44TH LEGISLATURE - STATE OF NEW MEXICO - FIRST SESSION, 1999

RELATING TO TELECOMMUNICATIONS; MAKING CHANGES IN THE NEW MEXICO TELECOMMUNICATIONS ACT; AMENDING AND ENACTING SECTIONS OF THE NMSA 1978.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:

Section 1. Section 63-9A-2 NMSA 1978 (being Laws 1985, Chapter 242, Section 2, as amended) is amended to read:

"63-9A-2. PURPOSE.--The legislature declares that it remains the policy of the state of New Mexico to maintain the availability of access to telecommunications services at affordable rates. Furthermore, it is the policy of this state to have comparable message telecommunications service rates, as established by the commission, for comparable markets or market areas. To the extent that it is consistent with maintaining availability of access to service at affordable rates [and comparable message telecommunications service rates], it is further the policy of this state to encourage competition and reduce regulation in the telecommunications industry, thereby allowing access by the public to resulting rapid advances in telecommunications technology. It is the purpose of the New Mexico Telecommunications Act to permit a regulatory framework that will allow an orderly transition from a regulated telecommunications industry to a competitive market environment consistent with the federal Telecommunications Act of 1996. Further, the legislature finds that as part of such regulatory framework, it is necessary to provide disparate regulatory treatment between rural telephone companies and non-rural telephone companies in order to assist with accomplishing the goals established by the above declared policies. Such disparate regulatory treatment is particularly necessary for those citizens who reside in rural New Mexico, which rural areas constitute the bulk of the surface area within the boundaries of New Mexico. Disparate regulatory treatment for rural telephone companies requires relaxed regulation for rural telephone companies with the objective of reducing the cost of regulation as well as the regulatory burden, permitting pricing flexibility and expediting required rate approvals, all consistent with the purpose of an orderly transition from regulation to a competitive market environment and consistent with the federal Communications Act of 1996."

Section 2. Section 63-9A-3 NMSA 1978 (being Laws 1985, Chapter 242, Section 3, as amended) is amended to read:

"63-9A-3. DEFINITIONS.--As used in the New Mexico Telecommunications Act:

A. "affordable rates" means rates for basic local exchange service [rates] that promote universal service within [a local exchange service area] New Mexico, giving consideration to the economic conditions and costs to provide service in [such] the area in which service is provided;

B. "basic service" means service that is provided to an end user customer that is consistent with the federal Telecommunications Act of 1996;

[B.] C. "cable television service" means the one-way transmission to subscribers of video programming or other programming service and subscriber interaction, if any, that is required for the selection of such video programming or other programming service;

[C.] D. "commission" means the public regulation commission;

[D.] E. "competitive telecommunications service" means a service that has been determined to be subject to effective competition; [pursuant to Section 63-9A-8 NMSA 1978;

E. "effective competition" means that the customers of the service have reasonably available and comparable alternatives to the service]

F. "eligible telecommunications carrier" means "eligible telecommunications" carrier as defined in the federal Telecommunications Act of 1996;

[F.] G. "fund" means the New Mexico universal service fund;

H. "incumbent local exchange carrier" means a person that:

(1) was designated as an eligible telecommunications carrier by the state corporation commission in Docket #97-93 TC by order dated October 23, 1997, or that provided local exchange service in this state on February 8, 1996; or

(2) became a successor or assignee of an incumbent local exchange carrier;

I. "incumbent rural telecommunications carrier" means a local exchange carrier that serves fewer than fifty thousand access lines within the state and was designated as an eligible telecommunications carrier by the state corporation commission on or before November 1, 1997, including any successor in interest thereto;

[G.] J. "local exchange area" means a geographic area encompassing one or more local communities, as described in maps, tariffs or rate schedules filed with the commission, where local exchange rates apply;

[H.] K. "local exchange service" means the transmission of two-way interactive switched voice communications furnished by a telecommunications company within a local exchange area;

[I.] L. "message telecommunications service" means telecommunications service between local exchange areas that originate and terminate within the state for which charges are made on a per-unit basis, not including wide-area telecommunications service, or its equivalent, or individually negotiated contracts for telecommunications services;

[J. "noncompetitive telecommunications service" means a service that has not been determined to be subject to effective competition pursuant to Section 63-9A-8 NMSA 1978;

K.] M. "private telecommunications service" means a system, including the construction, maintenance or operation thereof, for the provision of telecommunications service, or any portion of that service, by a person for the sole and exclusive use of that person and not for resale, directly or indirectly. For purposes of this definition, the person that may use such service includes any affiliates of the person if at least eighty percent of the assets or voting stock of the affiliates is owned by the person. If any other person uses the telecommunications service, whether for hire or not, the private telecommunications service is a public telecommunications service;

[L.] N. "public telecommunications service" means the transmission of signs, signals, writings, images, sounds, messages, data or other information of any nature by wire, radio, lightwaves or other electromagnetic means originating and terminating in this state regardless of actual call routing. "Public telecommunications service" does not include the provision of terminal equipment used to originate or terminate such service; private telecommunications service; broadcast transmissions by radio, television and satellite broadcast stations regulated by the federal communications commission; radio common carrier services, including mobile telephone service and radio paging; or one-way cable television service; [and]

O. "rural telephone company" means a local exchange carrier that serves less than five thousand access lines within the state; and

[M.] P. "telecommunications company" means a person that provides public telecommunications service."

