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Minnesota Legislature

Office of the Revisor of Statutes

Key: (1) language to be deleted (2) new language

                            CHAPTER 156-S.F.No. 752 
                  An act relating to telecommunications; allowing for 
                  alternative regulation of telephone companies for a 
                  limited period; authorizing rulemaking to promote fair 
                  and reasonable competition for local exchange service; 
                  making technical changes; amending Minnesota Statutes 
                  1994, sections 237.01, subdivision 6; 237.035; 237.09; 
                  237.16; and 237.461, subdivision 2; proposing coding 
                  for new law in Minnesota Statutes, chapter 237. 
        BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
           Section 1.  Minnesota Statutes 1994, section 237.01, 
        subdivision 6, is amended to read: 
           Subd. 6.  [TELECOMMUNICATIONS CARRIER.] "Telecommunications 
        carrier" means a person, firm, association, or corporation 
        authorized to furnish one or more of the following telephone 
        service services to the public, but not otherwise authorized to 
        furnish local exchange service:  (1) interexchange telephone 
        service; (2) local telephone service pursuant to a certificate 
        granted under the authority of section 237.16, subdivision 4, 
        before August 1, 1995; or (3) local service pursuant to a 
        certificate granted under section 237.16, for the first time 
        after August 1, 1995, except if granted to a successor to a 
        telephone company otherwise authorized to furnish local exchange 
        service.  Telecommunications carrier does not include entities 
        that derive more than 50 percent of their revenues from operator 
        services provided to transient locations such as hotels, motels, 
        and hospitals.  In addition, telecommunications carrier does not 
        include entities that provide centralized equal access services. 
           Sec. 2.  Minnesota Statutes 1994, section 237.035, is 
        amended to read: 
           237.035 [TELECOMMUNICATIONS CARRIER EXEMPTION.] 
           (a) Telecommunications carriers are not subject to 
        regulation under this chapter, except that only to the extent 
        required under paragraphs (b) to (e). 
           (b) Telecommunications carriers shall comply with the 
        requirements of section sections 237.121 and 237.74. 
           (c) Telecommunications carriers shall comply with section 
        237.16, subdivisions 8 and 9. 
           (d) To the extent a telecommunications carrier offers local 
        service, it shall obtain a certificate under section 237.16 for 
        that local service. 
           (e) In addition, a telecommunications carrier's local 
        service is subject to this chapter except that: 
           (1) a telecommunications carrier is not subject to 
        rate-of-return or earnings investigations under section 237.075 
        or 237.081; and 
           (2) a telecommunications carrier is not subject to section 
        237.22. 
           Sec. 3.  Minnesota Statutes 1994, section 237.09, is 
        amended to read: 
           237.09 [DISCRIMINATION PROHIBITED.] 
           Subdivision 1.  [GENERALLY.] No telephone company, or any 
        agent or officer thereof, shall, directly or indirectly, in any 
        manner, knowingly or willfully, charge, demand, collect, or 
        receive from any person, firm, or corporation, a greater or less 
        compensation for any intrastate service rendered or to be 
        rendered by it than it charges, demands, collects, or receives 
        from any other firm, person, or corporation for a like and 
        contemporaneous intrastate service under similar circumstances.  
           Subd. 2.  [PARTICULAR SERVICES.] (a) A telephone company 
        that offers or provides a service or services, service elements, 
        features, or functionalities on a separate, stand-alone basis to 
        any customer shall provide that service, service element, 
        feature, or functionality pursuant to tariff to all similarly 
        situated persons, including all telecommunications carriers and 
        competitors.  To the extent prohibited by the Federal 
        Communications Commission or public utilities commission, a 
        telephone company shall not give preference or discriminate in 
        providing services, products, or facilities to an affiliate or 
        to its own or an affiliate's retail department that sells to 
        consumers. 
           (b) For purposes of establishing an appropriate rate or 
        price floor for a rate for a telephone service, a telephone 
        company shall impute, on a service-by-service basis, into the 
        rate or price for that service, the tariffed rate or price for 
        the same services, service elements, or network functions that 
        the company provides to others who use it to provide a service 
        that competes with the telephone service offered by the 
        company.  A company is not required to impute a rate or price 
        under this paragraph if it demonstrates to the commission, in an 
        expedited proceeding under section 237.61, that: 
           (1) the competitor can obtain substantially equivalent 
        services, service elements, or network functions within the 
        relevant market or geographic area on reasonably comparable 
        terms and conditions through self-provision or from a provider 
        other than the telephone company; or 
           (2) application of the imputation requirement otherwise 
        would be inconsistent with the public interest. 
           Sec. 4.  [237.121] [PROHIBITED PRACTICES.] 
           A telephone company or telecommunications carrier may not 
        do any of the following with respect to services regulated by 
        the commission: 
           (1) upon request, fail to disclose in a timely and uniform 
        manner information necessary for the design of equipment and 
        services that will meet the specifications for interconnection; 
           (2) intentionally impair the speed, quality, or efficiency 
        of services, products, or facilities offered to a consumer under 
        a tariff, contract, or price list; 
           (3) fail to provide a service, product, or facility to a 
        consumer other than a telephone company or telecommunications 
        carrier in accordance with its applicable tariffs, price lists, 
        or contracts and with the commission's rules and orders; 
           (4) refuse to provide a service, product, or facility to a 
        telephone company or telecommunications carrier in accordance 
        with its applicable tariffs, price lists, or contracts and with 
        the commission's rules and orders; 
           (5) impose restrictions on the resale or shared use of its 
        services or network functions, provided that: 
           (i) it may require that residential service may not be 
        resold as a different class of service; and 
           (ii) the commission may prohibit resale of services it has 
        approved for provision for not-for-profit entities at rates less 
        than those offered to the general public; or 
           (6) provide telephone service to a person acting as a 
        telephone company or telecommunications carrier if the 
        commission has ordered the telephone company or 
        telecommunications carrier to discontinue service to that person.
           Sec. 5.  Minnesota Statutes 1994, section 237.16, is 
        amended to read: 
           237.16 [CONSTRUCTING TELEPHONE LINES AND EXCHANGES LOCAL 
        EXCHANGE COMPETITION, RULES.] 
