HBA-DMD H.B. 1701 76(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 1701 By: Van de Putte State Affairs 4/9/1999 Introduced BACKGROUND AND PURPOSE Legislation passed by the 74th Legislature set in motion the state's transition from a regulated environment to a fully competitive telecommunications marketplace. Under this legislation, traditional telephone companies were allowed to choose a new form of regulation which freed them from regulatory scrutiny of their earnings and price levels for competitive services, in exchange for certain requirements. H.B. 1701 authorizes an incumbent local exchange company (exchange company) to introduce a new service 24 hours after providing an informational notice to the Public Utility Commission (commission). This bill requires an exchange company to price each new service at or above the service's long run incremental cost. This bill also authorizes an exchange company to exercise pricing flexibility, including the packaging of any regulated service such as basic local telecommunications service with any other regulated or unregulated service or any service of an affiliate. It authorizes an exchange company to offer a promotion for a regulated service for not more than 90 days in any 12-month period. H.B. 1701 authorizes an exchange company to recover its universal service fund assessment through a surcharge added to the bills of the local exchange company's customers. This bill also authorizes an electing company to increase a rate for a basic network service after the expiration of the period the company's rates for basic network services are capped, rather than the four-year period, with approval from the commission and to the extent consistent with achieving universal affordable service. In addition, this bill authorizes an electing company to exercise pricing flexibility for basic network services, including the packaging of basic network services with any other regulated or unregulated service or any service of an affiliate. It prohibits a provider of telecommunications service from imposing a restriction on the resale or sharing of a service entitled to regulatory treatment as a nonbasic service. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this bill does not expressly delegate any additional rulemaking authority to a state officer, department, agency, or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends the section heading to Section 52.058, Utilities Code, as follows: Sec. 52.058. New Title: GENERAL PROVISIONS RELATING TO NEW OR EXPERIMENTAL SERVICES OR PROMOTIONAL RATES. SECTION 2. Amends Subchapter B, Chapter 52, Utilities Code, by adding Sections 52.0583, 52.0584, and 52.0585, as follows: Sec. 52.0583. NEW SERVICES. (a) Authorizes an incumbent local exchange company (exchange company) to introduce a new service 24 hours after providing an informational notice to the Public Utility Commission (commission). (b) Requires an exchange company to price each new service at or above the service's long run incremental cost. Requires the commission to allow a company serving fewer than one million access lines in this state to establish a service's long run incremental cost by adopting, at that company's option, the cost studies of a larger company for that service that have been accepted by the commission. (c) Authorizes only an affected person to file a complaint with the commission challenging whether the pricing by an exchange company of a new service is in compliance with Subsection (b). Requires the commission to allow the company to continue to provide the service while the complaint is pending. (d) Provides that an affected person filing a complaint under Subsection (c) has the burden of proving that the exchange company did not set the price for the new service in accordance with the applicable provisions of this subchapter. Specifies the requirements and authorizations for the company, if the complaint is finally resolved in favor of the complainant. Sec. 52.0584. PRICING AND PACKAGING FLEXIBILITY; CUSTOMER PROMOTIONAL OFFERINGS. (a) Authorizes an exchange company, notwithstanding any other provision of this title, to exercise pricing flexibility in accordance with this section, including the packaging of any regulated service such as basic local telecommunications service with any other regulated or unregulated service or any service of an affiliate. Authorizes the company to exercise pricing flexibility 24 hours after providing an informational notice to the commission. (b) Requires an exchange company, at the company's option, to price each regulated service offered separately or as part of a package under Subsection (a) at either the service's tariffed rate or at a rate not lower than the service's long run incremental cost. Requires the commission to allow a company serving fewer than one million access lines in this state to establish a service's long run incremental cost by adopting, at that company's option, the cost studies of a larger company for that service that have been accepted by the commission. (c) Authorizes only an affected person to file a complaint alleging that an exchange company has priced a regulated service in a manner that