In addition, informal comments may be sent by e-mail to Anne Arnold of the Commission staff for consideration in this proceeding. Her e-mail address is
arnola@psc.state.wi.us. E-mailed comments will be distributed for internal staff use, and if received by the Commission before
12:00 noon on
November 10, 1997, will be provided at the technical conference and treated as if submitted informally therein.
If there are any questions regarding these hearings, please contact Anne Arnold, Auditor, Telecommunications Division, at (608) 267-3897, or Michael Varda, Legal Counsel, Telecommunications Division, at (608) 267-3591.
The Public Service Commission of Wisconsin (Commission) proposes to create rules to establish a “fresh-look" procedure whereby existing s. 196.194(1), Stats., telecommunications services contracts may be ended, at the customer's option, provided the customer's area is experiencing emerging facilities-based telecommunications competition and appropriate compensation is made to the telecommunications utility. The objective of the rules is to promote competition and customer choice consistent with the public interest. The final promulgation of the rules, however, will be subject to adequate definition of a workable procedure, identification of appropriate contracts for fresh-look procedure, and further Commission assessment of the level of public interest and customer demand for fresh-look procedures.
FRESH-LOOK PROCEDURE GENERALLY
It is anticipated that a fresh-look procedure would give customers an opportunity to take advantage of new legislation intended to foster local exchange telecommunications competition that did not exist when many customers signed long-term service contracts. These contractual obligations may now effectively bar the customer from receiving any benefit from the new legislation. Because the contracts may be long-term, the change to favor competition would be substantially slowed because there would be fewer buyers, even though new entrants are becoming authorized competitors.
The “fresh-look procedure" in this proceeding is intended to allow a period of time for customers to decide, at their option, whether to terminate existing special telecommunications service contracts executed under s. 196.194(1), Stats. This “window" is created by the presence of additional facilities-based telecommunications providers in the local exchange market, and is intended to permit the customer to effectively take advantage of the new regulatory policy under 1993 Wis. Act 496. This Act favors competition as the primary means of delivering intrastate telecommunications services. Should a customer choose to opt out of a contract, the customer will usually have to pay any difference between the contract price and the price that would apply for the period of time of actual performance. (Usually, the price for the contract services will increase because of the shortened term of the contract.) Appropriate interest may also have to be paid to the utility to account for the time value of money. Interest would keep the telecommunications utility economically whole, and prevent the customer from receiving a windfall in the form of discounted pricing for the services already received. In order to remove a potential barrier to a customer's exercise of a fresh-look option contract termination penalties would not be collected.
CUSTOMER AND PROVIDER INPUT EXPRESSLY INVITED
The Commission specifically invites industry and customer input to consider the rules attached hereto as a starting point for further collaboration. The Commission wants to craft rules that respond to the needs of providers and customers and operate in a manner consistent with business practicalities. The Commission invites comment on the following subject matter areas as they are relevant to fresh-look procedures:
1. Types of service contracts that should be considered candidates for fresh-look procedures, in addition to, or other than, CENTREX, CENTREX-like and private line service contracts.
2. Procedural components, such as notice to customers of a fresh-look period, customer notice to a provider of its intention to exercise fresh-look procedures, information that may be needed by the customer, length of the fresh-look window, calculation of interest for amounts due on terminated contracts, other responsibilities of customers and providers, and dispute resolution processes.
3. Levels of competition that would justify establishment of a fresh-look procedure in an area, and how such competition may be reasonably measured or recognized.
4. Customer interest in, or need for, fresh-look procedures.
5. Appropriate geographical areas for fresh-look procedures, such as exchange territories, counties, or areas defined by the U.S. Bureau of the Census. (e.g. “urbanized areas" or standard metropolitan statistical areas).
6. Impacts upon small telecommunications utilities (those having 50,000 or fewer access lines), such as potential revenue losses, stranded investment, possible discouragement of infrastructure investment, effects on other rates and charges, implications for universal service in a relevant geographical area, and appropriate proceedings for presentation of such issues.
7. Any other relevant considerations regarding the practical processes of authorizing a fresh-look procedure in a geographical area and applying it to a contract that a customer wishes to terminate.
