CHAPTER 65. DEREGULATION OF CERTAIN INCUMBENT LOCAL EXCHANGE COMPANY MARKETS

TEXAS STATUTES AND CODES

CHAPTER 65. DEREGULATION OF CERTAIN INCUMBENT LOCAL EXCHANGE COMPANY MARKETS

UTILITIES CODE

TITLE 2. PUBLIC UTILITY REGULATORY ACT

SUBTITLE C. TELECOMMUNICATIONS UTILITIES

CHAPTER 65. DEREGULATION OF CERTAIN INCUMBENT LOCAL EXCHANGE

COMPANY MARKETS

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 65.001. STATEMENT OF POLICY. It is the policy of this

state to provide for full rate and service competition in the

telecommunications market of this state so that customers may

benefit from innovations in service quality and market-based

pricing.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch.

2, Sec. 26, eff. September 7, 2005.

Sec. 65.002. DEFINITIONS. In this chapter:

(1) "Deregulated company" means an incumbent local exchange

company for which all of the company's markets have been

deregulated.

(2) "Market" means an exchange in which an incumbent local

exchange company provides residential local exchange telephone

service.

(3) "Regulated company" means an incumbent local exchange

company for which none of the company's markets have been

deregulated.

(4) "Stand-alone residential local exchange voice service"

means:

(A) residential tone dialing service;

(B) services and functionalities supported under the lifeline

program;

by a local authority and access to dual party relay service;

(D) at the election of the incumbent local exchange company,

mandatory residential extended area service arrangements,

mandatory residential extended metropolitan service or other

mandatory residential toll-free calling arrangements, mandatory

expanded local calling service arrangements, or another service

that a company is required under a tariff to provide to a

customer who subscribes or may subscribe to basic network

services;

(E) flat rate residential local exchange telephone service

delivered by landline, but only if the service is ordered and

received independent of:

(i) a service classified as a nonbasic service under Section

58.151 or residential call waiting service;

(ii) a package of services that includes a service classified as

a nonbasic service under Section 58.151; or

(iii) another flat rate residential local exchange service

delivered by landline; and

(F) residential caller identification services if the customer

to whom the service is billed is at least 65 years of age.

(5) "Transitioning company" means an incumbent local exchange

company for which at least one, but not all, of the company's

markets has been deregulated.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch.

2, Sec. 26, eff. September 7, 2005.

Sec. 65.003. COMMISSION AUTHORITY. (a) Notwithstanding any

other provisions of this title, the commission has authority to

implement and enforce this chapter.

(b) The commission may adopt rules and conduct proceedings

necessary to administer and enforce this chapter, including rules

to determine whether a market should remain regulated, should be

deregulated, or should be reregulated.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch.

2, Sec. 26, eff. September 7, 2005.

Sec. 65.004. INFORMATION. (a) The commission may collect and

compile information from all telecommunications providers as

necessary to implement and enforce this chapter.

(b) The commission shall maintain the confidentiality of

information collected under this chapter that is claimed to be

confidential for competitive purposes. Information that is

claimed to be confidential is exempt from disclosure under

Chapter 552, Government Code.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch.

2, Sec. 26, eff. September 7, 2005.

Sec. 65.005. CUSTOMER PROTECTION. This chapter does not affect

a customer's right to complain to the commission regarding a

telecommunications provider.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch.

2, Sec. 26, eff. September 7, 2005.

SUBCHAPTER B. DETERMINATION OF WHETHER MARKET SHOULD BE REGULATED

Sec. 65.051. MARKETS DEREGULATED. (a) Except as provided by

Subsection (b), all markets of all incumbent local exchange

companies are deregulated on January 1, 2006, unless the

commission determines under Section 65.052(a) that a market or

markets should remain regulated.

(b) A market of an incumbent local exchange company in which the

population in the area included in the market is less than 30,000

is deregulated on January 1, 2007, unless the commission

determines under Section 65.052(f) that the market should remain

regulated.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch.

2, Sec. 26, eff. September 7, 2005.

