ADOPTED RULES An agency may take final action on a section 30 days after a proposal has been published in the Texas Register. The section becomes effective 20 days after the agency files the correct document with the Texas Register, unless a later date is specified or unless a federal statute or regulation requires implementation of the action on shorter notice. If an agency adopts the section without any changes to the proposed text, only the preamble of the notice and statement of legal authority will be published. If an agency adopts the section with changes to the proposed text, the proposal will be republished with the changes. TITLE 7. BANKING AND SECURITIES PART I. State Finance Commission CHAPTER 3.Banking Section The Finance Commission of Texas (the commission) adopts amendments to sec.3.21, concerning bank call reports, sec.3.92, concerning user safety at unmanned teller machines, and sec.3.111, concerning confidential information. The amendments are adopted without changes to the text as proposed in the September 5, 1997, issue of the Texas Register (22 TexReg 8807), and the text will not be republished. The amendments revise the manner in which statutory source law is cited to conform with the recent codification of the source law into the Finance Code. No substantive changes result from the amendments. The agency received no comments on the proposal. SUBCHAPTER B.General 7 TAC sec.3.21 The amendment is adopted pursuant to the Finance Code, sec.31.003(a), which authorizes the commission to adopt rules "to accomplish the purposes of this subtitle and Chapters 11, 12, and 13, including rules necessary or reasonable to ... implement and clarify this subtitle and Chapters 11, 12, and 13 ...." As required by the Finance Code, sec.31.003(b), the commission considered the need to promote a stable banking environment, provide the public with convenient, safe, and competitive banking services, preserve and promote the competitive parity of state banks with national banks and other depository institutions in this state consistent with the safety and soundness of state banks and the state bank system, and allow for economic development within this state. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on October 24, 1997. TRD-9714145 Everette D. Jobe General Counsel State Finance Commission Effective date: Novembe 13, 1997 Proposal publication date: September 5, 1997 For further information, please call: (512) 475-1300 SUBCHAPTER E.Banking House and Other Facilities 7 TAC sec.3.92 The amendment is adopted under the authority of Finance Code, sec.59.310, which requires the commission to adopt rules regarding enforcement and implementation of the Finance Code, Chapter 59, Subchapter D. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on October 24, 1997. TRD-9714146 Everette D. Jobe General Counsel State Finance Commission Effective date: November 13, 1997 Proposal publication date: September 5, 1997 For further information, please call: (512) 475-1300 SUBCHAPTER F.Access to Information 7 TAC sec.3.111 The amendment is adopted pursuant to various rulemaking authority under the Finance Code. The Finance Code, sec.31.304(a), provides that a financial institution, affiliate or service provider that receives confidential information from the department may not disclose that information to anyone who is not officially connected to the recipient, "except as authorized by rules adopted under this subtitle." The Finance Code, sec.31.305, provides that discovery of confidential information pursuant to subpoena from a person subject to the Finance Code, Chapter 31, Subchapter D, "must comply with rules adopted under this subtitle." The Finance Code, sec.31.305, also provides that the rules may restrict release to confidential information that is directly relevant to the legal dispute at issue and that the rules may require a court-issued protective order, in form and under circumstances the rules specify, prior to release. The Finance Code, sec.31.003(a), provides that the commission may adopt rules "to accomplish the purposes of this subtitle," including rules that "implement and clarify" it or "preserve or protect the safety and soundness of banks." Pursuant to the new Texas Trust Company Act, Texas Civil Statutes, Articles 342a-1.001 et seq, enacted by Acts 1997, 75th Legislature, chapter 769, effective September 1, 1997, the finance commission will in time enact similar rules applicable to trust companies under the authority of Texas Civil Statutes, Articles 342a-1.003, 342a-2.104, and 342a-2.105. Until new regulations are proposed and adopted, trust companies are required to comply with all regulations applicable to banks to the extent compatible with the Texas Trust Company Act, including sec.3.111. As required by the Finance Code, sec.31.003(b), the commission considered the need to promote a stable banking environment, provide the public with convenient, safe, and competitive banking services, preserve and promote the competitive parity of state banks with national banks and other depository institutions in this state consistent with the safety and soundness of state banks and the state bank system, and allow for economic development within this state. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on October 24, 1997. TRD-9714147 Everette D. Jobe General Counsel State Finance Commission Effective date: November 13, 1997 Proposal publication date: September 5, 1997 For further information, please call: (512) 475-1300 CHAPTER 4.Currency Exchange 7 TAC sec.4.3 The Finance Commission of Texas (the commission) adopts an amendment to sec.4.3, concerning reporting and recordkeeping, without changes to the text as proposed in the September 5, 1997, issue of the Texas Register (22 TexReg 8811). The amendment to sec.4.3(i) clarifies the original intent of the section that only currency transmission licensees may keep records based on a transaction threshold of $3,000 under federal law rather than the more strict threshold of $1,000 under state law. Currency exchange licensees must continue to comply with the requirements of sec.4.3(e)(1). In addition, the amendment revises the manner in which statutory source law is cited to conform with the recent codification of the source law into the Finance Code. The agency received a letter from the Non-Bank Funds Transmitters Group, Washington, D.C., indicating no opposition to adoption of the proposal. No other comments were received regarding the proposal. The amendment is proposed pursuant to the Finance Code, sec.153.002(1), which authorizes the commission to adopt rules "necessary to implement this chapter, including ... recordkeeping and reporting requirements of a license holder." This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on October 24, 1997. TRD-9714148 Everette D. Jobe General Counsel State Finance Commission Effective date: Novmeber 13, 1997 Proposal publication date: September 5, 1997 For further information, please call: (512) 475-1300 7 TAC sec.4.8 The Finance Commission of Texas (the commission) adopts the repeal of sec.4.8, concerning custody of criminal history information, without changes to the proposal as published in the September 5, 1997, issue of the Texas Register (22 TexReg 8812). The repeal is necessary because the source law was repealed in connection with its codification into the Penal Code by Acts 1993, 73rd Legislature, Chapter 790, and the requirement for rules was deleted in the process. The agency received no comments on the proposal. The repeal is adopted pursuant to rulemaking authority under the Finance Code, sec.153.002, which authorizes the commission to adopt rules necessary to implement the Finance Code, Chapter 153. sec.4.8. Custody of Criminal History Information. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on October 24, 1997. TRD-9714149 Everette D. Jobe General Counsel State Finance Commission Effective date: November 13, 1997 Proposal publication date: September 5, 1997 For further information, please call: (512) 475-1300 CHAPTER 9.Rules of Procedure for Contested Case Hearings, Appeals, and Rulemakings The Finance Commission of Texas, the Texas Department of Banking, the Savings and Loan Commissioner, and the Consumer Credit Commissioner (the agencies) adopt the repeal of sec.sec.9.1-9.5 (all of Subchapter A), 9.11-9.12 and 9.14-9.31 (all of Subchapter B except sec.9.13), and 9.53 (in Subchapter C), concerning practice and procedure before the agencies. The repeal is adopted without change to the proposal as published in the September 12, 1997, issue of the Texas Register (22 TexReg 9197). The repealed sections would conflict with adoption of new sections governing practice and procedure before the agencies and thus must be repealed simultaneously with such adoption. The new sections are adopted in this issue of the Texas Register. The agencies received no comments regarding the repeal. Discussion of comments received regarding the new sections in Chapter 9 appear with the adoption preamble for those sections. SUBCHAPTER A.General 7 TAC sec.sec.9.1-9.5 The repeal is adopted under Government Code, sec.2001.004(1), which requires all administrative agencies to adopt rules of practice stating the nature and requirements of all available formal and informal procedures. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on October 24, 1997. TRD-9714150 Everette D. Jobe General Counsel State Finance Commission Effective date: November 13, 1997 Proposal publication date: September 12, 1997 For further information, please call: (512) 475-1300 SUBCHAPTER B.Contested Case Hearings 7 TAC sec.sec.9.11, 9.12, 9.14-9.31 The repeal is adopted under Government Code, sec.2001.004(1), which requires all administrative agencies to adopt rules of practice stating the nature and requirements of all available formal and informal procedures. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on October 24, 1997. TRD-9714151 Everette D. Jobe General Counsel State Finance Commission Effective date: November 13, 1997 Proposal publication date: September 12, 1997 For further information, please call: (512) 475-1300 SUBCHAPTER C.Appeals to Finance Commission 7 TAC sec.9.53 The repeal is adopted under Government Code, sec.2001.004(1), which requires all administrative agencies to adopt rules of practice stating the nature and requirements of all available formal and informal procedures. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on October 24, 1997. TRD-9714152 Everette D. Jobe General Counsel State Finance Commission Effective date: November 13, 1997 Proposal publication date: September 12, 1997 For further information, please call: (512) 475-1300 CHAPTER 9.Rules of Procedure for Contested Case Hearings, Appeals, and Rulemakings The Finance Commission of Texas, the Texas Department of Banking, the Savings and Loan Commissioner, and the Consumer Credit Commissioner (the agencies) adopt new sec.sec.9.1-9.3, 9.11-9.12, 9.14-9.23, and 9.25-9.38, relating to rules of procedure for contested case hearings. Sections 9.3, 9.15, 9.17, 9.22, 9.25, and 9.32 are adopted with nonsubstantive changes to the text as proposed in the September 12, 1997, issue of the Texas Register (22 TexReg 9197). Sections 9.1, 9.2, 9.11, 9.12, 9.14, 9.16, 9.18-9.21, 9.23, 9.26-9.31, and 9.33-9.38 are adopted without changes and the text will not be republished. Adopted sec.sec.9.1-9.3 will comprise Subchapter A, and sec.sec.9.11-9.12, 9.14- 9.23, and 9.25-9.38 will appear in Subchapter B. Existing sec.9.13 in Subchapter B was left in its current form. The number for sec.9.24 was inadvertently skipped in the proposal and no rule will bear that number. All existing sections in Subchapters A and B other than sec.9.13, and sec.9.53 in Subchapter C, are repealed in this issue of the Texas Register. Subchapters D and E of Chapter 9 are unaffected by this action. Effective November 25, 1995, the agencies adopted uniform rules of practice and procedure for contested case hearings, appeals, and rulemakings, see the November 14, 1995, issue of the Texas Register (20 TexReg 9407). The adoption of uniform procedural rules helped expedite the fair hearing of contested cases before all of the agencies and simplify the duties of the administrative law judge employed by the finance commission to hear cases on behalf of the agencies. At the time of adoption, these rules were among the most modern and flexible in the state. Experience has demonstrated that, while the administrative process has worked smoothly as anticipated, more modernization is appropriate. In general, the adopted sections eliminate some detail contained in the former rules that have not been used in practice and more fully embrace the use of the Texas Rules of Civil Procedure (TRCP). Many reported cases, texts, treatises, and other educational materials discuss what these rules mean and can readily be cited by the administrative law judge in support of procedural decisions. Adopting the TRCP by reference also has the advantage of avoiding the occasional gaps that arise in agency-specific procedural rules that were unanticipated. Another advantage is that agency procedural rules will automatically update to incorporate future changes in the TRCP as such may occur. Finally, the TRCP will be "user friendly" to any appellate courts that might review agency cases and to lawyers who do not regularly practice before the agencies. Among other new features, the new sections expressly include the possibility of summary judgment (sec.9.23) and mediation (sec.9.33). Federal and Texas courts have used summary judgments for years and they are being used by a few Texas agencies in administrative proceedings and by out-of-state and federal administrative agencies. Mediation is now being widely used in the state district courts. Several state agencies are experimenting with mediation and the administrative law section of the bar is encouraging other state agencies to experiment with it. Several of the adopted sections differ from the TRCP by design. New sec.9.11 follows case law holding that agencies may serve their licensees informally by mailing a notice to the address furnished the agency in lieu of the formal service provided under the TRCP. However, the section still requires the agency to make formal service on unlicensed parties who violate the law by acting without a license or permit since there is no case law excusing formal service of initial pleadings on such parties. Also, the new sections require very minimal pleading as compared with the TRCP. Pleading is only one of many ways of providing opportunity to prepare. Deficiencies in a pleading may be cured by informal communication, by