Analysis Prepared by the Public Service Commission of Wisconsin
Statutory Authority: ss. 196.02(1) and (3); 196.03(6); 196.194(1); 196.219(3)(e), (4) and (5); 196.37(2), 196.44, and 227.11(2), and other provisions of chs. 133, 196 and 227, and Section 1 of 1985 Wis. Act 297 as may be pertinent hereto.
Statutes Interpreted: ss. 133.01; 196.03(6); 196.194(1); 196.37(2); and 196.219(3)(e), (4) and (5)
In 1993 Wis. Act 496 (Act 496), the legislature enacted a new regulatory model to manage the transition to a competitive telecommunications market place. In addition, Congress enacted the Telecommunications Act of 1996 to, in major part, foster the development of competition in the local exchange markets nationwide. Section 196.03(6), Stats., as created by Act 496, expands the concept of the public interest with respect to telecommunications to include several specific factors, including, but not limited to, the preservation and promotion of competition consistent with ch. 133 and s. 196.219, Stats., and the promotion of consumer choice, infrastructure deployment, and universal service. Section 133.01, Stats., states that the basic policy of the state is the maximum amount of competition, “consistent with other public interest goals established by the legislature."
Incumbent local exchange carriers (ILECs) are given the right under s.196.194(1), Stats., to execute individual contracts with customers if they file authorizing tariffs with the Commission. The Commission accepts the tariffs for filing “if substitute telecommunications services are available to customers or potential customers of the telecommunications utility and the absence of such a tariff would cause the telecommunications utility to be disadvantaged in competing for business." Act 496, however, did not change the provision of s. 196.194(1), Stats., that authorizes the Commission to impose in the tariffs “any other condition and procedure required by the commission in the public interest." Section 196.37(2), Stats., as interpreted in GTE North Inc. v. Public Service Commission, 176 Wis. 2d 559, 567, 500 N.W. 2d 284 (1993), authorizes the Commission to make just and reasonable orders regarding services, including “any services which can be reasonably demanded" but which “cannot be obtained." In addition, Act 496 created s. 196.219(3)(e) and (4), Stats., which authorize the Commission to take administrative enforcement action respecting the obligation of telecommunications utilities to “provide a service, product, or facility to a consumer other than a telecommunications provider in accord with the telecommunications utility's applicable tariffs, price lists or contracts and with the commission's rules and orders." Section 227.11(2), Stats., gives a general substantive rulemaking power to the Commission that may be invoked to create a rule requiring fresh-look procedures in tariffs filed under s. 196.194(1), Stats.
By accepting the filing of the tariff for these special s. 196.194(1), Stats., contracts, the Commission, since 1986, has implicitly acknowledged and accepted, based upon its experience and technical knowledge regarding telecommunications, that (1) in each tariff situation some “substitute" service existed, and (2) deviation from traditionally set rates and charges was needed to enable a telecommunications utility to compete through its proposed individual contracting authority. These tariffs for a number of years have included express reservation of Commission jurisdiction to investigate and issue further orders.
Except in very limited instances in rural parts of the state, the Commission for decades declined to authorize more than one facilities-based local exchange carrier in a given area. This has meant the competition prompting tariff filings under s. 196.194(1), Stats., has usually come from a non-regulated entity or substitute product (e.g., answering machines competing with voice mail). The types of contracts for which tariffs have been filed include, but are not confined to, local exchange private line, CENTREX, and CENTREX-like contracts. The latter two services are subject to “substitute" service competition. Nonregulated makers of PBX (private branch exchange) switching equipment sell PBX arrangements as a customer premises-based alternative to CENTREX or CENTREX-like services based in a telephone company's central office switching equipment. Other subjects of special contracts include video distance learning networks, voice mail, and billing and collection services.
Numerous contracts have been entered into between ILECs and their commercial and institutional customers. Generally, discounted rates have been available when the customer entered into a long-term contract, with the greatest discounts being offered for the longest term contract. Penalties for early termination of the contracts by customers appear to be included in typical contract language.
