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

                            CHAPTER 223-S.F.No. 739 
                  An act relating to telecommunications; providing 
                  policies to carry out the state's role in 
                  telecommunications regulation; providing for a state 
                  policy encouraging high speed telecommunication 
                  services and greater capacity for services; providing 
                  for a single statewide local access and transport area 
                  (LATA); amending Minnesota Statutes 1996, sections 
                  8.33, subdivision 2; 237.12, by adding a subdivision; 
                  237.121; 237.16, subdivision 9; 237.761, subdivisions 
                  4 and 8; 237.762, subdivisions 1, 3, and by adding a 
                  subdivision; 237.764, subdivision 1; 237.765; 237.766; 
                  and 237.769; 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 1996, section 8.33, 
        subdivision 2, is amended to read: 
           Subd. 2.  [DUTIES.] The attorney general is responsible for 
        representing and furthering the interests of residential and 
        small business utility consumers through participation in 
        matters before the public utilities commission involving utility 
        rates and adequacy of utility services to residential or small 
        business utility consumers.  The attorney general shall expend a 
        reasonable portion of effort among all three kinds of utility 
        services and shall identify and promote the needs of each class 
        of residential and small business consumers with respect to each 
        of the utility services.  When participating in 
        telecommunication matters that affect deployment of the 
        infrastructure, the attorney general may apply the goals of: 
           (1) achieving economically efficient investment in: 
           (i) higher speed telecommunication services; and 
           (ii) greater capacity for voice, video, and data 
        transmission; and 
           (2) just and reasonable rates. 
           Sec. 2.  [237.011] [TELECOMMUNICATIONS GOALS.] 
           The following are state goals that should be considered as 
        the commission executes its regulatory duties with respect to 
        telecommunication services: 
           (1) supporting universal service; 
           (2) maintaining just and reasonable rates; 
           (3) encouraging economically efficient deployment of 
        infrastructure for higher speed telecommunication services and 
        greater capacity for voice, video, and data transmission; 
           (4) encouraging fair and reasonable competition for local 
        exchange telephone service in a competitively neutral regulatory 
        manner; 
           (5) maintaining or improving quality of service; 
           (6) promoting customer choice; 
           (7) ensuring consumer protections are maintained in the 
        transition to a competitive market for local telecommunications 
        service; and 
           (8) encouraging voluntary resolution of issues between and 
        among competing providers and discouraging litigation. 
           Sec. 3.  [237.072] [LIMITATION ON RATE CHANGES.] 
           (a) After December 15, 1997, the commission, 
        notwithstanding any provision to the contrary, shall not allow 
        an incumbent telephone company with more than 1,000,000 access 
        lines in Minnesota to change its retail rates for 
        telecommunications services without a determination of its 
        revenue requirement pursuant to section 237.075 unless the 
        incumbent telephone company is regulated pursuant to sections 
        237.76 to 237.773. 
           (b) If, prior to December 15, 1997, the incumbent telephone 
        company petitions the commission to become subject to an 
        alternative regulation plan under sections 237.76 to 237.773, 
        paragraph (a) shall not apply to the petitioning company until 
        180 days after the date of the filing of the petition. 
           Sec. 4.  [237.082] [TELECOMMUNICATION SERVICES; POLICY OF 
        INCREASED SPEED AND SERVICES.] 
           When setting rates, adopting rules, or issuing orders 
        related to telecommunication matters that affect deployment of 
        the infrastructure, the commission may apply the goals of: 
           (1) achieving economically efficient investment in: 
           (i) higher speed telecommunication services; and 
           (ii) greater capacity for voice, video, and data 
        transmission; and 
           (2) just and reasonable rates. 
           The department of public service may apply the same goals 
        in its regulation of and recommendations regarding 
        telecommunication services. 
           Sec. 5.  Minnesota Statutes 1996, section 237.12, is 
        amended by adding a subdivision to read: 
           Subd. 4.  [PRICES FOR INTERCONNECTION AND NETWORK 
        ELEMENTS.] For telephone companies with more than 50,000 access 
        lines, the prices for interconnection or network elements to be 
        established by the commission in any pending or future 
        proceeding shall be based on a forward looking economic cost 
        methodology which shall include, but is not limited to, 
        consideration of the following: 
           (1) the use of the most efficient telecommunications 
        technology currently available and the least cost network 
        configuration, given the existing location of the incumbent 
        telephone company's wire centers; 
           (2) forward-looking depreciation rates; 
           (3) a reasonable allocation of forward-looking joint and 
        common costs; 
           (4) forward-looking cost of capital; and 
           (5) Minnesota tax rates, and where applicable, Minnesota 
        facility placement requirements, Minnesota topography, and 
        Minnesota climate. 
           Sec. 6.  Minnesota Statutes 1996, section 237.121, is 
        amended to read: 
           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 unreasonable or discriminatory 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. 7.  Minnesota Statutes 1996, section 237.16, 
        subdivision 9, is amended to read: 
           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 including access, usage and 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 and be consistent with section 
        254(b)(1) to (5) of the federal Telecommunications Act of 1996, 
        Public Law Number 104-104.  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.  
           Sec. 8.  [237.164] [UNIVERSAL SERVICE DISCOUNTS FOR SCHOOLS 
        AND LIBRARIES.] 
           The commission shall establish intrastate service discounts 
        for schools and libraries by order to the extent and within the 
        time frame necessary to enable schools and libraries to begin 
        receiving federally supported discounts at the earliest date 
        permitted by the Federal Communications Commission. 
           Sec. 9.  Minnesota Statutes 1996, section 237.761, 
        subdivision 4, is amended to read: 
           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 upon notice to affected customers 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 upon notice to affected customers and are considered 
        approved if no objection is filed or raised by an interested 
        party or the commission within 20 days after the filing.  If an 
        interested party files an objection, the commission shall make 
        its determination on the proposed rate increase within 90 days 
        of the filing of the objection. 