Section 3. Section 63-9A-5 NMSA 1978 (being Laws 1985, Chapter 242, Section 5) is amended to read:

"63-9A-5. REGULATION BY COMMISSION.--Except as otherwise provided in the New Mexico Telecommunications Act or the federal Telecommunications Act of 1996, each public telecommunications service is declared to be affected with the public interest and, as such, subject to the provisions of that act, including the regulation thereof as [hereinafter] provided in that act."

Section 4. Section 63-9A-6 NMSA 1978 (being Laws 1985, Chapter 242, Section 6, as amended) is amended to read:

"63-9A-6. CERTIFICATE REQUIRED.--

A. No public telecommunications service shall be offered in this state except in accordance with the provisions of the New Mexico Telecommunications Act.

B. No public telecommunications service shall be offered within this state without the telecommunications company first having obtained from the commission a certificate declaring that the operation is in the present or future public convenience and necessity, unless the operation is otherwise authorized by the New Mexico Telecommunications Act.

C. The commission shall have full power and authority to determine matters of public convenience and necessity relating to the issuance of a certificate of public convenience and necessity to a provider of public telecommunications service; provided, however, that in keeping with the purposes of the New Mexico Telecommunications Act, the commission shall not deny an applicant a certificate on the grounds of need if it is shown that the applicant possesses adequate financial resources and technical competency to provide the service. [It shall be within the discretion of the commission to determine when and upon what conditions plant, equipment or services may be provided under certificates of public convenience and necessity, by more than one person, and the commission may attach to the exercise of rights granted by the certificate such terms and conditions as, in its judgment, the public convenience and necessity may require or as otherwise authorized.

D. Notwithstanding the provisions of Subsection C of this section, any telecommunications company with less than one hundred thousand access lines holding a certificate of public convenience and necessity to provide local exchange service to the public shall have the exclusive right to provide local exchange service within its certificated service territory and shall not be subject to competition in the provision of local exchange service in its certificated service territory unless the commission determines that public convenience and necessity require additional plant or equipment for the provision of local exchange service within the certificated service territory of the existing telecommunications company and a certificate of public convenience and necessity is granted pursuant to Subsection E of this section]

D. For purposes of considering and acting upon applications for certificates pursuant to this section, the commission may adopt rules and regulations, on a competitively neutral basis and consistent with the provisions of the New Mexico Telecommunications Act and the federal act, necessary to preserve and advance universal service, protect the public safety and welfare, ensure the continued quality of public telecommunications services and safeguard the rights of the consumers.

E. In determining whether [public convenience and necessity require an additional] to issue a certificate to provide [local exchange] telecommunications service [in a certificated service territory], the commission shall [in a proceeding in which the telecommunications company certificated in the affected area is a party] consider [and determine upon substantial evidence that] the following: [conditions exist

(1) the existing telecommunications company is inadequate to meet the reasonable needs and convenience of the public;

(2) the proposed second plant or equipment would eliminate such inadequacy;

(3) it is economically feasible to operate the proposed second plant or equipment successfully and continuously for the furnishing of local exchange service;

(4)] (1) whether the applicant [for the second plant or equipment] has sufficient financial resources to provide the proposed local exchange service properly and continuously;

[(5)] (2) whether the applicant [for the second plant or equipment] has competent and experienced management and personnel to provide the proposed [local exchange] service; and

[(6)] (3) whether the applicant [for the second plant or equipment] is willing and able to conform to [the constitution of New Mexico and] all applicable laws [of New Mexico] and the rules [and regulations] of the commission.

[(7) the applicant for the second plant or equipment is in every respect willing and able to provide the proposed local exchange service properly; and

(8) granting the additional certificate to the applicant shall not have a significant adverse impact on the existing telecommunications company.]

F. All certificates of public convenience and necessity shall:

(1) continue in force, notwithstanding the provisions of this section [63-9A-2 NMSA 1978]; and

(2) remain subject to all terms and conditions imposed by statute or commission order at the time of issuance or in connection with any subsequent amendment, notwithstanding the provisions of [that] this section."

