SB 205-TELECOMMUNICATIONS REGULATION/EXEMPTIONS  2:48:51 PM CHAIR CLAMAN announced that the next order of business would be SENATE BILL NO. 205, "An Act relating to the Regulatory Commission of Alaska; and relating to telecommunications regulations, exemptions, charges, and rates." 2:49:24 PM SENATOR KEVIN MEYER, Alaska State Legislature, advised that all of the telecommunication companies support SB 205, which is rare because this business is competitive with 15 different telephone companies in Alaska. The intent of this legislation is to modernize the state's telecommunication statutes because technology has changed and consumer preferences for telephones have changed extensively since the laws were written in 1990. In fact, he advised, it is estimated that only 40 percent of homes continue to maintain a landline. He explained that this legislation removes the outdated regulation of long-distance competition and remedies the current distortion that exists as to which companies pay the regulatory costs charge. Under SB 205, he said, all of the companies will pay the RCC charges, thereby spreading the cost amongst all of the carriers and not to just a few as it is currently. He related that this bill also removes the requirement for the RCA to designate carriers of last resort (COLR) because it is unnecessary and results in unfairly imposing burdens on one carrier in a market. All carriers in a market should be treated equally unless there is a compelling reason to do otherwise. Another reason the carrier of last resort (COLR) is no longer necessary is because there are state statutes and regulations in place at the state and federal level that will remain and prohibit carriers from discontinuing a service without the permission of the RCA. 2:51:36 PM SENATOR MEYER reiterated that SB 205 simply removes obsolete inequity regulatory burdens while maintaining the obligation to provide landline service. The legislation provides efficiencies for both the industry and RCA by allowing all parties to focus on relevant regulatory activity, and it preserves the public interest oversight role that RCA has today. He cautioned that having been with this bill for a while, it is a technical bill and experts are available to better answer questions. 2:52:24 PM EDRA MORLEDGE, Staff, Senator Kevin Meyer, paraphrased the sectional analysis as follows [original punctuation provided]: Section 1 Municipal powers and duties. AS 29.35.070 Public Utilities. Section 11 repeals AS 42.05.810, therefore it is removed from reference in this section of the statute. MS. MORLEDGE advised that Section 1 was necessary because Sec. 11, AS 42.05.810 is repealed; therefore, the reference to that statute is in Section 1.   Section 2 Alaska Public Utilities Regulatory Act. AS 42.05.141 Adds two new subsections (e) and (f) to the general powers and duties of the RCA. These subsections state that the Commission may not designate a local exchange carrier or an interexchange carrier as the carrier of last resort, and that the Commission may designate an eligible telecommunications carrier consistent with the federal code that allows for federal subsidies under the Universal Service Fund. A carrier of last resort is a telecommunications company that commits (or is required by law) to provide service to any customer in a service area that requests it, even if serving that customer would not be economically viable at prevailing rates. The Universal Service Fund is a system of telecommunications subsidies and fees managed by the U.S. Federal Communications Commission intended to promote universal access to telecommunications services at reasonable and affordable rates for all consumers.   Section 3 Annual Report. This section requires the RCA to submit an annual report to the Legislature detailing the activity and costs related to regulating each type of telecommunications carrier.   Section 4 Amends AS 42.05.254(a) from the previous version of the bill that eliminated the Regulatory Cost Charge (RCC). This section maintains the current RCC funding mechanism of calculating and assessing the charge and applies it to all telecommunications companies.   Sections 5 & 6 both relate to implementing the Regulatory Cost Charge for all telecommunications companies.   Section 7 Alaska Public Utilities Regulatory Act. AS 42.05.711 Exemptions. This section exempts telecommunications carriers from the Act except for the following provisions: AS 42.05.141(f) New section in the bill (Section 2 above) AS 42.05.221 Requiring a Certificate of Public Convenience and Necessity AS 42.05.231 Provision for applying for the certificate AS 42.05.241 Conditions of issuing/denial of a certificate AS 42.05.251 Allow public utilities to obtain a permit for the use of streets in municipalities AS 42.05.254 Regulatory cost charge AS 42.05.261 Prohibits a public utility from discontinuing or abandoning service for which a certificate has been issued AS 42.05.271 Allows the RCA to amend, modify, suspend or revoke a certificate AS 42.05.281 Prohibiting a sale, lease, transfer or inheritance of certificate without RCA permission AS 42.05.296 Requirements for providing telephone services for certain impaired subscribers AS 42.05.306 Allows discounted rates for customers receiving benefits from a social services assistance program administered by the state or federal government AS 42.05.631 Allows a public utility to exercise the power of eminent domain AS 42.05.641 Extends RCA's jurisdiction to public utilities operating in a