Senate Bill No. 89

Introduced By beck

By Request of the Blue Ribbon Telecommunications Task Force

A Bill for an Act entitled: "An Act generally revising the laws relating to the regulation of telecommunications services in response to the federal telecommunications act of 1996; providing for the registration of telecommunications providers; establishing a duty to interconnect telecommunications carriers and providing for negotiated, mediated, and arbitrated interconnection agreements; requiring limited public service commission approval of interconnection agreements; providing for the designation of carriers eligible for federal universal service support; providing that the public service commission may adopt rules to allow verification of a subscriber's change in telecommunications services and providing a penalty for violation of the verification rules; allowing for special ratemaking procedures; restricting the resale of certain telecommunications services; amending the laws regarding promotional offerings by regulated telecommunications providers; changing the types of regulation and criteria for alternative regulation of telecommunications providers; increasing the amount of assistance in the telephone low-income assistance program; establishing an interim universal access to the advanced telecommunications services program administered by the public service commission; providing a discount for use of advanced telecommunications services for certain public access points, schools, libraries, health care providers, and tribal colleges; establishing a surcharge on retail revenue derived from intrastate telecommunications services in the state; requiring the public service commission to make recommendations to the 56th legislature regarding universal access and service; amending sections 2-4-102, 35-18-503, 69-3-305, 69-3-801, 69-3-802, 69-3-803, 69-3-805, 69-3-807, 69-3-809, 69-3-811, and 69-3-1001, MCA; repealing sections 69-6-101, 69-6-102, and 69-6-103, MCA; and providing effective dates, an applicability date, and a termination date."

STATEMENT OF INTENT

A statement of intent is required for this bill because rulemaking authority is granted to the public service commission and to the department of revenue.

[Section 4] authorizes the public service commission to adopt procedural rules relating to mediation and arbitration for interconnection proceedings.

[Section 12] grants rulemaking authority to the public service commission to make rules establishing verification procedures for the submission or execution of a change in a subscriber's selection of a provider of telecommunications services. The rules are to address the problems of "slamming"--a change in service providers that was unauthorized or a service change authorization that was made under deceptive or misleading circumstances.

Under the interim universal access provisions of [sections 16 through 22], the public service commission is to establish surcharge rates as provided in [section 21]. The surcharge rates must take into account different cost structures among telecommunications carriers, particularly the wireless and CATV industry. The retail revenue for these providers should be based on an equitable, per access line, revenue equivalent. The commission shall also set the surcharge rate to produce the amount of revenue necessary to fund the program. The formulation should consider any overlapping federal discounts. The commission should appoint an oversight group consisting of users and industry participants, to meet quarterly with the commission to review revenue, discounts, and the administration of [sections 16 through 22]. The public service commission shall also establish a method for paying discount reimbursements in accordance with [section 20]. The public service commission shall cooperate with the department of revenue in determining rates, administering offsets against any surcharges, and other matters necessary for the administration of [sections 16 through 22].

The department of revenue shall administer the collection of the surcharge by rule. Because of the limited duration of the program, it is contemplated that the rules and administration be minimal, flexible, and as unobtrusive as possible while ensuring that there are sufficient administrative powers to enable the implementation of [sections 16 through 22].

Be it enacted by the Legislature of the State of Montana:

NEW SECTION. Section 1. Statement of policies. (1) The commission shall, in the exercise of the powers conferred upon it under Montana law, consider the following declared policies of the state of Montana:

(a) The state of Montana shall encourage competition on a neutral basis and provide neither competitive advantage nor a competitive disadvantage to any telecommunications carrier.

(b) The regulation of telecommunications carriers by the commission should attempt to produce the same benefits for carriers as competition that includes:

(i) the ability to enter and exit markets quickly and easily;

(ii) the ability to price efficiently and flexibly; and

(iii) incentives to:

(A) offer new products and services;

(B) create operating and investing efficiencies; and

(c) It is the objective of the state of Montana to make basic telecommunications services available at the lowest possible price to all Montanans.

(d) It is the objective of the state of Montana to provide at least a minimum level of public access to advanced telecommunications services through a library, school, or public institution in every Montana community under the universal service access provisions in [sections 16 through 22].

(e) The advanced telecommunications services available in urban areas of Montana should also be available in rural areas at rates reasonably comparable to rates in urban areas.

(f) All Montanans should have the ability to route their telecommunications to their carriers of choice without the need to dial extra codes.

(g) Montana customers should have the ability to retain their telephone numbers when they switch carriers within their local exchange area. Number portability should be provided, to the extent technically feasible and economically reasonable, in accordance with the requirements prescribed by the federal communications commission. The cost to implement number portability should be borne by all telecommunications carriers on a competitively neutral basis. Rural telephone companies may petition the commission for suspension or modification of these requirements.

(h) The commission should proceed at a reasonable speed, based on demonstrated demand, to unbundle the network elements at technically feasible points.

(i) The commission is responsible for ensuring that prices for regulated telecommunications services are priced above relevant costs to prevent cross-subsidization and predatory pricing.

(j) During the transition to local competition, the commission and regulated telecommunications carriers are encouraged to review and remove any implicit subsidies and any other government-imposed mandates that inhibit competition.

(k) When establishing new depreciation rates for ratemaking purposes, forward-looking asset lives, consistent with the competitive market and consistent with the asset lives used by competing providers of similar services, should be used.

(2) (a) This section does not alter the state policy of local control and regulation of cooperatives through their elected boards of trustees and membership as provided in Title 35, chapter 18. However, cooperatives providing telecommunications services are subject to registration requirements and other provisions applicable to all other unregulated telecommunications carriers.

(b) This section does not grant the commission any power not otherwise provided in another section of this title applicable to the regulation of carriers of regulated telecommunications service.

