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DATE:
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November 7, 2007
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TO:
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Office of Commission Clerk (Cole)
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FROM:
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Office of the General Counsel (Gervasi)
Division of Competitive Markets & Enforcement
(Barrett)
Division of Economic Regulation (Dickens)
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RE:
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Docket No. 070587-TP – Proposed repeal of
Rules 25-4.053, Application and Scope; 25-4.054, Maintenance of Records;
25-4.055, Classification of Exchanges; and 25-4.056, Reclassification of
Exchanges, F.A.C.
Docket No. 070588-TP – Proposed repeal of Rules
25-4.042, Extended Area Service; 25-4.057, Application and Scope; 25-4.058,
Conditions for Approval; 25-4.059, Filing Requirements; 25-4.060, Community
of Interest Considerations; 25-4.061, Hearings; 25-4.063, Subscriber Survey;
and 25-4.064, Alternatives to Non-optional Extended Area Service, F.A.C.
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AGENDA:
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11/20/07 – Regular Agenda – Interested Persons May Participate
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COMMISSIONERS ASSIGNED:
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All Commissioners
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PREHEARING OFFICER:
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Argenziano
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RULE STATUS:
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Proposed Repeal
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SPECIAL INSTRUCTIONS:
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None
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FILE NAME AND LOCATION:
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S:\PSC\GCL\WP\070587.RCM.DOC
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CASE
BACKGROUND
For administrative efficiency, this recommendation
addresses two dockets, Docket Nos. 070587-TP and 070588-TP, both of which involve the proposed repeal of existing rules. Rules 25-4.053
through 25-4.056, Florida Administrative Code (F.A.C.), generally address
rate-grouping plans for incumbent local exchange companies (LECs), and are the
subject of Docket No. 070587-TP. A copy of these rules is attached to this
recommendation as Attachment A. Rules 25-4.042, 25-4.057 through 25-4.061, and
25-4.063 through 25-4.064, F.A.C., can be described as the Extended Area
Service (EAS) rules, and are the subject of Docket No. 070588-TP. A copy of these rules is attached to this recommendation as Attachment B. Staff
recommends that the rules at issue in both dockets are unnecessary and should
be repealed.
Discussion of
Issues
Issue 1: Should
Rules 25-4.053 through 25-4.056, F.A.C., be repealed in Docket No. 070587-TP?
Recommendation:
Yes, Rules 25-4.053 through 25-4.056, F.A.C., should be repealed in Docket No.
070587-TP because they are no longer necessary. (Gervasi, Barrett, Dickens)
Staff Analysis: Under
the rate-base, rate-of-return form of regulation, LECs often had local plans
and pricing structures that utilized grouping plans based on the number of
access lines a subscriber could call. The number of access lines in the local
calling area of an exchange was referred to as the “calling scope.” The rules
at issue in Docket No. 070587-TP provide guidance for establishing the rate
groups using calling scopes. In the past, when the Commission considered
requests for EAS, rate groups and calling scopes were often factors in those
cases.
Statutory changes have profoundly impacted the regulatory
landscape for LECs, and as a result, rate groups no longer serve as a vehicle
for regulating local exchange rates. In 1995, significant revisions were made
to portions of Chapter 364, Florida Statutes (F.S.). On or after January 1, 1996, LECs were allowed to move from the rate-base, rate-of-return form of
regulation to price regulation. For LECs that made this election, the
statutory change effectively “capped” the rates for basic local
telecommunications service initially, and established specific criteria for
pricing changes thereafter. The statutory change effectively meant that the
pricing for these LECs was no longer controlled by the rate group concept. In
addition, a separate provision of the statute stated that “no new proceedings”
for EAS were to be initiated for price-regulated LECs after July 1, 1995. See Sections 364.051 and 364.385(2), F.S.
Since January 1, 1996, nine of the ten LECs in Florida have elected to be price regulated. Therefore, Rules 25-4.053 through 25-4.056,
F.A.C., are inapplicable to them. Frontier Communications of the South, LLC
(Frontier), which serves two contiguous exchanges in the far western portion of
the state, is the only LEC in Florida that has not elected to be price
regulated. However, even under rate-base, rate-of-return regulation, Frontier does
not employ the “rate group” concept in its pricing. Therefore, the procedures
contained in these rules are not applicable to Frontier. For these reasons,
staff recommends that Rules 25-4.053 through 25-4.056, F.A.C., are unnecessary
and should be repealed.
