By:  Sibley, Fraser                                    S.B. No. 560
         99S0342/2                           
                                A BILL TO BE ENTITLED
                                       AN ACT
 1-1     relating to the regulation of telecommunications utilities and the
 1-2     provision of telecommunications services.
 1-3           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
 1-4           SECTION 1.  Section 52.102, Utilities Code, is amended to
 1-5     read as follows:
 1-6           Sec. 52.102.  LIMITED REGULATORY AUTHORITY.  Except as
 1-7     otherwise provided by this subchapter and Subchapter D, Chapter 55,
 1-8     the commission has only the following jurisdiction over a
 1-9     telecommunications utility subject to this subchapter:
1-10                 (1)  to require registration under Section 52.103;
1-11                 (2)  to conduct an investigation under Section 52.104;
1-12                 (3)  to require the filing of reports as the commission
1-13     periodically directs;
1-14                 (4)  to require the maintenance of statewide average
1-15     rates or prices of telecommunications service;
1-16                 (5)  to require access to telecommunications service
1-17     under Section 52.105; [and]
1-18                 (6)  to require the quality of telecommunications
1-19     service provided to be adequate under Section 52.106; and
1-20                 (7)  to require an interexchange telecommunications
1-21     carrier to pass switched access rate reductions to customers under
1-22     Chapter 56 or other law, as required under Section 52.112.
1-23           SECTION 2.  Section 52.108, Utilities Code, is amended to
1-24     read as follows:
 2-1           Sec. 52.108.  OTHER PROHIBITED PRACTICES.  The commission may
 2-2     enter any order necessary to protect the public interest if the
 2-3     commission finds after notice and hearing that a telecommunications
 2-4     utility has:
 2-5                 (1)  failed to maintain statewide average rates;
 2-6                 (2)  abandoned interexchange message telecommunications
 2-7     service to a local exchange area in a manner contrary to the public
 2-8     interest; [or]
 2-9                 (3)  engaged in a pattern of preferential or
2-10     discriminatory activities prohibited by Section 53.003, 55.005, or
2-11     55.006; or
2-12                 (4)  failed to pass switched access rate reductions to
2-13     customers under Chapter 56 or other law, as required under Section
2-14     52.112.
2-15           SECTION 3.  Section 52.110, Utilities Code, is amended to
2-16     read as follows:
2-17           Sec. 52.110.  BURDEN OF PROOF.  (a)  In a proceeding before
2-18     the commission in which it is alleged that a telecommunications
2-19     utility engaged in conduct in violation of Section 52.107, 52.108,
2-20     [or] 52.109, or 52.112, the burden of proof is on:
2-21                 (1)  a telecommunications utility complaining of
2-22     conduct committed against it in violation of this subchapter; or
2-23                 (2)  except as provided by Subsection (b), the
2-24     responding telecommunications utility if the proceedings are:
2-25                       (A)  brought by a customer or customer
2-26     representative who is not a telecommunications utility; or
 3-1                       (B)  initiated by the commission.
 3-2           (b)  The commission may impose the burden of proof on the
 3-3     complaining party in a proceeding described by Subsection (a)(2) if
 3-4     the commission determines that placing the burden of proof on the
 3-5     complaining party is in the public interest.
 3-6           SECTION 4.  Subchapter C, Chapter 52, Utilities Code, is
 3-7     amended by adding Section 52.112 to read as follows:
 3-8           Sec. 52.112.  REDUCTION PASS-THROUGH REQUIRED.  (a)  The
 3-9     commission shall require that each interexchange telecommunications
3-10     carrier doing business in this state pass reductions in intrastate
3-11     access charges through to customers under Chapter 56 or other law.
3-12           (b)  To carry out the public policy stated in Subsection (a)
3-13     and Section 52.001, notwithstanding any other provision of this
3-14     title, the commission may adopt rules and establish procedures
3-15     applicable to interexchange telecommunications carriers to:
3-16                 (1)  require the pass-through of reductions in
3-17     intrastate access charges to customers under Chapter 56 or other
3-18     law;
3-19                 (2)  require documentation sufficient to demonstrate
3-20     that the carrier has passed intrastate access charge reductions
3-21     through to customers; and
3-22                 (3)  take any other reasonable and necessary action,
3-23     consistent with public policy.
3-24           (c)  When evaluating the reasonableness of interexchange
3-25     telecommunications carrier reduction pass-through plans, the
3-26     commission may consider factors such as the following:
 4-1                 (1)  the proportion of price reductions by customer
 4-2     class in relation to the reduction in intrastate access rates; and
 4-3                 (2)  the net impact on customer bills including
 4-4     customers on basic rate plans and customers on discount rate plans.
