Session of 1998
                   
HOUSE BILL No. 2939
         
By Representative Edmonds
         
2-13
            9             AN ACT concerning telecommunications; relating to contributions to the
10             Kansas universal service fund; amending K.S.A. 1997 Supp. 66-2005
11             and 66-2008 and repealing the existing sections.
12            
13       Be it enacted by the Legislature of the State of Kansas:
14           Section 1. K.S.A. 1997 Supp. 66-2005 is hereby amended to read as
15       follows: 66-2005. (a) Each local exchange carrier shall file a network in-
16       frastructure plan with the commission on or after January 1, 1997, and
17       prior to January 1, 1998. Each plan, as a part of universal service protec-
18       tion, shall include schedules, which shall be approved by the commission,
19       for deployment of universal service capabilities by July 1, 1998, and the
20       deployment of enhanced universal service capabilities by July 1,   2001
21       2003, as defined pursuant to subsections (p) and (q) of K.S.A. 1997 Supp.
22       66-1,187, and amendments thereto, respectively. Each plan shall dem-
23       onstrate the capability of the local exchange carrier to comply on an on-
24       going basis with quality of service standards to be adopted by the com-
25       mission no later than January 1, 1997.
26           (b) In order to protect universal service, facilitate the transition to
27       competitive markets and stimulate the construction of an advanced tel-
28       ecommunications infrastructure, each local exchange carrier shall file a
29       regulatory reform plan at the same time as it files the network infrastruc-
30       ture plan required in subsection (a). As part of its regulatory reform plan,
31       a local exchange carrier may elect traditional rate of return regulation or
32       price cap regulation. Carriers that elect price cap regulation shall be ex-
33       empt from rate base, rate of return and earnings regulation. However,
34       the commission may resume such regulation upon finding, after a hearing,
35       that a carrier that is subject to price cap regulation has: violated minimum
36       quality of service standards pursuant to subsection (l) of K.S.A. 1997
37       Supp. 66-2002, and amendments thereto; been given reasonable notice
38       and an opportunity to correct the violation; and failed to do so. Regulatory
39       reform plans also shall include:
40           (1) A commitment to provide existing and newly ordered point-to-
41       point broadband services to: Any hospital as defined in K.S.A. 65-425,
42       and amendments thereto; any school accredited pursuant to K.S.A. 72-
43       1101 et seq., and amendments thereto; any public library; or other state

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  1       and local government facilities at discounted prices close to, but not be-
  2       low, long-run incremental cost; and
  3           (2) a commitment to provide basic rate ISDN service, or the tech-
  4       nological equivalent, at prices which are uniform throughout the carrier's
  5       service area and which are designed to stimulate the development of an
  6       extensive residential market. Local exchange carriers shall not be required
  7       to allow retail customers purchasing the foregoing discounted services to
  8       resell those services to other categories of customers. Telecommunica-
  9       tions carriers may purchase basic rate ISDN services for resale in ac-
10       cordance with K.S.A. 1997 Supp. 66-2003, and amendments thereto. The
11       commission may reduce prices charged for services outlined in provisions
12       (1) and (2) of this subsection, if the commitments of the local exchange
13       carrier set forth in those provisions are not being kept.
14           (c) Subject to the commission's approval, all local exchange carriers
15       shall reduce intrastate access charges to interstate levels as provided
16       herein. Rates for intrastate switched access, and the imputed access por-
17       tion of toll, shall be reduced over a   (tri-stars)ree-year five-year period with the
18       objective of equalizing interstate and intrastate rates in a revenue neutral,
19       specific and predictable manner. The commission is authorized to re-
20       balance local residential and business service rates to offset the intrastate
21       access and toll charge reductions. Any remaining portion of the reduction
22       in access and toll charges not recovered through local residential and
23       business service rates shall be paid out from the KUSF pursuant to K.S.A.
24       1997 Supp. 66-2008, and amendments thereto. Rural telephone compa-
25       nies shall reduce their intrastate switched access rates to interstate levels
26       on March 1, 1997, and every two years thereafter, as long as amounts
27       equal to such reductions are recovered from the KUSF.
28           (d) Beginning March 1, 1997, each rural telephone company shall
29       have the authority to increase annually its monthly basic local residential
30       and business service rates by an amount not to exceed $1 in each 12
31       month period until such monthly rates reach an amount equal to the
32       statewide rural telephone company average rates for such services. The
33       statewide rural telephone company average rates shall be the arithmetic
34       mean of the lowest flat rate as of March 1, 1996, for local residential
35       service and for local business service offered by each rural telephone
36       company within the state. In the case of a rural telephone company which
37       increases its local residential service rate or its local business service rate,
38       or both, to reach the statewide rural telephone company average rate for
39       such services, the amount paid to the company from the KUSF shall be
40       reduced by an amount equal to the additional revenue received by such
41       company through such rate increase. In the case of a rural telephone
42       company which elects to maintain a local residential service rate or a local
43       business service rate, or both, below the statewide rural telephone com-

