Implementation of the Telecommunications Act of 1996; Doc. No. M-00960799 [26 Pa.B. 1456] Public meeting held
March 14, 1996Commissioners Present: John M. Quain, Chairperson--Statement follows; Lisa Crutchfield, Vice Chairperson--Statement follows; John Hanger; David W. Rolka--Statement follows; Robert K. Bloom
Tentative Decision By the Commission:
A. General Background
On February 8, 1996, President Clinton signed the Telecommunications Act of 1996 (act) into law. The act is a landmark piece of legislation which for the first time in 62 years comprehensively amends the Federal law which governs the provision of telephone service throughout the Nation. The far-reaching nature of the act and its profound effects on the future regulation of telecommunications services at both the State and Federal levels are best summarized in the Congressional Conference Report which states that the purpose of the act is:
. . . To provide for a pro-competitive, de-regulatory national policy framework designed to accelerate rapidly private sector deployment of advanced telecommunications and information technologies and services to all Americans by opening all telecommunications markets to competition, and for other purposes. . . .
As reflected in the stated purpose, the act sets forth a National policy framework to be implemented and coordinated in cooperative fashion by the Federal Communications Commission (FCC) and the various State commissions. The primary themes of this National telecommunications policy framework, as reflected in the stated purpose, are as follows: (1) to move away from a fully regulated telecommunications business environment towards a deregulated fully competitive business environment in all markets and submarkets; (2) to accelerate advanced deployment of the Nation's telecommunications infrastructure and (3) to assure universal service to all Americans through equal access to the Nation's telecommunications infrastructure.
In this regard, the underlying themes of the act are consistent with the Commonwealth's telecommunications policy framework as set forth in Chapter 30 of the Public Utility Code (66 Pa.C.S. §§ 3001 et seq.). Because of the parallel courses established by the act and Chapter 30, it is clear that through its efforts to implement Chapter 30, Pennsylvania has already made substantial progress in the direction now required by the National policy framework, as established in the act.
This is not to say that the act will not have a significant effect on the Commission's future regulation of the telecommunications industry. It certainly will. However, the act will not require a fundamental change in direction or focus, but instead will require the Commission to take a number of steps, both internally and externally, to assure the level of cooperation and coordination between the Commission and the FCC envisioned, and indeed required, by the act in implementing the National policy framework. However, as long as the Commission continues on its course as directed under its State legislative mandate, the required implementation steps will be more in the form of adjustments rather than overhaul or preemption.
Within this scenario, there are many provisions of the act which raise questions as to what steps, if any, the Commission must take to assure that its regulation of the telecommunications industry is fully consistent with Federal law. These provisions of the act can be divided into two categories for purposes of discussion. First, there are preemptive provisions which appear to eliminate or restrict the ability of the Commission to regulate or act in a certain manner. Second, there are enabling provisions of the act which assign new areas of activity to the states and appear to assign new responsibilities to the Commission in participating in the implementation of the National policy framework.
In this regard, although the ultimate goal of the act is to move toward a deregulated, competitive environment, the transition process envisioned by the act is clearly one involving very complex and far reaching regulatory activity by both the FCC and various State commissions--regulatory activity which appears, at least on its face, to be more complex and resource and time consuming than previously encountered by the Commission in some areas. While ultimately, through development of a fully competitive business environment in all telecommunications markets, the Commission's and FCC's regulatory roles should start to significantly decrease, the period of transition involves a quickly changing but extremely active role by the Commission in participating in the implementation of both State and Federal law.
Through issuance of this Tentative Decision, we will briefly discuss the provisions of the act which we have identified as requiring potential substantive modification or restriction of past or future Commission action or otherwise affect the manner in which the Commission conducts its business in its day-to-day regulation of the telecommunications industry. This decision is issued in tentative form in order to solicit and consider the comments of all interested parties before the Commission takes any final steps in furtherance of implementation of the act. In this regard, the issues discussed are not intended to represent an exhaustive list and we welcome comment on any issue pertaining to any provision of the act which we may have overlooked and which parties believe to require further Commission action or scrutiny.
B. Discussion of Issues
1. Entry a. Certificates of Public Convenience
The most apparent, immediately significant, express preemption in the act is found in section 253(a) of the act which provides as follows:
(a) IN GENERAL.-No state or local statute or regulation, or other state or local legal requirement, may prohibit or have the effect of prohibiting the ability of any entity to provide any interstate or intrastate telecommunications service.
Under Pennsylvania law, the Commission regulates entry through issuance of certificates of public convenience under 66 Pa.C.S. §§ 1101 and 1103. Under section 1103, the Commission may only approve the entry of a carrier ''if the commission shall find or determine that the granting of such certificate is necessary or proper for the service, accommodation, convenience or safety of the public'' (public interest finding). Under the broad language of section 253(a) of the act, it appears that the Commission is prohibited from restricting the entry or preventing the continued operations of a telecommunications service provider whether or not the Commission finds the provision of services by the carrier to be in the public interest. Accordingly, it appears that the legal basis underlying the issuance and maintenance of all telecommunications certificates of public convenience, the public interest finding, has been preempted by the act, with one possible exception discussed hereafter.1 Given the language of section 253(a), it appears that the requirements of 66 Pa.C.S. §§ 1101 and 1103, at least as they pertain to Commission-approved operating authority, have generally been preempted2 and that it may no longer be legally permissible for the Commission to adjudicate entry applications or issue or maintain entry certificates of public convenience.3
Presuming entry preemption, Commission implementation of the preemption could take a variety of forms. Certificates could be converted to Registrations Statements with the Commission's ''A'' file becoming the repository for carrier specific information regarding the nature and scope of a given carrier's intrastate business. Procedures would be developed by the Commission for registering new entrants. Alternatively, the Commission could cancel all existing telecommunications certificates, as it did for radio carriers in implementing the OBRA, and require each existing carrier and new entrant to file a Registration Statement to be developed by the Commission which would provide the Commission and the public with necessary information regarding the conduct of the carrier's business in Pennsylvania. Market specific registration forms could be developed by the Commission which would reflect the varying levels of information required of different types of carriers.4 One possible advantage of this alternative would be that it would allow for more centralized record keeping for telecommunications carriers and more easily accessible information for the Commission and the public since the vital information on each carrier would be contained in the Registration Statement itself.
The Commission requests interested parties to comment on these and other possible alternatives and to include in their comments proposals regarding the content of registration information the Commission should require of providers in various markets. Comments should also address whether the Commission should require that registration forms be annually or periodically updated or whether the Commission should impose an ongoing obligation on carriers to file an amended Registration Statement if any of the information in the original Statement changes or becomes inaccurate. Commentators should also address whether it is feasible or desirable for Registration Statements to be filed in electronic format.
Parties should comment on whether removal of entry barriers and potential Commission implementation alternatives would have any tax or accounting repercussions as a result of possible loss in value of the certificate as a book asset or other financial ramifications resulting from potential Commission implementation.5 Finally, we also seek comment on any interim procedures parties believe may be appropriate for the Commission to employ pending issuance of its final order in this matter.
b. Terms and Conditions of Service
Although the language of section 253(a) is relatively broad, section 253(b) of the act continues to permit states to impose operating terms and conditions on a ''competitively neutral'' basis. Section 253(b) of the Act provides as follows:
(b) STATE REGULATORY AUTHORITY-Nothing in this section shall affect the ability of a State to impose, on a competitively neutral basis and consistent with Section 254, requirements necessary to preserve and advance universal service, protect the public safety and welfare, ensure the continued quality of telecommunications services and safeguard the rights of consumers.
While the entry preemption under section 253(a) is broadly expressed, the qualification to application of subsection (a) by subsection (b) appears to be equally broad. Although the State commission may not preclude new carriers from entering into any or all service markets, the State commission may continue to impose requirements pertaining to the terms and conditions under which services are provided to the consuming public as long as the requirements are competitively neutral.