NEW SECTION. Section 2. Interconnection -- construction and effect. [Sections 5 through 10] do not grant any jurisdiction to the commission over telecommunications carriers except as expressly set forth in [sections 5 through 10], and [sections 5 through 10] may not be construed to limit or repeal exemptions from the commission's jurisdiction otherwise recognized by statute or law. Legislation may not be considered to supersede or modify any provision of [sections 5 through 10] except to the extent that the legislation does so expressly.

NEW SECTION. Section 3. Interconnection -- jurisdiction. In addition to the authority granted to the commission in 69-3-102 to supervise and regulate public utilities, the commission has authority, for the purposes of implementing [sections 5 through 10], over all telecommunications carriers.

NEW SECTION. Section 4. Rulemaking authority. The commission may adopt rules of procedure to implement [sections 7 and 8].

NEW SECTION. Section 5. Duty to interconnect. (1) The purpose of this section is to implement specific provisions of the federal Telecommunications Act of 1996, Public Law 104-104.

(2) (a) Each telecommunications carrier shall perform the duties enumerated in 47 U.S.C. 251(a).

(b) Each local exchange carrier shall perform the duties enumerated in 47 U.S.C. 251(b).

(c) In addition to the duties provided for in subsection (2)(b), each incumbent local exchange carrier shall perform the duties enumerated in 47 U.S.C. 251(c).

(3) (a) Except under the circumstances set forth in subsection (4), the provisions of subsection (2)(c) do not apply to a rural telephone company until:

(i) the company has received a bona fide request for interconnection, services, or network elements; and

(ii) the commission determines under subsection (3)(b) that the request is not unduly economically burdensome, is technically feasible, and is consistent with 47 U.S.C. 254 (other than 47 U.S.C. 254(b)(7) and (c)(1)(D)).

(b) The party making a bona fide request of a rural telephone company for interconnection, services, or network elements shall submit a notice of its request to the commission. The commission shall conduct an inquiry for the purpose of determining whether to terminate the exemption provided by subsection (3)(a). Within 120 days after the commission receives notice of the request, the commission shall terminate the exemption if the request is not unduly economically burdensome, is technically feasible, and is consistent with 47 U.S.C. 254 (other than 47 U.S.C. 254(b)(7) and (c)(1)(D)). Upon termination of the exemption, the commission shall establish an implementation schedule for compliance with the request that is consistent in time and manner with the federal communications commission's regulations.

(4) The exemption provided by subsection (3)(a) does not apply with respect to a request from a cable operator providing video programming and seeking to provide any telecommunications service in the area in which the rural telephone company was providing video programming on February 8, 1996.

(5) (a) A local exchange carrier with fewer than 2% of the nation's subscriber lines, installed in the aggregate nationwide, may petition the commission for a suspension or modification of the application of a requirement of subsection (2)(b) or (2)(c) to telephone exchange service facilities specified in the petition. The commission shall grant the petition for the suspension or modification to the extent and for the duration that the commission determines:

(i) is necessary:

(A) to avoid a significant adverse economic impact on users of telecommunications services generally;

(B) to avoid imposing a requirement that is unduly economically burdensome; or

(ii) is consistent with the public interest, convenience, and necessity.

(b) The commission shall act upon any petition filed under subsection (5)(a) within 180 days after receiving the petition. Pending action, the commission may suspend enforcement of the requirement to which the petition applies with respect to the petitioning carrier.

NEW SECTION. Section 6. Voluntary negotiation of interconnection agreements. Upon receiving a request for interconnection, services, or network elements pursuant to [section 5], an incumbent local exchange carrier may negotiate and enter into a binding agreement with the requesting telecommunications carrier without regard to the duties set forth in [section 5(2)(b) or (2)(c)]. The agreement must include a detailed schedule of itemized charges for interconnection and each service or network element included in the agreement.

NEW SECTION. Section 7. Mediation of interconnection agreements. Upon the written request of any party negotiating an agreement for interconnection with another telecommunications carrier, the commission may designate a mediator, who may be a commission member, to mediate any differences arising in the course of the negotiation.

NEW SECTION. Section 8. Arbitration of interconnection issues. (1) The commission has the authority to arbitrate any open interconnection issues pursuant to 47 U.S.C. 252(b), as it existed on February 8, 1996, according to the duties in subsections (3) through (14) of this section. Except as expressly provided in this section, the provisions of the Montana Administrative Procedure Act do not apply to arbitrations conducted under the authority granted by this section.

(2) During the period from the 135th to the 160th day, inclusive, after the date on which an incumbent local exchange carrier receives a request for negotiation under [section 5], the carrier or any other party to the negotiation may petition the commission to arbitrate any open issues. A party that petitions the commission under this section shall, at the same time as it submits the petition, provide the commission all relevant documentation concerning the following:

(a) the unresolved issues;

(b) the position of each of the parties with respect to those issues; and

(3) A party petitioning the commission under this section shall provide a copy of the petition and any documentation to the other party or parties not later than the day on which the commission receives the petition.

(4) A nonpetitioning party to a negotiation under [section 5] may respond to the other party's petition and provide any additional information that it wishes within 25 days after the commission receives the petition.

(5) The commission shall limit its consideration to those issues set forth by the parties to the negotiation in the petition for arbitration and the response to the petition.

(6) The commission may appoint a hearings examiner for arbitration proceedings under this section. The hearings examiner shall file with the commission a proposed decision within the time set by order of the commission. A hearings examiner must be assigned with regard to the expertise required for the particular matter. On the filing by a party, in good faith, of a timely and sufficient affidavit of personal bias, lack of independence, disqualification by law, or other disqualification of a hearings examiner or on the hearings examiner's own motion, the commission shall determine the affidavit or motion as a part of the record in the case. The commission may disqualify the hearings examiner and appoint another hearings examiner. The affidavit must state the facts and the reasons for the belief that the hearings examiner should be disqualified and must be filed not less than 10 days before the original date set for the hearing.

(7) Participation in the arbitration proceeding must be limited to the telecommunications carrier requesting the arbitration, the telecommunications carrier from which interconnection is being sought, and the Montana consumer counsel.

