00 CS FOR HOUSE BILL NO. 111(L&C) 01 "An Act providing for the prospective effect of standards changed by the Regulatory 02 Commission of Alaska; relating to competition in regulated telecommunications and 03 exemptions from tariffs in competitive telecommunications markets; relating to the 04 designation of a dominant carrier in local exchange and long distance markets; relating 05 to depreciation expense rates and cost recovery for telecommunications utilities; setting 06 a policy regarding unbundled network elements in the telecommunications market; 07 extending the termination date of the Regulatory Commission of Alaska; and providing 08 for an effective date." 09 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 10  * Section 1. The uncodified law of the State of Alaska is amended by adding a new section 11 to read: 12 FINDINGS AND PURPOSE. (a) The legislature finds that 01 (1) the Telecommunications Act of 1996 was enacted to foster the rapid 02 deployment of advanced telecommunications, information technologies, and services to all 03 Americans by promoting competition and reducing regulation in telecommunications markets 04 nationwide; 05 (2) the Telecommunications Act of 1996 specifically recognizes the unique 06 abilities and circumstances of the types of local exchange carriers in Alaska--those that are in 07 remote areas that have never been served by a regional bell operating company or an affiliate 08 of a regional bell operating company; 09 (3) state law is tailored to the era of monopoly regulation that existed before 10 passage of the Telecommunications Act of 1996 and fails to reflect national policy of 11 achieving modern and efficient telecommunications systems by way of market incentives 12 rather than regulatory controls; 13 (4) state law fails to recognize that policies designed to encourage new 14 entrants to compete against the nation's largest carriers, the regional bell operating companies, 15 are disproportionately burdensome and financially threatening to Alaska's smaller local 16 exchange carriers; 17 (5) Alaska's outdated policies impede local exchange carriers' deployment of 18 advanced telecommunications services and competitive initiatives to consumers, discourage 19 investment for the future, and deny consumers some of the benefits of modern, efficient, and 20 market-driven telecommunications services; 21 (6) telecommunications in the state are of strategic importance to the 22 economic and social growth and development of the state, and it is vital to the state's future 23 that telecommunications providers operate in a stable and profitable regulatory environment 24 that promotes the improvement of local exchange facilities as well as the development of new 25 facilities; therefore, care and caution must be exercised in introducing competition into rural 26 areas of Alaska to ensure the preservation of universal service; 27 (7) state regulation during the monopoly era has been a surrogate for market 28 forces; upon the achievement of substantial competition, market forces should be allowed to 29 drive investment and service quality; 30 (8) in markets served by Alaska carriers where substantial competition has 31 been achieved, eliminating certain regulatory requirements will 01 (A) promote investment in existing local exchange facilities and the 02 development of new facilities; 03 (B) promote market-driven service quality levels; and 04 (C) relieve consumers of the burden of paying for the costs of 05 regulation; 06 (9) reducing regulatory burdens on Alaska local exchange carriers will enable 07 the carriers to devote additional resources to the deployment of advanced services and to 08 competitive initiatives to benefit consumers in Alaska; and 09 (10) in conformance with the Telecommunications Act of 1996, it is 10 appropriate to eliminate, where possible, the incidence of implicit subsidies in telephone rates; 11 state regulators should be prohibited from using revenue earned or expense incurred from 12 unregulated activities in determining appropriate levels for regulated prices. 13 (b) The purposes of this Act are to 14 (1) accelerate the development of competition in the telecommunications 15 industry for the benefit of consumers in the state by reducing regulatory burdens on these 16 carriers; 17 (2) ensure that competition will not threaten the integrity of Alaska's 18 telecommunications networks; 19 (3) promote the improvement of exiting facilities used to provide local 20 exchange services and the development of new facilities; 21 (4) maintain competition in local exchange markets once unbundling 22 requirements have achieved substantial competition; and 23 (5) clarify the jurisdiction of the Regulatory Commission of Alaska as it 24 relates to unregulated activities and prescribe changes to certain regulated accounting 25 practices. 