In Act 496, the legislature endorsed competition in the telecommunications marketplace, and enacted a new regulatory model to manage the transition from a monopolistic to a competitive telecommunications environment. Two large ILECs, Ameritech Wisconsin and GTE North Incorporated (GTE), had their service territories directly opened to competition by Act 496. Several competitive local exchange carriers (CLECs) obtained Commission approval to begin offering local service in and around certain urban areas of the state. New competitors raised the issue that fresh-look procedures should be authorized to effectively implement the promotion of competition and consumer choice, by returning to the marketplace customers who would be otherwise bound to long term contracts.
Plain Language Analysis
The proposed fresh-look procedures, subject to additional changes and customer input, are authorized as a “condition and procedure" for tariffs filed under s. 196.194(1), Stats. Fresh-look procedures are intended to promote competition and customer choice consistent with the public interest, as authorized in that statute. A rule requiring a fresh-look procedure will interpret the public interest under that statute, and therefore is authorized by s. 227.11(2), Stats. Sec. 196.219(3)(e), Stats., requires a telecommunications utility to offer services in compliance with its tariffs, such as those filed under s. 196.194(1), Stats., as interpreted by these rules issued pursuant to the rule-making power under s. 227.11(2), Stats. Sec. 196.219(5), Stats., authorizes alternative dispute resolution (ADR) procedures for complaints against a telecommunications utility arising under s. 196.219 Stats. A utility could violate s. 196.219(3)(e), Stats., by not properly terminating service in compliance with a fresh-look procedure when a customer exercises an authorized fresh-look opportunity. Sec. 196.219(4), Stats., authorizes the Commission to use rulemaking as an administrative action to implement ADR, permitted by s. 196.219(5), Stats. to expedite resolution of the dispute.
The rules in proposed ch. PSC 178, Wis. Adm. Code are designed to offer to a customer who entered into a long-term telecommunications contract, under a monopoly situation as described above, an opportunity to take advantage of the new competitive marketplace. The rules provide a process whereby a customer in an area where competition is present may elect to opt out of an existing ILEC contract. By meeting and following the criteria of the rules, a customer would be given a limited “window of opportunity" during which it could exercise the right to terminate its existing contract and obtain a different service provider. While termination penalties are rendered uncollectible under the rules, ILECs would still be compensated as if the original contract had been written for the period of actual contract performance.
A customer must within the 240-day fresh-look window (s. PSC 178.06) also sign a contract with another facilities-based provider. Services from that provider, however, may commence at a later time as provided by the contract. The length of the window is intended to allow a customer time to review alternatives.
The rules are also designed to foster competition and facilities deployment by providing a means by which a competitive provider may petition the Commission to make a determination, where appropriate under the rules, to apply a fresh-look procedure to a specific area.
The rules proposed address: (1) the types of contracts subject to fresh-look procedures; (2) geographical areas subject to fresh-look procedures; (3) sufficient facilities-based competition; (4) fresh look notice and termination processes; (5) ILEC compensation for terminated contracts; (6) arbitration of disputes; and (7) small telecommunications utility opportunities for modification or exemption from fresh-look procedures.
Initial Regulatory Flexibility Analysis
These proposed rules may have an effect on small telecommunications utilities, which are small businesses under s. 196.216, Stats., for the purposes of s. 227.114, Stats. The effect depends upon the pace of development of competition in mostly rural territories, which has tended to lag that in urban areas. Nonetheless, the rules include a specific opportunity for small telecommunications utilities to raise the issue of possible modification or cancellation of a fresh-look procedure when facilities-based competition is authorized in a small telecommunications utility territory under s. 196.50(1)(b), Stats. The public interest consequences of a fresh-look procedure appear to be intertwined with the public interest in certifying and introducing competitors to active marketplace competition. In this opportunity for special case treatment, a small telecommunications utility could make a case for modifying, temporarily suspending, or canceling altogether, use of fresh-look procedures in its basic territory. Because of the variety of potential fresh-look situations involved, more detail for purposes of s. 227.114(2), Stats., cannot be determined at this time.
Fiscal Estimate
These rules will have no fiscal impact on the agency or state government. The rules will have no direct effect on local government, but could allow a local government unit, as its option, to enter into a more favorable contract for telecommunications services with an alternative provider.