formal amendment, by pre-hearing conferences, or by ample continuances at the hearing. The question for a reviewing court is not the adequacy of the original notice or pleading but rather the fairness of the whole procedure. Finally, with regard to sec.9.37, the new sanctions section, a continuing debate exists in both state and federal case law, law review articles, treatises, and other scholarly materials regarding what sanctions an administrative law judge can impose for violations of agency subpoenas, discovery orders, and other procedural orders and rulings. Some authorities opine that the only method of enforcement is by bringing a separate law suit in state district court for a court order directing compliance with the agency order, a time consuming exercise that would disrupt and delay administrative proceedings. Other authorities opine that an administrative law judge has inherent authority to impose sanctions for violations similar to the sanctions that a court might impose and/or authority to impose any sanctions that the agency itself might impose. New sec.9.37 is modeled after the authority of the State Office of Administrative Hearings in Government Code, sec.2003.0421. The agency received advice from two commentors, both generally in support of adoption of the rules but requesting clarification of minor perceived ambiguities. The first commenter suggested a minor revision to the first sentence of sec.9.3 to better conform to Government Code, sec.2001.061, the addition of a phrase to the end of sec.9.15(b) to recognize party status of persons specially recognized as such by governing law, a minor revision to the second sentence of 9.17(a) to more clearly address situations in which a party is not represented by counsel, substitution of the phrase "make a motion" for "file a motion" in the second sentence of sec.9.22 to include oral motions in a hearing, and substitution of the phrase "be delivered" for "be mailed" in sec.9.32(b) to ensure that documents are in the hands of the parties prior to a telephone hearing. All suggestions have been accepted by the agency and textual changes made accordingly. The second commenter noted that sec.9.25(a) should not but could be construed to mean that interlocutory appeals to the agency head were permitted. The agency accepts the comment and clarifies the ambiguous language. SUBCHAPTER A.General 7 TAC sec.sec.9.1-9.3 The new sections are adopted under Government Code, sec.2001.004(1), which requires all administrative agencies to adopt rules of practice stating the nature and requirements of all available formal and informal procedures. The new sections are also adopted under specific rulemaking authority in the substantive statutes administered by the agencies. The legislature has enacted the Finance Code effective September 1, 1997, Acts 1997, 75th Legislature, Chapter 1008, sec.1 (the Finance Code). Certain authority citations are to the Finance Code. Finance Code, sec.31.003(a)(5), authorizes the finance commission to adopt rules necessary or reasonable to facilitate the fair hearing and adjudication of matters before the banking commissioner and the finance commission. Finance Code, sec.153.002, authorizes the finance commission to adopt rules necessary to implement the Finance Code, Chapter 153. Finance Code, sec.152.102, authorizes the finance commission to adopt rules necessary for the enforcement and orderly administration of the Finance Code, Chapter 152. Finance Code, sec.154.051(b), authorizes the department of banking to adopt rules concerning matters incidental to the enforcement and orderly administration of the Finance Code, Chapter 154. Finance Code, sec.11.302, authorizes the finance commission to adopt rules applicable to state savings associations or to savings banks. The Finance Code, sec.66.002 and sec.96.002(a)(2), also authorizes the savings and loan commissioner and the finance commission to adopt procedural rules for deciding applications filed with the savings and loan commissioner or the savings and loan department. Finance Code, sec.11.304, authorizes the finance commission to adopt rules necessary for supervising the consumer credit commissioner and for ensuring compliance with the Finance Code, Chapter 14 and Title 4, plus amendments to the source law made by Acts 1997, 75th Legislature, Chapter 1396. Texas Civil Statutes, Article 5069-3A.901 (added by Acts 1997, 75th Legislature, Chapter 1396), also authorize the finance commission to adopt rules necessary for the enforcement of Articles 5069-3A.001 et seq. Finance Code, sec.371.006, further authorizes the consumer credit commissioner to adopt rules necessary for the enforcement of the Finance Code, Chapter 371. sec.9.3. Ex Parte Communications. A person may not conduct oral or written communications with the administrative law judge regarding an issue of law or fact in a contested case other than on notice to all parties with an opportunity to participate or as otherwise authorized by law. Letters to the administrative law judge must show that copies have been sent to all parties (through counsel if a party is represented by counsel). This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on October 24, 1997. TRD-9714153 Everette D. Jobe General Counsel State Finance Commission Effective date: November 13, 1997 Proposal publication date: September 12, 1997 For further information, please call: (512) 475-1300 SUBCHAPTER B.Contested Case Hearings 7 TAC sec.sec.9.11, 9.12, 9.14-9.23, 9.25-9.38 The new sections are adopted under Government Code, sec.2001.004(1), which requires all administrative agencies to adopt rules of practice stating the nature and requirements of all available formal and informal procedures. The new sections are also adopted under specific rulemaking authority in the substantive statutes administered by the agencies. Finance Code, sec.31.003(a)(5), authorizes the finance commission to adopt rules necessary or reasonable to facilitate the fair hearing and adjudication of matters before the banking commissioner and the finance commission. Finance Code, sec.153.002, authorizes the finance commission to adopt rules necessary to implement the Finance Code, Chapter 153. Finance Code, sec.152.102, authorizes the finance commission to adopt rules necessary for the enforcement and orderly administration of the Finance Code, Chapter 152. Finance Code, sec.154.051(b), authorizes the department of banking to adopt rules concerning matters incidental to the enforcement and orderly administration of the Finance Code, Chapter 154. Finance Code, sec.11.302, authorizes the finance commission to adopt rules applicable to state savings associations or to savings banks. The Finance Code, sec.66.002 and sec.96.002(a)(2), also authorizes the savings and loan commissioner and the finance commission to adopt procedural rules for deciding applications filed with the savings and loan commissioner or the savings and loan department. Finance Code, sec.11.304, authorizes the finance commission to adopt rules necessary for supervising the consumer credit commissioner and for ensuring compliance with the Finance Code, Chapter 14 and Title 4, plus amendments to the source law made by Acts 1997, 75th Legislature, Chapter 1396. Texas Civil Statutes, Article 5069-3A.901 (added by Acts 1997, 75th Legislature, Chapter 1396), also authorize the finance commission to adopt rules necessary for the enforcement of Articles 5069-3A.001 et seq. Finance Code, sec.371.006, further authorizes the consumer credit commissioner to adopt rules necessary for the enforcement of the Finance Code, Chapter 371. sec.9.15. Party Status; Participation by General Public. (a) Every person or entity named or admitted as a party to a contested case has an equal right to participate fully in all stages of the proceeding. (b) Party status is limited to persons or entities with a legal right, duty, privilege, power, or economic interest that may be directly affected by the outcome of the proceeding or who are entitled to be parties pursuant to a statute or regulation governing the particular proceeding. (c) Party status will not be conferred on persons or entities that (1) only have an interest in the outcome of the proceeding that is common to members of the general public; (2) seek to litigate issues that are not by statute or regulation made part of the administrative proceeding in which party status is sought; or (3) are not among the persons or entities described by statute or regulation as eligible to participate in the particular type of administrative proceeding in which party status is sought. (d) The administrative law judge has discretion to allow a member of the general public who has not been admitted as a party to testify under oath or affirmation in a contested case. The administrative law judge may set fair and reasonable conditions on such an appearance, and the testimony shall be subject to cross- examination, challenge and rebuttal. After affording all parties a reasonable opportunity to be heard on this issue, the administrative law judge shall determine the extent, if any, to which a member of the general public who is not a party will be allowed to participate in a contested case. sec.9.17. Motions, Pleas and Other Written Requests for an Order or Ruling. (a) A party applying to the administrative law judge for an order or ruling shall do so by written motion, plea, or other form of written request unless an oral motion, plea, or request is made during a hearing, conference, or telephone conference call of which all parties had advance notice with a reasonable opportunity to participate. The parties shall send copies of all pleadings and responses subject to this section to one another (through their attorneys if represented by counsel), and shall include a certificate of service on such documents attesting they have done so. Each pleading subject to this section shall specify the grounds on which the relief or order is sought and the legal basis for the relief or order. (b) The administrative law judge shall allow all parties a reasonable amount of time to be heard before ruling on a pleading subject to this section unless the pleading is for: (1) a continuance or an extension of time due to an emergency and reasonable attempts to reach opposing counsel have been unsuccessful; (2) an order to which all parties have agreed; or (3) a temporary emergency order until a hearing can be held. (c) The administrative law judge has discretion to order oral or written argument or an evidentiary hearing on a pleading subject to this section as needed to clarify the issues and decide them properly. (d) An application for a subpoena may be requested and issued ex parte and is not subject to this section. sec.9.22. Protective Orders; Motions to Compel. All exemptions and privileges recognized under Texas law are recognized in agency hearings to the same extent as they are recognized in civil cases in the courts of this state. If a party or witness is asked to reveal privileged material or conversations, the party may make a motion with the administrative law judge for such protective orders as are reasonable and necessary or may refuse to provide the information and assert the privilege in response to a motion to compel. The administrative law judge shall hold such hearings and issue such orders on motions to compel or requests for protective orders as are required by the law applicable to the facts and circumstances of the case. sec.9.25. The Hearing. (a) The administrative law judge has authority analogous to that of a district judge sitting without a jury in a civil case and may make such rulings and issue such orders as may be required to provide a fair, just, expeditious, orderly, and proper hearing. Hearings are open to the public, except that matters made confidential by law must be considered in executive session if requested. If an executive session is not requested before confidential evidence is introduced, the confidentiality of such evidence is considered to have been waived. (b) At the time and place set for hearing, the administrative law judge shall proceed with the hearing as nearly as may be according to the rules of procedure governing the trial of civil cases in the courts of this state. The party with the burden of proof shall present such party's case, followed by other parties in the sequence assigned by the administrative law judge. Each party shall have the opportunity to present such party's case, by calling and examining witnesses, offering documentary evidence, and making legal arguments. Each party shall have the opportunity to contest the admissibility of evidence and cross- examine opposing witnesses on any matter relevant to the issues even if the matter was not covered in direct examination. A party must make an objection to testimony or an evidentiary offer in a timely manner, stating the basis for the objection, or the objection is waived. (c) The burden of proof is on the applicant in a case involving an application and on the agency in a case involving an order to cease and desist or to impose penalties or collect restitution for violations of law. (d) In a hearing on an application, the applicant must prove each of the statutory requirements for approval of the application by a preponderance of the evidence. (e) In a hearing on an action by the agency to enjoin or to impose penalties or collect restitution for violations of law, the agency must prove the violations alleged in the notice of hearing by a preponderance of the evidence. Failure of a respondent to file an answer or to appear at the hearing is not considered to admit the truth of the facts alleged to constitute grounds for a cease and desist or penalty or restitution order so as to excuse the need for other evidence. The hearing will proceed to permit the attorney for the agency to present the evidence in support of the agency case. Failure of the respondent to answer or to appear and contest the agency case may be considered as some evidence supporting an adverse inference that respondent could not defend or rebut the agency case. sec.9.32 Telephone Hearings. (a) Sua sponte or on motion of any party and a showing of good cause, after reasonable notice to all parties to allow them to object and argue against the procedure, the administrative law judge may conduct all or part of a hearing by telephone or other electronic means. In determining whether to allow testimony by telephone or other electronic means, the administrative law judge shall consider all relevant factors including whether the motion is opposed, the cost and feasibility of the witness being present at the hearing instead of appearing by telephone or other electronic means, the nature and duration of the expected testimony, the nature of any exhibits expected to be introduced through the witness, whether there is a good reason that the witness is unavailable to testify in person, and the extent to which the demeanor and credibility of the witness are likely to be significant factors in weighing the witness' testimony. In deciding a motion under this section, the administrative law judge shall insure that substantive and procedural rights of all parties are respected. (b) Documentary evidence to be offered during a telephone hearing must be delivered by the proponent to all parties and to the administrative law judge prior to hearing. (c) In a telephone hearing, the administrative law judge may consider the following as a failure to appear if the conditions exist for more than 20 minutes after the scheduled time for hearing: (1) failure to answer the telephone; (2) failure to free the telephone for a hearing; or (3) failure to be ready to proceed with the hearing as scheduled. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on October 24, 1997. TRD-9714154 Everette D. Jobe General Counsel State Finance Commission Effective date: November 13, 1997 Proposal publication date: September 12, 1997 For further information, please call: (512) 475-1300 PART II. Texas Department of Banking CHAPTER 12.Loans and Investments The Finance Commission of Texas (the commission) adopts amendments to sec.sec.12.2, 12.32, and 12.91, concerning loans and investments. The amendments are adopted without changes to the text as proposed in the September 5, 1997, issue of the Texas Register (22 TexReg 8813), and the text will not be republished. The amendments revise the manner in which statutory source law is cited to conform with the recent codification of the source law into the Finance Code. No substantive changes result from the amendments. The agency received no comments on the proposal. SUBCHAPTER A.Lending Limits 7 TAC sec.12.2 The amendment to sec.12.2 is adopted pursuant to the Finance Code, sec.31.003(a), which authorizes the commission to adopt rules "to accomplish the purposes of this subtitle and Chapters 11, 12, and 13, including rules necessary or reasonable to ... implement and clarify this subtitle and Chapters 11, 12, and 13 ...." As required by the Finance Code, sec.31.003(b), the commission considered the need to promote a stable banking environment, provide the public with convenient, safe, and competitive banking services, preserve and promote the competitive parity of state banks with national banks and other depository institutions in this state consistent with the safety and soundness of state banks and the state bank system, and allow for economic development within this state. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on October 24, 1997. TRD-9714144 Everette D. Jobe General Counsel Texas Department of Banking Effective date: November 13, 1997 Proposal publication date: September 5, 1997 For further information, please call: (512) 475-1300 SUBCHAPTER B.Loans 7 TAC sec.12.32 Amendments to sec.12.32 are adopted pursuant to the Finance Code, sec.31.003(a), which authorizes the commission to adopt rules "to accomplish the purposes of this subtitle and Chapters 11, 12, and 13, including rules necessary or reasonable to ... implement and clarify this subtitle and Chapters 11, 12, and 13 ...." As required by the Finance Code, sec.31.003(b), the commission considered the need to promote a stable banking environment, provide the public with convenient, safe, and competitive banking services, preserve and promote the competitive parity of state banks with national banks and other depository institutions in this state consistent with the safety and soundness of state banks and the state bank system, and allow for economic development within this state. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on October 24, 1997. TRD-9714143 Everette D. Jobe General Counsel Texas Department of Banking Effective date: November 13, 1997 Proposal publication date: September 5, 1997 For further information, please call: (512) 475-1300 SUBCHAPTER D.Investments 7 TAC sec.12.91 The amendment to sec.12.91 is adopted pursuant to the Finance Code, sec.31.003(a), which authorizes the commission to adopt rules "to accomplish the purposes of this subtitle and Chapters 11, 12, and 13, including rules necessary or reasonable to ... implement and clarify this subtitle and Chapters 11, 12, and 13 ...." As required by the Finance Code, sec.31.003(b), the commission considered the need to promote a stable banking environment, provide the public with convenient, safe, and competitive banking services, preserve and promote the competitive parity of state banks with national banks and other depository institutions in this state consistent with the safety and soundness of state banks and the state bank system, and allow for economic development within this state. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on October 24, 1997. TRD-9714142 Everette D. Jobe General Counsel Texas Department of Banking Effective date: November 13, 1997 Proposal publication date: September 5, 1997 For further information, please call: (512) 475-1300 CHAPTER 15.Corporate Activities SUBCHAPTER A.Fees and Other Provisions of General Applicability 7 TAC sec.sec.15.2, 15.3, 15.6 The Finance Commission of Texas (the commission) adopts amendments to sec.sec.15.2, 15.3, 15.6, 15.61, 15.62, 15.81, and 15.122, concerning corporate applications filed with the Texas Department of Banking. Amendments to sec.sec.15.2, 15.3, 15.61, and sec.15.62 are being adopted with nonsubstantive changes to the text as proposed in the September 12, 1997, issue of the Texas Register (22 TexReg 9206). Amendments to sec.sec.15.6, 15.81, and 15.122 are being adopted without changes and the text will not be republished. The primary purpose of the amendments is to revise the manner in which statutory source law is cited to conform with the recent codification of the source law into the Finance Code, effective September 1, 1997. The amendment to sec.15.3 also clarifies that banks that are well capitalized under 12 Code of Federal Regulations, sec.325.103, may file expedited filings for certain branch relocations under sec.15.42 (relating to establishing and closing of a branch office), and that banks and trust companies that are well capitalized under the same definition may file expedited filings for certain home office relocations under sec.15.41 (relating to written notice or application for change of home office). The amendments to sec.sec.15.3, 15.61, and 15.62 reflect the enactment of Texas Civil Statutes, Articles 342a-1.001 et seq (Acts 1997, 75th Legislature, Chapter 769, sec.1), effective September 1, 1997 (the Texas Trust Company Act). The amendment to sec.15.61 requires trust companies to comply with formerly applicable banking rules until such time as the commission can propose and adopt unique rules for trust companies. The amendment to sec.15.62 conforms the prior treatment of exempt trust companies with the new Texas Trust Company Act. References to trust companies are deleted in other sections in light of the Texas Trust Company Act. The text of sec.sec.15.3(b), 15.61, and 15.62 is modified by this adoption to correctly cite to the Texas Trust Company Act as it will eventually be set forth in the Texas Civil Statutes, citation forms that were unavailable at the time the amendments were proposed. In addition, an error in formatting in proposed sec.15.2 is corrected in the adoption. The listed fees in subsection (b) should number (1) through (21) but the last fee was misnumbered as (20) and included in the previous paragraph (correctly numbered (20)) as a run-on sentence. The agency received no comments regarding the proposal. The amendments are adopted pursuant to the Finance Code, sec.31.003(a), which authorizes the commission to adopt rules "to accomplish the purposes of this subtitle and Chapters 11, 12, and 13, including rules necessary or reasonable to ... implement and clarify this subtitle and Chapters 11, 12, and 13 ...." With respect to trust companies, the amendments are proposed pursuant to Texas Civil Statutes, Article 342a-1.003, which authorizes the commission to adopt rules as necessary or reasonable to implement and clarify the Texas Trust Company Act. As required by the Finance Code, sec.31.003(b), the commission considered the need to promote a stable banking environment, provide the public with convenient, safe, and competitive banking services, preserve and promote the competitive parity of state banks with national banks and other depository institutions in this state consistent with the safety and soundness of state banks and the state bank system, and allow for economic development within this state. sec.15.2. Filing Fees and Cost Deposits (a) (No change.) (b) Filing Fees. Simultaneously with any submitted filing, an applicant shall pay to the department the filing fee established in the following schedule of fees: (1) $5,000 for an application for bank charter or conversion pursuant to the Finance Code, sec.32.003 or sec.32.502; (2) $4,000 for an application to authorize a merger, a similar business combination, or a purchase of assets pursuant to the Finance Code, sec.32.301 or sec.32.401; (3) $2,500 for each request to authorize each additional merger if more than one affiliated merger is to occur simultaneously; (4) $1,500 for a standard application to establish a branch office pursuant to the Finance Code, sec.32.203, and sec.15.42 of this title (relating to Establishment and Closing of a Branch Office); (5) $1,500 for a standard application to relocate a branch office pursuant to sec.15.42(k) of this title; (6) $500 for a subsidiary notice letter pursuant to the Finance Code, sec.34.103, unless paragraph (7) of this subsection applies; (7) $4,000 for a subsidiary notice letter pursuant to the Finance Code, sec.34.103, if the banking commissioner notifies the applicant that additional information and analysis is required; (8) $5,000 for an application regarding acquisition of control pursuant to the Finance Code, sec.33.002, and sec.15.81 of this title (relating to Application for Acquisition or Change of Control of State Bank); (9) $200 for a notice to change the home office to an existing branch office with no abandonment of community pursuant to the Finance Code, sec.32.202, and sec.15.41(a) of this title (relating to Written Notice or Application for Change of Home Office); (10) $1,500 for an application to relocate the home office or a branch office pursuant to Finance Code, sec.32.202, and sec.15.41(b) of this title; (11) $500 for an application to relocate the home office or a branch office a short distance of one mile or less with no abandonment of the community pursuant to Finance Code, sec.32.202, and sec.15.41(b) of this title; (12) $500 for a filing for which an expedited application is permissible pursuant to sec.15.3 of this title (relating to Expedited Filing); (13) $3,000 for an application for a foreign bank agency license pursuant to the Finance Code, sec.39.103, and sec.3.41(a) of this title (relating to Applications, Notices, and Reports of a Foreign Bank Corporation); (14) $500 for the statement of registration of a foreign bank representative office pursuant to the Finance Code, sec.39.203, and sec.3.44(b) of this title (relating to Statement of Registration, Notices and Filings by a Representative Office); (15) $200 for an application to amend a bank charter (articles of association) pursuant to the Finance Code, sec.32.101; (16) $500 for filing a copy of an application pursuant to the Finance Code, sec.38.001, to acquire a bank or bank holding company; (17) $500 for filing a copy of an application pursuant to the Finance Code, sec.38.004, to acquire a nonbank entity; (18) $100 for a request for a "no objection" letter to use a name containing a term listed in the Finance Code, sec.31.004 or sec.31.005, by an entity other than a depository institution or trust company; (19) $500 for an application to authorize acquisition of treasury stock pursuant to the Finance Code, sec.34.102, and sec.15.121 of this title (relating to Acquisition and Retention of Shares as Treasury Stock); (20) $500 for a request to authorize an increase or reduction in capital and surplus pursuant to the Finance Code, sec.32.103; and (21) $500 for an application for trust company exemption as not doing business with the public. (c) Fee for Protest Filing. A person or entity filing a protest to the application of another person or entity shall pay a fee of $2,500 simultaneously with such protest filing. The purpose of the fee required under this subsection is to partially offset the department's increased cost of processing and reduce the costs incurred by the applicant resulting solely from the protest. (d)-(f) (No change.) sec.15.3. Expedited Filings (a) Eligible banks may file an expedited filing according to forms and instructions provided by the department solely for the following matters: (1) (No change.) (2) branch relocations less than one mile with no abandonment of the community pursuant to the Finance Code, sec.32.203(b), and sec.15.42 of this title (relating to Establishing and Closing of a Branch Office); and (3) home office relocations less than one mile with no abandonment of the community pursuant to the Finance Code, sec.32.202(c), and sec.15.41 of this title (relating to Written Notice or Application for Change of Home Office). (b) Eligible trust companies may file an expedited filing according to forms and instructions provided by the department solely for home office relocations where there is no abandonment of the community pursuant to Texas Civil Statutes, Article 342a-3.202(c) and (d), and sec.15.41 of this title. (c) Notwithstanding another provision of this section, the banking commissioner may deny expedited filing treatment to an eligible bank or eligible trust company, in the exercise of discretion, if the banking commissioner finds that the filing involves one or more of the following: (1)-(2) (No change.) (3) the proposed transaction will result in a fixed asset investment in excess of the limitation contained in the Finance Code, sec.34.002(a); (4) the proposed transaction requires the approval of the banking commissioner under the Finance Code, sec.33.109(b); (5) the proposed transaction involves an issue of parity between state and national banks pursuant to the Finance Code, sec.32.009; (6) (No change.) (7) the proposed transaction will result in a decrease in capital below the levels required to meet the definition