           Subdivision 1.  [LOCAL NEW SERVICE, CERTIFICATE OF 
        AUTHORITY.] (a) For the purpose of bringing about uniformity of 
        practice fair and reasonable competition for local exchange 
        telephone services, the commission shall have has the exclusive 
        right authority to grant authority to: 
           (1) authorize any telephone company person to construct 
        telephone lines or exchanges for furnishing or to otherwise 
        furnish local service to subscribers in any municipality of this 
        state, and to prescribe the terms and conditions upon which 
        construction or service delivery may be carried on,; and 
        whenever the commission grants such authority, it shall be in 
        the form of a permit of indeterminate duration -- coupled with 
        the right to the municipality to purchase the telephone plant 
        within the city, as hereinafter provided.  No lines or equipment 
        shall be constructed or installed for the purpose of furnishing 
        local telephone service to the inhabitants or telephone users in 
        any locality in this state, where there is then in operation in 
        the locality or territory affected thereby another telephone 
        company already furnishing such service, without first securing 
        from the commission a declaration, after a public hearing, that 
        public convenience requires such proposed telephone lines or 
        equipment; but 
           (2) establish terms and conditions for the entry of 
        telephone service providers so as to protect consumers from 
        monopolistic practices and preserve the state's commitment to 
        universal service.  
           (b) No person shall provide telephone service in Minnesota 
        without first obtaining a determination that the person 
        possesses the technical, managerial, and financial resources to 
        provide the proposed telephone services and a certificate of 
        authority from the commission under terms and conditions the 
        commission finds to be consistent with fair and reasonable 
        competition, universal service, the provision of affordable 
        telephone service at a quality consistent with commission rules, 
        and the commission's rules.  
           (c) The commission shall make a determination on an 
        application for a certificate within 120 days of the filing of 
        the application.  
           (d) The governing body of any municipality or town shall 
        have the same powers of regulation which it now possesses with 
        reference to the location of poles and, wires, and other 
        equipment or facilities on, below, or above the streets, alleys, 
        or other public grounds so as to prevent any interference with 
        the safe and convenient use of streets and, alleys, and other 
        public grounds by the public.  
           (e) A telephone company or telecommunications carrier shall 
        provide for repair or restoration of streets, alleys, and other 
        public areas to their original condition if necessitated by the 
        installation or operation of telephone or telecommunications 
        carrier facilities. 
           Subd. 2.  [CERTIFICATE OF TERRITORIAL AUTHORITY.] All 
        telephone companies operating exchanges in the state of 
        Minnesota as of April 21, 1961, shall be entitled to receive a 
        certificate of territorial authority from the commission 
        authorizing such company to continue to serve the areas 
        presently included within the exchange boundaries as indicated 
        by the exchange boundary maps now on record with the commission 
        provided however that such exchange boundaries shall be subject 
        to review by the commission upon the filing of a complaint by 
        any interested party, the time for filing such complaints to be 
        limited to 60 days after the passage of Laws 1961, chapter 637.  
        If more than one company files maps indicating service in the 
        same territory, the commission shall, after hearing, on 
        reasonable notice to the interested parties, determine, from 
        such evidence as it may reasonably require, which of such 
        companies shall be entitled to a certificate of territorial 
        authority.  In making such determination, the commission shall 
        consider the ability of such company to furnish thereafter 
        reasonably adequate service in the territory in question.  Any 
        company operating a switchboard that does not presently have a 
        map on record with the commission shall have three months from 
        April 21, 1961, to file such map showing the territory being 
        served by such company.  
           Subd. 3.  [MAPS; RULES.] The style, size and kind of map, 
        together with the information to be shown thereon, shall be as 
        required by Every company authorized to provide local telephone 
        service under this section shall file a territorial map.  The 
        map must comply with the rules prescribed by the commission.  
        Such rules shall indicate the time and place for filing such 
        maps and shall require that such maps be kept current.  
           Subd. 4.  [NEW AMENDED CERTIFICATE REQUIRED FOR EXPANSION.] 
        No company authorized to provide local service shall construct 
        or operate any line, plant or system, or any extension thereof, 
        or provide local telephone service in any area for which it has 
        not been certified nor shall any person acquire ownership or 
        control thereof, of another telephone company either directly or 
        indirectly, without first obtaining from the commission a 
        determination that the present or future public convenience and 
        necessity require or will require such construction, operation, 
        or acquisition, and a new an amended certificate of territorial 
        authority; provided that.  The applicant for an amended 
        certificate shall file with the commission notice of the 
        expansion or acquisition, along with a new map under subdivision 
        3, identifying the territory to be served.  Notice of the filing 
        shall be served on any affected municipality and local telephone 
        company certified in that territory.  If no objection is filed 
        with the commission by any interested party or raised by the 
        commission within 20 days of the filing, it is considered 
        approved, except if it involves an acquisition governed by 
        section 237.23, in which case no certificate shall be granted 
        until approval is obtained pursuant to that section and 
        subdivision 1 of this section.  If an objection is filed, the 
        commission shall determine whether to approve the amendment in 
        an expedited proceeding under section 237.61.  This section 
        shall not be construed to require a telephone company operating 
        an exchange in Minnesota to secure a certificate for an 
        extension within any territory within which such company has 
        heretofore filed maps or for substitute facilities within such 
        territories, or for extensions into territories contiguous to 
        that already occupied by such company and not receiving similar 
        service from another company if no certificate of territorial 
        authority has been issued to or applied for by any other company.
           Subd. 5.  [REVOCATION.] Any certificate of territorial 
        authority may, after notice of hearing and a hearing, be revoked 
        by the commission, in whole or in part, for:  the failure of the 
        its holder thereof to furnish reasonably adequate telephone 
        service within the area or areas determined and defined in such 
        the certificate of territorial authority; failure to meet the 
        terms and conditions of its certificate; or intentional 
        violation of the commission's rules or orders.  
           Subd. 6.  [EXPANSION OF SERVICE AREA NOT REQUIRED.] Nothing 
        contained in This section shall be construed to does not require 
        any telephone company operating exchanges providing local 
        service in the state of Minnesota to render telephone service in 
        any portion of any territorial area in which such not included 
        on the telephone company does not render and does not propose to 
        render telephone service company's territorial map. 
