LRB-4912/1
MDK:jld/hmh/cmh/cjs:pg
2001 - 2002 LEGISLATURE
February 20, 2002 - Introduced by Senator Jauch. Referred to Committee on
Health, Utilities, Veterans and Military Affairs.
SB451,2,5
1An Act to renumber 196.195 (1) and 196.204 (3);
to renumber and amend
2196.204 (1);
to amend 100.207 (3) (a), 100.207 (5), 100.207 (6) (b) 1., 100.207
3(6) (c), 100.207 (6) (em) 1., 196.01 (8), 196.196 (1) (c) 1., 196.196 (1) (g) 1. (intro.),
4196.196 (3) (a) and 196.37 (2); and
to create 20.155 (1) (Ls), 100.207 (3) (d),
5100.207 (3m), 100.207 (6) (g), 100.207 (7), 196.025 (6), 196.195 (1g), 196.196 (1)
6(em), 196.196 (6) (title), 196.196 (6) (a), 196.196 (6) (b), 196.196 (6) (c), 196.196
7(6) (d), 196.196 (6) (e), 196.196 (6) (f), 196.196 (6) (g), 196.196 (6) (h), 196.1995,
8196.204 (1r), 196.204 (3) (b), 196.219 (1) (c), 196.219 (3) (p), 196.219 (3m) and
9227.01 (13) (cm) of the statutes;
relating to: regulating large price-regulated
10telecommunications utilities, wholesale telecommunications service, small
11business telecommunications rates, telecommunications sales practices, and
12cross subsidization by small telecommunications providers; requiring
13mandatory credits for certain telecommunications customers; allowing the
14public service commission to order payments by certain telecommunications
1providers; requiring the public service commission to report on
2telecommunications competition; extending the time limit for emergency rule
3procedures; providing an exemption from emergency rule procedures;
4providing an exemption from rule-making procedures; granting rule-making
5authority; and making an appropriation.
Analysis by the Legislative Reference Bureau
This bill makes certain changes to the regulation of telecommunications
providers, including "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) creates
interconnection, collocation, and network elements requirements for large
price-regulated telecommunications providers; 2) changes the formula for
determining the price increases that a large price-regulated telecommunications
utility is allowed to make; 3) allows the public service commission (PSC) to approve
price increases by price-regulated telecommunications utilities for small business
rates; 4) requires certain telecommunications utilities to issue mandatory credits to
customers; 5) requires telecommunications providers to comply with wholesale
service standards; 6) allows the PSC to order certain telecommunications providers
to make payments to the PSC or other telecommunications providers; 7) regulates
certain sales practices by telecommunications providers; 8) creates exceptions on
cross subsidization for certain small telecommunications utilities; 9) requires the
PSC to report to the legislature on telecommunications competition; and 10) requires
the PSC to define "effective competition" for purposes of current law regarding
deregulation of telecommunications providers.
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.
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%.
Small business rates
Under current law, as noted above, a price-regulated telecommunications
utility is subject to certain restrictions regarding rate increases. This bill creates an
exception to these restrictions for "small business rates," which the bill defines as
rates for standard business access lines and usage by small businesses with no more
than three access lines.
Under the bill, the PSC must investigate whether to allow price-regulated
telecommunications utilities, including large price-regulated telecommunications
utilities, to increase small business rates in geographic areas specified by the PSC.
The PSC must complete the investigation no later the first day of the 13th month
beginning after the bill's effective date. The PSC may allow such increases only if,
as a result of the investigation, the PSC determines that effective competition exists
in a geographic area. The PSC must promulgate rules defining "effective
competition." If the PSC allows such rate increases, a price-regulated
telecommunications utility may petition the PSC to increase rates. The PSC must
grant the petition if it includes a statement that the price-regulated
telecommunications utility agrees to allow customers to terminate contracts, as
described below. However, the PSC may not grant a petition until after the PSC's
order regarding wholesale service standards (which is described below) goes into
effect.
If the PSC grants a petition by a price-regulated telecommunications utility,
the bill allows a customer who has a contract for small business rates with the utility
to terminate the contract without penalty. However, a customer may terminate such
a contract only if the customer enters into a new contract for small business rates
with another telecommunications provider. In addition, the right to terminate under
the bill expires one year after the effective date of the PSC's order granting the
price-regulated telecommunications utility's petition.
Mandatory credits
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; and 3) failure to keep service or repair appointments. The amount of a credit
depends on the type of requirement and whether a residential or business telephone
line is affected. The bill also allows the PSC, upon complaint or its own motion, to
issue an order requiring telecommunications utilities, in addition to large
price-regulated telecommunications utilities, to issue credits for failing to satisfy
the above requirements. The PSC may issue such an order if it is necessary to protect
the public interest.
The above requirements regarding the credits do not apply after the first day
of the 60th month after the bill's effective date, unless the PSC, after notice and
hearing, issues an order providing the requirements apply after that date. The PSC
may issue such an order if it is necessary to protect the public interest.
