, to impose a set use fee not exceeding 25 cents at the point at which the call is initiated for each "1-800" type call made from a pay telephone. (e) Prohibits a pay telephone service provider, other than an incumbent LEC, from charging for credit card, calling card, or live or automated operator-handled calls at a rate or charge that is an amount greater than the authorized rates and charges published in the eight newspapers having the largest circulation in this state on March 18, 1995, provided that the pay phone rates of an incumbent LEC subject to Subtitle H are governed by that subtitle. Declares that the published rates remain in effect until changed by the legislature. (f) Requires the commission to adopt rules within 180 days from the effective date of this section that require every pay telephone service provider not holding a CCN to register with the commission. Requires a provider of pay telephone service to be registered in order to do business in this state. (g) Authorizes the commission to order disconnection of service for up to one year for repeat violations of commission rules. (h) Authorizes the commission to adopt rules regarding information to be posted on pay telephone instruments, but those rules may not require a provider of pay telephone service or an affiliate of a provider to police the compliance with those rules by another provider of pay telephone service. (i) Defines "provider of pay telephone service." SECTION 39. Amends Section 3.263(a), PURA, to authorize the commission, at any time after notice and hearing, to revoke or amend any COA or SPC if it finds that the certificate holder has never provided or is no longer providing service in the area covered by the certificate. SECTION 40. Amends Section 3.302, PURA, by adding Subsection (i), to authorize a commercial mobile service provider to offer caller identification services under the same terms and conditions provided by Subsections (c)-(f) of this section. SECTION 41. Amends Title IIIG, PURA, by adding Section 3.3025, as follows: Sec. 3.3025. CALLER ID SERVICES: CONSUMER INFORMATION. (a) Requires the telecommunications provider, when a customer requests per-line blocking through the commission, to notify the customer by mail of the effective date that per-line blocking will be instituted. Requires a telecommunications provider providing Caller ID service to a customer originating a call, when the provider becomes aware of a failure to block the delivery of the calling party's identification information from a line equipped with per-call blocking or per-line blocking of Caller ID information, to report such failure to the panel, the commission, and the affected customer if that customer did not report the failure. Requires a reasonable effort to be made to notify the affected customer within 24 hours after the provider becomes aware of such failure. (b) Requires the commission to form the Caller ID Consumer Education Panel (panel). Sets forth the composition of the panel. Requires the panel to meet at least quarterly and to file an annual report with the commission regarding the level of effort and effectiveness of consumer education materials and its recommendations for increasing the safe use and privacy of the calling customer and decreasing the likelihood of harm resulting from Caller ID services. Authorizes the commission to implement the recommendations of the panel and interested parties to the extent consistent with the public interest. Requires the panel to disband on September 1, 1999, unless reauthorized by statute. (c) Requires all providers offering Caller ID services to file with panel, no later than the effective date of this Act, all existing Caller ID materials used on or before September 1, 1995. Requires all future materials to be provided when they become available. Requires the panel to investigate whether educational materials are distributed in as effective a manner as marketing materials. (d) Defines "Caller ID services." (e) Defines "Caller ID materials." SECTION 42. Amends Section 3.303, PURA, as follows: Sec. 3.303. New heading: INTEREXCHANGE SERVICES; INCUMBENT LOCAL EXCHANGE COMPANIES' RATES. Requires an incumbent LEC's rates for interexchange telecommunications services to be statewide average rates. SECTION 43. Amends Sections 3.304(a) and (b), PURA, as follows: (a)(1) Requires the commission, if a petition for the expansion of toll-free calling boundaries is filed with the commission, to order the incumbent LEC, rather than the LEC, to provide for the balloting of its subscribers. (2) Requires the commission to provide for such expansion for each incumbent LEC customer in the petitioning exchange if, in addition to other requirements, the central switching office of the exchange is located within 22 miles utilizing vertical and horizontal geographic coordinates of the central switching office of the exchange requested for toll-free calling service, or the petitioning exchange shall demonstrate in its petition that it shares a community of interest with the exchange requested for toll-free calling service. Redefines "community of interest." (3) Requires an incumbent LEC to recover all of its costs incurred through a request other than a revenue requirement showing by a monthly fee for toll-free calling of not greater than a certain amount for up to five exchanges, together with an additional monthly fee of $1.50 per line for each exchange in excess of five, whether obtained in one or more petitions. Makes conforming changes. (b) Makes conforming changes. SECTION 44. Amends Title IIIG, PURA, by adding Section 3.308, as follows: Sec. 3.308. CHARGE FOR EXTENDED AREA SERVICE. (a) Requires an incumbent LEC serving more than one million access lines in this state, that provides mandatory two-way extended area service to customers for a separately stated monthly charge of more than $3.50 per line for residential customers and $7 per line for business customers, to file with the commission to reduce its monthly rates for that extended area service to $3.50 per line for residential customers and $7 per line for business customers. Requires the incumbent LEC to recover all of its costs incurred and all loss of revenue that results from implementation of those rates in the manner prescribed by Section 3.304(a)(3)(A)(ii). (b) Declares that the commission and an incumbent LEC are not required to comply with this section with regard to the separately stated monthly charges for the provision of mandatory two-way extended area service, if the charge is for extended area service in or into a metropolitan exchange or for extended metropolitan service. SECTION 45. (a) Amends Title IIIG, PURA, by adding Section 3.309, as follows: Sec. 3.309. (a) Requires a private for-profit publisher of a residential telephone directory that is distributed to the public at minimal or no cost to include in the directory a listing of any toll-free and local telephone numbers of state agencies and state public services and of each state elected official who represents all or part of the geographical area for which the directory contains listings. (b) Requires the listing required by this section to be clearly identified and located or clearly referenced at the front of the directory before the main listing of residential and business telephone numbers. Declares that the listing is not required to exceed two 8-1/2 by 11-inch pages, single-spaced in eight-point type. (c) Authorizes the commission to adopt rules to implement this section. Requires the commission to compile relevant information to ensure accuracy of information in the listing, and to provide the information to a telecommunications utility or telephone directory publisher within a reasonable time after a request by the utility or publisher. (b) Effective date of this section: September 1, 1995. Makes application of this section prospective beginning September 1, 1996. SECTION 46. Amends Title IIIG, PURA, by adding Section 3.310, to require a telecommunications utility or an affiliate of that utility that publishes a residential or business telephone directory that is distributed to the public to publish the name of each state senator or representative who represents all or part of the geographical area for which the directory contains listings. SECTION 47. Amends Title IIIG, PURA, by adding Section 3.311, as follows: Sec. 3.311. HUNTING SERVICE. Requires LECs to make available, at a reasonable tariffed rate, hunting service from local exchange lines to extended metropolitan service lines. Prohibits the customer from being required to purchase additional extended metropolitan service in order to purchase hunting service from local exchange service to extended metropolitan service. SECTION 48. Amends the PURA, by amending Subtitles H and I, and adding Subtitles J-O, as