municipality AS 42.05.830 Requires the RCA to establish exchange access charges to be paid by long distance carriers to compensate local exchange carriers for the cost of originating and terminating long distance services AS 42.05.850 Relating to the administration of access charges by an exchange carrier association AS 42.05.840 Allows the RCA to establish a universal service fund AS 42.05.860 Prohibits a carrier from restricting the resale of telecommunications services   Section 8 AS 42.05.820 No Municipal Regulation. In addition to a long distance telephone company, this section amends AS 42.05.820 to add 'local exchange carrier' that is exempted in whole or in part from this chapter from being regulated by a municipality. Section 9 AS 42.05.890 Definitions. This section defines "local exchange carrier," "long distance telephone company," and "long distance telephone service.   Section 10 Relates to implementing Section 4, the Regulatory Cost Charge.   Section 11 Repealers. This section repeals the following provisions, as the changing nature of the industry and market conditions have rendered them obsolete: AS 42.05.325 Registration and regulation of alternate operator services AS 42.05.800 Findings AS 42.05.810 Competition unnecessary in today's market 2:58:42 PM REPRESENTATIVE LEDOUX acknowledged that it is unusual when all of the telecommunication companies can actually agree on anything, which obviously means the bill is great for the telecommunication companies. She asked how great the bill is for the consumer because when reviewing the bill and sectional analysis, a person would have to be an expert in telecommunications law in order to actually understand the legislation. She opined that the telecommunication companies receive subsidies from "someone, maybe it's the state or the federal government" to make sure that the companies provide services for areas which normally would not receive services. It appears that this bill will take away the guarantee of services because it is doing away with the carrier of last resort, she said. In the event it is taking away the guarantee for the services, she asked whether the telecommunication companies will still receive the subsidies, and if so, why would they continue receiving the subsidies if they are not guaranteeing the service. SENATOR MEYER responded that the committee will hear a presentation from the Alaska Telephone Association, which encompasses all 15 telephone companies in Alaska as to how those subsidies work. There will be some savings to the consumer now that the RCC charges are spread across all of the different companies, and he could not say the amount of the savings. First of all, he explained, all areas will still be covered as required by the State of Alaska and the FCC, and he opined that the subsidies would probably still continue to whoever is providing that service in those remote areas. 3:01:22 PM REPRESENTATIVE LEDOUX argued that if the RCA does not have the authority to keep carriers in these remote communities, what guarantee is there that the carriers will remain in the remote communities because those communities probably are not much of a profit sector. SENATOR MEYER clarified that the RCA will continue to have jurisdiction over the carriers and it will make certain the remote communities are covered. Even if the RCA does not do it, he said, the FCC will require that coverage, but the experts can better answer the question. 3:02:14 PM REPRESENTATIVE LEDOUX related that she knows there are various consumer advocacy groups, for example advocacy airline groups advising which is a good airline company, and asked whether there is any such group with respect to telecommunication service, and if so, she would like to hear from those groups. SENATOR MEYER answered that he did not have the answer. CHAIR CLAMAN noted that occasionally he does see consumer reports giving advice about all of the Lower-48 telephone companies, but they do not seem to mention Alaska's telephone companies. 3:02:49 PM REPRESENTATIVE LEDOUX stressed that this is an extremely complicated statute and she was unsure whether, at the end of the day, most of the 60 legislators will actually understand what they are voting on in this particular statute. Clearly, she said, it benefits the telecommunication companies but she was unsure that it benefits, or at least does not harm, the consumers, and she would like an answer. SENATOR MEYER commented that that is a fair question because legislators are elected to benefit their constituencies and not the telecommunication industry. Letters are contained within the committee packet from previous and current commissioners who like where this bill is going, and other commissioners have concerns. He opined that after hearing from the Alaska Telecommunication Association (ATA) and the RCA, Representative LeDoux will be better able to make that decision. 3:04:20 PM REPRESENTATIVE REINBOLD pointed out that she is disappointed about what took place on the Senate Floor with HB 140, "getting rid of the regulation, and so you guys come and talk about regulation and then you go and get rid of oversights." She stressed that that is a huge contention for her currently, (audio difficulties) analysis so people who do want just a quick glance at what this bill does, it does basically de-regulate telecommunication companies in this state according to the RCA. However, (audio difficulties) with regard to the RCA, "I think they are very expensive, it's a very big -- you know, I worked with them as Reg Review Chair and I think they're expensive, and I'm not sure that they always have the best interests of the consumer at hand." She offered that she is on the fence with regard "to some of this stuff right now," and asked about subsidies without providing the service because she may not have all of the details, but it sounds like "big government waste." CHAIR CLAMAN noted that Senator Meyer had responded to the subsidy question to the best of his ability. 