(8) Negotiations among the telecommunications carriers may continue, pending a final decision by the arbitrator.

(9) Unless otherwise agreed to by the parties, the commission shall, within 10 days of the filing of a request for arbitration, conduct a conference with the parties for the purpose of establishing a schedule for the orderly and timely disposition of the arbitration. The schedule must include discovery deadlines and a hearing date.

(10) The hearing must be conducted pursuant to the Montana Rules of Evidence, and the parties are entitled to be heard, present evidence material to the issues, and cross-examine witnesses appearing at the hearing. Parties must be allowed to conduct discovery pursuant to the schedule determined by the arbitrator, and the discovery must be conducted pursuant to the Montana Rules of Civil Procedure.

(11) The commission may issue subpoenas for the attendance of witnesses and the production of books, records, documents, and other evidence relevant to the issues being arbitrated and may administer oaths. Subpoenas must be served and enforced in the manner provided by law for the service and enforcement of subpoenas in a civil action in district court. The commission shall regulate the course of the hearings and the need for filing briefs and may direct the parties to appear and confer to consider simplification of the issues by consent of the parties.

(12) When the commission files its final decision or when the hearings examiner files the proposed decision with the commission, each party must be simultaneously given a copy delivered personally or by certified mail. The decision must:

(a) ensure the resolution of issues presented by the parties and ensure that the resolution meets the requirements of [section 5] and this section;

(b) establish rates for interconnection, services, or access to unbundled network elements pursuant to 47 U.S.C. 252(d); and

(13) If the person who conducted the hearing becomes unavailable to the commission, the commission is not precluded from issuing a final decision based on the record if the demeanor of the witnesses is considered immaterial by all parties.

(14) Unless required for the disposition of ex parte matters authorized by law, the person or persons who are charged with the duty of rendering a decision or of making findings of fact and conclusions of law in an arbitration proceeding, after issuance of notice of hearing, may not communicate with any party or a party's representative in connection with any issue of fact or law in the case unless there is notice and opportunity for all parties to participate.

NEW SECTION. Section 9. Approval of arbitration decision. (1) If the commission has not approved or rejected in its entirety an agreement adopted by arbitration under [section 8(12)] within 30 days of submission by the parties, the agreement is considered approved.

(2) The commission may reject the agreement only if the commission finds that the agreement does not meet the requirements of 47 U.S.C. 251 and the regulations prescribed to implement that section by the federal communications commission or the standards set forth in 47 U.S.C. 252(d). Upon rejection of an agreement, the commission shall provide the parties with written findings as to any deficiencies.

NEW SECTION. Section 10. Approval of interconnection agreements. (1) Within 90 days of filing of an interconnection agreement adopted by negotiation of the parties to an agreement, the commission shall approve or reject the agreement, or the agreement is considered approved.

(2) The commission may reject an agreement filed under this section only if the commission finds that:

(a) the agreement or a portion of the agreement discriminates against a telecommunications carrier not a party to the agreement; or

(b) the implementation of the agreement or portion is not consistent with the public interest, convenience, and necessity.

(3) Upon rejecting an agreement filed under this section, the commission shall issue written findings detailing any deficiencies in the agreement.

NEW SECTION. Section 11. Determination of eligible carrier status -- universal service support. (1) The commission is authorized to designate telecommunications carriers as eligible for federal universal service support in accordance with 47 U.S.C. 214(e)(1) and 47 U.S.C. 254. This authorization applies to all telecommunications carriers notwithstanding the carrier's exemption from further regulation by the commission.

(2) Upon the petition of a telecommunications carrier, or upon its own motion, the commission shall designate a telecommunications carrier that meets the requirements of 47 U.S.C. 214(e)(1) as an eligible telecommunications carrier for a service area designated by the commission. In the case of an area served by a rural telephone company, the term "service area" means the company's "study area" unless the federal communications commission establishes a different definition of service area for the company. The term "service area" for all other telecommunications carriers means a geographic area such as a census block or grid block as established by the commission for the purpose of determining universal service obligations and support mechanisms.

(3) Upon receiving a petition from a telecommunications carrier and consistent with the public interest, convenience, and necessity, the 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 telecommunications carrier for a service area, so long as each additional requesting telecommunications carrier meets the requirements of 47 U.S.C. 214(e)(1). Before designating an additional eligible telecommunications carrier for an area served by a rural telephone company, the commission shall find that the designation is in the public interest.

(4) If no telecommunications carrier will provide the services that are supported by universal service support mechanisms under 47 U.S.C. 254(c) to all or a part of an unserved community that requests service, the commission shall determine which telecommunications carrier is best able to provide the service to the requesting unserved community. Any telecommunications carrier ordered to provide service under this section shall meet the requirements of 47 U.S.C. 214(e)(1) and must be designated as an eligible telecommunications carrier for that community or the unserved portion of the community.

(5) The commission shall permit an eligible telecommunications carrier to relinquish its designation as an eligible carrier in any area served by more than one eligible telecommunications carrier. An eligible telecommunications carrier that seeks to relinquish its eligible telecommunications carrier designation for an area served by more than one eligible telecommunications carrier shall give advance notice to the commission of the relinquishment. Prior to permitting a telecommunications carrier designated as an eligible telecommunications carrier to cease providing universal service in an area served by more than one eligible telecommunications carrier, the commission shall require the remaining eligible telecommunications carrier to ensure that all customers served by the relinquishing carrier will continue to be served and shall require sufficient notice to permit the purchase or construction of adequate facilities by any remaining eligible telecommunications carrier. The commission shall establish a time, not to exceed 1 year after the commission approves relinquishment under this section, within which the purchase or construction must be completed.

NEW SECTION. Section 12. Illegal changes in subscriber carrier selections. (1) A telecommunications carrier may not submit or execute a change in a subscriber's selection of a provider of telecommunications services except in accordance with verification procedures that the commission has adopted by rule pursuant to this section.