           Subd. 7.  [EXISTING CERTIFICATES RETAINED.] This section 
        does not limit the ability of telephone companies possessing 
        certificates of territorial authority on August 1, 1995, 
        including, but not limited to, certificates authorizing resale 
        of local telephone service, to continue to provide telephone 
        service within their designated territories. 
           Subd. 8.  [RULES.] (a) Before August 1, 1997, the 
        commission shall adopt rules applicable to all telephone 
        companies and telecommunications carriers required to obtain or 
        having obtained a certificate for provision of telephone service 
        using any existing federal standards as minimum standards and 
        incorporating any additional standards or requirements necessary 
        to ensure the provision of high quality telephone services 
        throughout the state.  The rules must, at a minimum: 
           (1) define procedures for competitive entry and exit; 
           (2) require the provisions of equal access and 
        interconnection with the company's network and other features, 
        functions, and services which the commission considers necessary 
        to promote fair and reasonable competition; 
           (3) require unbundling of network services and functions to 
        at least the level required by existing federal standards; 
           (4) prescribe, if necessary, methods of reciprocal 
        compensation between telephone companies; 
           (5) provide for local telephone number portability; 
           (6) prescribe appropriate regulatory standards for new 
        local telephone service providers, that facilitate and support 
        the development of competitive services; 
           (7) protect against cross-subsidization, unfair 
        competition, and other practices harmful to promoting fair and 
        reasonable competition; 
           (8) prescribe methods for the preservation of universal and 
        affordable local telephone services; 
           (9) prescribe standards for quality of service; and 
           (10) provide for the continued provision of local emergency 
        telephone services under chapter 403. 
           (b) Before January 1, 1998, in a separate rulemaking, the 
        commission shall adopt separate rules regarding the issues 
        described in paragraph (a), clauses (1) to (10), as may be 
        appropriate to provision of competitive local telephone service 
        in areas served by telephone companies with less than 50,000 
        subscribers originally certified to provide local telephone 
        services before January 1, 1988.  
           Subd. 9.  [UNIVERSAL SERVICE FUND.] The commission shall 
        establish and require contributions to a universal service fund, 
        to be supported by all providers of telephone services, whether 
        or not they are telephone companies under section 237.01, 
        including, but not limited to, local telephone companies, 
        independent telephone companies, cooperative telephone 
        companies, municipal telephone companies, telecommunications 
        carriers, radio common carriers, personal communication service 
        providers, and cellular carriers.  Services that should be 
        considered for inclusion as universal include, at a minimum, 
        single-party service with touch-tone capability, line quality 
        capable of carrying facsimile and data transmissions, equal 
        access, emergency services number capability, statewide 
        telecommunications relay service for the hearing-impaired, and 
        blocking of long-distance toll services.  The fund must be 
        administered and distributed in accordance with rules adopted by 
        the commission and designed to preserve the availability of 
        universal service throughout the state.  Any state universal 
        service fund must be coordinated with any federal universal 
        service fund.  The department shall make recommendations to the 
        legislature by January 1, 1996, regarding a plan for 
        contributions to and expenditures from the universal service 
        fund.  In particular, the department shall address the following 
        issues: 
           (1) what additional services should be included in the 
        basic set of essential telephone services which the state should 
        encourage in its mandate to ensure universal service; 
           (2) whether and how expenditures from the fund should be 
        used to ensure citizens access to local government and other 
        public access programming; and 
           (3) whether expenditures from the fund should be used to 
        encourage construction of infrastructure for, and access to, 
        advanced services, especially in high-cost areas of the state, 
        and, if the commission determines the fund should be used for 
        this purpose, a plan to accomplish these goals.  
           Subd. 10.  [INTERIM AUTHORITY.] (a) Before adopting the 
        rules required under subdivision 8, the commission shall grant 
        an applicant a certificate to provide a proposed local telephone 
        service when the commission finds that the applicant meets the 
        conditions of subdivision 1.  Any applicant for a certificate 
        pursuant to subdivision 1 shall, at the time its application is 
        filed, provide notice of its application to all local telephone 
        companies authorized to provide local exchange service in the 
        geographic area identified in the application.  The applicant 
        and telephone companies shall negotiate a temporary arrangement 
        pertaining to interconnection matters for the effective 
        interconnection of local exchange networks, pending the adoption 
        of the rules under subdivision 8.  If the applicant and the 
        telephone companies fail to reach agreement within 60 days of 
        filing the application, the commission shall set the terms of 
        the temporary arrangement at the time of the issuance of the 
        certificate. 
           (b) Any company previously certified to provide local 
        telephone services may request a temporary arrangement for the 
        effective interconnection with the local exchange network of 
        another telephone company in the same territory, pursuant to the 
        time frames and procedures of this subdivision. 
           (c) In addition, through and until the rules are adopted 
        under subdivision 8, each telephone company serving more than 
        50,000 access lines in the state shall: 
           (1) permit interconnection or discontinue interconnection 
        for intrastate services to the same extent and in the same 
        manner and time frame as the Federal Communications Commission 
        requires interconnection or permits discontinuance of 
        interconnection for interstate services; and 
           (2) unbundle its intrastate services and facilities used 
        for intrastate services to the same extent and in the same 
        manner as the Federal Communications Commission requires 
        unbundling for interstate purposes. 
           Subd. 11.  [INTERIM AUTHORITY IN AREAS SERVED BY TELEPHONE 
        COMPANIES WITH LESS THAN 50,000 SUBSCRIBERS.] (a) Before 
        adopting the rules required under subdivision 8 for telephone 
        companies with less than 50,000 subscribers, when an applicant 
        requests certification to provide local telephone service in an 
        area served by a telephone company with less than 50,000 
        subscribers originally certified to provide local telephone 
        service before January 1, 1988, the commission shall grant the 
        application if it finds the applicant meets the requirements of 
        subdivision 1.  The commission shall make its determination on 
        the application, including whether to provide a temporary 
        arrangement for the effective interconnection of the local 
        exchange networks, after a hearing under chapter 14 or expedited 
        proceeding under section 237.61, within nine months of the 
        application, and considering any facts unique to that telephone 
        company.  In addition, if an application is granted, that 
        telephone company shall: 
           (1) permit interconnection or discontinue interconnection 
        for intrastate services to the same extent and in the same 
        manner and time frame as the Federal Communications Commission 
        may thereafter require for that small telephone company for 
        interstate purposes. 