           Sec. 10.  Minnesota Statutes 1996, section 237.761, 
        subdivision 8, is amended to read: 
           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; and 
           (4) a description of planned investment and deployment of 
        higher speed telecommunications services and increased capacity 
        for voice, video, and data transmission, in both the 
        metropolitan and outstate portions of the company's service 
        territory. 
           Sec. 11.  Minnesota Statutes 1996, section 237.762, 
        subdivision 1, is amended to read: 
           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. 
           Sec. 12.  Minnesota Statutes 1996, section 237.762, 
        subdivision 3, is amended to read: 
           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.  Except as 
        provided in paragraph (b), 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 two 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 changes in state 
        and federal taxes; 
           (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; and 
           (3) substantial financial impacts of investments in 
        telecommunications infrastructure which are made:  (i) if the 
        investments, for any 12 month period, exceed 20 percent of the 
        gross plant investment of the company; or (ii) are the result of 
        government mandates to construct specific telephone 
        infrastructure, the mandate applies to local telephone 
        companies, and the company would not otherwise be compensated 
        through some other manner under the plan. 
           Sec. 13.  Minnesota Statutes 1996, section 237.762, is 
        amended by adding a subdivision to read: 
           Subd. 7.  [PACKAGED SERVICES.] This section does not 
        prevent a telephone company from packaging any service 
        classified as price regulated or flexibly priced pursuant to 
        section 237.761, subdivisions 2 to 4, with any other service, or 
        engaging in promotional activities concerning such services, so 
        long as:  (1) the company also continues to offer these price 
        regulated and flexibly priced services as separate stand-alone 
        services at prices required by section 237.762; and (2) at the 
        time the packaged offering is introduced, or at the time the 
        package price is subsequently changed, the packaged rate or 
        price may not exceed the sum of the unpackaged rates or prices 
        for the individual service elements or services. 
           Sec. 14.  Minnesota Statutes 1996, section 237.764, 
        subdivision 1, is amended to read: 
           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.  At the time of filing a plan, the current 
        earnings level of a telephone company with more than 1,000,000 
        access lines in Minnesota shall be deemed reasonable. 
           (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, where necessary, 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. 
           Sec. 15.  Minnesota Statutes 1996, section 237.765, is 
        amended to read: 
           237.765 [QUALITY OF SERVICE.] 
           (a) For an alternative regulation plan to be approved by 
        the commission under sections 237.76 to 237.774, the plan must 
        contain and an existing service quality plan or settlement for 
        retail customers approved by the commission or if no such plan 
        or settlement has been approved, 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. 
           (b) Any penalties under paragraph (a), clause (5), may 
        shall be paid into a universal service fund or returned to 
        customers under a method set forth in the plan. 
           (c) The terms of an existing service quality plan or 
        settlement approved by the commission must be offered to extend 
        through the duration of an alternative regulation plan filed 
        under this section. 
           Sec. 16.  Minnesota Statutes 1996, section 237.766, is 
        amended to read: 
           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 
        three 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), if required 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.  Any revised or renewed plan must be approved by 
        the commission and shall contain a mechanism under which a 
        telephone company may reduce the rates for price-regulated 
        services below the initial rates or prices or increase the rates 
        or prices during the term of the 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. 17.  Minnesota Statutes 1996, section 237.769, is 
        amended to read: 
           237.769 [UNBUNDLING AND INTERCONNECTION RULES APPLICABLE.] 
           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. 18.  [237.775] [EXISTING PLANS NOT AFFECTED.] 
           An alternative regulation plan approved by the commission 
        prior to May 1, 1997, is not subject to the amendments in this 
        act; provided that a plan filed, revised, or renewed after that 
        date is subject to those amendments. 
           Sec. 19.  [STUDY OF GEOGRAPHICALLY DEAVERAGED RATES.] 
           The commissioner of public service shall convene a working 
        group to study the impacts of geographic deaveraging on 
        wholesale and retail rates and shall report in writing the 
        findings of this study to the legislature by February 1, 1998.  
        Members of the working group shall include representatives of 
        the office of the governor, the department of public service, 
        the public utilities commission, and the office of the attorney 
        general, as well as representatives of telephone companies, 
        telecommunications carriers, consumer organizations representing 
        senior citizens, other consumer organizations, and other 
        interested parties.  The study must include:  (1) consideration 
        of whether geographic deaveraging of wholesale and/or retail 
        rates is appropriate; (2) a description of how the universal 
        service mechanism should operate in conjunction with geographic 
        deaveraging of retail rates, in the event deaveraging were to 
        occur; (3) consideration of the appropriate timing of 
        implementation of wholesale and/or retail rate deaveraging, in 
        the event deaveraging were to occur; and (4) recommendations 
        regarding the state's regulatory role within the deaveraging 
        process, in the event deaveraging were to occur. 
           Sec. 20.  [DEPRECIATION TASK FORCE.] 
           The department of public service shall convene a task force 
        of telephone companies, telecommunications carriers, and other 
        interested parties and, by January 1, 1999, submit a report to 
        the legislature on the adequacy of commission-approved 
        depreciation rates and recommendations regarding recovery of 
        depreciation expense. 
           Sec. 21.  [EFFECTIVE DATE.] 
           Sections 2, 3, and 5 to 20 are effective on the day 
        following final enactment.  Sections 1 and 4 are effective the 
        day following final enactment and apply to all proceedings or 
        matters reconsidered, pending, or commenced on or after that 
        date. 
           Presented to the governor May 27, 1997 
           Signed by the governor May 30, 1997, 1:14 p.m.

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