3:06:17 PM [CHAIR CLAMAN, in reference to Representative Eastman's question regarding slide 2 of the PowerPoint yet to be presented, advised Representative Eastman that the committee would not discuss the PowerPoint presentation until it had been presented.] 3:07:02 PM CHRISTINE O'CONNOR, Executive Director, Alaska Telecommunications Association (ATA), pointed out that the legislation is technical with many details and that many answers to the questions offered today are contained within the PowerPoint. She suggested the committee keep in mind that this legislation is solely about landline service and long-distance access through landline service. This legislation is about modernizing the statutes adopted in 1990, the "in the pin drop era where they were just starting to compete for long-distance." She paraphrased the "SB 205 Telecommunications Statutes Simply & Modernize" PowerPoint Presentation as follows: 3:08:13 PM MS. O'CONNOR turned to slide 2, "Unanimous Support for SB 205" and advised that the legislation is supported by all ATA members, which include the following entities: Adak Eagle Enterprises Alaska Communications Alaska Telephone Company Arctic Slope Telephone Association Cooperative ASTAC Wireless AT&T Bettles Telephone Bristol Bay Cellular Partnership Bristol Bay Telephone Cooperative Bush-Tell Copper Valley Telephone Cooperative Copper Valley Wireless Cordova Telephone Cooperative Cordova Wireless GCI Interior Telephone Mukluk Telephone Ketchikan Public Utilities Matanuska Telephone Association North Country Telephone Nushagak Cooperative OTZ Telephone Cooperative OTZ Wireless Summit Telephone Company TelAlaska Cellular United Utilities Windy City Wireless Yukon Telephone Company MS. O'CONNOR said, (audio difficulties.) "I appreciate Commissioner Pickett's frankness, and we agree wholeheartedly with his characterization of this activity as without value." (Audio difficulties) SB 205 to public comment, such as this, given from the commission from the dais over the past two-to- three years. 3:09:42 PM MS. O'CONNOR turned to slide 3, "Transformation," and paraphrased as follows: Telecommunications have changed completely since many of Alaska's telecom statutes were adopted in 1990. The 1996 Telecom Act completely transformed the marketplace and started an evolution toward light touch regulation. Landline and long-distance use is dramatically reduced. Long distance revenues reduced from $64M to $16M between 2006-2016. Only 48% of households still have a landline. Landline services are still important, and will continue under SB205. MS. O'CONNOR (Audio difficulties.) She said she will "hit this again and again today" because she has heard this question over and over, which puzzles her because this legislation does not degrade landline service. That, she explained, is not the commitment of the companies in the Alaska Telecommunications Association (ATA), many of which are rural cooperatives and some are statewide providers. Simply because a person is talking on a cell phone, they are only wireless to the tower, and then the person is on the landline network; or if a person is using their ISP, that is also on the landline networks. She stressed that the landline network is critical and it will continue under SB 205, ATA is saying that there are a lot of resources that could be saved by providers to let "us focus on better services" and by the RCA to let it focus on more pressing matters. 3:11:50 PM MS. O'CONNOR turned to slide 4, "Landline Service will Continue" and advised that this is a list of some of the rules that require it, and paraphrased as follows: Certificate of Public Convenience & Necessity prevents abandonment of service without permission from the RCA and the FCC. Eligible telecommunications carrier designations require service. Federal and state rules require provision of service upon reasonable request. April 6, 2018 DC Circuit Court affirmed FCC requirement that companies continue to provide voice services. MS. O'CONNOR (audio difficulties) every utility must apply to the RCA to obtain a certificate before it begins operation. The RCA must find that a company is fit, willing, and able to provide service. She explained that before a company can leave service in an area, it must go to the RCA and request permission, and the RCA must find that it is in the public interest for the company to depart (audio difficulty) rarely, if ever, granted. This legislation does not impact the certificate of authority of the commission, the commission has authority over the "eligible telecommunications carrier designation," which assigns a service area and authorizes a company to receive federal funding. Last week, she related, a Federal D.C. Circuit Court decision came down that companies must continue to provide voice services even in the absence of support or a subsidy. 