 4-5           (d)  This subsection shall expire two years after the date
 4-6     incumbent local exchange companies doing business in the state are
 4-7     no longer prohibited by federal law from offering interLATA and
 4-8     interstate long distance service.
 4-9           SECTION 5.  Section 54.007, Utilities Code, is amended to
4-10     read as follows:
4-11           Sec. 54.007.  FLEXIBILITY PLAN.  (a)  After the commission
4-12     grants an application for a certificate of convenience and
4-13     necessity, a certificate of operating authority, or a service
4-14     provider certificate of operating authority or determines that a
4-15     certificate is not needed for the applicant to provide the relevant
4-16     services, the commission shall conduct appropriate proceedings to
4-17     establish a transitional flexibility plan for the incumbent local
4-18     exchange company in the same area or areas as the new certificate
4-19     holder.
4-20           (b)  A basic local telecommunications service price of the
4-21     incumbent local exchange company may not be increased before the
4-22     fourth anniversary of the date the certificate is granted to the
4-23     applicant except that the price may be increased[:]
4-24                 [(1)]  as provided by this title[;]
4-25                 [(2)  when the new certificate holder has completed the
4-26     build-out plan required by Subchapter C, if applicable; or]
 5-1                 [(3)  when a competitor for basic local
 5-2     telecommunications service provides the service in an area in which
 5-3     the build-out requirements have been eliminated].
 5-4           SECTION 6.  Subchapter C, Chapter 54, Utilities Code, is
 5-5     amended to read as follows:
 5-6              SUBCHAPTER C.  CERTIFICATE OF OPERATING AUTHORITY
 5-7           Sec. 54.101.  DEFINITION.  In this subchapter, "certificate"
 5-8     means a certificate of operating authority.
 5-9           Sec. 54.102.  APPLICATION FOR CERTIFICATE.  (a)  In lieu of
5-10     applying for a certificate of convenience and necessity, a person
5-11     may apply for a certificate of operating authority.
5-12           (b)  [An applicant for a facilities-based certificate of
5-13     operating authority must include with the application a proposed
5-14     build-out plan in compliance with this subchapter that demonstrates
5-15     how the applicant will, over a six-year period, deploy facilities
5-16     throughout the geographic area of the certificated service area.]
5-17           [(c)]  The applicant must file with the application a sworn
5-18     statement that the applicant has applied for each municipal
5-19     consent, franchise, or permit required for the type of services and
5-20     facilities for which the applicant has applied.
5-21           (c)  Notwithstanding the prohibition against one entity
5-22     holding a certificate of convenience and necessity and a
5-23     certificate of operating authority in the same service territory,
5-24     the commission may grant a certificate of operating authority to
5-25     the holder of a certificate of convenience and necessity for the
5-26     same service territory through the holder's affiliate:
 6-1                 (1)  to allow a carrier to provide advanced services
 6-2     through an affiliate if the Federal Communications Commission has
 6-3     determined that a carrier may provide such services through an
 6-4     affiliate as an exception to the resale or unbundling requirements
 6-5     of the Federal Telecommunications Act of 1996 (47 U.S.C. Section
 6-6     151 et seq.); or
 6-7                 (2)  to allow a carrier to provide advanced services
 6-8     through an affiliate if the commission determines that such
 6-9     services may be provided through an affiliate as an exception to
6-10     the resale or unbundling requirements of the Federal
6-11     Telecommunications Act of 1996 (47 U.S.C. Section 151 et seq.).
6-12           (d)  An affiliate of a person holding a certificate of
6-13     convenience and necessity may hold a certificate of operating
6-14     authority if the holder of the certificate of convenience and
6-15     necessity is in compliance with federal law and Federal
6-16     Communications Commission rules governing affiliates and structural
6-17     separation.
6-18           (e)  The commission shall determine which services and
6-19     related facilities pertain to an advanced service.
6-20           Sec. 54.103.  GRANT OR DENIAL OF CERTIFICATE.  (a)  The
6-21     commission must grant or deny a certificate not later than the 60th
6-22     day after the date the application for the certificate is filed.
6-23     The commission may extend the deadline on good cause shown.
6-24           (b)  The commission shall grant each certificate on a
6-25     nondiscriminatory basis after considering factors such as:
6-26                 (1)  [the adequacy of the applicant's build-out plan;]
 7-1                 [(2)]  the technical and financial qualifications of
 7-2     the applicant; and
 7-3                 (2) [(3)]  the applicant's ability to meet the
 7-4     commission's quality of service requirements.
 7-5           (c)  In an exchange of an incumbent local exchange company
 7-6     that serves fewer than 31,000 access lines, in addition to the
 7-7     factors described by Subsection (b), the commission shall consider:
 7-8                 (1)  the effect of granting the certificate on a public
 7-9     utility serving the area and on that utility's customers;
7-10                 (2)  the ability of that public utility to provide
7-11     adequate service at reasonable rates;
7-12                 (3)  the effect of granting the certificate on the
7-13     ability of that public utility to act as the provider of last
7-14     resort; and
7-15                 (4)  the ability of the exchange, not the company, to
7-16     support more than one provider of service.
