HBA-TYH S.B. 560 76(R)    BILL ANALYSIS


Office of House Bill AnalysisS.B. 560
By: Sibley
State Affairs
4/27/1999
Engrossed



BACKGROUND AND PURPOSE 

In 1995, the Texas 74th Legislature enacted legislation to change the
telecommunications market from a highly regulated industry to a less
regulated industry, and eventually to a competitive industry.  Since 1995,
the telecommunications industry market has changed considerably.  With the
development of alternative telecommunications providers, the growing
marketplace for telecommunications, and the end of certain commitments made
under the legislation enacted in 1995, the regulatory framework now
requires some adjustment.  S.B. 560 sets forth the regulations for the
telecommunications utilities and the provision of telecommunication
services. 

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 Section 12.005, Utilities Code, to provide that the
Public Utility Commission of Texas (commission) is abolished and this
chapter (Organization of Commission) expires on September 1, 2005, rather
than September 1, 2001, unless continued as provided by Chapter 325 (Texas
Sunset Act), Government Code. 

SECTION 2.  Amends Section 52.102, Utilities Code, to provide that a
telecommunications utility subject to this subchapter (Telecommunications
Utilities That Are Not Dominant Carriers) has jurisdiction to require a
telecommunications utility that, together with affiliates, had more than
six percent of the total intrastate access minutes of use as measured for
the most recent 12-month period, to pass switched access rate reductions
under this title (Public Utility Regulatory Act)  to customers as required
under Section 52.112.  Requires this authority to expire on the date
specified in Section 52.112.  Makes a conforming change.  

SECTION 3.  Amends Section 52.108, Utilities Code, to authorize the
commission to enter any order necessary to protect the public interest if
the commission finds after notice and hearing that a telecommunications
utility has failed to pass switched access rate reductions to customers
under Chapter 56 (Telecommunications Assistance and Universal Service Fund)
or other law, as required under Section 52.112. 

SECTION 4.  Amends Section 52.110, Utilities Code, to provide that in a
proceeding before the commission in which it is alleged that a
telecommunications utility engaged in conduct in violation of Section
52.112, the burden of proof is on a telecommunications utility complaining
of conduct committed against it in violation of this subchapter, or on the
responding telecommunications utility if the proceedings are brought by a
customer or customer representative who is not a telecommunications utility
or initiated by the commission. 

SECTION 5.  Amends Subchapter C, Chapter 52, Utilities Code, by adding
Section 52.112, as follows: 

Sec. 52.112.  REDUCTION PASS-THROUGH REQUIRED.   Requires each
telecommunications utility that, together with affiliates, had more than
six percent of the total  intrastate access minutes of use as measured for
the most recent 12-month period,  to pass through to customers switched
access rate reductions under this title.  Requires the residential customer
class to receive no less than a proportionate share of the reductions.
Requires each telecommunications utility subject to this section, within
six months following each reduction in intrastate switched access charges
under this title, to file a report with the commission demonstrating its
compliance on an average revenue per minute basis.  Requires this section
to expire two years after the date incumbent local exchange companies doing
business in the state are no longer prohibited by federal law from offering
interLATA and interstate long distance service. 

SECTION 6.  Amends Section 54.007, Utilities Code, to delete provisions
regarding certain instances in which a basic telecommunications service
price may be increased.  Makes a conforming change.  

SECTION 7.  Amends Subchapter C, Chapter 54, Utilities Code, as follows:

SUBCHAPTER C.  CERTIFICATE OF OPERATING AUTHORITY

 Sec.  54.101.  DEFINITION.  Makes no change. 

Sec. 54.102.  APPLICATION FOR CERTIFICATE. Authorizes an affiliate of a
person holding a certificate of convenience and necessity to hold a
certificate of operating authority if the holder of the certificate of
convenience and necessity is in compliance with federal law and Federal
Communications Commission rules governing affiliates and structural
separation.  Prohibits an affiliate of a person holding a certificate of
convenience and necessity from directly or indirectly selling to a
non-affiliate any regulated product or service purchased from the person
holding a certificate of convenience and necessity at any rate or price
less than the price paid to the person holding a certificate of convenience
and necessity. Authorizes a person 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.
Deletes provisions for an applicant for a facilities based certificate of
operating authority. 

Sec.  54.103.  GRANT OR DENIAL OF CERTIFICATE.  Deletes text regarding the
adequacy of an applicant's build-out plan as one of the commissioner's
required consideration factors in granting a certificate on a
nondiscriminatory basis.  Deletes existing Section 54.104 regarding
build-out plan requirements and existing Section 54.105 regarding six-year
limitation on resale of services.  Makes conforming changes. 