Statement of Estimated
Regulatory Costs
The Florida
Administrative Procedure Act encourages an agency to prepare a Statement of
Estimated Regulatory Costs (SERC). Staff prepared a SERC for Docket No. 070587-TP. The SERC states that the repeal of these rules: 1) will eliminate unnecessary
regulatory oversight; 2) should have no negative impact on the Commission, the
utilities, the customers, small businesses or local governments; and 3) will
likely have negligible transactional costs to the telecommunications industry
in Florida. A copy of the SERC for Docket No. 070587-TP is attached to this recommendation as Attachment C.
Issue 2: Should Rules
25-4.042, 25-4.057 through 25-4.061, and 25-4.063 through 25-4.064, F.A.C., be
repealed in Docket No. 070588-TP?
Recommendation: Yes,
Rules 25-4.042, 25-4.057 through 25-4.061, and 25-4.063 through 25-4.064,
F.A.C., should be repealed in Docket No. 070588-TP because they are no longer
necessary. (Gervasi, Barrett, Dickens)
Staff Analysis:
Rules 25-4.042, 25-4.057 through 25-4.061, and 25-4.063 through 25-4.064,
F.A.C., address a LEC’s obligation to anticipate or respond to the Commission’s
directive to study and/or provide toll relief under specific circumstances.
The toll relief at issue is Extended Area Service (EAS), which is defined in
Rule 25-4.057(2), F.A.C., as “a switching and trunking arrangement which
provides for a nonoptional, unlimited, two-way, flat-rate calling service
between two or more exchanges, at an increment to exchange rates, rather than
at toll message charges.”
Historically, the EAS rules provided guidance to LECs so
they could meet the unique needs of their respective communities. For example,
a portion of the EAS rules includes procedures for LECs to conduct traffic
studies. However, following those procedures may not capture the true calling
patterns in the marketplace today, since customers in LEC exchange areas now
have providers offering substitute services that compete with what LECs offer.
As a result, staff believes that the EAS rules are obsolete.
As referenced in Issue
1, significant revisions to portions of Chapter 364, F.S., impacted all LECs in
Florida, and nine of the ten Florida LECs have moved from the rate-base,
rate-of-return form of regulation to price regulation. Frontier is the only
LEC in Florida that has not elected price regulation. Because Section 364.385(2),
F.S., effectively prohibits new EAS proceedings for price-regulated LECs,
Frontier is the only LEC that could conceivably use these rules to expand its
calling scope. However, staff notes that with or without these rules, LECs can
voluntarily expand their calling areas, which Frontier did in 2006. Frontier
did not utilize the EAS rules or procedures therein for guidance.
For these reasons, staff recommends that Rules 25-4.042,
25-4.057 through 25-4.061, and 25-4.063 through 25-4.064, F.A.C., are unnecessary
and should be repealed.
Statement of Estimated
Regulatory Costs
The Florida
Administrative Procedure Act encourages an agency to prepare a Statement of
Estimated Regulatory Costs (SERC). Staff prepared a SERC for Docket No.
070588-TP. The SERC states that the repeal of these rules: 1) will eliminate
unnecessary regulatory oversight; 2) should have no negative impact on the
Commission, the utilities, the customers, small businesses or local
governments; and 3) will likely have negligible transactional costs to the
telecommunications industry in Florida. A copy of the SERC for Docket No.
070588-TP is attached to this recommendation as Attachment D.
Issue 3: Should Docket
Nos. 070587-TP and 070588-TP be closed?
Recommendation:
Yes, if no comments or requests for hearing are filed in these dockets, the
rule repeal proposals should be filed with the Secretary of State, and the
dockets should be closed. (Gervasi)
Staff Analysis: Unless
a request for hearing or comments are filed, these rule repeal proposals may be
filed with the Secretary of State without further Commission action.
Thereafter, these dockets may be closed.
25-4.053 Application and Scope.
(1) These rules set out as Part IV of the Commission’s general
rules and regulations governing telephone companies establish the procedure to
be used for the classification of telephone exchanges where exchange rates are
based on calling scopes under a systematic grouping plan.