7-17           (d)  Except as provided by Subsections (e) and (f), the
7-18     commission may grant an application for a certificate only for an
7-19     area or areas that are contiguous and reasonably compact and cover
7-20     an area of at least 27 square miles.
7-21           (e)  In an exchange in a county that has a population of less
7-22     than 500,000 and that is served by an incumbent local exchange
7-23     company that has more  than 31,000 access lines, an area covering
7-24     less than 27 square miles may be approved if the area is contiguous
7-25     and reasonably compact and has at least 20,000 access lines.
7-26           (f)  In an exchange of a company that serves fewer than
 8-1     31,000 access lines in this state, the commission may grant an
 8-2     application only for an area that has boundaries similar to the
 8-3     boundaries of the serving central office that is served by the
 8-4     incumbent local exchange company that holds the certificate of
 8-5     convenience and necessity for the area.
 8-6           [Sec. 54.104.  BUILD-OUT PLAN REQUIREMENTS.  (a)  The
 8-7     build-out plan required by Section 54.102 must provide that, by the
 8-8     end of the:]
 8-9                 [(1)  first year, 10 percent of the area to be served
8-10     must be served with facilities that are not facilities of the
8-11     incumbent local exchange company;]
8-12                 [(2)  third year, 50 percent of the area to be served
8-13     must be served with facilities that are not facilities of the
8-14     incumbent local exchange company; and]
8-15                 [(3)  sixth year, 100 percent of the area to be served
8-16     must be served with facilities that are not facilities of the
8-17     incumbent local exchange company.]
8-18           [(b)  The build-out plan may permit the certificate holder to
8-19     serve not more than 40 percent of the certificate holder's service
8-20     area by reselling the incumbent local exchange company's
8-21     facilities.  The resale must be in accordance with:]
8-22                 [(1)  Section 54.105; and]
8-23                 [(2)  the resale tariff approved by the commission
8-24     under Subchapter C, Chapter 60.]
8-25           [(c)  The resale limitation applies to an incumbent local
8-26     exchange facility that a certificate holder resells in providing
 9-1     local exchange telephone service, regardless of whether:]
 9-2                 [(1)  the certificate holder purchases the facility
 9-3     directly from the incumbent local exchange company; or]
 9-4                 [(2)  an intermediary carrier purchases the facility
 9-5     from the incumbent local exchange company and then provides the
 9-6     facility to the certificate holder for resale.]
 9-7           [(d)  To meet the build-out requirement prescribed by this
 9-8     subchapter, a certificate holder:]
 9-9                 [(1)  may not use commercial mobile service; and]
9-10                 [(2)  may use personal communication services (PCS) or
9-11     other wireless technology licensed or allocated by the Federal
9-12     Communications Commission after January 1, 1995.]
9-13           [Sec. 54.105.  SIX-YEAR LIMITATION ON RESALE OF SERVICES.
9-14     Before the sixth anniversary of the date a certificate is granted,
9-15     the certificate holder may extend service by resale only:]
9-16                 [(1)  in the area it is obligated to serve under the
9-17     approved build-out plan; and]
9-18                 [(2)  to the distant premises of one of its
9-19     multi-premises customers beyond the approved build-out area but in
9-20     its certificated service area.]
9-21           Sec. 54.104 [54.106].  TIME OF SERVICE REQUIREMENTS.
9-22     (a)  The commission by rule may prescribe the period within which a
9-23     certificate holder must be able to serve customers.
9-24           (b)  Notwithstanding Subsection (a), a certificate holder
9-25     must serve a customer [in the build-out area] not later than the
9-26     30th day after the date the customer requests service.
 10-1          [Sec. 54.107.  REQUIREMENTS RELATING TO CERTAIN FACILITIES.
 10-2    As part of the build-out requirements, the commission may not
 10-3    require a certificate holder to:]
 10-4                [(1)  place a drop facility on each customer's
 10-5    premises; or]
 10-6                [(2)  activate a fiber optic facility in advance of a
 10-7    customer request.]
 10-8          [Sec. 54.108.  BUILD-OUT PLAN COMPLIANCE.  (a)  A certificate
 10-9    holder shall file periodic reports with the commission
10-10    demonstrating compliance with:]
10-11                [(1)  the plan approved by the commission; and]
10-12                [(2)  the resale limitation prescribed by Section
10-13    54.104(b).]
10-14          [(b)  The commission may administratively and temporarily
10-15    waive compliance with the six-year build-out plan on a showing of
10-16    good cause.]
