TITLE economic-regulation

Part II. Public Utility Commission of Texas

Chapter 23. Substantive Rules

Subchapter D. Certification

16 TAC §23.38

The Public Utility Commission of Texas (commission) proposes the repeal of §23.38 relating to Standards for Granting of Certificates of Operating Authority and Service Provider Certificates of Operating Authority. Project Number 19582 has been assigned to this proceeding. The Appropriations Act of 1997, HB 1, Article IX, Section 167 (Section 167) requires that each state agency review and consider for readoption each rule adopted by that agency pursuant to the Government Code, Chapter 2001 (Administrative Procedure Act). Such reviews shall include, at a minimum, an assessment by the agency as to whether the reason for adopting or readopting the rule continues to exist. The commission held three workshops to conduct a preliminary review of its rules. As a result of these workshops, the commission is reorganizing its current substantive rules located in 16 Texas Administrative Code (TAC) Chapter 23 to (1) satisfy the requirements of Section 167; (2) repeal rules no longer needed; (3) update existing rules to reflect changes in the industries regulated by the commission; (4) do clean-up amendments made necessary by changes in law and commission organizational structure and practices; (5) reorganize rules into new chapters to facilitate future amendments and provide room for expansion; and (6) reorganize the rules according to the industry to which they apply. As a result of this reorganization, §23.38 will be duplicative of proposed new §§26.109 relating to Standards for Granting of Certificates of Operating Authority (COAs), 26.111 relating to Standards for Granting of Service Provider Certificates of Operating Authority (SPCOAs), and 26.113 relating to Amendment of Certificates of Operating Authority (COAs) or Service Provider Certificates of Operating Authority (SPCOAs) in Chapter 26, Substantive Rules Applicable to Telecommunications Service Providers.

Christopher Green, Assistant General Counsel, Office of Regulatory Affairs, has determined that for each year of the first five-year period the repeal is in effect there will be no fiscal implications for state or local government as a result of enforcing or administering the repeal.

Mr. Green has determined that for each year of the first five years the repeal is in effect, the public benefit anticipated as a result of the repeal will be the elimination of a duplicative rule. There will be no effect on small businesses as a result of repealing this section. There is no anticipated economic cost to persons as a result of repealing this section.

Mr. Green has also determined that the proposed repeal should not affect a local economy, and therefore no local employment impact statement is required under Administrative Procedure Act §2001.022.

Comments on the proposed repeal (16 copies) may be submitted to the Filing Clerk, Public Utility Commission of Texas, 1701 North Congress Avenue, PO Box 13326, Austin, Texas 78711-3326, within 30 days after publication. All comments should refer to Project Number 19582.

This repeal is proposed under the Public Utility Regulatory Act, Texas Utilities Code Annotated §14.002 (Vernon 1998) (PURA), which provides the Public Utility Commission with the authority to make and enforce rules reasonably required in the exercise of its powers and jurisdiction.

Cross Reference to Statutes: Public Utility Regulatory Act §14.002.

§23.38.Standards for Granting of Certificates of Operating Authority and Service Provider Certificates of Operating Authority.

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State on March 22, 1999.

TRD-9901679

Rhonda Dempsey

Rules Coordinator

Public Utility Commission of Texas

Earliest possible date of adoption: May 2, 1999

For further information, please call: (512) 936-7308

Subchapter I. Universal Service Fund

16 TAC §§23.131, 23.133, 23.134, 23.136, 23.138, 23.142, 23.143, 23.144, 23.145, 23.147, 23.148, 23.150

(Editor's note: The text of the following sections proposed for repeal will not be published. The sections may be examined in the offices of the Texas Public Utility Commission of Texas or in the Texas Register office, Room 245, James Earl Rudder Building, 1019 Brazos Street, Austin.)

The Public Utility Commission of Texas (commission) proposes the repeal of §23.131, §23.133, §23.134, §23.136, §23.138, §23.142, §23.143, §23.144, §23.145, §23.147, §23.148 and §23.150 of this title relating to the Universal Service Fund. Project Number 20428 has been assigned to this proceeding. The Appropriations Act of 1997, HB 1, Article IX, Section 167 (Section 167) requires that each state agency review and consider for readoption each rule adopted by that agency pursuant to the Government Code, Chapter 2001 (Administrative Procedure Act). Such reviews shall include, at a minimum, an assessment by the agency as to whether the reason for adopting or readopting the rule continues to exist. The commission held three workshops to conduct a preliminary review of its rules. As a result of these workshops, the commission is reorganizing its current substantive rules located in 16 Texas Administrative Code (TAC) Chapter 23 to (1) satisfy the requirements of Section 167; (2) repeal rules no longer needed; (3) update existing rules to reflect changes in the industries regulated by the commission; (4) do clean-up amendments made necessary by changes in law and commission organizational structure and practices; (5) reorganize rules into new chapters to facilitate future amendments and provide room for expansion; and (6) reorganize the rules according to the industry to which they apply. As a result of this reorganization the Universal Service Fund rules in Chapter 23 will be duplicative of proposed new §26.401, §26.403, §26.404, §26.406, §26.408, §26.412, §26.413, §26.414, §26.415, §26.417, §26.418 and §26.420 relating to the Texas Universal Service Fund (TUSF) in Chapter 26, Substantive Rules Applicable to Telecommunications Service Providers.

Mr. Martin Wilson, assistant general counsel, Office of Regulatory Affairs, has determined that for each year of the first five-year period the repeal is in effect there will be no fiscal implications for state or local government as a result of enforcing or administering the repeal.

Mr. Wilson has determined that for each year of the first five years the repeal is in effect, the public benefit anticipated as a result of the repeal will be the elimination of a duplicative rule. There will be no effect on small businesses as a result of repealing this section. There is no anticipated economic cost to persons as a result of repealing this section.

Mr. Wilson has also determined that the proposed repeal should not affect a local economy, and therefore no local employment impact statement is required under Administrative Procedure Act §2001.022.

Comments on the proposed repeal (16 copies) may be submitted to the Filing Clerk, Public Utility Commission of Texas, 1701 North Congress Avenue, PO Box 13326, Austin, Texas 78711-3326, within 30 days after publication. All comments should refer to Project Number 20428.

This repeal is proposed under the Public Utility Regulatory Act, Texas Utilities Code Annotated §14.002 (Vernon 1998) (PURA), which provides the Public Utility Commission with the authority to make and enforce rules reasonably required in the exercise of its powers and jurisdiction.

Cross Reference to Statutes: Public Utility Regulatory Act §14.002.

§23.131.Texas Universal Service Fund (TUSF).

§23.133.Texas High Cost Universal Service Plan (THCUSP).

§23.134.Small and Rural Incumbent Local Exchange Carrier (ILEC) Universal Service Plan.

§23.136.Implementation of the Public Utility Regulatory Act §56.025.

§23.138.Additional Financial Assistance (AFA).

§23.142.Lifeline Service and Link Up Service Programs.

§23.143.Tel-Assistance Service.

§23.144.Telecommunications Relay Service.

§23.145.Specialized Distribution Program.

§23.147.Designation of Local Exchange Carriers as Eligible Telecommunications Providers to Receive Texas Universal Service Funds (TUSF).

§23.148.Designation of Common Carriers as Eligible Telecommunications Carriers to Receive Federal Universal Service Funds.

§23.150.Administration of Texas Universal Service Fund (TUSF).

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State on March 17, 1999.

TRD-9901654

Rhonda Dempsey

Rules Coordinator

Public Utility Commission of Texas

Earliest possible date of adoption: May 2, 1999

For further information, please call: (512) 936-7308

Chapter 26. Substantive Rules Applicable to Telecommunications Service Providers

The Public Utility Commission of Texas (commission) proposes an amendment to §26.5 and new §26.401, §26.403, §26.404, §26.406, §26.408, §26.412, §26.413, §26.414, §26.415, §26.417, §26.418 and §26.420 relating to the Texas Universal Service Fund (TUSF). The proposed new sections will replace §23.131, §23.133, §23.134, §23.136, §23.138, §23.142, §23.143, §23.144, §23.145, §23.147, §23.148 and §23.150 of this title. Project Number 20428 has been assigned to this proceeding.

The Appropriations Act of 1997, HB 1, Article IX, Section 167 (Section 167) requires that each state agency review and consider for readoption each rule adopted by that agency pursuant to the Government Code, Chapter 2001 (Administrative Procedure Act). Such reviews shall include, at a minimum, an assessment by the agency as to whether the reason for adopting or readopting the rule continues to exist. The commission held three workshops to conduct a preliminary review of its rules. As a result of these workshops, the commission is reorganizing its current substantive rules located in 16 Texas Administrative Code (TAC) Chapter 23 to (1) satisfy the requirements of Section 167; (2) repeal rules no longer needed; (3) update existing rules to reflect changes in the industries regulated by the commission; (4) do clean-up amendments made necessary by changes in law and commission organizational structure and practices; (5) reorganize rules into new chapters to facilitate future amendments and provide room for expansion; and (6) reorganize the rules according to the industry to which they apply. Chapter 26 has been established for all commission substantive rules applicable to telecommunications service providers. The duplicative sections of Chapter 23 will be proposed for repeal as each new section is proposed for publication in the new chapter.

General changes to rule language:

The proposed amendment to §26.5 includes the deletion of two definitions: equipment distribution program and equipment distribution program voucher. The deleted definitions will be replaced with definitions for the Specialized Telecommunications Device Assistance Program (STDAP) and STDAP voucher. There are no substantial changes to the content of the definitions, only to the name of the program.

The proposed new sections reflect different section, subsection, and paragraph designations due to the reorganization of the rules. Citations to other sections of the commission's rules have been updated to reflect the new section designations. Some text has been proposed for deletion as unnecessary in the new sections because the dates and requirements in the text no longer apply due to the passage of time and/or fulfillment of the requirements. Some definitions have been deleted from the specific sections to avoid duplication and can be found in §26.5. The Texas Register will publish these sections as all new text. Persons who desire a copy of the proposed new sections as they reflect changes to existing sections in Chapter 23 may obtain a redlined version from the commission's Central Records under Project Number 20428.

Other changes specific to each section:

Proposed new §26.404(e)(1)(A) will replace corresponding §23.134 (e)(1)(A) of this title (relating to the Small and Rural Incumbent Local Exchange Carrier (ILEC) Universal Service Plan). The commission proposes to update the subsection by replacing "Texas Exchange Carrier Association (TECA)" with "Texas Universal Service Fund (TUSF) administrator."

Proposed new §26.415 will replace corresponding §23.145 of this title (relating to the Specialized Equipment Distribution Program). The commission proposes to change the title of the rule to "Specialized Telecommunications Device Assistance Program (STDAP)" to match the statutory title of the program in the Public Utility Regulatory Act (PURA) §3.611.

Proposed new §26.420(g)(5)(A)(ii) will replace corresponding §23.150(g)(5)(A)(ii) of this title (relating to the Administration of the Texas Universal Service Fund (TUSF)). The commission proposes to clarify the subsection by replacing the word "customers" with "services."

Mr. Martin Wilson, assistant general counsel, Office of Regulatory Affairs, has determined that for each year of the first five-year period the proposed sections are in effect there will be no fiscal implications for state or local government as a result of enforcing or administering the sections.

Mr. Wilson has determined that for each year of the first five years the proposed sections are in effect the public benefit anticipated as a result of enforcing the sections will be to implement a competitively neutral mechanism that enables all residents of the state to obtain the basic telecommunications services needed to communicate with other residents, businesses, and governmental entities. There will be no effect on small businesses as a result of enforcing these sections. There is no anticipated economic cost to persons who are required to comply with the sections as proposed.

Mr. Wilson has also determined that for each year of the first five years the proposed sections are in effect there should be no affect on a local economy, and therefore no local employment impact statement is required under Administrative Procedure Act §2001.022.

The commission invites specific comments to the following question: Does the phrase "retail customers" as used in PUC Substantive Rule §23.150(g)(5) mean retail customers subject to tax under Tax Code Chapter 151?

Comments on the proposed Texas Universal Service Fund rules (16 copies) may be submitted to the Filing Clerk, Public Utility Commission of Texas, 1701 North Congress Avenue, PO Box 13326, Austin, Texas 78711-3326, within 30 days after publication. Reply comments may be filed within 45 days after publication. The commission also invites specific comments regarding the costs associated with, and benefits that will be gained by, implementation of the proposed sections. The commission will consider the costs and benefits in deciding whether to adopt the sections. The commission also invites specific comments regarding the Section 167 requirement as to whether the reason for adopting or readopting the rule continues to exist. All comments should refer to Project Number 20428.

Subchapter A. General Provisions

16 TAC §26.5

This amendment is proposed under the Public Utility Regulatory Act, Texas Utilities Code Annotated §14.002 (Vernon 1998) (PURA), which provides the Public Utility Commission with the authority to make and enforce rules reasonably required in the exercise of its powers and jurisdiction.

Cross-Index to Statutes: Public Utility Regulatory Act §14.002, §56.021, Acts 1997, 75th Legislature, ch. 149, §3.608(a), and Acts 1997, 75th Legislature, ch. 149, §3.611.

§26.5.Definitions.

The following words and terms, when used in this chapter, shall have the following meanings, unless the context clearly indicates otherwise:

(1)-(76)

(No change.)

[ (77)

Equipment distribution program (EDP) - Program to assist individuals who are deaf or hard of hearing or who have an impairment of speech to purchase specialized telecommunications devices for telephone service access, authorized by 1997 Texas General Laws Chapter 149, to be jointly administered by the commission and the Texas Commission for the Deaf and Hard of Hearing.]

[ (78)

Equipment distribution program (EDP) voucher - a voucher issued by Texas Commission for the Deaf and Hard of Hearing under the equipment distribution program, in accordance with its rules, that an eligible individual may use to acquire eligible specialized telecommunications devices from a vendor of such equipment.]

(77)

[ (79) ] Exchange area - The geographic territory delineated as an exchange area by official commission boundary maps. An exchange area usually embraces a city or town and its environs. There is usually a uniform set of charges for telecommunications service within the exchange area. An exchange area may be served by more than one central office and/or one certificated telephone utility. An exchange area may also be referred to as an exchange.

(78)

[ (80) ] Expenses - Costs incurred in the provision of services that are expensed, rather than capitalized, in accordance with the Uniform System of Accounts applicable to the carrier.

(79)

[ (81) ] Experimental service - A new service that is proposed to be offered on a temporary basis for a specified period not to exceed one year from the date the service is first provided to any customer.

(80)

[ (82) ] Extended area service (EAS) - A telephone switching and trunking arrangement which provides for optional calling service by dominant certificated telecommunications utilities within a local access and transport area and between two contiguous exchanges or between an exchange and a contiguous metropolitan exchange local calling area. For purposes of this definition, a metropolitan exchange local calling area shall include all exchanges having local or mandatory EAS calling throughout all portions of any of the following exchanges: Austin metropolitan exchange, Corpus Christi metropolitan exchange, Dallas metropolitan exchange, Fort Worth metropolitan exchange, Houston metropolitan exchange, San Antonio metropolitan exchange, or Waco metropolitan exchange. EAS is provided at rate increments in addition to local exchange rates, rather than at toll message charges.

(81)

[ (83) ] Extended local calling service (ELCS) - Service provided pursuant to §23.49(c) of this title (relating to Telephone Extended Area Service and Expanded Toll-free Local Calling Areas).

(82)

[ (84) ] Facilities - All the plant and equipment of a public utility, including all tangible and intangible real and personal property without limitation, and any and all means and instrumentalities in any manner owned, operated, leased, licensed, used, controlled, furnished, or supplied for, by, or in connection with the business of any public utility, including any construction work in progress allowed by the commission.

(83)

[ (85) ] Facilities-based provider - A telecommunications provider that provides telecommunications services using facilities that it owns or leases or a combination of facilities that it owns and leases, including unbundled network elements.

(84)

[ (86) ] Foreign exchange (FX) - exchange service furnished by means of a circuit connecting a customer's station to a primary serving office of another exchange.

(85)

[ (87) ] Foreign serving office (FSO) - Exchange service furnished by means of a circuit connecting a customer's station to a serving office of the same exchange but outside of the serving office area in which the station is located.

(86)

[ (88) ] Forward-looking common costs - Economic costs efficiently incurred in providing a group of elements or services that cannot be attributed directly to individual elements or services.

(87)

[ (89) ] Forward-looking economic cost - The sum of the total element long-run incremental cost of an element and a reasonable allocation of its forward-looking common costs.

(88)

[ (90) ] Forward-looking economic cost per unit - The forward-looking economic cost of the element as defined in this section, divided by a reasonable projection of the sum of the total number of units of the element that the dominant certificated telephone utility (DCTU) is likely to provide to requesting telecommunications carriers and the total number of units of the element that the DCTU is likely to use in offering its own services, during a reasonable time period.

(89)

[ (91) ] Geographic scope - The geographic area in which the holder of a Certificate of Operating Authority or of a Service Provider Certificate of Operating Authority is authorized to provide service.

(90)

[ (92) ] Grade of service - The number of customers a line is designated to serve.

(91)

[ (93) ] Hearing - Any proceeding at which evidence is taken on the merits of the matters at issue, not including prehearing conferences.

(92)

[ (94) ] Hearing carryover - A technology that allows an individual who is speech-impaired to hear the other party in a telephone conversation and to use specialized telecommunications devices to send communications through the telecommunications relay service operator.

(93)

[ (95) ] High cost area - A geographic area for which the costs established using a forward-looking economic cost methodology exceed the benchmark levels established by the commission.

(94)

[ (96) ] High cost assistance (HCA) - A program administered by the commission in accordance with the provisions of §23.133 of this title (relating to Texas High Cost Universal Service Plan (THCUSP).

(95)

[ (97) ] Identity - The name, address, telephone number, and/or facsimile number of a person, whether natural, partnership, municipal corporation, cooperative corporation, corporation, association, governmental subdivision, or state agency and the relationship of the person to the entity being represented.

(96)

[ (98) ] Impulse noise - Any momentary occurrence of the noise on a channel significantly exceeding the normal noise peaks. It is evaluated by counting the number of occurrences that exceed a threshold. This noise degrades voice and data transmission.

(97)

[ (99) ] Incumbent local exchange company (ILEC) - A local exchange company that had a certificate of convenience and necessity on September 1, 1995.

(98)

[ (100) ] Information sharing program - Instruction, learning, and training that is transmitted from one site to one or more sites by telecommunications services that are used by a library predominantly for such instruction, learning, or training, including video, data, voice, and electronic information.

(99)

[ (101) ] Integrated services digital network (ISDN) - a digital network architecture that provides a wide variety of communications services, a standard set of user-network messages, and integrated access to the network. Access methods to the ISDN are the Basic Rate Interface (BRI) and the Primary Rate Interface (PRI).

(100)

[ (102) ] Interactive multimedia communications - Real-time, two-way, interactive voice, video and data communications conducted over networks that link geographically dispersed locations. This definition includes interactive communications within or between buildings on the same campus or library site.

(101)

[ (103) ] Intercept service - A service arrangement provided by the local exchange carrier whereby calls placed to a disconnected or discontinued telephone number are intercepted and the calling party is informed by an operator or by a recording that the called telephone number has been disconnected, discontinued, changed to another number, or otherwise is not in service.

(102)

[ (104) ] Interconnection - Generally means: The point in a network where a customer's transmission facilities interface with the dominant carrier's network under the provisions of this section. More particularily it means: The termination of local traffic (including basic telecommunications service as delineated in §24.32 of this title (Relating to Universal Service) or integrated services digital network (ISDN) as defined in this section and/or extended area service/extended local calling service traffic of a certificated telephone utility (CTU) using the local access lines of another CTU, as described in section §23.97(d)(4)(A)(i) of this title (relating to Interconnection). Interconnection shall include non-discriminatory access to signaling systems, databases, facilities and information as required to ensure interoperability of networks and efficient, timely provision of services to customers without permitting access to network proprietary information or customer proprietary network information, as defined in §23.57 of this title (relating to Telecommunications Privacy), unless otherwise permitted in §23.97 of this title.

(103)

[ (105) ] Interconnector - A customer that interfaces with the dominant carrier's network under the provisions of §23.92 of this title (relating to Expanded Interconnection).