Section 5. Section 63-9A-6.1 NMSA 1978 (being Laws 1987, Chapter 21, Section 4, as amended) is amended to read:

"63-9A-6.1. NEW MEXICO UNIVERSAL SERVICE FUND--ESTABLISHMENT--BOARD.--

A. No later than January 1, 2000, the commission shall [establish a "New Mexico] implement a "state universal service fund" to maintain [existing residential local exchange service] and support at affordable rates those public telecommunications services as are determined by the commission. Upon the effective date of this section, balances in the existing New Mexico universal service fund shall be transferred into the state universal service fund and the New Mexico universal service fund shall cease to exist.

B. The fund shall be [financed by a uniform surcharge on all local exchange service customers at a rate to be determined by the commission. Money deposited in the fund is not public money and the administration of the fund is not subject to the provisions of law regulating public funds] competitively and technologically neutral, equitable and nondiscriminatory in its collection and distribution of funds, portable between eligible telecommunications companies, targeted to high cost rural areas, and shall provide a specific, predictable and sufficient support mechanism as determined by the commission that reduces implicit subsidies, including long distance switched access charges, and assures universal service in the state. Reductions in charges for intrastate switched access services resulting from compliance with this section shall be passed on for the benefit of consumers in New Mexico.

C. The fund shall be financed by a surcharge on all intrastate retail public telecommunications services revenue, excluding revenue from services provided pursuant to a low- income telephone assistance plan billed to end user customers by a telecommunications carrier, and excluding from that revenue all amounts from surcharges, gross receipts taxes, excise taxes, franchise fees and similar charges. For the purpose of funding the state universal service fund, the commission has the authority to apply the surcharge on all end user retail public telecommunications services provided in the state by telecommunications companies and to comparable retail alternative services provided by telecommunications companies and non-telecommunications companies, including commercial mobile radio services, operator services and aggregator services offered by providers other than telecommunications companies, at a competitively and technologically neutral rate or rates to be determined by the commission. In prescribing competitively and technologically neutral surcharge rates, the commission may make distinctions between services subject to a surcharge, but it shall require telecommunications carriers and non-telecommunications carriers to apply uniform surcharge rates for the same or comparable services. Money deposited in the fund is not public money, and the administration of the fund is not subject to the provisions of law regulating public funds. The commission shall not apply the surcharge to a private telecommunications network.

[C.] D. The commission shall:

(1) establish eligibility criteria for participation in the fund [which assure the availability of service at affordable rates without unreasonably increasing rates to local exchange service and message telecommunications service customers

(2) determine which companies meet the eligibility criteria; and

(3) provide for the collection of the surcharge and the administration and disbursement of money from the fund] consistent with federal law, which ensure the availability of service at affordable rates without unreasonably increasing rates for basic service while still granting eligible telecommunications carriers a reasonable profit on supported services in geographic areas requiring support from the fund, but the eligibility criteria shall not require any investigations of the costs or rates of a telecommunications carrier receiving support from the fund, other than that provided for in Subsection E of this section. The eligibility criteria shall not restrict or limit an eligible telecommunications carrier from receiving federal universal service support;

(2) provide for the collection of the surcharge on a competitively neutral basis;

(3) determine those geographic areas and local exchange service areas requiring support from the fund; and

(4) provide for the separate administration and disbursement of federal universal service funds consistent with federal law.

E. The fund shall ensure the availability of local exchange service as determined by the commission at affordable rates in rural high cost areas of the state.

[D.] F. The commission shall adopt rules [and regulations] for the implementation and administration of the fund in accordance with the provisions of this section.

[E. The commission shall establish a board composed of representatives from the providers of local exchange service to collect, administer and disburse money from the fund under the supervision and control of the commission pursuant to the established criteria and the rules and regulations promulgated by the commission.]

G. The cost basis for establishing the fund and determining the rate of distribution of the new fund for areas served by an incumbent rural telecommunications carrier with fewer than fifty thousand access lines shall be the same cost of, and shall be consistent with the federal support mechanisms for, providing the supported service by geographic area, determined by the federal communications commission. The cost basis established by the commission for areas served by telecommunications carriers with fewer than fifty thousand access lines shall include the same return authorized by the federal communications commission for use in rates filed by the national exchange carriers association at the federal communications commission for those carriers. The revenue basis for rural telecommunications carriers with fewer than fifty thousand access lines shall only include revenues from public telecommunications services provided by the eligible telecommunications carrier. The cost basis for establishing the fund and determining the rate of distribution of the new fund for areas served by incumbent local exchange carriers with fifty thousand or more access lines shall be the forward looking economic cost of providing the supported service in the geographic area as determined by the commission.