Commission requirements governing the terms and conditions of service provided by telecommunications carriers are contained in Chapters 63 and 64 of the Pennsylvania Code and in some cases by Commission orders.6 At least initially, it does not appear that there are any existing regulatory provisions (other than entry) which are subject to preemption since, to our knowledge, all existing regulatory provisions are applied equally to all similarly situated carriers providing services in various markets and fall within the broad language of section 253(b). However, we request interested parties to identify and provide explanation as to any regulatory requirements which a party believes are not covered by section 253(b) and are thus subject to Federal preemption.7
c. Equity Transfers and Other Financial Transactions
In addition to certificates of public convenience issued under 66 Pa.C.S. § 1101, Pennsylvania also requires regulatory approval of a wide variety of financial transactions involving existing utilities under 66 Pa.C.S. § 1102, including equity and asset transfers. Within certain contexts, Commission approval of equity and asset transfers has been viewed as an entry barrier particularly when the transaction involves transfers of control of the utility.8 However here, the express language of section 253(a) only precludes State actions which have the effect of precluding a carrier's entry into various service markets. The language of section 253(a) thus does not appear to lend itself easily to an interpretation that the preemptive effect extends to required State regulatory approval of utility transfers of control. However, we request interested parties to comment on this issue.
Furthermore, section 103 of the act amends section 34(b) of the Public Utility Holding Act of 1935 ( 15 U.S.C. §§ 79 et seq.), to expressly recognize State commission authority to review proposed asset transfers by natural gas and electric registered public utility commission holding companies or their affiliates to a telecommunications affiliate in the holding company structure designated by the FCC as an exempt telecommunications company. This provision appears to reinforce the Commission's section 1102 authority in the public utility holding company context as gas and electric holding companies move into the telecommunications area. This provision should likewise be included as a subject for comment by interested parties.
d. Exception for Rural Telephone Companies
Another important exception to the removal of intrastate entry barriers by section 253(a) is found at section 253(f) of the act. Section 253(f) appears to establish a limited exception to the preemptive provisions of section 253(a) applicable only to rural telephone companies as defined in the act. Section 253(f) provides in relevant part as follows:
(f) RURAL MARKETS-It shall not be a violation of this section for a state to require a telecommunications carrier that seeks to provide telephone exchange service or exchange access in a service area served by a rural telephone company to meet the requirements of section 214(e)(1) for designation as an eligible telecommunications carrier for that area being permitted to provide such service . . .
Section 214(e)(1), referenced in section 253(f), establishes a designation of eligibility process for universal service funding purposes, as will be discussed in more detail hereafter, which requires carriers to offer basic universal service throughout a given service area and advertise the availability of such service offerings to the consuming public in the service area.9 Subsection (e)(1) expressly incorporates by reference the requirements contained in subsections (e)(2) and (e)(3). Section 214(e)(2) provides as follows:
(2) DESIGNATION OF ELIGIBLE TELECOMMUNICATIONS CARRIERS-A State commission shall upon its own motion or upon request designate a common carrier that meets the requirements of paragraph (1) as an eligible telecommunications carrier for a service area designated by the State commission. Upon request and consistent with the public interest, a State commission may, in the case of an area served by a rural telephone company, and shall, in the case of all other areas, designate more than one common carrier as an eligible telecommunications carrier for a service area designated by the State commission, so long as each additional carrier meets the requirements of paragraph (1). Before designating an additional telecommunications carrier for an area served by a rural telephone carrier, the State commission shall find that the designation is in the public interest.
Accordingly, in addition to the obligation to serve commitment required as a prerequisite to universal service support eligibility under subsection (e)(1), subsection (e)(2) requires the State commission to find, for rural telephone companies, that designation is in the public interest.
Finally, section 251(f) exempts rural telephone companies10 from interconnection requirements and procedures, the details of which will be discussed hereafter, until such time as the rural telephone company receives a bona fide request for interconnection, at which time the State commission is apparently directed to conduct an inquiry to determine whether to require the rural telephone company's compliance with general interconnection requirements. In reaching its determination, the State commission is to consider whether the request for interconnection is unduly economically burdensome, technically feasible and consistent with universal service principles--a public interest type standard.11 The Commission, at least with regard to the interconnection determination under section 251(b), is required to act upon the request within 120 days.
While for nonrural telephone companies universal service funding eligibility is considered independently from entry, for rural telephone companies it appears that universal service eligibility and interconnection requirements may be merged into consideration of the appropriateness of entry into a rural telephone company's local service and access service markets as an exception to the entry preemption.12 Under the provisions of the act cited above, it appears a State commission could consider competitive entry into a rural telephone company's local and access markets at the same time and under the same standard (a public interest finding) as interconnection and universal service funding eligibility for the competitive local exchange carrier seeking to serve the rural area.13 Under this scenario, in applying the public interest standard, the Commission would include in its consideration the ''economically burdensome,'' ''technically feasible'' and universal service criteria expressed in section 251(f)(1)(B).
While there may be a variety of ways to administer the rural telephone company exception to the removal of entry barriers, one of the simplest and most logical ways would be to maintain the existence of rural telephone certificates of public convenience (assuming other § 1101 certificates are cancelled) and to require new entrants into rural telephone company local and access service markets to file an application under section 1103 which would be reviewed by the Commission within the context of the ''necessary or proper'' or public interest standard as appears to be required by the act. Interconnection and universal service funding eligibility for the new entrant would be evaluated through the same application process.14 The public interest standard employed by the Commission in the consolidated proceeding would be consistent with all express considerations required by the act as discussed above.
While the alternative identified above may be a workable procedure, we request interested parties to comment on this procedure and other possible alternatives to implementation of the rural telephone company exception to the removal of entry barriers. We also request the Pennsylvania Telephone Association (PTA) to closely review the definition of a rural telephone company contained in section 3 of the act and identify in its comments the member companies which presently qualify for the rural telephone company exception and indicate the section 3 criteria under which each identified member qualifies.
2. Interconnection The act assigns far reaching responsibilities to State commissions to assure that interconnection arrangements between incumbent local exchange carriers and entrants seeking to compete with the incumbent are implemented through the development of interconnection parameters and procedures and through participation in the development and approval of interconnection agreements. The State commission's participation involves a combination of different roles including that of mediator, arbitrator and adjudicator. Such a mixed role, however it is implemented, involves a new type of responsibility for our Commission and will present a challenge in the development of appropriate internal and external procedures.
Section 251 of the act provides the general standards governing interconnection arrangements which standards will be further defined by the FCC and may be further defined by State commissions.15 While the MFS, Phase II proceeding was initiated to address unbundling and general interconnection pricing standards for Bell, in Investigation to Establish Standards and Safeguards for Competitive Safeguards, M-00940587, the Commission has expressed its intention to determine whether the safeguards developed for Bell should be applied to other local exchange carriers. It appears that such a determination to extend Bell standards to other local exchange carriers may also be appropriate for standards developed in the MFS, Phase II proceeding. In this regard, we expect active parties to address the requirements of the act in litigating the MFS, Phase II proceeding, for example, the wholesale-retail requirement of section 252(d)(3) and the specific standards for interconnection under section 251(c)(2).
Section 252 of the act sets forth very specific procedures and time restrictions governing State commission participation in development and approval of individual interconnection agreements. It is implementation of these procedures which requires our timely attention.
Under section 252, the act sets forth a schedule of events which commences on the date an entrant makes a request to the incumbent local exchange carrier for interconnection.16 The schedule is summarized as follows:
Day 1 Request for interconnection. Day 1-Day 135 Parties are required to negotiate and attempt in good faith to reach an agreement without state commission participation. However, if they choose, any party(s) may ask the Commission to ''mediate any differences arising in the course of the negotiation.'' Day 135-160 Parties may continue to negotiate. However, if they choose, any party(s) may petition the Commission to act as an arbitrator to resolve any open issues (not necessarily all issues). Opposing parties may respond to the petition. Petition date-
Day 270Section 252(b)(4)(C) requires the Commission to resolve all open issues by no later than 9 months from the original date the entrant made a request to the incumbent local exchange carrier for an interconnection arrangement (Day 1). Accordingly, the Commission will have between 110 days and 135 days to arbitrate the dispute, the exact amount of time depending on when during the day 135 to day 160 window a party petitions the Commission for arbitration. Execution of
AgreementUnder Section 252(e), following execution of an interconnection agreement, either through negotiations, mediation, arbitration, or a combination thereof, the agreement must be submitted to the Commission for approval. The Commission must either approve or reject the agreement within 90 days from submission for agreements reached through negotiations, and within 30 days for agreements reached through arbitration. Although the chronology of the process is made very clear by the act, the procedural and substantive nature of the process, particularly the arbitration process, is not. Sections 252(c) and (d) require that the Commission's resolution of disputes within the arbitration process be consistent with the act and FCC regulations and that cost-based and reciprocal interconnection and network element charges and an interconnection implementation schedule should be established by the Commission.17 Once an agreement is executed and filed with the Commission, whether reached through negotiation or arbitration, the Commission is to determine whether to approve or reject the agreement through application of a public interest standard. The Commission must also determine whether arbitrated agreements meet the generic interconnection standards under section 251 and the pricing standards under section 252--negotiated agreements are not required to meet the section 251 standards.