(104)

[ (106) ] Interexchange carrier (IXC) - A carrier providing any means of transporting intrastate telecommunications messages between local exchanges, but not solely within local exchanges, in the State of Texas. The term may include a certificated telecommunications utility (CTU) or CTU affiliate to the extent that it is providing such service. An entity is not an IXC solely because of:

(A)

the furnishing, or furnishing and maintenance of a private system;

(B)

the manufacture, distribution, installation, or maintenance of customer premises equipment;

(C)

the provision of services authorized under the FCC's Public Mobile Radio Service and Rural Radio Service rules; or

(D)

the provision of shared tenant service.

(105)

[ (107) ] Interoffice trunks - Those communications circuits which connect central offices.

(106)

[ (108) ] IntraLATA equal access - The ability of a caller to complete a toll call in a local access and transport area (LATA) using his or her provider of choice by dialing "1" or "0" plus an area code and telephone number.

(107)

[ (109) ] Intrastate - Refers to communications which both originate and terminate within Texas state boundaries.

(108)

[ (110) ] Least cost technology - The technology, or mix of technologies, that would be chosen in the long run as the most economically efficient choice. The choice of least cost technologies, however, shall:

(A)

be restricted to technologies that are currently available on the market and for which vendor prices can be obtained;

(B)

be consistent with the level of output necessary to satisfy current demand levels for all services using the basic network function in question; and

(C)

be consistent with overall network design and topology requirements.

(109)

[ (111) ] License - The whole or part of any commission permit, certificate, approval, registration, or similar form of permission required by law.

(110)

[ (112) ] Licensing - The commission process respecting the granting, denial, renewal, revocation, suspension, annulment, withdrawal, or amendment of a license.

(111)

[ (113) ] Lifeline Service - A program certified by the Federal Communications Commission to provide for the reduction or waiver of the federal subscriber line charge for residential consumers.

(112)

[ (114) ] Line - A circuit or channel extending from a central office to the customer's location to provide telecommunications service. One line may serve one customer, or all customers served by a multiparty line.

(113)

[ (115) ] Local access and transport area (LATA) - A geographic area established for the provision and administration of communications service. It encompasses one or more designated exchanges, which are grouped to serve common social, economic and other purposes. For purposes of these rules, market areas, as used and defined in the Modified Final Judgment and the GTE Final Judgment, are encompassed in the term local access and transport area.

(114)

[ (116) ] Local call - A call within the certificated telephone utility's toll- free calling area including calls which are made toll-free through a mandatory extended area service (EAS) or expanded local calling (ELC) proceeding.

(115)

[ (117) ] Local calling area - The area within which telecommunications service is furnished to customers under a specific schedule of exchange rates. A local calling area may include more than one exchange area.

(116)

[ (118) ] Local exchange company (LEC) - A telecommunications utility that has been granted either a certificate of convenience and necessity or a certificate of operating authority to provide local exchange telephone service, basic local telecommunications service, or switched access service within the state. A local exchange company is also referred to as a local exchange carrier.

(117)

[ (119) ] Local exchange telephone service or local exchange service - A telecommunications service provided within an exchange to establish connections between customer premises within the exchange, including connections between a customer premises and a long distance provider serving the exchange. The term includes tone dialing service, service connection charges, and directory assistance services offered in connection with basic local telecommunications service and interconnection with other service providers. The term does not include the following services, whether offered on an intraexchange or interexchange basis:

(A)

central office based PBX-type services for systems of 75 stations or more;

(B)

billing and collection services;

(C)

high-speed private line services of 1.544 megabits or greater;

(D)

customized services;

(E)

private line or virtual private line services;

(F)

resold or shared local exchange telephone services if permitted by tariff;

(G)

dark fiber services;

(H)

non-voice data transmission service offered as a separate service and not as a component of basic local telecommunications service;

(I)

dedicated or virtually dedicated access services;

(J)

a competitive exchange service; or

(K)

any other service the commission determines is not a "local exchange telephone service."

(118)

[ (120) ] Local message - A completed call between customer access lines located within the same local calling area.

(119)

[ (121) ] Local message charge - The charge that applies for a completed telephone call that is made when the calling customer access line and the customer access line to which the connection is established are both within the same local calling area, and a local message charge is applicable.

(120)

[ (122) ] Local service charge - The charge for furnishing facilities to enable a customer to send or receive telecommunications within the local calling area. This local calling area may include more than one exchange area.

(121)

[ (123) ] Local telecommunications traffic -

(A)

Telecommunications traffic between a dominant certificated telecommunications utility (DCTU) and a telecommunications carrier other than a commercial mobile radio service (CMRS) provider that originates and terminates within the mandatory single or multi-exchange local calling area of a DCTU including the mandatory extended area service (EAS) areas served by the DCTU; or

(B)

Telecommunications traffic between a DCTU and a CMRS provider that, at the beginning of the call, originates and terminates within the same major trading area.

(122)

[ (124) ] Long distance telecommunications service - That part of the total communication service rendered by a telecommunications utility which is furnished between customers in different local calling areas in accordance with the rates and regulations specified in the utility's tariff.

(123)

[ (125) ] Long run - A time period long enough to be consistent with the assumption that the company is in the planning stage and all of its inputs are variable and avoidable.

(124)

[ (126) ] Long run incremental cost (LRIC) - The change in total costs of the company of producing an increment of output in the long run when the company uses least cost technology. The LRIC should exclude any costs that, in the long run, are not brought into existence as a direct result of the increment of output.

(125)

[ (127) ] Mandatory minimum standards - The standards established by the Federal Communications Commission, outlining basic mandatory telecommunication relay services.

(126)

[ (128) ] Meet point billing - An access billing arrangement for services to access customers when local transport is jointly provided by more than one certificated telecommunications utility. In Chapter 23 of this title, this term is applicable only to dominant certificated telecommunications utilities when the context clearly indicates.

(127)

[ (129) ] Message - A completed customer telephone call.

(128)

[ (130) ] Message rate service - A form of local exchange service under which all originated local messages are measured and charged for in accordance with the utility's tariff.

(129)

[ (131) ] Minor change - A change, including the restructuring of rates of existing services, that decreases the rates or revenues of the small local exchange company (SLEC) or that, together with any other rate or proposed or approved tariff changes in the 12 months preceding the date on which the proposed change will take effect, results in an increase of the SLEC's total regulated intrastate gross annual revenues by not more than 5.0%. Further, with regard to a change to a basic local access line rate, a minor change may not, together with any other change to that rate that went into effect during the 12 months preceding the proposed effective date of the proposed change, result in an increase of more than 10%.

(130)

[ (132) ] Municipality - A city, incorporated village, or town, existing, created, or organized under the general, home rule, or special laws of the state.

(131)

[ (133) ] National integrated services digital network (ISDN) - the standards and services promulgated for integrated services digital network by Bellcore.

(132)

[ (134) ] Negotiating party - A certificated telecommunications utility (CTU) or other entity with which a requesting CTU seeks to interconnect in order to complete all telephone calls made by or placed to a customer of the requesting CTU.

(133)

[ (135) ] New service - Any service not offered on a tariffed basis prior to the date of the application relating to such service and specifically excludes basic local telecommunications service including local measured service. If a proposed service could serve as an alternative or replacement for a service offered prior to the date of the new-service application and does not provide significant improvements (other than price) over, or significant additional services not available under, a service offered prior to the date of such application, it shall not be considered a new service.

(134)

[ (136) ] Non-discriminatory - Type of treatment that is not less favorable than that an interconnecting certificated telecommunications utility (CTU) provides to itself or its affiliates or other CTUs.

(135)

[ (137) ] Non-dominant certificated telecommunications utility (NCTU) - A certificated telecommunications utility (CTU) that is not a dominant certificated telecommunications utility (DCTU) and has been granted a certificate of convenience and necessity (CCN) (after September 1, 1995, in an area already certificated to a DCTU), a certificate of operating authority (COA), or a service provider certificate of operating authority (SPCOA) to provide local exchange service.

(136)

[ (138) ] Nondominant carrier -

(A)

An interexchange telecommunications carrier (including a reseller of interexchange telecommunications services).

(B)

Any of the following that is not a dominant carrier:

(i)

a specialized communications common carrier;

(ii)

any other reseller of communications;

(iii)

any other communications carrier that conveys, transmits, or receives communications in whole or in part over a telephone system; or

(iv)

a provider of operator services that is not also a subscriber.

(137)

[ (139) ] Open network architecture - The overall design of an incumbent local exchange company's (ILEC's) network facilities and services to permit all users of the network, including the enhanced services operations of an ILEC and its competitors, to interconnect to specific basic network functions on an unbundled and non-discriminatory basis.

(138)

[ (140) ] Operator service - Any service using live operator or automated operator functions for the handling of telephone service, such as local collect, toll calling via collect, third number billing, credit card, and calling card services. The transmission of "1-800" and "1-888" numbers, where the called party has arranged to be billed, is not operator service.

(139)

[ (141) ] Operator service provider (OSP) - Any person or entity that provides operator services by using either live or automated operator functions. When more than one entity is involved in processing an operator service call, the party setting the rates shall be considered to be the OSP. However, subscribers to customer-owned pay telephone service shall not be deemed to be OSPs.

(140)

[ (142) ] Originating line screening (OLS) - A two digit code passed by the local switching system with the automatic number identification (ANI) at the beginning of a call that provides information about the originating line.

(141)

[ (143) ] Out-of-service trouble report - An initial customer trouble report in which there is complete interruption of incoming or outgoing local exchange service. On multiple line services a failure of one central office line or a failure in common equipment affecting all lines is considered out of service. If an extension line failure does not result in the complete inability to receive or initiate calls, the report is not considered to be out of service.

(142)

[ (144) ] Partial deregulation - The ability of a cooperative to offer new services on an optional basis and/or change its rates and tariffs under the provisions of the Public Utility Regulatory Act, §§53.351 - 53.359.

(143)

[ (145) ] Pay-per-call-information services - Services that allow a caller to dial a specified 1-900-XXX-XXXX or 976-XXXX number. Such services routinely deliver, for a predetermined (sometimes time-sensitive) fee, a pre- recorded or live message or interactive program. Usually a telecommunications utility will transport the call and bill the end-user on behalf of the information provider.

(144)

[ (146) ] Pay telephone access service (PTAS) - A service offered by a certificated telecommunications utility which provides a two-way, or optionally, a one-way originating-only business access line composed of the serving central office line equipment, all outside plant facilities needed to connect the serving central office with the customer premises, and the network interface; this service is sold to pay telephone service providers.

(145)

[ (147) ] Pay telephone service (PTS) - A telecommunications service utilizing any coin, coinless, credit card reader, or cordless instrument that can be used by members of the general public, or business patrons, employees, and/or visitors of the premise's owner, provided that the end user pays for local or toll calls from such instrument on a per call basis. Pay per call telephone service provided to inmates of confinement facilities is PTS. For purposes of this section, coinless telephones provided in guest rooms by a hotel/motel are not pay telephones. A telephone that is primarily used by business patrons, employees, and/or visitors of the premise's owner is not a pay telephone if all local calls and "1-800" and "1-888" type calls from such telephone are free to the end user.

(146)

[ (148) ] Per-call blocking - A telecommunications service provided by a telecommunications provider that prevents the transmission of calling party information to a called party on a call-by-call basis.

(147)

[ (149) ] Per-line blocking - A telecommunications service provided by a telecommunications utility that prevents the transmission of calling party information to a called party on every call, unless the calling party acts affirmatively to release calling party information.

(148)

[ (150) ] Percent interstate usage (PIU) - An access customer-specific ratio or ratios determined by dividing interstate access minutes by total access minutes. The specific ratio shall be determined by the certificated telecommunications utility (CTU) unless the CTU's network is incapable of determining the jurisdiction of the access minutes. A PIU establishes the jurisdiction of switched access usage for determining rates charged to switched access customers and affects the allocation of switched access revenue and costs by CTUs between the interstate and intrastate jurisdictions. In Chapter 23 of this title, this term is applicable only to dominant certificated telecommunications utilities when the context clearly indicates.

(149)

[ (151) ] Person - Any natural person, partnership, municipal corporation, cooperative corporation, corporation, association, governmental subdivision, or public or private organization of any character other than an agency.

(150)

[ (152) ] Pleading - A written document submitted by a party, or a person seeking to participate in a proceeding, setting forth allegations of fact, claims, requests for relief, legal argument, and/or other matters relating to a proceeding.

(151)

[ (153) ] Prepaid local telephone service (PLTS) - Prepaid local telephone service means:

(A)

voice grade dial tone residential service consisting of flat rate service or local measured service, if chosen by the customer and offered by the dominant certificated telecommunications utility (DCTU);

(B)

if applicable, mandatory services, including extended area service, extended metropolitan service, or expanded local calling service;

(C)

tone dialing service;

(D)

access to 911 service;

(E)

access to dual party relay service;

(F)

the ability to report service problems seven days a week;

(G)

access to business office;

(H)

primary directory listing;

(I)

toll blocking service; and

(J)

non-published service and non-listed service at the customer's option.

(152)

[ (154) ] Premises - A tract of land or real estate including buildings and other appurtenances thereon.

(153)

[ (155) ] Pricing flexibility - Discounts and other forms of pricing flexibility may not be preferential, prejudicial, or discriminatory. Pricing flexibility includes:

(A)

customer specific contracts;

(B)

volume, term, and discount pricing;

(C)

zone density pricing;

(D)

packaging of services; and

(E)

other promotional pricing flexibility.

(154)

[ (156) ] Primary interexchange carrier (PIC) - The provider chosen by a customer to carry that customer's toll calls.

(155)

[ (157) ] Primary interexchange carrier (PIC) freeze indicator - An indicator that the end user has directed the certificated telecommunications utility to make no changes in the end user's PIC.

(156)

[ (158) ] Primary rate interface (PRI) integrated services digital network (ISDN) - One of the access methods to ISDN, the 1.544-Mbps PRI comprises either twenty-three 64 Kbps B-channels and one 64 Kbps D-channel (23B+D) or twenty-four 64 Kbps B-channels (24B) when the associated call signaling is provided by another PRI in the group.

(157)

[ (159) ] Primary service - The initial provision of voice grade access between the customer's premises and the switched telecommunications network. This includes the initial connection to a new customer or the move of an existing customer to a new premises but does not include complex services.

(158)

[ (160) ] Print translations - The temporary storage of a message in an operator's screen during the actual process of relaying a conversation.

(159)

[ (161) ] Privacy issue - An issue that arises when a telecommunications provider proposes to offer a new telecommunications service or feature that would result in a change in the outflow of information about a customer. The term privacy issue is to be construed broadly. It includes, but is not limited to, changes in the following:

(A)

the type of information about a customer that is released;

(B)

the customers about whom information is released;

(C)

the entity or entities to whom the information about a customer is released;

(D)

the technology used to convey the information;

(E)

the time at which the information is conveyed; and

(F)

any other change in the collection, use, storage, or release of information.

(160)

[ (162) ] Private line - A transmission path that is dedicated to a customer and that is not connected to a switching facility of a telecommunications utility, except that a dedicated transmission path between switching facilities of interexchange carriers shall be considered a private line.

(161)

[ (163) ] Proceeding - A hearing, investigation, inquiry, or other procedure for finding facts or making a decision. The term includes a denial of relief or dismissal of a complaint. It may be rulemaking or nonrulemaking; rate setting or non-rate setting.

(162)

[ (164) ] Promotional rate - A temporary tariff, fare, toll, rental or other compensation charged by a certificated telecommunications utility (DCTU) to new or new and existing customers and designed to induce customers to test a service. A promotional rate shall incorporate a reduction or a waiver of some rate element in the tariffed rates of the service, or a reduction or waiver of the service's installation charge and/or service connection charges, and shall not incorporate any charge for discontinuance of the service by the customer. Such rates may not be offered for basic local telecommunications service, including local measured service.

(163)

[ (165) ] Provider of pay telephone service - The entity that purchases pay telephone access service (PTAS) from a certificated telecommunications utility (CTU) and registers with the Public Utility Commission as a provider of pay telephone service (PTS) to end users.

(164)

[ (166) ] Public utility or utility - A person or river authority that owns or operates for compensation in this state equipment or facilities to convey, transmit, or receive communications over a telephone system as a dominant carrier. The term includes a lessee, trustee, or receiver of any of those entities, or a combination of those entities. The term does not include a municipal corporation. A person is not a public utility solely because the person:

(A)

furnishes or furnishes and maintains a private system;

(B)

manufactures, distributes, installs, or maintains customer premise communications equipment and accessories; or

(C)

furnishes a telecommunications service or commodity only to itself, its employees, or its tenants as an incident of employment or tenancy, if that service or commodity is not resold to or used by others.

(165)

[ (167) ] Public Utility Regulatory Act (PURA) - The enabling statute for the Public Utility Commission of Texas, located in the Texas Utilities Code Annotated, §§11.001 - 63.063, (Vernon 1998).

(166)

[ (168) ] Qualifying low-income consumer - A consumer that participates in one of the following programs: Medicaid, food stamps, Supplemental Security Income, federal public housing assistance, or Low-Income Home Energy Assistance Program.

(167)

[ (169) ] Qualifying services -

(A)

residential flat rate basic local exchange service;

(B)

residential local exchange access service; and

(C)

residential local area calling usage.

(168)

[ (170) ] Rate - Includes:

(A)

any compensation, tariff, charge, fare, toll, rental, or classification that is directly or indirectly demanded, observed, charged, or collected by a public utility for a service, product, or commodity, described in the definition of utility in the Public Utility Regulatory Act §§31.002 or 51.002; and

(B)

a rule, practice, or contract affecting the compensation, tariff, charge, fare, toll, rental, or classification.

(169)

[ (171) ] Reciprocal compensation - An arrangement between two carriers in which each of the two carriers receives compensation from the other carrier for the transport and termination on each carrier's network facilities of local telecommunications traffic that originates on the network facilities of the other carrier.

(170)

[ (172) ] Reclassification area - The geographic area within the electing ILEC's territory, consisting of one or more exchange areas, for which it seeks reclassification of a service.

(171)

[ (173) ] Redirect the call - A procedure used by operator service providers (OSPs) that transmits a signal back to the originating telephone instrument that causes the instrument to disconnect the OSP's connection and to redial the digits originally dialed by the caller directly to the local exchange carrier's network.

(172)

[ (174) ] Regulatory authority - In accordance with the context where it is found, either the commission or the governing body of a municipality.

(173)

[ (175) ] Relay Texas Advisory Committee (RTAC) - The committee authorized by the Public Utility Regulatory Act, §56.110 and 1997 Texas General Laws Chapter 149.

(174)

[ (176) ] Relay Texas - The name by which telecommunications relay service in Texas is known.

(175)

[ (177) ] Relay Texas administrator - The individual employed by the commission to oversee the administration of statewide telecommunications relay service.

(176)

[ (178) ] Repeated trouble report - A customer trouble report regarding a specific line or circuit occurring within 30 days or one calendar month of a previously cleared trouble report on the same line or circuit.

(177)

[ (179) ] Residual charge - The per-minute charge designed to account for historical contribution to joint and common costs made by switched transport services.

(178)

[ (180) ] Retail service - A telecommunications service is considered a retail service when it is provided to residential or business end users and the use of the service is other than resale. Each tariffed or contract offering which a customer may purchase to the exclusion of other offerings shall be considered a service. For example: the various mileage bands for standard toll services are rate elements, not services; however, individual optional calling plans that can be purchased individually and which are offered as alternatives to each other are services, not rate elements.

(179)

[ (181) ] Return-on-assets - After-tax net operating income divided by total assets.

(180)

[ (182) ] Reversal of partial deregulation - The ability of a minimum of 10% of the members of a partially deregulated cooperative to request, in writing, that a vote be conducted to determine whether members prefer to reverse partial deregulation. Ten percent shall be calculated based upon the total number of members of record as of the calendar month preceding receipt of the request from members for reversal of partial deregulation.

(181)

[ (183) ] Rule - A statement of general applicability that implements, interprets, or prescribes law or policy, or describes the procedure or practice requirements of the commission. The term includes the amendment or repeal of a prior rule but does not include statements concerning only the internal management or organization of the commission and not affecting private rights or procedures.

(182)

[ (184) ] Rulemaking proceeding - A proceeding conducted pursuant to the Administrative Procedure Act, Texas Government Code, §§2001.021 - 2001.037 to adopt, amend, or repeal a commission rule.