This action is not expected to result in significant environmental impacts according to s. PSC 4.10(3), Wis. Adm. Code. Furthermore, since no unusual circumstances have come to the attention of the Commission which indicate that significant environmental consequences are likely, neither an environmental impact statement under s. 1.11, Stats., nor an environmental assessment is required.
Text of Rule
Chapter PSC 178
TELECOMMUNICATIONS TARIFFS FOR INDIVIDUAL CUSTOMER CONTRACTS
PSC 178.01 PURPOSE AND SCOPE. (1) The purpose of this chapter is to establish a procedure by which the contracts executed by local exchange telecommunications utilities pursuant to tariffs filed under s. 196.194(1), Stats., may be reopened at the option of the contracting customer for a period of time, upon the determination of the commission that in a defined geographical area in which the customer is located, sufficient emerging facilities-based local exchange service is present. These procedures will be known as “fresh-look procedures." The purpose of these rules is to permit the fullest promotion of local exchange competition, consistent with other public interest objectives as may be defined in ch. 196, Stats.
(2) This chapter applies to incumbent telecommunications utilities maintaining certification under s. 196.50 (2), Stats., and those entities that are designated as local exchange carriers either by the federal communications commission pursuant to rules promulgated under 47 USC 251(h) or by the commission pursuant to notice and an opportunity for hearing.
(3) Nothing in this chapter shall preclude special and individual consideration being given to exceptional or unusual situations and upon due investigation of the facts and circumstances involved, the adoption of requirements as to individual providers, markets, or services that may be lesser, greater, other or different than those provided in this chapter.
PSC 178.02 DEFINITIONS. The definitions in s. 196.01, Stats., apply in this chapter. In addition, in this chapter:
(1) “Contract" shall mean any written agreement executed by a telecommunications utility with another legal entity pursuant to tariffs filed with the commission under the authority of s. 196.194(1), Stats. A contract may include by reference terms, conditions and other provisions contained in tariffs of the telecommunications utility filed pursuant to s. 196.19, Stats. A contract under s. 196.194(1), Stats., may include a contract with another telecommunications provider. A contract shall incorporate by reference any subcontracts executed with third parties for purposes of delivering the services provided under the principal contract.
(2) “Incumbent telecommunications utility" and “incumbent local exchange carrier" mean the telecommunications utility, or its successor in interest that provides basic local exchange service in a geographical area as of the effective date of this chapter . . . [revisor inserts date].
(3) “Local exchange carrier" means a telecommunications utility providing telephone exchange service, exchange access, or both, as those services are defined in 47 USC 153.
PSC 178.03 CONTRACTS SUBJECT TO FRESH-LOOK. (1) A contract executed by a telecommunications utility shall be subject to fresh-look procedures set forth in s. PSC 178.06 if all of the following criteria are satisfied:
(a) The principal service provided by the contract is one of the following:
1. Private line service.
2. CENTREX or CENTREX-like service.
3. A combination of the services offered in subd. 1. and 2.
4. Any other type of local exchange service, or combination of services, that the commission has determined by order shall be subject to this paragraph.
(b) All of the services rendered under the contract are local exchange services rendered at customer facilities or premises that are identified to the contract and are within a geographical area that has sufficient facilities-based local exchange service competition as defined by this chapter or by commission order under sub. (2).
(c) The principal term of the contract, or any extension thereof, has one year or more remaining, as measured from the date set by the commission pursuant to sub. (2).
(2) Upon petition of an interested person, or on its own motion, the commission may determine in a geographical area that sufficient facilities-based competition is present and thereupon set a date establishing the commencement of a 240-day period in which a customer under contract may use the fresh-look procedure defined in s. PSC 178.06 to terminate a contract without penalty, subject to the right of the contracting telecommunications utility to be kept whole as set forth in s. PSC 178.07.
PSC 178.04 GEOGRAPHICAL AREAS. (1) The commission may select the following types of defined geographical areas to be subject to fresh-look procedures as described in this chapter:
(a) Standard metropolitan statistical areas as defined by the bureau of the census.
(b) One or more obliged-to-serve territories, as defined in the tariffs of one or more telecommunications utilities.