(2) Any telecommunications carrier that violates the verification procedures described in subsection (1) and that collects charges for telecommunications services from a subscriber is liable to the carrier previously selected by the subscriber in an amount equal to all charges paid by the subscriber after the violation, in accordance with procedures that the commission has adopted by rule pursuant to this section. The remedy provided by this section is in addition to any other remedies available by law.

NEW SECTION. Section 13. Special ratemaking procedures. (1) A provider of regulated telecommunications services may file with the commission, and the commission shall expeditiously hear, an application to eliminate or minimize a noncost-based differential in the price of its telecommunications services without reestablishing its cost of providing all regulated telecommunications services.

(2) If, upon hearing the application, the commission determines that a noncost-based differential exists in the prices of the services of the provider of regulated telecommunications services, it may authorize the provider to eliminate or minimize the differential in a fashion that neither increases nor decreases the revenue currently being earned by the provider in providing those services.

(3) The commission may, in its discretion, require any change in prices required by subsection (2) to be implemented over a transition period not exceeding 3 years.

NEW SECTION. Section 14. Biennial report on telecommunications. The commission is directed to prepare a status report, limited to data readily available by the commission, to the governor and the legislature by December 1 of each even-numbered year. The report must include:

(1) a summary of the implementation of [sections 16 through 22] and this part;

(2) a summary of the status of competition in the telecommunications industry in Montana, including effects on universal service, rates, technological deployment, and economic development;

(3) a comparison of Montana's progress in relation to neighboring states and the nation in the development of an affordable advanced telecommunications system necessary to maintain and advance Montana's economic viability in a global economy;

(4) changes in regulation that can or should be implemented pursuant to the level of competition in the telecommunications industry; and

(5) recommended changes to Montana law to further the goals of [sections 16 through 22] and this part.

NEW SECTION. Section 15. Restrictions on resale. The resale of telecommunications services is subject to the following restrictions:

(1) Services that are available for resale at a discounted rate do not include carrier access services.

(2) Resale is limited to retail products and services available to end-user customers. Wholesale services are available only for resale and not predominantly for internal use.

(3) Consistent with the federal Telecommunications Act of 1996, Public Law 104-104, resale between categories of customers is prohibited until any pricing disparity for the same service offered to different categories of customers has been eliminated.

(4) Any explicit universal service support to a specific category of customers may not be redistributed to another category of customers through resale.

(5) Lifeline and other means-tested services offerings may be resold only to customers who qualify for the service.

NEW SECTION. Section 16. Interim universal access program -- purpose. (1) There is an interim universal access program.

(2) The purpose of the interim universal access program is to further the goal of universal access to advanced telecommunications services in Montana by:

(a) increasing safety net coverage through which advanced telecommunications services would, at a minimum, be available through a library, school, or other specified type of public institution in every community in the state;

(b) encouraging innovation in communities to bring advanced services to Montana's rural areas; and

(c) assisting communities that have already succeeded in obtaining services when ongoing transport costs threaten the continued availability of these services.

NEW SECTION. Section 17. Interim universal access program -- definitions. As used in [sections 16 though 22], the following definitions apply:

(1) "Administrator" means the public service commission.

(2) "Advanced services" means high-speed (56 kbps and above), dedicated or switched, broadband telecommunications capability that enables users to originate and receive high-quality voice, data, graphics, and video telecommunications using any technology.

(3) "Health care provider" means any one of, or a consortium of, the following institutions located in Montana:

(a) postsecondary educational institutions offering health care instruction;

(b) community health care centers or health centers providing health care to migrants;

(d) community mental health centers;

(e) not-for-profit hospitals; and

(f) rural health clinics.

(4) "Library" means a library located in Montana that is eligible for participation in state-based plans for funds under Title III of the Library Services and Construction Act (20 U.S.C. 335c, et seq.).

(5) "School" means:

(a) an elementary school or secondary school that meets the definition set forth in paragraphs (14) and (25), respectively, of section 14101 of the Elementary and Secondary Education Act of 1965 (20 U.S.C. 8801) and that does not have an endowment of more than $50 million; or

(b) a bureau of indian affairs elementary and secondary school.

(6) "Tribal college" means a college recognized by the United States government as a tribal college.

NEW SECTION. Section 18. Interim universal access program -- public access points. At a minimum, all public access points must provide the general public access to advanced telecommunications services that are not subscription based free of charge and at convenient hours on a walk-in basis. Public access points may offer subscription based services, such as electronic mail, but are not required to administer these types of services.

NEW SECTION. Section 19. Interim universal access program -- funded services -- application for services. (1) The universal access program provides funding through discounts only for advanced services for use by public access points, schools, tribal colleges, libraries, and health care providers approved by the administrator.

(2) The first priority of the program is to provide funding for at least one public access point in each Montana community. Subject to available funding, the program shall also provide funding for advanced services to schools, tribal colleges, libraries, and health care providers.

(3) The administrator shall establish discount levels for services in each of the following categories:

(a) public access points;

(b) education services to schools and tribal colleges for distance learning, electronic access to educational resources, and electronic delivery or reception of educational programming;

(c) library services for libraries not serving as public access points for electronic access to information and library services; and

(d) rural health services to rural health care providers for access to similar services as urban health care providers and to ensure electronic access to health care services.

(4) To receive discounted services under the interim universal access program, public access providers, schools, tribal colleges, libraries, and health care providers shall apply for the discounts. The application must be accompanied by a resolution of support from the governing body of the appropriate city, county, or tribal government in which the applicant is located.

NEW SECTION. Section 20. Interim universal access program -- services provided at discounts -- reimbursements. (1) Telecommunications carriers shall provide advanced services to eligible users at specified discounts. The amount of the discount must be reimbursed to the provider from the interim universal access account established in [section 22].

(2) Except as provided in subsection (3), the advanced discount is equal to 50% of the best cost rate available to any business customer for an equivalent of one 56 kbps dedicated circuit to the nearest access point for the requested service. However, the cost to the eligible user may not exceed $100 a month.