follows: SUBTITLE H. INCENTIVE REGULATION OF TELECOMMUNICATIONS Sec. 3.351. POLICY. Sets forth the policy of the legislature, given the current status of competition in the telecommunications industry. Sec. 3.352. ELECTION AND BASKETS OF SERVICES. (a) Authorizes an incumbent LEC to notify the commission in writing of the company's election to be regulated under this subtitle. Requires the notice to state the company's commitment to limit any increase in rates charged for a four-year period under Section 3.353 and its infrastructure commitment under Section 3.358. (b) Requires the services of an incumbent LEC electing incentive regulation (electing company) to be classified initially into three categories or "baskets": "Basket I: basic network services," "Basket II: discretionary services," and "Basket III: competitive services." Grants the commission the authority to reclassify a service from Basket I to Basket II or III, or from Basket II to Basket III, as consistent with Section 3.357. (c) Requires an electing company's telecommunications services to be regulated under this subtitle regardless of whether that company is a "dominant carrier," as defined by Section 3.002. (d) Prohibits the commission, if an incumbent LEC notifies the commission in writing of its election to incentive regulation under this subtitle, from subjecting to any complaint, hearing, or determination as to the reasonableness of its rates, its overall revenues, its return on invested capital, or its net income. Declares that nothing herein restricts any consumer's right to complain to the commission regarding quality of service, the commission's right to enforce quality of service standards, or the consumer's right to complain regarding the application of an ambiguous tariff, and the commission's right, if the commission finds an ambiguity, to determine the proper application of the tariff or to determine the proper rate if the tariff is found to not apply. Declares that the aforementioned does not permit the commission to lower a tariff rate except as provided by this Act, to change its interpretation of a tariff, or to change a tariff so as to extend its application to new classes of customers. Sec. 3.353. BASKET I: BASIC NETWORK SERVICES. (a) Sets forth the services to be classified initially as basic network services in Basket I as of September 1, 1995. (b) Permits increases in rates for basic network services only upon commission approval and only within the parameters of Subsection (c) and for four years following the election of an incumbent LEC under Section 3.352. Authorizes decreases in rates at any time on the initiative of the electing company to a floor above long run incremental cost for switched access service or the appropriate cost for any basic local telecommunications service, which shall be long run incremental cost as to any incumbent LEC required by the commission to perform long run incremental cost studies or electing to perform those studies. Provides that this section does not affect the charges permitted under Section 3.304, 3.308, or 3.608. Prohibits the commission from increasing service standards applicable to the provision of local exchange telephone service by an electing company if the increased investment required for compliance with increased standards exceeds in any one year 10 percent of the incumbent LEC's average annual intrastate additions in capital investment for the most recent five-year period. Requires the incumbent LEC to exclude extraordinary investments made during that five-year period in calculating the average. (c)(1) Authorizes rates for basic network services to be changed only with commission approval that the proposed change is included in this subsection. (2) Requires the commission, on motion of an incumbent LEC or its own motion, to proportionally adjust prices for services to reflect changes in FCC separations affecting intrastate net income by 10 percent or more. (3) Authorizes the commission, if, after 42 months after the date of the incumbent LEC's election, an electing company in this state with less than five million access lines is in compliance with its infrastructure commitment, all quality of services requirements, and all commission rules under Subtitle J, undertake a proceeding to review the need for changes in the rates of services upon application of an incumbent LEC. Authorizes the application to request that the commission adjust rates, implement new pricing plans, restructure rates, or rebalance revenues between services. Authorizes the commission to use an index and a productivity offset in determining these changes. Prohibits the commission from ordering an increase in residential local exchange telephone service that would cause those rates to increase by more than the United States Consumer Price Index in any 12-month period. Prohibits the new monthly rate from exceeding the nationwide average of local exchange telephone service rates for like services. (4) Requires a rate group reclassification occurring as a result of access lines growth to be allowed by the commission on request of an electing company. (d)(1) Requires the regulation of basic network services of an electing company to be governed by specific provisions of this Act. (2) Declares that changes to the terms and conditions of the tariff offering of a basic network service, other than price changes, continue to require commission approval. (e) Sets the rates capped in Subsection (b) as the rates charged by the company on June 1, 1995. Sec. 3.354. RATE ADJUSTMENT PROCEDURES. (a) Authorizes an electing company to adjust its rates for basic network services under Section 3.353(c), upon notice to the commission accompanied by certain documents demonstrating that the rate adjustment meets the criteria in Section 3.353(c). Requires the commission to establish by rule or order the documentation to be required under this subsection. (b) Requires the notice to be published in a certain newspaper and included in or on the bill of each affected consumer in the next billing subsequent to the filing of the notice. Sets forth the title and information to be included in the notice. (c) Requires the commission to review the adjusted rates to ensure that they conform to the requirements of Section 3.353(c), and makes an adjustment effective 90 days from the date of completion of notice. (d) Authorizes an incumbent LEC having five percent or fewer of the total access lines in this state to adopt the cost, based on a long run incremental cost study, for the same or very similar services offered by a larger incumbent LEC, without needing to present long run incremental cost studies of its own. (e) Authorizes the commission to suspend the effective date of the rate adjustment and hold a hearing to review a rate set under Sections 3.353(c)(2)-(5). Requires the commission, after the review, to issue an order approving, modifying, or rejecting the adjustment if it does not comply with the applicable provisions. Requires orders modifying or rejecting an adjustment to specify each reason why the adjustment does not comply and the means for attaining compliance. (f) Requires any rate restructure under Section 3.353(c) to follow the notice and hearing procedures under Sections 3.211(a)-(c). Sec. 3.355. BASKET II: DISCRETIONARY SERVICES. (a) Declares that Basket II services include all services or functions provided by the electing company that have not been granted pricing flexibility in a particular geographic market, and which have not been listed under Baskets I or III. (b) Sets forth the services classified initially as Basket II as of September 1, 1995. Makes a conforming change. (c) Authorizes the commission to reclassify a service from Basket I to Basket II or III, or from Basket II to III, consistent with certain criteria. (d) Requires the prices for each Basket II service or function to be set above long run incremental cost (LRIC) cost. Requires the commission to set the price ceiling over and above LRIC cost, but not below or above the rate in effect on September 1, 1995. Authorizes the ceiling to be raised only after proceedings required under Subtitle J, and prohibits the commission from raising the ceiling more than 10 percent annually. Authorizes the incumbent LEC, within the LRIC floor and ceiling, to change the price of each service, and requires the incumbent LEC to notify the commission of each change. Provides that the placement of a service in Basket II does not preclude an incumbent LEC from using regulatory treatments under Section 3.051. Prohibits discounts and other forms of pricing flexibility from being preferential, prejudicial, or discriminatory. Sec. 3.356. BASKET III: COMPETITIVE SERVICES. (a) Sets forth the Basket III competitive services, and subjects them to pricing flexibility as