Under section 252(b), the arbitration process before the Commission is compulsory. Under section 252(b)(5), the refusal of any party to continue to negotiate throughout the process or to cooperate with the Commission in its role as arbitrator is considered a failure to negotiate in good faith and apparently viewed as a violation of the act. Furthermore, once issues are arbitrated by the Commission, the parties apparently must prepare and execute an agreement which includes the terms and conditions arbitrated by the Commission. Accordingly, it appears relatively clear that the Commission's role of arbitrator and its determinations within that role are binding on the participating parties.18 Furthermore, it appears that the Commission's actions in approving or disapproving arbitration determinations should not be considered adjudications and are interlocutory in nature, since the entire interconnection agreement, including arbitrated issues, is subject to subsequent Commission review under section 252(e)(2).
As to participants in the process, there is language throughout section 252 which seems to envision a process involving multiple parties and which could be read to permit interested parties other than the entrant and the incumbent local exchange carrier to participate in the process. If other parties are permitted to participate, it is unclear whether this participation should be permitted in all phases of the negotiations and/or arbitration, or whether such participation should be restricted to the review process before the Commission once the final interconnection agreement is formally submitted.
Section 252(a)(1) requires that all interconnection agreements be approved by the State commission, including those which were executed prior to enactment. It appears clear that this requirement would extend to areas like traditional extended area service (EAS) interconnection agreements between incumbent local exchange carriers, and to wireless interconnection agreements, arguably including those involving market sectors historically not regulated by the Commission, and possibly even to the IntraLATA Toll Originating Responsibility Plan (ITORP) arrangement.
Under section 252(f), Bell may file a statement of generally available terms with the Commission which sets forth Bell's offer of interconnection terms and conditions to entrants within the Commonwealth. The filing and review of this statement appears to be completely separate and apart from development and approval of individual interconnection agreements. Within 60 days of the filing of a terms statement by Bell, the Commission must either complete its review of the statement or allow the statement to go into effect subject to continuing review under subsection (f)(4), unless the filing carrier agrees to an extension of time. In reviewing a terms statement filed by Bell, the Commission must determine whether the statement is consistent with general interconnection standards under section 251 and otherwise consistent with the public interest. Although the act does not expressly identify a terms statement as a tariff filing, in coordinating administration of the act with State law procedures, it appears that tariff filing and approval procedures as provided by 66 Pa.C.S. §§ 1308(a) and (b) may be the best suited procedural platform for carrying out this function. However, if section 1308 procedures are utilized, application of the act would preclude the Commission from suspending the effectiveness of the terms statement but would permit the Commission to allow the terms statement to become effective, subject to litigation of interested party complaints.
Under section 252(h), the Commission must make all interconnection agreements available for public inspection within 10 days following Commission approval of a given agreement. The Commission is permitted to assess a reasonable and nondiscriminatory fee on participants to interconnection agreement procedures and on Bell for filing of a terms statement to cover the Commission's administrative costs. Of course, at the present time no such fees have been established and it is uncertain what level of fees is justified. In particular, the arbitration and mediation process in particular appear to be a relatively costly process for the Commission to administer, although it appears that the same individuals could serve both roles.
Because of the significant allocation of administrative time and resources required by the various regulatory functions assigned in the interconnection area by the act, it will be beneficial for the Commission to have advance notice, to the extent possible, when pleadings, requests or statements are going to be filed with the agency. While because of the various time deadlines and somewhat unpredictable circumstances which may arise it may be impossible to establish a strict prefiling notice requirement, it appears that some system should be developed to make the Commission aware of what is coming so it can plan accordingly.
Finally, section 251(c)(4) of the act enables State commissions to, ''consistent with regulations prescribed by the Commission under this section, prohibit a reseller that obtains at wholesale rates a telecommunications service that is available at retail only to a category of subscribers from offering such services to a different category of subscribers.'' This prohibition appears to apply to situations where a carrier attempts to cross customer classes and resell services to a customer class different than the class the reseller purchased the underlying service for. However, in what context this situation may arise and in what manner the Commission should address such a situation is not readily apparent.
As is readily apparent, administration of the Commission's far-reaching role pertaining to regulation of interconnection arrangements as defined by the act will require development and implementation of new regulatory parameters and procedures in areas and for functions previously unknown to this Commission. Although section 252 is very detailed and specific, the practical application of the section at the State level is somewhat complicated and unclear. To assist the Commission in the implementation process, interested parties should provide comment on all issues addressed in the previous discussion and any other issues which may have been overlooked. The Commission requests that the comments be expansive and explanatory so as to allow the Commission to develop a process which is fair to all interests.
3. Collocation Policy Statement Commission policy statements and guidelines at 52 Pa. Code § 69.311 establish the Commission's current policy governing expanded interconnection for intrastate special access. Section 69.331 provides as follows:
(c) It is the Commission's policy to permit Tier 1 Local Exchange Carriers to offer, on a nondiscriminatory basis, expanded interconnection for intrastate special access, either on a physical or virtual collocation basis. The expanded interconnection for intrastate special access that is offered on virtual collocation basis shall be technically, economically and operationally comparable to the physical collocation that is being offered. The Tier 1 Local Exchange Carriers and interconnectors may negotiate mutually acceptable arrangements on an individual basis, which will be tariffed to facilitate regulatory review and enforcement of nondiscrimination requirements.
This policy has governed intrastate collocation since 1994. However, section 251(c)(6) of the act provides as follows as one of the duties required of incumbent local exchange carriers:
(6) COLLOCATION-The duty to provide, on rates, terms, and conditions that are just, reasonable, and nondiscriminatory, for physical collocation of equipment necessary for interconnection or access to unbundled network elements at the premises of the local exchange carrier, except that the carrier may provide for virtual collocation if the local exchange carrier demonstrates to the State commission that physical collocation is not practical for technical reasons or because of space limitations.
While it has been the Commission's policy to allow the local exchange carrier to choose whether it offers collocation on a physical basis, subsection (c)(6) establishes the general rule that collocation must be made available on a physical basis unless it is infeasible in a given situation. The subsection also assigns the Commission the role of ascertaining when physical collocation is infeasible for both intrastate and interstate interconnection and access. While the subsection goes beyond the special access interconnection arrangement addressed in the Commission's policy statement, the subsection appears to be inconsistent with the policy statement and would appear to have preemptive effect on the policy statement. Interested parties should comment on whether 52 Pa. Code § 69.311 has been preempted and whether the policy statement should be rescinded or modified. Parties should also comment on what procedures should be utilized by the Commission to determine whether physical collocation is infeasible in a given instance.
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1 As to one sector of the telecommunications industry, radio carriers, the Commission's entry regulation was previously preempted through enactment of Section 6002(c)(3) of the Omnibus Budget Reconciliation Act of 1993 (OBRA), 47 U.S.C. § 332. In this regard, on June 16, 1995 the Commission entered an Order in In Re: Implementation of the Omnibus Budget Reconciliation Act of 1993, L-00950104, M-00950695, 25 Pa.B. 3238, which implemented the entry preemption for radio carriers by canceling all radio carrier certificates of public convenience and requiring radio carriers to file a registration form with the Commission on an annual basis. The June 16, 1995 order also initiated an inquiry as to whether PCS/PCN services should be considered jurisdictional and subject to the same procedural requirements as other radio carriers. Although the preemptive language in the OBRA reads much differently than the preemptive language in Section 253(a), the language of Section 253(a) appears on its face to be even broader than that in the OBRA.
2 66 Pa.C.S. §§ 3008(e) and 3009(a) clarify the application of Section 1101 within the context of Chapter 30. Accordingly, it appears that these subsections are also subject to preemption under the Act.
3 Although administratively difficult to implement, removal of entry barriers does not constitute a significant substantive modification to Commission regulatory policy since the Commission has now opened up all markets, including the local market, to competitive entry.
