S-1073

AN ACT Relating to enhanced telecommunications services; amending RCW 80.04.010 and 80.36.370; adding new sections to chapter 80.36 RCW; and creating a new section.

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

NEW SECTION. Sec. 1. The legislature declares that:

(1)(a) The public policy goals of this state as declared in RCW 80.36.300 and this section will be achieved most efficiently and effectively if enhanced services are developed and provided by many suppliers in markets throughout the state, including both long-established enhanced service providers and new entrants. Advances in computer and communications technology and the proliferation of enhanced services hold promise for improvements in the quality and variety of enhanced services available to the public. However, the entrance of large local exchange companies into the enhanced services industry may have the undesirable effects of stifling competition, reducing the diversity of services offered, and producing subsidies between noncompetitive telecommunications services and unregulated enhanced services provided by local exchange companies.

(2) Enhanced service providers and their customers require local exchange telecommunications services that are provided by local exchange companies. Local exchange companies, as well as other telecommunications companies and independent enhanced service providers, should be permitted to provide enhanced services to the public. To prevent damage to competition in enhanced services and to promote the commission's ability to regulate telecommunications companies' provision of exchange and interexchange telecommunications services in the public interest, the enhanced services operations of local exchange companies should be separate from their exchange and interexchange telecommunications services operations. This separation will be accomplished through the formation of separate subsidiaries for the provision of enhanced services by local exchange companies in accordance with section 2 of this act.

(3) The scope of small local exchange companies' regulated operations reduces the potential for undesirable impacts of their entry into enhanced services. Therefore, small local exchange companies serving fewer than ten thousand exchange access lines in the state of Washington should be exempt from the general requirement that they separate their exchange and interexchange telecommunications services operations from their enhanced services operations, if any, unless the commission finds, after notice and hearing, that formation of a separate subsidiary by a small local exchange company is a cost-effective means to ensure that rates for regulated services are fair, just, and reasonable for all ratepayers.

NEW SECTION. Sec. 2. Local exchange companies may provide enhanced services not prohibited by federal rule or statute. Local exchange companies shall separate their enhanced services operations, if any, from their exchange and interexchange telecommunications services operations as set forth in this section.

(1) A local exchange company may engage in the provision of enhanced services only through a subsidiary meeting the requirements of section 3 of this act and rules prescribed by the commission to carry out this section.

(2) A separate subsidiary is not required for a local exchange company serving fewer than ten thousand exchange access lines in Washington except that the commission's authority to regulate small local exchange companies' provision of exchange and interexchange telecommunications services includes the authority to require a small local exchange company to form a separate subsidiary for its enhanced services operations in accordance with section 3 of this act if, after notice and hearing, the commission finds that such a separation of operations is a cost-effective means to ensure that rates for regulated services are fair, just, and reasonable for all ratepayers.

NEW SECTION. Sec. 3. (1) Any subsidiary required to be formed under section 2 of this act shall have a board of directors not less than twenty percent of whom are not employees, officers, or directors of the local exchange company or any other affiliate of such local exchange company.

(2) Any transaction between any local exchange company and affiliates of the local exchange company shall not be based on any preference or discrimination arising out of affiliation, shall be carried out in the same manner as the company or affiliate conducts such business with unaffiliated persons, shall be fully auditable and reflect all costs associated with the conduct of such business, and shall otherwise be in accordance with chapter 80.16 RCW.

(3) A subsidiary required to be formed under section 2 of this act may not:

(a) Enter into any joint venture or partnership with the local exchange company;

(b) Have employees or a financial structure in common with the local exchange company;

(d) Establish any other subsidiary or affiliate except after notice to the commission in such form and containing such information as the commission may require.

(4) A subsidiary required to be formed under section 2 of this act shall carry out directly its own marketing, sales, advertising, accounting, hiring and training of personnel, purchasing, and maintenance.

(5) Any subsidiary required to be formed under section 2 of this act shall maintain books, records, and accounts in a manner prescribed by the commission which shall be separate from the books, records, and accounts maintained by the local exchange company and any other affiliates of the local exchange company, and which identify any conduct of business with the local exchange company or its other affiliates.

