76R12534 CBH-F By Counts H.B. No. 2690 Substitute the following for H.B. No. 2690: By Counts C.S.H.B. No. 2690 A BILL TO BE ENTITLED 1-1 AN ACT 1-2 relating to the acquisition of small and rural telephone exchanges. 1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-4 SECTION 1. Chapter 51, Utilities Code, is amended by adding 1-5 Section 51.011 to read as follows: 1-6 Sec. 51.011. REVIEW OF SALE OR TRANSFER OF CERTAIN 1-7 EXCHANGES. (a) This section applies to a sale or transfer of one 1-8 or more exchanges in which: 1-9 (1) each individual exchange being sold or transferred 1-10 has fewer than 10,000 access lines; 1-11 (2) all exchanges being sold or transferred have a 1-12 total of fewer than 100,000 access lines; 1-13 (3) the company that is selling or transferring the 1-14 exchange or exchanges is a company electing under Chapter 58 or 59; 1-15 and 1-16 (4) the company that acquires the exchange or 1-17 exchanges: 1-18 (A) is a telecommunications utility that is not 1-19 a company electing under Chapter 58 or 59; 1-20 (B) will not own more than 100,000 access lines 1-21 in this state after the acquisition is completed; and 1-22 (C) agrees to: 1-23 (i) not increase the rate for basic local 1-24 telephone service until after the fifth anniversary of the 2-1 acquisition date; 2-2 (ii) set intrastate switched access rates 2-3 at the level charged for interstate switched access by that company 2-4 or by the company selling or transferring the exchange or 2-5 exchanges; 2-6 (iii) include each acquired exchange 2-7 within the commission jurisdiction applicable to the other 2-8 exchanges of the acquiring company; and 2-9 (iv) establish a level of service quality 2-10 and infrastructure that meets or exceeds the service quality 2-11 requirements of the company selling or transferring the exchange or 2-12 exchanges at the time of acquisition. 2-13 (b) If two or more telecommunications utilities jointly 2-14 acquire two or more exchanges with the intent to partition the 2-15 exchanges among the utilities at a later date, this section applies 2-16 if each acquiring utility and the resulting partitioned 2-17 acquisitions meet the requirements prescribed by Subsection (a). 2-18 (c) A telecommunications utility that makes an acquisition 2-19 to which this section applies shall report the acquisition as 2-20 provided by Section 14.101 or 51.010 and may apply to have the 2-21 commission review the acquisition in accordance with this section. 2-22 If the utility makes a joint acquisition as described by Subsection 2-23 (b), the utilities may apply jointly. 2-24 (d) If the commission determines that the acquiring utility 2-25 and the acquisition meet the requirements prescribed by Subsection 2-26 (a), the commission shall approve the transaction and authorize the 2-27 acquiring telecommunications utility to receive universal service 3-1 fund disbursements under Section 56.021(1) for the residual revenue 3-2 requirements necessary for the utility to obtain a rate of return 3-3 equal to the rate of return allowed by the Federal Communications 3-4 Commission for interstate jurisdiction. The revenue requirement 3-5 that would otherwise be considered for the acquiring utility is 3-6 limited only to the extent that the acquiring utility purchased the 3-7 exchange or exchanges above the selling utility's net book value. 3-8 The commission may consider a rate of return above the federal 3-9 level if circumstances justify the higher rate and it is in the 3-10 public interest. 3-11 (e) The commission may approve the review and authorize the 3-12 universal fund disbursements by administrative review. 3-13 SECTION 2. The importance of this legislation and the 3-14 crowded condition of the calendars in both houses create an 3-15 emergency and an imperative public necessity that the 3-16 constitutional rule requiring bills to be read on three several 3-17 days in each house be suspended, and this rule is hereby suspended, 3-18 and that this Act take effect and be in force from and after its 3-19 passage, and it is so enacted.