3:13:16 PM MS. O'CONNOR turned to slide 5, "Universal Service Funds," noted that questions came up this week regarding universal service funds, and paraphrased as follows: Due to both federal and state USF support, Alaskans have remarkable access to communications across Alaska, and deployment of improved infrastructure is accelerating. Without Universal Service Funds telecom networks in Alaska would not exist in many areas. Alaska's Universal Service Fund (AUSF) is a critical component for sustaining voice service and improving broadband service statewide. The RCA has full jurisdiction over the Alaska Universal Service Fund. MS. O'CONNOR noted that a question was asked regarding what has happened to those funds, (audio difficulties) without those funds, there would not be communication networks in most of Alaska, it is that expensive. Universal service is similar to the original Rural Electrification Act created to make certain everyone was connected to the electric grid, and she described that it was very effective. Universal service is funded by a sur charge on everyone's bills in the nation, and those funds are targeted to the highest cost areas. Naturally, she advised, with Alaska being 22 percent of the United States land mass, remote and rugged, a lot of those funds do come to Alaska proportionally, not a large amount of the whole pot, but it is important funding. She related that it is reported on extensively to both the federal and state commissions, "we're very accountable," and the RCA has complete authority over the state universal service fund and dictates what reporting and information it wants from companies (audio difficulties). 3:15:02 PM MS. O'CONNOR turned to slide 6, "COLR Designation vs. COLR Support," (audio difficulties) in the weeds, but it is important to explain the slide clearly, and paraphrased as follows: Carrier of last resort (COLR) designation requires a company to serve a certain area. (So do Certificate, ETC and USF rules) Carrier of last resort (COLR) designation is funded in some areas of the state by a portion of the Alaska Universal Service Fund. The RCA is considering Docket R-18-001 "Consideration for the Full Repeal of Alaska Universal Service Fund Regulations." The stated timeline to eliminate all funds, including COLR support, is Jan. 1, 2019. Industry has responded to the RCA invitation for comment by proposing two different paths forward for the AUSF both eliminating COLR support. There is no disconnect between eliminating COLR designation and corresponding COLR support. The RCA has made it clear that any possible path forward for the AUSF will have a new funding structure. We do not expect the old structure to continue. Regardless of the RCA's decision in the AUSF docket, all rules requiring landline service will remain in place. MS. O'CONNOR advised that the carrier of last resort (COLR) designation says that a company must serve, but ATA also has the certificate, the Eligible Telecommunications Carrier (ETC), and (audio difficulties) it is by far the only thing requiring a company to serve. The designation is funded in some areas of the state to some companies but not all, and that designation allows them to receive a portion of the Alaska Universal Service Fund. Currently, she offered, the RCA has a docket opened titled, "Consideration of the Full Repeal of the Alaska Universal Service Fund," this has been under discussion at the RCA to eliminate this fund (audio difficulties). Particularly, she offered, the focus has been the COLR support, which the commission has been critical, and the ATA submitted two different proposals for how this reform might take place, and in both cases, there will not be explicit COLR support. Therefore, when ATA was drafting SB 205, it knew that it was in the record that COLR support would probably be completely revamped, possibly done away with, and the commission has an active docket wherein there was an eight-hour hearing last Monday. Naturally, she related, if a company is not receiving the funding, ATA thought the designation did not need to be there either. Conversely, she said, there is no company that will give up responsibility and still receive funding, in fact, even if this funding goes away, the companies will still be obligated to continue these duties. No subsidy is being given when no responsibility is being performed, she advised. 3:17:07 PM MS. O'CONNOR turned to slide 7, "41 States Have Reduced Regulation," and advised that 41 other states have eliminated or reduced telecommunication regulation. Although there is variation in the details of what the other states have done, it generally means that telecommunication companies manage their own rates, as half of the companies in Alaska do today, she said. Currently, approximately 90 percent of Alaska's population is already served by a company that can raise its local rates without permission from the RCA. However, she commented, rates have not risen dramatically, and even if the rates were to raise, there is a federal rule limiting that increase and the maximum it could possibly go is $49 and change. Most landline rates are in the $30-$35 range so it would theoretically be an approximate $14 increase, but most companies have not raised rates in five years. Part of the obligation under the federal funding is for those rates to be reasonable, and should the rates raise to the cap and someone cannot afford it, there is a federal lifeline program that would support that customer and they would probably qualify for a free phone. 