(2) These procedures shall have application to all exchange
grouping plans which are now, or may hereafter be, authorized and approved by
the Commission.
Specific Authority 350.127(2), 364.05 FS. Law Implemented
364.05 FS. History–New 1-20-63, Revised 12-1-68, Formerly 25-4.53.
25-4.054 Maintenance of Records.
Each telephone company employing the calling scope method of
establishing exchange rate groups shall maintain adequate records necessary to
effect compliance with the rules herein prescribed.
Specific Authority 350.127(2), 364.05 FS. Law Implemented
364.04, 364.05, 364.18 FS. History–New 1-20-63, Revised 12-1-68, Formerly 25-4.54.
25-4.055 Classification of Exchanges.
(1) Coincident with the introduction of any exchange grouping
plan approved by the Commission, the upper and lower limits for each group,
based on total main stations and PBX trunks, will be established and each
exchange classified into its proper group; provided, however, no exchange
grouping plan shall contain any group in excess of that which is necessary for
the classification of the largest exchange of the particular telephone company
involved, and the top group in any such plan shall contain no upper limit.
Thereafter, no change shall be made in the rates for any exchange, nor shall
any exchange be reclassified to another group, except as provided in these
rules or as otherwise ordered by the Commission.
(2) No change shall be made in any exchange grouping plan
except as approved by the Commission.
Specific Authority 350.127(2), 364.05 FS. Law Implemented
364.025, 364.05, 364.051 FS. History–New 1-20-63, Amended 7-21-65, Revised 12-1-68, Formerly 25-4.55.
25-4.056 Reclassification of Exchanges.
(1) Whenever the number of access lines in the local calling
area of an exchange increases or decreases to the extent that such exchange
would fall into a different rate group, the company shall file a revised tariff
with the Commission requesting authority to reclassify the exchange to its
appropriate group. The effective date of the proposed rate change shall be the
effective date of the next directory for the affected exchange or sixty days
after the date of filing the tariff, whichever is later.
(2) The rate group in which an exchange falls shall be
determined by the peak number of access lines in the exchange’s local calling
area since the effective date of the preceding directory.
(3) In each instance where exchange reclassification is
requested, the company shall provide adequate notice to the public in the
exchanges involved. A bill stuffer, subject to Commission approval, shall be
issued to each affected subscriber with the first bill following submittal of
the application to the Commission. The bill stuffer shall provide notice of the
application for regrouping and describe the reclassification sought, including
the present and proposed rates. A second bill stuffer shall be provided with
the first bill rendered following Commission approval, if approval is granted,
stating the reclassification approved, including the approved rates.
Specific Authority 350.127(2) FS. Law Implemented 364.025,
364.05 FS. History–New 1-20-63, Revised 12-1-68, Amended 3-31-76, 12-10-84, Formerly 25-4.56.
25-4.042 Extended Area Service.
Each telephone company shall undertake to anticipate, on a
continuing basis, the communication requirements of its subscribers for
expanded local calling privileges and shall, upon Commission request, conduct
appropriate surveys and studies of the feasibility of providing extended area
service, an optional calling plan, or other extended calling concept that would
better serve subscriber communication needs between contiguous exchanges, or
portions thereof in those instances where there appears to be more than a
normal degree of a community of interest, high toll usage, and a sufficient
desire by the subscribers to warrant the establishment of the service. The
results of such surveys and studies shall be reported promptly to the
Commission.
Specific Authority 350.127(2) FS. Law Implemented 364.03,
364.15, 364.17, 364.385 FS. History–New 12-1-68, Amended 3-31-76, Formerly 25-4.42.
25-4.057 Application and Scope.
(1) The rules set forth in this Sub-Part are intended to
establish uniformly consistent guidelines, standards and procedures for the
filing, acceptance and processing of requests for Extended Area Service (EAS)
which may be pending on, or applied for after, the effective date of these
rules.
(2) For the purpose of the rules in this Sub-Part, Extended
Area Service is defined as a switching and trunking arrangement which provides
for a nonoptional, unlimited, two-way, flat-rate calling service between two or
more exchanges, at an increment to exchange rates, rather than at toll message
charges.
