By: Carona S.B. No. 986

(In the Senate - Filed February 28, 2011; March 8, 2011, read first time and referred to Committee on Business and Commerce; April 4, 2011, reported adversely, with favorable Committee Substitute by the following vote: Yeas 9, Nays 0; April 4, 2011, sent to printer.)

COMMITTEE SUBSTITUTE FOR S.B. No. 986 By: Carona

A BILL TO BE ENTITLED

AN ACT

relating to deregulation of certain telecommunications markets and companies.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Section 52.002, Utilities Code, is amended by adding Subsection (c) to read as follows:

(c) The commission may not require a telecommunications utility that is not a public utility, including a deregulated or transitioning company, to comply with a requirement or standard that is more burdensome than a requirement or standard the commission imposes on a public utility.

SECTION 2. Subsection (b), Section 54.251, Utilities Code, is amended to read as follows:

(b) Except as specifically determined otherwise by the commission under this subchapter or Subchapter G of this chapter, and except as provided by Subchapters C and D, Chapter 65, the holder of a certificate of convenience and necessity[, or the holder of a certificate of operating authority issued under Chapter 65,] for an area has the obligations of a provider of last resort regardless of whether another provider has a certificate of operating authority or service provider certificate of operating authority for that area.

SECTION 3. Section 54.3015, Utilities Code, is amended to read as follows:

Sec. 54.3015. APPLICABILITY OF SUBCHAPTER. This subchapter applies to a transitioning company [holder of a certificate of operating authority issued] under Chapter 65 in relation to its regulated exchanges in the same manner and to the same extent this subchapter applies to a holder of a certificate of convenience and necessity.

SECTION 4. Subsection (d), Section 56.023, Utilities Code, is amended to read as follows:

(d) The commission shall adopt rules for the administration of the universal service fund and this chapter and may act as necessary and convenient to administer the fund and this chapter. The rules must include procedures to ensure reasonable transparency and accountability in the administration of the universal service fund.

SECTION 5. Subchapter B, Chapter 56, Utilities Code, is amended by adding Section 56.032 to read as follows:

Sec. 56.032. SUPPORT AVAILABLE TO DEREGULATED MARKETS. (a) An incumbent local exchange company may not receive support from the universal service fund for a deregulated market that has a population of at least 30,000.

(b) An incumbent local exchange company may receive support from the universal service fund for a deregulated market that has a population of less than 30,000 only if the company demonstrates to the commission that the company needs the support to provide basic local telecommunications service at reasonable rates in the affected market. A company may use evidence from outside the affected market to make the demonstration.

(c) An incumbent local exchange company may make the demonstration described by Subsection (b) in relation to a market before submitting a petition to deregulate the market.

SECTION 6. Section 65.051, Utilities Code, is amended to read as follows:

Sec. 65.051. MARKETS DEREGULATED. A market that is deregulated as of September 1, 2011, shall remain deregulated. Notwithstanding any other provision of this title, the commission may not reregulate a market or company that has been deregulated [(a) Except as provided by Subsection (b), all markets of all incumbent local exchange companies are deregulated on January 1, 2006, unless the commission determines under Section 65.052(a) that a market or markets should remain regulated.

[(b) A market of an incumbent local exchange company in which the population in the area included in the market is less than 30,000 is deregulated on January 1, 2007, unless the commission determines under Section 65.052(f) that the market should remain regulated].

SECTION 7. Subsections (a), (b), and (c), Section 65.052, Utilities Code, are amended to read as follows:

(a) An incumbent local exchange company may petition the commission to deregulate a market of the company that the commission previously determined should remain regulated. Notwithstanding any other provision of this title, only the incumbent local exchange company may initiate a proceeding to deregulate one of the company's markets. Not later than the 90th day after the date the commission receives the petition, [Except as provided by Subsection (f),] the commission shall:

(1) determine whether the regulated [each] market [of an incumbent local exchange company] should remain regulated [on and after January 1, 2006]; and

(2) issue a final order classifying the market [company] in accordance with this section [effective January 1, 2006].

(b) In making a determination under Subsection (a), the commission may not determine that a market should remain regulated if:

(1) the population in the area included in the market is at least 100,000; or

(2) the population in the area included in the market is [at least 30,000 but] less than 100,000 and, in addition to the incumbent local exchange company, there are at least two competitors operating in all or part of the market that [three competitors of which]:

(A) are unaffiliated with the incumbent local exchange company [at least one is a telecommunications provider that holds a certificate of operating authority or service provider certificate of operating authority and provides residential local exchange telephone service in the market]; and

(B) provide voice communications service without regard to the delivery technology, including through:

(i) Internet Protocol or a successor protocol;

(ii) satellite; or

(iii) a technology used by a wireless provider or a commercial mobile service provider, as that term is defined by Section 64.201 [at least one is an entity providing residential telephone service in the market using facilities that the entity or its affiliate owns; and

[(C) at least one is a provider in that market of commercial mobile service as defined by Section 332(d), Communications Act of 1934 (47 U.S.C. Section 151 et seq.), Federal Communications Commission rules, and the Omnibus Budget Reconciliation Act of 1993 (Pub. L. No. 103-66), that is not affiliated with the incumbent local exchange company].

(c) If the commission deregulates a market under this section and the deregulation results in a regulated or transitioning company no longer meeting the definition of a regulated or transitioning company, the commission shall issue an order reclassifying the company as a transitioning company or deregulated company, as those terms are defined by Section 65.002 [The commission shall issue an order classifying an incumbent local exchange company as a deregulated company that is subject to Subchapter C if:

[(1) the company does not have any markets in which the population in the area included in the market is less than 30,000; and

[(2) the commission does not determine that a market of the company should remain regulated on and after January 1, 2006].