Sec. 65.052. DETERMINATION OF WHETHER A MARKET SHOULD REMAIN

REGULATED. (a) Except as provided by Subsection (f), the

commission shall:

(1) determine whether each market of an incumbent local exchange

company should remain regulated on and after January 1, 2006; and

(2) issue a final order classifying the company in accordance

with this section effective January 1, 2006.

(b) In making a determination under Subsection (a), the

commission may not determine that a market should remain

regulated if:

(1) the population in the area included in the market is at

least 100,000; or

(2) the population in the area included in the market is at

least 30,000 but less than 100,000 and, in addition to the

incumbent local exchange company, there are at least three

competitors of which:

(A) at least one is a telecommunications provider that holds a

certificate of operating authority or service provider

certificate of operating authority and provides residential local

exchange telephone service in the market;

(B) at least one is an entity providing residential telephone

service in the market using facilities that the entity or its

affiliate owns; and

mobile service as defined by Section 332(d), Communications Act

of 1934 (47 U.S.C. Section 151 et seq.), Federal Communications

Commission rules, and the Omnibus Budget Reconciliation Act of

1993 (Pub. L. No. 103-66), that is not affiliated with the

incumbent local exchange company.

local exchange company as a deregulated company that is subject

to Subchapter C if:

(1) the company does not have any markets in which the

population in the area included in the market is less than

30,000; and

(2) the commission does not determine that a market of the

company should remain regulated on and after January 1, 2006.

(d) Regardless of the population in the area included in an

incumbent local exchange company's markets, the commission shall

issue an order classifying the company as a transitioning company

that is subject to Subchapter D if the commission determines that

one or more, but not all, of the markets of the company should

remain regulated on and after January 1, 2006.

(e) The commission shall issue an order classifying the company

as a regulated company that is subject to the provisions of this

title that applied to the company on September 1, 2005, if the

commission determines that all of the markets of the company in

which the population in each area included in the markets is at

least 30,000 should remain regulated on and after January 1,

2006. This subsection does not affect the authority of a

regulated company to elect under Chapter 58 or 59 after January

1, 2005, and to be regulated under the chapter under which the

company elected.

(f) Not later than November 30, 2006, the commission shall

determine whether a market of an incumbent local exchange company

in which the population in the area included in the market is

less than 30,000 should remain regulated on or after January 1,

2007. The commission by rule shall determine the market test to

be applied in determining whether the market should remain

regulated. If the commission does not determine that the market

should remain regulated on or after January 1, 2007, and the

deregulation of that market results in a transitioning or

regulated company no longer meeting the definition of a

transitioning or regulated company, as appropriate, the

commission shall issue an order reclassifying the company

appropriately.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch.

2, Sec. 26, eff. September 7, 2005.

Sec. 65.053. INCUMBENT LOCAL EXCHANGE COMPANY MARKETS. (a)

Notwithstanding Section 65.052, an incumbent local exchange

company may elect to have all of the company's markets remain

regulated on and after January 1, 2006.

(b) To make an election under Subsection (a), an incumbent local

exchange company must file an affidavit with the commission

making that election not later than December 1, 2005.

under this section, the commission shall issue an order

classifying the company as a regulated company that is subject to

the provisions of this title that applied to the company on

September 1, 2005. This subsection does not affect the authority

of a regulated company to elect under Chapter 58 or 59 after

January 1, 2005, and to be regulated under the chapter under

which the company elected.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch.

2, Sec. 26, eff. September 7, 2005.

Sec. 65.054. PETITION FOR DEREGULATION. (a) After July 1,

2007, a company may petition the commission to deregulate a

market that the commission previously determined should remain

regulated.

(b) If the commission deregulates a market under this section

and the deregulation results in the transitioning or regulated

company no longer meeting the definition of a transitioning or

regulated company, as appropriate, the commission shall issue an

order reclassifying the company appropriately.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch.

2, Sec. 26, eff. September 7, 2005.

Sec. 65.055. COMMISSION AUTHORITY TO REREGULATE CERTAIN MARKETS.

(a) This section applies only to a market of an incumbent local

exchange company in which the population in the area included in

the market is less than 100,000.

