[40 Pa.B. 4254]
[Saturday, July 31, 2010]
[Continued from previous Web Page]
Extended Discussion of Annex A Section 63.321. Purpose. The provision details the types of applications for which a telecommunications public utility can seek Commission approval. This provision reflects the Commission's statutory authority to issue a certificate of public convenience evidencing the approval of the type of transactions in this section.
Objections. There were no objections.
Disposition. The final-form rulemaking eliminates ''Affiliate Interest'' applications because we abandon that topic. The rules replace ''transactions'' with the phrase ''an application seeking Commission approval.'' The phrase also uses the general term ''applicant'' because it is more encompassing than a more limited term for submissions seeking Commission approval under 66 Pa.C.S. § 1102(a) and a Certificate of Public Convenience under 66 Pa.C.S. § 1103. The final-form rulemaking excludes Securities Certificates and Diminution of Control as well.
Section 63.322. Definitions.
Objections. There were objections to some of the definitions. They are disposed of on a word-by-word basis in this section.
The proposed rulemaking contained definitions for ''Affiliated Interest,'' ''Formal Complaint,'' ''Formal Investigation,'' ''Formal Proceeding,'' ''Incumbent Local Exchange Carrier,'' ''Informal Complaint,'' ''Informal Investigation,'' ''Informal Proceeding,'' ''Party,'' ''Pennsylvania Counsel,'' ''Person,'' ''Staff,'' ''Statutory Advocate,'' and ''Verification.'' These reflect definitions contained in the Public Utility Code or the Commission's existing regulations in §§ 1.1, 3.1 and 5.1, et seq.
Objection and Disposition. There were no objections to these long-standing terms. The final-form rulemaking adopts them as set out in the proposed rulemaking.
The proposed rulemaking set out definitions for ''controlling interest'' and ''diminution in control'' as a modified version of definitions set out in the Commission's Policy Statement on Utility Stock Transfers in § 69.901.
Objection. The use of a ten percent figure in these terms raised questions. IRRC asked the Commission to explain why the Commission used the ten percent figure as a threshold when the current Policy Statement on Utility Stock Transfers in § 69.901(b)(2) uses a 20% threshold. IRRC Comments, p. 4.
PTA believed that it is a mistake for the Commission to jettison its own rules in favor of simple uniformity with the FCC's 10% rule for regulated telecommunications companies. PTA noted that other Pennsylvania utilities will continue to follow the 20% rule. PTA Comments, p. 11.
Disposition. The final regulations delete the proposed ten percent figure and retain the 20% figures set out in the Commission's Policy Statement in § 69.901 et seq. The proposed percent figure reflects the figure used at the FCC in their Streamlined Order but it is not consistent with the Commission guidelines set out in the Policy Statement. The FCC figure would subject a greater number of relatively small transactions to regulatory approval with no discernible public benefit. The Commission supported efforts to mesh state mandates with federal mandates, Proposed Rulemaking Order (October 19, 2007) at 14; however, given the need for abbreviated review and current Commission guidelines, we prefer to use the 20% figure.
Objection. Level 3 is concerned about the lack of clarity on how the ten percent figure in the definitions is calculated. Level 3 notes a lack of clarity if the threshold is calculated based on assets and facilities ''within Pennsylvania'' or if assets and facilities are calculated on a ''nationwide'' basis. If the calculation is within Pennsylvania, a General Rule review could apply because the threshold is met. If assets and facilities were calculated nationwide, a Pro Forma review could apply as the threshold is not met. Level 3 Comments, pp. 4 and 5.
Disposition. On consideration, we agree with Level 3 that clarity is needed albeit limited to the twenty percent figure. The final definition for ''controlling interest'' will apply ''within Pennsylvania'' or ''nationwide'' whichever is larger. This provides certainty and maximizes use of the Pro Forma or General Rule using a twenty percent threshold.
Objection. Level 3 also believed that the ten percent threshold should not be used in § 63.324(a)(3) to define diminution of control. Level 3 argues that the lower threshold would burden market transactions and is already covered by provisions addressing direct and indirect transfers of control anyway under § 63.324(a)(2).
Disposition. We agree. The final-form rulemaking strikes § 63.324(a)(3) and the definition. The definition appears to burden market transactions. The concern of that definition is addressed in §§ 63.324(a)(2) and 63.325(a)(2) as a matter of direct and indirect transfers of control. The final-form rulemaking also removes the equivalent provision for Pro Forma review in § 63.235(a)(3) for the same reason. We also delete the proposed 10% threshold and reinstate the current twenty percent guideline figure instead.
Objection. IRRC noted that the term ''information service'' is used in several of these definitions. IRRC asks the Commission to explain why the definitions contain ''information service'' because at least one Comment thought the term is inappropriate. IRRC Comments, p. 4. BCAP opposed the inclusion of ''information services'' because those services are beyond the Commission's authority under 66 Pa.C.S. §§ 1102 and 1103. BCAP Comments, pp. 1—24. BCAP also notes that the term ''competitive carrier'' is defined only in the definitions section but is not used anywhere in the regulation so it should be deleted. BCAP Comments, p. 22, n. 51. Verizon suggested that the term be removed as well. Verizon Comments, Annex A, p. 3.
