[atlas:bill]

AN ACT Relating to the modification of state telecommunications regulation; amending RCW 80.36.330; adding new sections to chapter 80.36 RCW; creating a new section; and prescribing penalties.

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 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 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

NEW PRICE CAP REGULATORY OPTION

NEW SECTION. Sec. 2. 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 basic and noncompetitive telecommunications services determined under the provisions of this section.

(b) Basic telecommunications services are as defined in RCW 80.36.600(7)(b).

(i) Are not basic telecommunications services;

(ii) Have not been determined to be competitive telecommunications services under RCW 80.36.330; and

(iii) Have not been presumed to be competitive under subsection (6) of this section.

(d) 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 (d)(ii)(A) of this subsection.

(2)(a) 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.

(b) Upon such a filing, all rates, terms, and conditions for basic and noncompetitive telecommunications services provided by the incumbent local exchange carrier that were contained in the tariffs and end-user contracts that were in effect on January 1, 1999, shall be deemed fair, just, and reasonable.

(c) An electing company's election to be regulated under this section is permanent and a return to rate-of-return, rate-based regulation is not permitted. All liability associated with electing regulation under this section is the responsibility of the electing company.

(3) 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.

(4) Nothing in this section restricts any telecommunications company's right to enforce wholesale rules and standards, including, but not limited to, those contained in carrier-to-carrier contracts regarding pricing of unbundled network elements and discounts for resold services.

(5)(a) The monthly rates for basic telecommunications services that were in effect on January 1, 1999, shall be the maximum amount that an electing company may charge for basic services.

(b) The monthly rates for noncompetitive telecommunications services that were in effect on January 1, 1999, shall be the maximum amount that an electing company may charge for noncompetitive services for a three-year period following the date that the electing company filed an election to be regulated under this section. After this three-year period, the monthly rates for noncompetitive telecommunications services provided to:

(i) Residential customers may not be increased by more than fifty cents in any one year and may not be increased by more than one dollar over any consecutive three-year period; and

(ii) Business customers may not be increased by more than one dollar in any one year and may not be increased by more than two dollars over any consecutive three-year period.

(c) 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.

(d) Monthly rates do not include government-mandated charges, including, but not limited to, charges imposed for excise or gross receipts taxes, E911 or 911 service, the Washington telephone assistance program, or universal service.

(6)(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, or functionality 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.

(7) Price cap regulation shall replace the current rate-base, rate-of-return form of regulation by the commission of an electing company. An electing company shall not be subject to rate-of-return, rate-based regulation, or earnings review, and the commission shall have no authority in such matters over an electing company.

(8) An electing company under this section shall not be subject to the provisions of the following: RCW 80.04.130 (1) and (2), RCW 80.04.300 through 80.04.360, chapter 80.16 RCW, RCW 80.36.110, 80.36.140, and 80.36.150 (1) through (4).

Sec. 3. 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) ((~~The commission may reclassify any competitive telecommunications service if reclassification would protect the public interest.~~)) (a) Not sooner than one year after a service has been classified as competitive, the commission may, on its own motion or in response to a customer's petition, reclassify any competitive telecommunications service if:

(i) The commission finds, after de novo review, that the service in question is no longer subject to effective competition; and

(ii) Reclassification would protect the public interest.

(b) The commission may not reclassify a service that is presumed to be competitive under section 2(6) of this act.

(c) If a reclassification is for a service provided by a company that has elected to be regulated under section 2 of this act, the company may not charge a price for the reclassified service exceeding the following:

(i) The amount charged for the service on January 1, 1999, if the reclassification occurs before January 1, 2002;

(ii) The amount charged for the service on January 1, 1999, plus an additional one dollar for each consecutive three-year period following January 1, 2002, if the reclassification is for a residential service and the reclassification occurs on or after January 1, 2002; and

(iii) The amount charged for the service on January 1, 1999, plus an additional two dollars for each consecutive three-year period following January 1, 2002, if the reclassification is for a business service and the reclassification occurs on or after January 1, 2002.

(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 2 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.

(c) The commission shall enter a final order with respect to any motion or petition for classification or reclassification of a service within ninety days from the date of filing.

PART 3

INTERCONNECTION ENFORCEMENT AND PREVENTING OTHER

ANTICOMPETITIVE PRACTICES OR ACTS

NEW SECTION. Sec. 4. 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:

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

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

(2) A person may file a complaint alleging a violation under subsection (1) of this section and an application for expedited review with the commission and serve the respondent with the same.

(3) 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.

(4) 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 fifteen 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.

(5)(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, including reasonable attorneys' fees, incurred to the date of dismissal in responding to the complaint.

(6) 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.

(7) 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 5 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 6 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 6 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.

(8)(a) 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:

(i) 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 5 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;

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

(iii) The emergency relief sought is technically feasible; and

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

(b) 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 6 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 (2) of this section.

NEW SECTION. Sec. 5. 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 4 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 4(7) 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. 6. 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 4(1) of this act has occurred, the commission may impose a penalty. Additionally, the commission or its designee may impose a penalty for each day that a violation continues beyond the deadline set in the final decision issued under section 4(7) of this act.

(2) If parties are able to resolve a dispute through mediation, as provided in section 5 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 for each day beyond the specified date that a violation continues.

(3) If the commission issues an order granting emergency relief under section 4(8) 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 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 penalties 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 penalties imposed per violation under this section shall not exceed five thousand dollars. For purposes of this section, "violation" means all related matters alleged in a complaint filed under section 4 of this act.

(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 are in lieu of penalties available under RCW 80.04.380 but 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 paid into the treasury of the state and credited to the state general 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. 7. 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 4 through 6 of this act may differ with the provisions of chapter 34.05 RCW, the administrative procedure act, the provisions of this section and sections 4 through 6 of this act shall govern.

(2) In implementing the provisions of this section and sections 4 through 6 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 4 of this act.

PART 4

MISCELLANEOUS PROVISIONS

NEW SECTION. Sec. 8. Part headings used in this act are not any part of the law.

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