(b) The commission, on its own motion or on a complaint that the

commission considers to have merit, may determine that a market

that was previously deregulated should again be subject to

regulation.

standards applicable to a determination under this section.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch.

2, Sec. 26, eff. September 7, 2005.

SUBCHAPTER C. DEREGULATED COMPANY

Sec. 65.101. ISSUANCE OF CERTIFICATE OF OPERATING AUTHORITY.

(a) A deregulated company may petition the commission to

relinquish the company's certificate of convenience and necessity

and receive a certificate of operating authority.

(b) The commission shall issue the deregulated company a

certificate of operating authority and rescind the deregulated

company's certificate of convenience and necessity if the

commission finds that all of the company's markets have been

deregulated under Subchapter B.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch.

2, Sec. 26, eff. September 7, 2005.

Sec. 65.102. REQUIREMENTS. (a) A deregulated company that

holds a certificate of operating authority issued under this

subchapter is a nondominant carrier governed in the same manner

as a holder of a certificate of operating authority issued under

Chapter 54, except that the deregulated company:

(1) retains the obligations of a provider of last resort under

Chapter 54;

(2) is subject to the following provisions in the same manner as

an incumbent local exchange company that is not deregulated:

(A) Sections 54.156, 54.158, and 54.159;

(B) Section 55.012; and

(3) may not increase the company's rates for stand-alone

residential local exchange voice service before the date that the

commission has the opportunity to revise the monthly per line

support under the Texas High Cost Universal Service Plan pursuant

to Section 56.031, regardless of whether the company is an

electing company under Chapter 58.

(b) In each deregulated market, a deregulated company shall make

available to all residential customers uniformly throughout that

market the same price, terms, and conditions for all basic and

non-basic services, consistent with any pricing flexibility

available to such company on or before August 31, 2005.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch.

2, Sec. 26, eff. September 7, 2005.

SUBCHAPTER D. TRANSITIONING COMPANY

Sec. 65.151. PROVISIONS APPLICABLE TO TRANSITIONING COMPANY. A

transitioning company is governed by this subchapter and the

provisions of this title that applied to the company immediately

before the date the company was classified as a transitioning

company. If there is a conflict between this subchapter and the

other applicable provisions of this title, this subchapter

controls.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch.

2, Sec. 26, eff. September 7, 2005.

Sec. 65.152. GENERAL REQUIREMENTS. (a) A transitioning company

may:

(1) exercise pricing flexibility in a market in the manner

provided by Section 58.063 one day after providing an

informational notice as required by that section; and

(2) introduce a new service in a market in the manner provided

by Section 58.153 one day after providing an informational notice

as required by that section.

(b) A transitioning company may not be required to comply with

exchange-specific retail quality of service standards or

reporting requirements in a market that is deregulated.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch.

2, Sec. 26, eff. September 7, 2005.

Sec. 65.153. RATE REQUIREMENTS. (a) In a market that remains

regulated, a transitioning company shall price the company's

retail services in accordance with the provisions that applied to

that company immediately before the date the company was

classified as a transitioning company.

(b) In a market that is deregulated, a transitioning company

shall price the company's retail services as follows:

(1) for all services, other than basic local telecommunications

service, at any price higher than the service's long run

incremental cost; and

(2) for basic local telecommunications service, at any price

higher than the lesser of the service's long run incremental cost

or the tariffed price on the date that market was deregulated,

provided that the company may not increase the company's rates

for stand-alone residential local exchange voice service before

the date that the commission has the opportunity to revise the

monthly per line support under the Texas High Cost Universal

Service Plan pursuant to Section 56.031, regardless of whether

the company is an electing company under Chapter 58.

make available to all residential customers uniformly throughout

that market the same price, terms, and conditions for all basic

and non-basic services, consistent with any pricing flexibility

available to such company on or before August 31, 2005.