(183)

[ (185) ] Rural incumbent local exchange company (ILEC) - An ILEC that qualifies as a "rural telephone company" as defined in 47 United States Code §3(37) and/or 47 United States Code §251(f)(2).

(184)

[ (186) ] Separation - The division of plant, revenues, expenses, taxes, and reserves applicable to exchange or local service if these items are used in common to provide public utility service to both local exchange telephone service and other service, such as interstate or intrastate toll service.

(185)

[ (187) ] Service - Has its broadest and most inclusive meaning. The term includes any act performed, anything supplied, and any facilities used or supplied by a public utility in the performance of the utility's duties under the Public Utility Regulatory Act to its patrons, employees, other public utilities, and the public. The term also includes the interchange or facilities between two or more public utilities. The term does not include the printing, distribution, or sale of advertising in a telephone directory.

(186)

[ (188) ] Service connection charge - A charge designed to recover the costs of non-recurring activities associated with connection of local exchange telephone service.

(187)

[ (189) ] Service provider certificate of operating authority (SPCOA) reseller - A holder of a service provider certificate of operating authority that uses only resold telecommunications services provided by an incumbent local exchange company (ILEC) or by a certificate of operating authority (COA) holder or by a service provider certificate of operating authority (SPCOA) holder.

(188)

[ (190) ] Service restoral charge - A charge applied by the DCTU to restore service to a customer's telephone line after it has been suspended by the DCTU.

(189)

[ (191) ] Serving wire center (SWC) - The certificated telecommunications utility designated central office which serves the access customer's point of demarcation. In Chapter 23 of this title, this term is applicable only to dominant certificated telecommunications utilities when the context clearly indicates.

(190)

[ (192) ] Signaling for tandem switching - The carrier identification code (CIC) and the OZZ code or equivalent information needed to perform tandem switching functions. The CIC identifies the interexchange carrier and the OZZ digits identify the call type and thus the interexchange carrier trunk to which traffic should be routed.

(191)

[ (193) ] Small certificated telecommunications utility (CTU) - A CTU with fewer than 2.0% of the nation's subscriber lines installed in the aggregate nationwide.

(192)

[ (194) ] Small local exchange company (SLEC) - Any incumbent certificated telecommunications utility as of September 1, 1995, that has fewer than 31,000 access lines in service in this state, including the access lines of all affiliated incumbent local exchange companies within the state, or a telephone cooperative organized pursuant to the Telephone Cooperative Act, Texas Utilities Code Annotated, Chapter 162.

(193)

[ (195) ] Small incumbent local exchange company (Small ILEC) - An incumbent local exchange company that is a cooperative corporation or has, together with all affiliated incumbent local exchange companies, fewer than 31,000 access lines in service in Texas.

(194)

[ (196) ] Spanish speaking person - a person who speaks any dialect of the Spanish language exclusively or as their primary language.

(195)

[ (197) ] Special access - A transmission path connecting customer designated premises to each other either directly or through a hub or hubs where bridging, multiplexing or network reconfiguration service functions are performed and includes all exchange access not requiring switching performed by the dominant carrier's end office switches.

(196)

Specialized Telecommunications Device Assistance Program (STDAP) - The program described in Substantive Rule §26.415 of this title (relating to Specialized Telecommunications Device Assistance Program).

(197)

Specialized Telecommunications Device Assistance Program (STDAP) voucher - A voucher issued by the Texas Commission for the Deaf and Hard of Hearing under the equipment distribution program, in accordance with its rules, that an eligible individual may use to acquire eligible specialized telecommunications devices from a vendor of such equipment.

(198)-(209)

(No change.)

[ (210)

Texas Universal Service Fund (TUSF) - The fund authorized by the Public Utility Regulatory Act, §56.021 and 1997 Texas General Laws Chapter 149.]

(210)

[ (211) ] Telecommunications relay service (TRS) - A service using oral and print translations by either live or automated means between individuals who are hearing-impaired or speech-impaired who use specialized telecommunications devices and others who do not have such devices. Unless specified in the text, this term shall refer to intrastate telecommunications relay service only.

(211)

[ (212) ] Telecommunications relay service (TRS) carrier - The telecommunications carrier selected by the commission to provide statewide telecommunications relay service.

(212)

[ (213) ] Telecommunications utility -

(A)

a public utility;

(B)

an interexchange telecommunications carrier, including a reseller of interexchange telecommunications services;

(C)

a specialized communications common carrier;

(D)

a reseller of communications;

(E)

a communications carrier who conveys, transmits, or receives communications wholly or partly over a telephone system;

(F)

a provider of operator services as defined by §55.081, unless the provider is a subscriber to customer-owned pay telephone service; and

(G)

a separated affiliate or an electronic publishing joint venture as defined in the Public Utility Regulatory Act, Chapter 63.

(213)

[ (214) ] Telephones intended to be utilized by the public - Telephones that are accessible to the public, including, but not limited to, pay telephones, telephones in guest rooms and common areas of hotels, motels, or other lodging locations, and telephones in hospital patient rooms.

(214)

[ (215) ] Telephone solicitation - An unsolicited telephone call.

(215)

[ (216) ] Telephone solicitor - A person who makes or causes to be made a consumer telephone call, including a call made by an automatic dialing/announcing device.

(216)

[ (217) ] Test year - The most recent 12 months, beginning on the first day of a calendar or fiscal year quarter, for which operating data for a public utility are available.

(217)

Texas Universal Service Fund (TUSF) - The fund authorized by the Public Utility Regulatory Act, §56.021 and 1997 Texas General Laws Chapter 149.

(218)-(237)

(No change.)

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State on March 17, 1999.

TRD-9901655

Rhonda Dempsey

Rules Coordinator

Public Utility Commission of Texas

Earliest possible date of adoption: May 2, 1999

For further information, please call: (512) 936-7308

Subchapter P. Texas Universal Service Fund

16 TAC §§26.401, 26.403, 26.404, 26.406, 26.408, 26.412-26.415, 26.417, 26.418, 26.420

These sections are proposed under the Public Utility Regulatory Act, Texas Utilities Code Annotated §14.002 (Vernon 1998) (PURA), which provides the Public Utility Commission with the authority to make and enforce rules reasonably required in the exercise of its powers and jurisdiction, PURA §56.021, which requires the commission to adopt and enforce rules requiring local exchange carriers to establish a universal service fund.

Cross-Index to Statutes: Public Utility Regulatory Act §14.002, §56.021, Acts 1997, 75th Legislature, ch. 149, §3.608(a), and Acts 1997, 75th Legislature, ch. 149, §3.611.

§26.401.Texas Universal Service Fund (TUSF).

(a)

Purpose. The purpose of the Texas Universal Service Fund is to implement a competitively neutral mechanism that enables all residents of the state to obtain the basic telecommunications services needed to communicate with other residents, businesses, and governmental entities. Because targeted financial support may be needed in order to provide and price basic telecommunications services in a manner to allow accessibility by consumers, the TUSF will assist local exchange companies (LECs) in providing basic local telecommunications service at reasonable rates in high cost rural areas. In addition, the TUSF will reimburse qualifying entities for revenues lost as a result of providing Lifeline, Link Up and Tel-assistance services to qualifying low-income consumers under the Public Utility Regulatory Act (PURA); reimburse telecommunications carriers providing statewide telecommunications relay access service and qualified vendors providing specialized telecommunications device distribution service for the hearing- impaired and speech-impaired; and reimburse the Texas Department of Human Services, the Texas Department for the Deaf and Hard of Hearing, the TUSF administrator, and the Public Utility Commission for costs incurred in implementing the provisions of PURA Chapter 56 (relating to Telecommunications Assistance and Universal Service Fund).

(b)

Programs included in the TUSF.

(1)

Section 26.403 of this title (relating to the Texas High Cost Universal Service Plan (THCUSP));

(2)

Section 26.404 of this title (relating to the Small and Rural Incumbent Local Exchange Company (ILEC) Universal Service Plan);

(3)

Section 26.406 of this title (relating to the Implementation of the Public Utility Regulatory Act §56.025);

(4)

Section 26.408 of this title (relating to Additional Financial Assistance (AFA));

(5)

Section 26.412 of this title (relating to Lifeline and Link Up Service);

(6)

Section 26.413 of this title (relating to Tel-Assistance Service);

(7)

Section 26.414 of this title (relating to Telecommunications Relay Service);

(8)

Section 26.415 of this title (relating to Specialized Telecommunications Device Assistance Program (STDAP);

(9)

Section 26.417 of this title (relating to Designation of Local Exchange Companies as Eligible Telecommunications Providers to Receive Texas Universal Service Funds (TUSF));

(10)

Section 26.418 of this title (relating to Designation of Common Carriers as Eligible Telecommunications Carriers to Receive Federal Universal Service Funds (FUSF)); and

(11)

Section 26.420 of this title (relating to Administration of the Texas Universal Service Fund (TUSF)).

§26.403.Texas High Cost Universal Service Plan (THCUSP).

(a)

Purpose. This section establishes guidelines for financial assistance to eligible telecommunications providers (ETPs) that serve the high cost rural areas of the state, other than study areas of small and rural incumbent local exchange companies (ILECs), so that basic local telecommunications service may be provided at reasonable rates in a competitively neutral manner.

(b)

Definitions. The following words and terms when used in this section shall have the following meaning unless the context clearly indicates otherwise:

(1)

Benchmark - The per-line amount above which THCUSP support will be provided.

(2)

Business line - The telecommunications facilities providing the communications channel that serves a single-line business customer's service address. For the purpose of this definition, a single-line business line is one to which multi-line hunting, trunking, or other special capabilities do not apply.

(3)

Eligible line - A residential line and a single-line business line over which an ETP provides the service supported by the THCUSP through its own facilities, purchase of unbundled network elements (UNEs), or a combination of its own facilities and purchase of UNEs.

(4)

Eligible telecommunications provider (ETP) - A local exchange company (LEC) designated by the commission pursuant to §26.417 of this title (relating to Designation of Local Exchange Carriers as Eligible Telecommunications Providers to Receive Texas Universal Service Funds (TUSF)).

(5)

Residential line - The telecommunications facilities providing the communications channel that serves a residential customer's service address. For the purpose of this definition, a residential line is one to which multi-line hunting, trunking, or other special capabilities do not apply.

(c)

Application. This section applies to LECs that have been designated ETPs by the commission pursuant to §26.417 of this title.

(d)

Service to be supported by the THCUSP. The THCUSP shall support basic local telecommunications services provided by an ETP in high cost rural areas of the state and is limited to those services carried on all flat rate residential lines and the first five flat rate single-line business lines at a business customer's location. Local measured residential service, if chosen by the customer and offered by the ETP, shall also be supported.

(1)

Initial determination of the definition of basic local telecommunications service. Local telecommunications service shall consist of the following:

(A)

flat rate, single party residential and business local exchange telephone service, including primary directory listings;

(B)

tone dialing service;

(C)

access to operator services;

(D)

access to directory assistance services;

(E)

access to 911 service where provided by a local authority;

(F)

dual party relay service;

(G)

the ability to report service problems seven days a week;

(H)

availability of an annual local directory;

(I)

access to toll services; and

(J)

lifeline and tel-assistance services.

(2)

Subsequent determinations.

(A)

Timing of subsequent determinations.

(i)

The definition of the services to be supported by the THCUSP shall be reviewed by the commission every three years from February 10, 1998.

(ii)

The commission may initiate a review of the definition of the services to be supported on its own motion at any time.

(B)

Criteria to be considered in subsequent determinations. In evaluating whether services should be added to or deleted from the list of supported services, the commission may consider the following criteria:

(i)

the service is essential for participation in society;

(ii)

a substantial majority, 75% of residential customers, subscribe to the service;

(iii)

the benefits of adding the service outweigh the costs; and

(iv)

the availability of the service, or subscription levels, would not increase without universal service support.

(e)

Criteria for determining amount of support under THCUSP. The TUSF administrator shall disburse monthly support payments to ETPs qualified to receive support pursuant to this section. The amount of support available to each ETP shall be calculated using the base support amount available as provided under paragraph (1) of this subsection as adjusted by the requirements of paragraph (4) of this subsection.

(1)

Determining base support amount available to ETPs. The monthly per-line support amount available to each ETP shall be determined by comparing the forward-looking economic cost, computed pursuant to subparagraph (A) of this paragraph, to the applicable benchmark as determined pursuant to subparagraph (B) of this paragraph. The monthly base support amount is the sum of the monthly per-line support amounts for each eligible line served by the ETP, as required by subparagraph (C) of this paragraph.

(A)

Calculating the forward-looking economic cost of service. The monthly cost per-line of providing the basic local telecommunications services and other services included in the benchmark shall be calculated using a forward-looking economic cost methodology.

(B)

Determination of the benchmark. The commission shall establish two benchmarks for the state, one for residential service and one for single-line business service. The benchmarks for both residential and single-line businesses will be calculated using the statewide average revenue per line as described in clause (i) and (ii) of this subparagraph for all ETPs participating in the THCUSP.

(i)

Residential revenues per line are the sum of the residential revenues generated by basic and discretionary local services, as well as a reasonable portion of toll and access services, for the year ending December 31, 1997, divided by the average number of residential lines served for the same period, divided by 12.

(ii)

Business revenues per line are the sum of the business revenues generated by basic and discretionary local services for single-line business lines, as well as a reasonable portion of toll and access services for the year ending December 31, 1997, divided by the average number of single-line business lines served for the same period, divided by 12.

(C)

Support under the THCUSP is portable with the consumer. An ETP shall receive support for residential and the first five single-line business lines at the business customer's location that it is serving over eligible lines in such ETP's THCUSP service area.

(2)

Proceedings to determine THCUSP base support.

(A)

Timing of determinations.

(i)

The commission shall review the forward-looking cost methodology, the benchmark levels, and/or the base support amounts every three years from February 10, 1998.

(ii)

The commission may initiate a review of the forward-looking cost methodology, the benchmark levels, and/or the base support amounts on its own motion at any time.

(B)

Criteria to be considered in determinations. In considering the need to make appropriate adjustments to the forward-looking cost methodology, the benchmark levels, and/or the base support amount, the commission may consider current retail rates and revenues for basic local service, growth patterns, and income levels in low-density areas.

(3)

Calculating amount of THCUSP support payments to individual ETPs. After the monthly base support amount is determined, the TUSF administrator shall make the following adjustments each month in order to determine the actual support payment that each ETP may receive each month.

(A)

Access revenues adjustment. If an ETP is an ILEC that has not reduced its rates pursuant to §26.417 of this title, the base support amount that such ETP is eligible to receive shall be decreased by such ETP's carrier common line (CCL), residual interconnection charge (RIC), and toll revenues for the month.

(B)

Adjustment for federal USF support. The base support amount an ETP is eligible to receive shall be decreased by the amount of federal universal service high cost support received by the ETP.

(C)

Adjustment for service provided solely through the purchase of unbundled network elements (UNEs). If an ETP provides supported services over an eligible line solely through the purchase of UNEs, the commission shall determine the manner in which any THCUSP support for such eligible line may be allocated between the ETP providing service to the end user and the ETP providing the UNEs.

(f)

Reporting requirements. An ETP eligible to receive support pursuant to this section shall report the following information to the commission or the TUSF administrator.

(1)

Monthly reporting requirements. An ETP shall report the following to the TUSF administrator on a monthly basis:

(A)

information regarding the access lines on the ETP's network including:

(i)

the total number of access lines on the ETP's network,

(ii)

the total number of access lines sold as UNEs,

(iii)

the total number of access lines sold for total service resale,

(iv)

the total number of access lines serving end use customers, and

(v)

the total number of eligible lines for which the ETP seeks TUSF support;

(B)

the rate that the ETP is charging for residential and single-line business customers for the services described in subsection (d) of this section; and

(C)

a calculation of the base support computed in accordance with the requirements of subsection (e)(1) of this section showing the effects of the adjustments required by subsection (e)(3) of this section.

(2)

Annual reporting requirements. An ETP shall report annually to the TUSF administrator that it is qualified to participate in the THCUSP.

(3)

Other reporting requirements. An ETP shall report any other information that is required by the commission or the TUSF administrator.

(g)

Review of THCUSP after implementation of federal universal service support. The commission shall initiate a project to review the THCUSP within 90 days of the Federal Communications Commission's adoption of an order implementing new or amended federal universal service support rules for rural, insular, and high cost areas.

§26.404.Small and Rural Incumbent Local Exchange Company (ILEC) Universal Service Plan.

(a)

Purpose. This section establishes guidelines for financial assistance to eligible telecommunications providers (ETPs) that provide service in the study areas of rural ILECs areas and small ILECs' areas in the state so that basic local telecommunications service may be provided at reasonable rates in a competitively neutral manner.

(b)

Definitions. The following words and terms when used in this section shall have the following meaning unless the context clearly indicates otherwise:

(1)

Eligible line - A residential line and a single-line business line over which an ETP provides the service supported by the Small and Rural ILEC Universal Service Plan through its own facilities, purchase of unbundled network elements (UNEs), or a combination of its own facilities and purchase of UNEs.

(2)

Eligible telecommunications provider (ETP) - A telecommunications provider designated by the commission pursuant to §26.417 of this title (relating to the Designation of Local Exchange Companies as Eligible Telecommunications Providers to Receive Texas Universal Service Funds (TUSF)).

(3)

Small incumbent local exchange company (ILEC) - An ILEC that qualifies as a "small local exchange company" as defined in the Public Utility Regulatory Act, §53.304(a)(1).

(4)

Test year - The fiscal year ending in 1997.

(c)

Application.

(1)

Small or rural ILECs. This section applies to small ILECs and rural ILECs, as defined in subsection (b) of this section and/or §26.5 of this title (relating to Definitions), that have been designated ETPs by the commission pursuant to §26.417 of this title.

(2)

Other ETPs providing service in small or rural ILEC study areas. This section applies to LECs other than small or rural ILECs that provide service in small or rural ILEC study areas that have been designated ETPs by the commission pursuant to §26.417 of this title.

(d)

Service to be supported by the Small and Rural ILEC Universal Service Plan. The Small and Rural ILEC Universal Service Plan shall support the provision by ETPs of basic local telecommunications service as defined in §26.403(d) of this title (relating to the Texas High Cost Universal Service Plan (THCUSP)).

(e)

Small and Rural ILEC Universal Service Plan monthly per-line support. A monthly per-line amount of support for each small or rural ILEC study area shall be determined in a one-time calculation using data from such small or rural ILEC's test year that has been audited by an independent auditor in conformance with generally accepted accounting principles (GAAP).

(1)

Calculation of the monthly per-line amount of support for each small or rural ILEC. The toll pool amounts and access/toll revenue reductions determined in accordance with subparagraphs (A) and (B) of this paragraph shall be added together. To calculate the per-line amount of support, the resulting sum will then be divided by the average number of eligible lines served by such small or rural ILEC during the test year. To calculate the monthly per-line amount of support, the result shall be divided by 12.

(A)

Toll pool amounts. The toll pool amount for a small or rural ILEC shall be determined by subtracting the actual toll billed by the small or rural ILEC during the test year from its toll pool revenue requirement for the test year, as certified by the Texas Universal Service Fund (TUSF) administrator.

(B)

Access/toll revenue reduction. At the time this section is implemented, a small or rural ILEC may reduce carrier common line (CCL), residual interconnection charge (RIC), and/or intraLATA toll rates. Upon commission approval a small or rural ILEC may recover a reasonable amount of the difference between the previous rates and the new rates, computed on the basis of minutes of use in the test year. This amount is calculated by multiplying the difference between the previous rates and the new rates by the test year minutes of use.

(2)

Freeze on support levels. The per-line amount of support calculated in paragraph (1) of this subsection shall remain constant as long as the small or rural ILEC is eligible to receive funds pursuant to this section.

(f)

Small and Rural ILEC Universal Service Plan support payments to ETPs. The TUSF administrator shall disburse monthly support payments to ETPs qualified to receive support pursuant to this section.

(1)

Payments to small or rural ILEC ETPs. The payment to each small or rural ILEC ETP shall be computed by multiplying the per-line amount established in subsection (e) of this section by the number of eligible lines served by the small or rural ILEC ETP for the month.

(2)

Payments to ETPs other than small or rural ILECs. The payment to each ETP other than a small or rural ILEC shall be computed by multiplying the per-line amount established in subsection (e) of this section for a given small or rural ILEC study area by the number of eligible lines served by the ETP in such study area for the month.

