SB 205-TELECOMMUNICATIONS REGULATION/EXEMPTIONS  1:34:09 PM CHAIR COSTELLO announced the consideration of SB 205. 1:34:21 PM SENATOR KEVIN MEYER, Alaska State Legislature, Juneau, Alaska, sponsor of SB 205, stated that the legislation seeks to modernize the telecommunication statutes and adopts the cooperative model for tariffs. The RCA will assess regulatory costs directly to the company, rather that assessing individuals monthly. He continued the introduction speaking to the following sponsor statement: The telecommunication statutes (AS 42.05) are in need of revision due to rapid changes in technology and in FCC regulations, which render portions of the existing statutes obsolete and/or inefficient in the modern telecommunications world. All of Alaska's telecommunications providers through the Alaska Telephone Association have worked together to offer these suggested changes. In doing so, they have strived to maintain important consumer protections, appropriate RCA jurisdiction, and consistency with FCC regulations while at the same time allowing for greater flexibility to more rapidly take advantage of new technology. Some existing RCA regulations are over 25 years old and are largely obsolete today. Customer preferences continue to grow for broadband and mobile service while the demand for landlines declines. In competitive markets, carrier of last resort requirements and alternative operator services are no longer necessary. Placing service providers on a more level playing field will encourage deployment of advanced technologies and more efficient network design. Adoption of these recommended statutory changes will result reduced regulatory cost charges for consumers. 1:36:35 PM EDRA MORLEDGE, Staff, Senator Kevin Meyer, Alaska State Legislature, Juneau, Alaska, paraphrased the following sectional analysis of SB 205. Section 1 Municipal powers and duties. AS 29.35.070 Public Utilities. Section 7 repeals AS 42.05.810, therefore it is removed from reference in this section of the statute. 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 - 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 1:41:26 PM At ease 1:44:34 PM CHAIR COSTELLO reconvened the meeting. MS. MORLEDGE continued the sectional analysis of SB 205. Continuation of Section 3 • 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 42.05.840 Allows the RCA to establish a universal service fund • AS 42.05.860 Prohibits a carrier from restricting the resale of telecommunications services Section 4 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. MS. MORLEDGE said Section 5 and a corresponding repealer in Section 7 will be removed due to an open docket with the RCA that deals with exchange access charges and the administration of those charges. Section 6 AS 42.05.890 Definitions. This section defines "local exchange carrier," "long distance telephone company," and "long distance telephone service." Section 7 Repealers. This section repeals the following provisions: • AS 42.05.145 Telecommunications regulation policy; restriction on regulation of telephone directories. • AS 42.05.325 Registration and regulation of alternate operator services. • AS 42.05.810 Competition • AS 42.05.850 Exchange carrier association. Allows the RCA to require a trade association to assist in administering access charges and may require the association to file tariffs and pool costs and revenue. [This will be removed in a future version of the bill.] Section 8 Transition language requiring telecommunications utilities to continue paying the annual regulatory cost charge (RCC) until July 1, 2019. 1:48:46 PM CHRISTINE O'CONNOR, Executive Director, Alaska Telecom Association, Anchorage, Alaska, testified in support of SB 205. She recognized the member companies in the audience and clarified that all the statutes addressed in SB 205 relate to local landline service or long-distance access through a landline. MS. O'CONNOR presented a brief PowerPoint to help explain how SB 205 simplifies and modernizes the telecommunications statutes. Slide 2 depicts the roster of ATA members that are unanimous in support of SB 205. These are landline, long distance, wireless, and broadband companies. Slide 3 highlights the transformation of the telecommunications industry. Landlines still exist and are important, but consumer preferences are focused on wireless and broadband service. Currently, 48 percent of the population has a landline and 52 percent of adults are in wireless only households. The underlying networks are essential but the landline service (the piece regulated by Alaska statutes) is an increasingly smaller portion of the market and resources are consumed to monitor and report on the competition. For example, in 1999 there was $64 million in long distance revenues within the state and in 2016 that had dropped to $16 million. The national trends are similar. Forty-one states have reduced or eliminated oversight of retail landline telecommunications services. The National Regulatory Research Institute (NRRI) monitors the status of regulations throughout the U.S. and issues annual reports. They recommend that state commissions focus on the quality of the networks, consumer complaints, and interactions with providers and consumers to identify needs. She said those elements and strong consumer protections remain, regardless of the changes in SB 205. She displayed slide 5 that depicts a map of the U.S. from the NRRI showing the states that have reduced regulation. 