of September 1, 1995. Makes a conforming change. (b) Authorizes the commission to reclassify a service from Basket I to Basket II or III, or from Basket II to III, consistent with certain criteria. (c) Authorizes the electing company to set the service price at a level above the service's LRIC in compliance with Subtitle J. Prohibits discounts and other forms of pricing flexibility from being preferential, prejudicial, or discriminatory. Prohibits an electing incumbent LEC from increasing the price of a service in a geographic area in which that service or a functionally equivalent service is not readily available from another provider. (d) Requires the commission, not later than January 1, 2000, to initiate a review and evaluation of any incumbent LEC electing treatment under Subtitle H or I to review and evaluate the effects of the election. Requires the commission to file a report and recommendations to the legislature not later than January 1, 2001, as to whether the incentive regulation plan should be extended, modified, eliminated, or replaced. Authorizes the legislature to authorize the commission to take action on the plan. Sec. 3.357. TRANSFERRING SERVICES. (a) Requires the commission, in determining whether to transfer services from Basket I to Baskets II or III, or from Basket II to Basket III, to establish standards which include such considerations as the availability of the service from other providers, the proportion of the market currently receiving service, the effect of the transfer on subscribers of the service, and the nature of the service. (b) Prohibits transfer until the full implementation of all competitive safeguards under Sections 3.452-3.458. Sec. 3.358. INFRASTRUCTURE. (a) Declares that it is the goal of this state to facilitate and promote the deployment of an advanced telecommunications infrastructure in order to spur economic development through Texas. (b) Requires the commission to consider certain policy goals of the state in implementing this section. (c) Requires the commission to act, recognizing that it will take time for competition to develop in the local exchange market, in the absence of competition, to ensure that certain infrastructure goals are achieved by electing companies. (d)(1) Requires an electing company of greater than five million access lines to install Common Channel Signaling 7 capability in all central office by January 1, 2000. (2) Requires an electing company of greater than five million access lines to connect all of its serving central offices to their respective LATA tandem control offices with optical fiber or equivalent facilities by January 1, 2000. (3) Requires an electing company serving more than one million access lines and fewer than five million access lines to provide digital switching central offices in all exchanges by December 31, 1998. (e) Authorizes the commission to consider waivers of Subsections (c)(1)-(4) for electing LECs serving fewer than one million lines, if the LEC demonstrates that such investment is not viable economically; and to consider a temporary extension of any period with respect to Subsections (c)(1)-(4) for electing LECs serving fewer than two million but more than one million lines, if the LEC demonstrates that such extension is in the public interest. (f) Prohibits the commission from considering the cost of implementing Subsection (c) or (d) of this section in determining whether an electing company is entitled to a rate increase under this subtitle or increased universal service funds under Section 3.608 of this Act. Sec. 3.359. INFRASTRUCTURE COMMITMENT TO CERTAIN ENTITIES. (a)(1) States that it is the intent of this section to establish a telecommunications infrastructure that interconnects public entities described in this section. (2) States that the goal of this section is to interconnect and aggregate the connections to every entity described in this section, within the local serving area; and that the implementation of the infrastructure will connect all the entities requesting the services offered under this section. (b)(1) Requires the electing company, on customer request, to provide broadband digital service that is capable of providing transmission speeds of up to 45 megabits per second or better for customer applications and other customized or packaged network services to certain entities for their private and sole use except as provided in Subsection (d) of this section. (2) Prohibits an entity receiving the services provided under this section from being assessed special construction or installation charges. (3) Authorizes an educational institution or library to elect the rate treatment provided in this section or the discount provided by Section 3.605 of this Act. (4) Prohibits an electing company's rates for the services provided under this section from being increased for six years from the date of election except as otherwise provided in customer specific contracts. (5) Requires a LEC, on customer request by an educational institution or library in exchanges of an electing company serving more than five million access lines in which toll-free access to the Internet is not available, to make available a toll-free connection or toll-free dialing arrangement for use by educational institutions or libraries in accessing the Internet in an exchange in which Internet access is available on a toll-free basis. Sets forth guidelines and requirements for the provision of such service. (6) Requires an electing company to give priority to serving rural areas, areas designated as critically underserved, medically or educationally, and educational institutions with high percentages of economically disadvantaged students. (c) Authorizes the private network services provided pursuant to this section to be interconnected with other similar networks for distance learning, telemedicine, and information sharing purposes. (d) Prohibits the private network services provided pursuant to this section from being shared or resold to other customers, with a specific exception. Prohibits the services provided pursuant to this section from being required to be resold to other customers at the rates provided in this section. (e) Defines "telemedicine center." (f) Declares that Article 601b, V.T.C.S. (State Purchasing and General Services Act), does not apply to contracts entered under this section. SUBTITLE I. INFRASTRUCTURE PLAN FOR RATE OF RETURN COMPANIES Sec. 3.401. POLICY. Sets forth the policy of the legislature concerning incumbent LECs that do not elect to be regulated under Subtitle H. Sec. 3.402. ELECTION. (a) Authorizes an incumbent LEC serving less than five percent of the state's access lines and that has not elected incentive regulation under Section Subtitle H to elect for an infrastructure plan under this subtitle by notifying the commission in writing of its election under this section. (b) Prohibits an electing incumbent LEC, for a six-year period after the election date, from seeking an increase in a rate previously established for that company under this Act, except for charges permitted under Sections 3.304, 3.308, 3.608, and 3.610 of this Act, and upon commission approval that the proposed change is included in this subsection. Requires the commission, on motion of an electing incumbent LEC or its own motion, to adjust prices for services to reflect changes in FCC separations affecting intrastate net income by 10 percent or more. Requires a rate group classification resulting from access lines growth to be allowed by the commission on request of the electing company. (c) Declares that Section 3.354 of this Act applies to a rate change under Subsection (b) of this section. (d) Prohibits an electing company, if an incumbent LEC notifies the commission of its election to an alternative infrastructure plan under this subtitle, from being subject for the six-year period after election to any complaint or hearing as to the reasonableness of its rates, overall revenues, return on invested capital, or net income, if the electing incumbent LEC complies with its infrastructure commitment under Section 3.403, and from being subject to a complaint that any particular rate is excessive. Declares that nothing herein restricts any consumer's right to complain to the commission regarding quality of service, the commission's right to enforce quality of service standards, or the consumer's right to complain regarding the application of the tariff or to determine the proposed rate if the tariff is found to not apply. Prohibits the commission from lowering a tariff rate except as specifically provided by this Act, to change its interpretation of a tariff, or to change a tariff so as to extend its application to new classes of customers. Prohibits the commission from increasing service standards applicable to