H. Upon implementation of the fund, the commission shall select a neutral third party administrator to collect, administer and disburse money from the fund under the supervision and control of the commission pursuant to the established criteria and the rules promulgated by the commission. The administrator may be reasonably compensated for the provided services from the surcharge proceeds to be received by the fund pursuant to Subsection C of this section. The neutral third party administrator shall consult with an advisory board established by the commission composed of representatives from all participating providers. For purposes of this subsection, the commission shall not be a neutral third party administrator.

I. To ensure that providers of intrastate long distance service contribute to the fund as required above, and to further ensure that the surcharge to be paid by the end user customer will be held to a minimum, no later than December 31, 1999, the commission shall adopt rules, or take other appropriate action, to require all intrastate long distance service providers to participate in a plan to ensure accurate reporting of intrastate retail long distance revenues.

J. Switched access charges and other intrastate telecommunication services, other than basic local exchange service, may be considered for reductions as an offset to payments received by a telecommunications carrier from the universal service fund."

Section 6. A new section of Chapter 63, Article 9A NMSA 1978 is enacted to read:

"[NEW MATERIAL] REGULATION OF RETAIL RATES OF INCUMBENT RURAL TELECOMMUNICATIONS CARRIER.--

A. Rates for retail public telecommunications services provided by an incumbent rural telecommunications carrier shall be subject to regulation by the commission only in the manner and to the extent authorized by this section.

B. An incumbent rural telecommunications carrier shall file tariffs for all retail public telecommunications services, other than residential local exchange service, which shall be effective after ten days' notice to the commission and publication in a local newspaper in the incumbent service area.

C. Rates for residential local exchange service may be increased by an incumbent rural telecommunications carrier only after sixty days notice to all affected subscribers. The notice of increase shall include:

(1) the reasons for the rate increase;

(2) a description of the affected service;

(3) an explanation of the right of the subscriber to petition the commission for a public hearing on the rate increase;

(4) a list of local exchange areas that are affected by the proposed rate increase; and

(5) the dates, times and places for the public informational meetings required by this section.

D. An incumbent rural telecommunications carrier may increase its rates for residential local exchange service in the manner otherwise provided in this section as necessary to recover a reasonable allocation of costs incurred due to requirements imposed by any federal or state law or rule or regulation. An incumbent rural telecommunications carrier that proposes to increase its rates for residential local exchange service shall hold at least one public informational meeting in each public regulation commissioner's district as established by the Public Regulation Commission Apportionment Act in which there is a local exchange area affected by the rate change.

E. Local exchange service rates increased by any rural telecommunications carrier pursuant to Subsection D of this section shall be reviewed by the commission only upon written protest signed by two and one-half percent of all affected subscribers or upon the commission staff's own motion for good cause. The protest shall specifically set forth the particular rate or charge as to which review is requested, the reasons for the requested review and the relief that the persons protesting desire. If a proper protest is presented to the commission within sixty days from the date notice of the rate change was sent to affected subscribers of an incumbent rural telephone carrier, the commission may accept and file the complaint and, upon proper notice, may suspend the rates at issue during the pendency of the proceedings and reinstate the rates previously in effect and shall hold and complete a hearing thereon within ninety days after filing to determine if the rates as proposed are fair, just and reasonable. The commission may, within sixty days after close of the hearing, enter an order adjusting the rates at issue, except that the commission shall not set any rate below the intrastate cost of providing the service, which shall include cost and rate of return. In the order, the commission may order a refund of amounts collected in excess of the rates and charges as approved at the hearing, which may be paid as a credit against billings for future services. If the complaint is denied, the commission shall enter an order denying the complaint within sixty days after the close of the hearing, and the rates shall be deemed approved. For purposes of this section, cost shall also include a reasonable amount of joint and common costs incurred by the telecommunications carrier in its operations and may include other accounting adjustments authorized by the commission.

F. A rural telecommunications carrier that serves less than five percent of the state's aggregate, statewide subscriber lines may at any time elect to file an application with the commission requesting the commission to prescribe fair, just and reasonable rates for the carrier based on the carrier's revenue, expenses and investment in accordance with traditional rate-making principles.

G. Rates for local exchange, vertical and message telecommunications services to retail end-user customers may be reduced to a level equal to, but not below, the intrastate cost, which shall include cost and rate of return of providing the retail service. If a rural telecommunications carrier loses its exemption pursuant to Section 251 of the federal Telecommunications Act of 1996, the rate for a service, excluding basic service, must cover the cost of the service, including the imputed rate of wholesale service elements as may be required by the commission. The cost of message telecommunications service must also include any interexchange access rates charged to another telecommunications carrier for the service.

H. An incumbent rural telecommunications carrier operating pursuant to this section shall have the ability to offer or discontinue offering special incentives, discounts, packaged offerings, temporary rate waivers or other promotions, or to offer individual contracts."