Disposition. We agree. The final regulations delete reference to ''information service'' in the definitions and regulations. We do so given the General Assembly's 2008 enactment of legislation concerning Internet Protocol (IP) enabled services in general and Voice over Internet Protocol (VoIP) in particular P. S. § 2251.1 et seq. The 2008 legislation restricted Commission authority in some areas, particularly the regulation of rates, terms and conditions of retail VoIP or IP-enabled services, although the Commission retained its authority in other areas.4 Moreover, Federal regulation and legislation in this area are constantly changing. The Commission can revisit this issue if or when that becomes appropriate. The final regulations delete ''competitive carrier'' given BCAP's observation.
Objection. Verizon proposed reliance on federal law and would limit definitions to Act 183 and the Public Utility Code, particularly for ''telecommunications service,'' ''telecommunications carrier'' and ''public utility.'' PTA and BCAP supported Verizon. PTA Comments, Annex A, pp. 1—3; BCAP Comments, pp. 21—23.
Disposition. We disagree. The proposed rulemaking contained definitions that incorporate the very sections cited from the broader Public Utility Code while incorporating ancillary federal definitions that are neither new nor novel. The inclusion of federal definitions is more encompassing and consistent with our deleting terms for matters like information service, dominant market power, predominant market presence, and the Herfindahl-Hirschman Index because they were new or may be beyond our authority.
We recognize the concern that deletion of the proposed definitions for ''Dominant Market Power,'' the ''Herfindahl-Hirschman Index'' (HHI), and ''Predominant Market Presence'' may be inadvisable. However, other comments make a compelling case for eliminating new definitions that create ambiguity even if they reflect current merger guidelines at the FCC5 and the Department of Justice. We solve the issue by substituting a mandate that an applicant address competitive impact in §§ 63.324(d)(11) and 63.325(d)(11). A party with a greater concern can raise these FCC and U.S. Department of Justice (U.S. DOJ) principles by filing a formal protest or complaint and raising them in a Traditional Rule review.
The definition of Pro Forma Transaction reflects the FCC's Streamlined Regulation Order and the Commission Policy Statement on Utility Stock Transfers. There is a new definition that addressed diminutions of the controlling interest of stock based on the 20% rule set out in the Commission's Policy Statement in § 69.901. This definition also encompassed mundane and repetitive transactions that require an application and a certificate of public convenience but do not involve changes in rates and terms or conditions of service.
Objection. IRRC noted that the definitions define Pro Forma Transaction but fail to define General Rule transaction. IRRC Comments, p. 4.
Disposition. We agree. The critical difference between a Pro Forma Transaction abbreviated review and a General Rule Transaction abbreviated review turns on whether the application seeking abbreviated review contains rate changes, changes in terms or conditions of service, or whether the transfer of control is twenty percent or less. The final rule inserts a definition of a General Rule Transaction that is consistent with this distinction. The final rule also slightly revised the proposed definition for a Pro Forma Transaction that clearly distinguishes between the two abbreviated review procedures based on the twenty percent threshold for transfers of control. Finally, as noted earlier, ''Diminution in control'' is eliminated because the final rule eliminates that as well.
Objection. Level 3 identifies the lack of definition for two vaguely defined and ambiguous terms in § 63.324(j)(2) for ''major acquisition'' or ''substantial market shares'' in the proposed regulations. Level 3 believes that this rule using these undefined terms is unnecessary because the Commission has built safeguards into the process sufficient to ensure that a transaction which raises concerns about major acquisitions or substantial market shares will not escape Commission review. Level 3 proposes definitions if the Commission retains this provision using those undefined terms. Level 3 Comments, pp. 12—13. Verizon and Windstream agree with Level 3. Verizon Comments, p. 8, n. 8; Windstream Comments, Annex A, pp. 17—19.
Disposition. We agree. The undefined terms in § 63.324(j)(2) are as unnecessary as the provision, given the relationship between these related revisions in the final-form rulemaking. The same applies to an identical § 63.325(j)(2) provision as well.
The final-form rulemaking contains three revisions resolving this concern. The final-form rulemaking reinstates the long-standing practice that the filing of any formal protest or complaint by any entity triggers a Traditional Rule review. This ameliorates objections to differentiating between the treatment of Non-Statutory Advocate formal protests or complaints compared to those of a Statutory Advocate. The final-form rulemaking also abandons attempts to detail concerns with market power and concerns like market share or major acquisitions, best represented in a proposed mandate to include an Herfindahl-Hirschman Index analysis. Instead, an applicant has to address competitive impact in a filing. Someone with more concerns can file a formal protest or complaint and examine the issue in a Traditional Rule review. The final-form rulemaking deletes a Herfindahl-Hirschman Index mandate consistent with these determinations.
Objections. IRRC noted the absence of definitions for ''assets'' and ''customer base'' used in § 63.324(a). IRRC asked that both terms be defined. IRRC expressed the same concern for § 63.625(a) as well. IRRC Comments, p. 5. Verizon suggested use of the term applicant as well. Verizon Comments, Annex A, p. 9.
Disposition. We agree. The definitions in the final-form rulemaking include a definition for ''Assets'' and ''Customer Base'' as well as ''applicant'' for clarity and consistency.
Section 63.323. Applicability. The proposed rulemaking formalized the scope of relief sought in the Level 3 Petition as well as the Comments and Reply Comments of Level 3, Verizon, and the PTA. This provision is consistent with the Commission's authority to issue a certificate of public convenience granting an application to approve an acquisition, diminution in control, mergers, stock sales or transfers, and transfers of assets or control of a telecommunications public utility under 66 Pa.C.S. §§ 1102(a) and 1103 and 66 Pa.C.S. Chapter 30.