10-17          [Sec. 54.109.  ELIMINATION OF BUILD-OUT REQUIREMENTS FOR
10-18    CERTAIN PROVIDERS.  (a)  The commission may waive the build-out
10-19    requirements of this subchapter for an additional applicant in a
10-20    particular area:]
10-21                [(1)  on or after the sixth anniversary of the date a
10-22    certificate is granted for that area; or]
10-23                [(2)  on or after the date a certificate holder
10-24    completes the holder's build-out plan in that area.]
10-25          [(b)  The build-out requirements of this subchapter do not
10-26    apply to a service area:]
 11-1                [(1)  that is served by an incumbent local exchange
 11-2    company that:]
 11-3                      [(A)  has more than one million access lines; and]
 11-4                      [(B)  on September 1, 1995, was subject to a
 11-5    prohibition under federal law on the provision of interLATA
 11-6    service; and]
 11-7                [(2)  for which all prohibitions on the incumbent local
 11-8    exchange company's provision of interLATA services are removed so
 11-9    the company can  offer interLATA service together with local and
11-10    intraLATA toll service.]
11-11          [Sec. 54.110.  HEARING ON BUILD-OUT AND RESALE REQUIREMENTS.
11-12    (a)  The commission on application may conduct a hearing to
11-13    determine:]
11-14                [(1)  whether the build-out requirements of Sections
11-15    54.102(b), 54.103(e) and (f), 54.104, 54.105, 54.106, and 54.107
11-16    have created a barrier to the entry of facilities-based local
11-17    exchange telephone service competition in an exchange in a county
11-18    that has a population of more than 500,000 and that is served by a
11-19    company that has more than 31,000 access lines; and]
11-20                [(2)  the effect of the resale provisions on the
11-21    development of competition, other than the development of
11-22    competition in the certificated areas of companies that serve fewer
11-23    than 31,000 access lines as provided by Section 54.156(a).]
11-24          [(b)  In making a determination under Subsection (a), the
11-25    commission shall consider:]
11-26                [(1)  this title's policy to encourage construction of
 12-1    local exchange networks;]
 12-2                [(2)  the number and type of competitors that have
 12-3    sought to provide local exchange competition under the existing
 12-4    rules prescribed by this title; and]
 12-5                [(3)  whether adopting new build-out and resale rules
 12-6    would make innovative and competitive local exchange telephone
 12-7    services more likely to be provided.]
 12-8          [(c)  The commission may change a requirement described by
 12-9    Subsection (a)(1) or prescribed by Subchapter D if:]
12-10                [(1)  the commission determines that the build-out
12-11    requirements have created a barrier to facilities-based local
12-12    exchange competition in an exchange described by Subsection (a)(1);
12-13    and]
12-14                [(2)  the changes will encourage additional
12-15    facilities-based competition.]
12-16          [(d)  Notwithstanding Subsection (c), the commission may not
12-17    reduce an exchange size to below 12 square miles or increase the
12-18    resale percentage prescribed by Section 54.104(b) to more than 50
12-19    percent.]
12-20          [(e)  A rule adopted under Subsection (c) may apply only to a
12-21    person who files an application for a certificate after the date
12-22    the rule is adopted.]
12-23          Sec. 54.105 [54.111].  PENALTY FOR VIOLATION OF TITLE.  If a
12-24    certificate holder fails to comply with a requirement of this
12-25    title, the commission may:
12-26                (1)  revoke the holder's certificate;
 13-1                (2)  impose against the holder administrative penalties
 13-2    under Subchapter B, Chapter 15; or
 13-3                (3)  take another action under Subchapter B, Chapter
 13-4    15.
 13-5          SECTION 7.  Section 56.021, Utilities Code, is amended to
 13-6    read as follows:
 13-7          Sec. 56.021.  UNIVERSAL SERVICE FUND ESTABLISHED.  The
 13-8    commission shall adopt and enforce rules requiring local exchange
 13-9    companies to establish a universal service fund to:
13-10                (1)  assist telecommunications providers [local
13-11    exchange companies] in providing basic local telecommunications
13-12    service at reasonable rates in high cost or rural areas;
13-13                (2)  reimburse telecommunications providers [local
13-14    exchange companies] for revenue lost by providing tel-assistance
13-15    service under Subchapter C;
13-16                (3)  reimburse the telecommunications carrier that
13-17    provides the statewide telecommunications relay access service
13-18    under Subchapter D; and
13-19                (4)  reimburse the department and the commission for
13-20    costs incurred in implementing this chapter and Chapter 57.