the provision of local exchange telephone service by an electing company if the increased investment required to comply with the increased standards exceeds in any one year 10 percent of the incumbent LEC's average annual intrastate additions in capital investment for the most recent five-year period. Requires the incumbent LEC, in calculating the average, to exclude extraordinary investments made during the five-year period. (e) Authorizes the commission, on application of an incumbent LEC, to allow a company to withdraw its election under this section with good cause. Provides that good cause includes only matters that were beyond the control of the incumbent LEC. (f) Declares that this section does not prohibit an incumbent LEC from making an election under Section 3.352. Provides that the infrastructure agreement under Section 3.403, if the company so elects, offsets any infrastructure commitment required in connection with the Section 3.352 election. (g) Requires the rates capped by Subsection (b) to be the rates charged by the company at the date of its election. (h) Defines "election date." Sec. 3.403. INFRASTRUCTURE COMMITMENT. (a) Requires a company electing under Section 3.402 to make an infrastructure commitment in writing to the governor and commission, committing to make telecommunications infrastructure investment in the state over a six-year period following the company's election. (b) Requires the commission to act to ensure that certain infrastructure goals are achieved by electing companies. (c) Requires the electing company, on customer request, to provide private broadband services and other customized or packaged network services for the private and sole use of certain entities. Sets forth guidelines and requirements for the provision of such services. (d) Authorizes the commission to consider waivers of requirements listed under Subsections (b)(1)-(5) of this section for electing LECs serving fewer than one million lines if the LEC demonstrates that such investment is not viable economically. (e) Prohibits the commission from considering the cost of implementing Subsection (b) or (c) f this section in determining whether an electing company is entitled to a rate increase under this subtitle or increased universal service funds under Section 3.608 of this Act. (f) Defines "private network services" and "telemedicine center." (g) Requires each electing company to file an annual report with the commission on the anniversary date of its election that sets forth the progress on the company's infrastructure commitment and includes specific information. SUBTITLE J. COMPETITIVE SAFEGUARDS Sec. 3.451. COMPETITIVE SAFEGUARDS. (a) Requires the commission, to the extent necessary to ensure fair competition and accelerate the improvement of telecommunications in this state, to ensure that the rates and regulations of an incumbent LEC are not unreasonably preferential, prejudicial, or discriminatory but are equitable and consistent in application. Grants the commission exclusive jurisdiction to implement competitive safeguards. (b) Declares that Section 3.352(d) does not prevent the commission from enforcing this subtitle. (c) Grants the commission exclusive jurisdiction to implement competitive safeguards. Sec. 3.452. UNBUNDLING. (a) Requires an incumbent LEC to unbundle its network as ordered by the FCC. (b) Requires the commission, before the adoption of the pricing rules required by Section 3.457, to hold a hearing and adopt an order on the issue of requiring further unbundling of LEC services. (c) Authorizes the commission to order further unbundling only after considering the public interest and competitive merits of further unbundling. Authorizes the commission to proceed by rulemaking or evidentiary hearing. (d) Authorizes the commission, following the unbundling, to assign the unbundled components to the appropriate Basket according to the purposes and intents of those Baskets. Sec. 3.453. RESALE. (a) Requires an incumbent LEC, serving one million or more access lines or electing the incentive regulation plan under Subtitle H, to file a usage sensitive loop resale tariff. (b) Defines "loop" resale. (c) Requires the commission to conduct any proceeding it determines appropriate to determine the rates, terms, and conditions for this tariff within 180 days of filing. Authorizes the commission to approve only a usage sensitive rate that recovers the total long run incremental cost of the loop on an unseparated basis, plus an appropriate contribution to joint and common costs; and only permit a holder of a CCN, COA, or SPC to purchase from the resale tariff, except under Subsection (f)(1) of this section. (d) Prohibits a provider of telecommunications service, on September 1, 1995, from imposing any restriction on the resale or sharing of any service for which it is not a dominant provider, or, as to any incumbent LEC electing alternative regulation under Subtitle H of this title, for any service entitled to regulatory treatment under Basket III. (e) Places on a holder of a COA or SPC the reciprocal obligation to permit LECs to resell its existing loop facilities at its regularly published rates, if the LEC has no loop facilities and has a request for service. (f) Requires the commission to eliminate all resale prohibitions in an electing incumbent LEC's tariffs on completion of the commission's costing and pricing rulemaking, completion of rate rebalancing of the incumbent LEC rates under Section 3.457, and removal of all prohibitions on incumbent LECs providing interLATA service. Requires the commission to eliminate all resale prohibitions in the tariffs of an electing company of five million or more access lines on removal of all prohibitions and restrictions on such company's provision of interLATA service. Requires the commission, when it eliminates the resale prohibitions, to continue to prohibit the resale of local exchange or directory assistance flat rate services as a substitute for usage sensitive services. (g) Declares that nothing herein alters resale or sharing arrangements presently permitted in incumbent LEC tariffs existing on September 1, 1995, or tariffs proposed by an incumbent LEC serving more than five million access lines in this state that are filed on or before May 1, 1995. Sec. 3.454. IMPUTATION. Requires the commission, not later than December 1, 1996, to adopt rules governing imputation of the service price. (b) Declares that imputation is a regulatory policy the commission shall apply to prevent an incumbent LEC from selling a service or function to another telecommunications utility at a price that is higher than the rate the incumbent LEC implicitly includes in services it provides to its retail customers. (c) Authorizes the commission to require imputation only if the price of a service is not generally available from a source other than the incumbent LEC and is necessary for the competitor to provide its competing services. (d) Prohibits the commission from requiring the imputation of the price to a local exchange telephone service while the price is capped under Subtitle H or I. (e) Require the price of switched access service to be imputed to the price of each service for which switched access service is a component until switched access service is competitively available. (f) Prohibits the commission from requiring imputation on a rate-element-by-element basis but only on a service-by-service basis. (g) Prohibits the commission, for a service provided under a customer specific contract for which imputation may be required under Subsection (c), from requiring imputation on a rate-element-by-element basis but only on a service-by-service basis within the contract. (h) Requires the incumbent LEC to demonstrate that the price it charges for its retail service recovers the costs of providing the service. Defines the costs of providing the service. (i) Authorizes the commission to waive an imputation requirement for any public interest service if the commission determines that the waiver is in the public interest. Sec. 3.455. TELECOMMUNICATIONS NUMBER PORTABILITY. Requires the commission, by rule, to adopt guidelines governing telecommunications number portability and the assignment of telephone numbers in a competitively neutral manner. (b) Defines "telecommunications number portability." (c) Requires the commission, as an interim measure, to adopt reasonable mechanisms to allow consumers to retain their telephone numbers. Requires these mechanisms to include call forwarding functions and direct inward dialing. Requires the commission and incumbent LEC to determine reasonable rates for call forwarding functions, direct inward dialing, and other interim measures. Sec. 3.456. EXPANDED INTERCONNECTION. (a) Requires the commission, not later than September 1, 1996, to