Specific Authority 350.127(2) FS. Law Implemented 364.03,
364.14, 364.15, 364.385(2) FS. History–New 4-14-81, Formerly 25-4.57, Amended 10-5-92.
25-4.058 Conditions for Approval.
In the absence of proper and compelling reasons to the
contrary, the Commission will order New Extended Area Service established when
the following general conditions are satisfied:
(1) There exists a sufficient degree of community of interest
between exchanges, as defined in Rule 25-4.060, F.A.C., and
(2) As required, the incremental rates to be charged for the
Extended Area Service arrangement, as determined by the Commission, will
generate revenues within the affected exchange(s) to the extent possible,
sufficient to meet the increased cost resulting from the provision of EAS,
considering the strength of the community of interest, the overall rate level,
and effect on earnings of the telecommunications companies which will provide
the proposed EAS, and
(3) The proposed Extended Area Service, when offered at a
price determined by the Commission, is approved by the prescribed majority of
affected subscribers.
Specific Authority 350.127 FS. Law Implemented 364.03, 364.14,
364.15, 364.385(2) FS. History–New 4-14-81, Formerly 25-4.58, Amended 10-5-92.
25-4.059 Filing Requirements.
(1) In order to be considered by the Commission for further
handling, a request for Extended Area Service shall be initiated by one or more
of the following actions; provided, however, that a determination by the
Commission of the need for establishment of a particular Extended Area Service
or other toll alternative arrangement shall not be undertaken more frequently
than once in any three year period:
(a) A petition signed by at least five (5%) percent, but not
less than fifty (50), of the subscribers in the telephone exchange from which
the petition originates; or a petition, request, or resolution adopted and
filed with the Commission by the governing body of the political subdivision;
or where the subscribers requesting EAS are located in an exchange which has a
minority of its subscribers in another county (pocket community within an
exchange) at least ten (10%) percent of the subscribers in the pocket community
within an exchange. Any such petition filed with the Commission shall set forth
the name and telephone number of each signatory and be signed. It shall also
include the name of the exchange from which the individuals are served, and the
name of the exchange(s) to which EAS is desired and a statement that such
subscribers are willing to pay higher local service rates, if necessary, for
the desired EAS.
(b) A proposal by a telecommunications company or
telecommunications companies.
(2) All requests for EAS, regardless of how initiated, shall
state the name of the originating exchange and the name of the exchange(s) to
which the Extended Area Service is sought.
Specific Authority 350.127 FS. Law Implemented 364.03,
364.385(2) FS. History–New 4-14-81, Formerly 25-4.59, Amended 10-5-92.
25-4.060 Community of Interest Considerations.
(1) Upon receipt of a proper filing under the provisions of
Rule 25-4.059, F.A.C., the company or companies involved will be directed by
the Commission to initiate appropriate calling usage studies. The results of
such studies shall be filed with the Commission within ninety (90) days of
receipt of such notification. The data to be filed shall be developed from and
based upon a minimum thirty (30) day study of representative calling patterns,
shall be in such form, detail and content as the Commission may reasonably
require and shall include, as a minimum, the following information:
(a) The number of messages and calculated calling rates, with
and without Foreign Exchange (FX) Service, expressed in messages per access
line per month, (M/A/M), over each interexchange route and in each direction,
segregated between business and residence users and combined for both (sample
FX data may be submitted with adequate information to show sample adequacy and
appropriateness), and
(b) A detailed analysis of the distribution of calling usage
among subscribers, over each route and in each direction, segregated between
business and residence users and combined, showing, for each category, the number
of customers making 0 calls, 1 call, etc., through 25 calls and 26 or more
calls per month.
(c) Access line classification data showing, by classes of
service, the number of access lines in service for each of the exchanges being
studied.
(d) The interexchange toll rates, distance between rate
centers, the number and duration of calls by time of day and the average
revenue per message (ARPM) for the calls studied.
(e) The number of Foreign Exchange (FX) lines in service and
the average calling volumes carried on these lines expressed in messages per
month.
(2) In all exchanges where traffic studies are ordered, the
company will also be directed to file usage studies for any alternative toll
calling plan which is already in place. This study shall include, as a minimum:
(a) The date the alternative calling plan was implemented and
the tariff referenced,
(b) The number of subscribers currently signed up for the
plan,
(c) A statement indicating whether the alternative calling
plan messages are included in the M/A/M listed for the traffic studies.