13-21          SECTION 8.  Sections 56.023 and 56.024, Utilities Code, are
13-22    amended to read as follows:
13-23          Sec. 56.023.  COMMISSION POWERS AND DUTIES.  (a)  The
13-24    commission shall:
13-25                (1)  in a manner that assures reasonable rates for
13-26    basic local telecommunications service, adopt eligibility criteria
 14-1    and review procedures, including a method for administrative
 14-2    review, the commission finds necessary to fund the universal
 14-3    service fund and make distributions from that fund;
 14-4                (2)  determine which telecommunications providers
 14-5    [local exchange companies] meet the eligibility criteria;
 14-6                (3)  determine the amount of and approve a procedure
 14-7    for reimbursement to telecommunications providers [local exchange
 14-8    companies] of revenue lost in providing tel-assistance service
 14-9    under Subchapter C;
14-10                (4)  establish and collect fees from the universal
14-11    service fund necessary to recover the costs the department and the
14-12    commission incur in administering this chapter and Chapter 57; and
14-13                (5)  approve procedures for the collection and
14-14    disbursal of the revenue of the universal service fund.
14-15          (b)  The eligibility criteria must require that a
14-16    telecommunications provider [local exchange company], in compliance
14-17    with the commission's quality of service requirements:
14-18                (1)  offer service to each consumer within the
14-19    company's certificated area; and
14-20                (2)  render continuous and adequate service within the
14-21    company's certificated area.
14-22          (c)  The commission shall adopt rules for the administration
14-23    of the universal service fund and may act as necessary and
14-24    convenient to administer the fund.
14-25          Sec. 56.024.  REPORTS; CONFIDENTIALITY.  (a)  The commission
14-26    may require a [local exchange company or another]
 15-1    telecommunications provider to provide a report or information
 15-2    necessary to assess contributions and disbursements to the
 15-3    universal service fund.
 15-4          (b)  A report or information is confidential and not subject
 15-5    to disclosure under Chapter 552, Government Code.
 15-6          SECTION 9.  Section 56.026, Utilities Code, is amended to
 15-7    read as follows:
 15-8          Sec. 56.026.  UNIVERSAL SERVICE FUND DISBURSEMENTS.  (a)  A
 15-9    revenue requirement showing is not required for a disbursement from
15-10    the universal service fund under this subchapter.
15-11          (b)  The commission shall make each disbursement from the
15-12    universal service fund promptly and efficiently so that a
15-13    telecommunications provider [or local exchange company] does not
15-14    experience an unnecessary cash-flow change as a result of a change
15-15    in governmental policy.
15-16          SECTION 10.  Subchapter B, Chapter 56, Utilities Code, is
15-17    amended by adding Section 56.028 to read as follows:
15-18          Sec. 56.028.  UNIVERSAL SERVICE FUND REIMBURSEMENT FOR
15-19    CERTAIN INTRALATA SERVICE.  Upon request of a local exchange
15-20    company that is not an electing company under Chapters 58 and 59,
15-21    the commission shall provide reimbursement through the universal
15-22    service fund for reduced rates for intraLATA interexchange high
15-23    capacity (1.544 Mps) service for entities described in Section
15-24    58.253(a).  The amount of reimbursement shall be the difference
15-25    between the company's tariffed rate for such service as of
15-26    January 1, 1999, and the lowest rate offered for such service by
 16-1    any local exchange company electing incentive regulation under
 16-2    Chapter 58.
 16-3          SECTION 11.  Section 56.071, Utilities Code, is amended to
 16-4    read as follows:
 16-5          Sec. 56.071.  TEL-ASSISTANCE SERVICE REQUIREMENTS.  (a)  The
 16-6    commission shall adopt and enforce rules requiring a local exchange
 16-7    company to establish a telecommunications service assistance
 16-8    program to provide a reduction in the cost of telecommunications
 16-9    service to each eligible consumer in the company's certificated
16-10    area.  The reduction must be a reduction on the consumer's
16-11    telephone bill.
16-12          (b)  In addition to local exchange companies, this subchapter
16-13    applies to telecommunications providers that receive universal
16-14    service fund support pursuant to the commission's universal service
16-15    fund rules, and any reference to or requirement imposed on local
16-16    exchange companies in this subchapter shall also apply to such
16-17    telecommunications providers.
16-18          (c)  Except as provided by Section 56.075(b), the reduction
16-19    allowed by the program is 65 percent of the applicable tariff rate
16-20    for the service provided.
16-21          (d) [(c)]  The program is named "tel-assistance service."
16-22          SECTION 12.  Section 58.002, Utilities Code, is amended to
16-23    read as follows:
16-24          Sec. 58.002.  DEFINITIONS [DEFINITION].  In this chapter:
16-25                (1)  "Electing[, "electing] company" means an incumbent
16-26    local exchange company that elects to be subject to incentive
 17-1    regulation and to make the corresponding infrastructure commitment
 17-2    under this chapter.