3:18:24 PM MS. O'CONNOR turned to slide 8, titled "Rate Regulation - It Depends Who You Are," and paraphrased as follows: Cooperatives, with the approval of their members, and municipal telcos manage their own tariffs. All other companies must maintain a tariff at the RCA. 90% of Alaskans are served by company which can manage its own rates. But for the remainder, review & approval for rate changes varies, with timelines as long as 420 days. This limits the introduction of new offerings due to the expense of preparing and supporting tariff filings. SB205 adopts the cooperative model for tariffs and rate changes. MS. O'CONNOR explained that rate regulation is quite a patchwork of obligation (audio difficulties) and the RCA has complained that under existing regulation and statutory timelines, one company might make an informational filing that has to be drafted, reviewed, sent to the RCA, and the RCA must accept it without any revision because it has no authority to make that change. Or, she related, it could be a more traditional filing which takes 30-45 days and in some cases a company might have to create a Rate Case that is extremely detailed and it can take over 420 days (audio difficulties) remember, only related to landline and long-distance service. Instead of this, she said, ATA is proposing that all companies be on the same basis as the cooperatives today where they manage their own rates, are answerable to their own customers, and the commission's consumer protection division would still be there for quality complaints and so forth. Co-ops have operated in this manner for many years and approximately one-half of the companies in the state already do this as it has been successful as it is much more efficient, she said. 3:19:42 PM MS. O'CONNOR turned to slide 9-10, titled "Burden of Rate Regulation," and advised the following are two examples of telephone companies, and paraphrased as follows: Summit Telephone Company Family-owned serving Dalton Highway and Chena Hot Springs Road Needs to replace obsolete technology Tried to change the tariff to focus resources on broadband. "This process of educating the RCA causes the expenditure/depletion of Summit's already limited resources while what I need to do with those funds is extend FTTP (fiber to the premise) and wireless Broadband/Middle Mile facilities to our subscribers. Soon after I filed the Tariff Notice - I withdrew it in that it immediately became apparent that the RCA process was a Tar Baby that would deplete Summit of funds needed for the extension of Broadband to its subscribers." Roger Shofstall, Owner of Summit Telephone Company MS. O'CONNOR advised that the Summit Telephone Company is a small company with a federal mandate to provide broadband along the Dalton Highway and out toward Chena Hot Springs. The company was trying to change its tariff to focus its resources on broadband, and the above is a quote from its owner who eventually decided to "muddle along with the obsolete technology." Alaska Communications "We have 4 local exchange tariffs with a mixture of tariff rules that apply?Each time we make a tariff change we must do basically 5 times for the local exchange since one study area has different rules to follow. We also have an long-distance tariff which has even different rules. When filing 5 different tariffs plus a long-distance tariff, it simply is not an efficient business practice especially when these regulations do not apply across all other carriers." -Lisa Phillips, Senior Manager, Regulatory Affairs and Risk Management MS. O'CONNOR offered that Alaska Communications is a large company, it is under the same burden, and it is managing five different tariffs with a range of rates all related to landline service in different areas of the state. 3:20:36 PM MS. O'CONNOR turned to slide 11, titled "Tariffs Filings 2017," and advised that the information is from the Regulatory Commission's 2017 Annual Report, and paraphrased as follows: Regulatory Commission of Alaska Fiscal Year 2017 Annual Report MS. O'CONNOR (audio difficulties) accept and review them, this is a lot of expense by providers that could be better spent on service, and a lot of expense by the commission when it could better use its time on other issues. She opined that these may be the filings Commissioner Robert Pickett may have been referring when he said, "How is this doing anybody any good?" 3:21:08 PM MS. O'CONNOR turned to slide 12, titled, "Obsolete Statutes," and advised that the legislation repeals obsolete statutes related to long-distance companies, and paraphrased as follows: Long distance competition statutes at 42.05.800-810 (adopted in 1990) require the RCA to manage competition in the long-distance market. Even though these statutes were made obsolete by the 1996 Telecom Act, they are still on the books in Alaska. They require tariff filings and reporting. SB 205 removes outdated regulation of long distance retail competition. MS. O'CONNOR explained that these obsolete statutes date back to before the 1996 Telecommunications Act and were actually pre- empted by that Act, but they are still in the statute books so they are generating filings and generating reports that are wasting everyone's resources. 