26  * Sec. 2. AS 42.05.145 is amended by adding a new subsection to read: 27 (b) Upon the commission's approval of a carrier's application to provide 28 competitive local exchange telecommunications service in an incumbent local 29 exchange carrier's service area, the incumbent local exchange carrier may not be 30 regulated by the commission as a dominant carrier in the local exchange market if its 31 statewide market share, as measured in number of carrier common lines, is less than 01 60 percent. However, the incumbent local exchange carrier shall remain the carrier of 02 last resort in the relevant area until the commission orders otherwise or unless 03 AS 42.05.433(e) applies. 04  * Sec. 3. AS 42.05.291 is amended by adding a new subsection to read: 05 (e) Regulations, rules, and orders of the commission that change the standards 06 of service and facilities shall operate prospectively only. A rule, regulation, or order 07 may not require or have the effect of requiring a public utility to retrofit a 08 telecommunications network without the utility's consent. 09  * Sec. 4. AS 42.05.381 is amended by adding new subsections to read: 10 (k) A telephone utility's proposed depreciation rates shall be allowed under 11 this subsection if the underlying service lives are not shorter than the service lives 12 permitted by the United States Internal Revenue Service to determine the appropriate 13 level of depreciation expense for federal income tax computations. The commission 14 may not require a telephone utility to file a depreciation study unless the telephone 15 utility proposes to use depreciation rates based on service lives that are shorter than 16 the service lives permitted by the Internal Revenue Service. 17 (l) A telephone utility providing facilities, systems, or services to other 18 telephone utilities under state or federal law shall be allowed to recover costs it 19 expects to incur to provide the facilities, systems, or services, and shall be allowed a 20 reasonable profit. The best evidence of the costs a telephone utility expects to incur 21 shall be its most current costs, adjusted for inflation. Capital and depreciation costs 22 may rise to reflect increased business risk in competitive service areas and shall be 23 consistent with (k) of this section. If a telephone utility cancels the use of another 24 carrier's facilities, systems, or services at any time before the time when the applicable 25 costs for providing those facilities, systems, or services are fully amortized, the utility 26 canceling the usage shall, within 90 days, reimburse the other carrier for the balance of 27 the capital expenditures incurred by the other carrier as a result of cancellation of the 28 use of the facilities, systems, or services. 29  * Sec. 5. AS 42.05 is amended by adding new sections to read: 30 Sec. 42.05.433. Exemption from tariffs for telecommunications services in  31 a competitive market; carrier of last resort obligations. (a) A local exchange 01 carrier or an interexchange long distance carrier in a competitive service area may file 02 a certification with the commission certifying that the relevant market satisfies the 03 competitive service area standard of this section. A certification exempts the 04 telecommunications utility from tariff filing requirements. 05 (b) A certification filed under (a) of this section is effective upon filing. To 06 deny a certification and the exemption from tariffs, the commission shall make a 07 written finding and order. An exemption granted under this section applies upon its 08 effective date to any pending tariff filings, rate-setting proceedings, and any other rate- 09 related matters under consideration by the commission. 10 (c) A local exchange carrier or an interexchange long distance carrier granted 11 a tariff exemption under this section 12 (1) shall make product and service descriptions and rate lists available 13 to the public at the carrier's normal places of business; 14 (2) shall post the current version of the product and service 15 descriptions and rate lists on the carrier's Internet web sites; and 16 (3) may negotiate competitive rates, terms, and conditions for service. 17 (d) A local exchange carrier or an interexchange long distance carrier granted 18 a tariff exemption under (a) of this section is exempt from the following provisions of 19 this chapter: AS 42.05.291, 42.05.301, 42.05.306, 42.05.361, 42.05.371, 42.05.381, 20 42.05.391, 42.05.411, 42.05.421, 42.05.431, 42.05.451, and 42.05.471. 21 (e) Upon the commission's certifying that the relevant market is a competitive 22 service area, local exchange providers are subject to shared carrier of last resort 23 obligations when more than one carrier in the relevant market or rural telephone 24 company service area has been designated as an eligible telecommunications carrier. 