SB408: Bill Text

LRB-4151/3

MDK:jld/hmh/cmh:rs

2001 - 2002 LEGISLATURE

2001 Senate BILL 408

January 30, 2002 - Introduced by Senator Robson, cosponsored by Representative Powers. Referred to Committee on Health, Utilities, Veterans and Military Affairs.

SB408,1,11 An Act to renumber and amend 196.194 (1); to amend 196.195 (5), 196.196 (1) (c) 1., 196.196 (1) (c) 2., 196.196 (3) (a), 196.196 (3) (b), 196.196 (5) (b) 5. and 196.204 (3); and to create 196.01 (3j), 196.025 (1m), 196.194 (1) (b), 196.196 (6) (title), 196.196 (6) (a), 196.196 (6) (b), 196.196 (6) (c), 196.196 (6) (d), 196.196 (6) (e), 196.196 (6) (f), 196.196 (6) (g), 196.196 (6) (h), 196.196 (7), 196.196 (8), 196.196 (9), 196.197, 196.1995, 196.219 (3m) and 196.662 of the statutes; relating to: regulation of and enforcement against large price-regulated telecommunications utilities, termination of certain telecommunications contracts, telecommunications unbundling and interconnection requirements, providing an exemption from emergency rule procedures, granting rule-making authority, and providing penalties.

Analysis by the Legislative Reference Bureau

This bill makes changes to the regulation of "large price-regulated telecommunications utilities." The bill defines a "large price-regulated telecommunications utility" as a telecommunications utility that had more than 500,000 access lines in use in this state at the time that the utility elected to become price regulated. Under current law, "price regulation" is a form of regulation that is based on the prices of services offered by a telecommunications utility, instead of the utility's rate-of-return, which is the traditional basis for regulating public utilities.

The bill does all of the following, which are described below: 1) establishes retail and wholesale service standards for large price-regulated telecommunications utilities; 2) creates interconnection, collocation, and network elements requirements; 3) under certain circumstances, requires a large price-regulated telecommunications utility to structurally separate its retail and wholesale operations; 4) changes the formula for determining the price increases that a large price-regulated telecommunications utility is allowed to make; and 5) makes various other changes to the regulation of large price-regulated telecommunications utilities.

Retail and wholesale service quality

The bill requires a large price-regulated telecommunications utility to comply with monthly standards regarding retail and wholesale service quality. The retail standards consist of the following: 1) deadlines for initiating service after orders are received; 2) deadlines for restoring service outages; 3) requirements for minimizing repeat problem reports regarding access lines; 4) requirements for keeping installation and repair appointments; and 5) requirements regarding service center response times. The wholesale standards consist of the following: 1) deadlines for restoring service outages; 2) deadlines for filling orders from wholesale customers; 3) requirements for minimizing repeat problem reports regarding access lines used by wholesale customers; and 4) requirements for minimizing problems with orders made by wholesale customers. A large price-regulated telecommunications utility must make monthly reports to the public service commission (PSC) regarding compliance with the retail standards and monthly reports to the utility's wholesale customers regarding compliance with the wholesale standards.

If a large price-regulated telecommunications utility that has not structurally separated (as described below) violates a retail service standard in a month, the PSC must directly assess against the utility a forfeiture of between $2,000,000 and $6,000,000, depending on the number of standards that are violated. However, the bill allows the PSC to assess a smaller forfeiture that reflects the severity of the violation. A smaller forfeiture may be no less than 50% of the amount otherwise required. In addition, the PSC must promulgate rules that establish a range for the smaller forfeitures.

If a large price-regulated telecommunications utility that has not structurally separated violates a wholesale service standard in a month, the utility must pay compensation to the affected wholesale customer of between $200,000 to $1,000,000, depending on the the number of standards that are violated and the severity of the violation. Under certain circumstances, the amount of compensation must be doubled.