of "well capitalized" in 12 Code of Federal Regulations, sec.325.103, or, in the case of a trust company, would cause capital and surplus to fall below current minimum statutory or regulatory requirements; (8) the proposed transaction will result in an abandonment of the community pursuant to the Finance Code, sec.32.202(d); (9)-(10) (No change.) (d)-(f) (No change.) This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on October 24, 1997. TRD-9714141 Everette D. Jobe General Counsel Texas Department of Banking Effective date: November 13, 1997 Proposal publication date: September 12, 1997 For further information, please call: (512) 475-1300 SUBCHAPTER D.Trust Company Applications 7 TAC sec.sec.15.61, 15.62 The amendments are adopted pursuant to the Finance Code, sec.31.003(a), which authorizes the commission to adopt rules "to accomplish the purposes of this subtitle and Chapters 11, 12, and 13, including rules necessary or reasonable to ... implement and clarify this subtitle and Chapters 11, 12, and 13 ...." With respect to trust companies, the amendments are proposed pursuant to Texas Civil Statutes, Article 342a-1.003, enacted by Acts 1997, 75th Legislature, Chapter 796, sec.1 (the Texas Trust Company Act), which authorizes the commission to adopt rules as necessary or reasonable to implement and clarify that Act. As required by the Finance Code, sec.31.003(b), the commission considered the need to promote a stable banking environment, provide the public with convenient, safe, and competitive banking services, preserve and promote the competitive parity of state banks with national banks and other depository institutions in this state consistent with the safety and soundness of state banks and the state bank system, and allow for economic development within this state. sec.15.61. Applicability of Banking Rules. Because of the enactment of the Texas Trust Company Act, Texas Civil Statutes, Articles 342a-1.001 et seq (Acts 1997, 75th Legislature, Chapter 769, sec.1), effective September 1, 1997, the finance commission will in time enact new regulations for trust companies under the authority of Texas Civil Statutes, Article 342a-1.003. Until new regulations are proposed and adopted, a trust company shall comply with all regulations applicable to banks to the extent compatible with the Texas Trust Company Act, including sec.15.2 of this title (relating to Filing Fees and Cost Deposits). sec.15.62. Exempt Trust Companies (a) To obtain an exemption from the application of identified provisions of the Texas Trust Company Act, Texas Civil Statutes, Articles 342a-1.001 et seq, a trust company must file an application fulfilling the requirements of Texas Civil Statutes, Article 342a-3.012, accompanied by the filing fee required by sec.15.2 of this title (relating to Filing Fees and Cost Deposits). A trust company that was exempt under repealed Texas Civil Statutes, Articles 342-1101 et seq, is considered exempt under the Texas Trust Company Act so long as compliance with exemption requirements under the Texas Trust Company Act is maintained. (b) An approval granted to an exempt trust company for a change of home office without proof that abandonment is consistent with the original determination of public convenience and advantage for the establishment of a state trust company at that location, as required by Texas Civil Statutes, Article 342a-3.202(d), is conditioned upon the trust company maintaining its exempt status. An exempt trust company that is granted such a conditional change of home office may not transact business with the general public from its new home office, regardless of a change in its exempt status, until and unless the banking commissioner affirmatively makes the findings listed in Texas Civil Statutes, Article 342a- 3.003(b). (c) No approval will be granted to an exempt trust company for a change to nonexempt trust company status, until and unless the banking commissioner affirmatively makes the findings listed in Texas Civil Statutes, Article 342a- 3.003. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on October 24, 1997. TRD-9714140 Everette D. Jobe General Counsel Texas Department of Banking Effective date: November 13, 1997 Proposal publication date: September 12, 1997 For further information, please call: (512) 475-1300 SUBCHAPTER E.Change of Control Applications 7 TAC sec.15.81 The amendments are adopted pursuant to the Finance Code, sec.31.003(a), which authorizes the commission to adopt rules "to accomplish the purposes of this subtitle and Chapters 11, 12, and 13, including rules necessary or reasonable to ... implement and clarify this subtitle and Chapters 11, 12, and 13 ...." With respect to trust companies, the amendments are proposed pursuant to Texas Civil Statutes, Article 342a-1.003, enacted by Acts 1997, 75th Legislature, Chapter 796, sec.1 (the Texas Trust Company Act), which authorizes the commission to adopt rules as necessary or reasonable to implement and clarify that Act. As required by the Finance Code, sec.31.003(b), the commission considered the need to promote a stable banking environment, provide the public with convenient, safe, and competitive banking services, preserve and promote the competitive parity of state banks with national banks and other depository institutions in this state consistent with the safety and soundness of state banks and the state bank system, and allow for economic development within this state. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on October 24, 1997. TRD-9714139 Everette D. Jobe General Counsel Texas Department of Banking Effective date: November 13, 1997 Proposal publication date: September 12, 1997 For further information, please call: (512) 475-1300 SUBCHAPTER G.Charter Amendments and Certain Changes in Outstanding Stock 7 TAC sec.15.122 The amendments are adopted pursuant to the Finance Code, sec.31.003(a), which authorizes the commission to adopt rules "to accomplish the purposes of this subtitle and Chapters 11, 12, and 13, including rules necessary or reasonable to ... implement and clarify this subtitle and Chapters 11, 12, and 13 ...." With respect to trust companies, the amendments are proposed pursuant to Texas Civil Statutes, Article 342a-1.003, enacted by Acts 1997, 75th Legislature, Chapter 796, sec.1, which authorizes the commission to adopt rules as necessary or reasonable to implement and clarify that Act. As required by the Finance Code, sec.31.003(b), the commission considered the need to promote a stable banking environment, provide the public with convenient, safe, and competitive banking services, preserve and promote the competitive parity of state banks with national banks and other depository institutions in this state consistent with the safety and soundness of state banks and the state bank system, and allow for economic development within this state. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on October 24, 1997. TRD-9714138 Everette D. Jobe General Counsel Texas Department of Banking Effective date: November 13, 1997 Proposal publication date: September 12, 1997 For further information, please call: (512) 475-1300 CHAPTER 25.Prepaid Funeral Contracts The Texas Department of Banking (the department) adopts amendments to sec.25.23, concerning application fees, and sec.25.51 and sec.25.54, concerning investment of trust funds. The amendments are adopted without changes to the text as proposed in the September 26, 1997, issue of the Texas Register (22 TexReg 9585), and the text will not be republished. The amendment revises the manner in which statutory source law is cited to conform with the recent codification of the source law into the Finance Code, effective September 1, 1997, and eliminate certain definitions that duplicate terms already defined in the Finance Code. The amendment to sec.25.54 also implements a change in law made by Acts 1997, 75th Legislature, Chapter 1389, sec.2, by creating an opportunity for a discretionary exemption, upon application, from the investment limits of sec.25.54 and Finance Code, sec.154.258(b), (c), and (d). The department received no comments regarding the proposal. SUBCHAPTER B.Regulation of Licenses 7 TAC sec.25.23 The amendment is adopted pursuant to rulemaking authority under Finance Code, sec.154.051, which authorizes the department to prescribe reasonable rules and regulations concerning all matters relating to the enforcement and administration of Chapter 154. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on October 27, 1997. TRD-9714204 Everette D. Jobe General Counsel Texas Department of Banking Effective date: November 17, 1997 Proposal publication date: September 26, 1997 For further information, please call: (512) 475-1300 SUBCHAPTER C.Investment of Trust Funds 7 TAC sec.sec.25.51, 25.54 The amendment is adopted pursuant to rulemaking authority under Finance Code, sec.154.051, which authorizes the department to prescribe reasonable rules and regulations concerning all matters relating to the enforcement and administration of Chapter 154. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on October 27, 1997. TRD-9714205 Everette D. Jobe General Counsel Texas Department of Banking Effective date: November 17, 1997 Proposal publication date: September 26, 1997 For further information, please call: (512) 475-1300 TITLE 16. ECONOMIC REGULATION PART II. Public Utility Commission of Texas CHAPTER 23.Substantive Rules Customer Service and Protection 16 TAC sec.23.54 The Public Utility Commission of Texas (PUC) adopts amendments to sec.23.54, relating to Pay Telephone Service with changes to the proposed text as published in the August 19, 1997, issue of the Texas Register (22 TexReg 7970). The amendments eliminate the terms coin-sent-paid and dominant certificated telecommunication utility (DCTU). The amendments also eliminate the $.25 cap on local calls and set use fees because these caps have been prohibited by the federal Telecommunications Act of 1996 (FTA96); the provision requiring DCTUs to file tariffs; the reference to rates published in eight largest newspapers; and the provision related to average schedule DCTUs. The amendments clarify that mandatory extended area service and extended local calling fall within the definition of local calls; that per call telephone service provided to inmates is pay telephone service (PTS); when telephone service is not PTS; and that PTS providers must provide access to local operators. The amendments require that PTS providers bill in increments of one minute or less for operator-assisted intrastate toll calls; return fees for calls that do not result in a completed call; post fees for local calls and that no greater amount be charged; and, regardless of call technology, PTS providers are required to post the name of the operator service provider (OSP), along with instructions explaining how to access the operator of the incumbent local exchange carrier (ILEC). The amendments delete the presumption that subscribers to PTS are not OSPs; move the provision requiring the initial filing of PTS tariffs to the section related to special assemblies; and modify the reporting requirements so that CTUs must report the number of in-service access lines on a semi-annual basis. The public benefit anticipated as a result of enforcing the section will be to ensure that state rules are in compliance with federal rules, including the removal of the $.25 cap on local pay telephone calls and set use fees for 1-800-type calls, and simplification of Texas' pay telephone rules. However, this rule will impose costs as well as benefits. Because the Federal Communications Commission (FCC) has determined and a federal court has affirmed that states may no longer set rates for local pay telephone use, but must leave this task to competitive local markets, this rule will remove the long-standing cap on the price of local pay phone calls. The cost of pay phone calls may increase as a result. The commission recognizes that this is likely to impose real and potentially significant costs on frequent pay phone users. A public hearing was held on September 8, 1997. The Texas Pay Telephone Association offered oral comments that were consistent with their written comments and will be discussed below. Written comments concerning the proposed amendments were submitted by the following eight organizations: the Texas Payphone Association, Inc. (TPA), Office of Public Utility Counsel (OPC), Texas Association of Long Distance Companies (TEXALTEL), Consumers Union, Texas Telephone Association (TTA), Southwestern Bell Telephone Company (SWBT), GTE Southwest, Inc. (GTE), and AT&T Communications of the Southwest, Inc. (AT&T). The commission invited interested parties to provide responses to the following six questions. First, can pay telephone service providers now charge for local directory assistance (DA)? AT&T, GTE, SWBT, TPA, and TTA state that local DA calls are subject to charge. Each commentor cites to specific language in the FCC's Order which authorizes such charges. Accordingly, the rule has been modified to comply with federal law. Second, is "End User Choice" the same as "Billed Party Preference"? Should the revised rule retain the "End User Choice" provision? AT&T, SWBT, TPA, and TTA believe that the terms are essentially the same. However, GTE indicates that the terms are not identical. All parties agree that "End User Choice" should be deleted from the rule. In addition, AT&T states that the FCC is currently considering alternatives to "End User Choice." AT&T, GTE, SWBT, TPA, and TTA all agree that "End User Choice" is operationally and technologically unfeasible. The commission agrees with each of the comments and has deleted the "End User Choice" provision from the rule. Third, is it possible to create a limited definition or distinction between wholesale versus retail pay telephone service that does not impose on PTS the legal obligations and meanings that those terms carry for other telecommunications services covered under the FTA96? If not, what other terminology can be used to clearly and unambiguously refer to these services? AT&T is unsure of the underlying intent of the question, but states that "the proposed rule seems to make an appropriate distinction between PTS service supplied by PTS providers and wholesale PTS (previously customer owned pay telephone service) supplied by certificated telecommunications utilities." TPA believes that it might be possible to create a limited definition, but concludes that is it not necessary. SWBT believes that it is not possible to create a limited definition. SWBT and TTA state that the FCC's Order treats payphone access lines as retail service. TTA