(3) If funds from the interim universal access account are not sufficient to fully reimburse for discounts authorized in subsection (2), the amount of the discounts to each eligible user must be reduced proportionally.

(4) Even if best cost rates available to any business customer increase by more than 5%, the amount payable by an eligible user may not increase by more than 5% during the period from [the effective date of this section] to January 1, 2000.

(5) Subject to restrictions in federal law, if interstate universal access services are established by the federal communications commission, federal funding for universal access services must be used to reduce state funding for intrastate services.

NEW SECTION. Section 21. Interim universal access program -- funding -- surcharge rate. (1) (a) The interim universal access program is funded by a surcharge based on the retail revenue for all intrastate telecommunications services in the state. The surcharge must be determined by the administrator by rule. The surcharge must be set and applied to all telecommunications carriers on a competitively neutral basis.

(b) The rate of the surcharge must be set to raise $500,000 during the fiscal year ending June 30, 1998, and $1 million during the fiscal year ending June 30, 1999. The rate may be changed, by rule, as necessary.

(c) The payment of the surcharge is an explicit subsidy and may be shown as a separate line item on each carrier's retail telecommunications services bills.

(d) The surcharge may be applied only to telecommunications services. Customer premise equipment is not considered a telecommunications service.

(2) The surcharge is payable quarterly to the department of revenue and deposited by the department in the interim universal access account established in [section 22]. The department may by rule:

(a) establish the form of a reporting statement to be filed by telecommunications carriers subject to the surcharge;

(b) set the date after the end of a fiscal quarter that the quarterly payment must be made;

(d) provide methods to pay the surcharge, including offsets of surcharges owed against discounted services to be reimbursed, and to pay refunds of overpayment of the surcharge.

(3) (a) The collection of a surcharge under this section is subject to:

(i) the deficiency assessment, review, interest, and penalty provisions of 15-53-105;

(ii) the penalty and interest for delinquency and waiver provisions of 15-53-111;

(iii) the estimation of tax on failure to file a statement of provisions of 15-53-112;

(iv) the warrant for distraint provisions of 15-53-113; and

(v) the statute of limitations provisions of 15-53-115.

(b) Any reference to the tax under sections listed in subsection (3)(a), either by cite to a section of law or literally to the tax, refer, for the purposes of this section, to the surcharge imposed by this section.

NEW SECTION. Section 22. Interim universal access program -- account. An interim universal access account is established in the state special revenue fund in the state treasury. All money received by the department of revenue pursuant to [section 21] must be paid to the state treasurer for deposit in the account. After payment of refunds, the balance of the account must be used for the purposes described in [section 20].

NEW SECTION. Section 23. Commission to make recommendations on universal access and service. The public service commission shall examine and make recommendations to the 56th legislature on universal access and service. The commission shall:

(1) review the impact on universal access and service in Montana of any federal universal service fund that results from current federal communications rulemaking under the federal Telecommunications Act of 1996;

(2) evaluate the extent to which the federal universal service fund falls short of supporting legislatively defined universal access and service goals in Montana; and

(3) develop plans and propose legislation for the establishment of a state universal service fund that would ensure the attainment of those goals.

Section 24. Section 2-4-102, MCA, is amended to read:

"2-4-102. Definitions. For purposes of this chapter, the following definitions apply:

(1) "Administrative code committee" or "committee" means the committee provided for in Title 5, chapter 14.

(2) (a) "Agency" means an agency, as defined in 2-3-102, of the state government, except that the provisions of this chapter do not apply to the following:

(i) the state board of pardons and parole, except that the board is subject to the requirements of 2-4-103, 2-4-201, 2-4-202, and 2-4-306 and its rules must be published in the Administrative Rules of Montana and the Montana Administrative Register;

(ii) the supervision and administration of a penal institution with regard to the institutional supervision, custody, control, care, or treatment of youths or prisoners;

(iii) the board of regents and the Montana university system;

(iv) the financing, construction, and maintenance of public works.;

(v) the public service commission when conducting arbitration proceedings pursuant to 47 U.S.C. 252 and [section 8].

(b) Agency does not include a school district, unit of local government, or any other political subdivision of the state.

(3) "ARM" means the Administrative Rules of Montana.

(4) "Contested case" means a proceeding before an agency in which a determination of legal rights, duties, or privileges of a party is required by law to be made after an opportunity for hearing. The term includes but is not restricted to ratemaking, price fixing, and licensing.

(5) "License" includes the whole or part of any agency permit, certificate, approval, registration, charter, or other form of permission required by law but does not include a license required solely for revenue purposes.

(6) "Licensing" includes any agency process respecting the grant, denial, renewal, revocation, suspension, annulment, withdrawal, limitation, transfer, or amendment of a license.

(7) "Party" means a person named or admitted as a party or properly seeking and entitled as of right to be admitted as a party, but nothing in this chapter may be construed to prevent an agency from admitting any person as a party for limited purposes.

(8) "Person" means an individual, partnership, corporation, association, governmental subdivision, agency, or public organization of any character.

(9) "Register" means the Montana Administrative Register.

(10) "Rule" means each agency regulation, standard, or statement of general applicability that implements, interprets, or prescribes law or policy or describes the organization, procedures, or practice requirements of an agency. The term includes the amendment or repeal of a prior rule but does not include:

(a) statements concerning only the internal management of an agency and not affecting private rights or procedures available to the public;

(b) formal opinions of the attorney general and declaratory rulings issued pursuant to 2-4-501;

(c) rules relating to the use of public works, facilities, streets, and highways when the substance of the rules is indicated to the public by means of signs or signals;

(d) seasonal rules adopted annually or biennially relating to hunting, fishing, and trapping when there is a statutory requirement for the publication of the rules and rules adopted annually or biennially relating to the seasonal recreational use of lands and waters owned or controlled by the state when the substance of the rules is indicated to the public by means of signs or signals;

(e) rules implementing the state personnel classification plan, the state wage and salary plan, or the statewide budgeting and accounting system;

(f) uniform rules adopted pursuant to interstate compact, except that the rules must be filed in accordance with 2-4-306 and must be published in the Administrative Rules of Montana.