(6) The subsidiary required to be formed under section 2 of this act may carry out institutional advertising with the local exchange company, except that such advertising may not specifically relate to any service, and the subsidiary and the local exchange company shall share any costs of such advertising in proportion to their earnings.

(7) A subsidiary required to be formed under section 2 of this act shall submit to the commission a copy of any statement, prospectus, or annual or periodic report required to be filed with the securities and exchange commission or the secretary of state.

(8) Nothing in this section shall be construed to relieve a local exchange company of any separate subsidiary requirement imposed with respect to the performance of any other service.

NEW SECTION. Sec. 4. In addition to any other authority the commission may exercise under this chapter, the commission shall take such actions as are necessary to:

(1) Prevent anticompetitive practices between a local exchange company and any other affiliate of the local exchange company; and

(2) Protect local exchange telecommunications service ratepayers from bearing any cost not associated with the provision of such services by the local exchange company.

Sec. 5. RCW 80.04.010 and 1989 c 101 s 2 are each amended to read as follows:

As used in this title, unless specifically defined otherwise or unless the context indicates otherwise:

"Commission" means the utilities and transportation commission.

"Commissioner" means one of the members of such commission.

"Competitive telecommunications company" means a telecommunications company which has been classified as such by the commission pursuant to RCW 80.36.320.

"Competitive telecommunications service" means a service which has been classified as such by the commission pursuant to RCW 80.36.330.

"Corporation" includes a corporation, company, association or joint stock association.

"Person" includes an individual, a firm or partnership.

"Gas plant" includes all real estate, fixtures and personal property, owned, leased, controlled, used or to be used for or in connection with the transmission, distribution, sale or furnishing of natural gas, or the manufacture, transmission, distribution, sale or furnishing of other type gas, for light, heat or power.

"Gas company" includes every corporation, company, association, joint stock association, partnership and person, their lessees, trustees or receiver appointed by any court whatsoever, and every city or town, owning, controlling, operating or managing any gas plant within this state.

"Electric plant" includes all real estate, fixtures and personal property operated, owned, used or to be used for or in connection with or to facilitate the generation, transmission, distribution, sale or furnishing of electricity for light, heat, or power for hire; and any conduits, ducts or other devices, materials, apparatus or property for containing, holding or carrying conductors used or to be used for the transmission of electricity for light, heat or power.

"Electrical company" includes any corporation, company, association, joint stock association, partnership and person, their lessees, trustees or receivers appointed by any court whatsoever (other than a railroad or street railroad company generating electricity solely for railroad or street railroad purposes or for the use of its tenants and not for sale to others), and every city or town owning, operating or managing any electric plant for hire within this state. "Electrical company" does not include a company or person employing a cogeneration facility solely for the generation of electricity for its own use or the use of its tenants or for sale to an electrical company, state or local public agency, municipal corporation, or quasi municipal corporation engaged in the sale or distribution of electrical energy, but not for sale to others, unless such company or person is otherwise an electrical company.

"LATA" means a local access transport area as defined by the commission in conformance with applicable federal law.

"Private telecommunications system" means a telecommunications system controlled by a person or entity for the sole and exclusive use of such person, entity, or affiliate thereof, including the provision of private shared telecommunications services by such person or entity. "Private telecommunications system" does not include a system offered for hire, sale, or resale to the general public.

"Private shared telecommunications services" includes the provision of telecommunications and information management services and equipment within a user group located in discrete private premises in building complexes, campuses, or high-rise buildings, by a commercial shared services provider or by a user association, through privately owned customer premises equipment and associated data processing and information management services and includes the provision of connections to the facilities of a local exchange and to interexchange telecommunications companies.

"Radio communications service company" includes every corporation, company, association, joint stock association, partnership, and person, their lessees, trustees, or receivers appointed by any court, and every city or town making available facilities to provide radio communications service, radio paging, or cellular communications service for hire, sale, or resale.

