AN ACT Relating to the implementation of the federal telecommunications act of 1996, P.L. 104-104 (110 Stat. 56); amending RCW 80.36.310, 80.36.320, and 80.36.330; adding new sections to chapter 80.36 RCW; creating a new section; and providing a contingent expiration date.

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

NEW SECTION. Sec. 1. (1) The commission shall establish a program for the advancement of universal telecommunications service. The purpose of the universal service program is to benefit all telecommunications ratepayers in the state by providing for specific, sufficient, competitively neutral, and technologically neutral support for basic telecommunications services for customers of telecommunications companies in high-cost locations and by reducing implicit sources of support for universal service.

(2) The commission shall establish the level of support that all telecommunications carriers are to provide, make assessments on all carriers to provide that support, designate those telecommunications carriers serving high-cost locations that are eligible to receive support for the benefit of their customers in those locations, and make all necessary rules for administration of the program. The commission may delegate to the commission secretary or other staff the authority to resolve disputes or make other decisions necessary to the administration of the program.

(3) All transfers of money necessary to provide the support shall be outside the state treasury and not be subject to appropriation. The commission may contract with an independent program administrator subject to the direction and control of the commission and may authorize the establishment of an account or accounts in independent financial institutions should that be necessary for administration of the program. The expenses of the independent program administrator shall be authorized by the commission and shall be paid out of contributions by the telecommunications carriers participating in the program. The commission may require the carriers participating in the program, as part of their contribution, to pay into the public service revolving fund the costs of the commission attributable to supervision and administration of the program.

(4) The commission shall audit, or contract with the administrator or other person to audit, telecommunications carriers that receive support under the program to ensure that they are using that support only for the purposes of the program.

(5) The commission shall coordinate administration of the program with any federal universal service program and may administer the federal fund in conjunction with the state program if so authorized by federal law.

(6) The total amount of assessments by the commission shall not exceed the total of explicit and implicit support for all companies for the 1997 period. The commission shall require as a condition of receiving support that eligible telecommunications carriers subject to regulation under this chapter reduce intrastate rates containing implicit subsidies by an amount equal to their high-cost support.

(7) The definitions in this subsection apply throughout this section unless the context clearly requires otherwise.

(a) "Telecommunications carrier" has the same meaning as defined in 47 U.S.C. Sec. 153(44).

(b) "Basic telecommunications services" means the following services:

(i) Single-party service;

(ii) Voice grade access to the public switched network;

(iii) Support for local usage;

(iv) Dual tone multifrequency signaling (touch-tone);

(v) Access to emergency services (911);

(vi) Access to operator services;

(vii) Access to interexchange services;

(viii) Access to directory assistance; and

(ix) Toll limitation services.

(c) "High-cost location" means a location where the cost of providing telecommunications services is greater than a set revenue benchmark established by the commission by rule.

NEW SECTION. Sec. 2. The program authorized by section 1 of this act shall not take effect until the legislature acts to approve it. The utilities and transportation commission shall by November 1, 1998, report to the legislature on development of each of the program elements prescribed in section 1 of this act, including the estimated size and cost of the program. The report may also include recommendations for legislative action necessary to implement the program as established or revised.

NEW SECTION. Sec. 3. The commission is authorized to take actions, conduct proceedings, and enter orders as permitted or contemplated for a state commission under the federal telecommunications act of 1996, P.L. 104-104 (110 Stat. 56). The commission may establish by rule fees to be paid by persons seeking commission action under the federal act, and by parties to proceedings under that act, to offset in whole or part the commission's expenses in implementing the act.

NEW SECTION. Sec. 4. The rule-making authority granted to the utilities and transportation commission by sections 1 and 3 of this act for the purpose of establishing a program for the advancement of universal telecommunications service shall expire on December 31, 1999, unless extended by the legislature.

Sec. 5. RCW 80.36.310 and 1989 c 101 s 14 are each amended to read as follows:

(1) Telecommunications companies may petition to be classified as competitive telecommunications companies under RCW 80.36.320 or to have services classified as competitive telecommunications services under RCW 80.36.330. The commission may initiate classification proceedings on its own motion. The commission may require all regulated telecommunications companies potentially affected by a classification proceeding to appear as parties for a determination of their classification.

(2) Any company petition or commission motion for competitive classification shall state an effective date not sooner than thirty days from the filing date. The company must provide notice and publication of the proposed competitive classification in the same manner as provided in RCW 80.36.110 for tariff changes. The proposed classification shall take effect on the stated effective date unless suspended by the commission or set for hearing. The commission shall enter its final order with respect to any suspended classification within ((~~ten~~)) six months from the date of filing of a company's petition or the commission's motion.