The bill also allows a large price-regulated telecommunications utility to petition the PSC to waive the requirement to pay a forfeiture or compensation. The PSC is allowed to waive the requirement if the large price-regulated telecommunications utility demonstrates that the utility's violation of a retail or wholesale service standard was caused by a natural disaster, act of God, military action, war, insurrection, or riot.

Interconnection, collocation, and network elements

The bill creates various requirements for large price-regulated telecommunications utilities regarding interconnection, collocation, and network elements. The bill defines a "network element" as a facility or equipment used to provide telecommunications service. These requirements relate to the duty of a telecommunications utility under federal law to interconnect its facilities and equipment to other telecommunications providers. "Collocation" refers to the placement of a telecommunications provider's facilities and equipment at the premises of a telecommunications utility for the purpose of interconnection. Collocation may be physical, in which facilities and equipment are actually placed at the utility's premises, or collocation may be virtual, which is the functional equivalent of physical collocation, but without the actual placement of facilities and equipment at the utility's premises.

The bill requires a large price-regulated telecommunications utility to provide interconnection, collocation, and network elements in a manner that promotes the maximum development of competitive telecommunications service offerings in this state. Also, a large price-regulated telecommunications utility must provide interconnection, collocation, and network elements in a manner specified by a telecommunications provider if that manner is technically feasible. In addition, the rates at, and terms and conditions on, which a large price-regulated telecommunications utility provides physical or virtual collocation of any type of equipment for interconnection with, or access to the network elements of, the utility or any collocated telecommunications provider at the utility's premises, must be just, reasonable, and nondiscriminatory.

The bill also requires a large price-regulated telecommunications utility to provide, upon request, for cross-connects between the facilities or equipment of collocated telecommunications providers that are the most reasonably direct and efficient, as determined by the collocated telecommunications provider. Also upon request, a large price-regulated telecommunications utility must provide for cross-connects between the facilities or equipment of a collocated telecommunications provider and the network elements platform or transport facilities of a noncollocated telecommunications provider. (A "network elements platform" is the sum of the various constituent network elements of the utility.) A large price-regulated telecommunications utility must provide either type of cross-connect in a manner that is consistent with safety and network reliability standards.

Also, a large price-regulated telecommunications utility must, as requested by a telecommunications provider, provide network elements on a bundled or unbundled basis at rates, and on terms and conditions, that are just, reasonable, and nondiscriminatory. Although not defined in the bill, it is understood in the telecommunications industry that "bundled" network elements are those that are not separated from other network elements, and "unbundled" network elements are those that are separated from other network elements. The network elements must be provided at any point that the telecommunications provider determines is technically feasible and provided in a manner that allows the telecommunications provider to combine the network elements to provide new or existing telecommunications service. Unless directed by a telecommunications provider, a large price-regulated telecommunications utility is not allowed to require a wholesale customer to purchase network elements on an unbundled basis if the utility ordinarily combines the elements to provide service to the utility's own end-user customers. The bill defines "end-user customer" as a person who receives local exchange service, but does not resell the service or use the service to provide telecommunications service to another person. Also, as requested by a telecommunications provider, a large price-regulated telecommunications utility must combine any sequence of network elements that the utility ordinarily combines for itself.

In addition, a large price-regulated telecommunications utility may not require that a telecommunications provider purchase other network elements or retail services of the utility if the telecommunications provider uses the network elements platform of the utility that consists solely of combined network elements and the use is for the purpose of providing telecommunications service to an end-user customer. Other requirements apply to the use of a network elements platform, including the requirement that a large price-regulated telecommunications utility must provide the platform without any disruption of services to end-user customers.

Finally, the bill requires the PSC to issue an order establishing a compliance plan for each large price-regulated telecommunications utility that includes standards for the utility to provide nondiscriminatory access to the utility's services and network elements to the utility's wholesale customers. The plan must also include procedures for measuring the utility's compliance with the standards and requirements for the utility to make specified monetary payments to a wholesale customer if the utility fails to comply with a standard. The PSC must issue the order no later than nine months after the effective date of the bill.