4 For example, it can be presumed that the Commission would require a lesser volume of information in an interexchange reseller registration form as compared to a local exchange carrier registration form.
5 The Commission encountered these sorts of problems when it attempted to implement an Federal entry preemption in the motor carrier area. However, on its face, the telecommunications industry appears to be distinguishable from the motor carrier industry since, because of major differences in traditional forms of regulation of the two industries, telecommunications certificates were never as negotiable as motor carrier certificates and accordingly never accrued an identifiable market value as was associated with motor carrier certificates.
6 For example, in its Proposed Rulemaking to Establish a Universal Service Funding Mechanism, the Commission has proposed regulations to establish a state universal service fund and to require that all jurisdictional telecommunications carriers contribute to the fund on a pro rata, competitively neutral basis. It appears clear that the Commission's authority to require carrier contribution for all carriers, including carriers entering Pennsylvania markets, is preserved by Section 253(b). Another example pertains to the Commission's October 4, 1995 order approving entry applications for MFS Intelenet of Pennsylvania, Inc., TCG Pittsburgh, MCI Metro Access Transmission Services, Inc., and Eastern Telelogic Corporation at A-310203F0002, et al. In the Commission's order, the Commission imposed marketing restrictions on the new entrants applicable to the ''Joint Package'' marketing of their telecommunications services. It appears that the Commission's exercise of authority to impose these restrictions would also be preserved by Section 253(b).
7 For instance, the Commission currently requires a filing fee of $350 to be paid by all telecommunications carriers applying to do business in Pennsylvania. Some parties may argue that maintenance of this fee, in and of itself, constitutes an entry barrier even if the Commission continued to require it of all applicants or registrants on a competitively neutral basis.
8 In implementing OBRA, the Commission viewed regulatory approval of transfers of control under Section 1102 to be subject to the OBRA entry preemption. However, as indicated previously, the language of the entry preemption in the OBRA is significantly different than the language of the entry preemption in Section 253(a). The OBRA language in question provides that ''no state or local government shall have any authority to regulate the entry or the rates charged by any commercial mobile service or any private mobile service.'' 47 U.S.C. § 332. In contrast, the language of Section 253(a) is far more limited in scope, providing in relevant part that ''no state or local statute or regulation may prohibit or have the effect of prohibiting the ability of any entity to provide any interstate or intrastate telecommunications service.''
9 Section 253(f) is a permissive provision, not a mandatory provision. However, the Act appears to envision a potential situation in which entry to a rural service market would be linked to a readiness to serve throughout the service area.
10 Under the definitions section of the Act (Section 3), a rural telephone company is defined as a local exchange carrier which meets one of the four criteria listed in the definition. One of the criteria includes local exchange carriers whic provide telephone exchange service, including exchange access, to fewer than 50,000 access lines. This criteria appears to be the same criteria which qualifies a local exchange carrier for a streamlined form of regulation under Pennsylvania law. 66 Pa.C.S. § 3006. Accordingly, it appears that, at a minimum, all of the streamlined regulation carriers under Pennsylvania law qualify as rural telephone companies under the Federal standard.
11 Section 251(f)(2) also provides local exchange carriers with fewer than 2436000f the Nation's subscriber lines the opportunity to petition the Commission for suspension or modification of interconnection requirements, once interconnection requirements become effective. The Commission must evaluate such petitions under a public interest standard and must issue its decision within 180 days.
12 It appears the interrelationship of these various provisions is designed to protect rural telephone companies from ''cream skimming'' practices by competing carriers. Because of their small size and limited number of commercial customers, potential ''cream skimming'' practices create greater exposure for rural telephone companies.
13 This view is supported by Section 252(g) of the Act which expressly authorizes state commissions to consolidate entry, interconnection and universal service funding eligibility proceedings for rural telephone companies, ''to reduce administrative burdens on telecommunications carriers, other parties to the proceedings, and the State Commission in carrying out its responsibilities under this Act.''
14 It appears that the 120-day time limitation of Section 251(b) would not be applicable to a consolidated proceeding. Parties should comment on this issue.
15 The Commission has already commenced the process of establishing and defining interconnection standards in Application of MFS Intelenet of Pennsylvania, Phase II, A-310213F0002. From our review, it appears that the general direction in which the Commission is headed in these dockets is fully consistent with the general standards governing interconnection arrangements under Section 251.
16 Section 252 procedures only applies to an entrant's request to interconnect with an incumbent local exchange carrier. However, Section 251(a) of the Act requires all carriers to interconnect with each other. The Act does not address what procedures should be utilized, for example, if a local exchange carrier requires interconnection to an interexchange carrier's network and the parties are unable to reach a voluntary interconnection agreement. At the state level, it appears that complaint procedures would be best suited for this purpose. Interested parties should comment on this issue.
17 What constitutes cost-based and reciprocal pricing of terminating access is presently being litigated in the Commission's Universal Service docket. What constitutes cost-based and nondiscriminatory pricing of basic service elements is currently being litigated in the MFS, Phase II docket.
18 Despite the fact that arbitrator determinations appear to be binding on the parties, if the Commission subsequently approves the arbitrated agreement, aggrieved parties are given the opportunity by Section 252(e)(6) to challenge the Commission's action in Federal district court.
[Continued from previous Web Page] 4. Universal Service Section 254(f) of the act addresses State authority in the universal service area. Section 254(f) provides as follows:
(f) STATE AUTHORITY-A State may adopt regulations not inconsistent with the Commission's rules to preserve and advance universal service. Every telecommunications carrier that provides intrastate telecommunications services shall contribute, on an equitable and nondiscriminatory basis, in a manner determined by the State to the preservation and advancement of universal service in that State. A State may adopt regulations to provide for additional definitions and standards to preserve and advance universal service within that State only to the extent that such regulations adopt additional specific, predictable, and sufficient mechanisms to support such definitions or standards that do not rely on or burden Federal universal service support mechanisms.
Under section 254, the FCC must promulgate regulations which implement the recommendations of a Federal-State Joint Board on Universal Service within 15 months of enactment of the act.
At the State level, the Commission is presently conducting an on-the-record proceeding to address universal service in the Universal Service Investigation at I- 00940035, and has initiated a rulemaking proceeding at L-00950105 designed to establish a State universal funding mechanism. At least at the present time, the Commission's actions and stated course in its universal service dockets appear to be completely consistent with the direction of the Federal government as set forth in the act. However, some issues deserve discussion at this time.
Under the Commission's present rulemaking proposal, the Commission would create a State universal service fund to replace historic subsidies to high cost areas of the Commonwealth as those subsidies are identified in the litigation docket. The fund, as presently proposed, would be contributed to by all jurisdictional telecommunications carriers on a pro rata basis based on a given company's share of jurisdictional Statewide intrastate operating revenue. The fund would reimburse any carrier, incumbent or new entrant, which served a given customer in a high cost area in an amount equal to the historic subsidy as calculated by the Commission. Although the Commission's proposal only requires contribution by jurisdictional carriers, the Commission has previously requested comment as to whether nonjurisdictional telecommunications carriers should also contribute.
In its rulemaking comments to the Commission submitted in January of this year, the Independent Regulatory Review Commission questioned the Commission's legal authority under State law to establish a State universal service fund. While the Commission continues to strongly believe that it has authority under the Public Utility Code to establish a fund and proceed with its rulemaking, section 254(f) expressly recognizes the authority and the expectation that states, including the Commission on behalf of the Commonwealth, will promulgate regulations to preserve and advance universal service in the manner consistent with that proposed by the Commission. In this regard, section 254(f) appears to expressly enable State commissions, including the Commission, to promulgate regulations to establish a universal service funding mechanism, even if it were determined that the Commission lacks authority under State law on a stand alone basis. Interested parties should comment on this issue.
Under its present rulemaking proposal, the Commission only requires contribution to universal service by jurisdictional telecommunications carriers. However, section 254(f) mandates that every telecommunications carrier, as defined in section 3(a)(49) of the act, contribute to the State universal service funding mechanism. Given this statutory language, it appears clear that the nonjurisdictional telecommunications carriers, like cellular companies and possibly even cable companies, operating in Pennsylvania would be required by Federal law to contribute to the Commonwealth's universal service funding mechanism. Interested parties should comment on whether they agree with this analysis.
