WSR 00-10-086

PROPOSED RULES

UTILITIES AND TRANSPORTATION

COMMISSION

[ Filed May 2, 2000, 12:11 p.m. ]

Original Notice.

Preproposal statement of inquiry was filed as WSR 99-23-110.

Title of Rule: WAC 480-120-071 Extensions of telecommunications service, WUTC Docket No. UT-991737.

Purpose: The purpose of the proposed rule is to maintain and advance the efficiency and availability of telecommunications service; ensure that customers pay only reasonable charges for telecommunications service; and promote diversity in the supply of telecommunications services and products in telecommunications markets throughout the state. In addition, the rule is necessary to provide services that are reasonably comparable in quality and price between urban and rural areas and that are priced at rates that are fair, just, reasonable and sufficient.

Statutory Authority for Adoption: RCW 80.01.040 General;

80.04.160 Utility; 80.36.300, 80.36.080, 80.36.610. Also 47 U.S.C. 254(b).

Summary: This proposed rule sets a uniform standard for telecommunications service extensions. It provides an incentive to build within county approved growth-management areas because there is a greater charge for service extensions outside those areas. It maintains and advances the efficiency and availability of telecommunications services by setting a uniform standard and providing that unreasonable extensions are not required. It ensures that customers pay only reasonable charges by setting a uniform standard with an upper limit that individual customers must pay and provides a means to recover costs not met by customer charges. It promotes diversity in the supply of telecommunications services and products by permitting extensions through nonwireline telecommunications services. It results in comparable services and prices between urban and rural areas and sets a policy that promotes fair, just, reasonable and sufficient rates. It permits companies to cooperate in providing services across exchange boundaries and does not affect the price telecommunications companies charge developers for extensions to and within developments.

Reasons Supporting Proposal: The commission is charged with establishing policies that maintain and advance the efficiency and availability of telecommunications service; ensure that customers pay only reasonable charges for telecommunications service; and promote diversity in the supply of telecommunications services and products in telecommunications markets throughout the state. The commission is also charged with establishing policies that result in the provision of services that are reasonably comparable in quality and price between urban and rural areas and that are priced at rates that are fair, just, reasonable and sufficient. This proposal implements the legislature's policies and state and federal law. See Purpose above.

Name of Agency Personnel Responsible for Drafting: Robert Shirley, 1300 South Evergreen Park Drive S.W., Olympia, WA 98504, (360) 664-1174; Implementation and Enforcement: Carole J. Washburn, Secretary, 1300 South Evergreen Park Drive S.W., Olympia, WA 98504, (360) 664-1174.

Name of Proponent: Washington Utilities and Transportation Commission, governmental.

Rule is not necessitated by federal law, federal or state court decision.

Explanation of Rule, its Purpose, and Anticipated Effects: The purpose is to provide uniform standards that promote legislative policies and implement policies established by congress. The proposed rule will maintain and advance the efficiency and availability of telecommunications service; ensure that customers pay only reasonable charges for telecommunications service; and promote diversity in the supply of telecommunications services and products in telecommunications markets throughout the state. The proposed rule will also promote the provision of services that are comparable in quality and price between urban and rural areas and that are priced at rates that are fair, just, reasonable and sufficient. This proposal implements the legislature's policies and state and federal law.

The anticipated effects are a simpler, uniform process for the public to request and companies to provide service extensions. When appropriate, it permits the use of nonwireline technologies for service extensions. Customers will pay a reasonable price for extensions and companies will recover their costs.

Proposal Changes the Following Existing Rules: This proposal would change WAC 480-120-071 by expanding on the present requirement that each company must have a tariff. The rule changes are described above.

A small business economic impact statement has been prepared under chapter 19.85 RCW.

Small Business Economic Impact Statement

Background: WAC 480-120-071 Line extension policy, requires telephone companies to file a line extension tariff. The proposed amendments would add requirements which could cause all telephone companies to incur additional costs. Accordingly, a small business economic impact statement is required to determine whether there will be a disproportionate burden placed on small businesses.