           (2) unbundle its intrastate services and facilities used 
        for intrastate services to the same extent and in the same 
        manner as the Federal Communications Commission may thereafter 
        require for that telephone company for interstate purposes. 
           (b) If a telephone company with less than 50,000 
        subscribers is authorized by the Federal Communications 
        Commission to provide video common carrier services before the 
        rules required under subdivision 8 are adopted, an application 
        under this subdivision for certification to provide local 
        telephone service in an area served by that telephone company 
        shall be determined within 120 days of its filing. 
           Subd. 12.  [EXTENSION OF INTEREXCHANGE FACILITIES.] In 
        order to promote the development of competitive interexchange 
        services and facilities, any interexchange facility that is 
        owned by a certified telephone company, independent telephone 
        company, telecommunications carrier or an affiliate and that is 
        used to provide service to customers located in areas for which 
        it has been previously certified to provide service may be 
        extended to meet and interconnect with the facility of another 
        telephone company, small telephone company, or 
        telecommunications carrier, whether at a point inside or outside 
        of its territories, without further proceeding, order, or 
        determination of current or future public convenience and 
        necessity, upon mutual consent with the other telephone company, 
        small telephone company, or telecommunications carrier whose 
        facilities will be met and interconnected.  Written notice of 
        the extension and interconnection must be provided to the public 
        utilities commission and department of public safety within 30 
        days after completion.  The written notice must be served on all 
        local exchange companies certified before January 1, 1988, in 
        all areas where the facilities are located.  
           Subd. 13.  [APPLICATION OF OTHER LAW.] Notwithstanding any 
        provisions of sections 237.035 and 237.74 to the contrary, 
        before adopting the rules under subdivision 8, the local 
        services provided by a telecommunications carrier are subject to 
        this chapter in the same manner as those local services of a 
        telephone company regulated under this chapter, except that the 
        telecommunications carrier is not subject to section 237.22 and 
        is not subject to rate-of-return regulation or earnings 
        investigations under section 237.075 or 237.081.  Before 
        offering a local telephone service a telecommunications carrier 
        must be certified to provide local service under this section.  
           Sec. 6.  Minnesota Statutes 1994, section 237.461, 
        subdivision 2, is amended to read: 
           Subd. 2.  [CIVIL PENALTY.] A person who knowingly and 
        intentionally violates a provision of this chapter or rule or 
        order of the commission adopted under this chapter shall forfeit 
        and pay to the state a penalty, in an amount to be determined by 
        the court, of at least $100 and not more than $1,000 $5,000 for 
        each day of each violation.  The civil penalties provided for in 
        this section may be recovered by a civil action brought by the 
        attorney general in the name of the state.  Amounts recovered 
        under this section must be paid into the state treasury. 
           Sec. 7.  [237.76] [PURPOSE.] 
           A telephone company may petition the commission for 
        approval of an alternative regulation plan under sections 237.76 
        to 237.774.  The purpose of an alternative regulation plan is to 
        provide a telephone company's customers with service of a 
        quality consistent with commission rules at affordable rates, to 
        facilitate the development of telecommunication alternatives for 
        customers, and to provide, where appropriate, a regulatory 
        environment with greater flexibility than is available under 
        traditional rate-of-return regulation as reflected in other 
        provisions of this chapter. 
           Sec. 8.  [237.761] [ALTERNATIVE REGULATION PLAN; SERVICES.] 
           Subdivision 1.  [CLASSIFICATION OF SERVICES.] An 
        alternative regulation plan must contain provisions that provide 
        for classification of all telephone services as price regulated, 
        flexibly priced, or nonprice regulated consistent with 
        subdivisions 2 to 5. 
           Subd. 2.  [PRICE-REGULATED SERVICE; DEFINITION.] For 
        purposes of this section, the term "price-regulated service" 
        includes only those services that are: 
           (1) essential for providing local telephone service and 
        access to the local telephone network; 
           (2) integrally related to privacy, health, and safety of 
        the company's customers; and 
           (3) for which no reasonable alternative exists within the 
        relevant market or geographic area on reasonably comparable 
        terms and conditions. 
           Subd. 3.  [SPECIFIC PRICE-REGULATED 
        SERVICES.] Price-regulated telephone services are the following: 
           (1) residential and business service for local calling, 
        including measured local service, two-party service, private 
        branch exchange (PBX) trunks, trunk type hunting services, 
        direct inward dialing, the network access portion of central 
        office switched exchange service, and public access lines for 
        customer-owned coin-operated telephones; 
           (2) extended area service; 
           (3) switched network access service; 
           (4) call tracing; 
           (5) calling number blocking; 
           (6) touch tone service when provided separately from basic 
        local exchange service; 
           (7) local exchange, white-page, printed directories; 
           (8) 911 emergency services; 
           (9) installation and repair of local network access; 
           (10) local operator services, excluding directory 
        assistance; and 
           (11) toll service blocking and 1-900 or 976 access blocking.
           Subd. 4.  [FLEXIBLY PRICED SERVICES.] (a) A service not 
        listed in subdivision 3 or not otherwise determined to be price 
        regulated under subdivision 6 or 7 or nonprice regulated must be 
        classified as a flexibly priced service. 
           (b) Flexibly priced services are regulated consistent with 
        section 237.60, subdivision 2, except that: 
           (1) rate decreases may be effective immediately upon filing 
        and are considered approved if no objection is filed or raised 
        by an interested party or the commission within ten days after 
        the filing; and 
           (2) rate increases may be effective 20 days after filing 
        and are considered approved if no objection is filed or raised 
        by an interested party or the commission within 20 days after 
        the filing. 
           Subd. 5.  [NON-PRICE-REGULATED SERVICES.] (a) A service 
        must be classified as nonprice regulated if the commission 
        finds, based upon evidence filed by the telephone company and 
        other evidence available to the commission and consistent with 
        the company's proposed plan, that there is sufficient 
        competition to justify classification as nonprice regulated.  In 
        making that determination, the factors the commission shall 
        consider include: 
           (1) the number, size, and identity of competitors providing 
        the same or functionally equivalent service; 
           (2) the geographic area in which competitive service is 
        actually available to and being used by customers, to the extent 
        this information is available to the commission; 
           (3) the importance of the service to the public; and 
           (4) the effect of classification of the service on the 
        development of a competitive telecommunications market. 