Under the Commission's present rulemaking proposal, carriers automatically qualify to receive universal service funding if they serve customers in a high cost service area. No universal service certification or designation is required as a prerequisite.
Under section 214 of the act, carriers must receive designation from the State commission in order to be eligible to receive Federal universal service support19 in a given service area--which service areas are also to be established by the State commission.20 In order to qualify for State commission designation, a carrier must offer basic universal service to all parts of the universal service area for which it seeks designation and must advertise in the media the availability of charges for basic universal service.21 Procedures are also established by section 214(e)(4) of the act for the State commission to permit a carrier to relinquish its designation in an area upon approval of the State commission upon a finding that all customers in the area will be able to receive basic universal service from another designated carrier in the area.
Clearly there is a difference in approach between the Commission's present rulemaking proposal and the approach adopted by the act. Under the Commission's proposal, any carrier which serves any customer22 in a high cost service area would be automatically eligible for support from the State fund. Under the act, carriers will not be eligible for designation for support until the carrier commits to making service available to all customers in a given service territory. Although, the requirements and procedures of section 214 are expressly restricted to the Federal universal funding mechanism, interested parties should provide comments as to whether the Commission should or is required to take the Federal approach in proceeding with its universal service rulemaking. Interested parties should also include in their comments recommendations pertaining to the development of procedures for the Commission to administer designation for universal service support whether or not such designation is relevant to both the State and Federal universal service funding mechanism or just the Federal mechanism.23
Section 254(h) makes special provision for health care providers and educational providers and libraries within the universal service context. As to health care providers, section 254(h)(1)(A) requires carriers to make necessary services and instruction pertaining to the services available to rural health care providers at rates reasonably comparable to rates charged urban health care providers. As to educational providers and libraries, section 254(h)(1)(B) of the act requires that carriers make universal services, as will be defined by the FCC under section 254(c)(3) of the act or as may be defined by the State commission, available to all educational providers and libraries at a discounted rate. As to intrastate services, the act assigns responsibility for determining the amount of the discount to State commissions. Carriers which provide universal services to either health care providers or educational providers and libraries are eligible for support or reimbursement through universal service funding mechanisms.
Interested parties should provide comment as to what parameters and procedures should be utilized to fulfill the Commission's responsibilities to assure required universal service protections for rural health care providers and all educational providers and libraries. Parties should include recommendations in their comments as to what extent the Commission can address these issues in its pending Universal Service dockets.
Finally, section 254(k) of the act provides as follows:
(k) SUBSIDY OF COMPETITIVE SERVICES PROHIBITED.-A telecommunications carrier may not use services that are not competitive to subsidize services that are subject to competition. The Commission, with respect to interstate services, and the states, with respect to intrastate services, shall establish any necessary cost allocation rules, accounting safeguards, and guidelines to ensure that services included in the definition of universal service bear no more than a reasonable share of the joint and common costs of facilities used to provide those services.
Clearly, our Commission has already commenced implementation of this subsection in its Competitive Safeguards and Universal Service dockets and it appears the Commission's course is completely consistent with the subsection's requirements. Interested parties should include discussion of this issue in their respective comments.
6. Prohibition Against Interexchange Service Rate De-Averaging Section 254(g) of the Act generally prohibits providers of interexchange service from de-averaging interexchange toll rates between urban and rural areas. Subsection (g) provides as follows in relevant part:
(g) INTEREXCHANGE AND INTERSTATE SERVICES-Within 6 months after the date of enactment of the Telecommunications Act of 1996, the Commission shall adopt rules to require that the rates charged by providers of interexchange telecommunications services to subscribers in rural and high cost areas shall be no higher than the rates charged by each such provider in urban areas . . ..
While it is clear subsection (g) assigns responsibility to the FCC to implement and enforce the de-averaging prohibition, application of the subsection will undoubtedly have significant effect on intrastate toll rates. For example, presently some interexchange carriers charge different toll rates in different local exchange carrier service territories and, in fact, higher rates may be economically justified (although apparently now prohibited by the act) in areas where access rates are higher. See, generally, AT&T Petition for Approval of Revised Optional Calling Plans, L-00920069, et al., (January 24, 1995), Pennsylvania Public Utility Commission v. AT&T Communications of Pennsylvania, Inc., M-00940503F0095 (March 31, 1995). Furthermore, it is unclear as to what extent the subsection applies to promotional and/or contractual service offerings. Accordingly, interested parties should provide comment as to what type of activity is permitted and prohibited by subsection (g) within the intrastate context.
7. In-Region InterLATA Services For Bell Under section 271(c) of the act, a Bell affiliate24 is permitted to provide in-region interLATA services if either a facilities-based competitor is providing local service through a qualifying interconnection arrangement in Bell's service territory or if during a certain time frame specified by section 271(c)(1)(B) Bell has not received a request for access and interconnection.25 In order for an interconnection arrangement to qualify, the arrangement must meet a competitive checklist as established by section 271(c)(2)(B). While the checklist is relatively detailed and specific, its application will undoubtedly be subject to varying interpretations.
The review process governing a Bell affiliate's entry into the in-region interLATA market is governed by section 271(d). Section 271(d) provides as follows in relevant part:
(d) ADMINISTRATIVE PROVISIONS-
(1) APPLICATION TO COMMISSION-On and after the date of enactment of the Telecommunications Act of 1996, a Bell operating company or its affiliate may apply to the Commission for authorization to provide interLATA services originating in any in-region State. The application shall identify each State for which the authorization is sought.
(2) CONSULTATION-
* * * * * (B) CONSULTATION WITH STATE COMMISSION-Before making any determination under this subsection, the Commission shall consult with the state commission that is the subject of the application in order to verify the compliance of the Bell operating company with the requirements of subsection (c).
(3) DETERMINATION-Not later than 90 days after receiving an application under paragraph (1), the Commission shall issue a written determination approving or denying the authorization requested in the application for each state . . ..''
Review of any future Bell affiliate in-region interLATA application before the FCC, given the expected highly contentious nature of any such application, is placed on an extremely fast track and will involve statutorily required consultation between the Commission and the FCC--an unprecedented process--to address whether the competitive checklist has been met. Accordingly, interested parties should provide comment identifying how it is envisioned this process will operate and should address what factors should be considered by the Commission in reviewing whether the Bell affiliate has complied with the competitive checklist. Commentators should specifically address what input, if any, should be received by the Commission from interested parties during the application process in developing the Commission's positions for purposes of consultation with the FCC. If outside input is warranted, commentators should address how the opportunity for input should be procedurally structured.
8. InterLATA EAS for Bell and GTE Section 601(a) of the act supersedes the AT&T and GTE consent decrees which had required Bell and GTE to seek waivers from the Department of Justice (DOJ) before carrying any traffic across a LATA boundary. At the State level, the DOJ waiver process became relevant in situations involving interLATA EAS where the Commission ordered that a given interLATA route be converted from a toll route to a local route. Under this scenario, if Bell or GTE was the originating carrier (and in some cases the terminating carrier) for an interLATA EAS route, Bell or GTE was required to seek and receive a consent decree waiver prior to conversion of the route to local. In this regard, Commission regulations at 52 Pa. Code § 63.75(6) provide as follows:
(6) In cases where the local exchange carrier is prohibited from providing service between the calling exchange and the receiving exchange by Federal antitrust consent decree restrictions and a waiver is necessary to implement EAS, the local exchange carrier shall apply for a waiver of Federal antitrust restrictions to allow it to implement EAS. The Commission will file a statement affirmatively supporting the waiver application.
The consent decree restrictions pertaining to interLATA EAS have been superseded by the act and Bell and GTE are no longer subject to Federal restrictions historically imposed by consent decree in carrying local traffic across a LATA boundary for interLATA EAS purposes. At the time of enactment, Bell had at least two interLATA EAS waiver requests pending before the DOJ which it appears should be withdrawn or transferred. In any case, interested parties should comment on the effect of the Act on interLATA EAS situations involving Bell or GTE and whether the Commission's regulations at section 63.75(b) should be modified.
9. Bell IntraLATA Toll Imputation Requirement Under section 271(e)(2)(A) of the act, once granted authorization to provide in-region interLATA services, the Bell affiliate may not start to offer and provide in-region interLATA services until it makes intraLATA presubscription available throughout its service territory in a given state. Given this provision, it is extremely likely that the Bell affiliate will start to provide in-region interLATA services coincidental with the availability of intraLATA presubscription (most likely to the day).
