DE 90-002
GENERIC TELECOMMUNICATIONS COMPETITION DOCKET
Regulation of Competitive IntraLATA Toll Providers
Order Delineating Scope of Regulation over Competitive IntraLATA
Toll Providers
O R D E R N O. 22,473
January 6, 1997
The purpose of this order is to codify our
preliminary findings regarding the degree to which competitive
intraLATA toll providers should be regulated. Our experience in
the trial period for intraLATA competition established in Order
No. 20,916 (August 2, 1993) persuades us that our current
procedures for regulating such toll providers is cumbersome and
provides no greater degree of public protection than would a more
streamlined approach. Accordingly, as set forth more fully
below, we will modify our current procedures for authorizing
competitive intraLATA toll providers and will outline the manner
in which they will be regulated by this Commission in the future.
The Commission's movement towards competition in
telecommunications has been mirrored by enactments at our
Legislature (see, e.g., RSA 374:22-g) and on a federal level with
the passage of the Telecommunications Act of 1996. Consistent
with federal mandate, the Commission is encouraging the
development of meaningful competition through a number of
actions, including this reduction in regulation over competitive
intraLATA toll providers. Our decision today is based upon the
following history.
As the telecommunications industry has evolved in
recent years, so has the Commission's view of the appropriate
degree of regulation over some of the new participants in the
intraLATA toll market. One of the significant changes in the
past few years is the emergence of competitive interLATA and
intraLATA toll providers, who provide toll services either by
using their own facilities or by buying toll services in bulk
from a carrier or carriers and reselling them to individual
retail customers. Some toll providers are facilities based, that
is, they own or operate facilities, including switches, to route
and/or carry calls. Others are non-facilities based or
"switchless" toll providers, in that they only repackage the
product offered by one or more carriers and have no ability to
route, switch or carry the calls themselves. Many are a hybrid
of the two, using facilities in some instances while serving
customers on a non-facilities basis in others. In 1995,
competitive intraLATA toll providers generated over $32.3 million
in revenues in New Hampshire.
For years, New England Telephone, now doing
business as NYNEX, was the only carrier authorized to provide
intraLATA toll service. As the incumbent toll provider, NYNEX
still retains over 75% of the intraLATA toll traffic. Neither
NYNEX nor any other incumbent local exchange carrier (ILEC) is
included in our use of the term "competitive intraLATA toll
provider." At a future time, we intend to consider the
appropriate regulatory treatment for the intraLATA toll services
offered by NYNEX and other ILECs that may enter the intraLATA
toll market.
We first became involved in analysis of
competitive toll service when Long Distance North and AT&T sought
authorization, which prompted the Commission to undertake the
Generic Telecommunications Competition Docket, DE 90-002. During
this period, we became aware of a switched reseller operating
without Commission authorization. The Commission found the
carrier to be a public utility pursuant to RSA 362:2. See, Re
Atlantic Connections Ltd., 76 NHPUC 91 (1991), affirmed on
appeal, Appeal of Atlantic Connections Ltd., 135 N.H. 510 (1992).
In 1993, we learned from competitive toll
providers considering entry into the New Hampshire market that
the statutory requirement that a public utility be incorporated
within New Hampshire was a deterrent to operating within the
State. In response, we initiated a legislative amendment so that
a telecommunications public utility has a choice either to be
incorporated in New Hampshire or simply registered with the New
Hampshire Secretary of State. RSA 374:25 (effective June 23,
1994). The number of petitions for authorization increased
dramatically.
We also saw an increase in providers interested in
entering the New Hampshire market as a result of our Generic
Telecommunications Competition Docket, DE 90-002. In our final
order in that case, we established a framework for intraLATA toll
competition and set decreasing access rates that stepped down
from 20 cents per minute to the present level of 7.2 cents per
minute (for combined originating and terminating access). We
established a two year Trial Period of intraLATA competition,
commencing in October 1993. Prior to the Trial Period, there
were 20 competitive intraLATA toll providers authorized in New
Hampshire; since then, the Commission has certified over 125 and
has approximately 80 applications for authority pending.