           (b) Telephone companies shall file tariffs or price lists 
        for non-price-regulated services with the commission, but the 
        rates for these services are not subject to commission approval 
        or investigation except as provided in subdivision 6 and 
        sections 237.762, subdivision 6, 237.770, and 237.771. 
           Subd. 6.  [RECLASSIFICATION.] An alternative regulation 
        plan may contain provisions allowing for the reclassification of 
        services during the course of the plan upon a showing that the 
        service meets the criteria contained in subdivision 2, 3, 4, or 
        5, and the plan, for the requested classification. 
           Subd. 7.  [NEW SERVICES; CLASSIFICATION; RATES.] At the 
        time the company first offers a service, it shall file a tariff 
        or price list and the proposed classification for the service 
        under the plan along with a written explanation of why the 
        proposed classification is consistent with this section.  New 
        services classified as flexibly priced or nonprice regulated may 
        be offered on one day's notice to the commission and the 
        department.  New services classified as price regulated may be 
        offered pursuant to the terms set forth in the plan.  A service 
        is not considered a new service if it consists of a repackaging 
        including bundling, unbundling, or repricing of an already 
        existing service.  If no interested party or the commission 
        objects to the company's proposed classification within 30 days 
        of the filing of the petition, the company's proposed 
        classification of the service is approved.  If an objection is 
        filed, the commission shall determine the classification of the 
        service within 90 days of the filing of the new service. 
           Subd. 8.  [INVESTMENT COMMITMENTS.] (a) An alternative 
        regulation plan must also include a plan outlining the company's 
        commitment to invest in telecommunications infrastructure 
        improvements in this state over a period of not less than six 
        years. 
           (b) An investment plan shall include all of the following: 
           (1) a description of the level of planned investment in 
        technological or infrastructure enhancement; 
           (2) a description of the extent to which planned investment 
        will make new telecommunications technology available to 
        customers or expand the availability of current technology; and 
           (3) a description of the planned deployment of fiber-optic 
        facilities or broad-band capabilities to schools, libraries, 
        technical colleges, hospitals, colleges and universities, and 
        local governments in this state. 
           Sec. 9.  [237.762] [RATES; PRICES.] 
           Subdivision 1.  [INITIAL RATES.] As part of its evaluation 
        of an alternative regulation plan, the commission shall 
        determine whether the telephone company's existing service 
        substantially complies with commission rules and if its rates 
        and rate design are appropriate in light of the proposed plan or 
        whether changes should be made before the plan is implemented or 
        phased in during the course of the plan.  An alternative 
        regulation plan approved by the commission under this section 
        must provide that the recurring and nonrecurring rates or prices 
        that may be charged by a telephone company for price-regulated 
        services are no higher than the approved rate or prices on file 
        with the commission for those services on the date of the filing 
        of the plan.  Furthermore, no plan may in any way change the 
        terms or conditions of any access charge settlements approved by 
        the commission or exempt any company from compliance with any 
        commission access charge order issued before the filing of a 
        plan.  The plan must address implementation of additional access 
        charge reductions that may occur during that portion of the plan 
        that extends beyond expiration of commission-approved 
        settlements. 
           Subd. 2.  [NEW SERVICE; RATES.] For services offered by the 
        telephone company for the first time after August 1, 1995, the 
        rates or prices must equal or exceed the total service long-run 
        incremental cost of the service. 
           Subd. 3.  [RATE CHANGES.] (a) An alternative regulation 
        plan must set forth the procedures under which the telephone 
        company may reduce the rates or prices for price-regulated 
        services below the initial rates or prices or thereafter 
        increase the rates or prices during the term of the plan.  The 
        rates or prices may not be reduced below the total service 
        long-run incremental cost of providing the service.  The rates 
        or prices may not exceed the initial rates or prices for the 
        service determined under subdivision 1 for the first three years 
        of the plan.  After a plan has been in effect for three years, 
        price-regulated rates may be changed as appropriate under a 
        procedure set forth in an approved plan.  Rates for 
        price-regulated services may not be increased unless the company 
        has demonstrated substantial compliance with the quality of 
        service standards set forth in the plan. 
           (b) An approved plan may allow changes in rates for 
        price-regulated services after three years to reflect: 
           (1) substantial financial impacts of government mandates to 
        construct specific telephone infrastructure and increases or 
        decreases in state and federal taxes, if the mandate applies to 
        local telephone companies and the company would not otherwise be 
        compensated through some other manner under the plan; and 
           (2) changes in jurisdictional allocations from the Federal 
        Communications Commission, the amount of which the telephone 
        company cannot control and for which equal and opposite 
        exogenous changes are made on the federal level. 
           Subd. 4.  [BUNDLED RATES.] When the rates or prices for 
        services are unbundled, the price for each basic network 
        function must be set to equal or exceed its total service 
        long-run incremental cost.  Before August 1, 1997, if the rates 
        or prices for price-regulated services are bundled, the bundled 
        rate or price may not exceed the sum of the unbundled rates or 
        prices for the individual service elements or services or the 
        total initial bundled rate or price for those service elements 
        or services. 
           Subd. 5.  [INCOME-NEUTRAL CHANGES.] Other than as 
        authorized in this subdivision, an initial alternative 
        regulation plan must not permit income-neutral rate changes for 
        price-regulated services during the plan except as is necessary 
        to implement extended area service or any successor to that 
        service.  Any plan must provide that after the rules issued 
        pursuant to section 237.16 are adopted, rates for 
        price-regulated services may be increased, as approved by the 
        commission, to the extent necessary to carry out the purpose of 
        those rules.  However, rate increases, if any, for those 
        services must be incorporated with a universal service fund so 
        that the effective rate for the customers of those services does 
        not increase during the first three years of the plan. 