Separation of wholesale and retail affiliates

The bill requires the PSC to order a large price-regulated telecommunications utility to structurally separate its wholesale and retail operations into separate affiliates if, in any consecutive 24-month period after the effective date of the bill, the utility has three or more violations of specified requirements under state or federal law, including the interconnection, collocation, and network elements requirements described below. The PSC must also issue such an order if, after two years after the effective date of the bill, less than 50% of the residential or business access lines in the utility's service territory receive local exchange service from another telecommunications provider. In addition, the PSC must issue such an order if it makes other specified findings regarding the market power of the large price-regulated telecommunications utility or if the PSC finds that the utility's competitors are not able to obtain equal and reliable access to the utility's unbundled network elements or operational support systems.

A large price-regulated telecommunications utility that is ordered to structurally separate must satisfy certain requirements, including the following: 1) the retail and wholesale affiliates must have separate officers, directors, employees, and publicly traded stock; 2) no more than 50% of the publicly traded stock of the wholesale affiliate may be owned by persons that are affiliated with the retail affiliate; 3) the retail and wholesale affiliates must operate independently of each other, maintain separate books, records, and accounts, and conduct business between each other on an arm's length basis; 4) the retail affiliate must use the same operational support system interfaces that the wholesale affiliate makes available to unaffiliated telecommunications providers; 5) the retail and wholesale affiliates may not obtain credit under any arrangement that permits a creditor, upon default, to have recourse to the assets of the utility or another affiliate of the utility; 6) the retail and wholesale affiliates may not discriminate between another affiliate of the utility and any other person in providing or procuring goods, services, facilities, or information; and 7) the wholesale affiliate may not transfer any network element to any retail affiliate of the utility.

The bill allows the PSC to approve a transition plan submitted by a large price-regulated telecommunications utility for phasing in the utility's compliance with an order to structurally separate. Also, the bill allows a large price-regulated telecommunications utility voluntarily to structurally separate, subject to the PSC's approval.

Price increase formula

Under current law, a price-regulated telecommunications utility may increase its service rates according to a formula that is based on annual changes in the gross domestic product price index (GDPPI). Under the formula, the change in the revenue weighted price indexes for all services that are subject to price regulation may not exceed the difference between the most recent annual change in GDPPI and an offset percentage. In addition, the offset percentage is subject to the following: 1) a penalty adjustment that increases the offset percentage for inadequate service or insufficient investment by a telecommunications utility; and 2) an incentive adjustment that decreases the offset percentage for encouraging infrastructure investment by a telecommunications utility.

The amount of the offset percentage and the penalty and incentive adjustments depend on the size of a telecommunications utility. For a large price-regulated telecommunications utility, the offset percentage is 3%, which is subject to a penalty adjustment that may not exceed 2% and an incentive adjustment that may not exceed 2%. The PSC is required to promulgate rules that establish the penalty and incentive adjustments.

This bill changes the penalty adjustment to the offset percentage for large price-regulated telecommunications utilities. Under the bill, the penalty adjustment may not exceed 10%.

Other changes

The bill also does all of the following:

1. The bill allows the PSC to take various enforcement actions against a large price-regulated telecommunications utility that violates a requirement administered by the PSC, including ordering the utility to pay damages to a person who is injured by the violation. The bill also allows the PSC or a court to assess a forfeiture for such a violation of between $25,000 and $250,000. (This forfeiture authority does not apply to violations of the retail service standards, which are subject to the forfeitures described above.)

2. The bill requires a large price-regulated telecommunications utility to issue credits to end-user customers if the utility fails to satisfy requirements regarding each of the following: 1) disruption of service; 2) failure to install local exchange service; 3) failure to keep service or repair appointments; 4) printed directory mistakes; and 5) directory assistance mistakes. The amount of a credit depends on the type of requirement and whether a residential or business telephone line is affected.