1:52:35 PM MR. O'CONNOR reviewed the obsolete statutes addressed in SB 205. She explained that the long-distance competition statutes AS 42.05.800-810 require the RCA to manage competition in the landline long distance market. This is left over from the era when long distance competition was developing. It was hugely competitive, and the RCA played a critical role in adopting, monitoring, and managing regulations. The statute and the regulations are still in place and require annual reports and tariff filings. A lot of resources are expended for a small piece of the market. SB 205 removes the outdated regulation of long distance retail competition. She reviewed tariff regulation. She related that as the market has changed, cooperatives are able to manage their own tariffs if their members grant approval. They can post the rates on their websites and roll out new bundles and different service offerings for landlines. Any privately-owned companies must still file some form of tariff filing with the RCA. Depending on the operating location, the filing can be a simple informational filing or one that takes 45 days to review. That is a considerable delay for changing services for a customer for a new bundle. A full rate case has a statutory timeline of over 420 days. SB 205 proposes that all companies would operate the same as the cooperatives. With membership permission, cooperatives have been doing this successfully for over 15 years. MS. O'CONNOR displayed a snapshot of the telecom filings that still must go through the commission. She said this is an inefficient and unnecessary process for both sides. SB 205 proposes moving these to the cooperative model. 1:55:29 PM MS. O'CONNOR said SB 205 also proposes a change to the carrier of last resort designation. This is a duplicative designation that was used in the past to guarantee that at least one provider in an area would be available to offer service upon request. The Certificate of Public Convenience & Necessity designates an area where service is required and prevents the abandonment of service without permission from the RCA. An application to discontinue service is rigorously evaluated with the public interest in mind. Federal rules designate that a company must also apply through the FCC to abandon service in an area. She said she does not consider SB 205 a deregulation bill because the RCA retains strong authority to ensure that Alaskan consumers continue to have service. The bill adds efficiencies and saves resources while maintaining essential consumer protections. These include the Certificate of Public Convenience and Necessity, Eligible Telecommunications Carrier, RCA Consumer Protection & Information Section, Attorney General Consumer Protection Unit, and FCC Consumer Complaint Center. 1:58:50 PM MS. O'CONNOR said SB 205 is structured to right-size the regulation. SB 205 maintains essential RCA oversight, removes obsolete statutes, adopts the cooperative model for tariffs, requires RCA and FCC approval before discontinuing service, reduces costs and delays of regulation for RCA and providers, eliminates regulatory surcharges on consumer bills, and shifts actual costs to providers. The benefits to consumers are eliminating the regulatory cost charge. Now the cost to regulate telecommunication companies is funded by a surcharge on customers' bills. After some transition, the RCA will bill the cost of services directly to the companies. 2:00:14 PM CHAIR COSTELLO asked if the RCA has taken a position on the bill. MS. O'CONNOR said not yet; she will present the bill to the RCA tomorrow morning during the public meeting. CHAIR COSTELLO asked how SB 205 would impact SB 80, a bill she introduced on behalf of a member of the RCA. SB 80 takes a portion of the surcharge from landline fees and shifts it to the cellphone environment to help pay for the materials that deaf and hard of hearing Alaskans need for their devices. MS. O'CONNOR said SB 205 would not affect SB 80 and Alaska Telecom Association supports the much-needed change proposed by that bill. TRS services currently are funded by a separate surcharge on a consumer's bill, not the regulatory cost charge. 2:01:57 PM SENATOR MEYER said his concern is whether the bill would impact RCA budget. He offered his understanding that RCA now automatically receives the $0.16 RCC charge on consumers' monthly bill, whereas SB 205 provides that the RCA will need to bill the telephone companies directly. MS. O'CONNOR said that's correct. She explained that the bill provides a transition period for the RCA to get the mechanism in place to bill actual charges. Because fewer filings will be necessary, this should be more equitable. The RCA has the statutory authority to bill any telecom generated activity directly to the company, not the consumer. SENATOR MEYER asked if the list on slide two includes all the telephone providers in the state. MS. O'CONNOR replied Circle Telephone Company and Verizon are not on the list because they are not official members. Both operate in Alaska and ATA keeps them updated. Circle is a very small company and Verizon doesn't offer landline service in Alaska. SENATOR MEYER noted that the rural providers are listed so the concerns about future development and infrastructure in rural areas should be addressed. MS. O'CONNOR advised that the federal funding those companies receive has very stringent requirements for the deployment of broadband. 2:04:36 PM SENATOR MICCICHE asked if consumer groups are aware of the bill and if any have voiced concern about the changes. MS. O'CONNOR said she hasn't received any comment from consumer groups and she doesn't expect any objection because the strong RCA consumer protection role is unchanged. 2:05:25 PM SENATOR STEVENS asked if the legislation has any connection to or effect on 911 service. MS. CONNOR said no; that is a separate surcharge that the bill does not change. SENATOR GARDNER directed attention to Section 7 that repeals AS 42.05.145 and asked for an explanation of the restriction on regulation of telephone directories. MS. O'CONNOR explained that the provision removes the obligation for companies to deliver a phonebook to consumers. Companies are adjusting their phonebooks to meet the needs of consumers, including online options. 2:07:09 PM CHAIR COSTELLO found no one who wished to comment, and closed public testimony on SB 205. [SB 205 was held in committee.]