 17-3                (2)  "Electing period" means the period from the date
 17-4    an incumbent local exchange company elects to be subject to
 17-5    incentive regulation until September 1, 2003.
 17-6          SECTION 13.  Section 58.021, Utilities Code, is amended to
 17-7    read as follows:
 17-8          Sec. 58.021.  ELECTION.  (a)  An incumbent local exchange
 17-9    company may elect to be subject to incentive regulation and to make
17-10    the corresponding infrastructure commitment under this chapter by
17-11    notifying the commission in writing of its election.
17-12          (b)  The notice must include a statement that the company
17-13    agrees to:
17-14                (1)  limit for the electing period [four years] any
17-15    increase in a rate the company charges for basic network services
17-16    as prescribed by Subchapter C; and
17-17                (2)  fulfill the infrastructure commitment prescribed
17-18    by Subchapters F and G.
17-19          (c)  An election pursuant to this subchapter shall expire at
17-20    the conclusion of the electing period unless extended through
17-21    subsequent action by the legislature.  Upon the expiration of the
17-22    electing period, a company is no longer considered to be an
17-23    electing company.
17-24          SECTION 14.  Section 58.028, Utilities Code, is amended to
17-25    read as follows:
17-26          Sec. 58.028.  REVIEW AND REPORT OF EFFECTS OF ELECTION.
 18-1    (a)  Not later than January 1, 2002 [2000], the commission shall
 18-2    begin a review and evaluation of each company that elects under
 18-3    this chapter or Chapter 59.
 18-4          (b)  The review must include an evaluation of the effects of
 18-5    the election, including:
 18-6                (1)  consumer benefits;
 18-7                (2)  impact of competition;
 18-8                (3)  infrastructure investments; and
 18-9                (4)  quality of service.
18-10          (c)  The commission shall file a report with the legislature
18-11    not later than January 1, 2003 [2001].  The report must include the
18-12    commission's recommendations as to whether the incentive regulation
18-13    provided by this chapter and Chapter 59 should be extended,
18-14    modified, eliminated, or replaced with another form of regulation.
18-15          (d)  This section expires September 1, 2003 [2001].
18-16          SECTION 15.  Sections 58.054 and 58.055, Utilities Code, are
18-17    amended to read as follows:
18-18          Sec. 58.054.  RATES CAPPED.  (a)  As a condition of election
18-19    under this chapter, an electing company shall commit to not
18-20    increasing a rate for a basic network service during the electing
18-21    period [on or before the fourth anniversary of its election date].
18-22          (b)  For an election that took place during the year 1995,
18-23    the [The] rates an electing company may charge during the electing
18-24    period [on or before that fourth anniversary] are the rates charged
18-25    by the company on June 1, 1995, without regard to a proceeding
18-26    pending under:
 19-1                (1)  Section 15.001;
 19-2                (2)  Subchapter D, Chapter 53; or
 19-3                (3)  Subchapter G, Chapter 2001, Government Code.
 19-4          (c)  For an election that takes place after the year 1995,
 19-5    the rates an electing company may charge during the electing period
 19-6    are the rates charged by the company on the date of election.
 19-7          Sec. 58.055.  RATE ADJUSTMENT BY COMPANY.  (a)  An electing
 19-8    company may increase a rate for a basic network service during the
 19-9    four-year period prescribed by Section 58.054 only:
19-10                (1)  with commission approval that the proposed change
19-11    is included in Section 58.056, 58.057, or 58.058; and
19-12                (2)  as provided by Sections 58.056, 58.057, 58.058,
19-13    and 58.059.
19-14          (b)  Notwithstanding provisions restricting an electing
19-15    company's access to pricing flexibility for basic network services,
19-16    upon request by an electing company, the commission may allow the
19-17    company one or more forms of pricing flexibility for basic network
19-18    services.  The commission shall impose such conditions on pricing
19-19    flexibility as it deems necessary to protect the public interest
19-20    [Subchapter F, Chapter 60, an electing company may, on its own
19-21    initiative, decrease a rate for a basic network service during the
19-22    four-year period].
19-23          (c)  As part of an electing company's request pursuant to
19-24    Subsection (b), the electing company shall propose any potential
19-25    restrictions it believes are necessary to adequately minimize any
19-26    potential harm to the public interest.  [The company may decrease
 20-1    the rate for switched access service to an amount above the
 20-2    service's long run incremental cost.]
 20-3          (d)  The company may decrease the rate for a basic local
 20-4    telecommunications service other than switched access to an amount
 20-5    above the service's appropriate cost.  If the company has been
 20-6    required to perform or has elected to perform a long run
 20-7    incremental cost study, the appropriate cost for the service is the
 20-8    service's long run incremental cost.