Section 272(e) of the act defines the relationship between Bell and its interLATA affiliate. Under section 272(e)(3), Bell:
(3) shall charge the affiliate described in subsection (a), or impute to itself (if using the access for its provision of its own services), an amount for access to its telephone exchange service and exchange access that is no less than the amount charged to any unaffiliated interexchange carriers for such service . . ..
Therefore, it appears that once the Bell affiliate enters the in-region interLATA market, coincident with the availability of intraLATA presubscription in Bell's service territory, Bell is subject to a mandatory imputation requirement for the provision of its services which utilizes its access services, apparently including Bell's intraLATA toll services.
In Pennsylvania, on December 14, 1995, the Commission entered an Opinion and Order in Investigation Into IntraLATA Interconnection Arrangements, I-00940034, which set forth the terms and conditions under which intraLATA presubscription would be made available in the Commonwealth. As to Bell, the Commission required that intraLATA presubscription be made available by no later than June 30, 1997. Furthermore, the Commission refrained from imposing an imputation requirement on intraLATA services provided once presubscription is available, on either local exchange carriers, including Bell, or interexchange carriers. Instead, the Commission determined that, at least initially, the marketplace should be permitted to govern the pricing of intraLATA services and that the Commission would monitor the marketplace on an ongoing basis to assure that no carrier was engaging in anticompetitive behavior. The monitoring of the intraLATA market would commence upon the availability of intraLATA presubscription in a given area.
It appears that the effect of section 272(e)(3) is to require that Bell be made subject to an imputation requirement upon the availability of intraLATA presubscription in its service territory. Accordingly, interested parties should comment on whether the Commission's December 14, 1995 Order at I-00940034 requires revision given the application of the act.
10. Audits Section 272(d) of the act establishes an audit requirement for Bell and its interLATA service affiliates. Section 272(d) provides as follows:
(d) BIENNIAL AUDIT.-
(1) GENERAL REQUIREMENT.-A company required to operate a separate affiliate under this section shall obtain and pay for a joint Federal/State audit every 2 years conducted by an independent auditor to determine whether such company has complied with this section and the regulations promulgated under this section, and particularly whether such company has complied with the separate accounting requirements under subsection (b).
(2) RESULTS SUBMITTED TO COMMISSION: STATE COMMISSIONS.-The auditor described in paragraph (1) shall submit the results of the audit to the Commission and to the State Commission of each State in which the company audited provides service, which shall make such results available for public inspection. Any party may submit comments on the final audit report.
Interested parties should comment on what the Commission's role, if any, should be in the joint audit process for Bell. Commentators who advocate an active role for the Commission should provide further comment regarding the intended scope of any such audit. Parties should also address the audit comment process established by section 272(d)(2) and discuss what procedures should be utilized by the Commission to evaluate final audit report comments and what alternatives are available to the Commission to address these comments.
Furthermore, section 103 of the act amends section 34(d) of the Public Utility Holding Company Act of 1935 (15 U.S.C.A. §§ 79 et seq.), so as to establish independent audit authority for State commissions to audit telecommunications affiliates of public utility holding companies which are categorized as exempt telecommunications companies by the FCC. Although the subsection goes on to impose auditor selection requirements and time deadlines for such a State audit, the language of the subsection is permissive, not mandatory, and does not require the Commission to conduct such audits unless they are found by the Commission to be necessary. Interested parties should provide comment as to whether such audits, if found to be necessary, can be integrated into the Commission's normal audit functions.
11. Notice of FCC Filings In addition to the wide variety of filings which are required by the act to be filed with state commissions, the act also contains many filing requirements to be submitted to the FCC. Although in most instances the act does not expressly require documents filed by Pennsylvania carriers at the FCC to be submitted to the Commission, it appears important that Federal documents be shared with the Commission in order to assure the coordinated Federal/State activity envisioned by the act. At a bare minimum, it appears that the Commission should receive notice of all Federal filings by Pennsylvania carriers, particularly those which ultimately will require some action by the Commission or which trigger a deadline which requires Commission involvement. Interested parties should submit comments regarding this proposal.
12. Public Forum In addition to receipt and evaluation of the written comments of interested parties, it appears valuable to create a setting for an open discussion of these important issues. Accordingly, the Commission will hold a public forum to address the issues raised by this Order and any other issues relevant to interpretation, application and administration of the act. The public forum will be held on April 3, 1996, at 10 a.m. in Hearing Room No. 1. All interested parties are welcome to attend. Parties who wish to actively participate in the public forum should contact Otto F. Hofmann, Deputy Executive Director at (717) 783-5375 by no later than 5 days following publication of this Order in the Pennsylvania Bulletin. In both written comments submitted under this Order and any oral discussions at the public forum, parties should be careful not to discuss the substantive merits of any issue pending before the Commission in any contested on-the- record proceeding.
13. Conclusion Overall, issuance of this Order represents the Commission's initial attempt to commence the arduous task of implementation of the Federal Telecommunications Act of 1996. Through this Order, the Commission establishes a 30-day comment period following publication for interested parties to comment on the wide variety of issues pertaining to Commission implementation of the Federal Act. The Commission is hopeful that interested parties give requested comments the time and effort these issues deserve so that the Commission can move forward in a timely manner to implement the act and, in doing so, bring its current procedures into compliance with Federal law, develop procedures and plan the allocation of resources to accomplish its newly created responsibilities; Therefore,
It Is Ordered That:
1. The Commission hereby solicits comment from all interested parties on all of the issues discussed in the body of this Order and any other issues pertaining to Commission implementation of The Telecommunications Act of 1996.
2. The Secretary is hereby directed to serve this Order on the Office of Consumer Advocate, the Office of Small Business Advocate, each jurisdictional telecommunications carrier, the Pennsylvania Electric Association, the Pennsylvania Gas Association, the A-310213F0002 service list and the Commission's Chapter 30 service list.
3. The Secretary shall duly certify this Order and deposit it with the Legislative Reference Bureau for publication in the Pennsylvania Bulletin.
4. The Executive Director's Office shall schedule a public forum on for April 3, 1996, at 10 a.m. in Hearing Room No. 1 for interested parties to openly discuss all issues raised by this Order and any other issues relevant to interpretation, application or administration of The Telecommunications Act of 1996. Parties wishing to make an oral presentation at the public forum shall notify Otto Hofmann, Deputy Executive Director at (717) 783-8156 by no later than 5 days following publication of this Order in the Pennsylvania Bulletin.
5. Within 30 days of publication, an original and 10 copies of any comments concerning the subject matter addressed in the Order shall be submitted to the Pennsylvania Public Utility Commission at the above-captioned docket. The contact person is Alan Kohler, Assistant Counsel, (717) 772-8840. In addition to the original and 10 copies filed with the Commission's Secretary, each set of comments shall be served on each Commissioner's office.
JOHN G. ALFORD,
SecretaryStatement of Chairperson John M. Quain On February 8, 1996, President Clinton signed the Telecommunications Act of 1996 (Act) into law. The Act represents a landmark piece of legislation, which for the first time in 62 years, comprehensively amends the federal law which governs the provision of telephone service throughout the nation.
The Law Bureau introduction states that the ''far reaching nature of the Act and its profound effects on the future regulation of telecommunications services at both the State and Federal levels are best summarized in the Congressional Conference Report which states that the purpose of the Act is:
. . .To provide for pro-competitive, de-regulatory national policy framework designed to accelerate rapidly private sector deployment of advanced telecommunications and information technologies and services to all Americans by opening all telecommunications markets to competition and for other purposes. . .
In my view Congress has given the Federal Communications Commission and the individual State Commissions a distinct mandate for implementation of this legislation.
The Law Bureau Tentative Decision before us today initiates the arduous task to implement the legislation in the Commonwealth of Pennsylvania. I challenge all interested parties to give diligent thought to their responses to the procedural considerations set out in the proposed Tentative Decision. Unlike past regulatory schemes, both regulators and industry need to work together to meet the ultimate goal of economic growth through competition.
I look forward to working with all interested parties on this monumental task. We have the challenge so we must move forward expeditiously but with some level of caution. Pennsylvania and consumers can benefit from this process.
