[atlas:bill]

AN ACT Relating to the modification of state telecommunications regulation; amending RCW 80.36.610, 43.163.005, 43.163.120, and 80.36.330; reenacting and amending RCW 43.163.010; adding new sections to chapter 80.36 RCW; adding a new section to chapter 43.163 RCW; adding new sections to chapter 82.04 RCW; adding a new section to chapter 82.16 RCW; creating a new section; repealing RCW 80.36.600 and 80.36.620; prescribing penalties; and providing expiration dates.

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

PART 1

FINDINGS AND INTENT

NEW SECTION. Sec. 1. A new section is added to chapter 80.36 RCW to read as follows:

(1) The legislature finds that:

(a) Universal service has long been a state policy. Universal service has assured that all citizens have access to affordable telephone service. For reasons such as geography or population density, it may cost more to provide telephone service for some consumers than for others. Historically, universal service has been primarily supported through a system of hidden and implicit subsidies, but these hidden and implicit subsidies are incongruous with the development of a competitive telecommunications industry;

(b) A new universal service program supported by explicit contributions is needed to ensure that consumers in all regions of the state have access to telecommunications, advanced telecommunications, and information services that are reasonably comparable to those services provided in urban areas and that are available at rates that are reasonably comparable to rates charged for similar services in urban locations;

(c) Current prices paid by consumers for basic telecommunications services are affordable, as evidenced by a telephone penetration rate of 94.8 percent for Washington households; and

(d) State regulation of the telecommunications industry should focus less on price regulation and more on the promotion of competition.

(2) The legislature intends that modification of state telecommunications regulation shall achieve the following goals:

(a) Ensure that all citizens and businesses have reasonable access to a modern telecommunications network to the benefit of all telecommunications ratepayers in the state;

(b) Protect consumers by maintaining prices for noncompetitive telecommunications services at affordable levels;

(c) Facilitate the development of an advanced telecommunications and information services infrastructure in rural, insular, and high-cost locations so that the benefits of competition in telecommunications, advanced telecommunications, and information services, as contemplated by the federal telecommunications act of 1996, P.L. 104-104, reach not only urban areas but also other areas of the state on a reasonably comparable and timely basis;

(d) Minimize reliance upon implicit subsidies for universal service by maximizing reliance upon explicit subsidies through explicit contributions to a universal service fund, transfers from which will preserve and enhance a ubiquitous telecommunications network by ensuring rates and service quality in rural, insular, and high-cost locations at levels that are reasonably comparable to those in other areas; and

(e) Accelerate innovation and promotion of telecommunications competition by providing a new alternative to rate-based, rate-of-return regulation and by strengthening enforcement of interconnection agreements and removing other barriers to competitive entry.

PART 2

UNIVERSAL SERVICE‑-TWO PROGRAMS ESTABLISHED

NEW SECTION. Sec. 2. A new section is added to chapter 80.36 RCW to read as follows:

Consistent with the legislative findings and goals under section 1 of this act, a universal service system, not inconsistent with the requirements of 47 U.S.C. Sec. 254, shall be established. This universal service system shall be divided into two separate programs: A basic telecommunications services program and a telecommunications infrastructure program.

(1) The commission shall establish the basic telecommunications services program to provide specific, sufficient, and competitively and technologically neutral support for basic telecommunications services for telecommunications access lines located in high-cost locations. Basic telecommunications services are as listed in section 8 of this act.

(2) The Washington economic development finance authority shall establish and administer the telecommunications infrastructure program in coordination with the department of revenue. Under this program business and occupation tax credits will be utilized to promote the development of an advanced telecommunications and information services infrastructure in high-cost locations so that advanced telecommunications and information services may be offered in high-cost locations at rates and standards of quality comparable to those offered urban and other low-cost customers.

PART 3

UNIVERSAL SERVICE SYSTEM‑-

BASIC TELECOMMUNICATIONS SERVICES PROGRAM

NEW SECTION. Sec. 3. A new section is added to chapter 80.36 RCW to read as follows:

The definitions in this section apply throughout sections 1 through 9 of this act and RCW 80.36.610 unless the context clearly requires otherwise.

(1) "Administrator" means the administrator of the universal service fund designated under section 4 of this act.

(2) "Advanced telecommunications provider" means any person, corporation, partnership, or association that operates equipment and facilities capable of distributing digital communications signals for the transmission of voice, data, image, and video over distance for either self use or the provision of such services to others.

(3) "Eligible telecommunications provider" means a telecommunications carrier that has met the criteria established by the commission under section 8 of this act and is qualified to receive distributions from the universal service fund for the provision of basic telecommunications services in high-cost locations.

(4) "End-user telecommunications revenue" means the telecommunications carriers' international, interstate, and intrastate revenues derived from Washington end-users for telecommunications and telecommunications services.

(5) "Federal universal service program" means a universal service program established under 47 U.S.C. Secs. 214(e) and 254.

(6) "Federal universal service support" means moneys paid under 47 U.S.C. Sec. 254(e) to eligible telecommunications carriers that provide basic telecommunications services in high-cost locations.

(7) "High-cost location" means a rural, insular, or other location where the cost of providing telecommunications services is greater than an appropriate price benchmark as provided in section 5 of this act.

(8) "Incumbent local exchange carrier" as defined in 47 U.S.C. Sec. 251(h)(1), means, with respect to an area, the local exchange carrier that:

(a) On February 8, 1996, provided telephone exchange service in such area; and

(b)(i) On February 8, 1996, was deemed to be a member of the exchange carrier association pursuant to section 69.601(b) of the federal communications commission's regulations (47 C.F.R. 69.601(b)); or

(ii) Is a person or entity that, on or after February 8, 1996, became a successor or assign of a member described in (b)(i) of this subsection.

(9) "Primary telecommunications line" means the first access line that provides a connection to the public switched telecommunications network for each residential or business customer.

