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1997 SESSION

970830408
HOUSE JOINT RESOLUTION NO. 635
Offered January 20, 1997
Requesting the State Corporation Commission to continue its efforts to open up competition in the local exchange market between telephone, cable, and other communications companies by studying certain issues related to the Commonwealth's telecommunications system.
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Patrons-- Bennett, Plum and Scott; Senators: Stosch and Ticer
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Referred to Committee on Corporations, Insurance and Banking
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WHEREAS, there exists a need for the Commonwealth to foster and encourage the evolution of a telecommunications system which offers reasonable and affordable prices to Virginia's schools, institutions of higher education, and state and local governments; and

WHEREAS, on February 8, 1996, Congress passed the Telecommunications Act of 1996 ("TA 1996"), which is designed to open up competition in the local exchange market between telephone, cable, and other communications companies, primarily through the use of interconnectivity agreements negotiated by each states' public utility commission; and

WHEREAS, on August 8, 1996, the Federal Communications Commission (FCC) promulgated 700 pages of rules implementing TA 1996; and

WHEREAS, the FCC's rules include the rates which can be charged by local exchange companies for interconnectivity agreements; and

WHEREAS, lawsuits challenging the FCC's rules have been filed in several federal courts; and

WHEREAS, on October 15, 1996, the Eighth Federal Circuit Court of Appeals issued an injunction in a consolidated appeal which stayed the implementation of certain portions of the FCC's rules until their legality is decided; and

WHEREAS, TA 1996 created the "Federal-State Universal Service Joint Board" and directed the board to make recommendations to the FCC on how "universal service" should be defined, what basic services should be included in "universal service," and when the goal of TA 1996 to achieve "universal service" should be completed; and

WHEREAS, the board's recommendations, issued November 7, 1996, included a proposal to provide discounts of 40 to 90 percent for approximately 97 percent of the country's grade schools, at a cost capped at $2.25 billion per year; and

WHEREAS, the media reported that this proposal was in response to President Clinton's support, during a campaign speech in mid-October 1996, for giving schools and public libraries free basic access to the Internet through an "E" ("education") rate; and

WHEREAS, final implementation rules are due from the FCC by May 8, 1997; and

WHEREAS, since 1995, the State Corporation Commission (SCC) has practiced "rate cap" (or "price cap") regulation among several of Virginia's large local exchange companies (Bell Atlantic, Sprint Centel, and United Telephone); and

WHEREAS, through rate cap (or price cap) regulation, the SCC establishes caps on the rates (or prices) that local exchange companies may charge for basic telephone services but, in return, imposes no restrictions on a company's revenues and earnings; and

WHEREAS, the SCC categorizes telephone services of large local exchange companies into three categories--basic, discretionary, and competitive--based on the nature and competitiveness of each service; and

WHEREAS, the SCC has traditionally allowed only two classes of service: "residential" and "all other" (commonly referred to as "business"); and

WHEREAS, all government agencies and institutions (e.g., schools and libraries) fall into the business rate category; and

WHEREAS, § 56-234 exempts services to state government from SCC regulation; and

WHEREAS, language in the 1996-98 Budget Bill deems "communications services into public schools which are used for educational technology" as "state government" for purposes of §§ 56-232 and 56-234 of the Virginia Code (see Item 140C.11.f1 of Chapter 912 of the 1996 Acts of Assembly); and

WHEREAS, the SCC's authority to establish other classes of service or to provide discounted rates may also be limited by § 56-234 of the Virginia Code, which requires utilities to charge uniform rates under "like conditions" to prevent rate discrimination; and

WHEREAS, to date, the SCC has recognized only two "like conditions": "residential" and "all other"; now, therefore, be it

RESOLVED by the House of Delegates, the Senate concurring, That the SCC be requested to continue its efforts to open up competition in the local exchange market between telephone, cable, and other communications companies by studying by studying certain issues related to the Commonwealth's telecommunications system. Specifically, the SCC is requested to study the effectiveness of its current rate cap (or price cap) regulation among Virginia's local exchange companies by updating its previous studies on this issue. (See the evaluation of the SCC's experimental regulatory plan in case number PUC 920029, final order issued December 17, 1993, and the implementation of the SCC's alternative regulatory method in case number PUC 930036, final order issued October 18, 1994.) The SCC is also requested to study the feasibility, projected costs, and statutory or other impediments of establishing (i) an "E" ("education") rate for the Commonwealth's schools, colleges, universities, and libraries; (ii) a "G" ("government") rate for the Commonwealth's schools, colleges, universities, libraries, and all other state and local government agencies; and (iii) discounts for the Commonwealth's schools, colleges, universities, libraries, and all other state and local government agencies and the effect of the Telecommunications Act of 1996 and the Federal Communication Commission's implementation rules upon these approaches.

Assistance may be provided to the SCC by the joint subcommittee on science and technology created by House Joint Resolution 195 (1996) or a successor joint subcommittee or entity thereof. Upon request, all agencies of the Commonwealth shall provide assistance to the SCC for this study.

The SCC shall complete its work in time to submit its findings and recommendations on or before November 15, 1997, to the joint subcommittee on science and technology created by House Joint Resolution 195 (1996) or a successor joint subcommittee or entity thereof and shall also submit its findings and recommendations to the Governor and the 1998 Session of the General Assembly as provided in the procedures of the Division of Legislative Automated Systems for the processing of legislative documents.