3. The bill allows a customer of a large price-regulated telecommunications utility to terminate, without penalty, a contract with the utility for local exchange service, but only if the customer terminates the contract because the customer enters into another contract with another telecommunications provider. The deadline for terminating a contract is the first day of the 25th month beginning after the bill's effective date. The right to terminate does not apply to a wholesale customer of a large price-regulated telecommunications utility.

4. The bill requires the PSC, in making all telecommunications-related decisions and orders, to promote the availability of high-quality telecommunications services at reasonable rates, facilitate the development of competitive markets for local telecommunications services, protect the public against monopolies, and ensure the effective regulation of large price-regulated telecommunications utilities that have control or market power over essential telecommunications facilities.

5. The bill specifies the circumstances under which the PSC must advise against the federal communications commission's approval of a petition filed by a large price-regulated telecommunications utility for interlata long distance authority.

6. The bill provides that, if a large price-regulated telecommunications utility files a petition with the PSC that the utility's rates are not just and reasonable, the utility rescinds its election to be price regulated and the PSC must impose cost-based, rate-of-return regulation on the utility.

7. The bill prohibits a large price-regulated telecommunications utility from imposing or assessing a charge or fee, or otherwise seeking payment or requiring compensation from any person for the installation, construction, extension, or use of telecommunications facilities, equipment, or infrastructure, related to a real estate development.

8. The bill allows a person to bring an action for damages for an injury caused by a large price-regulated telecommunications utility's violation of a requirement administered by the PSC.

For further information see the state fiscal estimate, which will be printed as an appendix to this bill.

The people of the state of Wisconsin, represented in senate and assembly, do enact as follows:

SB408, s. 1 Section 1. 196.01 (3j) of the statutes is created to read:

SB408,7,4 196.01 (3j) "Large price-regulated telecommunications utility" means a telecommunications utility that had more than 500,000 access lines in use in this state at the time of electing to become price-regulated.

SB408, s. 2 Section 2. 196.025 (1m) of the statutes is created to read:

SB408,7,12 196.025 (1m) In making all telecommunications-related decisions and orders, including rate setting and rule-making orders, the commission shall promote the availability of high quality telecommunications services at reasonable rates, facilitate the development of competitive markets for local telecommunications services, protect the public against monopolies, and ensure the effective regulation of large price-regulated telecommunications utilities that have control or market power over essential telecommunications facilities.

SB408, s. 3 Section 3. 196.194 (1) of the statutes is renumbered 196.194 (1) (a) and amended to read:

SB408,8,16 196.194 (1) (a) Approval. Except as provided in this subsection paragraph, nothing in this chapter prohibits the commission from approving the filing of a tariff which permits a telecommunications utility to enter into an individual contract with an individual customer if substitute telecommunications services are available to customers or potential customers of the telecommunications utility and the absence of such a tariff will cause the telecommunications utility to be disadvantaged in competing for business. A tariff filed under this subsection paragraph shall include the condition that any such contract shall be compensatory as determined under s. 196.204 (5) and (6). The tariff shall include any other condition and procedure required by the commission in the public interest. Within 20 days after a contract authorized under this subsection paragraph or an amendment to such a contract has been executed, the telecommunications utility shall submit to the commission written notice of the general nature of the contract and the parties to the contract. Upon request, the commission shall inform a person, or direct that the person be informed, that notice has been received by the commission of execution of a contract under this subsection paragraph. Within 6 months after receiving substantial evidence that a contract may be noncompensatory, or upon its own motion, the commission shall investigate and determine whether the contract is compensatory. If the commission determines that the contract is noncompensatory, the commission may make appropriate adjustments in the rates or tariffs of the telecommunications utility that has entered into the contract, in addition to other remedies under this chapter. The dollar amount of the adjustment may not be less than the amount by which the contract was found to be noncompensatory.

