DE 90-002


              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
         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
         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
         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