adopt certain rules for expanded interconnection. (b) Declares that this section does not prohibit the commission from completing a proceeding pending on April 1, 1995, that addresses expanded interconnection. Sec. 3.457. COSTING AND PRICING. (a) Requires the commission to complete a pricing rulemaking and adopt a pricing rule by April 1, 1997. Requires companies subject to that rule to file cost studies and necessary supporting data not later than November 1, 1996. Requires the commission to approve a cost study or order changes to be made, within 85 days after the date a cost study is submitted. Authorizes any party to appeal to the commission an administrative determination by an administrative law judge or hearings examiner. Requires the parties to be permitted expedited discovery after a cost study is submitted. (b) Requires the commission, in adopting the pricing rule, to ensure that prices for monopoly services remain affordable; ensure that prices for competitive services may not be unreasonably preferential, prejudicial, or discriminatory, subsidized by noncompetitive services, or predatory or anticompetitive; and require that each service recover the appropriate cost of any and all facilities and functions used to provide that service. (c) Requires the commission to allow an incumbent LEC that is not a Tier I LEC as of September 1, 1995, to adopt the cost studies prices approved for a Tier I LEC. Sec. 3.458. INTERCONNECTION. (a) Defines "interconnection." (b) Requires the commission to require all providers of telecommunications services to maintain interoperable networks. Requires telecommunications services to negotiate network interconnectivity, charges, terms, and conditions. Authorizes the commission to resolve disputes filed by a party to those negotiations. (c) Requires each carrier, in the absence of a mutually agreed compensation rate under Subsection (b), to reciprocally terminate the other carrier's traffic at no charge for the first nine months after the date on which the first call is terminated between the carriers. (d) Requires the commission, within the nine-month period prescribed by Subsection (c), to complete a proceeding to establish reciprocal interconnection rates, terms, and conditions based solely on the commission proceeding. Sets forth guidelines for the requirement of cost studies by a new entrant. (e) Authorizes the incumbent LEC to adopt the interconnection rates approved for a larger incumbent LEC without the commission requirement of additional cost justification. (f) Authorizes the commission to make generic rules and set policies governing interconnection arrangements that are responsive to changes in federal law or developments in the local exchange market. (g) Prohibits the commission from using interconnection rates under this section as a basis to alter interconnection rates for other services. (h) Grants the commission exclusive jurisdiction over any holder of a CCN, COA, or SPC for the determination of rates, terms, and conditions for interconnection. Sec. 3.459. INCUMBENT LOCAL EXCHANGE COMPANY REQUIREMENTS. (a) Prohibits an incumbent LEC from taking certain unreasonable actions. (b) Prohibits this section from being construed to require an incumbent LEC to provide expanded interconnection. (c) Declares that nothing in this Act shall require the commission to change the rate treatment for Bulletin Board Systems in residences established by the commission in Docket No. 8387, and that nothing in this Act is intended to regulate or tax Bulletin Board Systems or Internet Service Providers or to require any changes in the rates charged to these entities under existing tariff, provided they only provide enhanced or information services and not telecommunications services. Sec. 3.460. COMMISSION AUTHORITY. (a) Grants the commission all authority necessary to establish procedures for the policies under Subsections 3.451-3.458 and to resolve any disputes under such policies. (b) Requires the commission to adopt procedures for the processing of proceedings under Section 3.452 and 3.453 of this Act by considering the impact on consumers, competitors, and the incumbent LEC. Prohibits the commission from implementing any requirement that is contrary to any applicable federal rule or law. Sec. 3.461. APPLICATIONS AND RULES. Sets forth limitations to the applicability of certain subsections of this section. Sec. 3.462. REVIEW OF IMPLEMENTATION. Declares that the provisions of Sections 3.452, 3.454, and 3.457 do not initially apply to incumbent LECs that as of September 1, 1995, have 31,000 or more, but fewer than one million, access lines in this state, and apply only on a bona fide request from a holder of a COA or SPC. Authorizes the commission to modify the rules in the public interest. Sec. 3.463. INFRASTRUCTURE SHARING. Requires the commission to prescribe rules that require a LEC to share public switched network infrastructure and technology with a requesting LEC that lacks economies of scale or scope, in order to enable that requesting company to provide telecommunications services in the geographic areas to which the requesting company is designated as the sole carrier of last resort. SUBTITLE K. BROADCASTER SAFEGUARDS Sec. 3.501. CUSTOMER PROPRIETARY NETWORK INFORMATION (CPNI). (a) Defines "specific customer proprietary network information" and "subscriber list information." (b) Prohibits telecommunications utilities from using specific customer proprietary network information (CPNI) for commercial purposes other than the sale, provision, or billing and collection of telecommunications or enhanced services. (c) Requires the commission, not later than September 1, 1996, to adopt rules consistent with FCC rules. Sets forth requirements for the rules. (d) Prohibits the commission from implementing any rules, regarding CPNI applicable to an incumbent LEC having 100,000 or fewer access lines in service in this state, that are more burdensome than FCC CPNI rules, with an exception. Sec. 3.502. AUDIO VIDEO. (a) Defines "video programming" and "audio programming." (b) Prohibits an incumbent LEC from providing audio or video programming in this state, but prohibits this section from prohibiting a separate corporate affiliate of an incumbent LEC from providing such programming. (c) Sets forth requirements for a separate corporate affiliate which provides audio or video programming. (d) Sets forth requirements for an incumbent LEC when a separate affiliate provides programming. (e) Requires an incumbent LEC, if it offers billing and collection services to nonaffiliated audio and video programming providers, to provide those services under nondiscriminatory terms and conditions. Provides that this section does not require an incumbent LEC to offer such services to nonaffiliated programmers, and authorizes an incumbent LEC to exclude certain classes of programmers from its billing and collection services. (f) Requires an incumbent LEC to have a compliance audit performed every three years by an independent accounting firm to determine compliance with requirements of this section. Requires the firm to file the report, considered confidential commercial or financial information, with the commission. Requires the commission to institute action against the incumbent LEC, if it does not comply with this section. (g) Limits the commission's jurisdiction over affiliates that are audio or video programmers to the requirements of this section. (h) Declares that this section does not apply to an incumbent LEC having 100,000 or fewer in-service total access lines in this state. (i) Authorizes a company under this section to petition the commission for waiver from any requirements of this section, and requires the commission to grant a waiver if it serves the public interest to do so. Authorizes the commission to revoke a waiver under certain conditions. Sec. 3.503. ADVERTISING. (a) Declares that advertising agency services include the functions generally performed by a general advertising agency. (b) Prohibits an incumbent LEC from selling advertising agency services to nonaffiliates in this state. Declares that this section does not prohibit a LEC from promoting or selling telecommunications services and equipment and from enhancing or promoting the use of the telecommunications network. (c) Authorizes a separate corporate affiliate of an LEC to engage in advertising agency activities, and sets forth requirements for the conduct of such business. (d) Prohibits an incumbent LEC with an affiliate providing advertising agency services on behalf of nonaffiliates in this state from jointly marketing that affiliate's services as they relate to telecommunications services and equipment provided by the incumbent LEC. (e) Declares that nothing in this section prohibits the incumbent LEC