(g)

Reporting requirements. An ETP eligible to receive support under this section shall report information as required by the commission and the TUSF administrator.

(1)

Monthly reporting requirements. An ETP shall report the total number of eligible lines served by the ETP in its study area to the TUSF administrator on a monthly basis.

(2)

Annual reporting requirements. An ETP shall report annually to the TUSF administrator that it is qualified to participate in the Small and Rural ILEC Universal Service Plan.

(3)

Other reporting requirements. An ETP shall report any other information required by the commission or the TUSF administrator.

(h)

Review of Small and Rural ILEC Universal Service Plan after implementation of federal universal service support. Within 90 days of the Federal Communications Commission's adoption of an order implementing new or amended federal universal service support rules for rural, insular, and high cost areas, the commission shall initiate a project to investigate a mechanism by which ETPs receiving support pursuant to this section would transition to receiving support pursuant to §26.403 of this title.

§26.406.Implementation of the Public Utility Regulatory Act §56.025.

(a)

Purpose. The purpose of this section is to implement the provisions of the Public Utility Regulatory Act (PURA) §56.025.

(b)

Applicability. An incumbent local exchange company (ILEC) serving fewer than five million access lines may seek to recover funds from the Texas Universal Service Fund (TUSF) under this section in the following circumstances:

(1)

Commission reduction in the amount of high cost assistance fund. In the event of a commission order, rule, or policy, the effect of which is to reduce the amount of the high cost assistance fund support received by the ILEC as of February 10, 1998, except an order entered in an individual company revenue requirement proceeding, the commission shall allow, through the universal service fund, an ILEC to replace the reasonably projected reduction in revenues caused by that regulatory action.

(2)

Change in federal universal service fund revenues. In the event of a Federal Communications Commission order, rule, or policy, the effect of which is to change the federal universal service fund revenues of an ILEC or change costs or revenues assigned to the intrastate jurisdiction, the commission shall, through either the universal service fund or an increase to rates if that increase would not adversely impact universal service, replace the reasonably projected change in revenues caused by the regulatory action.

(3)

Commission change in intraLATA dialing access policy. In the event of a commission change in its policy with respect to intraLATA "1+" dialing access, the commission shall, through either the universal service fund or an increase to rates if that increase would not adversely impact universal service, replace the reasonably projected reduction in contribution caused by the action. Contribution for purposes of this paragraph equals average intraLATA long distance message telecommunications service (MTS) revenue, including intraLATA toll pooling and associated impacts, per minute less average MTS cost per minute less the average contribution from switched access times the projected change in intraLATA "1+" minutes of use.

(4)

Other governmental agency action. In the event of any other governmental agency issuing an order, rule, or policy, the effect of which is to increase costs or decrease revenues of the intrastate jurisdiction, the commission shall, through either the universal service fund or an increase to rates, if that increase would not adversely impact universal service, replace the reasonably projected increase in costs or decrease in revenues caused by that regulatory action.

(c)

Requirements of the ILEC.

(1)

Burden of proof. The ILEC seeking to recover funds from the TUSF under this section has the burden of proof. A revenue requirement showing is not required with respect to disbursements from the TUSF under this section.

(2)

Contents of application. The ILEC seeking to recover funds from the TUSF under this section shall file an application:

(A)

complying with the commission's Procedural Rules §22.73 of this title (relating to General Requirements for Applications); and

(B)

providing the amount requested from the TUSF under this section, the calculation of the amount requested, and detailed documentation and workpapers supporting the calculations.

(3)

Notice. The ILEC seeking to recover funds from the TUSF under this section shall provide notice as required by the presiding officer pursuant to the commission's Procedural Rules §22.55 of this title (relating to Notice in Other Proceedings). At a minimum, the notice shall state that the ILEC is requesting to recover funds from the TUSF under this section and the Public Utility Regulatory Act §56.025 and state the amount the ILEC is requesting to recover. At a minimum, the notice shall be published in the Texas Register.

(d)

Commission processing of the application.

(1)

The application shall be processed under the commission's Procedural Rules.

(2)

The commission shall process applications under this section promptly and efficiently.

(e)

Reporting requirements. An ILEC awarded support under this section shall provide the TUSF administrator a copy of the commission's final order indicating the amount of support it is to receive under this section.

§26.408.Additional Financial Assistance (AFA).

(a)

Purpose. Incumbent local exchange companies (ILECs) serving high cost and rural areas of the state may require financial assistance, in addition to the funds provided by §26.403 of this title (relating to Texas High Cost Universal Service Plan (THCUSP)), by §26.404 of this title (relating to Small and Rural Incumbent Local Exchange Company (ILEC) Universal Service Plan), or by §26.406 of this title (relating to the Implementation of the Public Utility Regulatory Act §56.025), so that these carriers may provide basic local exchange service at reasonable rates. This section establishes guidelines for requesting Additional Financial Assistance (AFA) from the Texas Universal Service Fund (TUSF).

(b)

Application. Any ILEC that has been designated by the commission as an eligible telecommunications provider (ETP) and is not an electing company under the Public Utility Regulatory Act (PURA) Chapter 58 or 59, may request AFA in a PURA §§53.105, 53.151, or 53.306 proceeding.

(c)

Establishment of AFA need. The commission may approve an ILEC's AFA request if the commission finds:

(1)

that the ILEC has fulfilled the appropriate requirements under PURA §§53.105, 53.151, or 53.306; and

(2)

that raising the ILEC's rates for basic local telecommunications service, as defined in §26.403 of this title, would adversely affect universal service in such ILEC's certificated service area.

(d)

Reporting requirements. Any ILEC awarded AFA support pursuant to this section through a commission proceeding shall provide the TUSF administrator with a copy of the final order indicating the amount of support.

§26.412.Lifeline Service and Link Up Service Programs.

(a)

Application. This section applies to eligible telecommunications carriers as defined by §26.418 of this title (relating to Designation of Common Carriers as Eligible Telecommunications Carriers to Receive Federal Universal Service Funds (FUSF)).

(b)

Lifeline Service and Link Up Service. Each eligible telecommunications carrier shall provide Lifeline Service and Link Up Service as provided by this section. A consumer eligible for Lifeline Service is automatically eligible for Link Up Service. However, a consumer may qualify for and receive Link Up Service independently of Lifeline Service. Nothing in this section shall prohibit a consumer otherwise eligible to receive Lifeline Service and/or Link Up Service from obtaining and using telecommunications equipment or services designed to aid such consumer in utilizing qualifying telecommunications services.

(c)

Lifeline Service Program. Lifeline Service is a retail local service offering available to qualifying low-income consumers.

(1)

Provision of Lifeline Service. Lifeline Service shall be provided according to the following requirements.

(A)

Designated Lifeline services. The eligible telecommunications carrier shall offer the services or functionalities enumerated in 47 Code of Federal Regulations §54.101(a)(1)-(9) (relating to Supported Services for Rural, Insular and High Cost Areas).

(B)

Toll limitation.

(i)

Toll limitation requirements. The eligible telecommunications carrier shall offer toll limitation to all qualifying low-income consumers at the time such consumers subscribe to Lifeline Service. If the consumer elects to receive toll limitation, that service shall become part of the consumer's Lifeline Service.

(ii)

Waiver. The commission may grant a waiver of the requirement of clause (i) of this subparagraph upon a finding that exceptional circumstances prevent an eligible telecommunications carrier from providing toll limitation. The period for the waiver shall not extend beyond the time that the commission deems necessary for that eligible telecommunications carrier to complete network upgrades to provide toll limitation services.

(C)

Disconnection of service.

(i)

Disconnection prohibition. An eligible telecommunications carrier may not disconnect Lifeline Service for non-payment of toll charges.

(ii)

Waiver. The commission may grant a waiver of clause (i) of this subparagraph if the eligible telecommunications carrier can demonstrate that:

(I)

it would incur substantial costs in complying with this requirement;

(II)

it offers toll limitation to its qualifying low-income consumers without charge; and

(III)

telephone subscribership among low-income consumers in the eligible telecommunications carrier's service area is greater than or equal to the national subscribership rate for low-income consumers with an income below the poverty level for a family of four residing in the state.

(iii)

Review by Federal Communications Commission (FCC).

(I)

An eligible telecommunications carrier may file a petition for review of the commission decision pursuant to clause (ii) of this subparagraph with the FCC within 30 days of that decision.

(II)

If the commission has not acted on a petition to waive the requirement of clause (i) of this subparagraph within 30 days of the date of the filing of the waiver petition, the eligible telecommunications carrier may file the petition with the FCC on the 31st day after the initial filing date.

(iv)

Subsequent waiver requests. An eligible telecommunications carrier may reapply for the waiver set forth in clause (ii) of this subparagraph.

(D)

Service deposit prohibition.

(i)

Service deposit requirements. An eligible telecommunications carrier may not collect a service deposit in order to initiate Lifeline Service, if the qualifying low-income consumer voluntarily elects toll blocking from the eligible telecommunications carrier.

(ii)

Waiver. If a waiver for providing toll blocking has been granted pursuant to subparagraph (B)(ii) of this paragraph, an eligible telecommunications carrier may charge a service deposit.

(2)

Lifeline support.

(A)

Lifeline support amounts. Lifeline support amounts per qualifying low- income consumer shall be provided according to the provisions of this paragraph.

(i)

Federal baseline Lifeline support amount. An eligible telecommunications carrier shall grant a waiver of the $3.50 monthly federal subscriber line charge (SLC) to qualifying low- income consumers. If the eligible telecommunications carrier does not charge the federal SLC, it shall apply the $3.50 federal baseline support amount to reduce its lowest tariffed residential rate for supported services.

(ii)

State-approved $1.75 reduction. Pursuant to 47 Code of Federal Regulations §54.403 (relating to Lifeline Support Amount), an eligible telecommunications carrier shall give a qualifying low- income consumer a state-approved reduction of $1.75 in the monthly amount of intrastate charges paid.

(iii)

Additional state reduction with federal matching. Pursuant to 47 Code of Federal Regulations §54.403, an eligible telecommunications carrier shall give a qualifying low-income consumer the following:

(I)

an additional state-approved reduction of $3.50 in the monthly amount of intrastate charges; and

(II)

a further federally approved reduction of $1.75.

(B)

Recovery of support amounts.

(i)

Federal baseline Lifeline support. An eligible telecommunications carrier shall be entitled to recover the support amount required by subparagraph (A)(i) of this paragraph pursuant to 47 Code of Federal Regulations §54.407 (relating to Reimbursement for offering Lifeline), through the federal USF.

(ii)

State-approved $1.75 reduction. An eligible telecommunications carrier shall be entitled to recover federal Lifeline support pursuant to 47 Code of Federal Regulations §54.407 to recover the reduction amount required by subparagraph (A)(ii) of this paragraph.

(iii)

Additional state reduction with federal matching.

(I)

An eligible telecommunications carrier shall be entitled to recover support from the Texas Universal Service Fund to recover the reduction amount required by subparagraph (A)(iii)(I) of this paragraph. An eligible telecommunications carrier that is also an incumbent local exchange company (ILEC) as defined by §26.5 of this title (relating to Definitions) that offered, as of June 1, 1997, a tariffed $3.50 Lifeline Service rate discount in addition to the $3.50 waiver of the federal SLC, must reduce rates for services determined appropriate by the commission by an amount equivalent to the amount of support it is eligible to receive under this subclause. If such ILEC does not reduce its toll and access rates pursuant to this subclause, it shall not be eligible to receive support under this subclause.

(II)

An eligible telecommunications carrier shall be entitled to recover federal Lifeline support pursuant to 47 Code of Federal Regulations §54.407 to recover the reduction amount required by subparagraph (A)(iii)(II) of this paragraph.

(C)

Application of support amounts.

(i)

Eligible telecommunications carriers that charge the federal SLC or equivalent federal charges shall apply the $3.50 federal baseline Lifeline support to waive a qualified low-income consumer's federal SLC. The state-approved reductions of $1.75 and $3.50 and the additional federally approved reduction of $1.75 shall be applied to reduce the monthly intrastate end user charges paid by the qualifying low-income consumers.

(ii)

Eligible telecommunications carriers that do not charge the federal SLC or equivalent federal charges shall apply the $3.50 federal baseline Lifeline support amount, plus the state-approved reductions of $1.75 and $3.50 and the additional federally approved reduction of $1.75 to reduce their lowest tariffed residential rate for the supported services and charge qualified low- income consumers the resulting amount.

(iii)

The monthly discounted residential rate for qualified low-income consumers may not be reduced below $2.50.

(d)

Link Up Service Program. This is a program certified by the FCC that provides qualifying low-income consumer with the following assistance:

(1)

Services.

(A)

A qualifying low-income consumer may receive a reduction in the eligible telecommunications carrier's customary charge for commencing telecommunications service for a primary single line connection at the consumer's principal place of residence. The reduction shall be half of the customary charge or $30, whichever is less.

(B)

A qualifying low-income consumer may receive a deferred schedule for payment of the charges assessed for commencing service, for which the consumer does not pay interest. The interest charges not assessed the consumer shall be for connection charges of up to $200 that are deferred for a period not to exceed one year. Charges assessed for commencing service include any charges that the carrier customarily assesses to connect subscribers to the network. These charges do not include any permissible security deposit requirements.

(2)

Qualifying low-income consumer choice. A qualifying low-income consumer may choose one or both of the programs set forth in paragraphs (1)(A) and (B) of this subsection.

(3)

Limitation on receipt. An eligible telecommunications carrier's Link Up program shall allow a qualifying low-income consumer to receive the benefit of the Link Up program for a second or subsequent time only for a principal place of residence with an address different from the residence address at which the Link Up assistance was provided previously.

(e)

Obligations of the consumer, Texas Department of Human Services (TDHS), and the eligible telecommunications carrier.

(1)

Obligations of the consumer. Consumers may apply for Lifeline Service and Link Up Service by completing and filing an application with TDHS. Consumers who are eligible for Lifeline Service and Link Up Service and who do not have telephone service must additionally initiate a request for service from their serving eligible telecommunications carrier.

(2)

Obligations of TDHS. TDHS shall review the consumer's application form and shall determine if the consumer meets the eligibility criteria. TDHS shall provide each eligible telecommunications carrier with an initial list of consumers eligible for Lifeline Service and Link Up Service and shall provide an updated list to each eligible telecommunications carrier on a semi-annual basis.

(3)

Obligations of eligible telecommunications carriers.

(A)

Lifeline Service.

(i)

The eligible telecommunications carrier shall provide Lifeline Service to all eligible consumers identified by TDHS within its service area if the existing service of those consumers meets the qualifications set forth in subsection (d)(1) of this section. The eligible telecommunications carrier shall identify those consumers on the TDHS list to whom it is providing telephone service and shall determine if the existing telephone service qualifies. Within 60 days after receipt of the list, the eligible telecommunications carrier shall begin reduced billing for those qualifying low-income consumers subscribing to qualifying services.

(ii)

If the existing telephone service does not qualify, the eligible telecommunications carrier shall advise the eligible consumer by direct mail of changes necessary to satisfy Lifeline criteria. The eligible telecommunications carrier shall advise the eligible consumer by direct mail that persons choosing not to make necessary changes to their telephone service arrangements will not receive Lifeline Service and that the eligible consumer shall not be charged for changes in telephone service arrangements that are made in order to qualify for Lifeline Service, or for service order charges associated with transferring the account into Lifeline Service. If the eligible consumer changes the telephone service to qualifying services or initiates new qualifying service, the eligible telecommunications carrier shall begin reduced billing at the time the change of service becomes effective or at the time new service is established.

(iii)

The eligible telecommunications carrier shall notify TDHS on a semi- annual basis of changes in the status of its Lifeline Service consumers.

(B)

Link Up Service. The eligible telecommunications carrier shall provide Link Up Service to all qualifying low-income consumers identified by TDHS within its service area, who have initiated a request for service pursuant to subsection (e)(1) of this section.

(C)

Qualifying low-income consumer certification. An eligible telecommunications carrier shall obtain from the qualifying low-income consumer that consumer's signature on a document certifying under penalty of perjury that the consumer receives benefits from one of the following: Medicaid, food stamps, Supplemental Security Income, federal public housing assistance, or Low-Income Energy Assistance Program, and shall identify the program(s) from which that consumer receives benefits. On the same document, a qualifying low-income consumer must also agree to notify the eligible telecommunications carrier if that consumer ceases to participate in the program(s) identified.

(f)

Tariff requirement. Each carrier seeking designation as an eligible telecommunications carrier shall file a tariff to implement Lifeline Service and Link Up Service, or revise its existing tariff for compliance with this section and with applicable law, prior to filing its application for designation as an eligible telecommunications carrier. No other revision, addition, or deletion unrelated to Lifeline Service and Link Up Service shall be contained in the tariff application.

(g)

Reporting requirements.

(1)

Texas Universal Service Fund (TUSF). An eligible telecommunications carrier providing Lifeline Service pursuant to this section shall report information as required by the commission or the TUSF administrator, including but not limited to the following information.

(A)

Initial reporting requirements. An eligible telecommunications carrier shall provide the commission and the TUSF administrator with information demonstrating that its Lifeline plan meets the requirements of this section.

(B)

Monthly reporting requirements. An eligible telecommunications carrier shall report monthly to the TUSF administrator the total number of qualified low-income consumers to whom Lifeline Service was provided for the month by the eligible telecommunications carrier.

(C)

Other reporting requirements. An eligible telecommunications carrier shall report any other information required by the commission or the TUSF administrator.

(2)

Federal Lifeline Service Program. An eligible telecommunications carrier shall file the following information with the administrator of the Federal Lifeline Program:

(A)

information demonstrating that the eligible telecommunications carrier's Lifeline plan meets the criteria set forth in 47 Code of Federal Regulations Subpart E (relating to Universal Service Support for Low-Income Consumers);

(B)

the number of qualifying low-income consumers served by the eligible telecommunications carrier;

(C)

the amount of state assistance; and

(D)

other information required by the administrator of the Federal Lifeline Program.

§26.413.Tel-Assistance Service.

(a)

Application. This section applies to local exchange companies (LECs) as defined by §26.5 of this title (relating to Definitions).

(b)

Definition. The term "eligible consumer", when used in this section, shall mean that in order to be eligible for Tel-Assistance Service, the consumer must be a head of household and disabled, as determined by the Texas Department of Human Services (TDHS); and have a household income at or below the poverty level, as reported annually by the United States Office of Management and Budget in the Federal Register.

(c)

Provision of Tel-Assistance Service. Each LEC shall provide Tel-Assistance Service as provided in this section. A consumer eligible for Tel-Assistance Service also qualifies for Lifeline Service and Link Up Service as provided in §26.412 of this title (relating to Lifeline Service and Link Up Service). Nothing in this section shall prohibit a person otherwise eligible to receive Tel-Assistance Service from obtaining and using telecommunications equipment or services designed to aid such person in utilizing qualifying telecommunications services.

(1)

Rate reductions under Tel-Assistance Service.

(A)

Each LEC shall provide Tel-Assistance Service to all eligible consumers within its certificated area in the form of a 65% reduction in the applicable tariff rate for the qualifying services provided.

(B)

The reduction for local area calling usage shall be limited to an amount such that, together with the reduction for local exchange access service, the overall rate reduction does not exceed the comparable reduction applicable to flat rate service.

(2)

Texas Universal Service Fund (TUSF) reimbursement. LECs providing Tel- Assistance Service to eligible consumers under this section are eligible for reimbursement from the TUSF of the lost revenue associated with the application of a 65% reduction in the applicable tariff rate for those accounts.

(d)

Obligations of the consumer, TDHS, and the LEC.

(1)

Consumer. Consumers may apply for Tel-Assistance Service by obtaining an application form from TDHS. Persons who are eligible for Tel-Assistance Service, but do not have telephone service at the time TDHS provides its eligibility list to LECs, are responsible for initiating a request for qualifying services from their serving LEC.

(2)

TDHS. TDHS shall review the consumer's application form and shall determine if the consumer meets the eligibility criteria. TDHS shall provide each LEC with an initial list of persons eligible for Tel-Assistance Service and shall provide an updated list to each LEC on a semi-annual basis.

(3)

LEC.

(A)

The LEC shall provide Tel-Assistance Service to all eligible consumers identified by TDHS within its certificated area if the existing service of those consumers meets the qualifications set forth in subsection (b)(2) of this section. The LEC shall identify those consumers on the TDHS list to whom it is providing telephone service and shall determine if the existing telephone service qualifies. Within 60 days after receipt of the list, the LEC shall begin reduced billing for those eligible consumers subscribing to qualifying services.