Objection. IRRC's comments recommend amending the regulation to include a reference to a telecommunications public utility's ''affiliated interest'' as well. IRRC Comments, p. 4.
Disposition. We agree. We also agree with IRRC that there is no need for an extensive provision detailing affiliated interest filing requirements in § 63.626. The Commission deleted that provision given IRRC's observation that the provision may violate the 66 Pa.C.S. § 3019(b), limitation on affiliated interest agreement review and approval. In addition, the detailed provisions are less effective than a verified statement confirming compliance with the prohibition against cross-subsidization under state and federal law, particularly 66 Pa.C.S. § 3016(f)(1). A verified statement is simply an easier and less expensive way.
Objection. The OCA noted that, despite the reference to 66 Pa.C.S. § 102(a)(3), however, the proposed language of § 63.323 does not conform specifically to 66 Pa.C.S. § 1102(a)(3) because it does not include a reference to the applicant's affiliated interests. The OCA proposes insertion of the clause ''and an affiliated interest of a telecommunications public utility'' to bring the provision completely within 66 Pa.C.S. § 1102(a)(3). OCA Comments, p. 34; OSBA Comments, p. 7.
Disposition. We agree. The proposed rulemaking contained detailed provisions in § 63.326 governing Commission review and approval of affiliated interest transactions. The vast majority of the comments asked the Commission to explain how those detailed provisions were consistent with the language severely limiting Commission review and approval of affiliated interest transactions in 66 Pa.C.S. § 3019(b)(1). The final-form rulemaking removes that section in its entirety to avoid confusing affiliated interest transactions with the Commission's residual authority to prevent cross-subsidization in 66 Pa.C.S. § 3016(f)(1) and review utility contracts under 66 Pa.C.S. § 2101(a).
We include this language with the caveat that the addition shall not be construed to mandate review and approval in a manner contrary to 66 Pa.C.S. § 3019(b)(1). This addition reflects the Commission's authority under 66 Pa.C.S. §§ 3019(b)(4), 3016(f)(1).
Section 63.324. General Rule Transaction. The proposed rulemaking incorporated the parties' suggestion that the Commission review mirror federal review by the FCC and the U.S. DOJ. The Commission proposed to complete review and approval of a General Rule transaction within 60 days after publication in the Pennsylvania Bulletin. This reduced the current unlimited review and approval time span under the Traditional Rule.
This provision was modeled on the FCC practice of dating the FCC's review period from posting at the FCC. In this case, however, web posting is not legal notice in Pennsylvania. The Commission concludes that if a transaction involved changes in conditions of service or rates, legal notice is preferable because it provides for a quicker review on transactions with issues of public concern.
Section 63.324(a)(1)—(7). The proposed rulemaking listed the transactions eligible for General Rule review under the 60 day rule. The list is greater than that proposed by the parties. More transactions are included so the Commission can refocus scarce resources on complex, novel, or controversial transactions.
Objection. Verizon suggests that, rather than trying to enumerate a list of transactions that might qualify as ''general rule transactions,'' the Commission could merely refer to the transactions covered by 66 Pa.C.S. § 1102(a)(3) or (4) and preserve its right to reclassify particular transactions as Pro Forma applications or as outside the scope of the abbreviated review for good cause shown. Verizon Comments, pp. 5 and 6.
Disposition. The Commission acknowledges Verizon's point but will not make the revision. A general statement may have the virtue of being more encompassing but we conclude that a list minimizes the filing of formal protests or complaints while providing more clarity and better direction for future applicants.
Section 63.324(a)(3). The proposed rulemaking included any dilution in control greater than 10%. This addressed situations in recent mergers in which there was a significant dilution in a public utility's ownership of stock in the merged or spun-off entity even if there was no loss of control. In those instances, stock ownership was diluted but it never fell below a 51% ownership. In these situations, dilution in voting percentage transfers utility property by reducing but not changing public utility control. These kinds of transactions were included within the regulation because they are transfers of assets even if control is retained.
The proposed rulemaking included telecommunications utility stock transfers within the scope of the regulation and adopted the FCC's 10% threshold compared to the 20% reflected in the nonbinding Policy Statement. The 10% threshold is based on the 10% relied on by the FCC in the Streamlined Regulation Order6 and cited by Level 3 in their petition. The proposal also reflects similar decisions by other state regulators on affiliate transactions as well.7
Objection. Level 3 believed that the transaction described in § 63.324(a)(3) should not be included under the general rule. In most instances, if a party reduces its ownership by 10% or more, it may be adding a new minority owner or an existing owner may be increasing their ownership level. Level 3 believed this rule will have unintended consequences if for example a mutual fund or other investor accumulates more than 10% of the stock of a company on the open market. They do not obtain a board seat or exert any control over the day to day operations of the company. In those circumstances, obtaining approval before that ten percent threshold is impossible. Level 3 Comments, p. 5.
Disposition. We agree with Level 3. Given our earlier agreement with Level 3's concerns about the definition, we also agree with Level 3 on the need for striking § 63.324(a)(3) and the ancillary definition from the final-form rulemaking. Level 3 presents a cogent argument that inclusion appears to burden market transactions, particularly when the concern in this section is already included within the direct and indirect transfers of control under § 63.324(a)(2). The final-form rulemaking also removes the equivalent provision for Pro Forma review in § 63.235(a)(3) for the same reason and for consistency.