           Subd. 6.  [RATES FOR OTHER SERVICES.] The telephone company 
        shall file price lists with the commission for all flexibly 
        priced or non-price-regulated services.  The rate or price for 
        each flexibly priced and non-price-regulated service must be 
        equal to or exceed the total service long-run incremental cost 
        of providing that service.  In any proceeding regarding the 
        appropriateness of a rate or price for a flexibly priced or 
        non-price-regulated service, the telephone company has the 
        burden of proving that the rate or price is above the total 
        service long-run incremental cost of providing that service. 
           Sec. 10.  [237.763] [EXEMPTION FROM RATE-OF-RETURN 
        REGULATION AND RATE INVESTIGATIONS.] 
           Except as provided in the plan and any subsequent plans, a 
        company that has an alternative regulation plan approved under 
        section 237.764, is not subject to the rate-of-return regulation 
        or earnings investigations provisions of section 237.075 or 
        237.081 during the term of the plan.  A company with an approved 
        plan is not subject to the provisions of section 237.57; 237.58; 
        237.59; 237.60, subdivisions 1, 2, 4, and 5; 237.62; 237.625; 
        237.63; or 237.65, during the term of the plan.  Except as 
        specifically provided in this section or in the approved plan, 
        the commission retains all of its authority under section 
        237.081 to investigate other matters and to issue appropriate 
        orders, and the department retains its authority under sections 
        216A.07 and 237.15 to investigate matters other than the 
        earnings of the company. 
           Sec. 11.  [237.764] [PLAN ADOPTION; EFFECT.] 
           Subdivision 1.  [PETITION, NOTICE, HEARING, AND 
        DECISION.] (a) Before acting on a petition for approval of an 
        alternative regulation plan, the commission shall conduct any 
        public meetings it may consider necessary.  
           (b) The commission shall require the petitioning telephone 
        company to provide notice of the proposed plan to its customers, 
        along with a summary description of the plan provisions and the 
        dates, times, and locations of public meetings scheduled by the 
        commission.  
           (c) The company's petition shall contain an explanation of 
        how ratepayers will benefit from the plan and a justification of 
        the appropriateness of earnings levels and rates in light of the 
        proposed plan as well as any proposed changes in rates for 
        price-regulated services for the first three years of the 
        proposed plan.  If a telephone company has completed a general 
        rate proceeding, rate investigation, or audit of its earnings by 
        the department or commission within two years of the initial 
        application for an alternative form of regulation plan, the 
        commission order or department audit report, updated for the 
        most recent calendar year, is sufficient justification of 
        earnings levels to initiate the filing of an alternative 
        regulation plan.  
           (d) The commission shall conduct a proceeding under section 
        237.61 to decide whether to approve the plan and shall grant 
        discovery as appropriate.  
           (e) The commission shall issue findings of fact and 
        conclusions concerning the appropriateness of the proposed 
        initial rates and the proposed plan, or any modifications to it, 
        but may not order that a modified plan take effect without the 
        agreement of the petitioning telephone company.  The commission 
        shall issue its decision on a plan within six months after 
        receiving the petition to approve the plan unless the commission 
        and the petitioning company agree to an extension of the time 
        for commission action.  
           (f) If a settlement is submitted to the commission, the 
        commission shall accept, reject, or modify the proposed 
        settlement within 60 days from the date it was submitted. 
           Subd. 2.  [SETTLEMENT; STIPULATION; FINAL ORDER.] Upon 
        receipt of a petition for an alternative regulation plan, the 
        commission shall convene a conference including all interested 
        parties to encourage settlement or stipulation of issues.  Any 
        settlement or stipulation must be submitted to the commission, 
        which shall accept or reject the proposal in its entirety or 
        modify it.  If the commission modifies the proposal, all parties 
        have 30 days to comment on the proposed modifications, after 
        which the commission shall issue its final order.  If the final 
        order contains modifications to the proposal, each party to the 
        settlement has ten days to reject the proposed modifications, in 
        which case the matter must be decided under section 237.61.  
        After appropriate notice and hearing for all parties, the 
        commission may adopt a stipulation submitted by a substantial 
        number of, but less than all, parties. 
           Subd. 3.  [EFFECT ON INCENTIVE PLAN.] The approval of a 
        plan under this section automatically terminates any existing 
        incentive plan previously approved under section 237.625 upon 
        the effective date of the plan approved under this section, 
        provided, however, the company remains obligated to share 
        earnings under the terms of the incentive plan through the date 
        of the termination of that plan and also is required to complete 
        the performance of any other unexecuted commitments under the 
        incentive plan. 
           Sec. 12.  [237.765] [QUALITY OF SERVICE.] 
           For an alternative regulation plan to be approved by the 
        commission under sections 237.76 to 237.774, the plan must 
        contain and the commission shall require: 
           (1) evidence that current service quality substantially 
        complies with commission rules as to justify lessened rate 
        regulation; 
           (2) a baseline measurement of the quality of service levels 
        as achieved by the company during the previous three years, to 
        the extent the data are available, and specific statewide 
        standards for measuring the quality of price-regulated and 
        flexibly priced services provided by the company, including, but 
        not limited to (i) time intervals for installation, (ii) time 
        intervals for restoration or repair of service, (iii) trouble 
        rates, (iv) exchange access line held orders, and (v) customer 
        service answer time; 
           (3) provisions for reporting to the commission at least 
        annually the company's performance as to the quality of service 
        standards by quarter for the previous year; 
           (4) provisions that index quality of service standards for 
        local residence services to similar standards for local business 
        services; 
           (5) appropriate remedies, including penalties and 
        customer-specific adjustments or payments to compensate 
        customers for specific quality of service failures, so as to 
        ensure substantial compliance with the quality of service 
        standards set forth in the plan; and 
           (6) provisions for informing customers of their rights as 
        to quality of service and how customers can register their 
        complaints regarding service. 
           Any penalties under clause (5) may be paid into a universal 
        service fund or returned to customers under a method set forth 
        in the plan. 
           Sec. 13.  [237.766] [PLAN DURATION.] 
           An alternative regulation plan approved by the commission 
        under section 237.764 must remain in force as approved for the 
        term specified in the plan, which must be for no less than four 
        years.  Within six months prior to the termination of the plan, 
        the plan must be reviewed by the commission and, with the 
        consent of the company, revised or renewed consistent with 
        sections 237.76 to 237.774, except that the justification of 
        earnings levels in section 237.764, subdivision 1, paragraph 
        (c), and the provisions prohibiting rate increases at the 
        initiation of or during the first three years of a plan 
        contained in section 237.762, shall not apply to a revised or 
        renewed plan.  The plan must specify the reports required of the 
        telephone company for review of the plan and specify that the 
        telephone company shall maintain records in sufficient detail to 
        facilitate the review. 