(10) "Telecommunications," as defined in 47 U.S.C. Sec. 153(43), means the transmission, between or among points specified by the user, of information of the user's choosing, without change in the form or content of the information as sent and received.

(11) "Telecommunications access line" means the connection of the end-user customer to the local and toll public switched telecommunications network.

(12) "Telecommunications carrier" has the same meaning as that term is defined in 47 U.S.C. Sec. 153(44) on the effective date of this act.

(13) "Telecommunications services," as defined in 47 U.S.C. Sec. 153(46), means the offering of telecommunications for a fee directly to the public, or to such classes of users as to be effectively available directly to the public, regardless of the facilities used.

(14) "Universal service fund" means the basic telecommunications services universal service fund created in section 4 of this act.

NEW SECTION. Sec. 4. A new section is added to chapter 80.36 RCW to read as follows:

(1) In establishing the basic telecommunications services program under section 2 of this act, the commission shall create a basic telecommunications services universal service fund. This fund shall be outside the state treasury and transfers from the universal service fund shall not be subject to appropriation. The universal service fund shall include contributions by telecommunications carriers as provided in subsection (5) of this section, penalties imposed and paid under section 7 of this act, and other moneys authorized to be deposited in the universal service fund by law or by order of any court of competent jurisdiction.

(2) Basic telecommunications services are as listed in section 5(1) of this act.

(3) Each year the commission shall set by order the full and adjusted sizes of the universal service fund as follows:

(a) If a federal universal service program provides federal universal service support for:

(i) Only primary telecommunications access lines located in high-cost locations, then the commission shall set the full size of the universal service fund at the amount of money needed to provide support for basic telecommunications services for one primary telecommunications access line per each residential or business customer located in a high-cost location;

(ii) All telecommunications access lines located in high-cost locations, then the commission shall set the full size of the universal service fund at the amount of money needed to provide support for basic telecommunications services for all telecommunications access lines located in a high-cost location.

(b) If federal universal service support is uncertain because a federal universal service program has not begun, or has terminated or is expected to terminate, then the commission shall set the full size of the universal service fund at the amount of money needed to provide support for basic telecommunications services for one primary telecommunications access line per each residential or business customer located in a high-cost location.

(c) After determining the full size of the universal service fund, the commission shall determine the adjusted universal service fund size. The adjusted universal service fund size shall equal the full universal service fund size minus:

(i) Any universal service fund balance in excess of ten million dollars carried over from the previous year; and

(ii) The amount of federal universal service support expected to be distributed during the year to eligible telecommunications carriers for their provision of basic telecommunications services in high-cost locations located in this state.

(4) To determine the amount of money needed to provide universal service support for basic telecommunications services for a telecommunications access line located in a high-cost location, the commission shall:

(a) Set price benchmarks as provided in section 5 of this act; and

(b) Compute the amount of universal service support needed per telecommunications access line located in a high-cost area as the difference between the cost to provide basic telecommunications services and the appropriate price benchmark amount.

(5)(a) The commission shall require every telecommunications carrier to contribute to the universal service fund on an equitable and nondiscriminatory basis.

(b) The sum of all contributions shall equal the amount of money set as the adjusted size of the universal service fund under subsection (3) of this section plus an amount collected to cover the universal service fund administrator's budget. The budget shall be determined as provided in subsection (6) of this section.

(c) Annually the commission shall establish each carrier's contribution based on each carrier's proportionate share of total end-user telecommunications revenue.

(6) The universal service fund shall be administered by an independent fund administrator selected by the commission according to criteria established under subsection (10) of this section. Prior to each year, the commission shall establish and approve a budget for universal service administration. Administrative expenses shall be paid out of the administrator's expenses account of the universal service fund after approval by the commission. The administrator may establish accounts in one or more independent financial institutions. Annually the administrator's administration of the universal service fund shall be subject to audit.

(7) The universal service fund shall be divided into two separate accounts:

(a) The administrator's expenses account; and

(b) The basic telecommunications services account.

(8) The administrator shall deposit the amount of contributions collected to cover the administrator's budget into the administrator's expenses account and the remaining contributions to the basic telecommunications services account.

(9)(a) Each telecommunications carrier shall provide information the commission or the administrator deems necessary for the implementation and operation of the program, including, but not limited to, information on costs to the company to provide service in high-cost locations.

(b) The provisions of RCW 80.04.095 shall apply to any information submitted under this subsection.

(10) In establishing the universal service program, the commission shall adopt rules as needed to establish and operate the universal service program, and that are consistent with the legislative direction provided by this act. At a minimum, the rules shall include the following:

(a) Provisions for the operation of the universal service fund;

(b) Criteria for the selection of an independent third party administrator of the universal service fund through a competitive bid process;

(d) The methodology for minimizing the implicit sources of support as new explicit sources of universal service support are established.

(11) The commission may delegate to the commission secretary or other staff the authority to resolve disputes, approve expenses of the administrator, and make other administrative decisions necessary to the administration and supervision of the program consistent with the relevant statutes and commission rules.

NEW SECTION. Sec. 5. A new section is added to chapter 80.36 RCW to read as follows:

(1) The commission shall set separate residential and business price benchmarks for each telephone exchange area located in a high-cost location. The price benchmarks for each telephone exchange area shall equal the amount that an incumbent local exchange carrier charged per single residential or business wireline telecommunications access line on January 1, 1999, for the following package of basic telecommunications services:

(a) Single-party service;

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

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

(e) Access to emergency services (E911);

(f) Access to operator services;

(g) Access to interexchange services;

(h) Access to directory assistance and white pages directory; and

(i) Toll limitation services.

(2) In the event that one of these basic telecommunications services was not available in a given local telephone exchange on January 1, 1999, then the price benchmarks shall be set at the amount that was charged for those basic telecommunications services listed in subsection (1) of this section that were available on January 1, 1999.