Section 63.324(a)(6). The proposed rulemaking included transfers of a customer base within the general rule if there is a change in terms of service or rates. Otherwise, a transfer of a customer base is a Pro Forma Transaction under § 63.325. The Commission was concerned about customer impact and education, particularly in matters involving a change in rates or conditions of service. This is entirely consistent with the FCC's Streamlined Regulation Order and the Commission's current regulations governing Abandonment of Service in §§ 63.301 et seq., particularly § 63.305. The Commission has faced a lot of customer inquiries with transfers of a customer base, particularly where there are changes in rates or conditions of service. The lack of notice may, in the worst case, constitute a form of sanctioned slamming.
Objections. Level 3 did not object to the proposal but sought three clarifications. Level 3 notes that a customer base is an ''asset'' under § 63.324(a)(1) and would be subject to the 10% threshold whereas the § 63.324(a)(6) provision seems to contemplate a complete transfer of the customer base. There is uncertainty about how a partial transfer of a customer base is managed under the rules, particularly which provision will control. Level 3 also seeks to know if the ''change in rates'' provision includes rate reductions. Finally, Level 3 wants assurances that post-transaction rate changes through company integration would be done as a tariff filing. IRRC Comments, p. 5; Level 3 Comments, pp. 6 and 7.
Disposition. We agree with Level 3 on the need to explain the interplay of §§ 63.324(a)(1) and 63.324(a)(6) albeit in a manner consistent with retention of the 20% threshold figure.
The transfer of a customer base without a change in rates or terms of service but exceeding 20% would be a transfer of an asset under § 63.324(a)(1) and subject to General Rule. The same transfer of a customer base without a change in rates or terms of service under § 63.324(a)(6) that is less than 20% would be a transfer of an asset under § 63.325(a)(1) and, as a consequence, it would be subject to Pro Forma review. The critical feature is the presence or absence of a change in rates or terms of service, including rate reductions. It is a change in rates, either an increase or a decrease, that is usually important to consumers. The final-form rulemaking reflects that and, as Level 3 notes, a change following approval of an application would become a tariff issue.
Section 63.324(b). Reclassification of a general rule transaction. This provision addressed reclassification of a General Rule Transaction.
Section 63.324(b) stated that reclassification would favor a change to a Pro Forma Transaction classification. Section 63.324(b)(1)—(3) governed the new ''trigger date'' for review if a transaction is reclassified. In all instances, the ''trigger date'' would be the date the Commission informs the applicant of a reclassification. These provisions provided an applicant with a right of appeal directly to the Commission, using a process set out in § 5.44 of our rules, if an applicant disputes reclassification.
Objections. IRRC recommended that the Statutory Advocates be given notice of any reclassification. IRRC Comments, p. 5. OSBA suggested language emphasizing the reclassification to Pro Forma review. OSBA Comments, Annex A, p. 8.
Disposition. In response to IRRC's concern, the final-form rulemaking will publish applications for transfers of control in the Pennsylvania Bulletin. This notice allows the public, the Statutory Advocates, and the applicant to file a formal protest or complaint or challenge to a reclassification. That notice will contain any § 63.324(b) or § 63.325(b) reclassification. A reclassification challenge is filed during the fifteen day protest period.
The Commission will address any reclassification challenge involving an unprotested application during review and approval of the application. A challenge to any reclassification involving a protested application subjects the application to the Traditional Rule and, there, the challenge is considered in that review.
We do not think it appropriate to rule that an applicant's challenge to reclassification in an abbreviated review transaction subjects the application to Traditional Rule review in the absence of another filing of a formal protest or complaint that has already made the application a protested application.
Section 63.324(c). Notification requirements for general rule transactions. The proposed rulemaking contained a revised version of proposals presented by Level 3, Verizon, and the PTA.
Section 63.324(c) proposed that a filing be submitted no later than 60 days before the closing of any transaction. The Commission agreed with Verizon on the need for a viable period to trigger review. The Commission recognized that an applicant seeks approval on or right at the closing, not significantly after. By allowing a filing to occur 45, 30, or 15 days before a closing, the proposed 60 day review period would have extended beyond the closing. The proposed regulation contained a ''trigger date'' for filing 60 days before closing a transaction. Barring some unforeseen event, an applicant would have had Commission approval on or shortly near their anticipated closing date.
The proposed § 63.324(c)(1)—(4) adopted suggestions from Level 3 and Verizon that a filing be made at the time that any filing is made with the FCC or the U.S. DOJ. This provision also required additional notification on subsequent filings, including providing notice to the statutory advocates and the Commission.
Section 63.324(c)(5) required notifications if the Commission requires it in response to a request. The first would be at the request of a statutory advocate. The second would be at the request of another telecommunications public utility. The third and fourth are at the request of staff or a person or party with a stake in the transaction.