Statement of Vice Chairperson Lisa Crutchfield The recently enacted federal Telecommunications Act of 1996 (Act) sets the stage for a new era of competition in an industry that accounts for over $200 billion in annual sales.26 The Act, which amended the Communications Act of 1934, provides for a ''pro-competitive, de-regulatory national policy framework designed to accelerate rapidly private sector deployment of advanced telecommunications and information technologies and services to all Americans. . . .''27 Long distance carriers, cable companies and other companies, including public utilities such as electric companies are no longer prevented from offering local telephone services. Local telephone companies are permitted to offer long distance telephone service as well as deliver video to homes and businesses.
The Act removes existing entry barriers to the local telephone market by preempting state or local statutes and regulations that excludes entities other than the traditional local exchange carrier (LEC) monopoly from providing telecommunications services. All carriers are subject to a number of access requirements which are intended to provide for open and fair competition. Additionally, in an effort to address the growing gap between the information ''haves'' and ''have nots,'' the Act contemplates the development of an evolving definition for universal service as well as the establishment of a universal service fund.
A basic thrust of the Act is regulatory parity whereby all providers of telecommunications services are regulated in the same manner. The Act also provides for technologi-cal neutrality thereby preventing regulation from determining the appropriate technology (i.e. telephone, cable, satellite or wireless) that is used to provide services to consumers.
I envision a broadband, multimedia electronic network through which digitally coded information (i.e. voice, video, text, data, graphic or what have you) which runs to and from any point in the network to any other point in the network. This advance technology will serve important national goals, including (1) expansion of social services such as access to government information, improved health care, broader educational resources and (2) an increase in commercial activity including advanced manufacturing, more extensive electronic commerce and wider telecommuting.
The Act affects either directly or indirectly most areas of intrastate telecommunications services. There will be a significant impact on the Commission's regulatory activity. For example, the Act prohibits the Commission from restricting entry to the intrastate market. We currently regulate the entry to the intrastate market through the issuance of a certificate of public convenience pursuant to 66 Pa.C.S. §§ 1101 and 1103. This type of regulation is no longer permitted under the Act. There are other provisions of the Act that assign new areas of responsibility to the Commission thereby impacting our regulatory activity. These areas of responsibility include matters regarding interconnection, virtual collocation, Bell Operating Companies (BOC) requests for in-region interLATA services, and universal service. For example, the Act requires the Commission to approve negotiated interconnection agreements. Additionally, the Commission, pursuant to the Act, is permitted to mediate differences and to arbitrate unresolved disputes that arise during the course of interconnection negotiations.
This Commission deems it appropriate to take internal and external measures in order to implement the Act. The Executive Director's Office will serve as the chair of an internal implementation task force. The Law Bureau has prepared for our consideration today an implementation Order, in tentative form, to be issued for comment. Additionally, a public forum is scheduled to be held in April. This forum will provide an opportunity for dialogue with stakeholders and other interested parties. I believe these activities will provide for the orderly implementation of the Act. I commend the Law Bureau for its actions to date in preparing this Commission for the implementation of the Act. I, however, offer the following additional areas for consideration of comments by the parties in response to the Tentative Order.
1. Repeal or Amend Provisions of the Public Utility Code and Pennsylvania Code
Existing laws under the Public Utility Code are subject to preemption under the Act. I request interested parties to identify and provide explanations as to any statutory requirements under the Public Utility Code which it believes is subject to Federal preemption and requires the Commission to seek the General Assembly's action to repeal or amend the particular law. Additionally, the Act preempts Commission regulations that are inconsistent with the Act as well as the Federal Communications Commission (FCC) regulations. Accordingly, I request interested parties to identify Commission regulations that should be repealed or amended.
2. Interconnection
Section 251 of the Act includes general standards governing interconnection; however, it permits the Commission to enforce its regulations and policies governing access and interconnection obligations so long as the requirements are not inconsistent or prevent the implementation of the Act. The Commission's Application of MFS Intelenet of Pennsylvania, Phase II, at Docket No. A-310213F002, proceeding includes the unbundling and general interconnection pricing standards for The Bell Atlantic-Pennsylvania (Bell). The Tentative Order requires the parties, in this proceeding, to address the Act. Since this proceeding only examines unbundling and interconnection pricing standards for Bell as the incumbent LEC, I would like interested parties to comment on whether the Commission should institute a limited generic investigation or expand the MFS Phase II proceeding to include all other incumbent LECs.
Section 251(c)(6) requires incumbent LECs to provide for physical collocation unless it demonstrates to the Commission that physical collocation is not practical for technical reasons or there are space limitations. I encourage interested parties to comment on technical and space limitation standards the Commission should utilize in determining whether physical collocation is feasible and practical.
Section 251(f) of the Act exempts a rural telephone company from meeting the interconnection requirements of Section 251(c) until the company receives a bona fide request for interconnection service. The Act requires the Commission to make a determination as to whether the request is unduly economically burdensome, technically feasible and consistent with the universal service requirements. I request interested parties to identify standards the Commission should consider in making its determination as to the economic and technical feasibility of such interconnection request.
3. Universal Service
Section 254(f) permits a state to advance and preserve universal service. All intrastate telecommunications providers are required to contribute to universal service within a state as determined by the state. The FCC and the state are responsible for ensuring universal service is available at just, reasonable and affordable rates. The Tentative Order points out that the Independent Regulatory Review Commission, in comments to the Commission's universal service rulemaking, questioned our legal authority under state law to establish a state universal service fund. The Order specifically states that ''[w]hile the Commission continues to strongly believe that it has authority under the Public Utility Code to establish a fund and proceed with its rulemaking, Section 254(f) expressly recognizes the authority and the expectation that states, including the Commission on behalf of the Commonwealth, will promulgate regulations to preserve and advance universal service in the manner consistent with that proposed by the Commission.''
It is interesting to note that Congress specifically delineated the state commission as the responsible entity for carrying out certain provisions of the Act. As it relates to universal service, the Act specifically refers to the state rather than the state commission. We may require legislative action delegating to the Commission the state's responsibility relative to universal service. I request interested parties to comment on whether the Commission has the authority to oversee and implement the universal service provisions of the Act which are specifically reserved to the state.
4. Exempt Telecommunications Companies
Section 103 of the Act amends the Public Utility Holding Company Act of 1935 (PUCHA) to permit registered electric and gas holding companies to establish affiliates to provide telecommunications services. The Tentative Order provides for service of the Order on the Pennsylvania Electric Association and the Pennsylvania Gas Association. In order to facilitate the comment process, I recommend that the Tentative Order be served on all jurisdictional electric and gas companies.
5. Audits
Section 272 of the Act requires Bell and its interLATA service affiliates to obtain a biennial joint Federal/State audit. The Act also requires the state commission to implement procedures to protect proprietary information submitted during the course of the audit. The Commission currently has procedures governing the protection of proprietary information. I request interested parties to comment on the adequacy of the Commission's existing procedures.
Statement of Commissioner David W. Rolka The Federal law specifically prescribes procedures for state certification of eligible telecommunications carriers (ETC) for purposes of qualifying for universal service funding. For areas served by a rural telephone company, state certification of more than one ETC must be based on a public interest finding. One of the requirements that an ETC must meet is to offer services that are supported by Federal universal service support mechanisms and to advertise the availability of such services and charges therefor, throughout the service area applicable to the ETC designation. These provisions, found at Sections 254 and 102/214(e) of the Act, link a carrier's eligibility to receive Federal universal service financial support with a carrier's obligation to serve throughout a particular service territory that is determined by the state commission. Section 253(f) expressly provides that a state may require as a condition of market entry that a carrier seeking to serve a rural telephone company area must meet the ETC standard prescribed in Section 214(e)(1).
The state commissions also may continue to prescribe a carrier's obligation to serve within non-rural markets under the new federal law. Section 253(b) expressly preserves the states' ability to impose, on a competitively neutral basis and consistent with Section 254, ''requirements necessary to preserve and advance universal service, protect the public safety and welfare, ensure the continued quality of telecommunications services, and safeguard the rights of consumers.'' However, sole reliance on Section 253(b) would be incomplete if I failed to note that the authority set forth in subsection (b) is limited by subsection (a) of Section 253. Subsection (a) forbids the imposition of requirements which prohibit or have the effect of prohibiting the ability of any entity to provide any interstate or intrastate telecommunications service. My interpretation of these sections is that the state commission may not impose geographic boundaries on the scope of a carrier's operating authority as a condition to market entry because that may be a barrier to entry. However, the carrier may be required to identify the geographic boundaries in which it intends to provide service, and must comply with the associated common carrier responsibilities which includes the obligation to serve within the carrier's defined service territory.