3:21:31 PM MS. O'CONNOR turned to slide 13, titled "Consumer Protection," and offered that consumer protection still exists, and paraphrased as follows: Strong consumer protections exist today Certificate of Public Convenience and Necessity (CPCN) Eligible Telecommunications Carrier (ETC) RCA Consumer Protection & Information Section Attorney General Consumer Protection Unit FCC Consumer Complaint Center SB 205 maintains these protections. MS. O'CONNOR offered that the Certificate of Public Convenience and Necessity (CPCN) and the Eligible Telecommunications Carrier (ETC) designation, both require a company to offer service throughout its service area and to not withdraw service without permission. There are FCC rules requiring the above and SB 205 does not change this rule. This legislation does not de- regulate telecommunications, and companies are still required to submit to RCA's authority about where they serve, and when, and if they stop serving, she pointed out. 3:22:11 PM MS. O'CONNOR turned to slide 14, titled "Benefits to Consumers," and paraphrased as follows: Increases incentive for companies to offer new service bundles Focuses resources on consumer services Spreads cost of regulation equitably, with support from all companies. SB 205 does not include new taxes, it corrects existing unfair assessment of regulatory costs. MS. O'CONNOR advised that it increases the incentive for companies to offer new service bundles. The companies (audio difficulties) serving areas where they have to make the most extensive tariff filings, they just simply do not make changes even if it is something their consumers desire because it is too expensive to go through the process. The resources that ATA could save would be better focused on consumer services. She related that there is a change that corrects an existing problem with the RCA's budget as the statutes have become outdated, according to existing statute, the co-operatives are not paying the regulatory cost charge of which is the RCA's self-funding mechanism. She pointed out that that leaves the other one-half of the companies paying the full burden of the RCA's oversight authority. Telecommunication oversight is still taking place and this bill would fix that problem because all companies would access the regulatory cost charge, which would lower it for the companies that are currently carrying the entire burden. Everyone agreed to this, she said, there was no objection and she gave kudos to "my members" for recognizing the inequity. It was mentioned that SB 205 is bringing a new tax, which she described as a misunderstanding of this provision in that this is not a new tax, it simply corrects an existing inequity. 3:23:39 PM MS. O'CONNOR turned to slide 15, titled "Right-touch Regulation," (audio difficulties) landline and long-distance service, and paraphrased as follows: SB 205 maintains RCA oversight Removes obsolete statutes & exempts from many provisions in 42.05 which are outdated or apply to other industries Adopts cooperative model for rates Requires RCA and FCC approval before discontinuance of service Reduces cost and delay of regulation for RCA & providers Resolves existing inequity in the RCA's budget process MS. O'CONNOR advised that the legislation peels away obsolete statutes and allows companies and the commission to operate more efficiently, as many of the statutes under AS 42.05 apply generally to the operation of the commission and those would continue. She said that others apply to other industries so they are not applicable to telecommunication. She related that SB 205 will allow companies to focus on better service for Alaskans, and allow the RCA to focus on the important work before the RCA because it is also the regulatory commission for the Trans-Alaska Pipeline (TAPS), electric issues, water, waste, and natural gas industries. These are all fully regulated utilities, she offered, which are structured (audio difficulties) nation in order to function well. The 1996 Telecommunications Act changed telecommunications and put it on a path toward competition, innovation, and right touch regulation. She asked that the Alaska legislature tailor its statutes to ensure service continues, but stops wasting resources on work that is without value. When the RCA was asked to provide its opinion on SB 205, it cited concerns about its budget and those concerns have been completely resolved by correcting the RCC mechanism. She related that it claimed landline service will be threatened, but this is simply not accurate because landline service will be required under multi- state and federal rules unless it is found to not be in the public interest by state and federal regulators. That, she offered, is the situation today and it will not be changed under SB 205. On the day that the RCA considered SB 205, Commissioner Jan Wilson put it simply, "I think it's time for the legislature in our state to address these issues. So, I'm hesitant to take a position that the bill not pass because it might be interpreted that this commission, as a body, believes that the statutes as they are today are (audio difficulties) and I just don't think they are. I think changes need to be made in the statutes to conform to the industry the way it is today, rather than the industry as it was in the 1970s, 1980s, and that's it. It is entirely completely different than it was in 1990." Ms. O'Connor said, "We couldn't agree more." 3:26:25 PM REPRESENTATIVE STUTES noted that several times within the presentation Ms. O'Connor said, "Landline service will be continued. Landline service will be continued," and she asked how this will affect landline service. MS. O'CONNOR answered that it will affect landline service in freeing up resources for the companies to help with maintenance and operation. In the grand scope of what is spent on networks in Alaska, it is a small amount but it is still useful in avoiding waste. She advised that there is nothing here that allows a company to let their landline service stop, to let it deteriorate, and should a company do so, the RCA has demonstrated its ability to call that company in front of it, demand an explanation, and enforce its rules. 