Minnesota Legislature
Office of the Revisor of Statutes
Minnesota Session Laws - 1994, Regular Session
Key: (1) language to be deleted (2) new language
CHAPTER 534-H.F.No. 2143
An act relating to telecommunications; regulating
competitive telephone services and incentive plans;
extending expiration dates and making technical
changes for certain regulatory provisions; amending
Minnesota Statutes 1992, sections 237.161, by adding a
subdivision; 237.57, subdivision 4; 237.58,
subdivision 1; 237.59, subdivisions 1, 2, 3, 5, and by
adding a subdivision; 237.60, subdivision 2; 237.62,
subdivision 1; 237.625, subdivision 1; and 325E.26, by
adding a subdivision; proposing coding for new law in
Minnesota Statutes, chapter 237; repealing Minnesota
Rules, parts 7815.0700; 7815.0800; 7815.0900;
7815.1000; 7815.1100; 7815.1200; 7815.1300; 7815.1400;
and 7815.1500; Laws 1987, chapter 340, section 26;
Laws 1989, chapter 74, sections 25 and 27; Laws 1990,
chapter 513, section 3; and Laws 1993, chapter 41,
section 1.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
ARTICLE 1
Section 1. Minnesota Statutes 1992, section 237.161, is
amended by adding a subdivision to read:
Subd. 6. [EXPIRATION.] This section expires June 1, 1996,
or upon the issuance under this subdivision of a final order of
the commission to govern extended area service, whichever occurs
earlier.
Prior to June 1, 1996, the commission shall complete a
proceeding or series of proceedings to investigate issues
related to extended area telephone service and shall issue a
final order to establish, at a minimum, an orderly and equitable
process and standards for determining the configurations of and
cost allocations for extended area service in the state. The
commission shall provide notice of the proceedings required
under this subdivision in the same manner as for rulemaking and
shall ensure public participation in the proceedings as for rate
changes under section 237.075. The commission may not accept a
new petition for extended area service between the effective
date of this subdivision and the effective date of the final
order issued under this subdivision but shall continue to
process petitions pending on that effective date under this
section.
Sec. 2. Minnesota Statutes 1992, section 237.57,
subdivision 4, is amended to read:
Subd. 4. [EMERGING COMPETITION.] A service will be
regulated under "emerging competition" exists provisions when
the criteria of section 237.59, subdivision 5, have not been
satisfied, but there is a trend toward effective competition, or
if it is a new service offered for the first time after August
1, 1994, that is not integrally related to the provision of
adequate telephone service or access to the telephone network or
to the privacy, health, or safety of the company's customers,
whether or not it meets the criteria of section 237.59,
subdivision 5.
Sec. 3. [237.5799] [EXPIRATION.]
Sections 237.58, 237.59, 237.60, 237.61, 237.62, 237.625,
237.63, 237.64, 237.65, 237.66, and 237.68 expire on August 1,
1999.
Sec. 4. Minnesota Statutes 1992, section 237.58,
subdivision 1, is amended to read:
Subdivision 1. [APPLICABILITY.] This section and sections
237.59; 237.60, subdivisions 1, 2, and 5; 237.62; and 237.625 do
not apply to a telephone company unless the company notifies the
commission in writing of its decision to be subject to all of
those sections. The company may not revoke its decision to be
subject to those sections before January 1, 1994 1999, unless
the company becomes subject to some other form of alternative
regulation.
Sec. 5. Minnesota Statutes 1992, section 237.59,
subdivision 1, is amended to read:
Subdivision 1. [EMERGING COMPETITIVE SERVICES.] (a) The
following services provided by the telephone company are subject
to emerging competition unless and until reclassified as
noncompetitive or subject to effective competition under this
section:
(1) apartment door answering services;
(2) automatic call distribution;
(3) billing and collection services;
(4) call waiting, call forwarding, and three-way calling
services for businesses with three or more lines;
(5) central office-based pricing packages providing
switched business access lines which substitute for private
branch exchange systems which may or may not share intelligence
with customer premises equipment;
(6) command link-type services for network reconfiguring to
rearrange cross-connections between channel services;
(7) custom network services and special assemblies;
(8) digicom switchnet services for full duplex,
synchronous, information transport;
(9) direct customer access services for telephone number
information services video display;
(10) group access bridge teleconferencing services;
(11) inter-LATA and intra-LATA message toll service;
(12) inter-LATA and intra-LATA private line services;
(13) inter-LATA and intra-LATA wide area telephone service;
(14) mobile radio services;
(15) operator-handled intercept operator services,
excluding local operator services;
(16) public pay telephone services, excluding charges for
access to the central office;
(17) seminars;
(18) services not previously offered prior to August 1,
1987;
(19) a service that generates an annual revenue equal to or
less than the greater of one-tenth of one percent or $100,000 of
a telephone company's annual gross revenues in the year the
company elects to be covered by this section;
(20) special construction of facilities;
(21) studies;
(22) (18) systems for automatic dialing; and
(23) (19) versanet-type service access line involving
continuous monitoring and transmission of data from customer's
premises to the central office.