Sec. 6. RCW 80.36.320 and 1989 c 101 s 15 are each amended to read as follows:

(1) The commission shall classify a telecommunications company ((~~providing service in a relevant market~~)) as a competitive telecommunications company if ((~~it finds, after notice and hearing, that the telecommunications company has demonstrated that~~)) the services it offers are subject to effective competition. Effective competition means that the company's customers have reasonably available alternatives and that the company does not have a significant captive customer base. In determining whether a company is competitive, factors the commission shall consider include but are not limited to:

(a) The number and sizes of alternative providers of service;

(b) The extent to which services are available from alternative providers in the relevant market;

(c) The ability of alternative providers to make functionally equivalent or substitute services readily available at competitive rates, terms, and conditions; and

(d) Other indicators of market power which may include market share, growth in market share, ease of entry, and the affiliation of providers of services.

The commission shall conduct the initial classification and any subsequent review of the classification in accordance with such procedures as the commission may establish by rule.

(2) Competitive telecommunications companies shall be subject to minimal regulation. Minimal regulation means that competitive telecommunications companies may file, instead of tariffs, price lists ((~~which~~)) that shall be effective after ten days' notice to the commission and customers. The commission shall prescribe the form of notice. The commission may also waive other regulatory requirements under this title for competitive telecommunications companies when it determines that competition will serve the same purposes as public interest regulation. The commission may waive different regulatory requirements for different companies if such different treatment is in the public interest. A competitive telecommunications company shall at a minimum:

(a) Keep its accounts according to regulations as determined by the commission;

(b) File financial reports with the commission as required by the commission and in a form and at times prescribed by the commission;

(d) Cooperate with commission investigations of customer complaints.

(3) When a telecommunications company has demonstrated that the equal access requirements ordered by the federal district court in the case of U.S. v. AT&T, 552 F. Supp. 131 (1982), or in supplemental orders, have been met, the commission shall review the classification of telecommunications companies providing inter-LATA interexchange services. At that time, the commission shall classify all such companies as competitive telecommunications companies unless it finds that effective competition, as defined in subsection (1) of this section, does not then exist.

(4) The commission may revoke any waivers it grants and may reclassify any competitive telecommunications company if ((~~such~~)) the revocation or reclassification would protect the public interest.

(5) The commission may waive the requirements of RCW 80.36.170 and 80.36.180 in whole or in part for a competitive telecommunications company if it finds that competition will serve the same purpose and protect the public interest.

Sec. 7. RCW 80.36.330 and 1989 c 101 s 16 are each amended to read as follows:

(1) The commission may classify a telecommunications service provided by a telecommunications company as a competitive telecommunications service if ((~~it finds, after notice and hearing, that~~)) the service is subject to effective competition. Effective competition means that customers of the service have reasonably available alternatives and that the service is not provided to a significant captive customer base. In determining whether a service is competitive, factors the commission shall consider include but are not limited to:

(a) The number and size of alternative providers of services;

(b) The extent to which services are available from alternative providers in the relevant market;

(c) The ability of alternative providers to make functionally equivalent or substitute services readily available at competitive rates, terms, and conditions; and

(d) Other indicators of market power, which may include market share, growth in market share, ease of entry, and the affiliation of providers of services.

(2) When the commission finds that a telecommunications company has demonstrated that a telecommunications service is competitive, the commission may permit the service to be provided under a price list effective on ten days notice to the commission and customers. The commission shall prescribe the form of notice. The commission may adopt procedural rules necessary to implement this section.

(3) Prices or rates charged for competitive telecommunications services shall cover their cost. The commission shall determine proper cost standards to implement this section, provided that in making any assignment of costs or allocating any revenue requirement, the commission shall act to preserve affordable universal telecommunications service.

(4) The commission may investigate prices for competitive telecommunications services upon complaint. In any complaint proceeding initiated by the commission, the telecommunications company providing the service shall bear the burden of proving that the prices charged cover cost, and are fair, just, and reasonable.

(5) Telecommunications companies shall provide the commission with all data it deems necessary to implement this section.

(6) No losses incurred by a telecommunications company in the provision of competitive services may be recovered through rates for noncompetitive services. The commission may order refunds or credits to any class of subscribers to a noncompetitive telecommunications service which has paid excessive rates because of below cost pricing of competitive telecommunications services.

(7) The commission may reclassify any competitive telecommunications service if reclassification would protect the public interest.

(8) The commission may waive the requirements of RCW 80.36.170 and 80.36.180 in whole or in part for a service classified as competitive if it finds that competition will serve the same purpose and protect the public interest.

NEW SECTION. Sec. 8. Sections 1 and 3 of this act are each added to chapter 80.36 RCW.

NEW SECTION. Sec. 9. If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.