(3) A preliminary showing that a sufficient degree of
community of interest between exchanges, sufficient to warrant further
proceedings, will be considered to exist when the combined two-way calling rate
over each interexchange route under consideration equals or exceeds two (2)
messages per access line and equivalent access line per month (M/A/M) and fifty
percent (50%) or more of the subscribers in the exchanges involved make one or
more calls per month, except that:
On any given route between two exchanges, when the petitioning
exchange has less than half the number of access lines as the larger exchange,
studies of one-way traffic originating in the smaller exchange may be used, in
which case the community of interest qualification will require a calling rate
of three (3) or more (M/A/M) with at least fifty (50%) percent of the exchange
subscribers making two (2) or more calls per month.
(4) The Commission shall consider the impact of the EAS plan
on interexchange competition.
(5) In the event that the interexchange traffic patterns over
any given route do not meet prescribed community of interest qualifications,
the Commission may consider other community of interest factors to warrant
further proceedings.
Specific Authority 350.127 FS. Law Implemented 364.03, 364.14,
364.385(2) FS. History–New 4-14-81, Formerly 25-4.60, Amended 10-5-92.
25-4.061 Hearings.
(1) Following a determination of the extent of the community
of interest, the Commission may order that no toll relief is warranted or order
an EAS plan, a boundary change, or a toll alternative, depending on the
strength of the community of interest, the effect on the telecommunication
companies’ earnings and other factors. The order shall include information on the
rates to be charged and whether a subscriber survey is required. Pursuant to a
Section 120.57, F.S., protest of the Proposed Agency Action or on the
commission’s own motion, a public hearing shall be held to provide for the
proper examination and verification of data required by these rules, the
introduction of such additional testimony, evidence, and information as may be
germane to the issues and to afford an opportunity for all interested parties
to be fully heard.
(2) If a request for a hearing is granted, the affected
telecommunication companies shall file, unless otherwise ordered by the
Commission, the studies necessary to a determination of the changes in costs
which may reasonably be expected to result from establishment of the requested
Extended Area Service. These studies will consider and develop, for each year
and over each route, relevant revenues and costs over a five (5) year period
immediately following the potential date for initiation of the service, as
follows:
(a) Net increases in capital costs resulting from required
additions to network capacity less reductions in required quantities of
facilities and equipment utilized for toll services between the exchanges. The
added investment will be based upon the additional switching and trunking needs
necessary to accommodate the incremental usage at prescribed levels of service,
as may be determined from realistic estimates of call stimulation factors and
holding time effects due to the toll alternative. Appropriate annual charges
will be applied to the added investment to obtain the additional annual costs
attributable to this source.
(b) Analysis of increases and decreases in expenses including,
but not limited to, separations impacts, Modified Access Based Compensation
access charge changes, and the net effect on operating expenses.
(c) A separate schedule showing revenue increases and
decreases, including but not limited to, toll Modified Access Based
Compensation access charge revenues, interLATA access revenues and revenues
resulting from exchange regrouping, as applicable.
(d) Analysis of increases and decreases in toll revenues
separately identifying interstate and intrastate amounts:
1. Effect of increases and decreases of capital costs,
expenses and revenues, as described in paragraphs 25-4.061(1)(a) through
(1)(c), F.A.C., above, upon intercompany settlements.
2. Effect upon intercompany settlements of change in
separation factors resulting from the proportionate increase in local usage
(including EAS) to total usage.
3. Loss of toll revenue billed, identifying the effect upon
intercompany settlements.
(e) On or before ninety (90) days from the date of the request
for hearing, the respondent(s) shall file with the Commission the summary
results of these studies, together with supporting schedules and detail as will
permit the identification of study components and verification of study
results.
(3) If a hearing is requested, the affected telecommunication
companies shall submit recommendations for proposed incremental rate increases,
by classes of service, necessary to support the added service.
Specific Authority 350.127(2) FS. Law Implemented 364.03,
364.385(2) FS. History–New 4-14-81, Formerly 25-4.61, Amended 10-5-92.
25-4.063 Subscriber Survey.