Wholesale service standards
Under current law, telecommunications providers are subject to certain
prohibitions regarding their treatment of consumers and other telecommunications
providers. This bill creates an additional prohibition on failing to provide wholesale
services to another telecommunications provider on the same terms and conditions
that the telecommunications provider provides to itself or to any of its affiliates.
"Wholesale services" are defined in the bill to include preordering, ordering and
provisioning, maintenance and repair, network and system performance, unbundled
elements, operator services and directory assistance, service center availability, and
billing. In addition, the bill allows the PSC to issue an order that specifies additional
services that are wholesale services.
The bill also requires the PSC to issue an order that establishes
nondiscriminatory standards that require a telecommunications provider to
provision wholesale services and related facilities, and repair wholesale service
outages, in a timely manner. The order must also require a telecommunications
provider to minimize the number of reports to the provider regarding problems with
its wholesale service. In addition, the order may require a telecommunications
provider that fails to comply with the standards to make payments to another
telecommunications provider who is affected by the failure, or to the PSC, in amounts
and according to schedules specified in the order. The PSC may use any payment
that it receives for any purpose determined by the PSC relating to maintaining or
improving telecommunications service quality, including compensating persons who
are affected by the failure to comply with the PSC's order. The PSC must issue the
order no later than the first day of the fourth month beginning after the bill's effective
date.
In addition, the bill allows the PSC to issue an order that exempts a
telecommunications provider from the order described above or that imposes less
stringent requirements. The PSC may issue such an order only upon finding that
such an order is in the public interest and that the telecommunications provider that
is the subject of the order has not violated any of the following: 1) the order described
above; 2) the prohibitions under current law regarding treatment of consumers and
other telecommunications providers; 3) any provision of the federal
Telecommunications Act of 1996, or an order or regulation issued under that act,
relating to wholesale service; or 4) interconnection agreement approved by the PSC.
PSC authority regarding payments by telecommunications providers
Under current law, the PSC may order a person subject to its authority to take
appropriate action if the PSC determines that the person acted in a manner that is
unjust, unreasonable, insufficient, preferential, unjustly discriminatory, or
otherwise unreasonable or unlawful. The PSC may also issue such an order if the
PSC finds that service is inadequate or cannot reasonably be obtained.
Under this bill, if the PSC issues an order described above against a
telecommunications provider, the PSC may also require the telecommunications
provider to make payments specified in the order to persons affected by the
telecommunications provider's act or service or to the PSC. The PSC may use any
payment that it receives for any purpose determined by the PSC relating to
maintaining or improving telecommunications service quality, including
compensating persons who are affected by the telecommunications provider's act or
service.
Sales practices of telecommunications providers
Current state law prohibits persons who provide telecommunications services
from engaging in certain sales practices such as charging a customer for
telecommunications services provided after the customer has cancelled those
services. The law also prohibits a person who provides telecommunications services
from engaging in advertising practices concerning those services that are false,
misleading, or deceptive. In addition, the law requires that if a person orders
telecommunications services as the result of an oral solicitation, the provider of the
telecommunications services must provide independent confirmation of the order.
This bill provides that a person may request a telecommunications service
orally, in writing, or by electronic means but specifies that a telecommunications
provider may not provide services to a person who orders the service by any electronic
means that simultaneously activates the service.
The bill also imposes additional requirements on persons who provide
telecommunications services. The bill prohibits a person from enrolling a customer
in any telecommunications service in which the customer did not affirmatively
request to be enrolled. The bill specifies that a request to be enrolled in a particular
telecommunications service is an affirmative request to be enrolled only in that
particular service. The bill also prohibits the practice known as "slamming." A
person engages in slamming by making a change in a customer's selection of a
provider of telecommunications services even though the customer did not
affirmatively request that such a change be made.
In addition to the slamming prohibitions created under this bill, federal law
also prohibits slamming. This prohibition against slamming under federal law is
regulated by the federal communications commission (FCC). Under rules
promulgated by the FCC, any state may notify the FCC that it intends to administer
the FCC rules prohibiting slamming including the remedies and penalties specified
under those rules. This bill directs the department of agriculture, trade and
consumer protection (DATCP) to notify the FCC of its intention to administer the
FCC rules. It also requires DATCP to promulgate rules that are consistent with the
FCC regulations rules.
Cross subsidization
Current law prohibits a telecommunications utility from subsidizing the
activities of affiliates that are not subject to the PSC's authority. This prohibition is
referred to as the prohibition on "cross subsidization." The prohibition does not apply
to the retained earnings of a telecommunications utility.
This bill creates two exceptions to the prohibition on cross subsidization for
small telecommunications utilities. The bill defines "small telecommunications
utility" as a telecommunications utility that has less than 50,000 access lines in use
in the state. For a telecommunications utility that is in a holding company, the access
lines of all other telecommunications utilities in the holding company are counted in
determining whether the telecommunications utility is a small telecommunications
utility. (The access lines of any wireless telecommunications provider in the holding
company are not counted.)