(B)

If the existing telephone service does not qualify, the LEC shall advise the eligible consumer by direct mail of changes necessary to satisfy Tel- Assistance Service criteria. The LEC shall advise the eligible consumer by direct mail that persons choosing not to make necessary changes to their telephone service arrangements will not receive Tel-Assistance Service and that the eligible consumer shall not be charged for changes in telephone service arrangements that are made in order to qualify for Tel- Assistance Service, or for service order charges associated with transferring the account into Tel-Assistance Service. If the eligible consumer changes the existing telephone service to qualifying services or initiates new qualifying service, the LEC shall begin reduced billing at the time the change of service becomes effective or at the time new service is established.

(C)

The LEC shall notify TDHS on a semi-annual basis of changes in the status of its Tel-Assistance Service consumers.

(e)

Specific service exceptions for Tel-Assistance Service. No other local voice service may be provided to the dwelling place of a Tel-Assistance Service consumer, nor may single or party line optional extended area service, optional extended area calling service, foreign zone service or foreign exchange service be provided to a Tel-Assistance Service consumer.

(f)

Retroactive prohibition for Tel-Assistance Service. Tel-Assistance Service shall not be available on a retroactive basis except for such instances in which the LEC failed to initiate reduced billing within the time frame established in subsection (d)(3)(A) of this section.

(g)

Termination of Tel-Assistance Service. Consumer certification is provided by TDHS subject to annual renewal. Reduced billing will continue until such time as either the TDHS notifies the LEC that the consumer is no longer eligible or the consumer establishes telephone service arrangements that do not satisfy the qualifications for Tel- Assistance Service. After Tel-Assistance Service is established, if the recipient requests a change in telephone service arrangements such that the new arrangements do not meet the qualifications, before making such changes, the LEC shall advise the consumer by direct mail that the requested changes will result in removal of the Tel-Assistance Service discount. If the consumer then chooses to have such changes made, the LEC shall terminate the discount at the time the change of service becomes effective.

(h)

Reporting requirements for the provision of Tel-Assistance Service. LECs shall file monthly reports with the TUSF administrator detailing the lost revenues associated with the 65% discount applied to Tel-Assistance Service accounts. The LECs shall also file activity reports showing the total number of accounts transferred into and out of Tel- Assistance Service in the previous month and the total number of Tel-Assistance Service accounts at the end of the month.

(i)

Tariff requirement. Each LEC shall file a tariff to implement Tel-Assistance Service in compliance with this section and with applicable law within 30 days of beginning to provide service. No other revision, addition, or deletion unrelated to Tel-Assistance Service shall be contained in the tariff.

§26.414.Telecommunications Relay Service (TRS).

(a)

Purpose. The provisions of this section are intended to establish a statewide telecommunications relay service for individuals who are hearing-impaired or speech-impaired using specialized telecommunications devices and operator translations. Telecommunications relay service shall be provided on a statewide basis by one telecommunications carrier. Certain aspects of telecommunications relay service operations are applicable to local exchange companies and other telecommunications providers.

(b)

Provision of TRS. TRS shall provide individuals who are hearing-impaired or speech- impaired with access to the telecommunications network in Texas equal to that provided to other customers.

(1)

Components of TRS. TRS shall meet the mandatory minimum standards defined in §26.5 of this title (relating to Definitions) and further shall consist of the following:

(A)

switching and transmission of the call;

(B)

oral and print translations by either live or automated means between individuals who are hearing-impaired or speech-impaired who use specialized telecommunications devices and others who do not have such devices;

(C)

sufficient operators and facilities to meet the following grade and quality of service standards established by the commission for TRS:

(i)

the operator answering performance standards listed in §26.61(e)(3)(A)(i) and (3)(B) of this title (relating to Telephone Utilities); and

(ii)

not more than one out of one hundred calls shall encounter a busy signal when calling the TRS numbers;

(D)

appropriate procedures for handling emergency calls;

(E)

confidentiality regarding existence and content of conversations;

(F)

capability of providing sufficient information to allow calls to be accurately billed;

(G)

capability of providing for technologies such as hearing carryover or voice carryover;

(H)

operator training to relay the contents of the call as accurately as possible without intervening in the communications;

(I)

operator training in American Sign Language and familiarity with the special communications needs of individuals who are hearing-impaired or speech- impaired;

(J)

capability for callers to place calls through TRS from locations other than their primary location and to utilize alternate billing arrangements;

(K)

capability of providing both inbound and outbound intrastate and interstate service;

(L)

capability for carrier of choice; and

(M)

other service enhancements approved by the commission.

(2)

Conditions for interstate service. The TRS carrier shall not be reimbursed from the Texas Universal Service Fund (TUSF) for the cost of providing interstate TRS. Interstate TRS shall be funded through the interstate jurisdiction as mandated by the Federal Communications Commission. Separate funds and records shall be maintained for intrastate TRS and interstate TRS.

(3)

Rates and charges. The following rates and charges shall apply to TRS:

(A)

Local calls. The calling and called parties shall bear no charges for calls originating and terminating within the same toll-free local calling scope.

(B)

Intrastate long distance calls. The TRS carrier shall discount its tariffed intrastate rates by 50% for TRS users.

(C)

Access charges. Local exchange companies shall not impose access charges on calls that make use of this service and which originate and terminate within the same toll-free local calling scope.

(D)

Billing and collection services. Upon request by the TRS carrier, local exchange companies shall provide billing and collection services in support of this service at just and reasonable rates.

(c)

Contract for the TRS carrier.

(1)

Selection. On or before April 1, 2000, the commission shall issue a request for proposal and select a carrier to provide statewide TRS based on the following criteria: price, the interests of individuals who are hearing-impaired and speech- impaired in having access to a high quality and technologically-advanced telecommunications system, and all other factors listed in the commission's request for proposals. The commission shall consider each proposal in a manner that does not disclose the contents of the proposal to competing offerers. The commission's determination shall include evaluations of charges for the service, service enhancements proposed by the offerers, and technological sophistication of the network proposed by the offerers. The commission shall make a written award of the contract to the offerer whose proposal is the most advantageous to the state.

(2)

Location. The operator centers used to provide statewide TRS shall be located in Texas.

(3)

Contract administration.

(A)

Contract amendments. All recommendations for amendments to the contract shall be filed with the executive director of the commission on June 1 of each year. The executive director is authorized to approve or deny all amendments to the contract between the TRS carrier and the commission, provided, however, that the commission specifically shall approve any amendment that will increase the cost of TRS.

(B)

Reports. The TRS carrier and telecommunications providers shall submit reports of their activities relating to the provision of TRS upon request of the commission or the Relay Texas administrator.

(C)

Compensation. The TRS carrier shall be compensated by the TUSF for providing TRS at the rates, terms, and conditions established in its contract with the commission, subject to the following conditions:

(i)

Reimbursement shall include the TRS costs that are not paid by the calling or the called party, except the TRS carrier shall not be reimbursed for the 50% discount set forth in subsection (b)(3)(B) of this section.

(ii)

Reimbursement may include a return on the investment required to provide the service and the cost of unbillable and uncollectible calls placed through the service, provided that the cost of unbillable and uncollectible calls shall be subject to a reasonable limitation as determined by the commission.

(iii)

The TRS carrier shall submit a monthly report to the commission justifying its claims for reimbursement under the contract. Upon approval by the commission, the TUSF shall make a disbursement in the approved amount.

(d)

Advisory Committee. The commission shall appoint an Advisory Committee, to be known as the Relay Texas Advisory Committee (RTAC) to assist the commission in administering TRS and the equipment distribution program, as specified by Texas Utilities Code Annotated §56.111 (Vernon 1998) and 1997 Texas General Laws Chapter 149, §3. The Relay Texas administrator shall serve as a liaison between the RTAC and the commission. The Relay Texas administrator shall ensure that the RTAC receives clerical and staff support, including a secretary or court reporter to document RTAC meetings.

(1)

Composition. The commission shall appoint RTAC members based on recommended lists of candidates submitted by the organizations named as follows. The RTAC shall be composed of:

(A)

one deaf person recommended by the Texas Deaf Caucus;

(B)

one deaf person recommended by the Texas Association of the Deaf;

(C)

one hearing-impaired person recommended by Self-Help for the Hard of Hearing;

(D)

one hearing-impaired person recommended by the American Association of Retired Persons;

(E)

one deaf and blind person recommended by the Texas Deaf/Blind Association;

(F)

one speech-impaired person and one speech-impaired and hearing-impaired person recommended by the Coalition of Texans with Disabilities;

(G)

two representatives of telecommunications utilities, one representing a local exchange company and one representing a telecommunications carrier other than a local exchange company, chosen from a list of candidates provided by the Texas Telephone Association;

(H)

two persons, at least one of whom is deaf, with experience in providing relay services, recommended by the Texas Commission for the Deaf; and

(I)

two public members recommended by organizations representing consumers of telecommunications services.

(2)

Conditions of membership. The term of office of each RTAC member shall be two years. A member whose term has expired shall continue to serve until a qualified replacement is appointed. In the event a member cannot complete his or her term, the commission shall appoint a qualified replacement to serve the remainder of the term. RTAC members shall serve without compensation but shall be entitled to reimbursement at rates established for state employees for travel and per diem incurred in the performance of their official duties, provided such reimbursement is authorized by the Texas Legislature in the General Appropriations Act.

(3)

Responsibilities. The RTAC shall undertake the following responsibilities:

(A)

monitor the establishment, administration, and promotion of the statewide TRS;

(B)

advise the commission regarding the pursuit of services that meet the needs of individuals who are hearing-impaired or speech-impaired in communicating with other users of telecommunications services;

(C)

advise the commission regarding issues related to the contract between the TRS carrier and the commission, including any proposed amendments to such contract;

(D)

advise the commission and the Texas Commission for the Deaf and Hard of Hearing, at the request of either commission, regarding issues related to the equipment distribution program.

(4)

Committee activities report. After each RTAC meeting, the Relay Texas administrator shall prepare a report to the commission regarding the RTAC activities and recommendations.

(A)

The Relay Texas administrator shall file in Central Records under Project Number 13928, and provide to each commissioner, a report containing:

(i)

the minutes of the meeting;

(ii)

a memo summarizing the meeting; and

(iii)

a list of items, recommended by the RTAC, for the Relay Texas administrator to discuss with the TRS carrier, including issues related to the provisioning of the service that do not require amendments to the contract.

(B)

Within 20 days after a report is filed, any commissioner may request that one or more items described in the report be placed on an agenda to be discussed during an open meeting of the commission. If no commissioner requests that the list be placed on an agenda for an open meeting, the report is deemed approved by the commission.

(5)

Evaluation of RTAC costs and effectiveness. The commission shall evaluate the advisory committee annually. The evaluation shall be conducted by an evaluation team appointed by the executive director of the commission. The commission liaison, RTAC members, and other commission employees who work directly or indirectly with the RTAC, TRS, or the equipment distribution program shall not be eligible to serve on the evaluation team. The evaluation team will report to the commission in open meeting each August of its findings regarding:

(A)

the committee's work;

(B)

the committee's usefulness; and

(C)

the costs related to the committee's existence, including the cost of agency staff time spent in support of the committee's activities.

§26.415.Specialized Telecommunications Device Assistance Program (STDAP).

(a)

Purpose. The provisions of this section are intended to establish procedures for an equipment distribution program and for reimbursement to vendors who submit vouchers issued under the program.

(b)

Program responsibilities.

(1)

Texas Commission for the Deaf and Hard of Hearing (TCDHH) responsibilities. TCDHH is responsible for:

(A)

Adopting rules and procedures regarding the issuance of STDAP vouchers to eligible individuals;

(B)

Establishing a database containing sufficient information to enable the commission to verify the issuance of a particular STDAP voucher; and

(C)

Depositing amounts paid by eligible individuals for STDAP vouchers into the Texas Universal Service Fund (TUSF).

(2)

Commission responsibilities. The commission is responsible for:

(A)

Adopting rules and procedures regarding the reimbursement to vendors for properly redeemed STDAP vouchers;

(B)

Administering the TUSF to ensure adequate funding of the equipment distribution program; and

(C)

Appointing and providing administrative support for the RTAC, in accordance with PURA, Texas Utilities Code Annotated §56.110 and §56.112 (Vernon 1998).

(c)

Program administration.

(1)

Vendor registration. To facilitate the timely reimbursement of STDAP vouchers, the TUSF administrator may specify that a vendor who accepts STDAP vouchers shall register with the administrator by providing the vendor's name, contact person, address, telephone number, facsimile number (if available), and information sufficient to permit the administrator to reimburse the vendor by direct deposit rather than by check.

(2)

Vendor reimbursement. A vendor who exchanges an STDAP voucher for the purchase of approved equipment in accordance with the terms of the equipment distribution program specified by TCDHH shall be eligible for reimbursement of the lesser of the face value of the STDAP voucher or the actual price of the equipment. TUSF disbursements shall be made only upon receipt from the vendor of a completed STDAP voucher and a receipt showing the actual price of the equipment exchanged for the STDAP voucher. TUSF disbursements may also be subject to such other limitations or conditions as determined by the commission to be just and reasonable, including investigation of whether the presentation of an STDAP voucher represents a valid transaction for equipment under the equipment distribution program. The TUSF administrator shall ensure that reimbursement to vendors for STDAP vouchers shall be issued within 45 days after the STDAP voucher is received by the TUSF administrator.

§26.417.Designation of Local Exchange Carriers as Eligible Telecommunications Providers to Receive Texas Universal Service Funds (TUSF).

(a)

Purpose. This section provides the requirements for the commission to designate local exchange companies (LECs) as eligible telecommunications providers (ETPs) to receive funds from the Texas Universal Service Fund (TUSF) under §26.403 of this title (relating to the Texas High Cost Universal Service Plan (THCUSP)) and §26.404 of this title (relating to the Small and Rural Incumbent Local Exchange Carrier (ILEC) Universal Service Plan). Only LECs designated by the commission as ETPs shall qualify to receive universal service support under these programs.

(b)

Requirements for establishing ETP service areas.

(1)

THCUSP service area. THCUSP service area shall be based upon census block groups (CBGs) or other geographic area as determined appropriate by the commission. A LEC may be designated an ETP for any or all CBGs that are wholly or partially contained within its certificated service area. An ETP must serve an entire CBG, or other geographic area as determined appropriate by the commission, unless its certificated service area does not encompass the entire CBG, or other geographic area as determined appropriate by the commission.

(2)

Small and Rural ILEC Universal Service Plan service area. A Small and Rural ILEC Universal Service Plan service area for an ETP serving in a small or rural ILEC's territory shall include the entire study area of such small or rural ILEC.

(c)

Criteria for designation of ETPs.

(1)

LECs. A LEC, as defined in §26.5 of this title (relating to Definitions), shall be eligible to receive TUSF support pursuant to §26.403 or §26.404 of this title in each service area for which it seeks ETP designation if it meets the following requirements:

(A)

the LEC has been designated an eligible telecommunications carrier, pursuant to §26.418 of this title (relating to the Designation of Common Carriers as Eligible Telecommunications Carriers to Receive Federal Universal Service Funds (FUSF)), and provides the federally designated services to customers in order to receive federal universal service support;

(B)

the LEC defines its ETP service area pursuant to subsection (c) of this section and assumes the obligation to offer any customer in its ETP service area basic local telecommunications services, as defined in §26.403 of this title, at a rate not to exceed 150% of the ILEC's tariffed rate;

(C)

the LEC offers basic local telecommunications services using either its own facilities, purchased unbundled network elements (UNEs), or a combination of its own facilities, purchased UNEs, and resale of another carrier's services;

(D)

the LEC renders continuous and adequate service within the area or areas, for which the commission has designated it an ETP, in compliance with the quality of service standards defined in §23.61(c),(d) and (e) of this title (relating to Telephone Utilities);

(E)

the LEC offers services in compliance with §26.412 of this title (relating to Lifeline Service and Link Up Service) and §26.413 of this title (relating to Tel-Assistance Service); and

(F)

the LEC advertises the availability of, and charges for, supported services using media of general distribution.

(2)

ILECs. If the LEC is an ILEC, as defined in §26.5 of this title, it shall be eligible to receive TUSF support pursuant to §26.403 of this title in each service area for which it seeks ETP designation if it meets the requirements of paragraph (1) of this subsection and the following requirements:

(A)

if the ILEC is regulated pursuant to Chapter 58 or 59 of the Public Utility Regulatory Act it shall either:

(i)

reduce rates for services determined appropriate by the commission to an amount equal to its THCUSP support amount; or

(ii)

provide a statement that it agrees to a reduction of its THCUSP support amount equal to its CCL, RIC and intraLATA toll revenues.

(B)

if the ILEC is not regulated pursuant to Chapter 58 or 59 of the Public Utility Regulatory Act it shall reduce its rates for services determined appropriate by the commission by an amount equal to its THCUSP support amount.

(d)

Designation of more than one ETP.

(1)

In areas not served by small or rural ILECs, as defined in §26.404(b) of this title, the commission may designate, upon application, more than one ETP in an ETP service area so long as each additional provider meets the requirements of subsection (c) of this section.

(2)

In areas served by small or rural ILECs as defined in §26.404(b) of this title, the commission may designate additional ETPs if the commission finds that the designation is in the public interest.

(e)

Proceedings to designate LECs as ETPs.

(1)

At any time, a LEC operating with a certificate of convenience and necessity (CCN) or a certificate of operating authority (COA) may seek commission approval to be designated an ETP for a requested service area.

(2)

In order to receive support under §26.403 or §26.404 of this title for exchanges purchased from an unaffiliated provider, the acquiring ETP shall file an application, within 30 days after the date of the purchase, to amend its ETP service area to include those geographic areas in the purchased exchanges that are eligible for support.

(3)

If an ETP receiving support under §26.403 or §26.404 of this title sells an exchange to an unaffiliated provider, it shall file an application, within 30 days after the date of the sale, to amend its ETP designation to exclude, from its designated service area, those exchanges for which it was receiving support.

(f)

Requirements for application for ETP designation and commission processing of application.

(1)

Requirements for notice and contents of application for ETP designation.

(A)

Notice of application. Notice shall be published in the Texas Register. The presiding officer may require additional notice. Unless otherwise required by the presiding officer or by law, the notice shall include at a minimum a description of the service area for which the applicant seeks designation, the proposed effective date of the designation, and the following language: "Persons who wish to comment on this application should notify the Public Utility Commission by (specified date, ten days before the proposed effective date). Requests for further information should be mailed to the Public Utility Commission of Texas, P.O. Box 13326, Austin, Texas 78711-3326, or you may call the Public Utility Commission's Office of Customer Protection at (512) 936-7120 or (888) 782-8477. Hearing- and speech-impaired individuals with text telephones (TTY) may contact the commission at (512) 936-7136, or use Relay Texas (800) 735-2989 to reach the commission's toll free number (888) 782-8477."

(B)

Contents of application. A LEC seeking to be designated as an ETP for a high cost service area in this state shall file with the commission an application complying with the requirements of this section. In addition to copies required by other commission rules, one copy of the application shall be delivered to the commission staff and one copy shall be delivered to the Office of Public Utility Counsel.

(i)

LEC. The application shall:

(I)

show that the applicant is a LEC as defined in §26.5 of this title;

(II)

show that the applicant has been designated by the commission as a telecommunications provider eligible for federal universal service support and show that the applicant offers federally supported services to customers pursuant to the terms of 47 United States Code §214(e) (relating to Provision of Universal Service) in order to receive federal universal service support;

(III)

specify the THCUSP or small and rural ILEC service area in which the applicant proposes to be an ETP, show that the applicant offers each of the designated services, as defined in §26.403 of this title, throughout the THCUSP or small and rural ILEC service area for which it seeks an ETP designation, and show that the applicant assumes the obligation to offer the services, as defined in §26.403 of this title, to any customer in the THCUSP or small and rural ILEC service area for which it seeks ETP designation;

(IV)

show that the applicant does not offer the designated services, as defined in §26.403 of this title, solely through total service resale;

(V)

show that the applicant renders continuous and adequate service within the area or areas, for which it seeks designation as an ETP, in compliance with the quality of service standards defined in §23.61 (c), (d), and (e) of this title;

(VI)

show that the applicant offers Lifeline, Link Up, and Tel- Assistance services in compliance with §26.412 and §26.413 of this title;

(VII)

show that the applicant advertises the availability of and charges for designated services, as defined in §26.403 of this title, using media of general distribution;

(VIII)

a statement detailing the method and content of the notice the applicant has provided or intends to provide to the public regarding the application and a brief statement explaining why the notice proposal is reasonable and that the notice proposal complies with applicable law;

(IX)

provide a copy of the text of the notice;

(X)

state the proposed effective date of the designation; and

(XI)

provide any other information which the applicant wants considered in connection with the commission's review of its application.