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  1       pany average, the amount paid to the company from the KUSF shall be
  2       reduced by an amount equal to the difference between the revenue the
  3       company could receive if it elected to increase such rate to the average
  4       rate and the revenue received by the company.
  5           (e) For regulatory reform plans in which price cap regulation has
  6       been elected, price cap plans shall have three baskets: Residential and
  7       single-line business, including touch-tone; switched access services; and
  8       miscellaneous services. The commission shall establish price caps at the
  9       prices existing when the regulatory plan is filed subject to rate rebalancing
10       as provided in subsection (c) for residential services, including touch-tone
11       services, and for single-line business services, including touch-tone serv-
12       ices, within the residential and single-line business service basket. The
13       commission shall establish a formula for adjustments to the price caps.
14       The commission also shall establish price caps at the prices existing when
15       the regulatory plan is filed for the miscellaneous services basket. The
16       commission shall approve any adjustments to the price caps for the mis-
17       cellaneous service basket, as provided in subsection (f).
18           (f) On or before January 1, 1997, the commission shall issue a final
19       order in a proceeding to determine the price cap adjustment formula that
20       shall apply to the price caps for the local residential and single-line busi-
21       ness and the miscellaneous services baskets and for sub-categories, if any,
22       within those baskets. In determining this formula, the commission shall
23       balance the public policy goals of encouraging efficiency and promoting
24       investment in a quality, advanced telecommunications network in the
25       state. The commission also shall establish any informational filing require-
26       ments necessary for the review of any price cap tariff filings, including
27       price increases or decreases within the caps, to verify such caps would
28       not be exceeded by any proposed price change. The adjustment formula
29       shall apply to the price caps for the local residential and single-line busi-
30       ness basket after December 31, 1999, and to the miscellaneous services
31       basket after December 31, 1997. The price cap formula, but not actual
32       prices, shall be reviewed every five years.
33           (g) The price caps for the residential and single-line business service
34       basket shall be capped at their initial level until January 1, 2000, except
35       for any increases authorized as a part of the revenue neutral rate re-
36       balancing under subsection (c). The price caps for this basket and for the
37       categories in this basket, if any, shall be adjusted annually after December
38       31, 1999, based on the formula determined by the commission under
39       subsection (f).
40           (h) The price cap for the switched access service basket shall be set
41       based upon the local exchange carrier's intrastate access tariffs as of Jan-
42       uary 1, 1997, except for any revenue neutral rate rebalancing authorized
43       in accordance with subsection (c). Thereafter, the cap for this basket shall

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  1       not change except in connection with any subsequent revenue neutral
  2       rebalancing authorized by the commission under subsection (c).
  3           (i) The price caps for the miscellaneous services basket shall be ad-
  4       justed annually after December 31, 1997, based on the adjustment for-
  5       mula determined by the commission under subsection (f).
  6           (j) A price cap is a maximum price for all services taken as a whole
  7       in a given basket. Prices for individual services may be changed within
  8       the service categories, if any, established by the commission within a
  9       basket. An entire service category, if any, within the residential and single-
10       line business basket or miscellaneous services basket may be priced below
11       the cap for such category. Unless otherwise approved by the commission,
12       no service shall be priced below the price floor which will be long-run
13       incremental cost and imputed access charges. Access charges equal to
14       those paid by telecommunications carriers to local exchange carriers shall
15       be imputed as part of the price floor for toll services offered by local
16       exchange carriers on a toll service basis.
17           (k) A local exchange carrier may offer promotions within an exchange
18       or group of exchanges. All promotions shall be approved by the commis-
19       sion and shall apply to all customers in a nondiscriminatory manner within
20       the exchange or group of exchanges.
21           (l) Unless the commission authorizes price deregulation at an earlier
22       date, intrastate toll services within the miscellaneous services basket shall
23       continue to be regulated until the affected local exchange carrier begins
24       to offer 1 + intraLATA dialing parity throughout its service territory, at
25       which time intrastate toll will be price deregulated, except that prices
26       cannot be set below the price floor.
27           (m) On or before July 1, 1997, the commission shall establish guide-
28       lines for reducing regulation prior to price deregulation of price cap reg-
29       ulated services in the miscellaneous services basket, the switched access
30       services basket, and the residential and single-line business basket.
31           (n) Subsequent to the adoption of guidelines pursuant to subsection
32       (m), the commission shall initiate a petitioning procedure under which
33       the local exchange carrier may request rate range pricing. The commis-
34       sion shall act upon a petition within 21 days, subject to a 30-day suspen-
35       sion. The prices within a rate range shall be tariffed and shall apply to all
36       customers in a nondiscriminatory manner in an exchange or group of
37       exchanges.
38           (o) A local exchange carrier may petition the commission to designate
39       an individual service or service category, if any, within the miscellaneous
40       services basket, the switched access services basket or the residential and
41       single-line business basket for reduced regulation. The commission shall
42       act upon a petition for reduced regulation within 21 days, subject to a
43       suspension period of an additional 30-days, and upon a good cause show-

