Governor Rendell Signs House Bill 30

    HARRISBURG, Pa., Nov. 30 /PRNewswire/ -- Governor Edward G. Rendell today
 signed House Bill 30, "An Act amending Title 66 (Public Utilities) of the
 Pennsylvania Consolidated Statutes, further providing for residential
 telephone service rates based on duration or distance of call and for local
 exchange service increases and limitations; adding and repealing provisions
 relating to alternative form of regulation of telecommunications services;
 establishing the Broadband Outreach and Aggregation Fund; providing for Voice
 Over Internet Protocol; and making a repeal."
 
     The Governor's sent the following message to the House of Representatives:
 
 
     TO THE HONORABLE HOUSE OF REPRESENTATIVES
     OF THE COMMONWEALTH OF PENNSYLVANIA
 
 
     I have the honor to inform you that I have this day approved and signed
 House Bill 30, Printer's No. 4778 entitled "An Act amending Title 66 (Public
 Utilities) of the Pennsylvania Consolidated Statutes, further providing for
 residential telephone service rates based on duration or distance of call and
 for local exchange service increases and limitations; adding and repealing
 provisions relating to alternative form of regulation of telecommunications
 services; establishing the Broadband Outreach and Aggregation Fund; providing
 for Voice Over Internet Protocol; and making a repeal."
     In 1993, the General Assembly enacted telephone deregulation legislation
 that became known as Chapter 30 of the Public Utility Code.  This legislation
 put into effect a basic agreement that in exchange for establishing a
 framework for stimulating competition in local and long distance telephone
 services and implementing a more predictable rate setting process, the then
 monopoly local telephone companies would agree to ensure that every
 Pennsylvanian would have access to affordable, quality basic telephone service
 and to provide every Pennsylvanian with access to broadband telecommunications
 service by no later than 2015.  Chapter 30 expired on December 31, 2003.
     Today I am signing into law House Bill 30, which re-enacts and expands
 Chapter 30.
     This legislation authorizes several ambitious initiatives.
     First, it will substantially increase the investment in telecommunications
 infrastructure within the Commonwealth.  This will accelerate deployment of
 broadband services by:
 
     -- Hastening the deployment of high-speed broadband services before the
        2015 deadline established under the original Chapter 30.  In some rural
        areas, broadband will be universally available by the end of 2008.
 
     -- Providing financial assistance to school districts to support our goal
        of ensuring that every school in the Commonwealth has access to
        broadband and high-speed Internet service.
 
     -- Recognizing the importance of telecommunications infrastructure to
        economic development by creating a mechanism for DCED to accelerate
        broadband deployment.
 
     -- Establishing a special program to help communities aggregate the demand
        for broadband service and requiring local telephone companies to
        respond to the demand for service in a more timely fashion.
 
     Secondly, House Bill 30 ensures that every Pennsylvanian has access to
 affordable, basic telephone service by:
 
     -- Making it easier for more low-income Pennsylvanians to enroll in
        federal Lifeline service, which will help them install phones and pay
        their monthly bills.
 
     -- Protecting access to basic telephone services even in the most rural
        and economically depressed areas of the state.
 
     -- Limiting the price increases for basic service, particularly in harder
        to serve rural areas.
 
     -- Ensuring that the PUC retains its authority to oversee the quality of
        local telephone service.
 
 
                              Education Technology
 
     The bill will help accelerate broadband deployment to schools through two
 distinct mechanisms.  First the bill requires local telephone companies to
 provide broadband service at a discounted rate-the lower of 30% off its usual
 and customary rate or the actual incremental cost of getting the service from
 the street to the school building.  While it is difficult to accurately
 estimate the impact of this discount, it probably will save school districts
 between $25 and $40 million a year.  In addition, the bill provides that
 Verizon will contribute at least $7 million a year and all ILECS will
 contribute 10% of any inflationary increase in their charges to a special
 Education Technology Fund (E-Fund).  We believed that schools should be
 guaranteed at least $10 million year to accomplish our goal of bringing
 broadband service to every school.  The language of House Bill 30 only
 guarantees $7 million a year.  Consequently, Verizon has now agreed to make
 additional contributions in fiscal years 2006-2007 through 2010-2011 of up to
 $3 million to ensure that at a minimum $10 million a year will be made
 available to support our goal of ensuring that every school has access to
 broadband service.  This agreement is encompassed in a letter from Verizon to
 me.
     This E-Fund will support deploying broadband services to individual
 schools, including the technology required to allow the school to make
 connections, as well as fostering interschool networks, other technology,
 distance learning and content that would enable schools to take advantage of
 broadband and the Internet.
     Verizon has also agreed to offer discounts to Pennsylvania schools for
 equipment that they may need in order to bring broadband into their
 classrooms.  This commitment will provide necessary equipment at a price not
 to exceed cost plus 5%.  In addition, Verizon will provide eligible schools
 that purchase managed network services with a 20% discount from list prices.
 All told, over the next ten years, a minimum of $350 million and perhaps as
 much as $550 million will be made available to schools through House Bill 30
 and related commitments.
     This far outstrips any commitment made by local telephone companies to any
 other state.  By way of contrast, New Jersey received $230 million in
 assistance, mostly in the form of free equipment, from ILECs in that state.
 