(ii)

ILECs. If the applicant is an ILEC, in addition to the requirements of clause (i) of this subparagraph, the application shall show compliance with the requirements of subsection (c)(2) of this section.

(2)

Commission processing of application.

(A)

Administrative review. An application considered under this section may be reviewed administratively unless the LEC requests the application be docketed or the presiding officer, for good cause, determines at any point during the review that the application should be docketed.

(i)

The effective date of the ETP designation shall be no earlier than 30 days after the filing date of the application or 30 days after notice is completed, whichever is later.

(ii)

The application shall be examined for sufficiency. If the presiding officer concludes that material deficiencies exist in the application, the applicant shall be notified within ten working days of the filing date of the specific deficiency in its application. The earliest possible effective date of the application shall be no less than 30 days after the filing of a sufficient application with substantially complete information as required by the presiding officer. Thereafter, any deadlines shall be determined from the 30th day after the filing of the sufficient application and information or from the effective date if the presiding officer extends that date.

(iii)

While the application is being administratively reviewed, the commission staff and the staff of the Office of Public Utility Counsel may submit requests for information to the applicant. Three copies of all answers to such requests for information shall be provided to the commission staff and the Office of Public Utility Counsel within ten days after receipt of the request by the applicant.

(iv)

No later than 20 days after the filing date of the application or the completion of notice, whichever is later, interested persons may provide written comments or recommendations concerning the application to the commission staff. The commission staff shall and the Office of Public Utility Counsel may file with the presiding officer written comments or recommendations regarding the application.

(v)

No later than 35 days after the proposed effective date of the application, the presiding officer shall issue an order approving, denying, or docketing the application.

(B)

Approval or denial of application. The application shall be approved by the presiding officer if it meets the following requirements.

(i)

The provision of service constitutes basic local telecommunications service as defined in §26.403 of this title.

(ii)

Notice was provided as required by this section.

(iii)

The applicant has met the requirements contained in subsection (c) of this section.

(iv)

The ETP designation is consistent with the public interest in a technologically advanced telecommunications system and consistent with the preservation of universal service.

(C)

Docketing. If, based on the administrative review, the presiding officer determines that one or more of the requirements have not been met, the presiding officer shall docket the application. The requirements of subsection (c) of this section may not be waived.

(D)

Review of the application after docketing. If the application is docketed, the effective date of the application shall be automatically suspended to a date 120 days after the applicant has filed all of its direct testimony and exhibits, or 155 days after the proposed effective date, whichever is later. Three copies of all answers to requests for information shall be filed with the commission within ten days after receipt of the request. Affected persons may move to intervene in the docket, and a hearing on the merits shall be scheduled. A hearing on the merits shall be limited to issues of eligibility. The application shall be processed in accordance with the commission's rules applicable to docketed cases.

(g)

Relinquishment of ETP designation. A LEC may seek to relinquish its ETP designation.

(1)

Area served by more than one ETP. The commission shall permit a LEC to relinquish its ETP designation in any area served by more than one ETP upon:

(A)

written notification not less than 90 days prior to the proposed effective date of the relinquishment;

(B)

determination by the commission that the remaining ETP or ETPs can provide basic local service to the relinquishing LEC's customers; and

(C)

determination by the commission that sufficient notice of relinquishment has been provided to permit the purchase or construction of adequate facilities by any remaining ETP or ETPs.

(2)

Area where the relinquishing LEC is the sole ETP. In areas where the relinquishing LEC is the only ETP, the commission may permit it to relinquish its ETP designation upon:

(A)

written notification that the LEC seeks to relinquish its ETP designation; and

(B)

commission designation of a new ETP for the service area or areas through the auction procedure provided in subsection (h) of this section.

(3)

Relinquishment for non-compliance. The TUSF administrator shall notify the commission when the TUSF administrator is aware that an ETP is not in compliance with the requirements of subsection (c) of this section. The commission shall revoke the ETP designation of any LEC determined not to be in compliance with subsection (c) of this section.

(h)

Auction procedure for replacing the sole ETP in an area. In areas where a LEC is the sole ETP and seeks to relinquish its ETP designation, the commission shall initiate an auction procedure to designate another ETP. The auction procedure will use a competitive, sealed bid, single-round process to select a telecommunications provider meeting the requirements of subsection (f)(1) of this section that will provide basic local telecommunications service at the lowest cost.

(1)

Announcement of auction. Within 30 days of receiving a request from the last ETP in a service area to relinquish its designation, the commission shall provide notice in the Texas Register of the auction. The announcement shall at minimum detail the geographic location of the service area, the total number of access lines served, the forward-looking economic cost computed pursuant to §26.403 of this title, of providing basic local telecommunications service and the other services included in the benchmark calculation, existing tariffed rates, bidding deadlines, and bidding procedure.

(2)

Bidding procedure. Bids must be received by the TUSF administrator not later than 60 days from the date of publication in the Texas Register.

(A)

Every bid must contain:

(i)

the level of assistance per line that the bidder would need to provide all services supported by universal service mechanisms;

(ii)

information to substantiate that the bidder meets the eligibility requirements in subsection (c)(1) of this section; and

(iii)

information to substantiate that the bidder has the ability to serve the relinquishing ETP's customers.

(B)

The TUSF administrator shall collect all bids and within 30 days of the close of the bidding period request that the commission approve the TUSF administrator's selection of the successful bidder.

(C)

The commission may designate the lowest qualified bidder as the ETP for the affected service area or areas.

§26.418.Designation of Common Carriers as Eligible Telecommunications Carriers to Receive Federal Universal Service Funds.

(a)

Purpose. This section provides the requirements for the commission to designate common carriers as eligible telecommunications carriers to receive support from the federal universal service fund (FUSF). Only common carriers designated by the commission pursuant to 47 United States Code §214(e) (relating to Provision of Universal Service) as eligible for federal universal service support may qualify to receive universal service support under the FUSF.

(b)

Service areas. The commission may designate eligible telecommunications carrier service areas according to the following criteria.

(1)

Non-rural service area. To be eligible to receive federal universal service support in non-rural areas, a carrier must provide federally supported services pursuant to 47 Code of Federal Regulations §54.101 (relating to Supported Services for Rural, Insular, and High Cost Areas) throughout the area for which the carrier seeks to be designated an eligible telecommunications carrier.

(2)

Rural service area. In the case of areas served by a rural telephone company, as defined in §26.404 of this title (relating to the Small and Rural Incumbent Local Exchange Company (ILEC) Universal Service Plan), a carrier must provide federally supported services pursuant to 47 Code of Federal Regulations §54.101 throughout the study area of the rural telephone company in order to be eligible to receive federal universal service support.

(c)

Criteria for determination of eligible telecommunications carriers. A common carrier shall be designated as eligible to receive federal universal service support if it:

(1)

offers the services that are supported by the federal universal service support mechanisms under 47 Code of Federal Regulations §54.101 either using its own facilities or a combination of its own facilities and resale of another carrier's services; and

(2)

advertises the availability of and charges for such services using media of general distribution.

(d)

Criteria for determination of receipt of federal universal service support. In order to receive federal universal service support, a common carrier must:

(1)

meet the requirements of subsection (c) of this section;

(2)

offer Lifeline Service to qualifying low-income consumers in compliance with 47 Code of Federal Regulations Part 54, Subpart E (relating to Universal Service Support for Low-Income Consumers); and

(3)

offer toll limitation services in accordance with 47 Code of Federal Regulations §54.400 (relating to Terms and Definitions) and §54.401 (relating to Lifeline Defined).

(e)

Designation of more than one eligible telecommunications carrier.

(1)

Non-rural service areas. In areas not served by rural telephone companies, as defined in §26.404 of this title, the commission shall designate, upon application, more than one eligible telecommunications carrier in a service area so long as each additional carrier meets the requirements of subsection (b)(1) of this section and subsection (c) of this section.

(2)

Rural service areas. In areas served by rural telephone companies, as defined in §26.404 of this title, the commission may designate as an eligible telecommunications carrier a carrier that meets the requirements of subsection (b)(2) of this section and subsection (c) of this section if the commission finds that the designation is in the public interest.

(f)

Proceedings to designate eligible telecommunications carriers.

(1)

At any time, a common carrier may seek commission approval to be designated an ETP for a requested service area.

(2)

In order to receive support under this section for exchanges purchased from an unaffiliated carrier, the acquiring eligible telecommunications carrier shall file an application, within 30 days after the date of the purchase, to amend its eligible telecommunications carrier service area to include those geographic areas that are eligible for support.

(3)

If an eligible telecommunications carrier receiving support under this section sells an exchange to an unaffiliated carrier, it shall file an application, within 30 days after the date of the sale, to amend its eligible telecommunications carrier designation to exclude from its designated service area those exchanges for which it was receiving support.

(g)

Application requirements and commission processing of applications.

(1)

Requirements for notice and contents of application.

(A)

Notice of application. Notice shall be published in the Texas Register. The presiding officer may require additional notice. Unless otherwise required by the presiding officer or by law, the notice shall include at a minimum a description of the service area for which the applicant seeks eligibility, the proposed effective date of the designation, and the following statement: "Persons who wish to comment on this application should notify the Public Utility Commission of Texas by (specified date, ten days before the proposed effective date). Requests for further information should be mailed to the Public Utility Commission of Texas, P.O. Box 13326, Austin, Texas 78711-3326, or you may call the Public Utility Commission's Office of Customer Protection at (512) 936- 7120 or (888) 782-8477. Hearing- and speech-impaired individuals with text telephones (TTY) may contact the commission at (512) 936-7136, or use Relay Texas (800) 735-2989 to reach the commission's toll free number (888) 782-8477."

(B)

Contents of application for each common carrier seeking eligible telecommunications carrier designation. A common carrier that seeks to be designated as an eligible telecommunications carrier shall file with the commission an application complying with the requirements of this section. In addition to copies required by other commission rules, one copy of the application shall be delivered to the commission's Regulatory Division and one copy shall be delivered to the Office of Public Utility Counsel. The application shall:

(i)

show that the applicant offers each of the services that are supported by the FUSF support mechanisms under 47 United States Code §254(c) (relating to Universal Service) either using its own facilities or a combination of its own facilities and resale of another carrier's services throughout the service area for which it seeks designation as an eligible telecommunications carrier;

(ii)

show that the applicant assumes the obligation to offer each of the services that are supported by the FUSF support mechanisms under 47 United States Code §254(c) to any consumer in the service area for which it seeks designation as an eligible telecommunications carrier;

(iii)

show that the applicant advertises the availability of, and charges for, such services using media of general distribution;

(iv)

show the service area in which the applicant seeks designation as an eligible telecommunications carrier;

(v)

contain a statement detailing the method and content of the notice the applicant has provided or intends to provide to the public regarding the application and a brief statement explaining why the proposed notice is reasonable and in compliance with applicable law;

(vi)

contain a copy of the text of the notice;

(vii)

contain the proposed effective date of the designation; and

(viii)

contain any other information which the applicant wants considered in connection with the commission's review of its application.

(C)

Contents of application for each common carrier seeking eligible telecommunications carrier designation and receipt of federal universal service support. A common carrier that seeks to be designated as an eligible telecommunications carrier and receive federal universal service support shall file with the commission an application complying with the requirements of this section. In addition to copies required by other commission rules, one copy of the application shall be delivered to the commission staff and one copy shall be delivered to the Office of Public Utility Counsel. The application shall:

(i)

comply with the requirements of subparagraph (B) of this paragraph;

(ii)

show that the applicant offers Lifeline Service to qualifying low- income consumers in compliance with 47 Code of Federal Regulations Part 54, Subpart E; and

(iii)

show that the applicant offers toll limitation services in accordance with 47 Code of Federal Regulations §54.400 and §54.401.

(2)

Commission processing of application.

(A)

Administrative review. An application considered under this section may be reviewed administratively unless the presiding officer, for good cause, determines at any point during the review that the application should be docketed.

(i)

The effective date shall be no earlier than 30 days after the filing date of the application or 30 days after notice is completed, whichever is later.

(ii)

The application shall be examined for sufficiency. If the presiding officer concludes that material deficiencies exist in the application, the applicant shall be notified within ten working days of the filing date of the specific deficiency in its application. The earliest possible effective date of the application shall be no less than 30 days after the filing of a sufficient application with substantially complete information as required by the presiding officer. Thereafter, any deadlines shall be determined from the 30th day after the filing of the sufficient application and information or from the effective date if the presiding officer extends that date.

(iii)

While the application is being administratively reviewed, the commission staff and the staff of the Office of Public Utility Counsel may submit requests for information to the telecommunications carrier. Three copies of all answers to such requests for information shall be provided to the commission staff and the Office of Public Utility Counsel within ten days after receipt of the request by the telecommunications carrier.

(iv)

No later than 20 days after the filing date of the application or the completion of notice, whichever is later, interested persons may provide the commission staff with written comments or recommendations concerning the application. The commission staff shall and the Office of Public Utility Counsel may file with the presiding officer written comments or recommendations regarding the application.

(v)

No later than 35 days after the proposed effective date of the application, the presiding officer shall issue an order approving, denying, or docketing the application.

(B)

Approval or denial of application.

(i)

An application filed pursuant to paragraph (1)(B) of this subsection shall be approved by the presiding officer if the application meets the following requirements:

(I)

the provision of service constitutes the services that are supported by the FUSF support mechanisms under 47 United States Code §254(c);

(II)

the applicant will provide service using either its own facilities or a combination of its own facilities and resale of another carrier's services;

(III)

the applicant advertises the availability of, and charges for, such services using media of general distribution;

(IV)

notice was provided as required by this section;

(V)

the applicant satisfies the requirements contained in subsection (b) of this section; and

(VI)

if, in areas served by a rural telephone company, the eligible telecommunications carrier designation is consistent with the public interest.

(ii)

An application filed pursuant to paragraph (1)(C) of this subsection shall be approved by the presiding officer if the application meets the following requirements:

(I)

the applicant has satisfied the requirements set forth in clause (i) of this subparagraph;

(II)

the applicant offers Lifeline Service to qualifying low-income consumers in compliance with 47 Code of Federal Regulations Part 54, Subpart E; and

(III)

the applicant offers toll limitation services in accordance with 47 Code of Federal Regulations §54.400 and §54.401.

(C)

Docketing. If, based on the administrative review, the presiding officer determines that one or more of the requirements have not been met, the presiding officer shall docket the application.

(D)

Review of the application after docketing. If the application is docketed, the effective date of the application shall be automatically suspended to a date 120 days after the applicant has filed all of its direct testimony and exhibits, or 155 days after the proposed effective date, whichever is later. Three copies of all answers to requests for information shall be filed with the commission within ten days after receipt of the request. Affected persons may move to intervene in the docket, and a hearing on the merits shall be scheduled. A hearing on the merits shall be limited to issues of eligibility. The application shall be processed in accordance with the commission's rules applicable to docketed cases.

(E)

Waiver. In the event that an otherwise eligible telecommunications carrier requests additional time to complete the network upgrades needed to provide single-party service, access to enhanced 911 service, or toll limitation, the commission may grant a waiver of these service requirements upon a finding that exceptional circumstances prevent the carrier from providing single-party service, access to enhanced 911 service, or toll limitation. The period for the waiver shall not extend beyond the time that the commission deems necessary for that carrier to complete network upgrades to provide single-party service, access to enhanced 911 service, or toll limitation services.

(h)

Designation of eligible telecommunications carrier for unserved areas. If no common carrier will provide the services that are supported by federal universal service support mechanisms under 47 United States Code §254(c) to an unserved community or any portion thereof that requests such service, the commission, with respect to intrastate services, shall determine which common carrier or carriers are best able to provide such service to the requesting unserved community or portion thereof and shall order such carrier or carriers to provide such service for that unserved community or portion thereof.

(i)

Relinquishment of eligible telecommunications carrier designation. A common carrier may seek to relinquish its eligible telecommunications carrier designation.

(1)

Area served by more than one eligible telecommunications carrier. The commission shall permit a common carrier to relinquish its designation as an eligible telecommunications carrier in any area served by more than one eligible telecommunications carrier upon:

(A)

written notification not less than 90 days prior to the proposed effective date that the common carrier seeks to relinquish its designation as an eligible telecommunications carrier;

(B)

determination by the commission that the remaining eligible telecommunications carrier or carriers can offer federally supported services to the relinquishing carrier's customers; and

(C)

determination by the commission that sufficient notice of relinquishment has been provided to permit the purchase or construction of adequate facilities by any remaining eligible telecommunications carrier or carriers.

(2)

Area where the common carrier is the sole eligible telecommunications carrier. In areas where the common carrier is the only eligible telecommunications carrier, the commission may permit it to relinquish its eligible telecommunications carrier designation upon:

(A)

written notification not less than 90 days prior to the proposed effective date that the common carrier seeks to relinquish its designation as an eligible telecommunications carrier; and

(B)

commission designation of a new eligible telecommunications carrier for the service area or areas.

§26.420.Administration of Texas Universal Service Fund (TUSF).

(a)

Purpose. The provisions of this section establish the administration of the Texas Universal Service Fund (TUSF).

(b)

Programs included in the TUSF.

(1)

Section 26.403 of this title (relating to the Texas High Cost Universal Service Plan (THCUSP));

(2)

Section 26.404 of this title (relating to the Small and Rural Incumbent Local Exchange Company (ILEC) Universal Service Plan);

(3)

Section 26.406 of this title (relating to the Implementation of the Public Utility Regulatory Act §56.025);

(4)

Section 26.408 of this title (relating to Additional Financial Assistance (AFA));

(5)

Section 26.412 of this title (relating to Lifeline Service and Link Up Service);

(6)

Section 26.413 of this title (relating to Tel-Assistance Service);

(7)

Section 26.414 of this title (relating to Telecommunications Relay Service);

(8)

Section 26.415 of this title (relating to Specialized Telecommunications Device Assistance Program (STDAP));

(9)

Section 26.417 of this title (relating to Designation of Local Exchange Companies as Eligible Telecommunications Providers to Receive Texas Universal Service Funds (TUSF));

(10)

Section 26.418 of this title (relating to Designation of Common Carriers as Eligible Telecommunications Carriers to Receive Federal Universal Service Funds); and

(11)

Section 26.420 of this title (relating to Administration of Texas Universal Service Funds).

(c)

Responsibilities of the commission. The commission is the official governing agency for the TUSF, but may delegate the ministerial functions of TUSF administration to another entity (the TUSF administrator) through contractual agreement.

(1)

Monitoring, and supervising TUSF administration. The commission reserves the exclusive power to revise rules related to the operation and administration of the TUSF and to monitor and supervise such operation and administration.

(2)

Annual audit. The commission annually shall provide for an audit of the TUSF by an independent auditor. The costs of the audit are costs of the commission that are incurred in administering the TUSF, and therefore shall be reimbursed from the TUSF.

(3)

Inquiry into administration of the TUSF. The commission may, upon its own motion, upon the petition of the commission staff or the Office of Public Utility Counsel, initiate an inquiry into any aspect of the administration of the TUSF. Any other party may initiate a complaint proceeding pursuant to the commission's procedural rules.

(4)

Selection of the TUSF administrator.

(A)

The commission shall have the sole discretion in the selection of the TUSF administrator. The selection of the TUSF administrator shall be based on a competitive bidding process.

(B)

The TUSF administrator must meet the technical qualifications as provided in subsection (d)(1) of this section as well as other requirements as determined by the commission.

(5)

Contract term of the TUSF administrator. The commission shall determine the duration of the TUSF administrator's contract. Prior to expiration of the contract term, the commission may discharge the TUSF administrator of its duties upon 60-days written notice.

(d)

TUSF administrator. The TUSF administrator serves at the discretion of the commission.