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  1       ing of the commission in the suspension order, or within such shorter
  2       time as the commission shall approve. The commission shall issue a final
  3       order within the 21-day period or within a 51-day period if a suspension
  4       has been issued. Following an order granting reduced regulation of an
  5       individual service or service category, the commission shall act on any
  6       request for price reductions within 7 days subject to a 30-day suspension.
  7       The commission shall act on other requests for price cap adjustments,
  8       adjustments within price cap plans and on new service offerings within
  9       21 days subject to a 30-day suspension. Such a change will be presumed
10       lawful unless it is determined the prices are below the price floor or that
11       the price cap for a category, if any, within the entire basket has been
12       exceeded.
13           (p) The commission may price deregulate within an exchange area,
14       or at its discretion on a statewide basis, any individual service or service
15       category upon a finding by the commission that there is a telecommuni-
16       cations carrier or an alternative provider providing a comparable product
17       or service, considering both function and price, in that exchange area.
18       The commission shall act upon a petition for price deregulation within
19       21 days, subject to a suspension period of an additional 30 days, and upon
20       a good cause showing of the commission in the suspension order, or
21       within such shorter time as the commission shall approve; provided that
22       no such petition shall be filed prior to July 1997, unless the commission
23       otherwise authorizes. The commission shall issue a final order within the
24       21-day period or within a 51-day period if a suspension has been issued.
25           (q) Upon complaint or request, the commission may investigate a
26       price deregulated service. The commission shall resume price regulation
27       of a service provided in any exchange area by placing it in the appropriate
28       service basket, as approved by the commission, upon a determination by
29       the commission that there is no longer a telecommunications carrier or
30       alternative provider providing a comparable product or service, consid-
31       ering both function and price, in that exchange area.
32           (r) The commission shall require that for all local exchange carriers
33       all such price deregulated basic intraLATA toll services be geographically
34       averaged statewide and not be priced below the price floor established
35       in subsection (j).
36           (s) Cost studies to determine price floors shall be performed as re-
37       quired by the commission in response to complaints. In addition, not-
38       withstanding the exemption in subsection (b), the commission may re-
39       quest information necessary to execute any of its obligations under the
40       act.
41           (t) A local exchange carrier may petition for individual customer pric-
42       ing. The commission shall respond expeditiously to the petition within a
43       period of not more than 30 days subject to a 30 day suspension.

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  1           (u) No audit, earnings review or rate case shall be performed with
  2       reference to the initial prices filed as required herein.
  3           (v) Telecommunications carriers shall not be subject to price regu-
  4       lation, except that: Access charge reductions shall be passed through to
  5       consumers by reductions in basic intrastate toll prices; and basic toll prices
  6       shall remain geographically averaged statewide. As required under K.S.A.
  7       66-131, and amendments thereto, and except as provided for in subsec-
  8       tion (c) of K.S.A. 1997 Supp. 66-2004, and amendments thereto, telecom-
  9       munications carriers that were not authorized to provide switched local
10       exchange telecommunications services in this state as of July 1, 1996,
11       including cable television operators who have not previously offered tel-
12       ecommunications services, must receive a certificate of convenience
13       based upon a demonstration of technical, managerial and financial via-
14       bility and the ability to meet quality of service standards established by
15       the commission. Any telecommunications carrier or other entity seeking
16       such certificate shall file a statement, which shall be subject to the com-
17       mission's approval, specifying with particularity the areas in which it will
18       offer service, the manner in which it will provide the service in such areas
19       and whether it will serve both business customers and residential custom-
20       ers in such areas. Any structurally separate affiliate of a local exchange
21       carrier that provides telecommunications services shall be subject to the
22       same regulatory obligations and oversight as a telecommunications car-
23       rier, as long as the local exchange carrier's affiliate obtains access to any
24       services or facilities from its affiliated local exchange carrier on the same
25       terms and conditions as the local exchange carrier makes those services
26       and facilities available to other telecommunications carriers. The com-
27       mission shall oversee telecommunications carriers to prevent fraud and
28       other practices harmful to consumers and to ensure compliance with
29       quality of service standards adopted for all local exchange carriers and
30       telecommunications carriers in the state.
31           Sec. 2. K.S.A. 1997 Supp. 66-2008 is hereby amended to read as
32       follows: 66-2008. On or before January 1, 1997, the commission shall
33       establish the Kansas universal service fund, hereinafter referred to as the
34       KUSF.
35           (a) The initial amount of the KUSF shall be comprised of local
36       exchange carrier revenues lost as a result of rate rebalancing pursuant to
37       subsection (c) of K.S.A. 1997 Supp. 66-2005, and amendments thereto,
38       and subsection (a) of K.S.A. 1997 Supp. 66-2007, and amendments
39       thereto. Such revenues shall be recovered on a revenue neutral basis. The
40       revenue neutral calculation shall be based on the volumes and revenues
41       for the 12 months prior to September 30, 1996, adjusted for any rate
42       changes.
43           (b) The commission shall require every telecommunications carrier,