Summary of the Proposed Amendments: Companies that file tariffs are required to provide extensions of service to customers requesting service and willing to pay in accordance with the rule. The extension of service may be fulfilled either through traditional wireline service or through a contract with a radio communications service company. Customers may be required to pay up to forty times the basic service rate of the provider. The remainder of cost incurred by the company, not including the cost of reinforcement of facilities, can be recovered by an increase in terminating access charges. Exceptions to the rule apply.

Purpose and Process: RCW 19.85.040 requires that the economic impacts of a proposed rule on a small company be compared with the economic impacts of the rule on the largest companies, or those which comprise the top 10% of the local exchange telecommunications industry. RCW 19.85.020 defines small companies as those that have fifty or fewer employees.

On February 25, 2000, commission staff sent out the following small business economic impact statement questionnaire to all local and competitive telephone companies registered in the state.

February 24, 2000

To: All Local Exchange Companies
From: Gargi Charya, Telecommunications Analyst
Re: Small Business Economic Impact Statement
UT-991737 Service Extension Rulemaking

The Washington Utilities and Transportation Commission requests your assistance in preparation of the Small Business Economic Impact Statement (SBEIS) for the rulemaking in Docket No. UT-991737, Extension of Service. The SBEIS is a requirement of Washington's Regulatory Fairness Act, RCW 19.85, and is intended to focus an agency's attention on the economic impact of proposed rules on affected businesses, involve affected businesses in developing rules, and minimize any disproportionate impact of rules on small businesses. Your assistance is appreciated.

Before adopting a rule that will impose more than minor costs on an industry, the Commission is asked to analyze the compliance costs for both large and small businesses (including lost sales and revenue), involve small businesses in the development of the rule, take feasible steps to reduce the economic impact of the rule on small businesses, and prepare a Small Business Economic Impact Statement. A "small business" is any profit-making entity that has 50 or fewer employees.

In order to measure the impact on small businesses, the Commission also needs information from larger businesses. The Commission requests all local exchange companies to complete and return the SBEIS Questionnaire to the Commission by March 15, 2000.

If you have any questions or comments, please contact Gargi Charya, Telecommunications Analyst, at 360-664-1349.

Sincerely,

CAROLE J. WASHBURN

Secretary

SBEIS Questionnaire for All Local Exchange Companies
Company Name:


Company Contact:


Contact Telephone:


Contact Email:


1. Does your company employ: Fewer than 51 people?___

More than 50?___

2. For the purposes of this rule, approximately how much would it cost your company to:
File a Tariff or Price List: $____________
Provide for Extension of Service $____________
Notify Customers $____________
Make Billing Changes $____________
Other (please specify) $____________
3. Would compliance with this rule cause a loss of sales?

_____Yes ______No

Approximately how much? $____________
If "Yes" why would sales be lost? ________________
4. Would compliance with this rule cause a loss of revenue? ______Yes ______No
Approximately how much? $____________
If "yes," why would revenue be lost? ________________
5. In comparison with the cost incurred from prior cases of extension of service, would the cost of compliance for sections (2), (3), (4) and (5):
Increase? ____________________________
Decrease? ____________________________
The change in cost (increase or decrease) would be:
Substantial _____________
Moderate _____________
Minor _____________
6. Would access revenue increase? ____Yes? ____No?
Approximately how much? $______________
7. Would access expenses increase? ____Yes? ____No?
Approximately how much? $_______________

Thank you for your participation. If you have any questions, please contact Gargi Charya at (360) 664-1349. You may FAX your response to (360) 586-1150.

PLEASE Return Questionnaire to the Commission by March 15, 2000.

Return Address:

Gargi Charya

Washington Utilities and Transportation Commission

1300 South Evergreen Park Drive, SW

P.O. Box 47250

Olympia, WA 98504-7250

Responses were requested by March 15, 2000, and received from three incumbent local exchange companies one of which is defined as a small business (as shown below)1.