(1)

Technical requirements of the TUSF administrator. The TUSF administrator shall:

(A)

be neutral and impartial, not advocate specific positions to the commission in proceedings not related to the administration of the universal service support mechanisms, and not have a direct financial interest in the universal service support mechanisms established by the commission;

(B)

possess demonstrated technical capabilities, competence, and resources to perform the duties of the TUSF administrator as described in this section; and

(C)

be bonded or bondable.

(2)

Duties of the TUSF administrator. The TUSF administrator will administer the TUSF in accordance with the rules set forth in this section and in accordance with the guidelines established by the commission in its contract with the TUSF administrator. The TUSF administrator's general duties shall include, but not be limited to:

(A)

managing the daily operations and affairs of the TUSF in an efficient, fair and competitively neutral manner;

(B)

taking steps necessary to ensure that all eligible telecommunications providers (ETPs) are in compliance with the relevant sections of this title under which they are receiving universal service support;

(C)

calculating and collecting the proper assessment amount from every telecommunications provider and verifying that all telecommunications providers are in compliance with the Public Utility Regulatory Act §56.022;

(D)

disbursing the proper support amounts, ensuring that only eligible recipients receive funds, and verifying that all recipients are in compliance with the section or sections of this title under which they are eligible to receive support;

(E)

taking steps necessary, including audits, to ensure that all telecommunications providers that are subject to the TUSF assessment are accurately reporting required information;

(F)

taking steps necessary, including audits, to ensure that all recipients of TUSF funds are accurately reporting required information;

(G)

submitting periodic summary reports to the commission regarding the administration of the TUSF in accordance with specifications established by the commission;

(H)

notifying the commission of any telecommunications providers that are in violation of any of the requirements of this section, §26.417 of this title and any reporting requirements; and

(I)

performing other duties as determined by the commission.

(e)

Transition from existing USF programs to the TUSF.

(1)

Continuation of assessments and disbursements for periods prior to the implementation of TUSF programs. The TUSF administrator shall administer all outstanding assessment and disbursement obligations to support mechanisms existing on the effective date of this section, for periods prior to the implementation date of the programs in subsection (b) of this section.

(2)

Implementation of programs included in the TUSF and termination of existing support mechanisms. The TUSF administrator shall ensure that the collection of assessments from telecommunication providers pursuant to subsection (g) of this section, the disbursement of support amounts to ETPs pursuant to subsection (h) of this section, and the termination of support mechanisms existing on the effective date of this section, occur on a uniform date. In the event that interim assessments and disbursements are necessary prior to the establishment of final assessment and disbursement levels, they shall be subject to true-up to the final level of funding.

(f)

Determination of the amount needed to fund the TUSF.

(1)

Amount needed to fund the TUSF. The amount needed to fund the TUSF shall be composed of the following elements.

(A)

Costs of TUSF programs. The TUSF administrator shall compute and include the costs of the following TUSF programs:

(i)

Texas High Cost Universal Service Plan, §26.403 of this title;

(ii)

Small and Rural ILEC Universal Service Plan, §26.404 of this title;

(iii)

Implementation of the Public Utility Regulatory Act §56.025, §26.406 of this title;

(iv)

Additional Financial Assistance, §26.408 of this title;

(v)

Lifeline Service and Link Up Service, §26.412 of this title;

(vi)

Tel-Assistance Service, §26.413 of this title;

(vii)

Telecommunications Relay Service, §26.414 of this title; and

(viii)

Specialized Telecommunications Device Assistance Program (STDAP), §26.415 of this title.

(B)

Costs of implementation and administration of the TUSF. The TUSF implementation and administration costs shall include appropriate costs associated with the implementation and administration of the TUSF incurred by the commission (including the costs incurred by the TUSF administrator on behalf of the commission), any costs incurred by the Texas Department of Human Services caused by its administration of the Lifeline, Link Up, and Tel-Assistance programs, and any costs incurred by the Texas Commission for the Deaf and Hard of Hearing caused by its administration of the Specialized Telecommunications Device Assistance Program (STDAP) and the Telecommunications Relay Service programs.

(C)

Reserve for contingencies. The TUSF administrator shall establish a reserve for such contingencies as late payments and uncollectibles in an amount authorized by the commission.

(2)

Determination of amount needed. After the initial determination, the TUSF administrator shall determine, on a periodic basis, the amount needed to fund the TUSF. The determined amount shall be approved by the commission.

(g)

Assessments for the TUSF.

(1)

Providers subject to assessments. The TUSF assessments shall be payable by all telecommunications providers having access to the customer base; including but not limited to wireline and wireless providers of telecommunications services.

(2)

Basis for assessments. Assessments shall be made to each telecommunications provider based upon its monthly taxable telecommunications receipts reported by that telecommunications provider under Chapter 151, Tax Code.

(3)

Assessment. Each telecommunications provider shall pay its TUSF assessment each month as calculated using the following procedures.

(A)

Calculation of assessment rate. The TUSF administrator shall determine an assessment rate to be applied to all telecommunications providers on a periodic basis approved by the commission.

(B)

Calculation of assessment amount. Payments to the TUSF shall be computed by multiplying the assessment rate determined pursuant to subparagraph (A) of this paragraph by the basis for assessments as determined pursuant to subsection (g)(2) of this section.

(4)

Reporting requirements. Every month, each telecommunications provider shall be required to report taxable telecommunications receipts under Chapter 151, Tax Code to the commission or the TUSF administrator.

(5)

Recovery of assessments. A telecommunications provider may recover the amount of its TUSF assessment from its retail customers, except Lifeline, Link Up, and Tel-Assistance customers. The commission may order modifications in a telecommunications provider's method of recovery.

(A)

Retail customers' bills. In the event a telecommunications provider chooses to recover its TUSF assessment through a surcharge added to its retail customers' bills;

(i)

the surcharge must be listed on the retail customers' bills as "the universal service fund surcharge"; and

(ii)

the surcharge must be assessed as a percentage of every retail customers' bill, except Lifeline, Link Up, and Tel-Assistance services.

(B)

Commission approval of surcharge mechanism. An ILEC choosing to recover the TUSF assessment through a surcharge on its retail customers' bills must file for commission approval of the surcharge mechanism.

(C)

Tariff changes. A telecommunications provider choosing to recover the TUSF assessment through a surcharge on its retail customers' bills shall file the appropriate changes to its tariff and provide supporting documentation for the method of recovery.

(D)

Recovery period. A single universal service fund surcharge shall not recover more than one month of assessments.

(6)

Disputing assessments. Any telecommunications provider may dispute the amount of its TUSF assessment. The telecommunications provider should endeavor to first resolve the dispute with the TUSF administrator. If the telecommunications provider and the TUSF administrator are unable to satisfactorily resolve their dispute, either party may petition the commission to resolve the dispute. Pending final resolution of disputed TUSF assessment rates and/or amounts, the disputing telecommunications provider shall remit all undisputed amounts to the TUSF administrator by the due date.

(h)

Disbursements from the TUSF to ETPs, ILECs, other entities and agencies.

(1)

ETPs, ILECs, other entities, and agencies.

(A)

ETPs. The commission shall determine whether an ETP qualifies to receive funds from the TUSF. An ETP qualifying for the following programs is eligible to receive funds from the TUSF:

(i)

Texas High Cost Universal Service Plan;

(ii)

Small and Rural ILEC Universal Service Plan;

(iii)

Lifeline Service and Link Up Service; and/or

(iv)

Tel-Assistance Service.

(B)

ILECs. The commission shall determine whether an ILEC qualifies to receive support from the following TUSF programs:

(i)

Implementation of the Public Utility Regulatory Act §56.025; and/or

(ii)

Additional Financial Assistance program.

(C)

Other entities. The commission shall determine whether other entities qualify to receive funds from the TUSF. Entities qualifying for the following programs are eligible to receive funds from the TUSF:

(i)

Telecommunications Relay Service; and/or

(ii)

Specialized Telecommunications Device Assistance Program.

(D)

Agencies. The commission, the Texas Department of Human Services, the Texas Commission for the Deaf and Hard of Hearing, and the TUSF administrator are eligible for reimbursement of the costs directly and reasonably associated with the implementation of the provisions of the TUSF.

(2)

Reporting requirements.

(A)

ETPs. An ETP shall report to the TUSF administrator as required by the provisions of the section or sections under which it qualifies to receive funds from the TUSF.

(B)

Other entities. A qualifying entity shall report to the TUSF administrator as required by the provisions of the section or sections under which it qualifies to receive funds from the TUSF.

(C)

Agencies. A qualifying agency shall report its qualifying expenses to the TUSF administrator each month.

(3)

Disbursements. The TUSF administrator shall verify that the appropriate information has been provided by each ETP, local exchange company (LEC), other entities or agencies and shall issue disbursements to ETPs, LECs, other entities and agencies within 30 days of the due date of their reports.

(i)

True-up. The assessment amount determined pursuant to subsections (f) and (g) of this section shall be subject to true-up as determined by the TUSF administrator and approved by the commission. True-ups shall be limited to a three year period for under-reporting and a one year period for over-reporting.

(j)

Sale or transfer of exchanges.

(1)

An ETP that acquires exchanges from an unaffiliated small or rural ILEC receiving support for those exchanges pursuant to §26.404 of this title, shall receive the per-line support amount for which those exchanges were eligible prior to the sale or transfer.

(2)

An ETP that acquires exchanges from an unaffiliated ETP receiving support for those exchanges pursuant §26.403 of this title, shall receive the per-line support amount for which those exchanges were eligible prior to the transfer of the exchanges.

(k)

Proprietary information. The commission and the TUSF administrator are subject to the Texas Open Records Act, Texas Government Code, Chapter 552. Information received by the TUSF administrator from the individual telecommunications providers shall be treated as proprietary only under the following circumstances:

(1)

An individual telecommunications provider who submits information to the TUSF administrator shall be responsible for designating it as proprietary at the time of submission. Information considered to be confidential by law, either constitutional, statutory, or by judicial decision, may be properly designated as proprietary.

(2)

An individual telecommunications provider who submits information designated as proprietary shall stamp on the face of such information "PROPRIETARY PURSUANT TO PUC SUBST. R. §26.420(k)".

(3)

The TUSF administrator may disclose all information from an individual telecommunications provider to the telecommunications provider who submitted it or to the commission and its designated representatives without notifying the telecommunications provider.

(4)

All third party requests for information shall be directed through the commission. If the commission or the TUSF administrator receives a third party request for information that a telecommunications provider has designated proprietary, the commission shall notify the telecommunications provider. If the telecommunications provider does not voluntarily waive the proprietary designation, the commission shall submit the request and the responsive information to the Office of the Attorney General for an opinion regarding disclosure pursuant to the Texas Open Records Act, Texas Government Code, Chapter 552, Subchapter G.

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State on March 17, 1999.

TRD-9901656

Rhonda Dempsey

Rules Coordinator

Public Utility Commission of Texas

Earliest possible date of adoption: May 2, 1999

For further information, please call: (512) 936-7308

Subchapter E. Certification, Licensing and Registration

16 TAC §§26.109, 26.111, 26.113

The Public Utility Commission of Texas (commission) proposes new §26.109 relating to Standards for Granting of Certificates of Operating Authority (COAs), §26.111 relating to Standards for Granting of Service Provider Certificates of Operating Authority (SPCOAs), and §26.113 relating to Amendment of Certificates of Operating Authority (COA) or Service Provider Certificates of Operating Authority (SPCOA). Project Number 19582 has been assigned to this proceeding. The proposed sections will replace §23.38 of this title (relating to Standards for Granting of Certificates of Operating Authority and Service Provider Certificates of Operating Authority). The proposed sections establish commission rules for implementing the Public Utility Regulatory Act (PURA), Chapter 54, Subchapters C and D. The proposed sections will establish financial and technical standards for the award of certificates of operating authority and service provider certificates of operating authority and will establish the procedure for amending certificates of operating authority and service provider certificates of operating authority.

The Appropriations Act of 1997, HB 1, Article IX, Section 167 (Section 167) requires that each state agency review and consider for readoption each rule adopted by that agency pursuant to the Government Code, Chapter 2001 (Administrative Procedure Act). Such reviews shall include, at a minimum, an assessment by the agency as to whether the reason for adopting or readopting the rule continues to exist. The commission held three workshops to conduct a preliminary review of its rules. As a result of these workshops, the commission is reorganizing its current substantive rules located in 16 Texas Administrative Code (TAC) Chapter 23 to (1) satisfy the requirements of Section 167; (2) repeal rules no longer needed; (3) update existing rules to reflect changes in the industries regulated by the commission; (4) do clean-up amendments made necessary by changes in law and commission organizational structure and practices; (5) reorganize rules into new chapters to facilitate future amendments and provide room for expansion; and (6) reorganize the rules according to the industry to which they apply. Chapter 26 has been established for all commission substantive rules applicable to telecommunications service providers. The duplicative sections of Chapter 23 will be proposed for repeal as each new section is proposed for publication in the new chapter.

General changes to rule language:

The proposed new sections reflect different section, subsection, and paragraph designations due to the reorganization of the rules. Citations to the Public Utility Regulatory Act have been updated to conform to the Texas Utilities Code throughout the sections and citations to other sections of the commission's rules have been updated to reflect the new section designations. Some text has been proposed for deletion as unnecessary in the new sections because the dates and requirements in the text no longer apply due to the passage of time and/or fulfillment of the requirements. The Texas Register will publish these sections as all new text. Persons who desire a copy of the proposed new sections as they reflect changes to the existing section in Chapter 23 may obtain a redlined version from the commission's Central Records under Project Number 19852. Section 23.38(c) applies only to COAs and is therefore not included in the redline of §26.111 which applies only to SPCOAs; §23.38(d) applies only to SPCOAs and is therefore not included in the redline of §26.109 which applies only to COAs. Proposed §26.113 is redlined only to existing §23.38(g).

Other changes specific to each section:

Proposed new §26.109 will replace §23.38(a), (b), (c), (e) and (f) as they relate to Certificates of Operating Authority. Proposed new §26.111 will replace §23.38(a), (b), (d), (e) and (f) as they relate to Service Provider Certificates of Operating Authority. Proposed new §26.113 will replace §23.38(g) as it relates to both COAs and SPCOAs.

The following defined terms in existing §23.38(b) have not been included in proposed new §26.109 or §26.111 as these definitions were moved to §26.5 of this title (relating to Definitions): "affiliate", "assumed name", "capitalization", "corporate name", "geographic scope", "incumbent local exchange company (ILEC)", "SPCOA reseller", "return on assets", and "working capital requirements". The acronyms "COA" and "SPCOA" are explained in the text of the sections and are not included in the definitions. The term "telecommunications facilities" has been deleted, as it is not used in the sections. The terms "capital expenditures" and "control" have been deleted because they are standard definitions, which are not necessary to understand the rule.

Proposed new §26.109(b)(1) and §26.109(b)(1)(F) - (J) have deleted references to the COA build-out requirements and the limitation of 31,000 access lines as preempted by the Order FCC 97-346 on September 26, 1997. Proposed new §26.109(b)(1)(C)(iii) and §26.111(b)(1)(C)(iii) have been added to clarify that the complaint histories shall include the type of complaint, status of complaints, resolution of complaints and number of customers in each state where the complaints occurred. Proposed new §26.109(b)(1)(D) and §26.111(b)(1)(D) have been added to clarify what the quality of service standards shall include. Proposed new §§26.109(d)(1)(C), 26.111(d)(1)(C), and 26.113(a)(1)(B) have been added to review the requested name of a utility for deceptive, misleading or vague implications before granting certification. Proposed new §26.109(e) and §26.111(e) have been added to establish reporting requirements for COA and SPCOA holders. Proposed new §26.111(b)(2)(H) has been added to allow data-only SPCOA providers a waiver from 911 and local number portability compliance as related to voice services.

Proposed new §26.113(a)(1)(A) has been added to allow the commission to grant approval of simple name changes on an administrative basis. Proposed new §26.113(a)(3) has been added to clarify when a utility is required to file an amendment relating to selling, transferring, assigning, or leasing an SPCOA or COA certification. Proposed new §26.113(e) has been added to establish the standards for discontinuing optional services or relinquishing a certification.

Questions for parties who comment on the proposed rule: (1) What language should be adopted in §26.113 to clarify the commission's policy of granting a certificate in only one name, consistent with §26.109(d)(1) and §26.111(d)(1)?

Christopher Green, Assistant General Counsel, Office of Regulatory Affairs, has determined that for each year of the first five-year period the proposed section is in effect there will be no fiscal implications for state or local government as a result of enforcing or administering the section.

Christopher Green has determined that for each year of the first five years the proposed section is in effect the public benefit anticipated as a result of enforcing the section will be rules that enable the commission to better protect the public interest against entities that are not qualified to provide basic local exchange telephone service, basic local telecommunications service, and switched access service, while encouraging the development of a competitive marketplace for local exchange telecommunications services. There will be no effect on small businesses as a result of enforcing this section. There is no anticipated economic cost to persons who are required to comply with the section as proposed.

Christopher Green has also determined that the proposed new sections should not affect a local economy, and therefore no local employment impact statement is required under Administrative Procedure Act §2001.022.

The commission staff will conduct a public hearing on this rulemaking under Government Code §2001.029 at the commission's offices, located in the William B. Travis Building, 1701 North Congress Avenue, Austin, Texas 78701, on May 11, 1999, at 10:00 a.m.

Comments on the proposed new sections (16 copies) may be submitted to the Filing Clerk, Public Utility Commission of Texas, 1701 North Congress Avenue, PO Box 13326, Austin, Texas 78711-3326, within 30 days after publication. The commission invites specific comments regarding the costs associated with, and benefits that will be gained by, implementation of the proposed section. The commission will consider the costs and benefits in deciding whether to adopt the section. The commission also invites specific comments regarding the Section 167 requirement as to whether the reason for adopting or readopting the rule continues to exist. All comments should refer to Project Number 19582.

These new sections are proposed under the Public Utility Regulatory Act, Texas Utilities Code Annotated §14.002 (Vernon 1998) (PURA), which provides the Public Utility Commission with the authority to make and enforce rules reasonably required in the exercise of its powers and jurisdiction, and specifically, PURA §§54.102-54.111, which grant the commission authority to determine the criteria for financial and technical qualifications of applicants for certificates of operating authority, and PURA §§54.152-54.159, which grant the commission authority to determine the criteria for financial and technical qualifications of applicants for service provider certificates of operating authority.

Cross-Index to Statutes: Public Utility Regulatory Act §14.002, §§54.102-54.111, and §§54.152-54.159.

§26.109.Standards for Granting of Certificates of Operating Authority (COAs).

(a)

Scope and purpose. This section applies to the certification of persons and entities to provide basic local exchange telephone service, basic local telecommunications service, and switched access service as holders of certificates of operating authority established in the Public Utility Regulatory Act, Chapter 54, Subchapter C. Through this section, the commission strives to protect the public interest against entities that are not qualified to provide basic local exchange telephone service, basic local telecommunications service, and switched access service, while also encouraging the development of a competitive marketplace for local exchange telecommunications services that is free of unreasonable barriers to entry that restrict or impede the development of a market that will provide consumers with the best services at the lowest cost.

(b)

Standards for granting certification to COA applicants.

(1)

The commission shall consider the factors listed in subparagraphs (A)-(E) of this paragraph in deciding whether to grant a COA to an applicant proposing to serve an exchange of an incumbent local exchange company (ILEC).

(A)

Whether the applicant has satisfactorily provided all of the information required in the Application for a Certificate of Operating Authority.

(B)

Whether the applicant is financially qualified to be a facilities-based local service provider. To prove financial qualification as a facilities-based utility, an applicant shall provide evidence sufficient to establish that:

(i)

Applicant possesses the greater of $100,000 cash or cash equivalent or sufficient cash or cash equivalent to meet start up expenses, working capital requirements and capital expenditures, liquid and readily available to meet the applicant's startup expenses, working capital requirements and capital expenditures for the first two years of Texas operations; or

(ii)

Applicant is an established business entity and is able to demonstrate evidence of profitability in existing operations for two years preceding the date of application by submitting a balance sheet and income statement audited or reviewed by a certified public accountant establishing all of the following:

(I)

A long-term debt to capitalization ratio of less than 60%;

(II)

A return-on-assets ratio of at least 10%; and,

(III)

The greater of $50,000 cash or cash equivalent or sufficient cash or cash equivalent to meet startup expenses, working capital requirements and capital expenditures, liquid and readily available to meet the applicant's startup expenses, working capital requirements and capital expenditures for a minimum of the first two years of Texas operations.