Nothing in our experience in the Trial Period
suggests that extensive regulation of competitive toll providers
is necessary. We are now evaluating data collected during the
Trial Period and will issue a report of our findings in the near
future. It is clear to us based on our review thus far,
however, that we should reevaluate the degree of regulation
imposed on competitive intraLATA toll providers.
There is a long-standing tradition in New
Hampshire that one should exert regulation only to the extent
necessary. Part 2, article 83 of the New Hampshire Constitution
provides, in pertinent part,
Free and fair competition in the
trades and industries is an
inherent and essential right of the
people and should be protected
against all monopolies and
conspiracies which tend to hinder
or destroy it.
The New Hampshire Supreme Court elaborated on the
State's clear preference for free enterprise, admonishing the
Commission for exerting jurisdiction over a new area of
telecommunications which, the Court concluded, did not require
regulation. Appeal of Omni Communications, Inc., 122 N.H. 860
(1982). The Court found that the Legislature never intended the
Commission to have jurisdiction over radio paging services (or
"beepers") and there was no public need to bring these services
within the Commission's purview. As the Court stated, "...the
legislature did not intend to place all . . . telephone,
telegraph, light, heat and power companies under the umbrella of
the [Commission's] regulatory power." 122 N.H. at 863 (citations
omitted).
The New Hampshire Supreme Court has also stated
that the Commission's jurisdiction is somewhat fluid, depending
not only on the operations of the utility provider but the policy
reasons for asserting jurisdiction. In Allied N.H. Gas Co. v.
Tri-State Gas Co., 107 N.H. 306 (1966), the Court held that
though certain operations might fall within a strict reading of
RSA 362:2, they were not necessarily regulated if, by asserting
jurisdiction, the Commission would go beyond the purposes for
which the Commission had been created.
It is equally important, as noted in the Freedom
Energy appeal, that the Commission narrowly construe its
authority and exercise the degree of regulation that promotes
fair competition while ensuring the public good. Appeal of
Public Service Company of New Hampshire, 140 N.H. ___ (1996)
(Supreme Court Docket #95-610, Order May 13, 1996 at page 7). In
this case, therefore, we should impose regulation that will
encourage the development of competition as well as protecting
residential and commercial customers' interests.
Switched and switchless toll providers offer a
service that is now subject to considerable competition.
Recently, we ordered the implementation of intraLATA
presubscription which, we expect, will increase the level of
competition for smaller customers. Under presubscription,
customers will enjoy the same ease of selecting an intraLATA toll
carrier as they now have for interLATA toll, eliminating the need
to dial the extra five digit access code to reach a carrier other
than NYNEX. Customers can move from one toll provider to another
for intraLATA toll service if they are dissatisfied with any
aspect of the provider's service.
In light of the increasingly competitive market
for intraLATA toll service, we find no need for extensive
Commission regulation of the rapidly expanding number of
competitive intraLATA toll providers. We will no longer require
a provider to demonstrate its financial, technical or managerial
competence but instead will institute a simple registration
process. Nor will we scrutinize the terms, rates or conditions
of service or issue orders regarding tariff changes.
Effective immediately, we will require the
following:
A. Registration
A competitive intraLATA toll provider shall
register with the Commission before commencing operations in the
State. It shall submit the company's name, business address and
contact person, noting a toll free customer service number if
available. It shall submit evidence of incorporation in New
Hampshire or Secretary of State registration as a foreign entity
authorized to do business in the State in accordance with RSA
374:25. It shall also certify that it will be bound by all
applicable administrative rules and orders of the Commission.
These registration requirements are effective with the date of
this order.
The Commission will presume that competitive toll
providers possess the necessary qualifications to operate, a
presumption which is subject to further analysis if a problem is
raised by the public, another utility or the Commission regarding
a particular utility provider. Before commencing operations in
the State, a competitive intraLATA toll provider must obtain
verification from the Commission stating the provider has met the
Commission's registration requirements.