(3) If two or more incumbent local exchange carriers provided basic telecommunications service in the same telephone exchange on January 1, 1999, the price benchmarks shall be set at the highest amounts that were charged by an incumbent local exchange carrier for basic telecommunications services for residential or business wireline telecommunications access lines located in that exchange on January 1, 1999.

(4) When a telecommunications access line for a customer located in a given telephone exchange area is provided by a nonwireline carrier, the price benchmark for this nonwireline telecommunications access line shall equal the business benchmark set for a wireline telecommunications access line for that telephone exchange area.

NEW SECTION. Sec. 6. A new section is added to chapter 80.36 RCW to read as follows:

The commission shall coordinate the state universal service program with any federal universal service program. The commission shall establish rules which the independent fund administrator shall use to jointly administer federal and state universal service support, if such joint administration is permitted by federal law.

NEW SECTION. Sec. 7. A new section is added to chapter 80.36 RCW to read as follows:

(1) In addition to any other penalties prescribed by law, the commission may impose penalties for delays in making the required reports or contributions under the universal service program basic telecommunications services established in section 2 of this act. Such penalties shall be calculated as a percentage of the carrier's required contribution for the previous calendar year. The penalties shall be as follows:

(a) For delays of more than seven days but less than fourteen days, two percent;

(b) For delays of at least fourteen days but less than twenty-one days, four percent;

(d) For delays of twenty-eight days or more, eight percent; and

(e) For delays of thirty-five days or more, in the commission's discretion, an additional two percent per week.

(2) If a carrier owed no contributions for the previous calendar year, then the penalties shall be as follows:

(a) For late payment of required contributions, the penalties shall be calculated by multiplying the percentages set forth in subsection (1) of this section against the amount of the required contributions that is past due; and

(b) For late filing of a required report, the penalty shall be one hundred dollars for every day that a report is late.

(3) Any penalties imposed by the commission under this section shall be paid to the universal service fund's basic telecommunications services account.

(4) In addition to any penalties imposed under this section, the administrator may withhold distributions from the basic telecommunications services account to any eligible telecommunications carrier that fails to submit information as required under this act.

NEW SECTION. Sec. 8. A new section is added to chapter 80.36 RCW to read as follows:

To implement the basic telecommunications services program established under section 2 of this act, the commission shall:

(1) Establish criteria for designating telecommunications carriers as being eligible to receive distributions from the universal service fund's basic telecommunications services account for the provision of basic telecommunications services in high-cost locations. The criteria may include a requirement that a carrier serve all persons requesting service within a geographical area for which designation is to be made;

(2) Designate telecommunications carriers as eligible telecommunications carriers under the criteria established under subsection (1) of this section;

(3) Provide specific, sufficient, competitively neutral, and technologically neutral universal service support for basic telecommunications services for one primary line per residential or business customer located in a high-cost location. In the event that a federal universal service program provides explicit support for all telecommunications lines located in a high-cost location, then the commission shall provide specific, sufficient, competitively neutral, and technologically neutral universal service support for all telecommunications lines located in a high-cost location;

(4) Designate by rule the following services as basic telecommunications services:

(a) Single-party service;

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

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

(e) Access to emergency services (E911);

(f) Access to operator services;

(g) Access to interexchange services;

(h) Access to directory assistance and white pages directory; and

(i) Toll limitation services;

(5) Periodically recommend to the legislature that additional services be designated as basic telecommunications services. In determining whether additional services should be recommended to the legislature for designation as basic services, the commission shall take into account advances in telecommunications and information technologies and services and shall consider the extent to which such telecommunications services:

(a) Are essential to education, public health, or public safety;

(b) Have, through the operation of market choices by customers, been subscribed to by a substantial majority of residential customers;

(d) Are consistent with the public interest, convenience, and necessity; and

(6) Establish by rule the criteria and method to be used by the administrator for making distributions from the universal service fund's basic telecommunications services account to eligible telecommunications carriers serving high-cost locations.

NEW SECTION. Sec. 9. A new section is added to chapter 80.36 RCW to read as follows:

The commission periodically shall audit, or contract for an audit of, telecommunications carriers that receive universal service support under section 8 of this act to ensure that the support is used only for the purposes of the basic telecommunications services subprogram.

Sec. 10. RCW 80.36.610 and 1998 c 337 s 2 are each amended to read as follows:

((~~(1)~~)) 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), ((but the commission's authority to either establish a new state program or to adopt new rules to preserve and advance universal service under section 254(f) of the federal act is limited to the actions expressly authorized by RCW 80.36.600)) provided that such actions, proceedings, and orders are consistent with the legislative direction provided by this section, sections 1 through 9, 13, and 15 through 17 of this act, and RCW 43.163.010, 43.163.005, and 43.163.120. 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 that are not otherwise recovered through fees in implementing the act((, but new fees or assessments charged telecommunications carriers to either establish a state program or to adopt rules to preserve and advance universal service under section 254(f) of the federal act do not take effect until the legislature has approved a state universal service program.

~~(2) The legislature intends that under the future universal service program established in this state:~~

(a) Every telecommunications carrier that provides intrastate telecommunications services shall contribute, on an equitable and nondiscriminatory basis, to the preservation and advancement of universal service in the state;

~~(b) The contributions shall be competitively and technologically neutral; and~~

~~(c) The universal service program to be established in accordance with RCW 80.36.600 shall not be inconsistent with the requirements of 47 U.S.C. Sec. 254~~)).

PART 4

UNIVERSAL SERVICE SYSTEM‑-

TELECOMMUNICATIONS INFRASTRUCTURE PROGRAM

Sec. 11. RCW 43.163.005 and 1990 c 53 s 1 are each amended to read as follows:

Economic development is essential to the health, safety, and welfare of all Washington citizens by broadening and strengthening state and local tax bases, providing meaningful employment opportunities and thereby enhancing the quality of life. Economic development increasingly is dependent upon the ability of small-sized and medium-sized businesses and farms to finance growth and trade activities. Many of these businesses face an unmet need for capital that limits their growth. These unmet capital needs are a problem in both urban and rural areas which cannot be solved by the private sector alone. There presently exist some federal programs, private credit enhancements and other financial tools to complement the private banking industry in providing this needed capital. More research is needed to develop effective strategies to enhance access to capital and thereby stimulate economic development.