from providing telephone solicitation services for charitable organizations. (f) Declares that this section does not apply to an incumbent LEC having 100,000 or fewer in-service access lines in this state. (g) Authorizes a company under this section to petition the commission for a waiver from any requirement under this section, and authorizes the commission to grant a waiver if it serves the public interest. Authorizes the commission to revoke a waiver. Sec. 3.504. VIDEO CARRIAGE. (a) Requires each incumbent LEC, which provides telecommunications services used in the transmission of video programming directly to subscribers or which enables customers to access video programming, to permit local full-power, FCC licensed broadcast stations access to these services at tariffed rates. Requires the incumbent LEC to transmit signals from the local broadcast station without material degradation and in a quality at least on par with that of other video programmers. (b) Sets forth requirements for each incumbent LEC under Subsection (a). (c) Requires any programmer, that operates as a common channel manager and purchases for commercial purposes at least 50 analog channels on a local exchange video dial tone level one platform over which video programming is made available to subscribers, to make local full-power, FCC-licensed televisions stations available to subscribers, provided retransmission is granted under Subsection (d). Requires a programmer under this section to make available up to six television stations, and makes specific provisions for markets serving populations of more than one million. (d) Requires a FCC-licensed television station seeking carriage to grant retransmission consent to the programmer and incumbent LEC. Declares that this requires a programmer or incumbent LEC to provide any valuable consideration in exchange for that carriage. (e) Provides that this section does not apply to an incumbent LEC having 100,000 or fewer in-service access lines in this state or to a programmer on the video dial tone platform of that LEC. (f) Authorizes a company under this section to petition the commission for a waiver from any requirement under this section, and authorizes the commission to grant a waiver if it serves the public interest. Authorizes the commission to revoke a waiver. (g) Limits the commission's jurisdiction over affiliates that are video programmers to the requirements of this section. (h) Provides that this section expires August 31, 1999. Sec. 3.505. AUDIO CARRIAGE. (a) Requires a programmer, operating as a common channel manager and making available for commercial purposes to subscribers at least 12 channels of audio programming similar to broadcasts of FCC-licensed radio stations on an incumbent LEC's level one video dial tone platform, to make local FCC-licensed radio stations available to subscribers, provided that retransmission is granted under Subsection (b). Prohibits a programmer under this subsection from being required to make available more than one-third of its analog audio channels to radio stations. (b) Requires a local FCC-licensed radio station seeking carriage under Subsection (a) of this section to grant retransmission consent to the programmer and incumbent LEC. Declares that nothing in this Act requires a programmer or incumbent LEC to provide any valuable consideration in exchange for that carriage. (c) Provides that this section does not apply to an incumbent LEC having 100,000 or fewer in-service access lines in this state or to any programmer on the video dial tone platform of that LEC. (d) Authorizes a company under this section to petition the commission for a waiver from any requirement under this section, and authorizes the commission to grant a waiver if it serves the public interest. Authorizes the commission to revoke a waiver. (e) Limits the commission's jurisdiction over affiliates which are video programmers to the requirements of this section. (f) Provides that this section expires August 31, 1999. Sec. 3.506. APPLICATION OF SUBTITLE. Provides that this subtitle does not apply to a cable company. SUBTITLE L. ELECTRONIC PUBLISHING Sec. 3.551. DEFINITIONS. Defines "affiliate," "basic telephone service," "basic telephone service information," "control," "electronic publishing," "electronic publishing joint venture," "entity," "inbound telemarketing," "own," "separated affiliate," and "incumbent local exchange company." Sec. 3.3552. ELECTRONIC PUBLISHING. (a) Prohibits an incumbent LEC or an affiliate from engaging in the provision of electronic publishing disseminated through telephone service. (b) Declares that nothing in this subtitle prohibits a separated affiliate or electronic publishing joint venture from engaging in publishing or any other lawful service in any area. (c) Declares that nothing in this subtitle prohibits an incumbent LEC or affiliate from engaging in the provision of any lawful service other than electronic publishing in any area or from engaging in the provision of electronic publishing that is not disseminated by means of the incumbent LEC's or any of its affiliate's basic telephone service. Sec. 3.553. SEPARATED AFFILIATE OR ELECTRONIC PUBLISHING JOINT VENTURE REQUIREMENTS. Sets forth requirements for a separated affiliate or electronic publishing joint venture. Sec. 3.554. INCUMBENT LOCAL EXCHANGE COMPANY REQUIREMENTS. (a) Sets forth requirements for an incumbent LEC under common ownership or control with a separated affiliate or electronic publishing joint venture. (b) Requires an incumbent LEC, if it provides certain services to any electronic publisher for use with or in connection with the provisions of electronic publishing that is disseminated by means of the incumbent LEC's or any of its affiliate's basic telephone service, to provide all other electronic publishers the same type of facilities and services on request and unbundled and individually tariffed to the smallest extent that is technically feasible and economically reasonable to provide. (c) Requires the incumbent LEC to provide network access and interconnections for basic telephone service to electronic publishers at any technically feasible and economically reasonable point within the incumbent LEC's network, and at just and reasonable rates that are tariffed and are not higher on a per unit basis than those charged for those services to any other electronic publisher or any separated affiliate engaged in electronic publishing. (d) Requires the incumbent LEC, if prices for network access and interconnection for basic telephone service are no longer subject to regulation, to provide electronic publishers those services on the same terms and conditions as a separated affiliate receives those services. (e) Requires an incumbent LEC, if any basic telephone service used by electronic publishers ceases to require a tariff, to provide electronic publishers with that service on the same terms and conditions as a separated affiliate receives that service. (f) Requires the incumbent LEC to provide reasonable advance notification at the same time and on the same terms to all affected electronic publishers of information if the information is of a certain type. (g) Prohibits the incumbent LEC from providing anything of monetary value to a separated affiliate under a certain condition. (h) Prohibits the incumbent LEC from taking specific action. Sec. 3.555. CUSTOMER PROPRIETARY NETWORK INFORMATION. Prohibits an incumbent LEC or an affiliate from providing to an electronic publisher customer proprietary network information for use or in connection with electronic publishing disseminated through local basic telephone service that is not made available by the LEC or affiliate to all electronic publishers on the same terms and conditions. Sec. 3.556. COMPLIANCE WITH SAFEGUARDS. Prohibits an incumbent LEC or affiliate from acting in concert with another entity to knowingly and willfully violate or evade the requirements of this subtitle. Sec. 3.557. INCUMBENT LOCAL EXCHANGE COMPANY DIVIDENDS. Declares that nothing in this subtitle prohibits an affiliate from investing dividends derived from an incumbent LEC in its separated affiliate, and that Section 3.560 and 3.561 do not apply to that investment. Sec. 3.558. JOINT MARKETING. Prohibits an incumbent LEC from carrying out any promotion, marketing, sales, or advertising for or in conjunction with a separated affiliate or an affiliate related to the provision of electronic publishing, except as provided by Section 3.559 of this Act. Sec. 3.559. PERMISSIBLE JOINT ACTIVITIES. Sets forth permissible joint activities for an incumbent LEC related to joint telemarketing, teaming arrangements, and electronic publishing joint ventures. Sec. 3.560. TRANSACTIONS RELATED TO THE PROVISION OF ELECTRONIC PUBLISHING BETWEEN AN INCUMBENT LOCAL