Sec. 54.104.  New title: TIME OF SERVICE REQUIREMENTS.  Requires a
certificate holder, notwithstanding Subsection (a), to serve a customer,
rather than in the build out area, not later than the 30th day after the
date the customer requests service.  Redesignated from existing Section
54.106.  Deletes existing Section 54.107 regarding requirements to certain
facilities; Section 54.108 regarding build-out compliance; Section 54.109
regarding elimination of build-out requirements for certain providers; and
Section 54.110 regarding hearing on build out and resale requirements. 

Sec.  54.105.  New title: PENALTY FOR VIOLATION OF TITLE.  Redesignated
from existing Section 54.111. 

SECTION 8.  Amends Section 56.021, Utilities Code, to make this section
(Universal Service Fund Established) applicable to telecommunications
providers, rather than local exchange companies. Makes a conforming change. 

SECTION 9.  Amends Sections 56.023 and 56.024, Utilities Code, to require
the commission to establish and implement the universal service fund
provisions required by Section 56.021(1) for all eligible
telecommunications providers not later than August 1, 1999.  Authorizes the
commission to require a telecommunications provider to provide a report or
information necessary to assess contributions and disbursements to the
universal service fund. Makes conforming changes. 
 
SECTION 10.  Amends Section 56.026, Utilities Code, to require the
commission, in establishing and implementing the universal service fund
described in Section 56.021(1), to size the fund to provide for
disbursements to a company serving more than five million access lines in
this state sufficient to offset a reduction of at least 2.35 cents per
minute in switched access rates on a combined originating and terminating
basis.  Makes a conforming change. 

SECTION 11.  Amends Subchapter B, Chapter 56, Utilities Code, by adding
Section 56.028, as follows: 

Sec.  56.028.  UNIVERSAL SERVICE FUND REIMBURSEMENT FOR CERTAIN INTRALATA
SERVICE. Requires the commission to provide reimbursement through the
universal service fund for reduced rates for intraLATA interexchange high
capacity (1.544 Mps) service for entities described in Section 58.253(a)
(Private Network Services for Certain Entities) upon request of a local
exchange company that is not an electing company under Chapters 58
(Incentive Regulation) and 59 (Infrastructure Plan).  Requires the amount
of reimbursement to be the difference between the company's tariffed rate
for such service as of January 1, 1998,  and the lowest rate offered for
such service by any local exchange company electing incentive regulation
under Chapter 58. 

SECTION 12.  Amends Section 56.071, Utilities Code, to provide that in
addition to local exchange companies, this subchapter (Tel-Assistance
Service Program) applies to telecommunications providers that receive
universal service fund support pursuant to the commission's universal
service fund rules.  Requires any reference to or requirement imposed on
local exchange companies in this subchapter to also apply to such
telecommunications providers.  Makes conforming changes. 

SECTION 13.  Amends Section 58.002, Utilities Code, as follows:

Sec. 58.002.  New title: DEFINITIONS.  Defines "electing company" and
"urban."  Makes conforming changes. 

SECTION 14.  Amends Section 58.021, Utilities Code, to provide that notice
must include a statement that the company agrees to limit  any increase in
a rate the company charges for basic network services until September 1,
2005.  Provides that except as provided in this section (Election), an
election under this chapter remains in effect until the legislature
eliminates the incentive regulation authorized by this chapter and Chapter
59.  Authorizes the commission to allow an electing company serving fewer
than five million access lines to withdraw the company's election under
this chapter under certain circumstances.  Defines "good cause."         
 
SECTION 15. Amends Section 58.024, Utilities Code, to prohibit the
commission from reclassifying a service until, for a company that serves
more than five million access lines in this state, the date on which the
FCC determines in accordance with 47 U.S.C. Section 271 (Bell Operating
Company Entry into InterLATA Services) that the company may enter the
interLATA telecommunications market in this state.  Authorizes the
commission, for an electing company having greater than five million lines,
to reclassify a service subject to certain conditions.  Makes conforming
changes.  

SECTION 16.  Amends Section 58.028, Utilities Code, to require the
commission to begin a review and evaluation of each company that elects
under this chapter or Chapter 59 no later than January 1, 2004, rather than
January 1, 2000.  Requires the commission to file a report with the
legislature no later than January 1, 2005, rather than January 1, 2001.
Provides that this section expires on September 1, 2003, rather than
September 1, 2001. 