B. Tariff filings
A competitive intraLATA toll provider shall file
an initial tariff and keep a current tariff on file with the
Commission. New services and changes in services will be
effective upon 30 days of filing, pursuant to RSA 378:3, unless
otherwise ordered by the Commission.
We will presume that initial tariff provisions and
subsequent changes are just and reasonable and in the public
interest, given the wide availability of alternative toll
providers and services. This presumption is subject to further
evaluation if a problem is raised by the public, another utility
or the Commission regarding a particular service or condition of
service. Tariff conditions inconsistent with our administrative
rules and/or statutory requirements will be null and void,
notwithstanding a tariff on file with the Commission. Pursuant
to Order No. 20,566 (August 5, 1992), changes in rates of
existing services continue to be effective automatically if filed
no later than one day after the new rate's effective date.
C. Utility Assessment
Competitive toll providers shall remain utilities
pursuant to RSA 362:2. As such, they continue to be responsible
for their share of the Utility Assessment for Commission
operations in accordance with RSA 363-A.
D. Reporting Requirements
As a condition of authorization to operate within
the state, each competitive toll provider shall file with the
Commission an Annual Report consisting of a Balance Sheet and
Statement of Operations, statement of New Hampshire revenues, and
an Information Sheet containing the names, business mailing
addresses and titles of corporate officers, and the address to
which the New Hampshire Utility Assessment should be mailed.
E. Pending Applications for Authority
Applications for authority to operate now pending
before the Commission will be treated as registration filings.
We direct our Staff to review pending applications in light of
this order and contact any applicant who has not met the terms of
the registration process to complete its filing.
F. Pending Tariff Changes
Petitions for tariff approval now pending before
the Commission will be evaluated in light of the terms of this
order; that is, they will automatically become effective 30 days
from the date on which they were received by the Commission
unless an order is issued otherwise.
G. Remaining Commission Oversight
Because we remain at the threshold of significant
change in the telecommunications industry, it is not appropriate
at this time to fully deregulate competitive intraLATA toll
providers. Our role providing oversight and assistance on
consumer protection matters is critical, and we must maintain the
ability to exert greater control over any provider that abuses
its authority to operate or otherwise conducts business in an
unfair or deceptive manner. Effective immediately, we will
regulate competitive intraLATA toll providers in accordance with
the limited terms detailed in this order. Our authority, of
course, extends only so far as the Legislature provides. Based
upon current statutory enactment, we maintain the authority to
impose greater regulation over particular entities and
competitive intraLATA toll providers as a whole, should
circumstances so warrant.
Based upon the foregoing, it is hereby
ORDERED, that effective immediately, the
Commission will exert limited regulation over competitive
intraLATA toll providers in accordance with the terms of this
order; and it is
FURTHER ORDERED, that the following dockets: DS
96-395 Cable & Wireless, Inc.; DS 96-398 Business Telecom, Inc.;
DS 96-400 MCI Telecommunications Corporation; DS 96-403 LCI
International Telecom Corp.; DS 96-404 AT&T Communications of NH,
Inc.; DS 96-408 Sprint Communications Company of New Hampshire,
Inc.; DS 96-410 Tel-Save, Inc. d/b/a The Phone Company of New
Hope; DS 96-418 MCI Telecommunications Corporation; DS 96-421
Frontier Communications International, Inc.; DS 96-422 Frontier
Communications of New England, Inc.; and DS 96-423 Sprint
Communications Company of New Hampshire, Inc.; are hereby closed
and that the filings contained therein shall be considered
effective pursuant to paragraph F above.
By order of the Public Utilities Commission of New
Hampshire this sixth day of January, 1997.
Douglas L. Patch Bruce B. Ellsworth Susan S. Geiger
Chairman Commissioner Commissioner
Attested by:
Thomas B. Getz
Executive Director and Secretary