By Counts H.B. No. 2690 Line and page numbers may not match official copy. Bill not drafted by TLC or Senate E&E. 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. Subchapter B, Chapter 53, Utilities Code, is 1-5 amended by adding Section 53.088 to read as follows: 1-6 SEC. 53.066. SALE, TRANSFER, AND MERGER REVIEW OF CERTAIN 1-7 QUALIFIED EXCHANGES. (a) A telecommunications utility, reporting 1-8 its acquisition or purchase of an exchange or exchanges, pursuant 1-9 to Sections 14.101 or 51.010, may elect to be subject to Commission 1-10 review under this section to the extent an acquisition qualifies 1-11 herein and the utility makes the commitment specified herein. 1-12 (b) An acquisition qualifies for review pursuant to this 1-13 section to the extent: 1-14 (1) that each individual exchange subject to 1-15 acquisition involves less than 10,000 access lines; 1-16 (2) all exchanges acquired by a utility total, in the 1-17 aggregate, less than 100,000 access lines; 1-18 (3) in combination with all other exchanges already 1-19 owned by the acquiring utility, the acquisition would bring the 1-20 utility's total ownership to not more than 100,000 access lines; 1-21 (4) the exchanges subject to acquisition were 2-1 previously owned by an incumbent local exchange company which has 2-2 elected to be subject to commission jurisdiction pursuant to 2-3 Chapter 58 or 59 of this Act; and 2-4 (5) the exchanges are purchased by a 2-5 telecommunications utility which is not subject to commission 2-6 jurisdiction pursuant to Chapter 58 or 59 of this Act. 2-7 (c) For the acquisition to be considered a Qualified 2-8 Acquisition, the acquiring utility must commit: 2-9 (1) not to increase the present basic local exchange 2-10 rate on or before the 5th anniversary of the acquisition date; 2-11 (2) to set intrastate switched access rates at the 2-12 same level as the acquiring company's interstate switched access 2-13 rates; or the level of the selling company; 2-14 (3) to withdraw the acquired exchanges from commission 2-15 jurisdiction pursuant to Chapter 58 or 59 of this act, and include 2-16 such exchanges within the jurisdiction of the commission for the 2-17 acquiring company; and 2-18 (4) to establish a level of service quality and 2-19 infrastructure which meets or exceeds the selling company's service 2-20 quality requirements at the time of the acquisition. 2-21 (d) To the extent a telecommunications utility makes the 2-22 commitments specified in this section with regard to a Qualified 2-23 Acquisition, the Commission shall authorize Universal Service Fund 2-24 disbursements pursuant to Section 56.021(1) to the acquiring 2-25 utility for the residual revenue requirements necessary for the 3-1 acquiring utility, pursuant to Section 53.051, to obtain a rate of 3-2 return equal to that allowed by the Federal Communications 3-3 Commission for the interstate jurisdiction. The revenue 3-4 requirement which would otherwise be considered for the acquiring 3-5 utility is limited only to the extent that the acquiring utility 3-6 purchased the exchanges above the selling utility net book value. 3-7 If circumstances justify in the public interest, the Commission may 3-8 also consider a rate of return above the federal level. 3-9 (e) To the extent the acquiring utility meets the 3-10 specifications of this section, the Commission may approve the 3-11 review and authorize universal service disbursements by 3-12 administrative review. 3-13 (f) The Commission shall conduct its review pursuant to this 3-14 section based upon either the individual application of an 3-15 acquiring utility or based upon the joint application by utilities 3-16 which have made the acquisitions jointly with intent to partition 3-17 the exchanges among them so long as the partitioned acquisitions 3-18 otherwise meet the requirements of a Qualified Acquisition. 3-19 SECTION 2. The importance of this legislation and the 3-20 crowded condition of the calendars in both houses create an 3-21 emergency and an imperative public necessity that the 3-22 constitutional rule requiring bills to be read on three several 3-23 days in each house be suspended, and this rule is hereby suspended, 3-24 and that this Act take effect and be in force from the after its 3-25 passage, and it is so enacted.