3:27:18 PM REPRESENTATIVE STUTES asked that as far as Ms. O'Connor could tell, whether this will affect rates on landlines. MS. O'CONNOR answered "No," the biggest thing that could affect rates is a loss of these supports, these universal service supports. She said that in the event the AUSF was entirely repealed, that could definitely cause rates to rise in some areas. In the event of a disruption of the federal universal service, which is not likely at this point because it was just stabilized last year, those are the things that would drive local rates higher, she explained. 3:27:54 PM CHAIR CLAMAN advised that he thought Ms. O'Connor had said that with the de-regulation, local rates could go up to $14 a line increase. MS. O'CONNOR answered (audio difficulties), but a couple of things are going on there, with landline rates there is competition in 99 percent of the state from either another landline provider or wireless, which is why "we are down" to only 42 percent of landlines. People are simply abandoning their landline service (audio difficulties) increases. 3:28:52 PM REPRESENTATIVE REINBOLD asked whether Juneau, Anchorage, and Fairbanks were basically subsidizing the smaller communities. MS. O'CONNOR answered that it is a national sur charge. She explained that there are two sur charges, as follows: the federal sur charge (audio difficulties) so they pay and send funds to support Alaska; and the state sur charge is not as much (audio difficulties) every company in the state receives a portion of it to support their operations. 3:29:57 PM REPRESENTATIVE REINBOLD asked whether it was similar to Power Cost Equalization (PCE). MS. O'CONNOR responded (audio difficulties) different as she understands PCE is a fund, an endowment, and that goes to lower electric rates which is a more direct manner of lowering rates. Whereas, she explained, the AUS (indisc.) fund, the state fund, is a fund to help build and operate networks and it is not as direct of an offset, she explained that it is not really an offset to the rates because it has an indirect effect. REPRESENTATIVE REINBOLD noted that there is the regulatory cost charge, which is completely separate, and it funds the RCA. 3:30:46 PM REPRESENTATIVE REINBOLD referred to slide 14, and asked Ms. O'Connor to put the consumer benefits into more specific terms and how consumers will directly benefit. MS. O'CONNOR offered that the best example is the Summit Telephone Company where it is trying to basically retire obsolete services and build a fiber network to deliver broadband. The Summit Telephone Company had to give up on retiring that obsolete service due to the cost of that filing of the commission. In the event the Summit Telephone Company did not have to wrestle with those filings, it could put the money it is saving toward the new fiber network that it has been mandated to build by the federal funding. 3:31:54 PM REPRESENTATIVE REINBOLD (audio difficulties) RCA is a massive de-regulation bill which appears to be important. The fiscal note read that the RCA will be a liaison with the FCC, it is a significant de-regulation, but is still beneficial across Alaska, she said. She related that she heard the Senate presentation and she is contemplating offering the two amendments Senator Bill Wielechowski offered on the floor of the Senate. She said that, "If you have a docket that you've already sent that says virtually the same thing to the RCA, ..." CHAIR CLAMAN interjected that Representative Reinbold's question is whether Ms. O'Connor has a response to the two amendments offered by Senator Wielechowski on the floor of the Senate. He commented that he did not hear the two amendments, and asked Ms. O'Connor to tell the committee what the two amendments entailed, whether or not she supported the amendments, and why. CHAIR CLAMAN advised that the committee could come back to the questions if she was not ready to address these questions. 3:34:16 PM MS. O'CONNOR said she was ready and addressed Amendment 1, and referred to Sec. 2, [AS 42.05.141(e)(f), page 2, lines 1-4], which read as follows: (e) The commission may not designate a local exchange carrier or an interexchange carrier as the carrier of last resort. (f) The commission may designate an eligible telecommunications carrier consistent with 47 U.S.C. 214(e). MS. O'CONNOR explained that Amendment 1 would have struck subsections (e) and (f). Subsection (e) is actually the point of the amendment where the bill read, "the commission may not designate a COLR" and the objection was "You are getting COLR funding, how can you not accept the designation of a COLR?" She said that as she had previously explained, that COLR funding is being completely revamped and "our proposal" reduces all funding by 49 percent. Therefore, that is going away in one form or the other and "we are very strongly advocating" that some funding continue because it is important. The explicit COLR funding has been (audio difficulties) and "we have proposed" that the explicit COLR funding go away, so it made sense that the designation would not continue. 