Small Business Economic Impact Statement Cost Study

Company Name Small* Large* Cost to File a

Tariff or Price List ($)

Provide for

Extension of Service ($)

Notify Customers ($) Make Billing

Changes ($)

Other

($)

Concentric Carrier Services, Inc. X 2500 2500 50,000 25,000
DSLnet Communications, LLC. X 5000 2000-3000 5000
Global Crossing Local Services, Inc./Global Crossing Telemanagement Inc. X 500 500 2000 1000
GTE Northwest Incorporated X 1800 per 1/10 mile
Intermedia Communications Inc. X 5000 2000-3000 5000
McLeodUSA Telecommunications Service X 2000
Megsinet - CLEC, Inc. X 5000 2000-3000 5000
New Edge Network, Inc. X 1500 2500 2500
Rhythms Links Inc. X 2500 1000
Talk.Com Holding Corp. X 2500 2000-3000 5000
U S West Communications, Inc. X 3000 6,000,000 20,000-500,000 10,000-15,000
Universal Access, Inc. X 2000 10,000 500 1500
Ycom Networks X 1000 250
Z-Tel Communications, Inc. X 5000 2000-3000 5000

*A small company employs fifty or fewer people. A large company employs more than fifty.

The small telephone companies provided little information from which the commission could determine whether there would be significant cost for them to comply. Commission staff's experience with telephone companies in the state provides some basis for a general opinion regarding the cost of compliance. Without direct industry input and based on one data observation, the conclusions must be somewhat tentative. The data are consistent with the commission's experience in other settings, however, and do appear to be within a reasonable range.

Cost of Compliance: In order to comply with the new requirements, local exchange telephone companies reported the following costs. Estimates are derived from analysis of the March 15, 2000, industry response and include the cost of all company extensions for one year. See Table above for company specific information.

Cost to

Small Company ($)

Cost to

Large Companies ($)

Tariff/Price List Filing 1000 3000
Extension of Service Unknown 3,009,000
Billing Changes 250 15,000
Total2 1,250 3,027,000

Comparison of Costs: The available industry data indicates that, the small company would not incur a disproportionate share of the cost as a result of the proposed amendments. The relative effect on businesses is determined by the cost per one hundred dollars of revenue. Figures for company revenue are from the 1998 Annual Reports filed with the commission3. For every $100 of small company revenue, the rule would impose a cost of two cents. For every $100 of large company revenue, the rule would impose a cost of forty-two cents. Per $100 of revenue, the rule would impose a burden twenty-one times greater on large companies than it would on small companies.

In cases where the rule would pertain to small companies, the greatest burden would be the administrative cost associated with tariff or price list filing and billing changes. However, as stated in the rule, all costs incurred by the company, aside from costs associated with the reinforcement of facilities, are eventually recovered through access charges.

Lost Sales or Revenue: None of the proposed changes would directly result in loss of sales or revenue.

Impact of Proposed Amendments: As a result of the provision allowing all companies to recover their costs through an increase in access charges, the rule as a whole would have minimal impact on companies. However, opportunity costs are incurred by both the small and the large companies. As a result of extending service to areas outside urban growth areas, companies with opportunities to invest in urban areas face the prospect of decreased return at least temporarily. All regulated companies are entitled to general rates that provide the opportunity to earn a return that is fair, just, reasonable and sufficient. Nonetheless, since the magnitude of investment is less for a smaller company than the magnitude of investment for a company with greater scope the impact is not disproportionate.

Conclusion: All affected telephone companies have been given ample opportunity to participate in the rule making and to provide pertinent information to commission staff. Only one small telephone company has taken advantage of the opportunity to complete the SBEIS questionnaire.

As a result, although this small company would not be disproportionately affected, no broad conclusions can be drawn.

1Additionally, questionnaires were completed by eleven competitive local exchange companies (CLECs), however, since CLECs are not required to file tariffs, they are exempt from complying with the proposed amendments for extension of service. The burden of compliance falls mainly on the incumbent company. Therefore, to avoid a distortion of total cost, information provided by the CLECs is not incorporated into the SBEIS.

2 All costs, excluding reinforcement costs, will be recovered under the rule.

3 Total 1998 revenues: Ycomm - $5,443,017.00; U S West - $997,555,634.00; GTE Northwest - $444,139,000.00.

A copy of the statement may be obtained by writing to Carole Washburn, Secretary, Washington Utilities and Transportation Commission, 1300 South Evergreen Park Drive S.W., P.O. Box 47250, Olympia, WA 98504, phone (360) 664-1292, fax (360) 586-1150.

RCW 34.05.328 does not apply to this rule adoption. This commission is not an agency to which RCW 34.05.328 applies.