SECTION 17.  Amends Subchapter C, Chapter 58, Utilities Code, by adding
Section 58.0511, as follows: 

Sec.  58.0511.  SERVICES INCLUDED FOR CERTAIN ELECTING COMPANIES. Provides
that from September 1, 1999, until such time as an affected company offers
interLATA long distance service, and notwithstanding Section 58.051
(Services Included), for an electing company with more than five million
access lines, the services in this section are basic network services,
unless reclassified under Section 58.024 (Service  Reclassification).  Sets
forth what is included in basic network services.  Provides that rates for
the service listed in this section are capped until September 1, 2005.
Provides that at such time as an electing company servicing more than five
million access lines offers interLATA long distance, the services listed in
this section are basic network services for that company except that the
commission may permit an electing company, on application, to establish
rates, terms, and conditions of service for residential and business
installment billing and late payment charges.  Sets forth what basic
network services include. 

SECTION 18.  Amends Sections 58.054 and 58.055, Utilities Code, as follows:

Sec. 58.054. RATES CAPPED.  Provides that the rates an electing company may
charge on or before the fourth anniversary are the rates charged by the
company on June 1, 1995, or for a company that elects under this chapter
after September 1, 1999, the rates charged on the date of its election.
Prohibits the cap on the rates for basic network services for a company
electing under this subchapter from expiring before September 1, 2005. 

Sec.  58.055.  RATE ADJUSTMENT BY COMPANY.  Replaces reference to four-year
period with election period.   Deletes text regarding a company's ability
to decrease the rate for switched access service to an amount above the
service's long run incremental cost. Makes a conforming change.  

SECTION 19.  Amends Section 58.060, Utilities Code, to authorize an
electing company to increase a rate for a basic network service only with
the commission's approval subject to this title and to the extent
consistent with achieving universal affordable service, after the
expiration of the period during which the rates for basic network services
are capped as prescribed by Section 58.054 (Rates Capped), rather than
after the four-year period expires.  

SECTION 20.  Amends Subchapter C, Chapter 58, Utilities Code, by adding
Sections 58.063 and 58.064, as follows: 

Sec. 58.063.  FLEXIBLE PACKAGING ACROSS SERVICE CLASSIFICATIONS.  (a)
Authorizes an electing company, notwithstanding any other provisions of
this title, serving less than five million access lines to package basic
network services with discretionary services or competitive services as of
the date the company enters into the interLATA long distance market.  

(b)  Authorizes an electing company, notwithstanding any other provisions
of this title, serving less than five million access lines to package basic
network services with discretionary services or competitive services if the
company notifies the commission of its binding commitment to make certain
infrastructure improvements by September 1, 2001.  Prohibits these
commitments from applying to exchanges of the company sold or transferred
before, or for which contracts for which for sale or transfer were pending
on, September 1, 2001.  Requires the company, in the case of exchanges for
which contracts for sale or transfer were pending as of March 1, 2001,
where the purchaser withdrew or defaulted prior to September 1, 2001, to
have one year from the date of withdrawal or default to comply with the
commitments.  

(c)  Requires the price for a package of services containing basic network
and discretionary or competitive services to be no higher than the sum of
the tariffed rates of the basic network services and the competitive
services and the price ceilings of the discretionary services.   

(d)  Requires the price for a package of services containing basic network
services and discretionary or competitive services to be set at a level
above the sum of certain costs.   
(e)  Authorizes an electing company to flexibly price a package that
includes a basic network service in any manner listed in Section 51.002(7)
(Definitions), except that such a package is prohibited from being offered
in a manner that results in a customer-specific contract. 
 
Sec. 58.064.  ZONE-DENSITY PRICING OF BASIC LOCAL TELECOMMUNICATIONS
SERVICE.  Provides that until an electing company is authorized to engage
in pricing flexibility pursuant to Section 58.063, the only form of pricing
flexibility allowed for basic local telecommunications service is
zone-density pricing. 

SECTION 21.  Amends Subchapter D, Chapter 58, Utilities Code, by adding
Section 58.1011, as follows: 

Sec. 58.1011.  SERVICES INCLUDED FOR CERTAIN ELECTING COMPANIES. Provides
that from September 1, 1999, until such time as an affected company offers
interLATA long distance service, and notwithstanding Section 58.101
(Services Included), for an electing company with more than five million
access lines, the services in this section are discretionary services,
unless reclassified under Section 58.024.  Sets forth what is included in
discretionary services.  Provides that at such time as an electing company
serving more than five million access lines offers interLATA long distance,
the services are discretionary services of that company.  Sets forth what
is included in discretionary services. 