(11) "Substantive rules" are either:

(a) legislative rules, which if adopted in accordance with this chapter and under expressly delegated authority to promulgate rules to implement a statute have the force of law and when not so adopted are invalid; or

(b) adjective or interpretive rules, which may be adopted in accordance with this chapter and under express or implied authority to codify an interpretation of a statute. The interpretation lacks the force of law."

Section 25. Section 35-18-503, MCA, is amended to read:

"35-18-503. Annual fee to department of revenue -- exemption from other taxes. Cooperatives and foreign corporations transacting business in this state pursuant to the provisions of this chapter shall pay annually on or before July 1, to the department of revenue a fee of $10 for each 100 persons or fractions ~~thereof~~ of 100 persons to whom electricity or telephone service was supplied during the previous calendar year within the state and, except as provided in [section 21] and 10-4-201, ~~shall~~ are be exempt from all other excise and income taxes of ~~whatsoever~~ any kind or nature."

Section 26. Section 69-3-305, MCA, is amended to read:

"69-3-305. Deviations from scheduled rates, tolls, and charges. (1) A public utility may not:

(a) charge, demand, collect, or receive a greater or less compensation for a utility service performed by it within the state or for any service in connection with a utility service than is specified in the printed schedules, including schedules of joint rates, that may at the time be in force;

(b) demand, collect, or receive a rate, toll, or charge not specified in the schedules; or

(c) grant a rebate, concession, or special privilege to a consumer or user that, directly or indirectly, has or may have the effect of changing the rates, tolls, charges, or payments.

(2) The rates, tolls, and charges named in the printed schedules are the lawful rates, tolls, and charges until the rates, tolls, and charges are changed, as provided in this chapter.

(3) The commission may order refunds or credits of rates, tolls, or charges collected in violation of this section and may order payment of interest at a reasonable rate on the refunded amount.

(4) The provisions of this section do not prohibit the sharing of profits or revenues with customers in conjunction with an alternative form of regulation approved under 69-3-809.

(5) (a) A provider of regulated telecommunications service may offer, for a limited period of time, ~~either~~ rebates, price or reductions, or waivers of ~~installation~~ charges in conjunction with promotions, market trials, or other sales-related activities that are common business practices. Promotional pricing ~~of services that remain fully tariffed requires~~ for services other than basic local exchange access to end users does not require advance approval of the commission. Informational price lists must be filed with the commission on or before the date that the promotion begins. Promotional offerings for basic local exchange access to end users and packaged services that include basic local exchange access to end users require advance approval of the commission. The commission shall approve, deny, or upon a showing of good cause set for hearing an application for a promotional discount within 30 days of the filing of the application. If the commission has not acted on the application within the permitted time period, the application is considered granted. ~~A promotional offering may not combine monopoly services with competitive services unless authorized by the commission.~~

(b) A public utility providing electricity or natural gas may offer grants and subsidized loans to install energy conservation and nonfossil forms of energy generation systems in dwellings.

(c) The commission may define the appropriate scope of promotions, rebates, market trials, and grants and subsidized loans, either by rule or in response to complaints. The commission may determine whether a particular sales activity or grant or subsidized loan program under this subsection is unfairly discriminatory or is not cost-effective. Costs and expenses incurred or revenue foregone with respect to sales activities and grant and subsidized loan programs that the commission determines are unfairly discriminatory or not cost-effective are the responsibility of the provider's shareholders in rates set by the commission.

(6) A public utility violating the provisions of this section is subject to the penalty prescribed in 69-3-206. ~~This, however~~ However, this does not have the effect of suspending, rescinding, invalidating, or in any way affecting existing contracts."

Section 27. Section 69-3-801, MCA, is amended to read:

"69-3-801. Short title. This part may be cited as the "Montana Telecommunications Reform Act"."

Section 28. Section 69-3-802, MCA, is amended to read:

"69-3-802. Purpose. ~~The legislature declares that it remains the policy of the state of Montana to maintain universal availability of basic telecommunications service at affordable rates.~~ This part was adopted in response to the enactment into law of the federal Telecommunications Act of 1996, Public Law 104-104, and the work performed by the governor's blue ribbon telecommunications task force established by Chapter 508, Laws of 1995. This part expresses the policies of the state of Montana that should govern the orderly transition of the telecommunications industry in the state from a regulated industry to an industry primarily controlled by the economic forces of a competitive telecommunications marketplace. The legislature declares that it remains the policy of the state of Montana to maintain universal availability of basic telecommunications service at affordable rates. To the extent that it is consistent with maintaining universal service, it is further the policy of this state to encourage competition in the telecommunications industry, thereby allowing access by the public to resulting rapid advances in telecommunications technology. It is the purpose of this part to provide a regulatory framework that will allow an orderly transition from a regulated telecommunications industry to a competitive market environment, and it is further the purpose of this part to clarify that the commission has authority to implement alternative forms of regulation for providers of regulated telecommunications services."

Section 29. Section 69-3-803, MCA, is amended to read:

"69-3-803. Definitions. As used in this part, the following definitions apply:

(1) "Advanced telecommunications services" means high-speed (56 kbps) dedicated or switched, broadband telecommunications capability that enables users to originate and receive high-quality voice, data, graphics, and video telecommunications using any technology.

~~(1)~~(2) "Commission" means the public service commission.

(3) "Incumbent local exchange carrier" means, with respect to an area, the local exchange carrier that:

(a) on February 8, 1996, provided telephone exchange service in the area; and

(b) on February 8, 1996, was considered to be a member of the exchange carrier association pursuant to 47 CFR 69.601(b) or is a person or entity that, after that date, became a successor or assign of a member of the exchange carrier association.