           Sec. 14.  [237.767] [DISCONTINUANCE OF SERVICE.] 
           Without the express approval of the commission, a telephone 
        company subject to a plan may not discontinue the provision of a 
        service or basic network function that has been classified as 
        price regulated or flexibly priced. 
           Sec. 15.  [237.768] [PERIODIC FINANCIAL REPORTS.] 
           In addition to the reports required under section 237.766, 
        an alternative regulation plan may require a telephone company 
        to file with the department an annual report of financial 
        matters for the previous calendar year on or before May 1 of 
        each year on report forms furnished by the department of public 
        service in the same manner as is required of other telephone 
        companies on August 1, 1995.  In addition, any company subject 
        to a plan shall file with the commission and department a copy 
        of any filings it has made to the Federal Communications 
        Commission regarding the provisions of video programming 
        provided through a video dial tone facility in Minnesota.  An 
        alternative regulation plan may require a telephone company to 
        maintain its accounts in accordance with the system of accounts 
        prescribed for the company by the commission under section 
        237.10. 
           Sec. 16.  [237.769] [UNBUNDLING AND INTERCONNECTION.] 
           Every plan must contain, and the commission shall approve, 
        rates for and procedures under which the telephone company will, 
        on or before the effective date of the plan, permit 
        interconnection with and unbundle its intrastate services and 
        facilities to the same extent and in the same manner as the 
        Federal Communications Commission requires the interconnection 
        and unbundling for interstate purposes for that company.  Any 
        company under a plan is subject to any rules adopted under 
        section 237.16 on the same date as those rules are applicable to 
        other companies. 
           Sec. 17.  [237.770] [SUBSIDIZATION.] 
           No telephone company shall subsidize flexibly priced or 
        non-price-regulated services from other services.  A telephone 
        service is not subsidized if the aggregate revenues for the 
        service equal or exceed the total service long-run incremental 
        costs of providing the service.  If the commission determines, 
        after a proceeding under section 237.081, that subsidization 
        exists, it shall order changes in rates to price the subsidized 
        service above total service long-run incremental cost and may 
        invoke any other remedies otherwise available under this chapter.
           Sec. 18.  [237.771] [DISCRIMINATION.] 
           The rates of a telephone company under a plan must be the 
        same in all geographic locations of the state except for good 
        cause.  A plan may contain provisions that define good cause, 
        including consideration of the ability to respond to 
        competition.  Sections 237.09, 237.121, and 237.60, subdivision 
        3 apply to a telephone company under a plan. 
           Sec. 19.  [237.772] [COST STUDY METHODOLOGY.] 
           Subdivision 1.  [TOTAL SERVICE LONG-RUN INCREMENTAL 
        COST.] (a) For purposes of this chapter, total service long-run 
        incremental cost (TSLRIC) means the total cost to the company of 
        supplying a service, group of services, or basic network 
        function.  The term "long-run" means a period of time sufficient 
        so that all inputs are avoidable based on the total increment of 
        service, group of services, or basic network function and 
        includes the relevant costs resulting from the company's 
        decision to provide the service, group of services, or basic 
        network function, holding constant the production levels of all 
        other services, groups of services, or basic network functions 
        provided by the company.  
           (b) A telephone company is not required to prepare or file 
        TSLRIC or variable cost studies for all of its services as a 
        prerequisite to filing a plan.  However, the commission may 
        order cost studies to be prepared for specific services as a 
        condition of approval of the plan. 
           Subd. 2.  [PETITION FOR VARIABLE COST STUDY.] To the extent 
        that this section or the commission may require a company to 
        provide a TSLRIC study, a company may submit a petition to the 
        commission for permission to submit a variable cost study 
        instead of a TSLRIC study.  The commission shall grant the 
        petition if the telephone company demonstrates: 
           (1) that a TSLRIC study is burdensome in relation to its 
        annual revenue from the service involved; 
           (2) in the case of an existing service, that the service is 
        no longer being offered to new customers; or 
           (3) if the telephone company shows other good cause. 
           Sec. 20.  [237.773] [ALTERNATIVE REGULATION FOR SMALL 
        TELEPHONE COMPANIES.] 
           Subdivision 1.  [DEFINITION.] For purposes of this section, 
        "small telephone company" means a local exchange telephone 
        company with fewer than 50,000 subscribers that has made an 
        election under subdivision 2 whether or not the company is 
        subject to sections 237.58, 237.59, 237.60, subdivisions 1, 2, 
        and 5, 237.62, and 237.625. 
           Subd. 2.  [ELECTION; EFFECT.] A local telephone company 
        with fewer than 50,000 subscribers may elect to become a small 
        telephone company by notice to the commission, in writing, of 
        its decision.  The small telephone company may not revoke its 
        election for three years after making the election.  While that 
        election remains in effect, a small telephone company is not 
        subject to the rate-of-return regulation or earnings 
        investigation provisions of section 237.075 or 237.081. 
           If, before electing under this subdivision, a small 
        telephone company has been found by the commission to have 
        significant quality of service problems in violation of 
        applicable commission rules, that company must either resolve 
        the quality of service problems or develop a plan to resolve the 
        quality of service problems in conformance with section 
        237.765.  The quality of service plan must be approved by the 
        commission in order for an election under this subdivision to be 
        effective.  The commission shall make a determination on the 
        quality of service plan within 60 days after it is submitted. 
           Subd. 3.  [LOCAL RATES.] (a) Except as provided in 
        paragraph (b), a small telephone company shall not implement a 
        rate increase for any service listed in section 237.761, 
        subdivision 3, beyond the level in effect 60 days prior to an 
        election under subdivision 2, until the later of January 1, 
        1998, or two years after making an election.  However, a small 
        telephone company may implement any new service and establish 
        rates for any new service and may change rates for any other 
        service at any time subject to the requirements of section 
        237.761, subdivision 4. 