goes on to suggest that the service be referred to as PTS "exchange access service." Based on the comments, the commission agrees that it may not be necessary to distinguish between wholesale and retail payphone service. Nonetheless, the commission believes that the phrase "customer owned pay telephone service" (COPTS) is inappropriate. Therefore, the rule has been amended to refer to COPTS as "pay telephone access service" (PTAS). Fourth, whether the phrase coin-sent-paid should be used to define a local call and if not, how should a local call be defined? TPA, AT&T, SWBT, GTE, and TTA opine that the phrase should not be used to define a local call. TPA indicates that a local call should be defined as "a local coin call." AT&T states that coin-sent-paid is a method of payment, not a type of call. SWBT suggests that the phrase "local coin-sent-paid" be used to define a call where the end user deposits coins and dials a local number. SWBT also suggests that a local call be defined as "a call within the CTU's toll-free calling area including calls which are made toll-free through a mandatory Extended Area Service." GTE indicates that the FCC Order refers to local calls as "local coin call." TTA believes that a public payphone transaction should identify that the consumer is purchasing a prepaid public access service from a public payphone provider. TTA also states that there may need to be a distinction for those pay telephones that do not accept coinage for purposes of making a local call. The commission agrees with SWBT. Therefore, the commission clarifies the definition of local calls by restricting its application to mandatory extended area service. The rule as adopted eliminates the need to distinguish those pay telephones calls that do not accept coinage for purposes of making a local call. Fifth, whether other changes to sec.23.54 are necessary in order to comply with the Public Utility Regulatory Act of 1995 as amended, federal Telecommunications Act of 1996, CC Docket Number 96-128, Report and Order, FCC 966-388 (released September 20, 1996), CC Docket Number 96-128, Order on Reconsideration, FCC 96- 439 (released November 8, 1996), and the recently issued opinion in Illinois Public Telecommunications Association v. Federal Communications Commission and United States of America, Number 96-1394, (D.C. Cir. July 1, 1997)? SWBT and TTA state that the rate caps in subsection (f)(1)(E) and (F) for intrastate long distance and operator-assisted calls at Texas payphones should be eliminated. They reason that intrastate long distance calls originate from public payphones, and are therefore subject to deregulation. SWBT argues that rate caps are barriers to entry into the payphone market because they send artificial pricing signals. The commission disagrees with SWBT's comments. As indicated in SWBT's comments, the FCC's Order is intended to ensure that payphone providers receive "fair compensation" for calls originating at pay telephones. The Order makes specific reference to rates for local calls and those calls to "800-type" numbers. Because the FCC's Order make reference to two specific types of pay telephone calls, the commission interprets the Order to be restricted to local calls and "800-type" calls for which providers may have been under-compensated or did not receive compensation. SWBT and TTA fail to point to explicit language in the FCC's Order that would justify removal of the rate caps for intrastate long distance and operator-assisted calls. GTE states that the commission should address issues related to defining "public interest" payphones. The commission agrees with GTE and will address those issues in a separate proceeding. TTA, AT&T, GTE, SWBT, and TPA suggest that clause (v) of subsection (e)(4)(A) which prohibits the placing of "a time limit on local calls" be deleted. TTA reasons that under a system where local calls will be subject to market pricing, it is appropriate to remove time restraints from local calls. TTA states that removal of time restraints would introduce time sensitivity as an element in setting the price for pay telephone service. AT&T adds that the move to market- based rates should allow PTS providers to impose usage-based rates for local calls. SWBT comments that the restriction against time limits creates a barrier to entry and is contrary to local call rate deregulation. While the commission agrees that removal of time restraints would introduce time sensitivity, time sensitivity is not a necessary attribute of market-based pricing. SWBT's concerns about barriers to entry are not compelling because there is no clear link between the length of a payphone call and the ability of the provider to offer payphone service at a particular location, particularly since the payphone provider can set whatever rate the market will bear for the phone once in place. There is nothing in the FCC's Order specifically authorizing the introduction of a time-sensitive pricing methodology. On the other hand, the FCC's Order specifically authorizes state commissions to make rules and regulations providing for consumer protections. Under that authority, the commission believes that a consumer's right to know in advance the total price of a local call from a pay telephone outweighs a particular pricing methodology. TPA comments that the other provisions relating to cost-based rates, non- discriminatory provision of service and inmate services should be added to the rule. The commission does not believe that provisions related to cost-based rates are within the scope of this rulemaking. TPA's other concerns are discussed in other parts of the rule. AT&T comments that this rulemaking is limited to addressing the issues raised by the FCC's Order, and suggests that a more expansive review be performed at a future date. The commission agrees. Sixth, should access to the operator of a local exchange company be provided by dialing a code or number such as "00" or "611"? AT&T and TPA believe that there should be access to the local operator; however, AT&T states that the rules should not specify the method by which such access is accomplished, but should allow the PTS providers to implement this requirement in accordance with their own equipment and needs. TPA states that the access code should be "00" for consistency in view of the use of such code in other areas. SWBT and TTA argue that access to the operator of a local exchange company should be available via "0-". SWBT and TTA reason that additional calling configurations to reach a local operator would work to add to consumer confusion. GTE states that the code "00" provides access to the presubscribed interexchange carrier operator of the payphone and should be continued. GTE also indicates that the LEC repair is generally reached by dialing "611" and with the scarcity of the three-digit codes available the use of a three-digit code to reach an operator is not recommended. The commission agrees with SWBT and TTA that additional dialing codes to reach the operator of a local exchange company will contribute to customer confusion. Therefore, access to the ILEC operator will be restricted to the use of "0" or "00." In addition to responding to the specific questions, the parties made the following comments. SWBT recommended changes to the definition of operator service. SWBT states that alternately billed local calls should also be included in this definition because an alternatively billed local call, such as local collect or credit card, could be served by an OSP. The commission agrees with the comments of SWBT and the necessary change has been made. TPA recommends that inmate pay telephone service not be included in the definition of pay telephone service. TPA states pay telephone service is distinctly different from pay telephone service provided to inmates. These differences have been addressed in the rule and, where appropriate, provisions of the rule have been labeled as not applicable to inmates of confinement facilities. The commission is not persuaded by these comments to exclude inmate pay telephone service from the definition of pay telephone service. TPA and SWBT provided comments concerning the definition of provider of pay telephone service and wholesale PTS and the use of "retail" and "wholesale" in those definitions. Both commentors stated that there is no FCC requirement to distinguish or label the services as wholesale or retail. TPA goes further to recommend that the term "business access line" also be deleted because it refers to a different classification of access line. The commission agrees in part and disagrees in part. The term wholesale and retail carry inherent definitions that are not applicable in the context of this rule; therefore, the commission agrees that these terms offer no clarification of the service and the changes have been made to delete these terms from the definitions. The commission disagrees that the term "business access line" should be deleted. Telephone services are classified as residential or business offerings, and some services are intended to be utilized by both. However, business lines provide additional features that are used in the provision of pay telephone service that are intended to provide protections not available through residential lines. Therefore, there are no changes to the rule in response to this comment. AT&T and TPA provided comments on the current registration procedures. AT&T recommends that the current requirement that location reports be filed quarterly be changed to require an annual report. TPA comments on two of the requirements contained in the registrations process: 1) that the physical location of the pay telephone shall be included in the registration process; and 2) submission of the location report of the provider's payphones should be a semi-annual report, not quarterly as currently required. TPA states that the confidentiality of the physical location of each pay telephone could be breached by an open records request. The commission is persuaded that the requirement to file updated location reports on a quarterly basis is burdensome. These reports provide the commission with information that is not available from another source and is necessary to the enforcement of this substantive rule; however, the commission understands the necessity of balancing the needs of the commission with the concerns of the industry. Therefore, the rule has been changed to require the filing of this report on a semi-annual basis. This report shall be filed for each period ending December 31, 1997 and June 30, 1998, and continuing thereafter. This report shall be filed within 45 days after the end of the reporting period. The commission is not persuaded by TPA's comments requesting that the physical location requirement be omitted from the registration form. However, TPA's concern about the confidentiality of payphone location information registered with the commission seems valid, and is supported by the Attorney General's letter opinion that this information could be protected as proprietary information from an open records request. TEXALTEL submitted comments requesting clarification of the registration procedure. TEXALTEL believes that each location is registered and will receive proof of registration. The commission clarifies that under current procedures it is the provider of pay telephone service that is registered with the commission, not the location of the pay telephone. AT&T and TPA provided comments regarding the requirement that CTUs file tariffs with the commission before offering PTS. AT&T states the language is too broad and could be read to require a non-dominant CTU to offer PTS service. TPA states that this rule "should contain express language prohibiting any interconnection inhibition or prohibition relating to PTS resale". PUC Substantive Rule sec.23.61(j)(3) currently requires non-dominant telecommunications carriers, including those holding a certificate of operating authority (COA) or service provider certificate of operating authority (SPCOA), to register with the commission. As part of that registration process, the carrier must provide a tariff, schedule, or list showing all recurring and nonrecurring rate(s) for each service provided. It is not the intent of the commission to require that a CTU offer a service; however, if the CTU offers the service, then a tariff should be filed with the commission. The commission does not believe that this rulemaking should include any language relating to PTS and the terms of an interconnection agreement. Therefore, the commission declines to adopt the proposed changes by AT& and TPA. TEXALTEL states that the requirement that access must be provided to the incumbent local exchange carrier is inappropriate. This comment repeats the comments of AT&T concerning subsection (f)(2)(D). These commentors state that in some cases this requirement could require a CTU to transfer calls to its competitor, the ILEC. The commission declines to make the changes requested by TEXALTEL and AT&T. The requirement to provide this information is not burdensome or anti-competitive and the user of the pay telephones should be given the instructions to reach the ILEC. AT&T and TPA provided comments that they cannot "ensure" that carriers and OSPs will bill calls or provide other service in conformance with the commission's rules. The commission is not persuaded by these comments. To the contrary, it is the provider's responsibility to ensure this through two measures. The provider should make an effort to choose business partners which have demonstrated through their past performance that they are willing and able to perform in a manner which respects all relevant commission rules and state laws. Furthermore, the provider's contract with the OSP should specify that the OSP shall comply with all PUC rules and lay out particular performance standards and requirements (including, if desired, billing in increments of less than a minute) as desired. With respect to billing calls in increments of one minute or less, the rule allows the provider to continue billing in full-minute increments, but gives the provider the option of billing in smaller increments if it chooses to so distinguish itself in the competitive marketplace. Since the rule makes it optional rather than mandatory, there is no need to delete the new language. TPA comments that the language in sec.23.54(k) is unconstitutionally vague in failing to provide standards under which the commission may invoke such power for "repeat violations." The commission clarifies that "repeat violations" means more than one violation. The commission also notes that it will use