 
                              Economic Development
 
     The legislation establishes a process to allow DCED to accelerate
 broadband deployment in order to serve economic development projects.  The
 legislation requires that broadband service be provided no later than a year
 after a request has been made.  This program complements the Business in Our
 Sites program created under the economic stimulus program and the new
 PENNWorks program to be funded with the recently-approved water and sewer bond
 issue.  Together these programs will help redevelop old industrial sites and
 support economic development efforts to create more jobs for Pennsylvania's
 working families.  We can truly say that we will have business-ready sites for
 any type of business enterprise.
 
 
                                    Lifeline
 
     It is clear that basic telephone service is a necessity of modern life.
 Under federal law, telephone customers contribute funds to support Lifeline
 programs.  These Lifeline funds assist low-income families to pay for phone
 installation and to pay their monthly phone bills.  In the past, Pennsylvania
 has been a net exporter of Lifeline monies, paying out more to the federal
 government than Pennsylvanians receive in assistance.
     House Bill 30 helps ensure that more low-income Pennsylvanians get the
 help that they need and that they are entitled to.  The bill establishes a
 process to automatically inform every low-income Pennsylvanian applying for
 state assistance that they can get aid in paying their local phone bill.  The
 federal lifeline program provides low-income households with a $100 subsidy to
 cover the cost of installing a telephone and $8 per month to help pay their
 monthly bill.
     In addition, the bill removes one significant barrier to enrollment.  The
 legislation allows these households to purchase vertical services (caller ID,
 voice mail, call waiting, call forwarding, etc.).  Under current law, Lifeline
 participants cannot purchase vertical services; so if a low-income spousal
 abuse victim wanted caller ID, she could not receive the $8 monthly subsidy.
 The bill removes that barrier.
 
 
                    Deployment Schedule and Inflation Offset
 
     Chapter 30 originally proposed full statewide deployment of broadband
 service by 2015.  Through negotiations with the PUC, some companies have
 agreed to accelerate their schedules for deployment.  These companies will
 complete their modernization efforts by 2013.  House Bill 30 allows for even
 faster deployment by some rural companies.  Those companies that agree to
 fully deploy by 2008 are relieved of some additional regulatory requirements,
 including participating in the E-Fund program, the Bona Fide Retail Request
 Program and the economic development program.
     In exchange for agreeing to full deployment by 2015, under Chapter 30,
 ILECs were given an alternative form of rate setting.  Instead of filing
 formal tariff increase requests with the PUC, companies were allowed to raise
 their prices by the rate of inflation less a fixed amount that came to be
 known as the inflation offset.  Verizon's inflation offset was set at 2.9%;
 all other ILECs had their inflation offset set at 2.4%.
     Under House Bill 30, companies that continue to adhere to the Chapter 30
 2015 deployment schedule would have their inflation offset reduced to 0.5%.
 Companies that move on a faster schedule would have their inflation offset
 eliminated.  However, the bill does establish a penalty for companies that
 fail to meet their interim or final deployment targets.  These companies would
 be required to make a refund to their customers based on the percentage by
 which it failed to reach its target date.  They could also be subject to other
 fines and penalties by the PUC.
     Frankly, I would have preferred a much stronger penalty for companies that
 fail to meet their interim and final deployment goals.  But the inclusion of
 the "clawback" provision is recognition of the point that I made repeatedly
 throughout the debate over House Bill 30-namely, that there should be some
 combination of incentives, rewards and penalties in order to ensure that ILECs
 honored their commit to invest in the telecommunications infrastructure of our
 Commonwealth.
 
 
     Other Issues
     The bill establishes a minimum uplink speed for broadband service.  This
 will ensure that broadband users can take full advantage of most of the
 business services offered through the Internet, something that was missing in
 Chapter 30.  House Bill 30 also establishes new safeguards for corporate
 whistle blowers.
     The final version of the bill also represents an improvement over earlier
 versions in at least one significant way.  Voice over Internet, or VoIP, which
 is still in its infancy, has the potential to revolutionize telecommunications
 by using the Internet to complete telephone calls.  We want to foster this new
 technology, but the language that had been in earlier versions of House Bill
 30 was extremely problematic.  The definition of VoIP went far beyond that
 which has been established by the FCC.  As a consequence, services that are
 not truly recognized as VoIP, including many aspects of traditional landline
 telephone service, would have been defined as VoIP in Pennsylvania.  This
 would have created not only a backdoor to deregulation, but would also have
 caused a significant revenue loss for the Commonwealth.  The final version of
 House Bill 30 eliminated all reference to VoIP.
     Earlier versions of House Bill 30 also virtually eliminated PUC oversight
 of local telephone service.  The final version, while streamlining and in some
 cases weakening the regulatory role of the PUC, allows the Commission to
 retain significant authority over quality service standards and basic
 telephone service.  This will allow the Commission to determine when
 competitive services are available and review and approve network
 modernization plans.
 
