AN ACT Relating to the implementation of the federal telecommunications act of 1996; amending RCW 80.36.610; adding new sections to chapter 80.36 RCW; creating a new section; prescribing penalties; and repealing RCW 80.36.600.

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

NEW SECTION. Sec. 1. The legislature finds that pursuant to section 1, chapter 337, Laws of 1998, the utilities and transportation commission has prepared a plan to implement a program for preservation and advancement of universal telecommunications service and has submitted a report describing that plan to the legislature as required.

NEW SECTION. Sec. 1. Universal telephone service, which is the wide availability of basic telephone service at reasonably affordable rates, has long been the policy of the state of Washington and is essential to the economic well-being of the state. In order to comply with the 1996 federal telecommunications act, the state must modify its universal service program so as to meet the twin goals, under the federal act, of competition and reasonable rates for basic phone service. In making the transition to a more competitive telecommunications market, the legislature intends to minimize the shifting of costs among classes of customers, so that no class of customers bears a disproportionately adverse change in its share of universal service costs.

NEW SECTION. Sec. 2. (1) The commission shall implement a program for the preservation and advancement of universal telecommunications service that is consistent with the requirements of the federal telecommunications act of 1996 (47 U.S.C. Sec. 254).

(2) The purposes of the program are to:

(a) Benefit all telecommunications ratepayers in the state by ensuring that there exists a modern telecommunications network to which all citizens and businesses have reasonable access;

(b) Provide specific, sufficient, competitively neutral, and technologically neutral support for all telecommunications lines used to provide basic telecommunications services for customers of telecommunications companies in high-cost locations;

(c) Replace the existing system of universal service provisioning, that relies on implicit subsidies for companies serving customers in high-cost locations, with a program that relies on explicit contributions to a fund, transfers from which will preserve and enhance a ubiquitous telecommunications network by ensuring rates and services in high-cost locations that are reasonably comparable to those in other areas; and

(d) Facilitate the development of competition in both urban and rural areas of the state.

NEW SECTION. Sec. 3. The definitions in this section apply throughout sections 2 through 14 of this act unless the context clearly requires otherwise.

(1) "Administrator" means the administrator of the universal service fund designated under section 6(5) of this act.

(2) "Benchmark" means an amount per high-cost location, determined by the commission by rule or order, above which universal service funds will be available to support the provision of service in the high-cost location.

(3) "End user telecommunications revenue" means the telecommunications carrier's international, interstate, and intrastate revenue derived from Washington end users for telecommunications and telecommunications services.

(4) "Fund" means the universal service fund created by section 6 of this act.

(5) "High-cost location" means a place where the cost of providing telecommunications services is greater than a benchmark established by the commission.

(6) "Program" means the universal telecommunications service program created in sections 2 through 14 of this act.

(7) "Telecommunications" has the same meaning as that term is defined in 47 U.S.C. Sec. 154(43).

(8) "Telecommunications carrier" has the same meaning as that term is defined in 47 U.S.C. Sec. 154(44).

(9) "Telecommunications services" has the same meaning as that term is defined in 47 U.S.C. Sec. 154(46).

NEW SECTION. Sec. 4. The commission shall implement the program authorized by sections 2 through 14 of this act to support the following basic telecommunications services:

(1) Single-party service;

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

(3) Support for local usage;

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

(5) Access to emergency services (E-911);

(6) Access to operator services;

(7) Access to interexchange services;

(8) Access to directory assistance; and

(9) Toll blocking services and toll limitation services at such time as toll limitation is technically feasible.

NEW SECTION. Sec. 5. (1) The universal service fund is created. All receipts from contributions from telecommunications carriers as provided in subsection (2) of this section, penalties imposed under section 11 of this act, and other moneys authorized to be deposited in the fund by law or by order of any court with proper jurisdiction must be deposited into the fund. The fund shall be outside the state treasury. An appropriation is not required for expenditures from the fund.

(2) The commission shall establish by rule a specific, predictable, and sufficient mechanism to provide support for the universal service fund. Not earlier than July 1, 2000, every telecommunications carrier shall contribute to the fund on an equitable and nondiscriminatory basis. The commission shall establish each carrier's contribution annually by order based on each carrier's proportionate share of total end user telecommunications revenue.