 20-9          SECTION 16.  Section 58.060, Utilities Code, is amended to
20-10    read as follows:
20-11          Sec. 58.060.  RATE ADJUSTMENT AFTER CAP EXPIRATION.  After
20-12    the electing [four-year] period [prescribed by Section 58.054]
20-13    expires, an electing company may increase a rate for a basic
20-14    network service only:
20-15                (1)  with commission approval subject to this title;
20-16    and
20-17                (2)  to the extent consistent with achieving universal
20-18    affordable service.
20-19          SECTION 17.  Subchapter C, Chapter 58, Utilities Code, is
20-20    amended by amending Section 58.062 and adding Sections 58.063 and
20-21    58.064 to read as follows:
20-22          Sec. 58.062.  SWITCHED ACCESS RATES.  (a)  Notwithstanding
20-23    any other provision of this title, and except as provided in this
20-24    section, the commission may not reduce an electing company's rates
20-25    for switched access services before the expiration of the cap on
20-26    basic network services.
 21-1          (b)  For an electing company with greater than five million
 21-2    access lines, switched access rates shall be transitioned to six
 21-3    cents per minute on a combined originating and terminating basis.
 21-4          (c)  For purposes of this section, the difference between the
 21-5    tariffed intrastate switched access rates on a combined originating
 21-6    and terminating basis on September 1, 1999, and six cents per
 21-7    minute on a combined originating and terminating basis shall be
 21-8    known as the "transition amount."
 21-9          (d)  The proportional relationship between the levels of
21-10    originating and terminating intrastate access charges shall remain
21-11    the same as the proportional relationship in effect on September 1,
21-12    1999.
21-13          (e)  For an electing company with greater than five million
21-14    access lines, the following switched access rate reduction plan
21-15    shall be followed:
21-16                (1)  on September 1, 1999, switched access rates in
21-17    effect shall be reduced by one-third of the transition amount;
21-18                (2)  on the company's entry into the interLATA long
21-19    distance market, switched access rates shall be reduced by an
21-20    additional one-third of the transition amount; and
21-21                (3)  on the one-year anniversary of the company's entry
21-22    into the long distance market, switched access rates shall be
21-23    reduced by a final one-third of the transition amount.
21-24          (f)  For an electing company with less than five million
21-25    access lines, there shall be a rebuttable presumption that a
21-26    switched access rate reduction is not required.  This rebuttable
 22-1    presumption may be overcome only upon a showing in a contested case
 22-2    that the switched access rates of the electing company were more
 22-3    than 20 percent above the cost of switched access service on
 22-4    September 1, 1999.  In determining the September 1, 1999, cost, the
 22-5    commission shall include the long run incremental cost associated
 22-6    with providing switched access service and may attribute a portion
 22-7    of the cost of the local loop to the cost of providing switched
 22-8    access service.
 22-9          Sec. 58.063.  FLEXIBLE PACKAGING ACROSS SERVICE
22-10    CLASSIFICATIONS.  (a)  Notwithstanding any other provision of this
22-11    title,  an electing company serving more than five million access
22-12    lines may package basic network services with discretionary
22-13    services or competitive services as of the date the company
22-14    complies with the requirements of Section 58.062(e)(2).
22-15          (b)  Notwithstanding any other provision of this title, an
22-16    electing company serving less than five million access lines may
22-17    package basic network services with discretionary services or
22-18    competitive services if the company notifies the commission of its
22-19    binding commitment to make the following infrastructure
22-20    improvements by September 1, 2001:
22-21                (1)  install Common Channel Signaling 7 capability in
22-22    each central office; and
22-23                (2)  connect all of the company's serving central
22-24    offices to their respective LATA tandem central offices with
22-25    optical fiber or equivalent facilities.
22-26          (c)  The price for a package of services containing basic
 23-1    network services and discretionary or competitive services shall
 23-2    not be higher than the sum of the tariffed rates of the basic
 23-3    network services and the competitive services and the price
 23-4    ceilings of the discretionary services.
 23-5          (d)  The price for a package of services containing basic
 23-6    network services and discretionary or competitive services shall be
 23-7    set at a level above the sum of:
 23-8                (1)  the lesser of the long run incremental cost or the
 23-9    tariffed rate in effect on September 1, 1999, for a basic network
23-10    service; and
23-11                (2)  the long run incremental cost in accordance with
23-12    the imputation rules prescribed in Subchapter D, Chapter 60, for a
23-13    discretionary or competitive service.
23-14          (e)  An electing company may flexibly price a package that
23-15    includes a basic network service in any manner listed in Section
23-16    51.002(7), except that such a package may not be offered in a
23-17    manner that results in a customer-specific contract.
23-18          Sec. 58.064.  ZONE-DENSITY PRICING OF BASIC LOCAL
23-19    TELECOMMUNICATIONS SERVICE.  Until an electing company may engage
23-20    in pricing flexibility pursuant to Section 58.063, the only form of
23-21    pricing flexibility allowed for basic local telecommunications
23-22    service is zone-density pricing.