(d) In any market, regardless of whether regulated or

deregulated, the transitioning company may not:

(1) establish a retail rate, term, or condition that is

anticompetitive or unreasonably preferential, prejudicial, or

discriminatory;

(2) establish a retail rate for a basic or non-basic service in

a deregulated market that is subsidized either directly or

indirectly by a basic or non-basic service provided in an

exchange that is not deregulated; or

(3) engage in predatory pricing or attempt to engage in

predatory pricing.

(e) A rate that meets the pricing requirements in Subsection (b)

shall be deemed compliant with Subsection (d)(2).

Added by Acts 2005, 79th Leg., 2nd C.S., Ch.

2, Sec. 26, eff. September 7, 2005.

SUBCHAPTER E. REDUCTION OF SWITCHED ACCESS RATES

Sec. 65.201. REDUCTION OF SWITCHED ACCESS RATES BY DEREGULATED

COMPANY. (a) On the date the last market of an incumbent local

exchange company is deregulated, the company shall reduce both

the company's originating and terminating per minute of use

switched access rates in each market to parity with the company's

respective federal originating and terminating per minute of use

switched access rates.

(b) After reducing the rates under Subsection (a), a deregulated

company shall maintain parity with the company's federal

originating and terminating per minute of use switched access

rates. If the company's federal originating and terminating per

minute of use switched access rates are changed, the company

shall change the company's per minute of use switched access

rates in each market as necessary to re-achieve parity with the

company's federal originating and terminating per minute of use

switched access rates.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch.

2, Sec. 26, eff. September 7, 2005.

Sec. 65.202. REDUCTION OF SWITCHED ACCESS RATES BY TRANSITIONING

COMPANY WITH MORE THAN THREE MILLION ACCESS LINES. (a)

Notwithstanding any other provision of this title, a

transitioning company that has more than three million access

lines in service in this state on January 1, 2006, shall:

(1) on July 1, 2006, reduce both the company's originating and

terminating per minute of use switched access rates in each

market by an amount equal to 33 percent of the difference in the

rates in effect on June 30, 2006, and the company's respective

federal originating and terminating per minute of use switched

access rates;

(2) on July 1, 2007, reduce both the company's originating and

terminating per minute of use switched access rates in each

market by an amount equal to 33 percent of the difference in the

rates in effect on June 30, 2006, and the company's respective

federal originating and terminating per minute of use switched

access rates; and

(3) on July 1, 2008, reduce both the company's originating and

terminating per minute of use switched access rates in each

market to parity with the company's respective federal

originating and terminating per minute of use switched access

rates.

(b) After reducing the rates under Subsection (a), a

transitioning company shall maintain parity with the company's

federal originating and terminating per minute of use switched

access rates. If the company's federal originating and

terminating per minute of use switched access rates are changed,

the company shall change the company's per minute of use switched

access rates in each market as necessary to re-achieve parity

with the company's federal originating and terminating per minute

of use switched access rates.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch.

2, Sec. 26, eff. September 7, 2005.

Sec. 65.203. REDUCTION OF SWITCHED ACCESS RATES BY CERTAIN

TRANSITIONING COMPANIES WITH NOT MORE THAN THREE MILLION ACCESS

LINES. (a) Notwithstanding any other provision of this title, a

company that is classified as a transitioning company effective

January 1, 2006, and that has not more than three million access

lines in service in this state on that date shall reduce both the

company's originating and terminating per minute of use switched

access rates in each market in accordance with this section.

(b) On July 1, 2006, the transitioning company shall reduce both

the company's originating and terminating per minute of use

switched access rates in each market by an amount equal to the

lesser of:

(1) 25 percent of the difference in the company's rates in

effect on June 30, 2006, and the company's respective federal

originating and terminating per minute of use switched access

rates in effect on that date; or

(2) an amount derived by multiplying that difference by a

percentage derived by dividing the number of the company's

markets that are not regulated on July 1, 2006, by the total

number of the company's markets on December 30, 2005.

the company's originating and terminating per minute of use

switched access rates in each market by an amount equal to the

lesser of:

(1) 25 percent of the difference in the company's rates in

effect on June 30, 2006, and the company's respective federal

originating and terminating per minute of use switched access

rates in effect on that date; or

(2) an amount derived by multiplying that difference by a

percentage derived by dividing the number of the company's

markets that were deregulated in the prior 12 months by the total

number of the company's markets on December 30, 2005.