(3) A carrier's contribution to the fund shall not exceed three percent of its gross end-user telecommunications revenue. If three percent of total end-user telecommunications revenue of all carriers is insufficient to fund the universal program at the commission determined level of support, the commission shall adjust the benchmark, or benchmarks, upward.

(4) Any carrier that discloses on its customers' bills the effect of its contribution to the fund shall also disclose the effect, whether direct or indirect, on customers' bills of reductions in rates by eligible telecommunications carriers to offset the additional universal service support.

(5) The fund shall be administered by a fund administrator designated by the commission through a competitive bid process and is subject to the guidance and direction of the commission. The commission shall establish and approve the budget for the administrator and the administrative expenses shall be paid out of the fund when such expenses have been approved by the commission. The administrator may establish an account or accounts in one or more independent financial institutions. Moneys in the state universal service fund shall be used only to fund the universal service support determined by the commission to be necessary to ensure that affordable basic telecommunications service is available in high-cost locations in the state, and to pay the costs of administration of the state universal service program.

NEW SECTION. Sec. 6. The commission shall designate telecommunications carriers that are eligible to receive support for their provision of service in high-cost locations and establish criteria for making such designations. In making such designations, the commission may require the carriers to serve all persons requesting service within the geographic area for which designation is made.

NEW SECTION. Sec. 7. (1) Not earlier than July 1, 2000, the commission shall provide support for eligible telecommunications carriers serving high-cost locations. In determining the amount of support required by eligible carriers, the commission shall take into consideration any moneys received by those carriers from any federal universal service support program.

(2) The commission shall establish by rule: (a) The criteria and method for making distributions from the fund to eligible telecommunications carriers serving high-cost locations; and (b) the method for establishing benchmarks.

(3) The commission shall periodically audit, or contract for an audit of, telecommunications carriers that receive support under this section to ensure that they are using that support only for the purposes of the program.

NEW SECTION. Sec. 8. In establishing the program, the commission shall adopt rules that include the following:

(1) Provisions for the operation of the universal service fund created by section 6 of this act;

(2) Criteria for the selection of an independent third party administrator of the fund; and

(3) Reporting requirements for telecommunications carriers.

NEW SECTION. Sec. 9. The commission shall coordinate administration of the program with any federal universal service program and may administer the federal fund in conjunction with the state program if so authorized by federal law.

NEW SECTION. Sec. 10. (1) The administrator of the fund may request, and each telecommunications carrier shall provide, information the commission or the administrator deems necessary for the implementation and operation of the program.

(2) Any person may submit information under RCW 80.04.095 and the administrator shall treat such information according to the terms of RCW 80.04.095.

NEW SECTION. Sec. 11. (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 program. The penalties shall be calculated as a percentage of the carrier's required contribution for the previous calendar year.

(2) Any penalties imposed by the commission under this section or imposed for violation of rules adopted under sections 2 through 14 of this act or RCW 80.36.610 shall be payable to the universal service fund created by section 6 of this act.

(3) In addition to any penalties imposed under this section, the administrator may withhold payments to any eligible telecommunications carrier that fails to submit information required to be submitted under sections 2 through 14 of this act.

NEW SECTION. Sec. 12. 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. 13. The commission shall develop measures to evaluate, and shall evaluate, the program. In the evaluation, the commission shall attempt to assess whether rates for high-cost locations remain comparable to those in low-cost locations, how implementation of the program has impacted the development of competition in both high-cost and low-cost locations, whether the overall rates for residential and small business customers are affordable, and whether the fund is appropriately sized. The commission shall report its findings annually to the committees of the senate and house of representatives with jurisdiction over telecommunications services by December 31st of each year.

Sec. 14. 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)). 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~~)).

NEW SECTION. Sec. 15. 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. 16. Sections 2 through 14 of this act are each added to chapter 80.36 RCW.

NEW SECTION. Sec. 17. RCW 80.36.600 (Universal service program‑-Planning and preparation‑-Commission's duties‑-Approval of legislature required‑-Definitions) and 1998 c 337 s 1 are each repealed.