SB408, s. 4 Section 4. 196.194 (1) (b) of the statutes is created to read:

SB408,8,18 196.194 (1) (b) Right to terminate certain contracts. 1. In this paragraph:

SB408,8,21 a. "Contract" means a contract between a telecommunications provider and a person for the telecommunications provider to provide local exchange service to the person.

SB408,8,24 b. "Customer" means a person who enters into a contract with a telecommunications provider, but does not include a wholesale customer, as defined in s. 196.197 (1) (f).

SB408,8,25 c. "Local exchange service" has the meaning given in s. 196.50 (1) (b) 1.

SB408,9,9 2. Notwithstanding any provision in a tariff filed under par. (a), no later than the first day of the 25th month beginning after the effective date of this subdivision .... [revisor inserts date], a customer may terminate, without penalty, a contract entered into before the effective date of this subdivision .... [revisor inserts date], with a large price-regulated telecommunications utility before the expiration of the contract if the customer terminates the contract because the customer enters into a contract with another telecommunications provider. Termination of a contract under this subdivision is effective when the large price-regulated telecommunications utility receives oral or written notice from the customer.

SB408,9,15 3. A large price-regulated telecommunications utility for which a contract is terminated under subd. 2. may not remove, alter, or render unusable any network element, as defined in s. 196.196 (7) (a) 1., used to serve the customer who terminated the contract, except in accordance with generally recognized telecommunications industry engineering standards that relate to the safe, economical, or efficient use or operation of the network element.

SB408, s. 5 Section 5. 196.195 (5) of the statutes is amended to read:

SB408,9,24 196.195 (5) Commission action. If after the proceedings under subs. (2), (3), and (4) the commission has determined that effective competition exists in the market for the telecommunications service which justifies a lesser degree of regulation and that lesser regulation in that market will serve the public interest, the commission may, by order, suspend any of the following provisions of law, except as provided under subs. (7) and (8): ch. 201 and s. 196.02 (2); s. 196.05; s. 196.06; s. 196.07; s. 196.09; s. 196.10; s. 196.12; s. 196.13 (2); s. 196.19; tariffing requirements under s. 196.194 (1) (a); s. 196.196 (1) or (5); s. 196.20; s. 196.204 (7); s. 196.21; s. 196.22; s. 196.26; s. 196.28; s. 196.37; s. 196.49; s. 196.52; s. 196.58; s. 196.60; s. 196.604; s. 196.77; s. 196.78; s. 196.79; and s. 196.805.

SB408, s. 6 Section 6. 196.196 (1) (c) 1. of the statutes is amended to read:

SB408,11,9 196.196 (1) (c) 1. A price-regulated telecommunications utility may not increase its rates for services under par. (a), except for basic message telecommunications service, for a period of 3 years after electing to become price regulated. Following the initial 3-year period for services under par. (a), except for basic message telecommunications service, and at any time for basic message telecommunications service, a price-regulated telecommunications utility may increase its rates for those services to the extent that the change in the revenue weighted price indices does not exceed 2 percentage points less than the most recent annual change in the gross domestic product price index, as published by the federal government. The commission shall, by rule, create a penalty mechanism for up to a one percentage point increase in the percentage offset for inadequate service provided by or insufficient investment made by a price-regulated telecommunications utility. The commission shall, by rule, create an incentive mechanism for up to a one percentage point decrease in the percentage offset to encourage infrastructure investment by the price-regulated telecommunications utility. For a large price-regulated telecommunications utility with more than 500,000 access lines in use in this state at the time of electing to become price regulated, the percentage offset to the change in the gross domestic product price index shall be 3 percentage points and, the penalty mechanism shall be up to a 10 percentage point increase, and the incentive mechanism shall be up to a 2 percentage points point decrease. No earlier than 6 years after September 1, 1994, and no more frequently than every 3 years thereafter, the commission may, following notice and an opportunity for hearing, by rule increase or decrease the gross domestic product price index percentage offset by a maximum of one percentage point in any 12-month period to reflect any statewide changes in the productivity experience of the telecommunications industry. The commission shall promulgate rules to identify the factors that the commission may consider in determining changes in the productivity experience of the telecommunications industry. If application of the price regulation index formula achieves a negative result, prices shall be reduced so that the cumulative price change for services under par. (a), including prior price reductions in these services, achieves the negative result.