This provision required notification when a party does not file a protest or delay a proceeding but wants to keep abreast about a transaction. This provision provided an alternative to a formal adjudicatory proceeding in limited instances. The Commission proposed a viable and less expensive way of keeping abreast of a proceeding.8
Objections. OSBA wanted the rules to require the application to be served on the Statutory Advocates. OSBA Comments, Annex A, p. 8. Verizon would have deleted most of the filing requirements, limited the notice mandate to only those applications that required a certificate of public convenience, and filed the initial application on the same day as the first filing made with a federal agency. Verizon Comments, pp. 4 and 5. PTA did not think it necessary to require an applicant to respond to requests from the Statutory Advocates, other carriers, the Commission, or the public. PTA Comments, pp. 5 and 6.
Disposition. We agree with the OSBA that the Statutory Advocates should be provided copies of the application and any updates. We do not agree that service is required. That unnecessarily increases costs. Service is a legal requirement whereas providing a copy is a notice requirement. We agree with Verizon that an applicant should be allowed to file on the same date that they file with a federal agency. We also agree with Verizon that the term Applicant should be used as opposed to another term. Verizon Comments, Annex A, p. 9.
We disagree that substantial revision in the information requirements is necessary. The purpose of the information is to discourage the filing of formal complaints and protests simply to get information and updates. This keeps the public updated without making a formal filing that would also trigger Traditional Rule review.
Section 63.324(d). Contents of Notification for General Rule Transactions. This provision detailed the upfront filing requirements. The list incorporated the filing requirements in § 5.14 of the Commission's rules of administrative practice and procedure to promote consistency and self-contained provisions.
This provision relied on the detailed information requirements the FCC imposed on applicants for streamlined review in the Streamlined Regulation Order. The Commission's review of the Streamlined Regulation Order identified significant information requirements beyond those identified in the comments. The Commission agreed that, in this instance, regulatory uniformity and predictability warranted reliance on these requirements as opposed to unique mandates for the Commission.
Section 63.324(d)(11) listed the affirmative benefits that an applicant must allege in support of an application. This facilitated compliance with the obligation under Pennsylvania law, set out in City of York v. Pa. PUC, 295 A.2d 825 (Pa. 1972) and Popowsky v. Pa. PUC, 937 A.2d 1040 (Pa. 2007) requiring that a merger demonstrate an affirmative public benefit. This provision allowed the Commission to determine when, and under what circumstances, conditions may be appropriate under Section 1103 to meet this requirement.
Objection. IRRC asked the Commission to explain how the regulations complied with the City of York standard of review. IRRC Comments, pp. 3 and 4.
Disposition. The final regulations reiterate word-for-word the City of York standard in § 63.324(d)(11)(i) that will be applicable to a merger or similar transaction. This addresses the concern about not extending that precedent.
Section 63.324(d)(11)(ii) is revised to require an applicant to propose findings sufficient to meet the 66 Pa.C.S. § 1103(a) determination that a Certificate of Public Convenience ''is necessary or proper for the service, accommodation, convenience, or safety of the public.'' This addresses OCA's concern with making findings in a manner that is consistent with the 66 Pa.C.S. § 1103(a) obligation to make findings.
Section 63.324(d)(11)(iii) requires an applicant to append a verified statement on the transaction's impact on competition in Pennsylvania. This effectively negates the need for other filing requirements on competition.
Objection. IRRC asked why incumbent carriers and competitive carriers had identical requirements in §§ 63.324(d) and 63.325(d) even though incumbents also had broadband deployment commitments and COLR obligations. IRRC Comments, p. 4.
Disposition. The final-form regulations on filing requirements in §§ 63.324(d) and 63.325(d) contains two provisions requiring the applicant to address, as appropriate, their respective broadband deployment commitment in § 63.324(d)(21) and their COLR obligation in § 63.324(d)(22). These requirements are also set out in §§ 63.325(d)(21) and 63.325(d)(22) for Pro Forma applications. They are not limited to ''ILECs'' for the reasons set out below.
Currently, incumbent carriers have broadband deployment commitments under 66 Pa.C.S. § 3019(b). However, federal developments in pursuit of a National Broadband Plan issued in March 2010 envision reforming the Federal Universal Service Fund (FUSF) to transition support from narrowband voice to deployment of a broadband network.
The proposal to only require incumbent carriers to address any broadband deployment commitment is an older paradigm undergoing rapid change, including current proposals to support broadband deployment commitments using Federal grants and loans. Sections 63.324(d)(21) and 63.325(d)(21) require any applicant with a broadband deployment commitment under state or federal law to address compliance with that commitment in Pennsylvania.
In recognition of IRRC's concern about COLR, the final regulation revised the applicant's filing requirements in §§ 63.624(d)(22) and 63.625(d)(22) to address that concern albeit one required of any applicant with an Eligible Telecommunications Carrier (ETC) status. An applicant with ETC status will have to file a verified statement affirming that they will continue to comply with the requirement.
Objection. The OSBA proposed that an applicant provide a verified statement addressing the expected effect on the applicant's capital structure over the next five years. OSBA Comments, pp. 9 and 10 and Annex A, p. 19.
Disposition. We agree. The final regulations in §§ 63.324(d)(20) and 63.325(d)(20) include the OSBA proposal. We use the term ''applicant'' here as well since it is more encompassing and Verizon's suggestion for clarity and consistency.
Objection. Neutral Tandem wants the Commission to require an applicant to provide information on their 3-year history of regulatory compliance under State and Federal law in § 63.324(d)(12). Neutral Tandem Comments, p 3.
Disposition. We agree. The final regulations in §§ 63.324(d)(12) and 63.325(d)(12) adopt the proposed revision for clarity and consistency.