The first exception to the prohibition is that a small telecommunications utility
is allowed to guarantee a loan for an affiliate if the loan is made before the first day
of the 60th month beginning after the bill's effective date. Also, the purpose of the
loan must be to partially or completely fund the cost of equipment that the affiliate
will use to provide telecommunications service, cable television service, or both. The
second exception to the prohibition is that a small telecommunications utility may
allow an affiliate free use of the utility's intangible assets, including its name,
goodwill, patents, and trademarks. However, the affiliate must use the intangible
asset to provide telecommunications service, cable television service, or both. In
addition, neither of the bill's two exceptions applies unless the small
telecommunications utility waives its right under current law to object to the PSC
allowing a competitor to provide telecommunications service in the municipality
served by the utility.
A small telecommunications utility that takes advantage of either of the bill's
exceptions is subject to additional requirements if certain actions occur under the
federal Telecommunications Act of 1996. The federal act allows certain rural
telecommunications utilities to petition the PSC to suspend or modify the application
of the act's interconnection requirements. Also, certain rural telecommunications
utilities are exempt from the interconnection requirements until another
telecommunications provider requests interconnection and the PSC determines to
terminate the exemption.
Under this bill, if a small telecommunications utility guarantees a loan for an
affiliate under the bill's first exception and the utility petitions the PSC to suspend
or modify the federal act's interconnection requirements, the affiliate must annually
pay the utility an amount equal to one-quarter of 1% of the outstanding balance of
the loan. The affiliate must also make such payments if another telecommunications
provider requests interconnection and the PSC determines not to terminate the
small telecommunications utility's exemption under the federal act. In addition, if
a small telecommunications utility allows an affiliate free use of an intangible asset
under the bill's second exception and the utility petitions the PSC to suspend or
modify the federal act's interconnection requirements, the affiliate must annually
pay the utility an amount equal to one-quarter of 1% of the affiliate's gross sales.
The affiliate must also make such payments if another telecommunications provider
requests interconnection and the PSC determines not to terminate the small
telecommunications utility's exemption under the federal act.
Current law also requires the PSC to establish the minimum accounting and
reporting requirements that are necessary for the PSC to, among other things,
enforce the prohibition on cross subsidization. Under this bill, the accounting and
reporting requirements that apply to transactions between small
telecommunications utilities and their affiliates must conform with certain federal
accounting and reporting requirements. The PSC must promulgate rules regarding
such requirements.
PSC report on telecommunications competition
The bill requires the PSC to investigate competition among intrastate
telecommunications providers, including those that provide Internet access service,
during the five-year period after the bill's effective date and to submit a report to the
legislature that assesses the relationship between the regulatory and competitive
status of such providers. The report must assess specified aspects of such
competition, including: 1) the number of different providers in different product and
geographic markets; 2) the prices of telecommunications services offered by the
providers; 3) the provider's market power; 4) the different levels of regulation
applicable to the providers; 5) the different retail service quality credit plans offered
by the providers; 6) the barriers to effective competition; 7) the number and types of
complaints by residential customers regarding the providers; and 8) certain
information regarding the unbundled network elements, interconnection, and
collocation offered by the providers.
The report must also include proposals for legislation recommended by the
PSC, including recommendations for remedying anticompetitive behavior of
intrastate telecommunications providers. If the proposals do not include requiring
providers to structurally separate wholesale and retail operations into
independently operated affiliates, the report must indicate the PSC's reasons for not
making such a recommendation.
Definition of "effective competition"
Under current law, the PSC is allowed to suspend certain requirements
regarding telecommunications providers in order to establish a degree of regulation
that is less than the degree under current law. The PSC may suspend the
requirements if, after a hearing, the PSC makes certain determinations, including
determining that effective competition exists in a market for telecommunications
services and that the competition justifies a lesser degree of regulation. Current law
does not define "effective competition." This bill requires the PSC to promulgate
rules that provide such a definition.
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:
SB451, s. 1
1Section
1. 20.155 (1) (Ls) of the statutes is created to read:
SB451,9,52
20.155
(1) (Ls)
Telecommunications provider payments. All moneys received
3from payments by telecommunications providers under ss. 196.219 (3m) (c) and
4196.37 (2) for purposes determined by the commission under ss. 196.219 (3m) (c) and
5196.37 (2).
SB451, s. 2
6Section
2. 100.207 (3) (a) of the statutes is amended to read:
SB451,9,107
100.207
(3) (a) A person may not engage in negative option billing or negative
8enrollment of telecommunications services, including unbundled
9telecommunications services. A person may not bill a customer for
, or enroll a
10customer in, any telecommunications service that the customer did not affirmatively
1order unless that service is required to be provided by law, the federal
2communications commission
, or the public service commission. A customer's failure
3to refuse a person's proposal to provide a telecommunications service is not an
4affirmative request for that telecommunications service.
A customer's request to be
5enrolled in a particular telecommunications service is an affirmative request to be
6enrolled only in that particular telecommunications service.
SB451, s. 3
7Section
3. 100.207 (3) (d) of the statutes is created to read:
SB451,10,108
100.207
(3) (d) A person may not make a change in a customer's selection of a
9telecommunications service provider unless the customer affirmatively requests
10that the person take such action.