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  1       telecommunications public utility and wireless telecommunications serv-
  2       ice provider that provides intrastate telecommunications services to con-
  3       tribute to the KUSF on an equitable and nondiscriminatory basis. How-
  4       ever, after July 1, 1998, no further contributions shall be required until
  5       the commission initiates and completes a proceeding to determine whether
  6       the obligations of the fund can be satisfied by existing fund balances,
  7       growth in the revenues of qualified telecommunications carriers, telecom-
  8       munications public utilities and wireless telecommunications service pro-
  9       viders or from alternative revenue sources without causing undue hard-
10       ship to consumers. Any telecommunications carrier, telecommunications
11       public utility or wireless telecommunications service provider which con-
12       tributes to the KUSF may collect from customers an amount equal to
13       such carrier's, utility's or provider's contribution.
14           (c) Pursuant to the federal act, distributions from the KUSF shall be
15       made in a competitively neutral manner to qualified telecommunications
16       public utilities, telecommunications carriers and wireless telecommuni-
17       cations providers, that are deemed eligible both under subsection (e)(1)
18       of section 214 of the federal act and by the commission.
19           (d) The commission shall periodically review the KUSF to determine
20       if the costs of qualified telecommunications public utilities, telecommu-
21       nications carriers and wireless telecommunications service providers to
22       provide local service justify modification of the KUSF. If the commission
23       determines that any changes are needed, the commission shall modify
24       the KUSF accordingly.
25           (e) Any qualified telecommunications carrier, telecommunications
26       public utility or wireless telecommunications service provider may re-
27       quest supplemental funding from the KUSF based upon a percentage
28       increase in access lines over the 12-month period prior to its request. The
29       supplemental funding shall be incurred for the purpose of providing serv-
30       ices to and within the service area of the qualified telecommunications
31       carrier, telecommunications public utility or wireless telecommunications
32       service provider. Supplemental funding from the KUSF shall be used for
33       infrastructure expenditures necessary to serve additional customers
34       within the service area of such qualifying utility, provider or carrier. All
35       affected parties shall be allowed to review and verify a request of such a
36       qualified utility, carrier or provider for supplemental funding from the
37       KUSF, and to intervene in any commission proceeding regarding such
38       request. The commission shall issue an order on the request within 120
39       days of filing. Additional funding also may be requested for: the recovery
40       of shortfalls due to additional rebalancing of rates to continue mainte-
41       nance of parity with interstate access rates; shortfalls due to changes to
42       access revenue requirements resulting from changes in federal rules; ad-
43       ditional investment required to provide universal service and enhanced

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  1       universal service; and for infrastructure expenditures in response to fa-
  2       cility or service requirements established by any legislative, regulatory or
  3       judicial authority. Such requests shall be subject to simplified filing pro-
  4       cedures and the expedited review procedures, as outlined in the stipu-
  5       lation attached to the order of November 19, 1990 in docket no. 127,140-
  6       U (Phase IV).
  7           (f) Additional supplemental funding from the KUSF, other than as
  8       provided in subsection (e) of this section, may be authorized at the dis-
  9       cretion of the commission. However, the commission may require ap-
10       proval of such funding to be based upon a general rate case filing. With
11       respect to any request for additional supplemental funding from the
12       KUSF, the commission shall act expeditiously, but shall not be subject to
13       the 120 day deadline set forth in subsection (e).
14           Sec. 3. K.S.A. 1997 Supp. 66-2005 and 66-2008 are hereby repealed.
15           Sec. 4. This act shall take effect and be in force from and after its
16       publication in the statute book.
17      
18