Legislature(2017 - 2018)BELTZ 105 (TSBldg)
04/02/2018 09:00 AM Senate LABOR & COMMERCE
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SB 205-TELECOMMUNICATIONS REGULATION/EXEMPTIONS 9:28:21 AM CHAIR COSTELLO reconvened the meeting and announced the consideration of SB 205. She noted the proposed committee substitute (CS). 9:28:56 AM SENATOR MEYER moved to adopt the work draft CS for SB 205, 30- LS1431\U, as the working document. CHAIR COSTELLO objected for an explanation. 9:29:20 AM EDRA MORLEDGE, Staff, Senator Kevin Meyer, Alaska State Legislature, Juneau, Alaska, said there are four primary changes: • Requires telecommunications utilities to continue to pay an annual Regulatory Cost Charge to the Regulatory Commission of Alaska. • Requires the Regulatory Commission of Alaska to provide in their annual report to the Legislature details pertaining to how much activity is spent on each area of telecommunication regulatory oversight. • Removes exemption for AS 42.05.145. • Removes transition language that is no longer applicable. 9:30:20 AM CHAIR COSTELLO removed her objection and version U was adopted. SENATOR GARDNER asked Ms. Morledge to repeat the third change. MS. MORLEDGE said it removes the exemption for AS 42.05.145, the exemption for telecommunications regulation policy and restrictions on regulation of telephone directories. SENATOR MICCICHE asked what the new report might be because that cost will be passed on to rate payers. CHAIR COSTELLO said she'd like to defer the question until after the sectional. 9:31:46 AM MS. MORLEDGE read the following sectional analysis for SB 205, version U. 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 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 Committee Substitute that eliminated the Regulatory Cost Charge. 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 42.05296 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 Related 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 also unnecessary at this point • AS 42.05.800 Findings • AS 42.05.810 Competition unnecessary in today's market, which experts can speak on. MS. MORLEDGE noted that Ms. O'Connor could answer detailed questions. 9:37:50 AM CHAIR COSTELLO listed the individuals available to answer questions. SENATOR GARDNER asked what kind of change Section 4 describes. 9:39:05 AM CHRISTINE O'CONNOR, Executive Director, Alaska Telecom Association, Anchorage, Alaska, said that change is spreading the cost across a broader section. About half of the telecoms in Alaska don't pay the RCC [Regulatory Cost Charge] because they have become exempt. The committee substitute would cause all telecoms to resume paying the regulatory cost charge. That provides a broader base to support the Regulatory Commission of Alaska (RCA). SENATOR GARDNER said she didn't know if that was good or bad. Noting that Section 7 has a description of the services for which the utility that provides telecommunications services is not exempt, she asked what is being exempted. She asked for an answer in common language, not numbers. All the sections apply to telecommunications services and now a bunch are being exempted. She asked what they are. CHAIR COSTELLO asked the drafter to comment on which sections the exemptions are for. 9:41:09 AM EMILY NAUMAN, Deputy Director, Legislative Legal Services, Legislative Affairs Agency, Juneau, Alaska, said she would submit her answer in writing because the answer isn't as straightforward as it might seem. The challenge is that she wouldn't want to misstate what statutes apply. All the statutes other than the ones listed in the RCA statutes will apply with the exception that some of those statutes are specific to certain types of utilities or certain types of behavior that a telecommunications company might never engage in. SENATOR GARDNER rephrased the question. She asked if there is any impact on consumers in exempting any of those provisions or are they no longer relevant to the industry. MS. NAUMAN suggested the RCA would be better able to answer that question. 9:42:32 AM DAVID PARISH, Common Carrier Specialist IV, Regulatory Commission of Alaska, Anchorage, Alaska, said the RCA would no longer be able to assign COLRs [Carrier of Last Resort]. The primary impacts for consumers would be the RCA would lose current jurisdiction over interconnection agreements, so disputes between carriers would no longer come to the RCA. Also, the RCA would have no exercise of economic jurisdiction over rate making for the carriers across the state that have no competition. That is for both left market and interexchange markets. He did not know if there would be negative effects immediately, but should a carrier want to raise rates in a monopoly market, there would be no obligation for the increase to be vetted and approved by the commission. 9:44:27 AM SENATOR MEYER commented that this bill pertains only to landlines. MR. PARISH agreed. SENATOR MEYER asked the percent of people who have landlines. MR. PARISH estimated that it was below 50 percent. There is a steady decline with residential use. Businesses tend to keep their landlines longer, but the erosion is steady. 9:46:06 AM STEPHEN MCALPINE, Chair, Regulatory Commission of Alaska, Anchorage, Alaska, said when the power goes down and the cell towers are no longer operable, someone without a landline can come to his house and make a call. He has two landlines. SENATOR MEYER asked if the CS addresses the concerns Mr. McAlpine raised at a previous meeting. MR. MCALPINE said, as Mr. Parish indicated, there are two overriding issues. The bill is getting better, but this is the type of bill that ought to be developed over time. The RCA has had to deal with carriers that decide to stop service. He asked where customers go to complain about that. That is what is happening in the MatSu. Some of the customers have been cut off because they have been losing the better system that MTA [Matanuska Telephone Association] has decided not to provide. Because MTA is deregulated, consumers do not have the ability to come to the RCA's consumer protection arm. They are going to the FCC [Federal Communications Commission]. He cannot say anything further because it is on the RCA's public meeting agenda on Wednesday. Carriers of last resort are receiving tens of millions in subsidies in