(1) In all cases where a request for Extended Area Service
conforms to the requirements of these rules and the customers of either
exchange would be subject to increased rates from either regrouping or the use
of a mandatory incremental charge for EAS, or both, the Commission will order a
survey to be made by the company by mail of all subscribers so affected, one
ballot per account.
(a) Two weeks in advance of mailing the ballots, the Company
shall publish an advertisement of the upcoming survey in a newspaper of general
circulation in the geographic area where the survey is to take place. This
display advertisement shall run for three days, be at least one-eighth page in
size, and be titled “NOTICE OF PROPOSAL FOR (Name of Company) TO EXPAND THE
LOCAL CALLING AREA.” The notice shall include a description of the affected
customers (telephone exchanges and three-digit telephone number prefixes), the
present local calling area (telephone exchanges and three-digit telephone
number prefixes), the proposed extended area (telephone exchanges and three-digit
telephone number prefixes), and the present and proposed basic monthly rates by
class of service.
(b) In addition, the notice shall include the following
passage:
The Company will be conducting a survey to determine customer
interest in expanding the local calling area in return for an increase in basic
monthly rates. Ballots will be mailed during the week of ___ and must be signed
and returned by ___ in order to be counted. The Florida Public Service
Commission will approve or deny the proposal based on a simple majority of
votes cast.
(2) If the Commission determines that a group of exchanges
(more than one) is to be surveyed, the Commission shall specify whether the
vote shall be calculated individually for each exchange or on a consolidated
basis. This method of calculation shall be included in the advertisement
specified in paragraph (1)(b) above.
(3) The customer survey explanatory letter shall include all
pertinent information that would enable the customer to exercise a rational
choice of acceptance or rejection of the proposal and shall contain at least
the following items:
(a) A brief explanation of the purpose of the survey.
(b) A tabulation showing, by classes of service, the increases
in rates to which subscribers would be subject.
(c) A listing of the telephone exchanges and three-digit
telephone number prefixes which would become accessible if the Extended Area
Service were approved.
(d) A statement indicating that only those voting by a signed
return postcard will be counted. The statement shall also include information
specifying the threshold for voter approval of a request for EAS as specified
in subsection 25-4.063(6), F.A.C.
(e) The date by which the postcard ballots must be returned to
be considered. This return date will provide, as a minimum, a period of thirty
days from the date on which the survey letter is mailed.
(4) The customer survey letter shall contain no additional
material or information not contemplated by these rules and shall include a
pre-addressed, stamped postcard ballot which shall provide at least the
following information:
(a) A brief statement of the service proposal being voted on
as more fully described in the customer survey letter.
(b) Spaces for the customer to indicate his or her preference
for or against the proposal.
(c) Lines for signature, telephone number and date.
(d) A space for customer comments, if desired.
(e) The date by which the ballot must be returned in order to
be considered in the determination of voting results.
(5) Both the subscriber survey letter and the return postcard
ballot shall have prior approval of the Commission staff before mailing and the
postcard ballot shall be returnable to the Commission staff for tabulation of
results.
(6) The requested Extended Area Service shall be approved and
ordered by the Commission upon a finding that: a majority of all respondents in
each exchange if route-by-route, or the consolidated results if so ordered,
required to be surveyed vote favorably, and at least (40%) percent of all
ballots sent are returned.
(7) If the vote is ordered to be route-by-route, the
subscriber survey material shall state separately for each exchange to be
surveyed the amount of local service rate increases.
Specific Authority 350.127 FS. Law Implemented 364.03,
364.385(2) FS. History–New 4-14-81, Formerly 25-4.63, Amended 10-5-92.
25-4.064 Alternatives to Non-Optional Extended Area Service.
Whenever interexchange traffic
patterns are such that subscriber needs may be adequately served by alternative
service offerings, or requests may not fully meet the requirements of these
rules but higher than average interexchange calling may exist, the Commission
may give consideration to other alternatives such as one-way Optional Calling
Plans, interexchange message rate service, Usage Sensitive Pricing options,
discounted toll offering, etc.
Specific
Authority 350.127(2) FS. Law Implemented 364.03, 364.14, 364.385(2) FS.
History–New 4-14-81, Formerly 25-4.64, Amended 10-5-92.