SB408, s. 7 Section 7. 196.196 (1) (c) 2. of the statutes is amended to read:

SB408,11,21 196.196 (1) (c) 2. Annual permitted price increases under this paragraph may be deferred and accumulated for a maximum of 3 years into a single increase. The first permitted increase after the telecommunications utility elects to become price regulated shall be limited by the most recent annual change in the gross domestic product price index, less 2 percentage points, plus or minus any penalty or incentive adjustment. For a large price-regulated telecommunications utility with more than 500,000 access lines in use in this state, the first permitted increase shall be limited by the most recent annual change in the gross domestic product price index, less 3 percentage points, plus or minus any penalty or incentive adjustment. The increase in any rate element may not at any time exceed 10% or the increase in the gross domestic product price index, whichever is greater.

SB408, s. 8 Section 8. 196.196 (3) (a) of the statutes is amended to read:

SB408,12,2 196.196 (3) (a) Except to the extent expressly permitted by this section and ss. 196.19 (1m), 196.194, 196.195, 196.197, 196.1995, 196.20 (1m), 196.204, 196.209, and 196.219, the commission may not have jurisdiction over the prices or terms and conditions for the offering of any other services, including new telecommunications services, offered by a price-regulated telecommunications utility.

SB408, s. 9 Section 9. 196.196 (3) (b) of the statutes is amended to read:

SB408,12,9 196.196 (3) (b) A price-regulated telecommunications utility shall file tariffs with the commission for the provision of any telecommunications service, whether or not the service is otherwise subject to this chapter. Except as provided in s. ss. 196.20 (2) (am) and 196.662 (1) (b) 2., changes in the terms and conditions of tariffed services under par. (a) shall be effective one day after filing with the commission, unless the tariff specifies a later effective date.

SB408, s. 10 Section 10. 196.196 (5) (b) 5. of the statutes is amended to read:

SB408,12,14 196.196 (5) (b) 5. For a large price-regulated telecommunications utility with more than 500,000 access lines in use in this state at the time of electing to become price regulated, a level of planned investment in an amount of not less than $700,000,000 within the first 5 years of the plan.

SB408, s. 11 Section 11. 196.196 (6) (title) of the statutes is created to read:

SB408,12,16 196.196 (6) (title) Mandatory credits.

SB408, s. 12 Section 12. 196.196 (6) (a) of the statutes is created to read:

SB408,12,18 196.196 (6) (a) Definitions. In this subsection:

SB408,12,21 1. "Customer" means any person, including a telecommunications provider, that uses the services, products, or facilities provided by a large price-regulated telecommunications utility.

SB408,12,25 2. "End-user customer" means a person that receives local exchange service from a large price-regulated telecommunications utility or another telecommunications provider, and that does not resell the local exchange service or use such service to provide telecommunications service to any other customer.

SB408,13,1 3. "Local exchange service" has the meaning given in s. 196.50 (1) (b) 1.

SB408, s. 13 Section 13. 196.196 (6) (b) of the statutes is created to read:

SB408,13,8 196.196 (6) (b) Service disruptions. 1. If the local exchange service of an end-user customer is disrupted by a large price-regulated telecommunications utility and remains disrupted for more than 24 hours after the disruption is reported to the large price-regulated telecommunications utility, the utility shall issue a credit in an amount specified in subd. 2. to the end-user customer unless one of the following applies:

SB408,13,10 a. The disruption is caused by the end-user customer or the end-user customer's telecommunications equipment.

SB408,13,12 b. The disruption is caused by a natural disaster, act of God, military action, war, insurrection, or riot.