prosecutorial discretion in exercising this enforcement power as needed to curb abuses by pay telephone providers. AT&T provided comments on the requirement that the informational placard attached to the pay phone reflect the rate(s) that are actually charged for the call. AT&T recommended that this restriction be applicable only to local calls as outlined in subsection (e)(1)(E). AT&T concludes that subsections (e)(1)(E) and (d)(4)(A)(ix) refer to the same information and, therefore, the requirements of the two subsections should contain the same information. The commission agrees with AT&T and the appropriate changes have been made. TPA provided comments requesting that the requirement that each call be validated be deleted. TPA states that inmate calls from confinement facilities are repetitive in that the inmates call the same numbers. TPA requests that pay telephone service from confinement facilities should be separately addressed. The commission disagrees with TPA on the issue. Calls from confinement facilities should continue to be validated in the same manner as any other alternatively billed call. AT&T states that sec.23.54(e)(2)(D) and (E), regarding operator access, creates a barrier to competition. First, AT&T believes that the PTS provider could be served by a CTU and the rule in effect would refer the pay phone user to the CTU's competitor. Second, AT&T states that each time the PTS provider changes carriers a new informational placard would be required for each pay phone instrument. The commission declines to adopt the positions offered by AT&T. Nothing in the rule prohibits a pay telephone provider from including information on how to reach operators of both the ILEC and the CTU. The requirement to provide this information is not burdensome and the end user of the pay telephone should be given these instructions. The commission disagrees with AT&T because when consumers are provided with a choice, competition is enhanced. SWBT requests that the PUC delete the requirement that pay telephone numbers not be displayed on those phones not allowing incoming calls. These phone numbers are used for record-keeping purposes by the PTS provider. The commission is not persuaded by this comment. End users of pay telephones would assume that the pay telephone could receive incoming calls if the phone number is displayed; therefore there were no changes as a result of this comment. TEXALTEL commented that subsection (f)(1)(B) is in violation of the FCC's pay phone order. TEXALTEL states that the FCC prohibits the PTS providers from requiring deposit of coins for any "800" or "888" call. The commission agrees with TEXALTEL that the FCC order prohibits the PTS provider from charging the end-user for any type of subscriber "800" or "888" call, or from charging for dial-around calls to the carrier of choice. GTE submitted comments recommending that subsection (i)(6) be deleted. GTE reasons that the FCC has determined that PTS providers may charge for DA. This subsection requires that incumbent local exchange carriers not charge the PTS provider for DA services. GTE states that this subsection will require the ILEC to provide DA services, but not charge the PTS provider. This expense will be absorbed by the general body of ratepayers. The commission is persuaded by this comment. To allow the PTS provider to charge the end user of the pay telephone for directory assistance, but not allow the ILEC to charge for the service, will force the ratepayers of the ILEC to absorb the cost. The appropriate changes have been made to the rule. TPA, SWBT, and TEXALTEL submitted comments concerning subsection (l), relating to the rate structure for PTS. TPA recommends that the commission delete the requirement that the rate structure contain a usage-sensitive rate element. TEXALTEL recommends that the commission retain the DCTU distinction in this subsection. TEXALTEL reminds the commission that it has limited regulatory authority over CTUs. SWBT states that the CTU should determine the rate design elements of a service. The commission agrees that the rate design for this service could be on either a flat rate and/or usage-sensitive basis. However, the commission disagrees with TEXALTEL concerning its jurisdiction over CTUs. PUC Substantive Rule sec.23.61(j)(3) currently requires non- dominant telecommunications carriers, including those holding a certificate of operating authority (COA) or service provider certificate of operating authority (SPCOA), to register with the commission. As part of that registration process, the carrier must provide a tariff, schedule, or list showing all recurring and nonrecurring rate(s) for each service provided. It is not the intent of the commission to require that a CTU offer a service; however, if the CTU offers the service then a tariff should be filed with the commission. TEXALTEL provided comments concerning the tracking reports requirement. TEXALTEL states that it is unclear who is required to file these reports. Currently the commission requires the CTU providing PTS access lines to file this report to the commission. This report provides the commission with a source of information that is not available from another source. The commission declines to make changes in response to these comments. Consumers Union submitted comments reminding the commission that consumers will require more information concerning the rates for calls from pay telephones and instructions concerning how to reach the carrier of choice. OPC's comments agree with the comments of Consumers Union. Consumers Union also recommended that the commission establish procedures to monitor the price-competitiveness of the payphone market and the funding of public interest pay telephones. The commission agrees with the comments of Consumers Union and OPC. The public interest pay telephones and price competitiveness will be addressed in separate rulemakings. Effective September 1, 1997, the Public Utility Regulatory Act of 1995 was codified into the Texas Utilities Code. The citation in subsection (k) to Subtitle I of the Public Utility Regulatory Act of 1995 has been amended to reflect the correct cite in the Texas Utilities Code. These amendments are adopted under the Public Utility Regulatory Act, 75th Legislature, Regular Session, chapter 166, sec.1, 1997 Texas Session Law Service 732 (Vernon) (to be codified at TEXAS UTILITIES CODE ANNOTATED sec.14.002) (PURA), which provides the Public Utility Commission of Texas 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 sec.14.002. sec.23.54. Pay Telephone Service. (a) Definitions. The following words and terms, when used in this section, shall have the following meanings unless the context clearly indicates otherwise: (1)-(4) (No change.) (5) Certificated telecommunications utility (CTU) -- As defined in sec.23.3 of this title (relating to Definitions). (6) Completed call -- a call that is answered by the called party. (7) Incumbent local exchange company -- As defined in sec.23.3 of this title. (8) Local call -- A call within the CTU'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. (9) 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. (10) 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. (11) Originating line screening (OLS) -- A two digit code passed by the local switching system with the ANI at the beginning of a call that provides information about the originating line. (12) 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 PTS providers. (13) 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. (14) Provider of pay telephone service -- The entity that purchases PTAS from a CTU and registers with the Public Utility Commission as a provider of PTS to end users. (15) Rate information -- All charges ultimately charged by the PTS provider, including any surcharges, fees, and any other form of compensation charged by the PTS provider on behalf of the call aggregator. (b) Registration. (1) All PTS providers must register with the commission, using commission- prescribed forms, in order to do business in the state of Texas. Registration requires disclosure of the physical location of each of the registrant's pay telephones; the registrant must update this information for any phone with a change in status. Information related to the physical location of pay telephones shall be confidential unless the Attorney General issues a letter opinion, or a court of competent jurisdiction rules otherwise. Updated filings shall be made with the commission within 45 days after the periods ending December 31 and June 30 of each calendar year. The commission shall provide each registrant with proof of registration within 30 days of filing. (2) Certificated telecommunications utilities shall not provide PTAS to a person required to be registered under this subsection, unless that person provides a commission-supplied proof of registration. (c) Available upon request. Upon formal request for service by any prospective provider of PTS, a CTU is required to file a tariff providing for interconnection of customer-owned pay telephones, except as otherwise provided in subsection (n) of this section. (d) PTS requirements. (1) Requirements before call is completed. If the PTS provider uses automated call completion technology to complete operator service calls, the provider of PTS must: (A) audibly and distinctly identify itself to the caller upon answering; (B) audibly and distinctly identify itself to the billed party, if the billed party is different from the caller; (C) provide a mechanism for the caller to obtain rate information, without charge, 24 hours a day, seven days a week; and (D) permit the caller or billed party to terminate the call at no charge prior to completion of the call by the PTS provider. (2) E911 or 911 calls, and "0-" calls. The PTS provider must allow E911 or 911 calls to be outpulsed directly to the Public Service Answering Point at no charge and without requiring a coin or credit card. This requirement does not apply to pay telephones accessible to inmates of confinement facilities. (3) Access. (A) The PTS provider must: (i) provide access to operator services, 24 hours a day, seven days a week, at no charge and without requiring a coin or credit card; (ii) provide access to directory assistance, 24 hours a day, seven days a week; (iii) provide access that includes the local exchange calling scope of the CTU furnishing the PTAS including mandatory EAS and ELC, except that ELC rate additives are not applicable to PTS access lines; and (iv) provide access to the operator of a local exchange company that meets the requirements enumerated in sec.23.55(k)(3) and that serves the area from which the call is made, at no charge and without requiring a coin or credit card, either: (I) by directly routing all local operator calls to such local exchange company operator, without charge to the caller; or (II) by transfer or redirection of the call by an OSP in accordance with the provisions of sec.23.55(i)(1)(A)(ii)(I)- (III). (B) The PTS provider must also allow access to other telecommunications utilities unless otherwise provided in clause (iii) of this subparagraph. (i) Access to interexchange carriers by "950-XXXX" and "1-800" or "1-888" numbers must not be blocked. (ii) Access to interexchange carriers by "10XXX+0" (whether "10XXX+0+" or "10XXX+0-") dialing must not be blocked if the end office serving the originating line has OLS capability. (iii) To prevent fraudulent use of the pay telephone, the access requirement is explicitly waived under the following conditions without prior application to the commission: (I) Access to interexchange carriers by "10XXX+0" (whether "10XXX+0+" or "10XXX+0-") dialing may be blocked, if the end office serving the originating line does not have OLS screening capability. (II) Access to interexchange carriers by "10XXX+1" dialing may be blocked. (C) The requirements of this paragraph do not apply to pay telephones accessible to inmates of confinement facilities. (4) Other. (A) The PTS provider must: (i) ensure that end users can place all local and toll calls, except direct- dialed international calls, from the pay telephone, including, but not limited to, operator-assisted international calls, collect calls, third number billed calls, and calling card calls; (ii) be responsible for the payment of charges for all local and toll messages, including, but not limited to, non-local directory assistance charges, except as provided in subsection (h) of this section; (iii) comply with all applicable federal, state and local laws and regulations including those concerning the use of pay telephones by disabled and/or hearing- or speech-impaired persons; (iv) not attach extension telephones to pay telephones, unless the pay telephone displays a notice that legibly and conspicuously states in capital letters, "YOUR CONVERSATION MAY BE OVERHEARD BECAUSE AN EXTENSION TELEPHONE IS ATTACHED TO THIS PHONE LINE."; (v) not impose a time limit on local calls; (vi) ensure operator-assisted intrastate long distance usage sensitive rates are billed in increments of one minute or less, provided that the total per minute fee does not exceed the rate authorized in subsection (f); (vii) return to the end-user any pre-paid fee for a direct dialed intrastate long distance and/or local call that does not result in a completed call; (viii) not charge the caller for any uncompleted call in accordance with the provisions of sec.23.55(f)(1)-(4) of this title; (ix) not charge a fee for a local call greater than that posted on the informational placard attached to each pay phone; (x) provide access to ILEC operators by dialing either "0" or "00" access codes; and (xi) the requirements of subparagraph (A)(i) and (v) of this paragraph do not apply to pay telephones accessible to inmates of confinement facilities. (B) If the PTS provider uses automated call completion technology to complete operator service calls, and if validation information is available for calls that the PTS provider (or a third-party billing and collection agent operating on behalf of the PTS provider) will bill through a certificated telecommunications utility, the PTS provider is required to validate the call and is allowed to submit the call for billing only if the call was validated. (C) PTS may be connected to, from, or through a customer-provided telecommunications switching system, or local exchange carrier-provided central office switching system, provided that the PTS provider meets all requirements of this rule. The PTS provider must ensure that access to E- 911, 911 and/or 0- is not blocked and must comply with all legislative and rule requirements regarding the