     Problem Areas
     Finally, House Bill 30 has two problem areas.  In the days since House
 Bill 30 was passed, my administration has been actively working to correct
 these issues.  One is the issue of whether municipalities and municipal
 authorities can own and operate telecommunications systems.  The other
 revolves around the role of the PUC in determining the circumstances under
 which a competing telephone company can use the network of the incumbent or
 dominant local phone company to deliver services to consumers.
 
 
                                 Municipal Ban
 
     There are communities across the state, such as Kutztown, which have taken
 the initiative to develop an integrated telecommunications network that
 provides advanced telephone and cable television service.  There are other
 communities, ranging in size from Perryopolis to Philadelphia that are
 attempting to launch wireless networks-Wi-Fi networks as they are known in the
 industry-which will enable their residents to have high speed connection to
 the Internet.
     Early versions of House Bill 30 precluded communities from developing
 their own networks.  The final version of the bill allows existing municipal
 systems to continue to operate and provides local governments and authorities
 a one-year window to develop these networks.  Municipalities that are
 providing telecommunications service through a municipally owned or created
 network as of January 1, 2006 can continue to offer and provide the services
 "to the extent and scope" that these services were provided before that date.
 After that window closes, municipalities must offer the incumbent telephone
 company the right of first refusal to provide the proposed service.  Then, the
 municipality can proceed with its proposed network only if the ILEC waives
 it's right of first refusal under this act.
     Verizon has already agreed to waive its right of first refusal in regard
 to Philadelphia's proposed municipal Wi-Fi network guaranteeing that that
 particular project can proceed.  They have done so in a signed agreement with
 the City.  We will work with other municipalities on projects that they have
 established or propose to establish in order to ensure that, to the extent
 that they are now viable, they will also have the opportunity to succeed.
 
 
                    The Role of the PUC in Local Competition
 
     Competition over both local and long distance service is at the core of
 both Chapter 30 and the federal Telecommunications Act of 1996.  Rather than
 requiring competing telephone companies to replicate the existing networks
 established by the ILECs, both laws allow regulators to "unbundle" the
 components of these networks and require ILECs to offer these unbundled
 network elements, or UNEs, to their competitors at a just and fair price.
 However, the federal law, court decisions and FCC rulings have clearly
 limited, but not entirely eliminated, the ability of state utility commissions
 to determine which elements can be unbundled and what the ILECs can charge for
 using these elements.
     Currently, there are cases in the federal courts that may clarify the role
 of state commissions in this area.  One of these pending cases involves the
 PUC.  The changes in House Bill 30 will not materially affect the outcome of
 the cases, but they can help delineate the role of the Commission.  In
 addition, the FCC appears to be on the verge of issuing new rules that may
 clarify the role of the state agencies in this area.  In the mean time, my
 office has worked with all of the parties-ILECs, CLECs and the PUC-to clarify
 our understanding that the existing rulings, orders and tariffs adopted by the
 PUC will remain in effect until and unless they are changed by the courts, the
 FCC or the PUC.
     We were concerned that the removal of the PUC from this process could
 potentially hurt competition in the Commonwealth.  As a result, we have
 negotiated with Verizon a proposal that will foster competition by allowing
 CLECs to use Verizon's network.  Verizon will be joining with the Commonwealth
 to announce pricing agreements that will be available to competing telephone
 companies at discounts of up to 40% below market rates.  These agreements will
 be available to any CLEC, at rates well below the existing rates for these
 services.  These deep discounts will be a major factor in stimulating local
 telephone competition in Pennsylvania.
     Finally, in signing this legislation I would be remiss if I didn't
 mention, in addition to the PUC, the broad coalition actively participating in
 the debate over this legislation, including those who have worked on the bill
 and are now urging me to sign it into law.  They include virtually every
 school group in Pennsylvania-PSEA, the Pennsylvania Association of Rural and
 Small Schools, the School Board Association, the School Administrator's
 Association and the Intermediate Unit Executive Directors among others,
 economic development organizations and Chambers of Commerce from across the
 state, unions-including both the AFL-CIO and the Communications Workers of
 America and Pennsylvania's Consumer Advocate, Sonny Popowsky.
 
 

SOURCE Pennsylvania Office of the Governor

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