EXCHANGE COMPANY AND ANY AFFILIATE. (a) Requires any transaction from an incumbent LEC to any affiliate related to the provision of electronic publishing to be recorded in a specific manner. Requires any transfer of assets from the incumbent LEC to an affiliate to be valued at the greater of net book cost or fair market value, and any asset transfer from an affiliate to a company to be valued at the lesser of net book cost. Prohibits an incumbent LEC from providing to a separated affiliate any facilities, services, or basic telephone service information related to the provision of electronic publishing that are not made available to unaffiliated companies on the same terms and conditions. Sec. 3.561. TRANSACTIONS RELATED TO THE PROVISION OF ELECTRONIC PUBLISHING BETWEEN AN AFFILIATE AND A SEPARATED AFFILIATE. Requires any transaction from an incumbent LEC to an affiliate, and then from the affiliate to a separated affiliate, to be recorded in a specific manner. Requires any transfer of assets from the incumbent LEC to an affiliate, and then from the affiliate to a separated affiliate, to be valued at the greater of net book cost or fair market value, and any asset transfer from a separated affiliate to an affiliate, and then from the affiliate to the company to be valued at the lesser of net book cost or fair market value. Prohibits an affiliate from providing to a separated affiliate any facilities, services, or basic telephone service information related to the provision of electronic publishing that are not made available to unaffiliated companies on the same terms and conditions. Sec. 3.562. OTHER ELECTRONIC PUBLISHERS. (a) Limits the involvement of an incumbent LEC and an entity whose principal business is publishing of which a part is electronic publishing. (b) Prohibits an incumbent LEC or an affiliate that owns an electronic publishing joint venture from being deemed to be engaged in the electronic publishing business solely because of that ownership. (c) Prohibits an incumbent LEC from carrying out any marketing or sales of an entity that engages in electronic publishing or any hiring of personnel, purchasing, or production for an entity that engages in electronic publishing. Provides an exception. (d) Prohibits the incumbent LEC from providing any facilities, services, or basic telephone service information to an entity that engages in electronic publishing for use with or in connection with the provision if electronic publishing that is disseminated by means of the incumbent LEC's or affiliates' basic telephone service. Provides exceptions. Sec. 3.563. PRIVATE RIGHT OF ACTION. Sets forth requirements governing private rights of action regarding complaints against an incumbent LEC, affiliate, or separated affiliate. Sec. 3.564. ANTITRUST LAWS. Prohibits anything in this section from being construed to modify, impair, or supersede the applicability of any of the antitrust laws. Sec. 3.565. TRANSITION. Requires any electronic publishing service being offered to the public by an incumbent LEC or affiliate on the date of enactment of this section to comply with the requirements of this section within one year from the date of enactment. Sec. 3.566. SUNSET. Sunset date: June 30, 2001. SUBTITLE M. INFORMATION TECHNOLOGY SERVICES Sec. 3.581. DEFINITIONS. Defines "management consulting," "systems development," "systems integration," "systems management," and "process management." Sec. 3.582. PROVISION OF INFORMATION TECHNOLOGY SERVICES THROUGH SEPARATE AFFILIATE. (a) Prohibits a LEC serving more than five million access lines in this state from providing certain customized business products or services to customers with 50 or more access lines in this state. (b) Declares that this section does not prohibit an affiliate of the LEC from providing any of the products or services under Subsection (a) in accordance with Sections 3.583 and 3.584 of this Act, or prohibit a LEC from providing those products or services to itself. Authorizes the LEC to provide those services to an affiliate if neither the LEC nor any of its affiliates are engaged in providing those products or services to unaffiliated third parties. (c) Declares that the prohibitions under Subsection (b) do not prohibit a LEC from providing mass market and consumer market products and services to certain customers, or selling or leasing billing and collection services, local area networks, wide area networks, or any other telecommunications service. Sec. 3.583. SEPARATE AFFILIATE REQUIREMENTS. (a) Requires an affiliate of the LEC providing a service under Section 3.582(a) to operate independently from the LEC in the provision of its services, maintain its own books of accounts, and, with exception, have separate officers, directors, and employees who may not also serve as officers, directors, and employees of the LEC. (b) Requires all transactions between the LEC and the affiliate providing a service under Section 3.582(a) of this Act to be conducted on an "arms length" basis with respect to the acquisition of that service from the affiliate. (c) Requires the LEC to maintain and keep available for commission inspection copies of all contracts and arrangements between the company and an affiliate relating to the LEC's acquisition of a service described by Section 3.582(a) from the affiliate. Requires the LEC's records to show each cash or noncash transaction with the affiliate for that service. (d) Prohibits the LEC and an affiliate engaged in a service under Section 3.582(a) of this Act from jointly owning or sharing in the use of any property. Sec. 3.584. ADDITIONAL COMPETITIVE SAFEGUARDS. (a) Prohibits a LEC from discriminating between an affiliate providing a service under Section 3.582(a) and any other person in the provision or procurement of goods, services, facilities, or information, or in the establishment of standards. (b) Prohibits a LEC or affiliate from using revenues from local exchange telephone service or from local-exchange-company-provided access services to subsidize the provision of a service described by Section 3.582(a). (c) Declares that this section does not prohibit the investment by an affiliate of dividends or profits derived from a LEC, or the development of a product or service described by Section 3.582(a) by an affiliate of a LEC for the LEC if the investment or development complies with Section 3.583. SUBTITLE N. TELECOMMUNICATIONS SERVICE ASSISTANCE PROGRAM; UNIVERSAL SERVICE FUND Sec. 3.601. Redesignates existing Section 3.351. Sec. 3.602. Redesignates existing Section 3.352. Sec. 3.603. Redesignates existing Section 3.353. Sec. 3.604. Redesignates existing Section 3.354. Sec. 3.605. New heading: DISTANCE LEARNING ACTIVITIES BY EDUCATIONAL INSTITUTIONS AND INFORMATION SHARING PROGRAMS BY LIBRARIES; REDUCED RATES. (a) Requires the commission, by rule, to require a dominant carrier to file an information sharing program that is or could be conducted by a library in this state. (b) Requires the commission rules to specify the process by which a library qualifies for a reduced rate. (d) Requires the services and reduced rates to be designed, among other goals, to encourage the development and offering of information sharing programs of libraries, meet the information sharing needs identified by libraries, and recover certain costs so as to avoid subsidizing libraries. (f) Authorizes an educational institution, library, or dominant carrier to provide for a reduced rate for a service directly related to an information sharing program that is not covered by commission rules. (h) Defines "library." Sec. 3.606. TELECOMMUNICATIONS INFRASTRUCTURE FUND. (a) Defines "board," "fund," "institution of higher education," "public library," "school district," "private network services," "public, not-for-profit hospital" or "public not-for-profit health care facility," and "telemedicine." (b)-(c) Requires the Telecommunications Infrastructure Fund Board (board) to administer the Telecommunications Infrastructure Fund (fund). Requires the board to consist of nine members, and sets forth the guidelines for appointment and membership. (d) Requires board members to serve without pay, but to be reimbursed for expenses. (e) Subjects the board to Chapters 325, 551, and 2001, Government Code. Makes the board and this article expire September 1, 2001, unless continued by Chapter 325, Government Code. (f) Authorizes the board to employ any personnel necessary to perform duties delegated by the board, and to enter into contracts with state or private entities as necessary to perform its duties. (g) Authorizes the board to appoint committees to assist in performing its duties. (h) Declares that the fund is financed by an assessment on all telecommunications providers doing business in the state. Sets forth guidelines for the assessment. (i) Requires