~~(2)~~(4) "Private telecommunications service" means a system, including the construction, maintenance, or operation ~~thereof~~ of the system, for the provision of telecommunications service or any portion of ~~such~~ the service, by a person or entity for the sole and exclusive use of that person or entity and not for resale, directly or indirectly. For purposes of this definition, the term "person or entity" includes a corporation and all of its affiliates and subsidiaries if the corporation, affiliates, and subsidiaries have a common ownership or control of 80% of the outstanding voting shares.

~~(3)~~(5) (a) "Regulated telecommunications service" means two-way switched, voice-grade access and transport of communications originating and terminating in this state and nonvoice-grade access and transport if intended to be converted to or from voice-grade access and transport.

(b) ~~Regulated telecommunications service~~ The term does not include the provision of terminal equipment used to originate or terminate ~~such~~ the regulated service, private telecommunications service, ~~resale of telecommunications service,~~ one-way transmission of television signals, cellular communication, or provision of radio paging or mobile radio services.

(4) "Resale of telecommunications service" means the resale of regulated telecommunications service, with or without adding value, provided any value added would not otherwise be subject to regulation.

(6) "Rural telephone company" means a local exchange carrier operating entity to the extent that the entity:

(a) provides common carrier service to any local exchange carrier study area that does not include either:

(i) all or any part of an incorporated place of 10,000 inhabitants or more based on the most recently available population statistics of the United States bureau of the census; or

(ii) any territory, incorporated or unincorporated, included in an urbanized area, as defined by the United States bureau of the census as of August 10, 1993.

(b) provides telephone exchange service, including exchange access, to fewer than 50,000 access lines;

(c) provides telephone exchange service to any local exchange carrier study area with fewer than 100,000 access lines; or

(d) has less than 15% of its access lines in communities of more than 50,000 on February 8, 1996.

(7) "Telecommunications" means the transmission, between or among points specified by the user, of information of the user's choosing without a change in the form or content of the information upon receipt.

(8) "Telecommunications carrier" or "carrier" means any provider of telecommunications services. A person providing other products and services in addition to telecommunications services is considered a telecommunications carrier only to the extent that it is engaged in providing telecommunications services. The term does not mean aggregators of telecommunications services as defined in 47 U.S.C. 226."

Section 30. Section 69-3-805, MCA, is amended to read:

"69-3-805. ~~Manner of regulation~~ Registration of telecommunications ~~service~~ providers. (1) Before any person or entity provides ~~regulated~~ telecommunications service within the state of Montana, it shall file with the commission a notice including:

(a) the name, ~~and~~ address, and telephone number of the provider;

(b) ~~a narrative description of the regulated telecommunications service to be offered and the geographic area and markets to be served;~~

~~(c) initial tariffs for the regulated telecommunications service;~~

~~(d) such other information as the commission may require to accomplish the purpose of this chapter.~~ the name, address, and telephone number of the person responsible for regulatory contacts and customer dispute resolution on behalf of the provider;

(c) a description of the provider's existing operations and general service and operating areas in any other jurisdictions;

(d) a list of the provider's parent, subsidiary, and affiliated companies, together with principal addresses and telephone numbers of each;

(e) initial tariffs or price lists for regulated telecommunications services, including a narrative description of the regulated telecommunications to be offered and the geographic area and markets to be served;

(f) a general description of the facilities and equipment that will be used to provide services, including whether the service will be offered on a facilities basis, a resale basis, or a combination of both of them;

(g) a statement of whether the provider intends to draw from the federal or state universal service fund or other explicit support funds, including a statement of whether the provider intends to seek the commission's designation as an eligible telecommunications carrier;

(h) disclosure of any formal actions against it by any court or state or federal regulatory agency that resulted in any type of penalty or sanction or within the 5 years prior to the date of filing the notice;

(i) if the provider is other than a corporation, a description of the form of ownership, the names and addresses of all principal owners and managers, the provider's agent for service of process in Montana, and the date of creation of the business entity; and

(j) other information from regulated telecommunications carriers as the commission may require to accomplish the purposes of this chapter.

(2) ~~The provision of any regulated telecommunications service does not subject the provider thereof to regulation of any other telecommunications services otherwise exempt under this chapter.~~ The commission may waive any of the requirements set forth in subsection (1).

(3) The provider shall file with the commission a report of any judgment, penalty, or sanction entered in any other jurisdiction that could adversely affect the provider's ability to provide communications services in Montana."

Section 31. Section 69-3-807, MCA, is amended to read:

"69-3-807. Regulation of rates and charges. (1) ~~As to telecommunications service that is provided under regulation, the~~ The commission may establish specific rates, tariffs, or fares for the provision of ~~the~~ regulated telecommunications service to the public. The rates, tariffs, or fares must be just, reasonable, and nondiscriminatory.

(2) Alternatively, the commission may authorize the provision of regulated telecommunications service under terms and conditions that best serve the declared policy of this state. For a service detariffed under this subsection, the provider shall maintain a current price list on file with the commission and shall provide notice of changes in the price list as prescribed by the commission. The commission is not required to fix and determine specific rates, tariffs, or fares for the service and in ~~lieu thereof~~ the alternative may:

(a) totally detariff the service;

(b) detariff rates for the service but retain tariffs for service standards and requirements;

(c) establish only maximum rates, only minimum rates, or permissible price ranges as long as the minimum rate is cost compensatory; or

(d) provide ~~such~~ other rate or service regulation as will promote the purposes of this part.

(3) Except as provided in subsection (4), in determining applications under subsection (2), the commission shall consider the following factors:

(a) the number, size, and distribution of alternative providers of service;

(b) the extent to which services are available from alternative providers in the relevant market;

(d) the overall impact of the proposed terms and conditions on the continued availability of existing services at just and reasonable rates; and

(e) other factors that the commission may prescribe through rulemaking that are appropriate to fulfill the purposes of this part.