SECTION 8. Subsection (a), Section 65.102, Utilities Code, is amended to read as follows:

(a) A deregulated company that holds a certificate of operating authority issued under this subchapter:

(1) is a nondominant carrier governed in the same manner as a holder of a certificate of operating authority issued under Chapter 54;

(2) is not required to:

(A) fulfill the obligations of a provider of last resort;

(B) comply with retail quality of service standards or reporting requirements;

(C) file an earnings report with the commission unless the company is receiving support from the Texas High Cost Universal Service Plan; or

(D) comply with a pricing requirement other than a requirement prescribed by this subchapter; and

(3) [, except that the deregulated company:

[(1) retains the obligations of a provider of last resort under Chapter 54;

[(2)] is subject to the following provisions in the same manner as an incumbent local exchange company that is not deregulated:

(A) Sections 54.156, 54.158, and 54.159;

(B) Section 55.012; and

(C) Chapter 60[; and

[(3) may not increase the company's rates for stand-alone residential local exchange voice service before the date that the commission has the opportunity to revise the monthly per line support under the Texas High Cost Universal Service Plan pursuant to Section 56.031, regardless of whether the company is an electing company under Chapter 58].

SECTION 9. Section 65.151, Utilities Code, is amended to read as follows:

Sec. 65.151. PROVISIONS APPLICABLE TO TRANSITIONING COMPANY. (a) Except as provided by Subsection (b), a [A] transitioning company is governed by this subchapter and the provisions of this title that applied to the company immediately before the date the company was classified as a transitioning company. If there is a conflict between this subchapter and the other applicable provisions of this title, this subchapter controls.

(b) A transitioning company is not required to fulfill the obligations of a provider of last resort in a deregulated market.

SECTION 10. Subsection (b), Section 65.152, Utilities Code, is amended to read as follows:

(b) A transitioning company may not be required to:

(1) comply with [exchange-specific] retail quality of service standards or reporting requirements in a market that is deregulated; or

(2) file an earnings report with the commission unless the company is receiving support from the Texas High Cost Universal Service Plan.

SECTION 11. Subchapter D, Chapter 65, Utilities Code, is amended by adding Sections 65.154 and 65.155 to read as follows:

Sec. 65.154. RATE AND PRICE REQUIREMENTS NOT APPLICABLE. (a) A transitioning company is not required to comply with the following requirements prescribed by this title on submission of a written notice to the commission:

(1) a direct or indirect requirement to price a residential service at, above, or according to the long-run incremental cost of the service or to otherwise use long-run incremental cost in establishing prices for residential services; or

(2) a requirement to file with the commission a long-run incremental cost study for residential or business services.

(b) Notwithstanding Subsection (a), a transitioning company may not:

(1) establish a retail rate, price, term, or condition that is anticompetitive or unreasonably preferential, prejudicial, or discriminatory;

(2) establish a retail rate for a basic or non-basic service in a deregulated market that is subsidized either directly or indirectly by a basic or non-basic service provided in an exchange that is not deregulated; or

(3) engage in predatory pricing or attempt to engage in predatory pricing.

(c) A rate or price for a basic local telecommunications service is not anticompetitive, predatory, or unreasonably preferential, prejudicial, or discriminatory if the rate or price is equal to or greater than the rate or price in the transitioning company's tariff for that service in effect on the date the transitioning company submits notice to the commission under Subsection (a).

(d) This section, including Subsection (a)(1), does not affect:

(1) other law or legal standards governing predatory pricing or anticompetitive conduct; or

(2) an infrastructure commitment under Chapter 58 or 59.

Sec. 65.155. COMPLAINT BY AFFECTED PERSON. (a) An affected person may file a complaint at the commission challenging whether a transitioning company is complying with Section 65.154(b).

(b) Notwithstanding Section 65.154(a)(2), the commission may require a transitioning company to submit a long-run incremental cost study for a business service that is the subject of a complaint submitted under Subsection (a).

SECTION 12. Subsections (d), (e), and (f), Section 65.052, and Sections 65.054 and 65.055, Utilities Code, are repealed.

SECTION 13. (a) In this section, "commission" means the Public Utility Commission of Texas.

(b) Not earlier than January 2, 2012, the commission shall initiate one or more proceedings to review and evaluate whether the universal service fund accomplishes the fund's purposes, as prescribed by Section 56.021, Utilities Code, or whether changes are necessary to accomplish those purposes.

(c) The commission has all authority necessary to conduct the review, including determining issues relevant to each telecommunications provider's need for universal service fund support, adjusting monthly per line support amounts under Section 56.031, Utilities Code, and implementing any other changes it determines are necessary and in the public interest.

(d) Notwithstanding Subsection (b), Section 56.024, Utilities Code, a party to a commission proceeding examining the universal service fund is entitled to access confidential information provided to the commission under Subsection (a), Section 56.024, Utilities Code, if a protective order is issued for the confidential information in the proceeding.

(e) The commission shall complete the proceeding or proceedings required by this section and issue any associated orders not later than November 1, 2012. The commission shall provide to the legislature a copy of any findings or orders issued under this section.

SECTION 14. (a) Except as provided by Subsection (b) of this section, this Act takes effect September 1, 2011.

(b) Sections 56.032, 65.154, and 65.155, Utilities Code, as added by this Act, take effect January 2, 2012.

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