the comptroller to assess and collect from telecommunications providers a total annual amount of $150 million for the fiscal year beginning September 1, 1995, and for the next ten fiscal years. (j) Authorizes the comptroller to require providers to provide information and reports, exempt from disclosure, which are necessary to fulfill duties under this section. (k) Requires all amounts collected by the comptroller to be deposited in the fund and designated solely for board use. (l) Requires the comptroller, from funds appropriated to the board, to issue warrants as requested by the board. (m) Authorizes the board to accept gifts, grants, and donations. (n) Requires the board to use the fund to award grants and loans competitively to rural and urban school districts, institutions of higher education, and libraries recommended to it by the Central Education Agency (CEA), the Texas Higher Education Coordinating Board (coordinating board), or the Texas State Library and Archives Commission (TSLAC). (o) Sets forth the requirements for awarding grants. (p) Authorizes the board to award loans to projects and proposals to acquire equipment needed for distance learning and telemedicine projects. (q) Requires the board to give priority to certain projects and proposals. (r) Requires CEA, the coordinating board, and TSLAC to adopt policies and procedures designed to aid the board. (s) Requires the board, in distributing funds to public schools, to consider the relative property wealth per student of recipient school districts and to recognize the unique needs of rural communities. Sec. 3.607. Redesignates existing Section 3.356. Sec. 3.608. Redesignates existing Section 3.357. (a) Makes conforming changes. (b) Authorizes the commission to adopt mechanisms necessary to maintain reasonable rates for local exchange telephone service and to establish rules that would expand the universal service fund (USF) for LECs serving fewer than 1 million access lines in circumstances prescribed by this subsection. Makes other provisions. (c) Makes conforming changes. (d) Requires the commission to establish review procedure, including administrative review procedure, necessary for funding of and distribution from the USF, and to determine which LECs meet eligibility criteria including requirements to offer service to every consumer in a certificated area and render continuous, adequate service within that area. (e) Redesignates existing Subsection (d). (f) Redesignates existing Subsection (e). Authorizes the commission to require LECs and other telecommunications providers to provide reports and information, not to be disclosed, which are necessary to assess fund contributions. Sec. 3.609. Redesignates existing Section 3.358. Sec. 3.610. Redesignates existing Section 3.359. Severability clause. SUBTITLE O. AUTOMATIC DIAL ANNOUNCING DEVICES Sec. 3.651. Redesignates existing Section 3.401. Makes a conforming change. Sec. 3.652. Redesignates existing Section 3.402. Sec. 3.653. Redesignates existing Section 3.403. Provides that, if an automated dial announcing device (ADAD) is used for debt collection purposes and the use complies with applicable federal law and regulations, and the ADAD is used by a live operator for automatic dialing or hold announcement purposes, the use complies with this subdivision. Permits a person to operate an ADAD that plays a recorded message when the connection is completed to a telephone number if the device, when used for solicitation purposes, has a message shorter than one minute or has the technical capacity to recognize a telephone answering device on the called person's line and terminates the call within one minute. Sec. 3.654. Redesignates existing Section 3.404. Sec. 3.655. Redesignates existing Section 3.405. Sec. 3.656. Redesignates existing Section 3.406. Sec. 3.657. Redesignates existing Section 3.407. Sec. 3.658. Redesignates existing Section 4.408. Sec. 3.659. Redesignates existing Section 3.409. Sec. 3.660. New heading: NOTICE TO CONSUMER OF PROVISIONS OF CHAPTER 37 OF THE BUSINESS & COMMERCE CODE AND SECTION 3.659. Redesignates existing Section 3.410. Makes a conforming change. SECTION 49. (a) Amends Chapter 74D, Property Code, by adding Section 74.3011, as follows: Sec. 74.3011. DELIVERY OF MONEY TO RURAL SCHOLARSHIP FUND. (a) Authorizes a local telephone exchange company to deliver reported money to a scholarship fund for rural students instead of delivering the money to the state treasurer under Section 74.301. (b) Authorizes a local telephone exchange company to deliver money under this section only to a scholarship fund established by one or more local telephone exchange companies in this state to enable needy students from rural areas to attend college, technical school, or another postsecondary educational institution. (c) Requires a local telephone exchange company to file with the state treasurer a verification of money delivered under this section. (d) Requires a claim for money delivered to a scholarship fund under this section to be filed with the local telephone exchange company that delivered the money. Requires the LEC to forward the claim to the scholarship fund administrator, and requires the fund to pay the claim if it determines in good faith that the claim is valid. Authorizes an aggrieved person to file a suit against the fund in the district court. (e) Requires the state treasurer to prescribe forms and procedures governing this section. (f) Defines "local telephone exchange company." (g) Prohibits the total amount of money transferred by all local telephone exchange companies from exceeding $400,000 during a state fiscal year. Requires the state treasury to keep a record of the total amount transferred annually. Requires the treasury, when the total amount transferred during a state fiscal year equals the amount allowed by this subsection, to notify each local telephone exchange company that the company may not transfer any additional money to the company's scholarship fund during the remainder of that state fiscal year. (b) Makes application of Section 74.3011, Property Code, prospective. SECTION 50. (a) Amends Chapter 74D, Property Code, by adding Section 74.3012, as follows: Sec. 74.3012. DELIVERY OF MONEY TO URBAN SCHOLARSHIP FUND. (a) Authorizes a LEC to deliver reported money to a scholarship fund for urban students instead of delivering the money to the state treasurer under Section 74.301. (b) Authorizes a LEC to deliver money under this section only to a scholarship fund established by one or more LECs in this state to enable needy students from urban areas to attend college, technical school, or another postsecondary educational institution. (c) Requires a LEC to file with the state treasurer a verification of money delivered under this section. (d) Requires a claim for money delivered to a scholarship fund under this section to be filed with the LEC that delivered the money. Requires the LEC to forward the claim to the scholarship fund administrator, and requires the fund to pay the claim if it determines in good faith that the claim is valid. Authorizes an aggrieved person to file a suit against the fund in the district court. (e) Requires the state treasurer to prescribe forms and procedures governing this section. (f) Defines "local exchange company." (g) Prohibits the total amount of money transferred by all LECs from exceeding $400,000 during the 1995-1996 fiscal year. Prohibits the total amount of money that may be transferred by all LECs during each subsequent fiscal year from exceeding the total amount of money transferred to rural scholarship funds under Section 74.3011 during the previous state fiscal year. Requires the state treasury to keep a record of the total amount transferred annually. Requires the treasury, if the total amount transferred during a state fiscal year equals the amount allowed by this subsection, to notify each LEC that the company may not transfer any additional money to the company's scholarship fund during the remainder of that state fiscal year. (b) Makes application of Section 74.3012, Property Code, prospective. SECTION 51. Requires the governor and lieutenant governor, as soon as possible after the effective date of this Act, to appoint the members of the Telecommunications Infrastructure Fund Board, and sets forth guidelines and term limits for those appointments. SECTION 52. Repeals all laws and parts of laws in conflict with this Act effective September 1, 1995. SECTION 53. (a) Effective date: September 1, 1995. (b) Makes application of Section 3.2555, PURA, applicable only to a franchise or contract entered into or amended on or after September 1, 1995. (c) Makes application of Section 3.304(a)(3)(A)(i), PURA, applicable only to a petition filed on or after April 15, 1995. SECTION 54. Emergency clause.