(c) An extended area service local exchange service territory served by two or more telecommunications utilities.
(d) A territory that is defined as any combination of territories defined under pars. (a), (b), and (c).
(e) A geographical area specially defined by commission order, taking into account the business and residential demands for telecommunications services within the defined geographical area.
PSC 178.05 MARKETS HAVING EMERGING FACILITIES-BASED COMPETITION. (1) Upon its own motion, or the petition of an interested provider or purchaser of telecommunications services, the commission may determine that a geographical market as defined in s. PSC 178.04 is experiencing or is about to experience facilities-based local exchange service competition. Upon making such a finding, the commission may thereupon order that each telecommunications utility serving that area shall insert the fresh-look procedure defined in s. PSC 178.06 in all tariffs under s. 196.194 (1), Stats., pursuant to which the utility provides in the geographical area those services identified in s. PSC 178.03 (1) (a).
(2) Notwithstanding sub. (1), the geographical area consisting of the standard metropolitan statistical areas for Milwaukee, Racine and Kenosha is determined to have emerging facilities-based competition as of the effective date of this rule . . . [revisor inserts date]. Within 30 days of the effective date of this section, each telecommunications utility serving the specified geographical area shall amend all its tariffs in compliance with sub. (1) and shall include any modifications as may be required by any commission order to adjust the boundaries of the foregoing geographical area.
(3) With respect to any other geographical area, emerging facilities-based competition exists in an area if both the following criteria are satisfied:
(a) Two or more telecommunications providers, not including the incumbent telecommunications utility or utilities and commercial mobile radio service providers, are providing facilities-based local exchange telecommunications services within the specified geographical area.
(b) In the aggregate, the providers identified in par. (a) actively provide basic local exchange service or business access line and usage, and the total number of such access lines equals or exceeds 1 percent or more of the total of access lines of the incumbent telecommunications utilities in use in the geographical area at issue. The commission may chose any reasonable date and method for obtaining access line counts for purposes of this paragraph.
PSC 178.06 Fresh-Look Procedure. Fresh-look procedures that the commission has ordered to be inserted in tariffs pursuant to s. PSC 178.05 (1) shall comply with the following provisions:
(1) The tariff for a category of contract under s. 196.194 (1), Stats., shall provide for a fresh-look period of 240 days commencing on the date specified by the commission in the order for fresh-look procedures.
(2) The incumbent telecommunications utility shall transmit written notice of the fresh-look period to all affected contract customers not less than 15 days before the effective date of the tariff provisions containing fresh-look procedures. The text of the notice shall be as set forth in the order, or as prepared by the staff upon direction of the commission, and shall advise customers of the procedures and responsibilities of providers and customers under this chapter with respect to compliance with fresh-look procedures.
(3) A customer shall have a period of 240 days from the date specified by the commission pursuant to sub. (1) in which to exercise its option to terminate its existing contract or contracts with the incumbent telecommunications utility and execute one or more new contracts with a competing facilities-based telecommunications provider. The customer and the telecommunications utility shall comply with the following requirements:
(a) If the customer is considering the termination of any current contract, it shall notify the telecommunications utility in writing by certified mail, return receipt, of its present intention to use fresh-look procedures to terminate one or more contracts with the telecommunications utility. This notice shall be mailed not later than the 90th day of the fresh-look period, and shall include the customer's projected termination date for each contract at issue. If the notice is not timely mailed in strict compliance with this paragraph, the customer may not use fresh-look procedures in this chapter.
(b) The telecommunications utility shall furnish in writing to the customer within 20 days of the date of the receipt of the notice described in par. (a), a good faith estimate of the termination compensation, as computed in sub. (4), for the contract services for the period of projected actual contract performance, as determined using the customer's projected termination date.
(c) The customer shall notify the telecommunications utility in writing of its actual termination of a contract, and shall state in the notice the last date of service from the utility. The notice shall be sent by certified mail, return receipt, on or before the 240th day of the fresh-look period.
(d) In the absence of a complaint for dispute resolution under s. PSC 178.07, the good faith estimate of termination compensation shall be due and owing to the incumbent telecommunications utility as of the 30th day after the termination date, unless a mutually acceptable payment date is otherwise agreed upon by the parties in writing.