(4) Notwithstanding the provisions of subsection (3), the commission may exercise its power under subsection (2)(c) with respect to any services of a telecommunications provider if the commission finds that action consistent with the provisions of 69-3-802 and with the public interest. Noncompetitive local exchange access to end-users and carrier access services may not be detariffed.

(5) A provider of regulated message telecommunications service and related services shall average its service rates on its routes of similar distance within the state unless otherwise authorized by the commission. ~~Nothing contained in this~~ This subsection may not be construed to prohibit volume discounts, discounts in promotional offerings, or other discounts as long as the discounts are not offered in a discriminatory manner.

(6) All providers of comparable regulated telecommunications services within a market area must be subject to the same standards of regulation. For purposes of this section, regulated telecommunications services are comparable to the extent alternative providers can make functionally equivalent substitutes or substitute services readily available."

Section 32. Section 69-3-809, MCA, is amended to read:

"69-3-809. Alternative forms of regulation. (1) The commission may authorize a provider of regulated telecommunication services, as defined in 69-3-803, to implement alternatives to the ratemaking practices required under parts 2, 3, and 9 of this chapter, including but not limited to:

(a) price caps;

(b) price regulation; and

(c) equitable sharing of earnings or ~~revenues~~ revenue between a provider of regulated telecommunications services and its customers.

(2) A provider of regulated telecommunications services may petition the commission to regulate the provider under an alternative form of regulation. The provider shall submit its plan for an alternative form of regulation with its petition. The commission's order on the petition must be issued no later than 9 months after the filing of the petition. The commission shall review and may authorize implementation of the plan if it finds, after notice and hearing, that the plan:

(a) ~~will not degrade the quality of or the availability of efficient telecommunications services;~~

~~(b) will produce fair, just, and reasonable rates for telecommunications services;~~

~~(c) will not unduly or unreasonably prejudice or disadvantage a customer class;~~

~~(d) will reduce regulatory delay and costs;~~

~~(e)~~ is in the public interest; and

~~(f) will enhance economic development in the state;~~

~~(g) will result in the improvement of the telephone infrastructure in the state; and~~

~~(h)~~(b) conforms to the purpose stated in 69-3-802 more nearly than regulation under part 2, 3, or 9 of this chapter conforms to the stated purpose.

(3) If the commission determines that the plan does not satisfy the requirements of this section, it may either reject the petition or issue a proposed order modifying the plan as submitted by the provider.

(4) A proposed order modifying the plan submitted by a provider of regulated telecommunications service may not be final until 60 days after issuance. During that 60-day period, the provider may withdraw its petition for alternative regulation or the consumer counsel may object to the proposed order. If a petition for alternative regulation is withdrawn or the consumer counsel objects to the proposed order, the provider:

(a) remains subject to the same regulation that applied when the petition was filed; and

(b) may petition the commission to be regulated under a revised alternative plan.

(5) Upon petition or upon its own motion, the commission may rescind its approval or amend an alternative form of regulation if, after notice and hearing, it finds that the conditions in subsection (2) are no longer satisfied.

(6) ~~Nothing contained in this~~ This section may not be construed as limiting or otherwise affecting the commission's authority to conduct investigations or hear complaints as provided in part 3 of this chapter."

Section 33. Section 69-3-811, MCA, is amended to read:

"69-3-811. ~~Costs for services provided~~ Relevant cost defined -- jurisdiction over complaints. (1) Prices charged for a regulated telecommunications service must be above relevant costs unless otherwise ordered by the commission. If the commission determines that a price is below relevant costs, it may ensure that shareholders and not ratepayers are responsible for any relevant costs not recovered through prices.

~~(2)~~ With regard to competitive services, the term "relevant costs" includes the price for any components that are used by the telecommunications provider and that would be essential for alternative providers to use in providing the competitive services pursuant to commission-approved methodology.

~~(3)~~(2) The commission has jurisdiction to consider complaints and initiate investigations to determine whether the price charged by a provider of regulated telecommunications service is above relevant costs. The commission may also consider complaints that a pricing or promotional practice violates any provision of this title."

Section 34. Section 69-3-1001, MCA, is amended to read:

"69-3-1001. Creation of program -- amount of assistance. (1) There is a telephone ~~low income~~ low-income assistance program to provide an eligible subscriber with a discount in the monthly charge for local exchange service in the telephone network.

(2) ~~This~~ The commission shall set the discount in the charge for local exchange service ~~is the greater of:~~

~~(a) $2~~ that is at least $3.50 a month for each eligible subscriber~~; or~~

~~(b)~~ but not more than the amount ~~necessary to obtain the matching waiver available under applicable orders and regulations of the federal communications commission~~ that is the difference between the otherwise applicable current rate for local exchange service and the rate as it was on [the effective date of this section]."

NEW SECTION. Section 35. Codification instruction. (1) [Sections 1 through 15] are intended to be codified as an integral part of Title 69, chapter 3, part 8, and the provisions of Title 69, chapter 3, part 8, apply to [sections 1 through 15].

(2) [Sections 16 through 22] are intended to be codified as an integral part of Title 69, chapter 3, and the provisions of Title 69, chapter 3, apply to [sections 16 through 22].

NEW SECTION. Section 36. Repealer. Sections 69-6-101, 69-6-102, and 69-6-103, MCA, are repealed.

NEW SECTION. Section 37. Effective dates -- applicability -- rulemaking. (1) Except as provided in subsection (2)(a), [this act] is effective on passage and approval.

(2) (a) [Sections 16 through 22] are effective July 1, 1997.

(b) [Section 21] applies to retail revenue for all intrastate telecommunications services received by telecommunications providers after June 30, 1997.

(c) For the purpose of allowing the implementation of [sections 16 through 22] to begin on July 1, 1997, without resorting to the adoption of emergency rules, the public service commission and the department of revenue may begin the process for the adoption of rules to implement [sections 16 through 22] prior to [the effective date of sections 16 through 22], but rules may not be adopted until July 1, 1997.

NEW SECTION. Section 38. Termination. [Sections 16 through 22] terminate December 31, 1999.

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