"Telecommunications company" includes every corporation, company, association, joint stock association, partnership and person, their lessees, trustees or receivers appointed by any court whatsoever, and every city or town owning, operating or managing any facilities used to provide telecommunications for hire, sale, or resale to the general public within this state.

"Noncompetitive telecommunications service" means any service which has not been classified as competitive by the commission.

"Facilities" means lines, conduits, ducts, poles, wires, cables, cross-arms, receivers, transmitters, instruments, machines, appliances, instrumentalities and all devices, real estate, easements, apparatus, property and routes used, operated, owned or controlled by any telecommunications company to facilitate the provision of telecommunications service.

"Telecommunications" is the transmission of information by wire, radio, optical cable, electromagnetic, or other similar means. As used in this definition, "information" means knowledge or intelligence represented by any form of writing, signs, signals, pictures, sounds, or any other symbols.

"Water system" includes all real estate, easements, fixtures, personal property, dams, dikes, head gates, weirs, canals, reservoirs, flumes or other structures or appliances operated, owned, used or to be used for or in connection with or to facilitate the supply, storage, distribution, sale, furnishing, diversion, carriage, apportionment or measurement of water for power, irrigation, reclamation, manufacturing, municipal, domestic or other beneficial uses for hire.

"Water company" includes every corporation, company, association, joint stock association, partnership and person, their lessees, trustees or receivers appointed by any court whatsoever, and every city or town owning, controlling, operating, or managing any water system for hire within this state: PROVIDED, That for purposes of commission jurisdiction it shall not include any water system serving less than one hundred customers where the average annual gross revenue per customer does not exceed three hundred dollars per year, which revenue figure may be increased annually by the commission by rule adopted pursuant to chapter 34.05 RCW to reflect the rate of inflation as determined by the implicit price deflator of the United States department of commerce: AND PROVIDED FURTHER, That such measurement of customers or revenues shall include all portions of water companies having common ownership, regardless of location or corporate designation. However, water companies exempt from commission regulation shall be subject to the provisions of chapter 19.86 RCW.

"Cogeneration facility" means any machinery, equipment, structure, process, or property, or any part thereof, installed or acquired for the primary purpose of the sequential generation of electrical or mechanical power and useful heat from the same primary energy source or fuel.

"Public service company" includes every gas company, electrical company, telecommunications company, and water company. Ownership or operation of a cogeneration facility does not, by itself, make a company or person a public service company.

"Local exchange company" means a telecommunications company providing local exchange telecommunications service.

"Department" means the department of social and health services.

The term "service" is used in this title in its broadest and most inclusive sense.

"Enhanced services" means services offered over common carrier telecommunications transmission facilities, which employ computer processing applications that act on the format, content, code, protocol, or similar aspects of the subscriber's transmitted information; provide the subscriber additional, different, or restructured information; or involve subscriber interaction with stored information.

"Enhanced service provider" includes every corporation, company, association, joint stock association, partnership, and person, their lessees, trustees, or receivers appointed by any court, and every city or town owning, operating, or managing any machines, instrumentalities, or devices used to provide enhanced services for hire, sale, or resale.

Sec. 6. RCW 80.36.370 and 1990 c 118 s 1 are each amended to read as follows:

The commission shall not regulate the following:

(1) One way broadcast or cable television transmission of television or radio signals;

(2) Private telecommunications systems;

(3) Telegraph services;

(4) Enhanced services;

(5) Any sale, lease, or use of customer premises equipment except such equipment as is regulated on July 28, 1985;

((~~(5)~~)) (6) Private shared telecommunications services, unless the commission finds, upon notice and investigation, that customers of such services have no alternative access to local exchange telecommunications companies. If the commission makes such a finding, it may require the private shared telecommunications services provider to make alternative facilities or conduit space available on reasonable terms and conditions at reasonable prices;

((~~(6)~~)) (7) Radio communications services provided by a regulated telecommunications company, except that when those services are the only voice grade, local exchange telecommunications service available to a customer of the company the commission may regulate the radio communication service of that company.

NEW SECTION. Sec. 7. Sections 2 through 4 of this act are each added to chapter 80.36 RCW.