Economic development is also increasingly dependent upon the existence of an advanced telecommunications and information infrastructure. For a healthy economy, businesses located in rural, insular, and other high-cost locations need access to advanced telecommunications and information services at rates and standards of quality that are reasonably comparable to rates and standards of quality that are offered in urban and other low-cost locations.

It is the purpose of this chapter to establish a state economic development finance authority to act as a financial conduit that, without using state funds or lending the credit of the state or local governments, can issue nonrecourse revenue bonds, and participate in federal, state, and local economic development programs to help facilitate access to needed capital by Washington businesses that cannot otherwise readily obtain needed capital on terms and rates comparable to large corporations, and can help local governments obtain capital more efficiently. It is also a primary purpose of this chapter to encourage the employment and retention of Washington workers at meaningful wages and to develop innovative approaches to the problem of unmet capital needs. An additional purpose of this chapter is to provide guidance and direction in facilitating the development of an advanced telecommunications and information services infrastructure in rural, insular, and high-cost locations so that the benefits of competition in telecommunications, advanced telecommunications, and information services reach not only urban areas but also other areas of the state on a reasonably comparable and timely basis. This chapter is enacted to accomplish these and related purposes and shall be construed liberally to carry out its purposes and objectives.

Sec. 12. RCW 43.163.010 and 1994 c 238 s 1 and 1994 c 92 s 498 are each reenacted and amended to read as follows:

As used in this chapter, the following words and terms have the following meanings, unless the context requires otherwise:

(1) "Advanced telecommunications provider" means any person, corporation, partnership, or association that operates equipment and facilities capable of distributing digital communications signals for the transmission of voice, data, image, and video over distance for either self use or the provision of such services to others;

(2) "Authority" means the Washington economic development finance authority created under RCW 43.163.020 or any board, body, commission, department or officer succeeding to the principal functions of the authority or to whom the powers conferred upon the authority shall be given by law;

((~~(2)~~)) (3) "Bonds" means any bonds, notes, debentures, interim certificates, conditional sales or lease financing agreements, lines of credit, forward purchase agreements, investment agreements, and other banking or financial arrangements, guaranties, or other obligations issued by or entered into by the authority. Such bonds may be issued on either a tax-exempt or taxable basis;

((~~(3)~~)) (4) "Borrower" means one or more public or private persons or entities acting as lessee, purchaser, mortgagor, or borrower who has obtained or is seeking to obtain financing either from the authority or from an eligible banking organization that has obtained or is seeking to obtain funds from the authority to finance a project. A borrower may include a party who transfers the right of use and occupancy to another party by lease, sublease or otherwise, or a party who is seeking or has obtained a financial guaranty from the authority;

((~~(4)~~)) (5) "Economic development activities" means activities related to: Manufacturing, processing, research, production, assembly, tooling, warehousing, pollution control, energy generating, conservation, transmission, sports facilities, and industrial parks;

(6) "Eligible banking organization" means any organization subject to regulation by the director of the department of financial institutions, any national bank, federal savings and loan association, and federal credit union located within this state;

((~~(5)~~)) (7) "Eligible export transaction" means any preexport or export activity by a person or entity located in the state of Washington involving a sale for export and product sale which, in the judgment of the authority: (a) Will create or maintain employment in the state of Washington, (b) will obtain a material percent of its value from manufactured goods or services made, processed or occurring in Washington, and (c) could not otherwise obtain financing on reasonable terms from an eligible banking organization;

((~~(6)~~)) (8) "Eligible farmer" means any person who is a resident of the state of Washington and whose specific acreage qualifying for receipts from the federal department of agriculture under its conservation reserve program is within the state of Washington;

((~~(7)~~)) (9) "Eligible person" means an individual, partnership, corporation, or joint venture carrying on business, or proposing to carry on business within the state and is seeking financial assistance under RCW 43.163.210;

((~~(8)~~)) (10) "Financing agreements" means a contractual arrangement with an eligible person whereby the authority obtains rights from or in an invention or product or proceeds from an invention or product in exchange for the granting of financial and other assistance to the person;

(11) "Financial assistance" means the infusion of capital to persons for use in the development and exploitation of specific inventions and products;

((~~(9)~~)) (12) "Financing document" means an instrument executed by the authority and one or more persons or entities pertaining to the issuance of or security for bonds, or the application of the proceeds of bonds or other funds of, or payable to, the authority. A financing document may include, but need not be limited to, a lease, installment sale agreement, conditional sale agreement, mortgage, loan agreement, trust agreement or indenture, security agreement, letter or line of credit, reimbursement agreement, insurance policy, guaranty agreement, or currency or interest rate swap agreement. A financing document also may be an agreement between the authority and an eligible banking organization which has agreed to make a loan to a borrower;

((~~(10)~~)) (13) "High-cost location" means a rural, insular, or other location where the cost of providing telecommunications services is greater than an appropriate price benchmark as provided in section 5 of this act;

(14) "Plan" means the general plan of economic development finance objectives developed and adopted by the authority, and updated from time to time, as required under RCW 43.163.090. This plan is distinct from the telecommunications infrastructure grants plan developed under section 13(5) of this act;

(((11) "Economic development activities" means activities related to: Manufacturing, processing, research, production, assembly, tooling, warehousing, pollution control, energy generating, conservation, transmission, and sports facilities and industrial parks;

~~(12)~~)) (15) "Project costs" means costs of:

(a) Acquisition, lease, construction, reconstruction, remodeling, refurbishing, rehabilitation, extension, and enlargement of land, rights to land, buildings, structures, docks, wharves, fixtures, machinery, equipment, excavations, paving, landscaping, utilities, approaches, roadways and parking, handling and storage areas, and similar ancillary facilities, and any other real or personal property included in an economic development activity;

(b) Architectural, engineering, consulting, accounting, and legal costs related directly to the development, financing, acquisition, lease, construction, reconstruction, remodeling, refurbishing, rehabilitation, extension, and enlargement of an activity included under subsection ((~~(11)~~)) (5) of this section, including costs of studies assessing the feasibility of an economic development activity;

(c) Finance costs, including the costs of credit enhancement and discounts, if any, the costs of issuing revenue bonds, and costs incurred in carrying out any financing document;

(d) Start-up costs, working capital, capitalized research and development costs, capitalized interest during construction and during the eighteen months after estimated completion of construction, and capitalized debt service or repair and replacement or other appropriate reserves;

(e) The refunding of any outstanding obligations incurred for any of the costs outlined in this subsection; and

(f) Other costs incidental to any of the costs listed in this section;

((~~(13)~~)) (16) "Product" means a product, device, technique, or process that is or may be exploitable commercially. "Product" does not refer to pure research, but shall be construed to apply to products, devices, techniques, or processes that have advanced beyond the theoretic stage and are readily capable of being, or have been, reduced to practice;

(((14) "Financing agreements" means, and includes without limitation, a contractual arrangement with an eligible person whereby the authority obtains rights from or in an invention or product or proceeds from an invention or product in exchange for the granting of financial and other assistance to the person.)) (17) "Telecommunications infrastructure improvement" means the construction or upgrade of real property or tangible personal property used to distribute digital communications signals for the transmission of voice, data, image, and video over distance. It includes, but is not limited to, activities such as the laying of fiber optic cable, the construction of terrestrial facilities to support digital communications by satellite, and the construction of towers and other facilities to support digital communications through nonwireline technologies.

NEW SECTION. Sec. 13. A new section is added to chapter 43.163 RCW to read as follows:

(1) In implementing a telecommunications infrastructure program established under section 2 of this act, the authority shall review applications for business and occupation tax credits on a competitive basis, in accordance with criteria adopted under the telecommunications infrastructure plan under subsection (5) of this section.

(2) The authority shall recommend to the department of revenue which tax credit applications should be approved, provided that each year the total amount of tax credits recommended for approval does not exceed the available amount of tax credits computed under section 15 of this act. Each year the authority shall deliver to the department of revenue a list of the telecommunications infrastructure tax credits recommended for approval.

(3) The department of revenue shall approve applications for these telecommunications infrastructure tax credits as provided in section 16 of this act.

(4) The authority shall allow a joint tax credit application to be submitted under this section when two or more advanced telecommunications providers intend to jointly construct a telecommunications infrastructure improvement.

(5) As a guide for operating the telecommunications infrastructure program, the authority shall prepare a telecommunications infrastructure plan addressing, but not limited to, the following:

(a) The manner in which business and residential consumers located in high-cost locations and advanced telecommunications providers will be informed about the business and occupation tax credits available on a competitive basis for telecommunications infrastructure improvements made in high-cost locations;

(b) Criteria for evaluating and ranking tax credit applications. At a minimum the criteria must include consideration of the following factors:

(i) The number of jobs to be created or retained as a result of a telecommunications infrastructure improvement in a high-cost location;

(ii) Comparability between rates generally charged for advanced telecommunications and information services in urban and other low-cost locations of the state to the rates that that tax credit applicant indicates it will charge customers in the high-cost location where the infrastructure improvement is to be made, if the applicant will provide advanced telecommunications and information services to others;

(iii) The size of the telecommunications bandwidth that will be made available to consumers in a high-cost location as a result of the telecommunications infrastructure improvement;

(iv) The amount of money that an applicant will spend from its own funds, in excess of the expenditure amount for which a tax credit application is made, to make a telecommunications infrastructure improvement in a high-cost location; and

(v) The geographical distribution of the tax credits to be recommended for approval;

(c) Information that tax credit applicants shall be required to provide with their applications. At a minimum a tax credit applicant must attach to the application a list of the businesses that have requested advanced telecommunications and information services which cannot be supported by the existing telecommunications infrastructure located in the area where the telecommunications infrastructure improvement is to be made. The list shall indicate for each business the number of jobs expected to be created or retained as a result of the telecommunications infrastructure improvement.

(6) No more than fifteen percent of tax credits recommended for approval in any one year shall be for telecommunications infrastructure projects located in the same county.

(7) No more than fifteen percent of the tax credits recommended for approval in any one year shall be for telecommunications infrastructure projects to be constructed by the same advanced telecommunications provider or its affiliates.

(8) The authority shall conduct at least one public hearing on its telecommunications infrastructure plan before adoption. A plan shall be adopted by resolution of the authority no later than one year after the effective date of this act. The authority may periodically update its telecommunications infrastructure plan as the authority deems necessary, but changes shall take effect at the beginning of the calendar year following adoption of the changes by resolution.

(9) This section expires December 31, 2005.

Sec. 14. RCW 43.163.120 and 1998 c 245 s 51 are each amended to read as follows:

The authority shall receive no appropriation of state funds. The department of community, trade, and economic development shall provide staff to the authority, to the extent permitted by law, to enable the authority to accomplish its purposes; the staff from the department of community, trade, and economic development may assist the authority in organizing itself and in designing programs, but shall not be involved in the issuance of bonds ((or)), in making credit decisions regarding financing provided to borrowers by the authority, or in reviewing and recommending for approval application for telecommunications infrastructure tax credits.

NEW SECTION. Sec. 15. A new section is added to chapter 82.04 RCW to read as follows:

For purposes of the universal service telecommunications infrastructure program established in section 2 of this act, each calendar year the available amount of tax credits shall be determined as follows:

(1) In Washington the average rate of growth in gross revenues for telephone businesses during calendar years 1992 through 1996 was seven percent. For purposes of this section, seven percent shall be the base growth rate.