Hearing Location: Commission Hearing Room, 1300 South Evergreen Park Drive S.W., Olympia, WA 98504, on June 16, 2000, at 1:30 p.m.

Assistance for Persons with Disabilities: Contact Pat Valentine by Wednesday, June 14, 2000, TDD (360) 586-8203.

Submit Written Comments to: Secretary, Washington Utilities and Transportation Commission, P.O. Box 47250, Olympia, WA 98504-7250, fax (360) 586-1150, by May 25, 2000.

Date of Intended Adoption: June 16, 2000.

May 1, 2000

Carole J. Washburn

Secretary

OTS-4015.1


AMENDATORY SECTION(Amending Order R-25, filed 5/5/71)

WAC 480-120-071
((Line extension policy.)) Extension of service.

((All utilities shall have on file as part of their established tariff, a line extension schedule stating the terms and conditions under which extensions of its lines and services will be made to render service to applicants.)) (1) Extensions of service.

(a) Each company required to file tariffs under RCW 80.36.100 must have on file an extension of service tariff and must extend service consistent with its tariff and this section. An extension of service is an initial extension of company distribution plant outside an approved county urban growth area established under RCW 36.70A.110, or outside municipal boundaries not contained within an approved county urban growth area established under RCW 36.70A.110, that extends more than 1/10 mile, and is constructed at the request of one or more applicants that pay a charge under this section. Service extensions must be completed within a reasonable time after a request is made and the customer makes the initial payment. Extensions of service do not include customer trenches, conduits or other construction for placement of company-provided facilities from the customer property line to the premises to be served. For extensions to neighboring exchange facilities, see subsection (4) of this section. The requirements of subsection (5) of this section apply to local exchange companies required to file either tariffs under RCW 80.36.100, or price lists under RCW 80.36.320.

(b) Extension of service is required to premises unless the company demonstrates occupancy is temporary. In the case of new construction commenced after the effective date of this section, extension of service is required only if the applicant has permission to build from the applicable local government and the need for service is not temporary.

(c) Any company required to extend service under this section may do so by extending distribution plant or by making a service and financial agreement with a radio communications service company to provide service. The services provided through a radio communications service company must be reasonably comparable services at reasonably comparable prices compared to services provided through wireline distribution facilities in the area of the exchange where service has been requested. In addition, the services must include all elements of basic service defined in RCW 80.36.600. A company extending service through a service agreement with a radio communications service company may file a tariff as permitted under subsection (3) of this section to recover the lesser of the actual direct cost to extend the service through the cooperative agreement or the direct cost of extending wireline distribution plant.

(2) Service extension charge to applicants.

(a)(i) The charge to applicants for service extensions must include an initial payment to complete the order. The maximum initial payment to complete the order shall be an amount equal to twenty times the basic monthly service rate exclusive of all fees, taxes or other charges.

A per-month payment beginning with the first month of service will be charged once service is provided. The maximum per-month payment for a period of twenty months will be an amount equal to the basic monthly service rate, exclusive of all fees, taxes or other charges. Customers may pay the entire amount at any time, in lieu of monthly payments.

Companies may impose the initial fee and the per-month fee on any applicant requesting service from a service extension that is less than five years old measured from the date of the initial service provided by the extension.

(ii) Customers are responsible for providing or paying the cost of trenching, conduit, or other structures required for placement of company provided drop wire from the customer's property line to the premises.

(b) Exceptions to (a)(i) of this subsection:

(i) No company may levy a service extension charge against an applicant or customer located within an urban growth area.

(ii) No company may levy a service extension charge against an applicant or customer outside an urban growth area that is served by an extension that is less than 1/10 mile in length in total.

(iii) A company may charge the cost for a wireline service extension to an applicant or customer if there is available radio communication service that is reasonably comparable in service and price to the company's wireline service in the area of the exchange where service has been requested. The radio communication service must include all elements of basic service defined in RCW 80.36.600. The cost of a service extension, for the purposes of this section, is the direct and indirect costs of the material and labor to plan and construct the facilities including, but not limited to, drop wire, permitting fees, rights of way fees, and payments to subcontractors, and does not include the cost of reinforcement, network upgrade, or similar costs.