(C)

Whether the applicant is technically qualified. The commission shall determine whether an applicant possesses sufficient technical qualifications to be awarded a COA based upon a review of the following information.

(i)

Prior experience by the applicant or one or more of the applicant's principals or employees in the telecommunications industry or a related industry.

(ii)

Any complaint history regarding the applicant, applicant's affiliates, predecessors in interest, shareholders, and principals on file at the Public Utility Commission of Texas.

(iii)

Any complaint history regarding the applicant, applicant's affiliates, predecessors in interest, shareholders, and principals with Public Utility Commissions or Public Service Commissions in other states where the applicant is doing business. The complaint history shall include, but not be limited to, the type of complaint, status of complaint, resolution of complaint and the number of customers in each state where complaints occur.

(iv)

Any complaint history regarding the applicant, applicant's affiliates, predecessors in interest, shareholders, and principals on file with the Office of the Texas Attorney General and the Attorney General in other states where the applicant is doing business.

(v)

The compliance record of the applicant, applicant's affiliates, predecessors in interest, shareholders, and principals at the Texas Comptroller's Office.

(vi)

The compliance record of the applicant, applicant's affiliates, predecessors in interest, shareholders, and principals at the Public Utility Commission of Texas.

(D)

Whether the applicant is able to meet the commission's quality of service standards. Quality of service standards shall include, but not be limited to, 911 compliance, local number portability capability and Y2K compliance of all telecommunications equipment.

(E)

Whether certification of the applicant is in the public interest.

(2)

If, after considering the factors in this subsection, the commission finds it to be in the public interest to do so, the commission may limit the geographic scope of the COA.

(c)

Financial instruments that will meet the cash requirements established in this section.

(1)

Applicants for COAs shall be permitted to use any of the financial instruments set out in subparagraphs (A)-(F) of this paragraph to satisfy the cash requirements established in this rule to prove financial qualification.

(A)

Cash or cash equivalent, including cashier's check or sight draft.

(B)

A certificate of deposit with a bank or other financial institution.

(C)

A letter of credit issued by a bank or other financial institution, irrevocable for a period of at least 12 months beyond certification of the applicant by the commission.

(D)

A line of credit or other loan, issued by a bank or other financial institution, irrevocable for a period of at least 12 months beyond certification of the applicant by the commission and payable on an interest-only basis for the same period.

(E)

A loan issued by a subsidiary or affiliate of applicant, or a corporation holding controlling interest in the applicant, irrevocable for a period of at least 12 months beyond certification of the applicant by the commission, and payable on an interest-only basis for the same period.

(F)

A guaranty issued by a shareholder or principal of applicant, a subsidiary or affiliate of applicant, or a corporation holding controlling interest in the applicant, irrevocable for a period of at least 12 months beyond the certification of the applicant by the commission.

(2)

To the extent that the applicant relies upon a loan or guaranty provided in paragraph (1)(E) or (F) of this subsection, the applicant shall provide evidence sufficient to establish that the lender or guarantor possesses sufficient cash or cash equivalent to fund the loan or guaranty.

(3)

All cash and instruments listed in paragraph (1)(A)-(F) of this subsection shall be unencumbered by pledges as collateral and shall be subject to verification and review by the commission prior to certification of the applicant and for a period of 12 months beyond the date of certification of the applicant by the commission. Failure to comply with this requirement may void an applicant's certification or result in such other action as the commission deems in the public interest, including, but not limited to, assessment of reasonable penalties and all other available remedies under the Public Utility Regulatory Act.

(d)

Name on certificates.

(1)

All basic local exchange telephone service, basic local telecommunications service, and switched access service provided under a COA shall be provided in the name under which certification was granted by the commission. The commission shall grant the certificate in only one name.

(A)

If the applicant is a corporation, the commission shall issue the certificate in the corporate or assumed name of the applicant.

(B)

If the applicant is an unincorporated business entity or an individual, the commission shall issue the certificate in the assumed name of the entity or the individual.

(C)

Commission staff shall review the requested name to determine if the name is deceptive, misleading, vague, inappropriate, or duplicative of an existing certificated telecommunications utility. If the staff determines that the requested name is deceptive, misleading, vague, inappropriate, or duplicative, it shall notify the applicant and the applicant shall modify the name to alleviate the staff's concerns. If the name is not adequately modified, the application may be denied.

(2)

The holder of a COA may request commission approval to change the name on the certificate by filing an application to amend its certificate with the commission.

(e)

Reporting requirements

(1)

All COA holders shall file updated information set forth in paragraph (2) of this subsection on an annual basis, by June 30 of each year.

(2)

Annual reportable information shall consist of, but not be limited to the following:

(A)

Changes in addresses, telephone numbers, authorized contacts and other information for contacting COA holders in Project Number 19421, Notification of Changes in Address, Contact Representative, and/or Telephone Numbers, Pursuant to P.U.C. Substantive Rule §26.89;

(B)

A description of the type(s) of communications services being provided and the exchanges in which the services are being provided.

§26.111.Standards for Granting of Service Provider Certificates of Operating Authority (SPCOAs).

(a)

Scope and purpose. This section applies to the certification of persons and entities to provide basic local exchange telephone service, basic local telecommunications service, and switched access service as holders of service provider certificates of operating authority, established in the Public Utility Regulatory Act, Chapter 54, Subchapter D. Through this section, the commission strives to protect the public interest against entities that are not qualified to provide basic local exchange telephone service, basic local telecommunications service, and switched access service, while also encouraging the development of a competitive marketplace for local exchange telecommunications services that is free of unreasonable barriers to entry that restrict or impede the development of a market that will provide consumers with the best services at the lowest cost.

(b)

Standards for granting certification to SPCOA applicants.

(1)

The commission may condition or limit the scope of a SPCOA's service in at least the following ways:

(A)

Facility-based;

(B)

Resale-only;

(C)

Data-only;

(D)

Geographic scope;

(E)

Some combination of the above, as appropriate.

(2)

The commission shall consider the following factors in deciding whether and how to condition or limit a SPCOA:

(A)

Whether the applicant has satisfactorily provided all of the information required in the application for a SPCOA.

(B)

Whether the applicant is financially qualified as a facilities-based SPCOA. To prove financial qualifications as a facilities-based SPCOA, the applicant shall meet the standards set forth in §26.109(b)(1)(B) of this title (relating to Standards for Granting Certificates of Operating Authority).

(C)

Whether the applicant is financially qualified as a resale-only SPCOA. To prove financial qualifications as a resale-only SPCOA, an applicant shall provide evidence sufficient to establish that:

(i)

Applicant possesses the greater of $25,000 cash or cash equivalent or sufficient cash or cash equivalent to meet startup expenses, working capital requirements and capital expenditures, liquid and readily available to meet the applicant's startup expenses, working capital requirements and capital expenditures for the first year of Texas operations; or

(ii)

Applicant is an established business entity and is able to demonstrate evidence of profitability in existing operations for two years preceding the date of application by submitting a balance sheet and income statement audited or reviewed by a certified public accountant establishing all of the following:

(I)

A long-term debt to capitalization ratio of less than 60%;

(II)

A return-on-assets ratio of at least 10%; and,

(III)

The greater of $10,000 cash or cash equivalent or sufficient cash or cash equivalent to meet startup expenses, working capital requirements and capital expenditures, liquid and readily available to meet the applicant's startup expenses, working capital requirements and capital expenditures for the first year of Texas operations.

(D)

Whether the applicant is technically qualified. The commission shall determine whether an applicant possesses sufficient technical qualifications to be awarded a facilities-based SPCOA certification or whether applicant should be restricted to a resale-only SPCOA certification, based upon a review of the following information.

(i)

Prior experience by the applicant or one or more of the applicant's principals or employees in the telecommunications industry or a related industry.

(ii)

Any complaint history regarding the applicant, applicant's affiliates, predecessors in interest, shareholders, and principals on file at the Public Utility Commission of Texas, the Texas Attorney General, or with the Public Utility Commissions, Public Service Commissions, or Attorneys General in other states where the applicant is doing business. The complaint history shall include, but not be limited to, the type of complaint, status of complaint, resolution of complaint, and the number of customers in each state where complaints have occurred.

(iii)

The compliance record of the applicant, applicant's affiliates, predecessors in interest, shareholders, and principals at the Texas Comptroller's Office.

(iv)

The compliance record of the applicant, applicant's affiliates, predecessors in interest, shareholders, and principals at the Public Utility Commission of Texas.

(E)

Whether the applicant is able to meet the commission's quality of service standards. The quality of service standards shall include, but not be limited to, 911 compliance, local number portability capability and Y2K compliance of all telecommunications equipment.

(F)

Whether certification of the applicant is in the public interest.

(G)

Whether the applicant, together with affiliates, had in excess of 6.0% of the total intrastate switched access minutes of use as measured by the most recent 12-month period preceding the filing of the application for which data is available.

(H)

Whether the applicant has limited its operation to data-only services. If the applicant is limited to data-only services, the applicant will be eligible for a data-only SPCOA, and the applicant shall be waived from 911 and local number portability compliance as related to switched voice services. If the applicant intends to add voice services at a future date, the applicant must first file an amendment, subject to approval of the commission, which shows that the applicant is in compliance with all of the commission's quality of service standards.

(3)

If, after considering the factors in this subsection, the commission finds it to be in the public interest to do so, the commission may limit the geographic scope of the SPCOA.

(c)

Financial instruments that will meet the cash requirements established in this section.

(1)

Applicants for SPCOAs shall be permitted to use any of the financial instruments set out in subparagraphs (A)-(F) of this paragraph to satisfy the cash requirements established in this rule to prove financial qualification.

(A)

Cash or cash equivalent, including cashier's check or sight draft.

(B)

A certificate of deposit with a bank or other financial institution.

(C)

A letter of credit issued by a bank or other financial institution, irrevocable for a period of at least 12 months beyond certification of the applicant by the commission.

(D)

A line of credit or other loan, issued by a bank or other financial institution, irrevocable for a period of at least 12 months beyond certification of the applicant by the commission and payable on an interest-only basis for the same period.

(E)

A loan issued by a subsidiary or affiliate of applicant, or a corporation holding controlling interest in the applicant, irrevocable for a period of at least 12 months beyond certification of the applicant by the commission, and payable on an interest-only basis for the same period.

(F)

A guaranty issued by a shareholder or principal of applicant, a subsidiary or affiliate of applicant, or a corporation holding controlling interest in the applicant, irrevocable for a period of at least 12 months beyond the certification of the applicant by the commission.

(2)

To the extent that the applicant relies upon a loan or guaranty provided in paragraph (1)(E) or (F) of this subsection, the applicant shall provide evidence sufficient to establish that the lender or guarantor possesses sufficient cash or cash equivalent to fund the loan or guaranty.

(3)

All cash and instruments listed in paragraph (1) (A) - (F) of this subsection shall be unencumbered by pledges as collateral and shall be subject to verification and review by the commission prior to certification of the applicant and for a period of 12 months beyond the date of certification of the applicant by the commission. Failure to comply with this requirement may void an applicant's certification or result in such other action as the commission deems in the public interest, including, but not limited to, assessment of reasonable penalties and all other available remedies under the Public Utility Regulatory Act.

(d)

Name on certificates.

(1)

All basic local exchange telephone service, basic local telecommunications service, and switched access service provided under an SPCOA shall be provided in the name under which certification was granted by the commission. The commission shall grant the certificate in only one name.

(A)

If the applicant is a corporation, the commission shall issue the certificate in the corporate or assumed name of the applicant.

(B)

If the applicant is an unincorporated business entity or an individual, the commission shall issue the certificate in the assumed name of the entity or the individual.

(C)

Commission staff shall review the requested name to determine if the name is deceptive, misleading, vague, inappropriate, or duplicative of an existing certificated telecommunications utility. If the staff determines that the requested name is deceptive, misleading, vague, inappropriate, or duplicative, it shall notify the applicant and the applicant shall modify the name to alleviate the staff's concerns. If the name is not adequately modified, the application may be denied.

(2)

The holder of an SPCOA may request commission approval to change the name on the certificate by filing an application to amend its certificate with the commission.

(e)

Reporting requirements

(1)

All SPCOA holders shall file updated information set forth in paragraph (2) of this subsection on an annual basis, by June 30 of each year.

(2)

Annual reportable information shall consist of, but not be limited to the following:

(A)

Changes in addresses, telephone numbers, authorized contacts and other information for contacting SPCOA holders in Project Number 19421, Notification of Changes in Address, Contact Representative, and/or Telephone Numbers, Pursuant to P.U.C. Substantive Rule §26.89;

(B)

A description of the type(s) of communications services being provided and the exchanges in which the services are being provided.

§26.113.Amendment of Certificate of Operating Authority (COA) or Service Provider Certificate of Operating Authority (SPCOA).

(a)

A person or entity granted a COA or an SPCOA by the commission shall be required to file an application to amend the COA or an SPCOA on a commission approved form in order to:

(1)

Change the corporate name or assumed name of the certificate holder.

(A)

Name change amendments may be granted on an administrative basis, if the holder is in compliance with §26.109(b)(1)(C) of this title (relating to Standards for Granting Certificates of Operating Authority) or §26.111(b)(2)(C) of this title (relating to Standards for Granting Service Provider Certificates of Operating Authority), and no hearing is requested.

(B)

Commission staff shall review the requested name to determine if the name is deceptive, misleading, vague, inappropriate, or duplicative of an existing certificated telecommunications utility. If the staff determines that the requested name is deceptive, misleading, vague, inappropriate, or duplicative, it shall notify the applicant and the applicant shall modify the name to alleviate the staff's concerns. If the name is not adequately modified, the amendment may be denied.

(2)

Change the geographic scope of the COA or SPCOA;

(3)

Sell, transfer, assign, or lease a controlling interest in the COA or the SPCOA or sell, transfer, or lease a controlling interest in the entity holding the COA or the SPCOA.

(4)

Remove the resale-only restriction on a resale-only SPCOA certificate.

(5)

Remove the data-only restriction on a data-only SPCOA certificate.

(b)

If a COA holder sells, merges, assigns, or leases its certificate or the entity holding the certificate to an SPCOA holder with an identical geographic scope, the surviving entity shall hold a COA certificate and shall have all the obligations of a COA holder set forth under state and federal law; the surviving entity shall also notify the commission within 30 days of the sale, merger, assignment, or lease.

(c)

If the application to amend is for a name change of the certificate holder and is not a sale, transfer, assignment, or lease of the COA or the SPCOA or a sale, transfer, or lease of the entity holding the COA or the SPCOA, applicant will be required to provide a general description of the applicant, including the following:

(1)

Legal name and all assumed names of the entity to which the commission issued the certificate.

(2)

All other assumed names, if any, under which the certificate holder does business.

(3)

Certificate number of the COA or SPCOA.

(4)

Address and telephone number of the principal office of certificate holder.

(5)

Name, address, and office location of each partner, officer, and the five largest shareholders of certificate holder.

(6)

Proposed amendment to legal name or assumed name of certificate holder.

(d)

If the application to amend requests any change other than a name change, the commission shall consider the factors set forth in §26.109 of this title and §26.111 of this title in determining whether to approve the amendment to the certificate.

(e)

Standards for discontinuing optional services or relinquishing certifications.

(1)

Utility discontinuing optional services or relinquishing an SPCOA or COA certification shall comply with PURA §54.253. Notification to the commission shall consist of filing an amendment, which provides the following information:

(A)

Name, address, and phone number of utility;

(B)

SPCOA or COA number being discontinued or relinquished;

(C)

Commission docket number in which the SPCOA or COA was granted;

(D)

A sworn statement stating the authority to discontinue service or relinquish certification, notification of customers, and that the information provided in the amended application is true and correct;

(E)

Notification to each customer.

(i)

The notification letter shall clearly state the intent of the utility to either cease an optional service or cease operations and a copy of the letter shall be provided to the commission;

(ii)

The notification letter shall give customers a minimum of 60 days notice of relinquishment of certification or discontinuation of optional services;

(iii)

The notification letter shall inform customers of the carrier of last resort or make other arrangements to provide service as approved by the customers.

(2)

All customer deposits and credits shall be returned within 60 days of notification to relinquish certification;

(3)

Any switchover fees that will be charged to affected customers shall be paid by the utility relinquishing the certification;

(4)

The relinquishing utility shall maintain operations until it has obtained commission authorization to cease operations or services. Upon receiving commission authorization to cease operations, the relinquishing utility shall void its existing interconnection agreement(s).

(f)

No later than five days after filing an application to amend, the applicant shall notify the Advisory Commission on State Emergency Communications and all affected 9-1-1 entities by providing a copy of the application to amend.

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State on March 22, 1999.

TRD-9901680

Rhonda Dempsey

Rules Coordinator

Public Utility Commission of Texas

Earliest possible date of adoption: May 2, 1999

For further information, please call: (512) 936-7308

Part IX. Texas Lottery Commission

Chapter 401. Administration of State Lottery Act

Subchapter D. Lottery Game Rules

16 TAC §401.308

The Texas Lottery Commission proposes amendments to §401.308, relating to Cash 5 On-line game. The proposed amendments will allow advanced play and extended multi-draw purchases. A lottery player will be able to purchase a Cash 5 ticket for any of the four Cash 5 drawings immediately following the current drawings. Additionally, the proposed amendments will allow a player to purchase a Cash 5 ticket for up to 20 consecutive draws beginning with the current draw.

Lynn Gunn, Senior Financial Manager, has determined that for the first five-year period the section as proposed will be in effect the fiscal implications for state government as a result of enforcing or administering the section will be a net gain to the State as follows: FY 1999, $50,639; FY 2000, $202,557; FY 2001, $202,557; FY 2002, $202,557; and, FY 2003, $202,557.

Ms. Gunn also has determined that for each year of the first five-year period the section as proposed is in effect there will be no fiscal implication for local government as a result of enforcing or administering the section as proposed.

Ms. Gunn also has determined that for each year of the first five-year period the section as proposed is in effect the public benefit anticipated as a result of enforcing the section as proposed will be to generate additional revenue for the State of Texas through advance sales and through the ability to purchase tickets for multiple draws. Ms. Gunn has also determined that there will be no cost to small businesses or individuals who are required to comply with the section as proposed, and no effect on local employment is anticipated.

Comments on the proposed amendments may be submitted to Kimberly L. Kiplin, General Counsel, Texas Lottery Commission, P.O. Box 16630, Austin, Texas 78761-6630.

The amendments are proposed under Texas Government Code, Section 466.015 which provides the Texas Lottery Commission with the authority to adopt rules governing the operation of the lottery.

Texas Government Code, Chapter 466 is affected by the proposed amendments.

§401.308."Cash 5" On-Line Game Rule.

(a)

(No change.)

(b)

Definitions. In addition to the definitions provided in §401.304 of this title (relating to On-Line Games Rules (General)), and unless the context in this rule otherwise requires, the following definitions apply.

(1)

Advance Play - A player may purchase a Cash 5 ticket for any of the three Cash 5 drawings immediately following the current drawing. Example: On Monday, before the drawing, a Cash 5 ticket can be purchased for Tuesday, Thursday, or Friday drawings.

(2)

Multi draw - A player may purchase a Cash 5 ticket for up to 20 consecutive drawings beginning with the current draw.

(3) [ (1) ]

Number - Any play integer from one through 39 inclusive.

(4)

[ (2) ]

Play - The five numbers selected on each play board and printed on the ticket.

(5) [ (3) ]

Play board - A field of the 39 numbers found on the playslip.

(6) [ (4) ]

Playslip - An optically readable card issued by the Texas Lottery used by players of Cash 5 to select plays. There shall be five play boards on each playslip identified at A, B, C, D, and E. A playslip has no pecuniary value and shall not constitute evidence of ticket purchase or of numbers selected.

(c)

Price of ticket. The price of each Cash 5 play shall be $1.00. A player may purchase up to five plays on one ticket. Multiple draws are available for up to [ 10 ] 20 consecutive draws beginning with the current draw. A player may purchase a Cash 5 ticket for advance play.

(d)-(h)

(No change.)

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State, on March 15, 1999.

TRD-9901639

Kimberly L. Kiplin

General Counsel

Texas Lottery Commission

Earliest possible date of adoption: May 2, 1999

For further information, please call: (512) 344-5113