(2) Every October the department of revenue shall:

(a) Compute total tax paid under this chapter by businesses in North American industry classification system code 5133 for the last two calendar years. If at any time the United States office of management and budget or a successor agency should change or replace the present North American industry classification code system, the department of revenue shall use the code system issued by the office of management and budget or its successor agency to determine the code corresponding to the one listed in this definition;

(b) Compute the rate of growth that occurred in taxes paid under this chapter by telecommunications businesses by subtracting total taxes paid from two calendar years ago from last calendar year's total taxes paid and then dividing this amount by total taxes paid from two calendar years ago;

(c) Compare the growth rate computed under (b) of this subsection to the base growth rate. If the rate of growth computed under (b) of this subsection exceeds the base growth rate, then the department of revenue shall subtract the base growth rate from the growth rate computed under (b) of this subsection and multiply this amount against total taxes paid by telecommunications businesses for the last calendar year. The product of this calculation or thirty million dollars, whichever is less, shall be the amount of tax credits available for the calendar year beginning on January 1st for the telecommunications infrastructure program;

(d) If the rate of growth computed under (b) of this subsection is less than the base growth rate, then no moneys shall be available for tax credits; and

(e) By October 15th of each year the department of revenue shall inform the Washington economic development finance authority of the amount of tax credits available for the telecommunications infrastructure program.

(3) This section expires December 31, 2005.

NEW SECTION. Sec. 16. A new section is added to chapter 82.04 RCW to read as follows:

(1)(a) An advanced telecommunications provider may be allowed credits against tax due under this chapter or chapter 82.16 RCW for expenses incurred in constructing telecommunications infrastructure improvements in high-cost locations. Credits approved by the department under subsection (2) of this section may be claimed over a three-year period but may not exceed the amount of tax that would otherwise be due under this chapter and chapter 82.16 RCW during the three-year period.

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

(i) "Advanced telecommunications provider" means any person, corporation, partnership, or association that operates equipment and facilities capable of distributing digital communications signals for the transmission of voice, data, image, and video over distance for either self use or the provision of such services to others.

(ii) "High-cost location" means a rural, insular, or other location where the cost of providing telecommunications services is greater than an appropriate price as provided in section 5 of this act.

(iii) "Telecommunications infrastructure improvement" means the construction or upgrade of real property or tangible personal property used to distribute digital communications signals for the transmission of voice, data, image, and video over distance. It includes, but is not limited to, activities such as the laying of fiber optic cable, the construction of terrestrial facilities to support digital communications by satellite, and the construction of towers and other facilities to support digital communications through nonwireline technologies.

(2) The department shall approve a tax credit application and allow a person to claim a tax credit under this section, if the Washington economic development and finance authority has recommended the tax credit application for approval to the department as provided in section 13 of this act.

(3)(a) A person is required to repay any tax credits received plus interest if the person who claims a tax credit under this section fails to:

(i) Construct a telecommunications infrastructure improvement in accordance with the specifications for bandwidth, rates, and other criteria that the person indicated the improvement would meet in the tax credit application; or

(ii) Complete the telecommunications infrastructure improvement within three years of the tax credit application being approved by the department.

(b) The Washington economic development finance authority shall be responsible for informing the department of revenue when a tax credit recipient must repay tax credits received plus interest.

(4) This section expires December 31, 2005.

NEW SECTION. Sec. 17. A new section is added to chapter 82.16 RCW to read as follows:

(1) An advanced telecommunications provider may be allowed credits against tax due under this chapter or chapter 82.04 RCW for expenses incurred in constructing telecommunications infrastructure improvements in high-cost locations, as provided in section 16 of this act.

(2) This section expires December 31, 2005.

PART 5

NEW PRICE CAP REGULATORY OPTION

NEW SECTION. Sec. 18. A new section is added to chapter 80.36 RCW to read as follows:

(1)(a) Notwithstanding the provisions of RCW 80.36.135, an incumbent local exchange carrier may elect to have the rates, terms, and conditions for its noncompetitive telecommunications services determined under the provisions of this section.

(b) Noncompetitive telecommunications services are telecommunications services that have not been determined to be competitive telecommunications services under RCW 80.36.330 and that have not been presumed to be competitive under subsection (7) of this section.

(c) For the purposes of this section, an "incumbent local exchange carrier" as defined in 47 U.S.C. Sec. 251(h)(1), means, with respect to an area, the local exchange carrier that:

(i) On February 8, 1996, provided telephone exchange service in such area; and

(ii)(A) On February 8, 1996, was deemed to be a member of the exchange carrier association under section 69.601(b) of the federal communication commission's regulations (47 C.F.R. 69.601(b)); or

(B) Is a person or entity that, on or after February 8, 1996, became a successor or assign of a member described in (c)(ii)(A) of this subsection.

(2) An incumbent local exchange carrier shall file a notice of its intent with the commission to be an electing company and to be regulated under this section.

(3) Upon such a filing, all rates, terms, and conditions for noncompetitive telecommunications services provided by the incumbent local exchange carrier that were contained in the tariffs and end-user contracts in effect on the date of election under this section shall be deemed fair, just, and reasonable.

(4) Nothing in this section restricts any customer's right to enforce any quality of service rules and standards. Not later than one hundred eighty days from the effective date of this act, the commission shall complete a proceeding to ensure that all such rules and standards are applied equally to all telecommunications providers.

(5) Nothing in this section restricts any telecommunications company's right to enforce wholesale rules and standards.

(6) The rates for telecommunications services that were in effect on the date of filing of a notice of election by an incumbent local exchange carrier under subsection (3) of this section shall be the maximum amount that such incumbent local exchange carrier may charge for such services. An electing company may adjust prices subject to this subsection effective on ten days' notice, without commission approval, so long as no price exceeds the maximum amount set by this subsection.