SECTION 22. Amends Section 58.102, Utilities Code, to require the
commissioner to set the maximum price an electing company may charge for
discretionary service until one of the specified dates.  Provides that the
initial market price for a service is the price in effect on the date of
the electing company's election, rather than September 1, 1995.  Authorizes
the electing company, after the dates prescribed in Section 58.102(a)
(Maximum Price), to file annually a revised maximum price list for the
services classified as discretionary services.  Prohibits the new maximum
prices for the services classified as discretionary services from
exceeding, in the aggregate, 112 percent of the previous maximum prices for
those services.  Requires the electing company to file the new maximum
price list in an informational tariff filed with the commission five days
prior to the date on which the new maximum prices will become effective.
Deletes text prohibiting the commission from increasing the initial maximum
price.  Deletes text authorizing the commission to change the initial
maximum price. 

SECTION 23.  Amends Subchapter E, Chapter 58, Utilities Code, by adding
Section 58.1511, as follows: 

Sec. 58.1511.  SERVICES INCLUDED FOR CERTAIN ELECTING COMPANIES. Provides
that from September 1, 1999, until such time as an affected company offers
interLATA long distance service, and notwithstanding Section 58.151
(Services Included), for an electing company with more than five million
access lines, the services in this section are competitive services.  Sets
forth what is included in competitive services.  Provides that at such time
as an electing company serving more than five million access lines offers
interLATA long distance, the services listed in this section are
competitive services for that company.  Sets forth what is included in
competitive services.  Provides that rates for the services listed in
Subsection(d)(1)-(3) are capped until September 1, 2005. 

SECTION 24.  Amends Subchapter E, Chapter 58, Utilities Code, by adding
Section 58.1512, as follows: 

Sec. 58.1512.  SERVICES INCLUDED FOR CERTAIN ELECTING COMPANIES.  Sets
forth certain required services to be offered by an electing company to be
classified as discretionary services and prohibits it from being
reclassified under Section 58.024, for the 12-month period following the
date an electing company with more than five million access lines begins
offering interLATA long distance service, and notwithstanding Sections
58.101 and 58.1511.  Requires the services listed in this section, at the
expiration of the 12-month period, to be classified as competitive
services.  Prohibits an electing company, notwithstanding any other
provision in this title, with more than five million access lines from
providing the services in this section pursuant to a customer specific
contract until 18 months have expired following the date that such an
electing company begins offering interLATA long distance service.
Prohibits an electing company from offering a package of services,
including a service listed in this section, that results in a customer
specific contract  until the 18-month period has expired. 

SECTION 25.  Amends Subchapter E, Chapter 58, Utilities Code, by adding
Section 58.155, as follows: 

Sec. 58.155.  INTERCONNECTION SERVICES.  Provides that because
interconnection to competitive providers and interconnection for commercial
mobile service providers are subject to the requirements of Sections 251
(Interconnection) and 252 (Procedures for Negotiation, Arbitration, and
Approval of Agreements), Title 47, U.S.C. (Communications Act of 1934), and
FCC rules, they are not addressed in Sections 58.0511, 58.1011, and
58.1511. 

SECTION 26.  Amends Chapter 58, Utilities Code, by adding Subchapter H, as
follows: 

SUBCHAPTER H.  SWITCHED ACCESS SERVICES

Sec. 58.301.  SWITCHED ACCESS RATE REDUCTION.  Sets forth the required
methods in which an electing company with greater than five million lines
is required to reduce its switched access rates on a combined operating and
terminating basis. 

Sec. 58.302.  SWITCHED ACCESS RATE CAP. Prohibits an electing company from
increasing the per minute rates for switched access services on a combined
originating and terminating basis as specifically provided. 

Sec. 58.303.  SWITCHED ACCESS CHARGE STUDY.  Requires the commission, not
later than November 1, 1999, to begin a review and evaluation of the rates
for intrastate switched access service.  Sets forth the required issues to
be evaluated.  Requires the commission to file a report with the
legislature no later than January 1, 2001.  Requires the report to include
the commission's recommendations as to the issues reviewed and evaluated.
Provides that this section expires on September 1, 2001.  

SECTION 27.  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.  Provides that an election that
is renewed under this subsection remains in effect until the earlier of
certain dates. 