(d) On July 1, 2008, the transitioning company shall reduce both

the company's originating and terminating per minute of use

switched access rates in each market by an amount equal to the

lesser of:

(1) 25 percent of the difference in the company's rates in

effect on June 30, 2006, and the company's respective federal

originating and terminating per minute of use switched access

rates in effect on that date; or

(2) an amount derived by multiplying that difference by a

percentage derived by dividing the number of the company's

markets that were deregulated in the prior 12 months by the total

number of the company's markets on December 30, 2005.

(e) On July 1, 2009, and each succeeding year thereafter on July

1, the transitioning company shall reduce both the company's

originating and terminating per minute of use switched access

rates in each market by an amount derived by multiplying the

difference in the company's rates in effect on June 30, 2006, and

the company's respective federal originating and terminating per

minute of use switched access rates in effect on that date by a

percentage derived by dividing the number of the company's

markets that were deregulated in the prior 12 months by the total

number of the company's markets on December 30, 2005, except that

a transitioning company shall be required to reduce both the

company's originating and terminating per minute of use switched

access charges to parity with the company's respective federal

originating and terminating per minute of use switched access

charges if more than 75 percent of the transitioning company's

markets are not regulated on July 1 of 2009 or any succeeding

year.

(f) After reducing the rates under Subsection (e), a

transitioning company shall maintain parity with the company's

federal originating and terminating per minute of use switched

access rates. If the company's federal originating and

terminating per minute of use switched access rates are changed,

the company shall change the company's per minute of use switched

access rates in each market as necessary to re-achieve parity

with the company's federal originating and terminating per minute

of use switched access rates.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch.

2, Sec. 26, eff. September 7, 2005.

Sec. 65.204. REDUCTION OF SWITCHED ACCESS RATES BY NEWLY

DESIGNATED TRANSITIONING COMPANY. (a) Notwithstanding any other

provision of this title, a company that is classified as a

transitioning company after January 1, 2006, shall reduce both

the company's originating and terminating per minute of use

switched access rates in each market in accordance with this

section.

(b) On the date the company is classified as a transitioning

company, the company shall reduce both the company's originating

and terminating per minute of use switched access rates in each

market by an amount equal to the lesser of:

(1) 25 percent of the difference in the company's rates in

effect on the day before the date the company was classified, and

the company's respective federal originating and terminating per

minute of use switched access rates in effect on that date; or

(2) an amount derived by multiplying that difference by a

percentage derived by dividing the number of the company's

markets that are not regulated on the date the company is

classified as a transitioning company by the total number of the

company's markets on December 30, 2005.

classified as a transitioning company, the company shall reduce

both the company's originating and terminating per minute of use

switched access rates in each market by an amount equal to the

lesser of:

(1) 25 percent of the difference in the company's rates in

effect on the day before the date the company was classified, and

the company's respective federal originating and terminating per

minute of use switched access rates in effect on that date; or

(2) an amount derived by multiplying that difference by a

percentage derived by dividing the number of the company's

markets that were deregulated in the prior 12 months by the total

number of the company's markets on December 30, 2005.

(d) On the second anniversary of the date the company is

classified as a transitioning company, the company shall reduce

both the company's originating and terminating per minute of use

switched access rates in each market by an amount equal to the

lesser of:

(1) 25 percent of the difference in the company's rates in

effect on the day before the date the company was classified, and

the company's respective federal originating and terminating per

minute of use switched access rates in effect on that date; or

(2) an amount derived by multiplying that difference by a

percentage derived by dividing the number of the company's

markets that were deregulated in the prior 12 months by the total

number of the company's markets on December 30, 2005.

(e) On the third anniversary of the date the company is

classified as a transitioning company and each anniversary

thereafter, the company shall reduce both the company's

originating and terminating per minute of use switched access

rates in each market by an amount derived by multiplying the

difference in the company's rates in effect on the day before the

date the company was classified as a transitioning company, and