(7)(a) Whenever an electing company offers a service that was not available in a given exchange or wire center on the date that the company elected to be regulated under this section, the subsequent introduction of the service in the exchange or wire center shall be presumed to be an offering of a competitive telecommunications service if it is a new service. A new service is a service that provides a significant difference in transmission speed, capability, functionality, or reliability in comparison to the services that existed in the exchange or wire center on the date that a company elected to be regulated under this section.

(b) The provisions of (a) of this subsection shall not apply if the service introduced into an exchange or wire center area after the date that a company elected to be regulated under this section is a basic telecommunications service. The total amount charged a consumer for basic telecommunications services shall not exceed the price benchmarks set for basic telecommunications services under section 5 of this act.

(8) Price cap regulation shall replace the current rate-base, rate-of-return form of regulation by the commission of an electing company. The commission shall not consider rate-of-return, rate-base, or earnings of an electing company in connection with its oversight of an electing company's operations.

(9) An electing company under this section shall not be subject to the provisions of the following: RCW 80.04.130 (1) and (2), chapter 80.16 RCW, RCW 80.36.110, 80.36.140, and 80.36.150 (1) and (2).

Sec. 19. RCW 80.36.330 and 1998 c 337 s 6 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 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)(a) The commission may reclassify any competitive telecommunications service if reclassification would protect the public interest.

(b) If the reclassification is for a service provided by a company that has elected to be regulated under section 18 of this act, the company shall not charge a price for the reclassified service exceeding the amount charged for the service prior to its classification as a competitive service.

(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.

(9) In designating telecommunications services as competitive telecommunications services for a company that has elected to be regulated under section 18 of this act:

(a) The commission may make classifications apply to a particular telephone exchange or wire center area and to a specific customer class.

(b) In determining whether a service should be designated as a competitive telecommunications service for a given telephone exchange or wire center area, the commission shall give great weight to evidence showing that other telecommunications companies are offering like or similar services to a majority of customers located within the relevant customer class and telephone exchange or wire center area.

PART 6

INTERCONNECTION ENFORCEMENT AND PREVENTING OTHER

ANTICOMPETITIVE PRACTICES OR ACTS

NEW SECTION. Sec. 20. A new section is added to chapter 80.36 RCW to read as follows:

(1) The commission may handle on an expedited basis, as provided in this section, any complaint that a telecommunications company has violated:

(a) Any agreement approved by the commission under 47 U.S.C. Sec. 252(e); or

(b) Any act or practice which the commission may identify by rule as serving as a barrier to competitive entry in the telecommunications market.

(2) Before filing a complaint with the commission, the complainant must serve notice to the respondent telecommunications company of its intent to file a complaint with the commission alleging a violation under subsection (1) of this section and provide a period of five working days for the alleged violation to be corrected.

(3) If the respondent telecommunications company fails to cure the alleged violation within the five-day period, the complainant may file a complaint and application for expedited review with the commission and serve the respondent with the same. The complainant shall attach to the complaint a copy of the written notification that was served on the respondent telecommunications company and any written response that was received thereto.

(4) The respondent telecommunications company shall have five working days to answer the complaint and shall file its answer and any other responsive pleadings with the commission and serve the complainant with the same.

(5) Within five working days after a complaint and application for expedited review is filed with the commission, all parties shall serve on each other any discovery requests for the production of data. Each party shall have ten days to respond to the other party's requests. Any objections to the discovery requests shall be served on the other party and filed with the commission within five working days after receipt of the discovery request.

(6)(a) Once the respondent files an answer to the complaint, the commission or its designee shall determine within three working days whether to:

(i) Approve the application for expedited review and begin an expedited adjudicative proceeding under this section;

(ii) Deny the application and proceed with a regular adjudicative proceeding under RCW 80.04.110; or

(iii) Dismiss the application as frivolous and advanced without reasonable cause.

(b) If the commission or its designee dismisses the complaint as frivolous and advanced without reasonable cause, the commission or its designee shall require the complainant to reimburse the commission and the respondent for costs incurred to the date of dismissal in responding to the complaint.

(7) In determining whether to approve an application for expedited review, the commission or its designee shall consider whether the complainant is likely to suffer irreparable harm in its ability to serve customers if the alleged violation under subsection (1) of this section continues unabated.

(8) If an application for expedited review is approved:

(a) The commission shall designate a commissioner or other person to preside over the expedited adjudicative proceeding;

(b) Within fourteen days of approving the application for expedited review, the presiding officer shall schedule a prehearing conference which may be conducted by telephone. During the prehearing conference the presiding officer shall:

(i) Resolve all outstanding discovery disputes and establish a schedule for completion of any additional discovery; and

(ii) Confirm that an attempt to resolve the dispute through nonbinding mediation under section 21 of this act has been or is being conducted;

(c) The presiding officer shall schedule a hearing to commence within thirty-five days of the complaint being filed. During the hearing evidence may be presented by the parties and commission staff both orally and in written form. Any individual who testifies either orally or in written form must be available for cross-examination;

(d) The presiding officer shall issue a recommended decision in written form within sixty days of the complaint being filed. The presiding officer's recommended decision shall be based on the facts and no finding of an intent to impede market entry by a competitor shall be necessary in order to determine that a violation has occurred. The recommended decision shall set forth the reasoning for the decision and, if the recommended decision finds that a violation under subsection (1) of this section has occurred, directions and a deadline for correcting the violation. The recommended decision shall state the amount of any penalties imposed under section 22 of this act;

(e) The commission shall hear the arguments or comments of the parties regarding the recommended decision at a regular or special open public meeting. The parties may submit written comments to the commission prior to the meeting under the schedule established in the recommended decision. The commission shall conduct this session within ten days after the date of the recommended decision;

(f) The commission shall serve a final decision on the parties, in the form of a commission order, resolving the issues within ten days of the hearing conducted under (e) of this subsection. The order shall be based on the facts and no finding of an intent to impede market entry by a competitor shall be necessary in order to determine that a violation has occurred. The order shall set forth the reasoning for the final decision and, if the final decision finds that a violation under subsection (1) of this section has occurred, directions and a deadline for correcting the violation. The final decision shall state the amount of any penalties imposed under section 22 of this act;

(g) Within ten days after the commission serves its order under (f) of this subsection, the parties may petition for reconsideration. A petition for reconsideration is denied unless the commission by separate decision grants the petition within ten days after it is filed, or such longer time established by the commission secretary. If a party files a petition for reconsideration, the commission may, in its discretion, request that an answer be filed or call for additional comments, briefing, evidence, or argument from the parties. Filing a petition for reconsideration of the order does not stay the effect of the order.