           A small company shall provide to its customers the ability 
        to block, at no extra charge, any new service which it offers, 
        provides, or bills.  This requirement shall not apply to 
        services that require affirmative subscription by the customer.  
        Nothing in this section shall prevent the commission from 
        requiring blocking or other privacy or safety protections for 
        other types of telecommunications services under section 237.081.
           (b) At any time following one year after electing under 
        subdivision 2, a small telephone company may change rates for 
        local services except switched network access services, listed 
        in section 237.761, subdivision 3, to reflect: 
           (1) changes in state and federal taxes; 
           (2) changes in jurisdictional allocations from the Federal 
        Communications Commission, the amount of which the small 
        telephone company cannot control and for which equal and 
        opposite exogenous changes are made on the federal level; 
           (3) substantial financial impacts of investments in network 
        upgrades which are made; or 
           (i) if the investment exceeds 20 percent of the gross plant 
        investment of the company; or 
           (ii) as the result of government mandates to construct 
        specific telephone infrastructure, if the mandate applies to 
        local telephone companies and the company would not otherwise be 
        compensated. 
        A small telephone company may change rates for local services 
        listed in section 237.761, subdivision 3, at any time, to 
        implement extended area service or any successor to that service 
        on an income neutral basis. 
           A small telephone company proposing an increase under this 
        subdivision, shall provide 60 days' advance written notice to 
        the department and each of the company's customers including the 
        individual rates affected and the procedure necessary for the 
        customers to petition for investigation.  If the department 
        receives a petition within 45 days after the notice from five 
        percent or 500, whichever is fewer, of the customers of the 
        small telephone company, the department shall determine if the 
        petition is valid and, if so, may investigate the rate change to 
        determine if it conforms to the limitations of this subdivision. 
        The department shall report its findings to the commission, 
        which shall either adopt the report or order changes to conform 
        to this subdivision. 
           (c) On or after the later of January 1998, or two years 
        after making an election under subdivision 2, a small telephone 
        company may increase rates for local services, except switched 
        network access services, listed in section 237.761, subdivision 
        3.  
           A small telephone company proposing an increase shall 
        provide 60 days' advance written notice to its customers 
        including individual rates affected and the procedure necessary 
        for the customers to petition for investigation.  If the 
        commission receives a petition within 45 days after such notice, 
        from five percent or 500, whichever is fewer, of the customers 
        of the small telephone company, the department shall determine 
        if the petition is valid and, if so, may investigate the 
        proposed rate increase to determine if it is appropriate in 
        light of rates charged by other local exchange telephone 
        companies for comparable services, taking into account calling 
        scope, quality of service, the availability of competitive 
        alternatives, service costs, and the features available to the 
        customers.  The department shall file a report with the 
        commission which shall then approve appropriate rates for those 
        services.  Rates established by the commission under this 
        paragraph shall not be increased within one year of 
        implementation. 
           Subd. 4.  [ACCESS RATES.] (a) No election by a small 
        telephone company may in any way change the terms or conditions 
        of any interexchange access charge settlements approved by the 
        commission before an election under subdivision 2. 
           (b) While any interexchange access charge settlement 
        approved by the commission remains in effect, the commission and 
        department shall enforce the agreement without further 
        investigation of interexchange access charges or earnings 
        relating to the interexchange access service.  Except as 
        specifically provided in this section, the commission retains 
        all of its authority under section 237.081 to investigate other 
        matters relating to interexchange access charges and to issue 
        appropriate orders, and the department retains its authority 
        under sections 216A.07 and 237.15 to investigate matters 
        relating to interexchange access charges. 
           Subd. 5.  [DEPRECIATION.] While an election under 
        subdivision 2 is in effect, the company shall be subject to 
        complaints by the department or others concerning its 
        depreciation rates and practices pursuant to section 237.081, 
        subdivision 1a, and shall submit to the department the 
        information required by Minnesota Rules, parts 7810.7700 and 
        7810.7800, but shall not otherwise be subject to section 237.22 
        or the certification procedures of Minnesota Rules, part 
        7810.7000.  
           Sec. 21.  [237.774] [OTHER LAWS.] 
           Except as provided in sections 237.76 to 237.773, a 
        telephone company subject to a plan approved under sections 
        237.764 and 237.773, shall comply with any state or federal laws 
        governing the provision of telephone services.  Nothing 
        contained in sections 237.76 to 237.773 is intended in any way 
        to change or modify the definitions contained in section 237.01 
        or what constitutes the provision of telephone service under 
        this chapter or other laws. 
           Sec. 22.  [PUBLIC ACCESS.] 
           The department of public service shall investigate how to 
        ensure citizen access to local government and other public 
        access programming on emerging communication technologies such 
        as video dial-tone and satellite transmission equivalent to that 
        required of cable franchise operators pursuant to Minnesota 
        Statutes, chapter 238, and the alternatives available to the 
        state to ensure that access. 
           The department shall make recommendations to the 
        legislature by February 15, 1996, concerning public access. 
           Sec. 23.  [STATEMENT OF INTENT.] 
           The amendments to Minnesota Statutes, section 237.16, 
        subdivision 1, paragraph (d), in this law are solely intended 
        for clarification.  No substantive changes in powers of 
        regulation are intended, nor are to be implied. 
           Sec. 24.  [MUNICIPAL FRANCHISE FEES; UTILITIES.] 
           The department of public service shall study the issue of 
        franchise fees and related compensation paid to local 
        governments by utilities and cable communication companies.  The 
        study shall include a survey of fees and related compensation 
        currently paid to municipalities by utilities and cable 
        communication companies, and the purpose for which the franchise 
        fees and related compensation are remitted to municipalities by 
        utilities and cable communication companies.  The department 
        shall develop recommendations on a state policy regarding these 
        fees and related compensation, particularly addressing the 
        issues of the purposes for which such fees may be assessed and 
        paid, the amount of the fees, and uses of such fee revenue and 
        related compensation.  The department shall report its findings 
        and recommendations to the legislature by February 15, 1996. 
           Sec. 25.  [EFFECTIVE DATE; EXPIRATION.] 
           Sections 1 to 22 are effective August 1, 1995, and expire 
        January 1, 2006. 
           Presented to the governor May 9, 1995 
           Signed by the governor May 10, 1995, 10:16 a.m.