does not meet the pricing standards of this subchapter. Provides that the complaint must be filed before the 31st day after the company implements the rate. Sec. 52.0585. CUSTOMER PROMOTIONAL OFFERINGS. Authorizes an exchange company to offer a promotion for a regulated service for not more than 90 days in any 12-month period. Specifies the provisions to be included in a promotional offering that the company is required to file with the commission. Provides that a exchange company is not required to obtain commission approval to make a promotional offering. Authorizes an exchange company to offer a promotion of any regulated service as part of a package of services consisting of any regulated service with any other regulated or unregulated service or any service of an affiliate. SECTION 3. Amends Subchapter C, Chapter 54, Utilities Code, by adding Section 54.1015, as follows: Sec. 54.1015. EFFECT OF AFFILIATE. Authorizes a person, notwithstanding any other provision of this title, to hold a certificate for all or any portion of a service area for which one or more affiliates of the person holds a certificate of operating authority, a service provider certificate of operating authority, or a certificate of convenience and necessity. SECTION 4. Amends Section 54.103, Utilities Code, by adding Subsection (g), to prohibit the commission, notwithstanding any other provision of this title, in determining whether to grant a certificate, from considering whether an affiliate of the applicant holds a certificate of operating authority, a service provider certificate of operating authority, or a certificate of convenience and necessity for all or part of the territory the applicant has applied to serve. SECTION 5. Amends Section 56.026, Utilities Code, is amended by adding Subsections (c) and (d), as follows: (c) Prohibits the commission, notwithstanding any other provision of this title, if a company electing under Chapters 58 (Incentive Regulation) or 59 (Infrastructure Plan), Utilities Code, agrees to reduce rates in conjunction with receiving disbursements from the universal service fund, from reducing the amount of those disbursements unless the electing company agrees to the disbursement reduction. (d) Requires any reductions in switched access services rates to offset disbursements from the universal service fund under Section 56.021(1) (Universal Service Fund Established), Utilities Code, to local exchange companies with more than 125,000 access lines in service in this state on December 31, 1998, to be proportional, based on equivalent minutes of use, to reductions in intraLATA toll rates. Requires the decreases, to the extent that the disbursements from the universal service fund under Section 56.021(1) for small and rural local exchange companies are used to decrease the implicit support in intraLATA toll and switched access rates, to be made in a competitively neutral manner. SECTION 6. Amends Subchapter B, Chapter 56, Utilities Code, by adding Sections 56.027 and 56.028, as follows: Sec. 56.027. UNIVERSAL SERVICE CHARGE SURCHARGE. Authorizes a local exchange company to recover its universal service fund assessment through a surcharge added to the bills of the local exchange company's customers. Sec. 56.028. UNIVERSAL SERVICE FUND REIMBURSEMENT FOR CERTAIN INTRALATA SERVICE. Requires the commission, on request of a local exchange company that is not an electing company under Chapters 58 or 59, to provide reimbursement through the universal service fund for reduced rates for intraLATA interexchange high capacity (1.544 Mbps) service for entities described by Section 58.253(a) (Private Network Services for Certain Entities), Utilities Code. Requires the amount of reimbursement to be equal to the difference between the company's tariffed rates for that service on January 1, 1998, and the lowest rate offered for that service by any company electing incentive regulation under Chapter 58. SECTION 7. Amends Section 58.021, Utilities Code, by adding Subsections (c) and (d), as follows: (c) Provides that except as provided by Subsection (d), an election under this chapter remains in effect until the legislature eliminates the incentive regulation authorized by this chapter and Chapter 59. (d) Authorizes an electing company serving fewer than five million access lines in this state, notwithstanding any other provision of this chapter, to withdraw its election under this chapter at any time after the later of September 1, 2001, or the fourth anniversary of the company's election date. SECTION 8. Amends Section 58.023, Utilities Code, as follows: Sec. 58.023. SERVICE CLASSIFICATION. Provides that on election, the services provided by an electing company are classified into two, rather than three, categories containing basic network services governed by Subchapter C (Basic Network Services), Chapter 58, Utilities Code, and nonbasic services governed by Subchapter E (Competitive Services), Chapter 58, Utilities Code, rather than discretionary services governed by Subchapter D (Discretionary Services), Chapter 58, Utilities Code, and competitive services governed by Subchapter E. SECTION 9. Amends Sections 58.024(a) and (b), Utilities Code, to authorize the commission to reclassify a basic network service as a nonbasic service, rather than a discretionary or competitive service or discretionary service as a competitive service. Authorizes the criteria established for determining whether a service should be reclassified to only, rather than the criteria must, include certain considerations. SECTION 10. Amends Section 58.051, Utilities Code, as follows: Sec. 58.051. SERVICES INCLUDED. Deletes flat rate business local exchange telephone service, switched access service, interconnection to competitive providers, interconnection for commercial mobile service providers, directory assistance, and "1 plus" intraLATA message toll service as basic network services, unless reclassified under Section 58.024 (Service Reclassification), Utilities Code. Includes flat rate residential local exchange voice telephone service, residential tone dialing service, service connection for basic residential service, direct inward dialing service for basic residential services, access for all residential and business end users to 911 service provided by a local authority and access to dual party relay service among the list of basic network services, unless reclassified under Section 58.024. SECTION 11. Amends Section 58.054, Utilities Code, by adding Subsections (c) and (d), as follows: (c) Prohibits the cap on the rates for basic network services for a company electing under this subchapter from expiring before September 1, 2001, notwithstanding Subsections (a) and (b). (d) Provides that the cap on the rates for basic network services does not preclude an electing company from charging and collecting a surcharge or fee, or both, required or permitted to be assessed under any provision of this title. SECTION 12. Amends Section 58.055, Utilities Code, as follows: Sec. 58.055. RATE ADJUSTMENT BY COMPANY. (a) Authorizes an electing company to increase a rate for a basic network service during the period the company's rates for basic network services are capped, rather than the four-year period, as prescribed by Section 58.054. (b) Makes a conforming change. (c) Authorizes the company to decrease the rate for a basic local telecommunications service, rather than a basic local telecommunications service other than switched access, to an amount above the service's appropriate cost. Deletes text authorizing the company to decrease the rate for switched access service to an amount above the service's long run incremental cost. Redesignates existing Subsection (d) to (c). SECTION 13. Amends Section 58.058, Utilities Code, as follows: Sec. 58.058. RATE GROUP RECLASSIFICATION. Requires the commission, notwithstanding Section 58.054, rather than Subchapter B, to allow a rate group reclassification that results from access line growth, on request of the electing company. SECTION 14. Amends Subchapter C, Chapter 58, Utilities Code, is amended by adding Section 58.0595 to read as follows: Sec. 58.0595. PRICING AND PACKAGING FLEXIBILITY. (a) Authorizes an electing company, notwithstanding Section 58.052(b) (Regulation of Services) or Subchapter F (Pricing), Chapter 60 (Competitive Safeguards), to exercise pricing flexibility for basic network services including the packaging of basic network services with any other regulated or unregulated service or any service of an affiliate. Authorizes the company to exercise pricing flexibility in accordance with this section 24 hours after providing an informational notice to the commission. (b) Specifies the level that an electing company is required to set the price of a package of services containing basic network services and nonbasic services. SECTION 15. Amends Section 58.060, Utilities Code, to authorize an electing company to increase a rate for a basic network service only with the commission approval subject to this title and to the extent consistent with achieving universal affordable service, after the expiration of the period during which the company's rates for basic network services are capped as prescribed by Section 58.054, rather than after the four-year period prescribed by Section 58.054 expires. SECTION 16. Amends Subchapter E, Chapter 58, Utilities Code, as follows: SUBCHAPTER E. New Heading: NONBASIC SERVICES Sec. 58.151. SERVICES INCLUDED. Sets forth the services that are classified as nonbasic services, rather than competitive services. Sec. 58.152. PRICES. (a) Authorizes an electing company to set the price for any nonbasic service, rather than a competitive service, at any level above the service's long run incremental cost in accordance with the imputation rules prescribed by or under Subchapter D (Imputation), Chapter 60, Utilities Code, or price for the service in effect on September 1, 1999, whichever is less. (b) Authorizes an electing company, rather than subject to the requirements of Sections 60.001 (Fair Competition) and 60.002 (Exclusive Jurisdiction, Enforcement), Utilities Code, to use pricing flexibility for a nonbasic service, rather than competitive service. Provides that pricing flexibility includes all pricing arrangements included in the definition of "pricing flexibility" prescribed by Section 