(b) A service classified as subject to emerging competition
before the effective date of this act retains that
classification unless and until it is reclassified pursuant to
subdivision 3 or 10.
Sec. 6. Minnesota Statutes 1992, section 237.59, is
amended by adding a subdivision to read:
Subd. 1a. [CLASS SERVICES.] Notwithstanding the terms of
subdivision 1, paragraph (b), CLASS services may be classified
as competitive services only when so classified according to
subdivision 3 or 10.
Sec. 7. Minnesota Statutes 1992, section 237.59,
subdivision 2, is amended to read:
Subd. 2. [PETITION.] (a) A telephone company, or the
commission on its own motion, may petition to have a service of
that telephone company classified as subject to effective
competition or emerging competition. The petition must be
served on the commission, the department of public service, the
office of the attorney general, and any other person designated
by the commission. The petition must contain at least:
(1) a list of the known alternative providers of the
service available to the company's customers; and
(2) an estimate of the company's current market share;
(3) identification of barriers to entry or exit from the
market for the service; and
(4) a description of affiliate relationships with any other
provider of the service in the company's market.
(b) At the time the company first offers a service, it
shall also file a petition with the commission for a
determination as to how the service should be classified. In
the event that no interested party or the commission objects to
the company's proposed classification within 20 days of the
filing of the petition, the company's proposed classification of
the service is deemed approved. If an objection is filed, the
commission shall determine the appropriate classification after
a hearing conducted pursuant to section 237.61. In either
event, the company may offer the new service to its customers
ten days after the company files the price list and incremental
cost study as provided in section 237.60, subdivision 2,
paragraph (f).
(c) A new service may be classified as subject to effective
competition or emerging competition pursuant to the criteria set
forth in subdivision 5. A new service must be regulated under
the emerging competition provisions if it is not integrally
related to the provision of adequate local service or access to
the telephone network or to the privacy, health, or safety of
the company's customers, whether or not it meets the criteria
set forth in subdivision 5.
Sec. 8. Minnesota Statutes 1992, section 237.59,
subdivision 3, is amended to read:
Subd. 3. [EXPEDITED PROCEEDING.] An interested party
wishing to contest the change of classification of a service
must file an objection with the commission within 20 days after
the filing of the petition. If no party files an objection, the
service must be reclassified in accordance with the petition.
If a petition is contested, a telephone company that is the
subject of a petition under subdivision 2 may request that the
commission determine the classification of the service through
an expedited proceeding under section 237.61 or a contested case
hearing. If an expedited proceeding is requested, the
commission must provide interested persons an opportunity to
comment on the appropriateness of the process and the merits of
the petition.
When an expedited proceeding is requested, the commission
shall make a final determination within 60 days of the date on
which all required information required under subdivision 2 is
filed, unless during the 60 days the commission finds that a
material issue of fact is in dispute, in which case it shall
order that a contested case hearing be conducted to evaluate the
petition.
Sec. 9. Minnesota Statutes 1992, section 237.59,
subdivision 5, is amended to read:
Subd. 5. [CRITERIA.] (a) If a proposed classification is
objected to pursuant to subdivision 2, paragraph (b), on the
basis that the service does not meet the criteria of this
subdivision, the commission shall consider, in determining
whether a service is subject to either effective competition or
emerging competition from available alternative services service
providers, the commission shall consider and make findings on
the following factors:
(1) the number and sizes of alternative providers of
service and affiliation to other providers;
(2) the extent to which services are available from
alternative providers in the relevant market;
(3) the ability of alternative providers to make
functionally equivalent or substitute services readily available
at competitive rates, terms, and conditions of service;
(4) the market share, the ability of the market to hold
prices close to cost, and other economic measures of market
power; and
(5) the necessity of the service to the well-being of the
customer.