25 When more than two eligible telecommunications carriers exist in a market or rural 26 telephone company service area, carrier of last resort obligations shall be based on 27 relative market share calculations as more specifically described in regulations 28 adopted by the commission. 29 (f) The local exchange market in Anchorage and the statewide interexchange 30 long distance market shall be considered competitive service areas. Facilities-based 31 providers in those two markets shall share carrier of last resort obligations based on 01 relative market share calculations as more specifically described in regulations 02 adopted by the commission. 03 (g) In this section, 04 (1) "competitive service area" means 05 (A) the service area served by a local exchange carrier under a 06 certificate of public convenience and necessity in which at least 50 percent of 07 all retail customers have a choice of facilities-based providers; or 08 (B) the entire state for the long distance market; 09 (2) "eligible telecommunications carrier" means a telephone utility 10 eligible to receive universal service support under 47 U.S.C. 254. 11 (3) "facilities-based service provider" means a telephone utility that 12 offers a portion of its products and services by means of facilities it owns and operates 13 or by means of facilities and unbundled network elements it leases from another 14 provider, or any combination of facilities owned and leased; 15 (4) "network element" means a facility or equipment used in the 16 provision of a telecommunications service, including features, functions, and 17 capabilities that are provided by means of the facility or equipment, including 18 subscriber numbers, data bases, signaling systems, and information sufficient for 19 billing and collection or used in the transmission, routing, or other provision of a 20 telecommunications service; 21 (5) "unbundled network elements" means network elements that are 22 available on a nondiscriminatory basis for sale or lease at a technically feasible point 23 to other telecommunications service providers. 24 Sec. 42.05.435. State telecommunications policy: pricing of unbundled  25 network elements. (a) It is the policy of the state to encourage the negotiation of 26 market prices in the telecommunications market for the use of unbundled network 27 elements in Alaska. 28 (b) To the extent that rates must be arbitrated under the provision of the 29 Telecommunications Act of 1996, it is the policy of the state to have arbitrated rates 30 for unbundled network elements set as closely as possible to market prices. 31 (c) A carrier that provides facilities, systems, or services to other carriers shall 01 be fully compensated for all capital expenditures related to providing the facilities, 02 systems, or services to another carrier. 03 (d) In this section, 04 (1) "market price" means the price arrived at between willing buyers 05 and willing sellers; 06 (2) "network element" and "unbundled network elements" have the 07 meanings given in AS 42.05.433. 08  * Sec. 6. AS 42.05.810 is amended by adding a new subsection to read: 09 (d) The commission may not regulate a long distance carrier as a dominant 10 carrier in the long distance market if the carrier's statewide market share, as measured 11 in intrastate minutes of use, is less than 60 percent. However, the carrier that is, on the 12 effective date of this subsection, the dominant long distance carrier shall remain the 13 carrier of last resort certificated to provide intrastate interexchange telephone services 14 until the commission orders otherwise. 15  * Sec. 7. AS 44.66.010(a)(4) is amended to read: 16 (4) Regulatory Commission of Alaska (AS 42.04.010) -- June 30, 2007 17 [2003]; 18  * Sec. 8. The uncodified law of the State of Alaska is amended by adding a new section to 19 read: 20 APPLICABILITY. To implement the policy of AS 42.05.381(l), added by sec. 4 of 21 this Act, an incumbent local exchange carrier that is providing facilities, systems, or services 22 to other telephone utilities may immediately adjust and implement new rates for existing 23 interconnection agreements after providing a written statement to the Regulatory Commission 24 of Alaska certifying compliance with this Act. 25  * Sec. 9. The uncodified law of the State of Alaska is amended by adding a new section to 26 read: 27 CARRIER OF LAST RESORT. The Regulatory Commission of Alaska shall, by 28 regulations, effective not later than December 31, 2003, adjust and allocate the financial 29 obligation of being a carrier of last resort to all carriers serving a competitive service area. 30 The adjustment and allocation made under this section must be proportionate to each carrier's 31 share of the market.  01  * Sec. 10. This Act takes effect immediately under AS 01.10.070(c).