Objection. Level 3 raised concerns and proposed alternative language for § 63.342(d)(6). Level 3 was concerned that the § 63.324(d)(6) mandate to describe the geographic area was too broad, confusing, and would consume resources identifying every geographic calling area. Level 3 proposed, instead, a revision that the applicant provide ''a summary of the services and service territories'' impacted by the application. Level 3 Comments, pp. 7 and 8.
Disposition. We agree with Level 3. The final-form rulemaking adopts the proposed language in §§ 63.324(d)(6) and 63.325(d)(6).
Objections. Level 3 was concerned about the § 63.324(d)(13) verified statement that every customer received notice. Level 3 thought this inadvisable because it is highly unlikely that individualized notices can be provided, securities law prevent giving notice until a transaction becomes public, and relying on billing inserts will delay the process because those can take up to 60 days. Level 3 proposed that the applicant affirm that ''customers will receive'' notice. Level 3 Comments, pp. 8 and 9.
IRRC asked how a verified statement that customers received notice for General Rule transactions in § 63.324(d)(13) worked with a § 63.324(g) requirement to provide notice to customers of a rate or terms of service change in consultation with the Commission's Bureau of Consumer Service. IRRC Comments, pp. 5 and 6.
Disposition. We agree with IRRC and Level 3. A verified commitment to providing notice may be more workable for General Rule and Pro Forma abbreviated review applications. However, the Commission remains concerned that customers receive prior notice of an impending transaction, most particularly when the transaction involves a change in rate or terms of service—changes that subject an abbreviated review application to General Rule review. This rule is consistent with § 63.305 of our rules on abandonment of service by a local service provider.
The final regulations require an applicant to provide prior notice to the consumers. This requires an applicant to provide advance notice unless that is not practical, a possibility raised by Level 3. In that case, the applicant can seek a waiver of this requirement under § 1.2. In either instance, the notice is prepared and approved by the applicant and the Bureau of Consumer Services. This ensures that consumers receive an understandable notice that should discourage the filing of formal protests or complaints by a confused consumer. Moreover, any disagreement between an applicant and the Bureau of Consumer Services can be resolved by a direct appeal to the Commission mirroring the procedures set out in our current rule in § 5.44.
This approach is sound because the final-form rulemaking requires publication of an application seeking abbreviated review. Publication, notice, and protest give consumers and the Statutory Advocates information and a time period to decide on future action. Equally important, this will discourage the filing of those formal protests or complaints that will now subject a General Rule or Pro Forma application to Traditional Rule review.
This solution also addresses IRRC's concern about consistency with the prior notice provisions in § 63.324(g) and the need to explain how the Commission's Bureau of Consumer Services will do this. Section 63.324(d)(13) required a verified statement that consumers received notice whereas § 63.324(g) mandates the same except for good cause shown. In § 63.324(g), moreover, the applicant must consult with the Commission's Bureau of Consumer Services to ensure the language is understandable and that the consumers receive all the relevant information.
Carriers have historically worked with the Bureau of Consumer Services on such notices, whether in advance or after the fact. This best ensures that consumers receive understandable notice about the transaction. This occurred informally.
The final-form rulemaking anticipates that this informal process will continue here. In the unlikely event an applicant and the Commission staff are unable to agree on suitable language or what constitutes relevant information, the applicant can always appeal from staff action under § 5.44 of our rules.
The final-form rulemaking requires an applicant to provide advance notice under §§ 63.324(d)(13) and 63.325(d)(13) consistent with § 63.324(g) unless prior notice is not practical. In that case, a waiver granted under § 1.2 of our rules allows the applicant to provide notice after the fact.
Transactions involving changes in rates or terms of service, particularly a change in their provider due to a transfer of a customer base, are far more compelling matters to consumers than concerns about competitive impact or transactions that may involve rates but not their consumer rates.
Objection. PTA expressed its preference for statements as opposed to verified statements. PTA also suggested that a reference to a pending matter in a federal agency occur also by the electronic location. PTA proposed elimination of the verified statements on ''market power'' in §§ 63.324(d)(11)(iii) and 63.324(d)(18), the verified statements and copies of other Pennsylvania certificates in § 63.324(d)(14), and the verified statements regarding anticipated regulatory action at the Federal level or by other states in § 63.324(d)(17).
Disposition. We agree with PTA on § 63.324(d)(18) and that an electronic reference to a pending matter should be provided but not in place of providing a copy.
We disagree with PTA on eliminating verified statements. Verified statements have clearer legal implications compared to statements. Given the importance of the applications and the public interest, the final regulations retain verified statements. We disagree on eliminating a requirement that an applicant provide verified copies of current Pennsylvania certificates. A complete and comprehensive understanding of an applicant's operations in Pennsylvania is an important consideration. This is the same logic the Commission used for adopting Neutral Tandem's proposed language on an applicant's regulatory history as well.
Objections. Verizon would eliminate all verified statements going to eligibility for abbreviated review, the City of York standard, impacts on competition, and notices to consumers. Verizon Comments, Annex A, pp. 5—8.