operation of E-911 and 911. This access configuration is not allowed if it prevents usage measurement, by the local exchange carrier, of a local exchange carrier-provided PTAS line. For purposes of this paragraph, local exchange carrier is defined as any entity holding either a Certificate of Convenience and Necessity, Certificate of Operating Authority, or Service Provider Certificate of Operating Authority. (e) Posting requirements for pay telephones. (1) The PTS provider must attach to each instrument a card that provides: (A) instructions in English and Spanish for accessing emergency service subject to the conditions contained in clauses (i) and (ii) of this subparagraph: (i) where E-911 or 911 emergency service is available, the caller must be instructed to dial 911 and the PTS provider must allow E-911 or 911 calls to be outpulsed directly to the Public Service Answering Point at no charge and without requiring a coin or credit card; or (ii) where E-911 or 911 is not available, the caller must be instructed to dial "0" and dialing "0" must, at no charge and without requiring a coin or credit card, directly connect the caller with an OSP that is in compliance with the technical standards set forth in sec.23.55(g)(2)(A)-(F); (B) instructions for use, including specifically instructions for completion of local and toll calls, access to operator services, access to directory assistance, obtaining refunds, obtaining repair service, registering complaints at a designated toll-free telephone number, reporting out-of-service conditions, and using one-way calling (if the instrument is so equipped); and (C) notice stating the name, address, and 10 digit telephone number for the pay telephone owner or agent providing the set, and providing the name and toll-free telephone number of the owner or agent responsible for refunds and repairs; and (D) if an extension has been attached, a notice that legibly and conspicuously states in capital letters: "YOUR CONVERSATION MAY BE OVERHEARD BECAUSE AN EXTENSION TELEPHONE IS ATTACHED TO THIS PHONE LINE."; and (E) a placard that clearly states the fee for completing a local call from that telephone. (2) PTS providers must also attach to each instrument a card that says : "The long distance carrier serving this phone is {insert name of the pre-subscribed OSP}. You can learn what its rates are by calling {insert OSP's toll-free rate information phone number} at any hour at no cost to you. If you would rather use another long distance carrier, you can either use {insert name of incumbent local exchange provider}'s operator by calling {insert dialing directions here}, or use your own long distance carrier by following its dialing instructions or asking the operator for assistance." (3) If the PTS provider subscribes to the services of an OSP that is required to comply with sec.23.55, the PTS provider remains liable for compliance with this paragraph, but may coordinate with the OSP so that information to be provided at the pay telephone set is not duplicated. If the PTS provider uses automated call completion technology to complete some operator service calls and subscribes to the services of an OSP that is required to comply with sec.23.55, the PTS provider must ensure that the information provided at the pay telephone set clearly informs the caller about which information applies to which operator service calls. (4) If a pay telephone cannot receive incoming calls, the PTS provider shall place in a conspicuous location on the pay telephone a notice, in letters one- quarter inch high, stating, "THIS TELEPHONE CANNOT RECEIVE TELEPHONE CALLS." Furthermore, the PTS provider shall not display the number of the pay telephone on any such telephone that does not receive incoming calls. (5) The requirements of this subsection do not apply to pay telephones accessible to inmates of confinement facilities. (f) Charges. (1) A PTS provider must: (A) not impose on pay phone end users any charge for calls made under Chapter 771 or 772 of the Texas Health and Safety Code; (B) not impose a charge for "950-XXXX" calls, "10XXX+0", or "1-800" or "1-888"- type calls to nonpresubscribed interexchange carriers (for example "1-800- COLLECT" , "1-800-CALLATT", or "1-800-877-8000"); (C) not impose a charge for local calls from pay telephones to the Telecommunications Relay Service (TRS); (D) for local calls which are collect, operator-assisted or paid by credit card or calling card, not impose a charge which exceeds the highest applicable rate for such calls of any of the four largest interexchange carriers operating in this state; and (E) for credit card, calling card, or live or automated operator-handled toll calls, not charge a rate or total charge that exceeds the authorized rates and charges listed in subparagraph (F) of this paragraph. (F) Rate Caps For Intrastate Long Distance And Operator- Assisted Calls At Texas Pay Phones: Figure: 16 TAC sec.23.54(f)(1)(F) (2) The requirements of paragraph (1)(A) through (C) of this subsection do not apply to pay telephones accessible to inmates of confinement facilities. (g) Applications for modification of information to be provided at the pay telephone set and for waivers of the requirement for access. (1) The commission may approve applications for modification of the requirements contained in subsection (e)(2) and (3) of this section upon showing of good cause by the PTS provider. The commission shall process applications for modification using the criteria and procedures set forth in sec.23.55(d)(4). (2) The commission may approve waivers to the access requirements of subsection (d)(3)(B) of this section to prevent fraudulent use of telephone services or for other good cause. Applications for waiver may be filed by the provider of pay telephone service. The commission shall process such applications for waiver using the criteria and procedures set forth in sec.23.55(i)(3)(B). (h) Fraud protection. (1) Notwithstanding the provision of sec.23.55(i)(1)(C)(ii) that would otherwise require notice to interexchange carriers, an OSP must not bill the PTS provider for charges for any call billed to a pay telephone line where the call originated at that pay telephone by use of "10XXX+0", "10XXX+01", "950-XXXX", or "1-800" or "1-888" access codes, or where the call(s) originated at that pay telephone and otherwise reached an operator position, if the originating telephone line was subscribed to outgoing call screening and the call was placed after the effective due date of the outgoing call screening service order. (2) An OSP or PTS provider that uses automated call completion technology to complete operator service calls must not bill charges for any collect or third number billed call to a PTS provider if the pay telephone line to which the call was billed was subscribed to incoming call screening and the call was placed after the effective due date of the incoming call screening service order. (3) Any calls billed through a certificated telecommunications utility in violation of paragraphs (1) and (2) of this subsection must be removed from the PTS providers bill by the certificated telecommunications utility upon identification and verification that the violation occurred. If it is determined that, at the time of the violation, the appropriate incoming or outgoing call screening was available to the OSP or PTS provider that uses automated call completion technology to complete operator service calls at the time of the call, the certificated telecommunications utility may return the charges for said call to the OSP or PTS provider as unbillable. (4) Any calls billed directly by an OSP or PTS provider that uses automated call completion technology to complete operator service calls in violation of paragraph (1) or (2) of this subsection must be removed from the PTS provider's bill by the OSP or PTS provider upon identification. The OSP or PTS provider using automated call completion technology to complete operator service calls may request an investigation of such a call by the certificated telecommunications utility serving the pay telephone to which the call was billed. If the CTU determines that the appropriate incoming or outgoing call screening was not available to the OSP or PTS provider using automated call completion technology to complete operator service calls at the time of the call, the OSP or PTS provider may bill the charges for said call to the relevant certificated telecommunications utility. (i) Responsibilities of CTUs Holding a CCN. (1) A listing in the local telephone directory, for each pay telephone, must be provided to any provider of pay telephone service on request. (2) PTAS must be available in all exchanges. (3) Incoming and outgoing call screening on pay phone calls must be provided where facilities are available. (4) Regardless of whether call screening is available, the CTU will not bill any call, including, but not limited to, third number billed, collect, "0+" or "0-" calls, to a number which has been clearly identified to the certificated telecommunications utility operator at the time of the call attempt as a pay telephone. The certificated telecommunications utility will not be responsible for refunds or adjustments of charges for calls placed through non-certificated telecommunications utilities carrier operators, except as provided in subsection (h) of this section. (5) The certificated telecommunications utility shall not initiate a maintenance service call or take any other action in response to a trouble report on a customer-owned pay telephone until such time as requested by the pay telephone owner or its agent. The pay telephone owner must keep the certificated telecommunications utility advised of the identity of the pay telephone owner or agent authorized to request a maintenance service call. (6) The CTU must provide to a PTS provider using automated call completion technology to complete operator service calls the same services and information that the CTU provides to interexchange carriers in sec.23.55(j)(1) and (2), on the same prices, terms, and conditions that any interexchange carrier receives from the CTU. (7) CTUs must file tariffs to offer direct dialed international call blocking ("011+" and "10XXX+011+") as facilities become available. (j) Enforcement of tariff requirements. If a PTS provider is in violation of a tariff provision, the CTU must notify the PTS provider of the violation in writing. Such notice must refer to the specific tariff provisions being violated. The notice must state that the PTS provider is subject to disconnection by the CTU of the instrument(s) in violation of the tariff unless the PTS provider corrects the violation and notifies the CTU in writing, within 20 days of receipt of the notice of the violation, that the violation has been corrected. The CTU may disconnect the instrument(s) that are in violation of the tariff on or after the 20th day after receipt of the notice by the PTS provider, if the PTS provider did not notify the CTU in writing within 20 days of receipt of the notice that the violation was corrected. However, if the PTS provider has filed a complaint with the commission regarding the disconnection and has provided the CTU with a copy of the complaint that indicates that the complaint has been filed with the commission within 20 days of receipt of the notice of a violation from the CTU, the CTU may not disconnect the instrument(s) pending resolution of the complaint by the commission. (k) Violation of regulations. The commission may order disconnection of service for up to one year for repeat violations of commission rules. A PTS provider who violates commission rules is also subject to administrative penalties, civil penalties, and injunctive relief under Chapter 15, Subchapter B of the Public Utility Regulatory Act. (l) Rate structure. CTU rates for wholesale service must be designed on a flat access line and/or a local message usage rate basis. Multi-element measured rates are prohibited. In areas without measuring capabilities, the CTU may use a flat rate usage surrogate instead of a per call message rate. Measurement capabilities are defined as the capability in place to measure and bill pay telephone usage without incurring unreasonable expense. (m) Tracking Reports. A CTU shall report the number of PTS access lines in service by filing a tracking report with the commission on December 31 and June 30 of each year, with the first report due on December 31, 1997. This report must be filed in the Central Records Office of the commission, and a copy of the report must be delivered to the commission's directors of Industry Analysis and Office of Customer Protection. (n) Special assembly tariffs. A CTU with less than 50 pay telephone lines may provide PTAS pursuant to existing special assembly tariffs; however, in no event may a CTU provide to more than 10 special assembly arrangements. Special assembly rates must be computed in accordance with this section. CTUs that provide PTAS pursuant to special assembly tariffs must enter into a written agreement with the PTS provider that requires the provider to perform all functions and obligations specified in subsection (d) of this section. When a CTU that holds a certificate of convenience and necessity (CCN) makes its initial filing to offer PTAS, the application must include the proposed tariff, cost studies or a commission approved rate for similar services offered by a larger CTU holding a CCN. (o) Compliance. All CTUs must file revised tariffs in compliance with this section within 45 days of the effective date of this section, or of any amendments thereto. (p) Severability. If any provision of this section or the application thereof to any person or circumstances is held invalid, such invalidity shall not affect other provisions or applications of this section that can be given effect without the invalid provision or application. It is the intent of the commission that the provisions of this section are severable. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on October 24, 1997. TRD-9714125 Rhonda Dempsey Rules Coordinator Public Utility Commission of Texas Effective date: November 13, 1997 Proposal publication date: August 19, 1997 For further information, please call: (512) 936-7308 TITLE 25. HEALTH SERVICES PART I. Texas Department of Health CHAPTER 217.Milk and Dairy 25 TAC sec.217.81 The Texas Department of Health (department) adopts an amendment to sec.217.81, concerning milk and milk product fees, without changes to the proposed text as published in the August 8, 1997, issue of the Texas Register (22 TexReg 7332), and therefore the section will not be republished. The section provides for imposition of fees assessed milk and dairy products. House Bill 1875, 75th Legislature, 1997, amended Health and Safety Code, Chapter 435, sec.435.009(b)(5), effective September 1, 1997, to increase the inspection fee from $.01 to $.02 per hundredweight for milk and milk products offered for sale in the State of Texas, whether produced in Texas or imported into Texas. This revenue will be used by the department to fund increased costs of laboratory services for the milk and milk products regulatory program, and will contribute to a higher quality and safer supply of milk and milk products for consumers. No comments were received on the proposal of these rules during the comment period. The amendment is adopted under Health and Safety Code, sec.435.009(c), which provides the Texas Board of Health (board) with the authority to adopt rules to assess and collect fees; and under the Health and Safety Code, sec.12.001, which provides the board with the authority to adopt rules for the performance of every duty imposed by law on the board, the department, and the commissioner of health. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on October 27, 1997. TRD-9714214 Susan K. Steeg General Counsel Texas Department of Health Effective date: November 17, 1997 Proposal publication date: August 8, 1997 For further information, please call: (512) 458-7236 TITLE 28. INSURANCE PART I. Texas Department of Insurance CHAPTER 19.Agent's Licensing SUBCHAPTER C.Written Examination for Applicants for License to Write Insurance Upon any One Life in Excess of $10,000 Under the Insurance Code Article 21.07, sec.4A 28 TAC sec.19.201 The Commissioner of Insurance adopts an amendment to sec.19.201, which sets out the purpose of Subchapter C concerning establishing parameters for the written examination for licensure of individuals who desire to write life insurance upon any one life in excess of $10,000 under the provisions of the Insurance Code, Article 21.07, sec.4A. The amendment is adopted without changes to the proposed text as published in the August 15, 1997 issue of the Texas Register (22 TexReg 7543) and will not be republished. The amendment to sec.19.201 is necessary to implement changes made to the provisions of the Insurance Code, Article 21.07 during the 75th Legislative session, relating to increasing the amount of life insurance written on any one life from $7,500 to $10,000. The title of the subchapter has been changed to more accurately reflect the content of the subchapter. The amendment to sec.19.201 changes the application of the subchapter to individuals who desire to write life insurance upon any one life in excess of $10,000 under the provisions of the Insurance Code, Article 21.07, sec.4A. A commenter supports the proposed amendment to sec.19.201 increasing the amount of life insurance written on any one life from $7,500 to $10,000. AGENCY RESPONSE: The agency agrees. FOR: Texas Association of Insurance Officials AGAINST: None The amendment is adopted under the Insurance Code, Articles 21.07 and 1.03A. The Insurance Code, Article 21.07, sec.4A requires written examination of applicants who desire to write life insurance in excess of $10,000 upon any one life, and authorizes the department to establish reasonable rules with regard to the written examination. The Insurance Code, Article 1.03A provides that the Commissioner of Insurance may adopt rules and regulations to execute the duties and functions of the Texas Department of Insurance as authorized by statute. The Government Code, Chapter 2001, sec.sec.2001.004 et seq. authorizes and requires each state agency to adopt rules of practice setting forth the nature and requirement of available procedures and prescribes the procedures for adoption of rules by a state administrative agency. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on October 27, 1997. TRD-9714211 Caroline Scott General Counsel and Chief Clerk Texas Department of Insurance Effective date: November 17, 1997 Proposal publication date: August 15, 1997 For further information, please call: (512) 463-6327 SUBCHAPTER T.Interim Study of Agents' License Statutes 28 TAC sec.19.1901 The Commissioner of Insurance adopts new Subchapter T concerning the interim study of agents and agents' licenses statutes. New sec.19.1901 is adopted without changes to the proposed text as published in the August 15, 1997 issue of the Texas Register (22 TexReg 7544), and will not be republished. New Subchapter T is necessary to implement Insurance Code, Article 21.15-7, enacted by the 75th Legislature in 1997. The new subchapter sets out the requirements of the Advisory Committee for the Interim Study of Agents and Agents' Licenses Statutes. New sec.19.1901 is required by Texas Civil Statutes, Article 6252-33, which governs state agency advisory committees and which requires a state agency that is advised by an advisory committee to specify by rule the advisory committee's purpose and task, its reporting requirements, and its duration. Article 6252-33 also outlines the required composition of members on an advisory committee. New sec.19.1901 sets out the purpose of the advisory committee, defines its tasks and the manner in which it will report to the department, specifies its membership, and sets its duration. The purpose of the advisory committee is to assist the commissioner in performing the review and evaluation of agents and agents' licenses statutes so that the commissioner may make a report to the legislature on any changes needed to address new insurance marketing methods and new technologies, to reduce the number and types of agents' licenses, to determine which statutory provisions should apply to all agents' licenses, and to address other problems which may exist with agents' licensing requirements. The tasks of the advisory committee are outlined as well as the reporting requirements. The advisory committee is composed of twelve members and a balance between the industries and occupations regulated and consumers. The commissioner or his representative is an ex-officio member of the committee. The advisory committee will terminate on December 31, 1998 unless the commissioner extends the duration prior to that date. Comment: Some commenters believe membership on the advisory committee should include a Certified Financial Planner ("CFP") licensee with experience in risk management to complete the cross-section of industry and professional interests. The commenters feel financial planners have a vested interest in any public policy recommendations made to the Commissioner due to the fact that 64.7% of CFP licensees hold insurance licenses and are restricted in their dual capacity by current Texas law. Due to the experience, examination, ethical and continuing educational requirements requisite of CFP licensees, the commenters believe the public would be better served with a representative of the financial planning profession on the advisory committee. Some commenters urge that stipulated premium companies and Group II agents have vital interests in the advisory committee and its studies and are entitled to have representation on the committee. A commenter refers to the rapidly expanding area of insurance of small life policies used to cover funeral expenses or to pay the insured's debts. The commenter also notes that Article 21.15-7 refers to the "types" of agents in the plural, suggesting that more than one person of the same type of advisory member may be appointed. Another commenter feels the interests of agents licensed under other articles are not the same as those of agents whose sole license is a Group II license, and is concerned that the Group II agent category would not be adequately represented by the agent slot in the proposed rule. Response: The agency disagrees that the rule should specify a specific member to be a Certified Financial Planner licensee, Group II agent, or representative of a stipulated premium company. The purpose of this rule is to comply with Article 6252-33, Texas Civil Statutes, which requires a state agency that is advised by an advisory committee to adopt rules stating the committee's purpose and tasks, the manner in which the committee will report to the agency, and the duration of the committee. The composition of the committee is also prescribed by Article 6252-33 requiring a balance between the industries or occupations regulated and consumers of services. The agency believes that the membership outlined in sec.19.1901(e) complies with the requirements of Article 6252-33. Due to the large number of different license types and the desire to keep the number of members on the committee at a workable level, the agency anticipates the committee will create working groups to assist in completing its tasks, and some of these working groups may include representation as suggested by the commenters. These working groups will allow the committee to benefit from the experience and perspective of a number of different persons or groups. Comment: Several commenters are concerned with the composition and size of the proposed advisory committee. The commenters believe a 12 member committee with 6 consumer members entails too much risk of dilution of the value of votes of non- consumer members. The non-consumer membership is seen as too widely dispersed and internally conflicted to achieve cohesion comparable to consumer members, particularly since only 5 of the non-consumer members are from the insurance industry and one is a banker. The commenters recommend an increase in the number of non-consumer members, including a representative from the life-health industry of Texas domestic small life, stipulated premium, mutual, burial, and fraternal companies, and a representative from Texas domestic county mutual-farm sector on the property-casualty side. The commenters further stated concerns over the committee's ability to address new marketing methods and technologies such as the Internet and electronic commerce. Response: The agency disagrees that the rule should increase the number of non-consumer members to include a representative from the life-health industry of Texas domestic small life, stipulated premium, mutual, burial, and fraternal companies, and a representative from Texas domestic county mutual-farm sector on the property- casualty side. The composition of the committee is prescribed by Article 6252-33 which requires a balance between the industries or occupations regulated and consumers of services. In addition, Article 1.35C of the Texas Insurance Code requires at least one-half of the membership of an advisory body represent the general public. The agency believes that the size and composition of membership outlined in sec.19.1901(e) complies with the requirements of Article 6252-33, Texas Civil Statutes, and Articles 1.35C and 21.15-7, Texas Insurance Code. Due to the large number of different license types and the desire to keep the number of members on the committee at a workable level, the agency anticipates the committee will create working groups to assist in completing its tasks, and some of these working groups may include representation as suggested by the commenters. These working groups will allow the committee to benefit from the experience and perspective of a number of different persons or groups. The agency appreciates the commenters' concerns regarding new marketing methods and technologies, but believes the tasks outlined in the section are required by Article 21.15-7, Insurance Code. FOR WITH CHANGES: The Institute of Certified Financial Planners, Houston Society of the Institute of Certified Financial Planners, Texas Association of Insurance Officials, Texas Automobile Dealers Association, Texas Directors Life Insurance Company and Funeral Directors Life Insurance Company, and Southeast Surplus Underwriters General Agency. The new section is adopted pursuant to Texas Civil Statutes, Article 6252-33 and Insurance Code, Articles 21.15-7 and 1.03A. Texas Civil Statutes, Article 6252- 33, sec.5 requires a state agency that is advised by an advisory committee to adopt rules that state the purpose of the committee, and describe the committee's task and the manner in which the committee will report to the agency. Section 8 of Article 6252-33 requires a state agency that is advised by an advisory committee to establish by rule a date on which the committee will automatically be abolished. Insurance Code, Article 21.15-7 directs the commissioner to appoint an advisory committee to assist in the evaluation and review of agents and agents' licenses statutes. Article 1.03A provides that the Commissioner of Insurance may adopt rules and regulations to execute the duties and functions of the Texas Department of Insurance only as authorized by a statute. The Government Code, sec.sec.2001.004 et seq. authorizes and requires each state agency to adopt rules of practice setting forth the nature and requirements of available procedures and to prescribe the procedures for adoption of rules by a state agency. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on October 27, 1997. TRD-9714212 Caroline Scott General Counsel and Chief Clerk Texas Department of Insurance Effective date: November 17, 1997 Proposal publication date: August 15, 1997 For further information, please call: (512) 463-6327 TITLE 37. PUBLIC SAFETY AND CORRECTIONS PART III. Texas Youth Commission CHAPTER 85.Admission and Placement SUBCHAPTER B.Placement Planning 37 TAC sec.85.23 The Texas Youth Commission (TYC) adopts an amendment to sec.85.23, concerning classification, without changes to the proposed text as published in the September 19, 1997, issue of the Texas Register (22 TexReg 9444). The justification for amending the section is greater protection for the public. The amendment will add arson to the list of offenses that will allow classification of a youth sentenced to commitment in TYC for that offense. The definitions of classifying offenses for Type A and Type B offenders is broadened. This revision complies with laws passed by the 75th Legislature. No comments were received regarding adoption of the amendment. The amendment is adopted under the Human Resources Code, sec.61.071, which provides the Texas Youth Commission with the authority to examine and make a study of each child committed to it as soon as possible after commitment. The adopted rule implements the Human Resource Code, sec.61.034. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on October 20, 1997. TRD-9713966 Steve Robinson Executive Director Texas Youth Commission Effective date: November 10, 1997 Proposal publication date: September 19, 1997 For further information, please call: (512) 424-6244