Agenda Date: February 23, 2000 Item Number: Docket: UT-991573 Company Name: Utilities - Telecommunications Staff: Betty Erdahl, Policy Research Specialist Glenn Blackmon, Assistant Director - Telecommunications Jing Roth, Regulatory Consultant Mary Tennyson, Senior Assistant Attorney General Bob Wallis, Review Judge Recommendation: Direct the Secretary to file a Notice of Proposed Rulemaking (CR-102) with the office of the Code Reviser in Docket UT-991573 proposing a new rule, WAC 480-120-990, Toll Carrier Obligations. Discussion: Background/Process On September 22, 1999, the Commission granted a petition by U S WEST Communications, Inc., to be relieved of its obligation to provide local toll service in areas where it does not offer local exchange service. The Commission also directed Staff to file a statement of inquiry (CR-101) with the Office of the Code Reviser to investigate the need for a rule requiring a competitively neutral obligation on all toll carriers and to report to the Commission by December 31, 1999, regarding whether a rule is needed. The CR-101 was issued on October 25, 1999, and invited written comments from all interested persons by November 12, 1999. The Commission received comments from U S WEST, GTE, AT&T, MCI and the Washington Independent Telephone Association (WITA). Staff drafted proposed rule language after reviewing the comments filed by interested parties. On December 29, 1999, Staff reported to the Commission and proposed that a rule should be explored further and the Commission directed the Secretary to file a Notice of Proposed Rulemaking (CR-102) with the Office of the Code Reviser in Docket UT-991573. A notice to comment solicited written comments from interested parties by January 26, 2000. The Commission received comments from U S WEST, GTE, Sprint, AT&T, MCI, WITA and Whidbey Telephone Company. Since the CR-102 was filed, Staff reviewed comments of the seven interested parties who responded to the notice and have worked with interested parties through individual discussions and written comments to further clarify the rule and resolve concerns. This proposed rule as modified considers the comments of interested parties. The changes are included in the attachment. Interested parties expressed concern about the level of access charges, the requirement of statewide average toll rates, the need for 30 days notice for carriers to exit a market, the need to avoid barriers to enter or exit the toll market. Several of the comments received have been incorporated into the attached proposed rule. There are areas, however, where participants and staff did not reach complete agreement. The 30-day notice requirement to exit the market and the elimination of average toll rate requirement changes are the more substantive disagreements. After working with interested parties and giving this rule further thought, Staff decided it would be more appropriate to take a slightly different approach to this rule than originally drafted. The first difference is to require toll carriers to give the Commission, its customers and the customers’ local exchange carrier thirty (30) days notice before exiting the toll market. The importance of the notice requirement is to provide the Commission adequate time to react if there is concern that the carriers’ exit would be harmful to the public interest. The proposal is limited to require only companies with greater than $20 million in revenues to give 30-day notice before exiting the toll market. The reason for the cut off of $20 million regarding the notice requirement is to reduce regulatory burdens on smaller companies and keep the Commission from receiving an overwhelming number of filings (approximately 491 interexchange carriers provide toll service throughout the state), while providing a safety net for toll customers in rural exchanges. With the inclusion of the notice requirement recommended by WITA, Staff believes that the requirement for uniform rates is no longer necessary. Many commenters argued that this provision would unnecessarily limit the workings of the competitive toll market and would be difficult to administer. Eliminating the requirement from the rule does not preclude the Commission from taking action in specific circumstances if it becomes concerned that pricing practices are unreasonably discriminatory or otherwise contrary to law. Conclusion Staff believes that the proposed rule as modified addresses the concerns that Washington state customers have a toll carrier available and that the notice requirement provides adequate time for the Commission to react so that no rural exchange is left unserved. Written comments on this Notice of Proposed Rulemaking may be submitted to the Commission Secretary by March 22, 2000. The scheduled adoption date for this rulemaking is April 12, 2000. Therefore, Staff recommends that the Commission direct the Secretary to file a Notice of Proposed Rulemaking (CR-102) with the office of the Code Reviser in Docket UT-991573 proposing a new rule, WAC 480-120-990, Toll Carrier Obligations. Attachment Attachment NEW SECTION WAC 480-120-990 Toll Carrier Obligations. (1) Telecommunications companies offering originating toll service from an exchange must transmit toll calls to all other exchanges within the state and outside the local calling area. This requirement may be satisfied through toll service offerings of an affiliated company. This requirement does not apply to the extent a company is prohibited by law from offering toll service for calls between specified exchanges or areas. (2) A company may not charge different per-minute or per-unit prices for toll calls based on where the call terminates; however, it may charge different per-minute or per-unit prices based on distance if the schedule of distance-based charges applies to all calls from the exchange. (2) A telecommunications company offering originating toll service may not discontinue offering such service from an exchange until 30 days after it has notified all of its customers in that exchange, notified each company offering local exchange service within that exchange, and notified the commission by filing a tariff or price list revision. (3) The notice requirements of subsection (2) shall not apply to any telecommunications company whose gross revenues from Washington intrastate toll service in the prior calendar year were less than $20 million. For the purposes of this calculation, the Washington intrastate toll revenues of all affiliated companies shall be combined.