SECTION 28.  Amends Section 59.024, Utilities Code, to prohibit an electing
company, before the end of the company's election period under this
chapter, rather than before the sixth anniversary of its election date,
from increasing a rate previously established for that company.  Requires
the commission, on motion of the electing company or on its own motion to
adjust prices for services to reflect changes in FCC separations that
affect the intrastate net income by at least 10 percent. Requires the
commission, notwithstanding Subsection (a), on request of the electing
company, to allow a rate group reclassification that results from access
line growth. 

SECTION 29.  Amends Section 59.025, Utilities Code, to prohibit the
commission, notwithstanding any other provision of this title, on the
commission's own motion, to reduce an electing company's rate for switched
access services before the expiration of the election period, rather than
the six-year period, prescribed by Section 59.024, but the commission is
authorized to approve a reduction proposed by the electing company. 

SECTION 30.  Amends Section 59.026(a), Utilities Code, to make conforming
changes. 

SECTION 31.  Amends Subchapter B, Chapter 59, Utilities Code, by adding
Sections 59.030, 59.031, 59.032, as follows: 

Sec. 59.030.  NEW SERVICES. (a) Authorizes an electing company to introduce
a new service 10 days after providing an informational notice to the
commission and to any person who holds a certificate of operating authority
in the electing company's certificated area or areas or who has an
effective interconnection agreement with the electing company.   
 
(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 to establish a
service's long run incremental cost by adopting, at the company's option,
the cost studies of a large company for that service that has 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).   

(d)  Provides that if an affected person files a complaint under Subsection
(c), the electing company has the burden of proving that the company set
the price for the new service in accordance with  the applicable provisions
of this subchapter (Infrastructure Incentives). Provides if a complaint is
finally resolved in the favor of the complainant, the electing company: 

_is required, not later than the 10th day after the date the complaint is
finally resolved, to amend the price of the service as necessary to comply
with a final resolution; or  

_the company is authorized, at the company's option, to discontinue the
service.   

Sec. 59.031.  PRICING AND PACKAGING FLEXIBILITY.  (a)  Authorizes a
company, notwithstanding Section 59.027(b) (Consumer Complaints Regarding
Tariffs) or Subchapter F (Pricing), Chapter 60 (Competitive Safeguards), to
exercise pricing flexibility in accordance with this section.  Authorizes a
company to exercise pricing flexibility 10 days after providing an
informational notice to the commission and to any person who holds a
certificate of operating authority in the electing company's certificated
area or areas or who has an affective interconnection agreement with the
electing company.  Provides that pricing flexibility includes all pricing
arrangements included in the definition of "pricing flexibility" and
includes packaging of regulated services with non-regulated services or
services of an affiliate, except that such a package may not be offered in
a manner that results in a customer-specific contract.   

(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 commissioner to
allow a company serving fewer than one million access lines to establish a
service's long run incremental cost by adopting, at the 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.  Requires the complaint
to be filed before the 31st day after the company implements the rate. 

Sec. 59.032.  CUSTOMER PROMOTIONAL OFFERINGS.  Authorizes an electing
company to offer a promotion for a regulated service for not more than 90
days in any 12month period.  Sets forth the required information to be
included in a company's promotional offering to be submitted to the
commission.  Provides that an electing company is not required to obtain
commission approval to make a promotional offering.  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 or affiliate. 

SECTION 32.  Amends Section 60.124, Utilities Code, to require the
commission to require that interconnection agreements between incumbent
local exchange companies and competitive local  exchange companies contain
self-executing performance penalties for incumbent noncompliance with
contract provisions that impair a competitor's ability to provide service
to its customers. 

SECTION 33.  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 from
adopting any rule or order that would prohibit a local exchange company
from jointly marketing or selling its products and services with the
products and services of any of its affiliates in any manner permitted by
federal law or applicable rules of the FCC, except as prescribed in
Chapters 61 (Information Technology Service) and 63 (Electronic
Publishing). 

Sec.  60.165.  AFFILIATE RULE.  Prohibits the commission from adopting any
rule or order that would prescribe for any local exchange company any
affiliate rule that is more burdensome than federal law or applicable rules
of the FCC, except as prescribed in Chapters 61 and 63.  Prohibits the
commission, notwithstanding any other provision in this title, from
attributing or imputing to a local exchange company a price discount
offered by an affiliate of the local exchange company to the affiliate's
customers.  Provides that this section does not limit the authority of the
commission to consider a complaint brought under Subchapter A (General
Powers and Duties of Commission), Chapter 52, Section 53.003 (Just and
Reasonable Rates), or Chapter 60. 

SECTION 34. Emergency clause.
  Effective date: upon passage.