(9) In conducting an expedited review of a complaint under this section, the commission may at any time issue an order granting emergency relief for the complainant if the commission finds that:

(a) The respondent has failed to file a timely answer to a complaint, has not met discovery deadlines, has failed to attend the required mediation session under section 21 of this act, has failed to attend required hearings, or has otherwise failed to comply with a request made by the presiding officer or by the commission;

(b) The complainant is likely to suffer irreparable harm in its ability to serve customers if emergency relief is not granted;

(d) An order granting emergency relief is in the public interest.

(10) An order for emergency relief shall direct the respondent telecommunications company to act or refrain from acting as the commission finds necessary to avoid, prevent, or mitigate the complained of harm. An order for emergency relief shall set a deadline for the respondent telecommunications company to comply with the order before penalties are imposed under section 22 of this act. The order granting emergency relief shall remain in effect until the commission issues a final order deciding the complaint filed under subsection (3) of this section.

NEW SECTION. Sec. 21. A new section is added to chapter 80.36 RCW to read as follows:

(1) Whenever the commission or its designee approves an application for expedited review of a complaint under section 20 of this act, the commission or its designee shall conduct at least one mediation session with the parties.

(2) The mediation session shall be held no later than the date scheduled for a prehearing conference under section 20(8) of this act. An individual with authority to negotiate and settle the matter shall be present from each party.

(3) The mediation session shall be confidential and any verbal statements made during the session shall not be disclosed.

(4) Any agreement of the parties resolving any disputed issue shall be submitted to the mediator for approval. Approval shall be granted unless the mediator finds that the agreement is based upon a mistake in material fact or that the agreement is not in the public interest. The approved agreement shall be deemed to constitute a final order of the commission, unless the commission enters its own order within six working days following the mediator's approval of the agreement.

(5) Any agreement or order resolving a dispute through mediation shall be considered part of the public record and shall be made available by the commission upon request.

(6) Willful or negligent failure to attend the mediation conference or to comply with the mediator's directions shall be reported to the mediator or the commission in writing.

NEW SECTION. Sec. 22. A new section is added to chapter 80.36 RCW to read as follows:

(1) If the commission or its designee finds that a violation under section 20(1) of this act has occurred, the commission may impose penalties up to one hundred thousand dollars per violation. Additionally, the commission or its designee may impose a penalty up to one hundred thousand dollars for each day that a violation continues beyond the deadline set in the final decision issued under section 20(8) of this act.

(2) If parties are able to resolve a dispute through mediation, as provided in section 21 of this act, there shall be no initial assessment of penalties. However, if a violation is not corrected by the date specified in any mediation agreement, the commission or its designee may impose a penalty up to one hundred thousand dollars for each day beyond the specified date that a violation continues.

(3) If the commission issues an order granting emergency relief under section 20(9) of this act and the respondent telecommunications company fails to comply with the deadline set in that order, then the commission or its designee may impose a penalty up to one hundred thousand dollars for each day beyond the deadline that noncompliance continues.

(4) In determining the amount of any penalties imposed under subsections (1) through (3) of this section, the commission or its designee shall take into account the appropriateness of the penalties with respect to the gravity of the violation, the size of the respondent telecommunications company's Washington operations, and the respondent telecommunications company's history of previous violations. In no case shall a penalty imposed per violation exceed one-half of one percent of a respondent telecommunications company's gross revenues from its Washington operations during the previous year. If a respondent Washington telecommunications company had no Washington operations during the previous year, then the penalty imposed per violation under this section shall not exceed five thousand dollars.

(5) Any imposition of penalties shall be by order of the commission, after providing for notice and a hearing.

(6) Penalties imposed under this section shall be in addition to any monetary payments ordered by the commission under an interconnection agreement and shall not restrict a complainant's ability to recover damages under any other remedy that may be available under any other provision of state or federal law.

(7) Payment of penalties imposed under this section shall be made to the public service revolving fund within thirty days of issuance by the commission of an order imposing penalties. The commission may petition a court of competent jurisdiction for enforcement of its order requiring payment of penalties imposed under this section.

NEW SECTION. Sec. 23. A new section is added to chapter 80.36 RCW to read as follows:

(1) To the extent that the provisions of this section and sections 20 through 22 of this act may differ with the provisions of chapter 34.05 RCW, the administrative procedure act, the provisions of this section and sections 20 through 22 of this act shall govern.

(2) In implementing the provisions of this section and sections 20 through 22 of this act, the commission may:

(a) Adopt rules as needed; and

(b) Obtain external resources and contract for outside persons to serve as presiding officers, mediators, or consultants for the purposes of facilitating the prompt disposition of expedited proceedings authorized under section 20 of this act.

PART 7

MISCELLANEOUS PROVISIONS

NEW SECTION. Sec. 24. Part headings used in this act are not any part of the law.

NEW SECTION. Sec. 25. 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.

NEW SECTION. Sec. 26. The following acts or parts of acts are each repealed:

(1) RCW 80.36.600 and 1998 c 337 s 1; and

(2) RCW 80.36.620 and 1998 c 337 s 3.