(e) Except where established practice dictates otherwise, addressees for notices described in this subsection shall be those identified in a contract as appropriate for the subject matter of contract termination.
(4) Upon receipt of the notice described in sub. (2), an incumbent telecommunications utility shall compute good faith termination compensation of the contract based as nearly as practicable on its own pricing for similar contracts. A “similar contract" is one that is for the same principal services, is entered into within 180 days before or after the date of the original customer contract, and is for a period of time that is within 90 days of the length of the actual performance projected for the contract to be terminated under this chapter. Termination penalties imposed by the original contract may not be included. Reasonable service termination costs relating to actual and necessary physical facility termination arrangements that are authorized in a contract may be included in termination compensation.
(5) If the price for the period of actual performance period exceeds the price paid under the contract for that period, then interest may be added by the incumbent telecommunications utility to establish the total due from the customer. Interest shall be calculated on accrued amounts due according to the payment terms of the contract, using the prime rate as published in the Wall Street Journal on the nearest date preceding a contractually specified payment due date. The commission may designate by order a substitute index for establishing the applicable prime rate for interest.
(6) A telecommunications utility subject to a fresh-look procedure termination shall not remove, alter, or render unusable network facilities used exclusively to serve the customer, except as accepted by generally recognized telecommunications industry engineering standards relating to safe, economical, or efficient use or operation of network facilities when services are terminated, or for immediate reuse elsewhere in the utility's network.
(7) The incumbent telecommunications utility shall retain for not less than three years from date of contract termination all documentation for its good faith termination compensation estimate, and shall furnish copies of the documentation immediately upon demand of either the customer or the commission. Documentation will be deemed adequate if it furnishes all relevant assumptions and calculations and sets forth when necessary those judgments determining similar contracts appropriate for the computation of the good faith estimate.
PSC 178.07 RESOLUTION OF TERMINATION DISPUTES. (1) If a customer disputes a good faith termination compensation estimate, it may file a complaint for dispute resolution under this section, and shall not be obliged to make payment of termination compensation until the complaint is resolved. If a customer files a complaint under this section, interest compounding per s. PSC 178.06 (5) shall cease as of the date of termination of the utility's contract services, and thereafter only interest at the applicable legal rate shall apply, unless otherwise agreed by the parties in writing.
(2) A customer shall file a complaint for dispute resolution with the commission no later than 15 days after the actual termination of contract services by the incumbent telecommunications utility, or if services are not terminated, no later than 15 days after the last projected termination date set by the customer in compliance with these rules.
(3) Upon receipt of a complaint, the commission may elect to do either one or both of the following:
(a) Mediate the dispute between the customer and the telecommunications utility.
(b) Order the parties to enter arbitration governed by the American Arbitration Association to enter a final award. The final award shall be reviewable by any court of competent jurisdiction. If such arbitration is ordered, the costs of arbitration shall be paid by the incumbent telecommunications utility initially, but upon completion of the arbitration, the prevailing party shall recover all of its costs but no attorney's fees.
PSC 178.08 CONTRACTS GENERALLY. Any provisions in a tariff filed pursuant to s. 196.194(1), Stats., or in a contract executed pursuant to that section, shall be null and void if they provide for any procedure materially differing from the procedure in this chapter, or have as their primary effect or purpose the impairment or elimination of the right of a customer to use the fresh-look procedures provided in this chapter.
PSC 178.09 FRESH-LOOK PROCEDURES AFFECTING SMALL TELECOMMUNICATIONS UTILITIES. Upon any petition or motion of the commission as provided in s. PSC 178.03, or upon application by a telecommunications provider for a certificate of authority that requires a determination under s. 196.50 (1) (b), Stats., an affected small telecommunications utility may in such proceeding request that the commission determine whether or not the application of any or all of the provisions of this chapter should, in the public interest, be modified, temporarily suspended, or canceled. In making its determination, the commission shall consider any relevant factor identified in s. 196.03 (6) (a) - (g), Stats., whether users of telecommunications services generally would experience a significant adverse economic impact, and any other relevant factor.