(b) In order for the commission to find a service subject
to effective competition alternative services must be available
to over 50 percent of the company's customers for that service.
(c) In order for the commission to find a service subject
to emerging competition alternative services must be available
to over 20 percent of the company's customers for that service.
Sec. 10. Minnesota Statutes 1992, section 237.60,
subdivision 2, is amended to read:
Subd. 2. [EMERGING COMPETITION.] (a) A company may
decrease the rate for a service subject to emerging competition
that is listed in the price list, effective ten days after
filing a new price list with the commission and the department,
along with an incremental cost study demonstrating that the new
price is above incremental cost. The commission shall prevent a
proposed price reduction from going into effect or prospectively
reinstate the original rate if the reduction has gone into
effect if, after receiving a complaint or on its own motion,
under section 237.081, the commission finds that the new rate is
below incremental cost or that the new rate is not just and
reasonable.
(b) A company may increase the rate for a service subject
to emerging competition that is listed in the price list
effective 30 days after notice is given to affected customers,
the commission, and the department. The notice and new price
list filing to the commission and the department for a rate
increase must include an incremental cost study demonstrating
that the proposed price is above incremental cost, unless a cost
study for the service has been filed within the past three years
and the company certifies that the cost study remains
appropriate for setting rates. However, the commission may
order a new cost study upon showing that the most recent cost
study is inadequate. The department shall investigate an
increase in rates for services subject to emerging competition,
and report its findings to the commission within 30 days of the
filing.
An interested party may file comments on the proposed rate
increase within 30 days of the filing. If no party objects to
the increase within that time, the rate is deemed approved. If
an objection is filed, the rate increase must nonetheless be
deemed approved unless within 60 days of the date of the filing
the commission determines that the increase is potentially
contrary to the public interest. In that event, the commission
may shall, within 60 days after the date of the filing, order
that the rate increase is interim in nature and subject to
refund. If interim rates are not ordered, the rate increase is
not refundable. If a rate is subject to refund, the commission,
after a contested case hearing or an expedited hearing under
section 237.61, must make a final decision regarding the
propriety of the rate increase within six months of the date the
price change was filed, except that if a contested case hearing
before an administrative law judge is required the commission
shall make a final decision within ten months of the date the
price change was filed. If the commission does not do so, the
price change is deemed approved.
(c) If language describing a rate, term, or condition of
service in a price list is changed without substantially
altering the application of the price list, the change may take
effect upon one-day notice to the commission.
(d) If a term or condition of service in a price list is
changed in a way that results in a substantial change in the
application of the price list, but the price is not changed, the
change in the price list is effective at the same time as a
price decrease under paragraph (a).
(e) If a new pricing plan is proposed for a service that is
currently offered by a telephone company, the change in the
price list is subject to the same schedules governing a price
increase under paragraph (b). For purposes of this paragraph, a
new pricing plan is a proposal that bundles rate elements for a
service, alters the definition of the rate elements for a
service, or includes increases for some rate elements and
decreases for other rate elements.
(f) A telephone company may offer a new service to its
customers ten days after it files a price list and incremental
cost study for the service with the department and the
commission.
(g) A telephone company may discontinue a telephone service
that is subject to emerging competition, as long as the
discontinuance is effective for that service throughout the
state, effective 60 days after notice to the commission, the
department, and affected customers, unless the commission,
within 45 days of the notice, orders a hearing on it. If the
commission orders a hearing, the commission shall make a final
determination on the discontinuance within 180 days of the date
that notice of the discontinuance was filed with the commission,
except that if a contested case hearing before an administrative
law judge is required the commission shall make a final decision
within ten months of the date the notice of discontinuance was
filed.
(h) A change in a price list not covered by paragraphs (a)
to (f) must be reviewed according to the schedule prescribed for
a price increase under paragraph (b).