Disposition. We conclude that retention of the proposed filing requirements, albeit with some modifications, is important for several reasons. The final filing requirement modifies information on the territory covered, deletes reference to undesirable provisions on competitive impact, and gives an applicant the secondary option of providing consumers notice after the fact when prior notice is not practical. The amended requirements now contained in a submitted application greatly assist the Commission and the public in quickly getting pertinent information about a transaction while reducing the filing of formal protests or complaints. Given that the final-form rulemaking now holds that the filing of a formal protest or complaint subjects abbreviated review applications to Traditional Rule review, the submission of more information earlier is even more important to discourage the filing of formal protests or complaints.
Section 63.324(e). Continuing Obligations for Notification of General Rule Transactions. This provision reflected a determination that the Commission must be given updated notice and information about a pending proceeding. This maximized information and furthered the goal of making abbreviated review workable.
Objections. Verizon provided several proposed revisions to the applicant's ongoing obligation to keep the Commission and the interested public current on developments elsewhere if they pertain to an application for abbreviated review pending at the Commission. Verizon Comments, Annex A, p. 8.
Disposition. We agree with Verizon. The final-form rulemaking is revised to incorporate much of Verizon's suggestion. The final-form rulemaking adopts Verizon's proposal to inform the Statutory Advocates by providing notice and a copy but they do not impose a legal mandate to ''serve'' a copy. Instead, providing a copy should reduce costs.
Section 63.324(f). Commission Publication of General Rule Transactions. This provision incorporated current publication requirements for applications under § 5.14 of the Commission's rules of administrative practice and procedure. The provision requires notice to consumers for transfers of a customer base.
Objections. This was a particularly controversial part of the proposed rulemaking because it would allow some formal filings to be treated as ''general comments'' as opposed to a formal protest or complaint. Moreover, some formal protests or complaints would not warrant a hearing and unlimited review under Traditional Review.
IRRC thought that the proposal that the Commission ''may'' reclassify a transaction on the filing of a protest ''unless shown otherwise for good cause'' was vague. IRRC was concerned that the regulation did not identify how a General Rule Transaction would be reclassified. IRRC suggested that the Commission develop criteria used in making a reclassification determination. This concern applied to similar provisions in the Pro Forma proposed regulation in § 63.325(f)(2)(ii). IRRC Comments, pp. 4 and 5.
Some comments, particularly those of the Statutory Advocates and BCAP, raised due process concerns. OSBA Reply Comments, p. 7; OCA Reply Comments, pp. 7—20; BCAP Comments, pp. 17—23. Other comments, particularly those of Level 3, PTA, and Verizon, supported the proposal. They thought the proposal was consistent with due process while reducing the filing of formal protests or complaint for ancillary purposes. They also thought the proposal was entirely consistent with the Chester Water Authority holding that the Commission need not have a formal hearing on every formal protest, particularly when there are no material factual issues in dispute. Level 3 Reply Comments, pp. 5—12; PTA Comments, pp. 5—10; PTA Reply Comments, pp. 17—20.
Disposition. After careful consideration of this controversial proposal, we conclude that, although the comments raised legitimate concerns, the suggested modifications are unworkable. Accordingly, we will continue our existing practice. The final-form rulemaking continues the existing practice that the filing of any formal protest or complaint will subject that application to the Traditional Rule.
Section 63.324(f)(2)(iii) is deleted in the final-form rulemaking given that any formal protest or complaint against a Pro Forma or General Rule transaction subjects the transaction to Traditional Rule review. At the same time, however, if the formal protest or complaint does not raise any material factual disputes, the Traditional Rule review need not include evidentiary hearings.
Section 63.324(g). Telecommunications public utility notice to customers. Proposed § 63.324(g)(1) required the applicant to prepare and distribute a prior notice to consumers with the approval of the Commission's Bureau of Consumer Services (BCS). BCS involvement was deemed appropriate because the transaction involved changes in conditions of service or rates, items of particular interest to customers. BCS' involvement would ensure a notice understandable to consumers.
Sections 63.324(g)(2)(i)—(iv) would have distinguished between a general comment that did not involve a formal protest and formal protests. Section 63.324(g)(2)(iii) and (iv) distinguished between formal protests filed by a statutory advocate and the formal protests of others.
Objections. IRRC raised three concerns and recommended that the Pro Forma Transaction requirements of § 63.325(g)(1)—(2) mirror those of a General Rule Transaction. First, IRRC asked why a Pro Forma application did not require additional customer notice. Second, a formal protest filed to a Pro Forma application would not reclassify a transaction but one filed under the General Rule does. Third, Statutory Advocates' rights to file formal protests is set out for General Rule transactions but is not discussed for a Pro Forma Transaction. IRRC suggested the rules for a Pro Forma Transaction mirror those of a General Rule Transaction. IRRC Comments, pp. 6—8.
IRRC asked the Commission to explain how the requirement for a verified statement affirming prior con sumer notice in the filing requirements provision in §§ 63.624(d) and 63.625(d) meshed with provisions dispensing with that same mandate in §§ 63.324(g) and 63.325(g). IRRC also asked if the applicant would have to secure BCS approval and, if so, how that would work. Finally, IRRC asked how disagreements would be solved. IRRC Comments, pp. 5 and 6.
Disposition. IRRC raises some valid points. The final-form regulations in §§ 63.324(g)(1) and (2) and 63.325(g)(1) and (2) are consistent with each other. The final-form rulemaking is revised so that the Commission's disposition of a § 63.324(d)(13) mandate for a verified statement on prior notice meshes with §§ 63.324(g) and 63.325(g). The final-form rulemaking now uniformly requires prior notice to consumers. An applicant can seek a waiver under § 1.2 if prior notice is not practical.