competitive markets. He would like that to go to high-cost areas or to development of other kinds of telecommunications that could better serve the rural areas of Alaska. The second concern is the failure to agree on interconnection. In case of a dispute between two carriers, current statute provides that the utility would apply to the commission to arbitrate. MR. MCALPINE said he didnt know when those changes were developed. This bill appeared without any prior notice and as they work through it, there are multiple concerns and problems. Many have been addressed, but he would like to see a good bill come out at the end of the pipe rather than the one currently before the committee. SENATOR MEYER asked if the added year-end report was a concern for the RCA. MR. MCALPINE said the RCA does calculate time dedicated to different activities. He isn't sure what "should provide the legislature with detailed activity" means exactly. It could require more staff time, but they could do it. SENATOR GARDNER asked the impact of the provision in Section 8 that adds a local exchange carrier to the exemption from municipal regulation. MR. PARISH said this already exists for long distance carriers. His understanding is that it means a municipality cannot step in and start regulating since the RCA, under this bill, would not have jurisdiction. 9:53:49 AM MS. O'CONNOR agreed with Mr. Parrish. She went on to address issues raised earlier. The latest national figures indicate just 42 percent of households have landlines, but those are still important and they are not in any way proposing to eliminate landlines or to degrade that service. Local rates are capped federally. If they wish to raise rates, which is not happening today, they would be limited by the federal rate ceiling. Regarding Chair McAlpines comments about the COLR, she said that obligation continues under the certificate process. It is one of the listings not being exempted. The commission is currently looking into one situation. This bill doesn't change that. Regarding the funds companies are receiving to provide service, there is a docket in which the RCA is actively pursuing how to change that. The chair and commissioners have stated their goal is to reform that and industry is actively participating and has submitted draft regulations, comments, and proposals to implement those changes. MS. O'CONNOR clarified that the bill requires that the annual report be formatted to show the detail of the telecom activities. It is intended to use the data already collected. The RCA annual report format changes and some years it is difficult to see how much activity is attributed to each form of telecommunications. They were not suggesting any additional data be collected, just that the presentation provide a similar detail as was provided in the FY2017 report. 9:59:05 AM SENATOR MICCICHE said the fiscal note still says the regulatory cost charge (RCC) would be removed for telecommunications services, so that needs updating. Looking at the last line of the fiscal note, he asked that if in the future the RCC funding mechanism is removed from telecommunications, if that would reduce the workload of the RCA. He asked what is the likelihood that the RCC would be passed on to other regulated utility sectors. MR. PARRISH said he assumed that the question is referencing if RCCs are eliminated for telecommunication companies. He asked if that was correct. SENATOR MICCICHE said they haven't had an updated fiscal note. Before the bill was amended, it eliminated the RCC for telecommunications services and the fiscal note said it could be shifted to the other regulated utilities, which has been a concern of his. He asked if the RCA doesn't regulate telecommunications, wouldn't that reduce the RCA work load and avoid a cost shift to the other regulated utilities. 10:01:10 AM KRISTIN SCHUBERT, Manager, Commission Section, Regulatory Commission of Alaska, Anchorage, Alaska, said in regard to shifting RCCs to other regulated utilities, they are still going to be doing work on telecoms, and so that burden is going to be shifted to the other utilities because the RCCs are calculated using labor ratios. Since they cannot charge telecoms RCCs, that burden gets put on the other utilities, so their charges will increase. SENATOR MICCICHE said since that has been removed in Section 4 now, it maintains the current RCC funding mechanism. Nothing will change, but he should be on the lookout for a change in the future that could unfairly distribute that cost to other utilities. MS. SCHUBERT answered yes. MR. PARRISH said this was something the commission addressed at the public meeting. The current draft is fairer. One of the interesting things is that when other utility sectors become deregulated, the commission generally does no work for them. With telecommunications it's a strange beast because they have lots of delegated authority from the FCC to provide ongoing regulation even of deregulated carriers. Bringing back a requirement for otherwise economically deregulated entities that they do perform regulatory work for to pay some of those costs would be an improvement over the current landscape. MS. O'CONNOR said their legal expert can speak to the concerns about interconnection disputes. 10:04:21 AM JAMES JACKSON, Legal Counsel, GCI, Anchorage, Alaska, said he is not sure what raised the concern from Mr. Parrish and Mr. McAlpine regarding joint use and interconnection. The statute is confusing on this issue. The sections on joint use and interconnection are AS 42.05.311 and AS 42.05.321. "It's true that those are not listed as sections which will still apply to us," he said. That is because the statute is somewhat strange. It is stated within those sections that they still apply to utilities that are exempt under AS 42.05.711. Specifically, AS 42.05.321 which is entitled Failure to Agree upon Joint Use or Interconnection, gives the commission the authority to resolve those disputes. Subsection (d) of AS 42.05.321 says this section and AS 42.05.311 apply to all utilities, whether or not they are exempt from other regulation under AS 42.05.711. Since the exemption this bill grants is under AS 42.05.711, the section on joint use will still apply. 10:07:01 AM CHAIR COSTELLO stated her intention to hold SB 205 for further consideration.