(i) An incremental cost study required by this section,
section 216D.01, subdivision 8, and 237.62, must be a long-run
incremental cost study unless the commission has allowed the
telephone company required to do the study to set rates based on
a variable cost study. A telephone company may include a
petition to file a variable cost study instead of a long-run
incremental cost study with its notice of price change, notice
of a promotion, or its filing of a new service. The commission
shall grant the petition if the company demonstrates that a
long-run incremental cost study is burdensome in relation to its
annual revenue from the service involved, that the company has a
low market share, that the service is no longer being offered to
new customers, or if the company shows other good cause. A
petition must be accompanied by a variable cost study. If the
petition is denied, the company shall withdraw a filing made
under this section.
(j) For purposes of this section and section 237.62, (1)
long-run incremental cost means the change in total cost
associated with a change in volume of the service, expressed on
a per-unit basis, and (2) variable cost means the change in
total cost, excluding fixed costs, associated with a change in
volume of service, expressed on a per-unit basis.
Sec. 11. Minnesota Statutes 1992, section 237.62,
subdivision 1, is amended to read:
Subdivision 1. [FINANCIAL REQUIREMENTS.] (a) This
subdivision governs a proceeding initiated under section 237.075
or 237.081 to change the rates for noncompetitive services.
Subdivision 1a governs a proceeding under section 237.075 or
237.081 to change the rates for noncompetitive services and for
services subject to emerging competition. The company shall
elect that rate changes be made in accordance with either this
subdivision or subdivision 1a, and that election is binding on
the commission in all respects.
(b) A company electing to use this subdivision may
demonstrate the revenue requirement for its noncompetitive
services by providing:
(1) revenues, expenses, and embedded investments directly
related to the provision of the noncompetitive services;
(2) a reasonable portion of the net income generated
jointly or arising from jointly competitive and noncompetitive
services, and net income received by a telephone company as a
result of the sale of telephone number listings, charges and
advertising for use in white pages, yellow pages, other
directory and other related services, must be treated as arising
jointly from competitive and noncompetitive services; and
(3) a reasonable portion of the company's total joint and
common costs to be attributable to the provision of the
noncompetitive services.
(c) For purposes of this subdivision, when a telephone
company uses an investment to provide competitive services to
end-user customers and another company provides a competing
service that requires, in part, the use of a similar investment
to provide the telephone company's noncompetitive services or
service elements, the telephone company shall treat both
investments and related costs as though they are providing
noncompetitive services and shall attribute revenues to the
noncompetitive category using the rates for the noncompetitive
service or service elements multiplied by the appropriate
current volumes for the telephone company's competitive service
instead of determining the investment, associated expenses, and
common and joint costs under paragraph (b), clauses (1) and (3)
to determine the revenue requirement for the noncompetitive
category.
(d) A telephone company that receives annual revenues from
Minnesota intrastate services of less than $100,000,000 may
demonstrate the revenue requirement for its noncompetitive
services by removing from the telephone company's total
revenues, expenses, and embedded investments the revenues,
expenses, and embedded investments of:
(1) interstate services, determined using:
(i) the specific jurisdictional separations procedures
adopted by the Federal Communications Commission, if the
telephone company is an actual cost company for interstate
services; or
(ii) applicable jurisdictional separations principles, if
the telephone company is an average schedule company for
interstate services; and
(2) competitive intrastate services, determined as follows:
(i) revenues must be directly assigned based on the related
services;
(ii) revenues from services with both competitive and
noncompetitive elements must be assigned first to noncompetitive
elements based on tariffs, with the remainder assigned to
competitive elements;
(iii) expenses must be directly assigned to either
competitive or noncompetitive services when possible, based on
the origin of those expenses;
(iv) joint expenses, which are those that cannot be
directly assigned to any single competitive or noncompetitive
service, must be allocated using a cost causal methodology in
accordance with the following hierarchy:
(A) whenever practicable, the allocation of expenses must
be based on a measurable assignment method; then
(B) other expenses, to the extent practicable, must be
allocated by employing surrogate measures; and then
(C) any remaining joint expenses must be allocated to
competitive services based on the ratio of related direct and
joint expenses assigned to the competitive services to total
related direct and joint expenses;
(v) expenses that are common to all services must be
allocated based on the ratio of all direct and joint expenses of
competitive and noncompetitive services; and
(vi) embedded investments must be assigned and allocated
using a hierarchy comparable to the hierarchy used for the
assignment and allocation of expenses.