51.002 (Definition), Utilities Code, and includes packages that include basic network services. (c) Requires an electing company, when the electing company that is required, as of January 1, 1999, to obtain the authorization described by 47 U.S.C. Section 271 and its subsequent amendments to provide certain interLATA services obtains a final order permitting the company to provide those services in this state and the electing company or an affiliate of the company formed in compliance with 47 U.S.C. Section 272 and its subsequent amendments actually begins providing that service in this state, to reduce its rates in effect on that date for originating and terminating switched access services by the amount of two cents per conversation minute of use. Deletes text prohibiting the company from increasing the price of a competitive service in a geographic area in which that service or a functionally equivalent service is not readily available from another provider. (d) Prohibits an electing company, notwithstanding Subsection (a), from increasing the rates for switched access services, computed on an average conversation minute of use basis above a certain amount. Sec. 58.153. NEW SERVICES. (a) Authorizes an electing company to introduce a new service 24 hours after providing an informational notice to the commission, subject to the pricing conditions prescribed by Section 58.152(a). (b) Authorizes only an affected person to file a complaint with the commission challenging whether the pricing by an exchange company of a new service is in compliance with Section 58.152(a). Requires the commission to allow the company to continue to provide the service while the complaint is pending. (c) Provides that an affected person filing a complaint under Subsection (b) has the burden of proving that the exchange company did not set the price for the new service in accordance with Section 58.152(a). Sets requirements and authorization for the company, if the complaint is finally resolved in favor of the complainant. SECTION 17. Amends Section 59.021, Utilities Code, by adding Subsection (c), to authorize a company electing under this chapter to renew the election for successive two-year periods. Specifies the date until which an election that is renewed under this subsection remains in effect. SECTION 18. Amends Section 59.024, Utilities Code, by amending Subsections (a), (d), and (e) and adding Subsections (f) and (g), as follows: (a) Prohibits an electing company, except for the charges permitted under Subchapter C (Expanded Toll-Free Local Calling Areas), Chapter 55 (Regulation of Telecommunications Services), Subchapter B (Universal Service Fund), Chapter 56 (Telecommunications Assistance and Universal Service), and Section 55.024, before the end of the company's election period under this chapter, rather than on or before the sixth anniversary of its election date, from increasing a rate previously established for that company under this title unless the commission approves the proposed change as authorized under Subsection (c) or (d). (d) Requires the commission, notwithstanding Subsection (a), on request of the electing company, to allow a rate group reclassification that results from access line growth. (e) Provides that the cap on an electing company's rates does not preclude the company from charging and collecting a surcharge or fee, or both, required or permitted to be assessed under any provision of this title. (f) Authorizes an electing company to, on its own initiative, decrease a rate during the company's election period. Sets forth that Section 58.059 (Commission Rate Adjustment Procedure), Utilities Code, does not apply to a rate decrease under this subsection. (g) Provides that Section 58.059 applies to a rate change under this section, except as provided by Subsection (f). SECTION 19. Amends Section 59.025, Utilities Code, as follows: Sec. 59.025. SWITCHED ACCESS RATES. Prohibits the commission, notwithstanding any other provision of this title, on the commission's own motion, from reducing an electing company's rates for switched access services before the expiration of the election period, rather than six-year period, prescribed by Section 59.024, but the commission is authorized to approve a reduction proposed by the electing company. SECTION 20. Amends Section 59.026(a), Utilities Code, to provide that on or before the end of the company's election period, rather than on or before the sixth anniversary of the company's election date, an electing company is not, under any circumstances, subject to certain complaints. SECTION 21. Amends Subchapter B, Chapter 59, Utilities Code, by adding Sections 59.030, 59.031, and 59.032, as follows: Sec. 59.030. NEW SERVICES. (a) Authorizes an electing company to introduce a new service 24 hours after providing an informational notice to the commission. (b) Requires an electing company to price each new service at or above the service's long run incremental cost. Requires the commission to allow a company serving fewer than one million access lines in this state to establish a service's long run incremental cost by adopting, at that company's option, the cost studies of a larger