These provisions pursuant to Section 253 authorize state commissions to impose a common carrier obligation to serve on all carriers seeking to provide local exchange service, independent of and regardless of whether the carrier is certified by the state commission as an ETC under Section 214(e) to receive federal universal service financial support. Carriers which seek entry into areas served by rural telephone companies may have to meet an additional public interest threshold pursuant to Sections 253(f) and 214(e). All carriers, nonetheless, which seek entry into telecommunications markets, may be required to undertake an obligation to serve, consistent with the states' continued authority over such matters such as universal service, public safety and welfare and quality of service.
Under this interpretation of the Federal act, new competitors or new entrants could have the ability to serve narrow geographic segments of the Commonwealth and could more easily focus their energies in those areas where profit is expected to be most substantial. This may increase the potential for new competitors to ''cream skim'' the incumbent's customers, and may create pressure on incumbents to seek to deaverage rates as a responsive tactic. Given that both Pennsylvania and federal law prohibit deaveraged interexchange rates, local rate deaveraging is expected to be the primary focus for rate rebalancing efforts. Such efforts could seriously jeopardize the affordability of local basic rates. We must be mindful that like Pennsylvania's Chapter 30, the federal law establishes a framework for local exchange competition and for the advancement and preservation of universal service. Affordability of rates is a common goal of both the state and federal law. Our implementation efforts must take into account that the federal law was enacted to benefit customers through the introduction of competition. While the industry structure must undergo some further transition as the bill's framework is implemented, the perspective of the end result to the customer--the monthly bill--must always be a guiding factor.
In our pending docket on universal service, rules have been proposed that any carrier which serves a high cost customer could qualify to receive intrastate universal service financial support. The proposed Tentative Order before us today poses the question of whether a carrier's eligibility to receive intrastate universal service support should be predicated on the same basis as the eligibility to receive federal financial support, namely the carrier's obligation to serve throughout the service area. This approach might limit a new entrant's interest in ''creamskimming'' to only those areas where the new entrant would be willing to serve without qualifying for federal universal service support and perhaps state universal service financial support (if the state's eligibility criteria were revised to reflect the standards prescribed in Section 254).
In our pending Universal Service Investigations at Docket Nos. I-940035 and L-950105, the proposed rules would allow all local exchange service providers which serve subscribers in a high cost service area to receive universal service support. Some commenting parties have challenged this framework and have suggested that state universal service funding should be disbursed only to the incumbent carriers because only those carriers have an obligation to serve. Such a limitation appears to be foreclosed by the federal act for those facilities-based carriers which serve non-rural markets, because Section 214(e) prescribes that the state commission shall certify as an ''eligible telecommunications carrier'' any carrier which: (1) agrees to offer the set of services included within the Section 254 definition of universal service; (2) agrees to advertise the availability of such services; and (3) which offers the universal services using its own facilities or a combination of its own facilities and resale of another carrier's services. If a facilities-based carrier undertakes the obligation to provide service within a non-rural service area, the state commission must certify the carrier as an ETC, which renders the carrier eligible to receive universal service support pursuant to Section 254. Section 254 establishes the ETC certification as a prerequisite for receiving Federal universal service support and further prescribes that state regulations must not be inconsistent with the FCC rules. These provisions appear to prohibit the limitation of availability of either state or federal universal service support mechanisms to incumbent carriers who are serving non-rural markets.
The law contemplates that the FCC and state commissions will work together to develop and implement policies governing telecommunications services. The FCC's deadlines for promulgating regulations to implement the various provisions and requirements of the law are very compressed, and consequently, the states must diligently and promptly pursue their implementation efforts so that we can be assured that federal and state policy making will be coordinated. As the proposed Tentative Order notes, Pennsylvania already has a number of proceedings well under way that will address various aspects of the federal law. In particular the second phase of our local competition docket will address various aspects of unbundling; the universal service docket will address cost and pricing issues for local call termination rates in addition to universal services and the competitive safeguards investigation will identify appropriate requirements applicable to Bell's provision of competitive services. Those dockets are currently scheduled to produce recommendations for Commission consideration in June of 1996. It will be imperative for the Commission to promptly review and dispose of these recommendations so that we can promptly implement our responsibilities under the federal law. This effort will also demonstrate to the FCC that we intend to be a full partner in fulfilling the requirements of the new law.
I noted with interest the statutory interpretation issue raised in Vice Chairman Crutchfield's Statement regarding this matter. In particular, the Statement seeks comment on whether the use of the term ''state'' rather than ''state commission'' in Section 254 means that legislative action is required to delegate to this Commission the state's responsibility relative to universal service. I would request commenting parties to consider whether the use of the terms ''state'' and ''state commission'' are interchangeable in Title II of the Federal Act. For example, Section 254 uses the term ''state,'' while its companion section, 214(e) uses the term ''state commission.'' Similarly, Section 253 uses the term ''state,'' while Section 252 uses both terms within different subsections. Section 252(e)(1) and (2) refers to ''state commission,'' whereas Section 252(e)(6) uses both terms within that subsection:
(6) REVIEW OF STATE COMMISSION ACTIONS--In a case in which a State fails to act as described in paragraph (5), the proceeding by the Commission under such paragraph and any judicial review of the Commission's actions shall be the exclusive remedies for a State commission's failure to act. . . .
(Emphasis added). Another such example is evident in Section 214(e)(3), which uses the term ''state commission.'' In contrast, the Conference Committee Report uses the term ''state'' to describe the responsibilities and requirements set forth in Section 214(e).
By making state universal service support mechanisms available to new entrants as well as incumbents, the fund can be used as an incentive to obtain new entrants' commitments to serve particular areas and to minimize the potential for creamskimming. If the funds are not available to new entrants that are willing to undertake an obligation to serve in non-rural markets, the new entrants will be disadvantaged by having to compete with incumbents who would be able to qualify for such support. Additionally, the use of the fund as a tool to encourage more competition will be lost.
The interplay between Section 253(a) and 253(b) also raises a more general question of whether the state commission may revoke the operating authority of a telecommunications service provider and what alternative forms of recourse might be available. We should proceed cautiously before concluding that the fitness requirements prescribed in Chapter 30 should be nullified. The Tentative Order indicates that these criteria may be entry barriers. I suggest that they could also be construed as reasonable terms and conditions permitted by Section 253(b). We must consider an appropriate analytical framework for identifying market entry barriers versus reasonable terms and conditions.
I request commenting parties to address the analysis and ideas proposed in this Statement in their formal comments as well as at the public forum scheduled in the Tentative Order.
[Pa.B. Doc. No. 96-517. Filed for public inspection March 29, 1996, 9:00 a.m.] _______
19 In interpreting the Act, it is important to distinguish between the issue of which carriers are required to contribute to the universal service funding mechanism and which carriers are eligible for universal service support. While, under Section 254(f) every intrastate telecommunications carrier must contribute to the universal service funding mechanism, only carriers designated under Section 214(e) are eligible for universal service support.
20 In the on-the-record component of the Commission's Universal Service Investigation, the Commission is presently addressing the establishment of service areas for universal service support purposes.
21 The difference in the standard applicable to state commission review of universal service designation for a rural telephone company service area has been previously discussed in the discussion pertaining to removal of entry barriers.
22 The issue as to whether or to what extent to include commercial customers in a high cost area in the universal service funding mechanism is an issue which has not been determined and is subject to inquiry in the proposed rulemaking docket.
23 Pursuant to Section 214(e)(3), of the Act the Commission is assigned the responsibility to determine which carrier or carriers should be designated to serve unserved areas. Interested parties should also comment on what standards and procedures should be utilized by the Commission in making this determination.
24 Pursuant to Section 272 of the Act, Bell is required to structurally separate its in-region interLATA activities, once approved, through operation of an affiliate.
25 It is so unlikely that Bell will not receive a request for access and interconnection during the time frame prescribed by Section 271(c)(1)(B) that the possibility is not worth further discussion.
26Source: Economic Report of the President to Congress (February 14, 1996).
27H.R. Conf. Rep. No. 104-458, 104 Cong., 2d Sess. (1996).