(e) A telephone company shall also treat the net income
from the sale of telephone number listings, charges, and
advertising for use in the white pages directory, yellow pages
directory, other directories, and other related services as
provided in paragraph (b), clause (2).
(f) Unless otherwise ordered by the commission, a telephone
company may omit the determination and removal of the revenues,
expenses, and embedded investments related to competitive
services that:
(1) generate, in the aggregate, annual revenues less than
$50,000; or
(2) individually generate annual revenues less than
one-tenth of one percent of the company's annual gross revenues
for the test year period.
However, the telephone company shall not omit determination
based on clauses (1) and (2).
Sec. 12. Minnesota Statutes 1992, section 237.625,
subdivision 1, is amended to read:
Subdivision 1. [INCENTIVE PLANS.] (a) A telephone company
whose general revenue requirement is determined under section
237.075 may petition the commission for approval of an incentive
plan. The incentive plan must apply to the noncompetitive
services of a company covered by section 237.62, subdivision 1,
and must apply to noncompetitive services and services subject
to emerging competition if the company has chosen to be governed
by section 237.62, subdivision 1a. The purpose of the plan is
to provide an incentive to the company to improve its operating
efficiency while maintaining or improving the quality of its
service. If a telephone company is able to increase its
earnings, the telephone company shall share the increased
earnings with its customers to the extent and in the manner set
forth in the commission-approved plan. The commission may not
approve a plan that does not meet the requirements of this
paragraph and paragraphs (b) to (e) (f).
(b) A telephone company shall share increased earnings
during the term of the incentive plan with its customers either
by giving them credits against bills or by lowering rates. The
division of increased earnings between the company and the
customers must reflect the degree to which the company has
assumed a risk of earning less than its revenue requirement and
the degree to which the customers have assumed a risk of rate
increases. Any plan approved or renewed under this section
after August 1, 1994, must require that the percentage of
increased earnings shared with customers change in relation to
the amount that earnings exceed the last authorized return on
equity for that company.
(c) The incentive plan must be in effect for at least two
years.
(d) The incentive plan must provide for periodic reporting
to the commission to document that the sharing requirements of
the plan are being properly implemented. The company's rates
and earnings under the plan are not subject to section 237.081,
subdivision 2, paragraph (b), except to the extent necessary to
enforce the sharing provisions of the incentive plan.
(e) An incentive plan may not permit rate increases except
under other provisions in this chapter. The plan may, however,
permit the direct pass-through of cost decreases and increases
approved or reallocated by a governmental entity, except for
changes in intrastate depreciation schedules.
(f) An incentive plan approved or renewed by the commission
pursuant to this section after August 1, 1994, must contain:
(1) specific standards for measuring the quality of
noncompetitive services and services subject to emerging
competition in all areas served by the company and including,
but not limited to, standards concerning installation and time
intervals for restoration or repair of service, trouble rates,
exchange access line held orders, customer satisfaction, and
dial tone speed;
(2) quality reports provisions for reporting to the
commission at least annually the company's performance as to the
quality of service standards;
(3) indexing provisions that index quality of service
improvements for local residence services to similar
improvements for local business services; and
(4) appropriate remedies, which may include incentives and
sanctions, that may apply to ensure substantial compliance with
the quality of service standards set forth in the plan.
Sec. 13. [REPEALER.]
Laws 1987, chapter 340, section 26; Laws 1989, chapter 74,
sections 25 and 27; Laws 1990, chapter 513, section 3; and Laws
1993, chapter 41, section 1, are repealed.
Minnesota Rules, parts 7815.0700; 7815.0800; 7815.0900;
7815.1000; 7815.1100; 7815.1200; 7815.1300; 7815.1400; and
7815.1500, are repealed.
Sec. 14. [EFFECTIVE DATE.]
Section 1 is effective the day following final enactment.
Sections 2 to 13 are effective June 1, 1994.
ARTICLE 2
Section 1. Minnesota Statutes 1992, section 325E.26, is
amended by adding a subdivision to read:
Subd. 6. [MESSAGE.] "Message" means any call, regardless
of its content.
Sec. 2. [EFFECTIVE DATE.]
Section 1 is effective July 1, 1994.
Presented to the governor April 26, 1994
Signed by the governor April 28, 1994, 2:30 p.m.
Official Publication of the State of Minnesota
Revisor of Statutes