(c) Waiver of subsection (2)(a) of this section.

(i) A company may petition for a waiver of subsection (2)(a) of this section in order to charge an applicant the direct cost to extend service if it is unreasonable for the direct cost of the extension of service to be borne by rates permitted under subsection (3) of this section.

(ii) In determining whether providing an extension is unreasonable and granting a waiver is consistent with the public interest, the commission will consider:

(A) The total direct cost of the extension;

(B) The number of customers to be served;

(C) The comparative cost and capabilities of radio communication;

(D) Technological difficulties and physical barriers presented by the requested extensions;

(E) The effect on the individuals and communities involved;

(F) The effect on the public switched network; and

(G) The effect on the company.

(3) Cost recovery for extensions of service.

(a) A company with a terminating access tariff under WAC 480-120-540 may file tariffs to include a service extension element in an amount necessary to recover the cost of an extension of service. The cost of a service extension, for the purposes of this section, is the direct and indirect costs of the material and labor to plan and construct the facilities including, but not limited to, drop wire, permitting fees, rights of way fees, and payments to subcontractors, and does not include the cost of reinforcement, network upgrade, or similar costs. The tariff may not recover costs covered by applicant or customer payments for service extensions, federal universal service funds, or any similar funds or grants from other sources. The company must file the tariff to be effective only so long as necessary to recover the costs allowed under this section.

(b) Companies may recover costs by filing a tariff under (b)(i) or (ii) of this subsection. In the case of a Class B company, placement of the tariff on the agenda of a commission open meeting constitutes notice of an opportunity to be heard on the need for any reporting requirements related to a tariff based on estimated costs.

(i) A company may file such a proposed tariff to recover fifty percent of the estimated cost of an extension after it obtains all permits necessary for construction related to the extension of service. Extensions of service must be completed within twelve months of the effective date of a tariff that uses estimated costs. The tariff based on estimates is null and void at the end of that twelve-month period if the extension of service is not completed, and the company must within thirty days thereafter file a tariff to offset the amounts collected; however, the commission may permit the tariff to remain in effect after twelve months for good cause shown. After completion of an extension subject to a tariff based on estimated costs, the company may file a tariff to recover the cost of the extension less any amount already recovered or, in the event of an over collection, must file a tariff to reduce terminating access sufficient to offset the amount over collected through the initial tariff.

Class A companies with a service extension tariff based on estimated costs in effect must report quarterly on collections, expenditures, and construction timetables and progress, including a final report after completion of the extension and termination of the tariff. Class B companies with a service extension tariff based on estimated costs in effect must make the same report every six months if ordered by the commission.

(ii) A company may file a tariff to recover the cost of a service extension at any time within two years after completion of an extension and may accumulate the cost of multiple line extensions before filing a tariff.

(c) The commission will review the cost justification for the tariffs and approve the tariffs if they are consistent with this section and in the public interest. The commission will not conduct an earnings review of the company's operations for the purpose of reviewing the proposed tariffs.

(4) Extension of service to neighboring exchange facilities. When an applicant is in the exchange of one company and the property line of the applicant is within one-half mile of facilities in a neighboring exchange, the company may elect to extend service to the neighboring exchange if the company operating in the neighboring exchange agrees and if the extension cost to the extending company would be less than extending to distribution plant in the applicant's exchange. Under this arrangement, an applicant will become a customer of and receive service from the neighboring exchange at regular local service rates and the customer's local calling capability will be that which is provided in the neighboring exchange. The newly constructed facilities will become the property of the serving company, but the exchange boundary will remain unchanged. The charge to the customer shall be determined in the same manner as in subsection (2) of this section. The company that constructs the extension may file a tariff under subsection (3) of this section to recover the cost of the extension.

(5) Extensions to developments. This subsection applies to all geographic areas of the state and all local exchange carriers. A development is the platting or other approval for construction on the same or on contiguous properties of four or more residential units and any commercial or industrial units. The price local exchange companies may charge for extending service to and within developments is not covered by this section. Companies may not recover under subsection (3) of this section the cost of service extensions to developments or within developments.

[Order R-25, 480-120-071, filed 5/5/71. Formerly WAC 480-120-170.]

Washington State Code Reviser's Office