company for that service that have been accepted by the commission. (c) Authorizes only an affected person to file a complaint with the commission challenging whether the pricing by an electing company of a new service is in compliance with Subsection (b). Requires the commission to allow the company to continue to provide the service while the complaint is pending. (d) Sets forth that an affected person filing a complaint under Subsection (c) has the burden of proving that the electing company did not set the price for the new service in accordance with the applicable provisions of this subchapter. Specifies authorizations and requirements for the company, if the complaint is finally resolved in favor of the complainant. Sec. 59.031. PRICING AND PACKAGING FLEXIBILITY; CUSTOMER PROMOTIONAL OFFERINGS. (a) Authorizes an electing company, notwithstanding Section 59.027(b) or Subchapter F, Chapter 60, to exercise pricing flexibility in accordance with this section, including the packaging of any regulated service such as basic local telecommunications service with any other regulated or unregulated service or any service of an affiliate. Authorizes the company to exercise pricing flexibility 24 hours after providing an informational notice to the commission. (b) Requires an electing company, at the company's option, to price each regulated service offered separately or as part of a package under Subsection (a) at either the service's tariffed rate or at a rate not lower than the service's long run incremental cost. Requires the commission to allow a company serving fewer than one million access lines in this state to establish a service's long run incremental cost by adopting, at that company's option, the cost studies of a larger company for that service that have been accepted by the commission. (c) Authorizes only an affected person to file a complaint alleging that an electing company has priced a regulated service in a manner that does not meet the pricing standards of this subchapter. Provides that the complaint must be filed before the 31st day after the company implements the rate. Sec. 59.032. CUSTOMER PROMOTIONAL OFFERINGS. (a) Authorizes a electing company to offer a promotion for a regulated service for not more than 90 days in any 12-month period. (b) Requires the company to file with the commission a promotional offering that consists of waiver of installation charges or service order charges, or both, for not more than 90 days in a 12-month period, or a temporary discount of not more than 25 percent from the tariffed rate for not more than 60 days in a 12-month period. (c) Provides that an electing company is not required to obtain commission approval to make a promotional offering described by Subsection (b). (d) Authorizes an electing company to offer a promotion of any regulated service as part of a package of services consisting of any regulated service with any other regulated or unregulated service or any service of an affiliate. SECTION 22. Amends Section 60.042, Utilities Code, as follows: Sec. 60.042. PROHIBITED RESALE OR SHARING. Prohibits a provider of telecommunications service from imposing a restriction on the resale or sharing of a service entitled to regulatory treatment as a nonbasic, rather than competitive, service under Subchapter E, Chapter 58, if the provider is a company electing regulation under Chapter 58. SECTION 23. Amends Subchapter I, Chapter 60, Utilities Code, by adding Sections 60.164 and 60.165, as follows: Sec. 60.164. PERMISSIBLE JOINT MARKETING. Prohibits the commission, except as prescribed by Chapters 61 (Information Technology Services) and 63 (Electronic Publishing), Utilities Code, from adopting a rule or order that would prohibit a local exchange company from marketing or selling the company's products and services jointly with the products and services of an affiliate in a manner permitted by federal law or applicable rules of the Federal Communications Commission. Sec. 60.165. AFFILIATE RULES. (a) Prohibits the commission, except as prescribed by Chapters 61 and 63, from adopting a rule or order that would prescribe for a local exchange company an affiliate rule, including an accounting rule, cost allocation rule, or structural separation rule, that is more burdensome than prescribed by federal law or applicable rules of the Federal Communications Commission. (b) Prohibits the commission, notwithstanding any other provision of this title, from attributing or imputing to a local exchange company a price discount offered by an affiliate to the affiliate's customers. SECTION 24. (a) Requires the commission to implement the universal service fund in all areas of this state no later than November 1, 1999. (b) Requires the commission to establish and implement the universal service fund provisions required by Section 56.021(1), Utilities Code, for all eligible telecommunications providers no later than November 1, 1999. SECTION 25. Repealer: Section 58.062 (Switched Access Rates), Utilities Code. Repealer: Subchapter D (Discretionary Services), Chapter 58 (Incentive Regulation), Utilities Code. SECTION 26.Effective date: September 1, 1999. SECTION 27.Emergency clause.