23-23          SECTION 18.  Section 59.002, Utilities Code, is amended by
23-24    adding Subdivision (3) to read as follows:
23-25                (3)  "Electing period" means the period from the date
23-26    an incumbent local exchange company elects to be subject to the
 24-1    infrastructure plan under this chapter until such time that the
 24-2    incentive regulation provided by this chapter is no longer in
 24-3    effect.
 24-4          SECTION 19.  Section 59.021, Utilities Code, is amended by
 24-5    adding Subsection (c) to read as follows:
 24-6          (c)  An electing company may, on its own motion, decrease a
 24-7    rate during the electing period described in Subsection (a).
 24-8    Section 58.059 does not apply to a rate decrease under this
 24-9    subsection.
24-10          SECTION 20.  Subsection (a), Section 59.024, Utilities Code,
24-11    is amended to read as follows:
24-12          (a)  Except for the charges permitted under Subchapter C,
24-13    Chapter 55, Subchapter B, Chapter 56, and Section 55.024, an
24-14    electing company may not, during the election period [on or before
24-15    the sixth anniversary of its election date], increase a rate
24-16    previously established for that company under this title unless the
24-17    commission approves the proposed change as authorized under
24-18    Subsection (c) or (d).
24-19          SECTION 21.  Section 59.025, Utilities Code, is amended to
24-20    read as follows:
24-21          Sec. 59.025.  SWITCHED ACCESS RATES.  Notwithstanding any
24-22    other provision of this title, the commission may not reduce an
24-23    electing company's rates for switched access services during the
24-24    election period [before the expiration of the six-year period]
24-25    prescribed by Section 59.024.
24-26          SECTION 22.  Subsection (a), Section 59.026, Utilities Code,
 25-1    is amended to read as follows:
 25-2          (a)  An [On or before the sixth anniversary of the company's
 25-3    election date, an] electing company is not, under any
 25-4    circumstances, subject to:
 25-5                (1)  a complaint or hearing regarding the
 25-6    reasonableness of the company's:
 25-7                      (A)  rates;
 25-8                      (B)  overall revenues;
 25-9                      (C)  return on invested capital; or
25-10                      (D)  net income; or
25-11                (2)  a complaint that a rate is excessive.
25-12          SECTION 23.  Section 60.124, Utilities Code, is amended to
25-13    read as follows:
25-14          Sec. 60.124.  INTEROPERABLE NETWORKS REQUIRED.  (a)  The
25-15    commission shall require each telecommunications provider to
25-16    maintain interoperable networks and shall require that
25-17    interconnection agreements between incumbent local exchange
25-18    companies and competitive local exchange companies contain
25-19    self-executing performance penalties for incumbent noncompliance
25-20    with contract provisions that impair a competitor's ability to
25-21    provide service to its customers.
25-22          (b)  The commission may:
25-23                (1)  adopt rules, including generic rules that are
25-24    responsive to changes in federal law or a development in the local
25-25    exchange market; and
25-26                (2)  set policies governing interconnection
 26-1    arrangements.
 26-2          SECTION 24.  Subchapter I, Chapter 60, Utilities Code, is
 26-3    amended by adding Sections 60.164 and 60.165 to read as follows:
 26-4          Sec. 60.164.  PERMISSIBLE JOINT MARKETING.  Except as
 26-5    prescribed in Chapters 61 and 63, the commission shall not adopt
 26-6    any rule or order that would prohibit a local exchange company from
 26-7    jointly marketing or selling its products and services with the
 26-8    products and services of any of its affiliates in any manner
 26-9    permitted by federal law or applicable rules of the Federal
26-10    Communications Commission.
26-11          Sec. 60.165.  AFFILIATE RULE.  Except as prescribed in
26-12    Chapters 61 and 63, the commission shall not adopt any rule or
26-13    order that would prescribe for any local exchange company any
26-14    affiliate rule, including any accounting rule, any cost allocation
26-15    rule, or any structural separation rule, that is more burdensome
26-16    than federal law or applicable rules of the Federal Communications
26-17    Commission.  Notwithstanding any other provision in this title, the
26-18    commission shall not attribute or impute to a local exchange
26-19    company a price discount offered by an affiliate of the local
26-20    exchange company to the affiliate's customers.
26-21          SECTION 25.  The importance of this legislation and the
26-22    crowded condition of the calendars in both houses create an
26-23    emergency and an imperative public necessity that the
26-24    constitutional rule requiring bills to be read on three several
26-25    days in each house be suspended, and this rule is hereby suspended,
26-26    and that this Act take effect and be in force from and after its
 27-1    passage, and it is so enacted.