3:35:37 PM CHAIR CLAMAN surmised that Amendment 1 would actually maintain the COLR designation. MS. O'CONNOR agreed that Amendment 1 would maintain the COLR designation and the ATA does not support that issue. She explained that subsection (f) simply codifies something the RCA already does, and the ATA did not consider it controversial and she explained that this is the designation that the FCC (audio difficulties) in order for universal service funding to come into the state. It is important funding, it builds infrastructure, it operates networks, and that is almost a housekeeping item just to say that the RCA will continue the funding, she said. 3:36:21 PM MS. O'CONNOR referred to Amendment 2 (audio difficulties) the designation was not there and the subsidy should not be there either. In effect, she reiterated, that is probably where "we're" headed with the RCA and the "R Docket." The Alaska Telecommunications Association (ATA) stressed in hundreds of pages of testimony to the RCA, the importance of (audio difficulties) universal service fund. She comment that explicitly designated COLR does not appear to be the future path, but there must be some support coming from the Alaska Universal Service Fund in order that there is not negative impacts on landline service or all services in Alaska. 3:37:18 PM REPRESENTATIVE LEDOUX surmised that the impetus [audio difficulties continued to timestamp 3:37:55.] MS. O'CONNOR (audio difficulties) several years and it has not yet been accomplished. 3:38:03 PM REPRESENTATIVE LEDOUX asked whether that was something the legislature could mandate. MS. O'CONNOR answered that the RCA is a commission that reports to the legislature. 3:38:20 PM CHAIR CLAMAN asked whether anything in this legislation requires legislative action, or is everything being requested something that the RCA could perform entirely by regulation. MS. O'CONNOR responded [audio difficulties continued to timestamp 3:39:05]. 3:39:08 PM REPRESENTATIVE LEDOUX asked whether the statutes could be changed in order to streamline the regulations without simply exempting the carriers from the RCA jurisdiction, "which this bill basically does." MS. O'CONNOR replied that it exempts the remaining carriers that are serving approximately 10 percent of Alaska's population that are still under rate regulation. [Audio difficulties continued to 3:40:00.] these service, and that has to be granted upon a finding of the public interest. The Alaska Telecommunications Association (ATA) considers that strong RCA jurisdiction. 3:40:12 PM REPRESENTATIVE LEDOUX referred to the fiscal note analysis [page 2, paragraph 2,] which read in part: The RCA would still be required to certificate wireline telecommunications carriers and adjudicate the relinquishment or transfer of those certificates. REPRESENTATIVE LEDOUX surmised that the RCA still has the authority to prevent a carrier from "leaving someplace." MS. O'CONNOR answered that Representative LeDoux was correct. (Audio difficulties) sectional, that is one of the exact sections, a separate section, that is solely regarding the requirement to request permission before a carrier deceases service. (Audio difficulties) as well as regulations tied to "your very substantial universal service funding." 3:41:16 PM REPRESENTATIVE LEDOUX asked whether eliminating the carrier of last resort impacts [audio difficulties continued to timestamp 3:41:58]. 3:42:01 PM REPRESENTATIVE LEDOUX asked the criteria for deceasing service. MS. O'CONNOR answered [audio difficulties continued to timestamp 3:42:29] only has two people left, and ATA believes it is in the public interest that it would stop [audio difficulties continued to timestamp 3:42:47]. 3:42:52 PM REPRESENTATIVE LEDOUX surmised that it is a high hurdle currently, and asked whether it would still be a high hurdle under this legislation. MS. O'CONNOR responded (audio difficulties.) 3:44:28 PM REPRESENTATIVE EASTMAN moved that the committee decide that hence forth it will let someone ask a question before "we decide to cut them off." CHAIR CLAMAN ruled that this committee is managed under the rules of Mason's Manual and he will continue to follow Mason's Manual. Chair Claman ruled Representative Eastman's motion out- of-order. 3:45:08 PM REPRESENTATIVE EASTMAN referred to Senator Meyer's opening presentation regarding all of the telecommunication companies in support of CSSB 205, and asked why Verizon is not listed on slide 2. SENATOR MEYER responded that Verizon does not offer landline services in Alaska. 3:45:53 PM REPRESENTATIVE EASTMAN asked whether Senator Meyer had reached out to any of the other communications companies that might want to service Alaska, that are not currently in the state, to obtain their comments as to whether this legislation will make their decision to move into Alaska more or less likely. SENATOR MEYER advised that he had not reached out, and currently there are 15 companies in Alaska so it is a competitive field. 3:46:49 PM REPRESENTATIVE EASTMAN asked Senator Meyer's perspective as to whether this legislation would make it less likely that new companies would form in the future to compete in this competitive market. He opined that one of the reasons all of the current providers are supportive is because the bill might make it less likely that they would have increased competition. SENATOR MEYER answered that he does not believe this bill would prohibit new companies from coming into Alaska, and reiterated that this bill pertains to landlines, and landlines have decreased to approximately 40 percent in Alaskan homes. 3:47:54 PM CHAIR CLAMAN opened public testimony on CSSB 205. After ascertaining no one wished to testify, closed public testimony on CSSB 205. [SB 205 was held over.]