An issue arose about the management of consumer notices when there are transfers of a customer base. These transfers occur frequently but have been rarely addressed until now. These transfers often occur with no prior consumer notice let alone consent. The final regulations resolve this problem by reconciling notice with any pressing need for rapid approval. This reasoning applies with equal force to a Pro Forma Transaction in § 63.325(g)(1) and (2).
Moreover, prior notice is consistent with current regulations governing abandonments of service in § 63.301 et seq., particularly § 63.305. A prior notice that is understandable to consumers will discourage formal filings and promote abbreviated review. Any disagreements on the notice between an applicant and staff can be resolved with an appeal to the Commission mirroring the rules in § 5.44. Consequently, the final form regulations will require customer notice for a transaction which transfers a customer base, even in the absence of a change in rates or terms of service.
Section 63.324(h). Commission Review of Transactions Subject to the General Rule. This provision formalized the Commission's discretionary authority under 66 Pa.C.S. §§ 1102(a)(3) and 1103, particularly when the imposition of conditions for approval of the transactions is in the public interest. Discretion on the matter of conditions was consistent with due process.
Objections. The OCA expressed concern that the proposed rulemaking did not make the requisite findings, did not provide time to review the applications, and did not differentiate between incumbent and competitive carriers. The OCA recommended using a process that is open and flexible enough to allow for protests. OCA Comments, pp. 15—19; OCA Reply Comments, pp. 1—23, esp. 4—6. Verizon proposed language revisions to clarify that it is the application, not the transactions, reviewed and approved by the Commission. Verizon Comments, Annex A, p. 9.
Disposition. We agree that revisions are appropriate for clarity. The final-form rulemaking is revised to buttress the legal, due process, and notice determinations. The rule in § 63.234(d)(11) lists the findings and allegations that an applicant must show to the Commission to facilitate a consideration of the legal City of York standard, reach findings required by 66 Pa.C.S. § 1103 for Certificates of Public Convenience, and comply with the consideration of competitive impact. The Commission's disposition of an application in § 63.324(k) or § 63.325(k) will be done based on a review conducted under § 63.324(h)(1)—(4) or § 63.325(h)(1)—(4), respectively. Any concern with due process is bolstered by revised rules which provide that the filing of a formal protest or complaint will subject the transaction to the unlimited time span of Traditional Rule review. The concern with notice is resolved with rule revisions that mandate publication in the Pennsylvania Bulletin and a 15 day protest period.
The final-form regulations in §§ 63.324(d)(11), 63.324(h)(1)—(4), and 63.324(k) requires factual filings, Commission review, and issuance of Commission approval sufficient to meet 66 Pa.C.S. §§ 1102 and 1103(a). This abbreviated review is consistent with those legal standards.
Section 63.324(i). Formal Protests to a General Rule Transaction. This provision allowed the filing of a formal protest pursuant to the filing requirements set out in the Commission's Rule of Practice and Procedure.
Objections and Disposition. There were no objections to this section. However, the proposed rulemaking refers only to Formal Protests whereas the final regulations address formal protests and complaints based on filed comments. The revision here repeats that for consistency.
Section 63.324(j). Reclassification of a Transaction from the General Rule. This provision recognized that some transactions may be reclassified from the General Rule to either a Pro Forma Transaction or a Traditional Rule transaction. The provision also provided that the filing of a general comment or formal complaint or protest was not always tantamount to a formal protest requiring Traditional Rule review.
Objections. IRRC was concerned that the time periods in §§ 63.324(j)(1) and 63.325(j)(1) were too short and would encourage formal protests to simply get more time for review. IRRC also questioned why as a matter of equity a different result should hold for the public compared to a Statutory Advocate. IRRC Comments, pp. 4 and 6.
Disposition. We agree with IRRC. The final regulations retain the thirty and 60 day review periods for a Pro Forma and General Rule transaction, respectively, with four critical changes.
The final regulations will publish every application in the Pennsylvania Bulletin. This addresses concerns with notice and due process.
The notice establishes a 15 day protest period for every application. This addresses concerns with an opportunity to be heard.
The filing of any formal protest or complaint will trigger Traditional Rule review. This addresses the concern with consistent and equitable treatment of any formal protest or complaint by any private or public entity.
Finally, the rules require prior consumer notice. This addresses concerns with consistency between Pro Forma and General Review applications but in a way that minimizes the filing of a formal protest or complaint that would derail that application.
Taken in total, these revisions reduce concerns about the time to review and approve applications while giving all public and parties equal treatment.
Section 63.324(k). Commission Approval for a General Rule Transaction. This provision established a 60 day review and approval period for General Rule transactions following publication in the Pennsylvania Bulletin.
Objections. OCA questioned whether the ''deemed approved'' status for 60 day General Rule transactions or even a 30-day Pro Forma Transaction met the City of York standard or 66 Pa.C.S. §§ 1102 and 1103(a). OCA was concerned that the approval would occur by Secretarial Letter issued within a certain time interval from the date of filing with the Commission. OCA Comments, pp. 1—12; OCA Reply Comments, pp. 1—15.
Level 3 read the ''in law and fact'' language in §§ 63.324(k)1) and 63.325(k) as allowing an applicant to close a transaction on the 61st or 31st day, respectively. Level 3 was concerned about interpretations which could require issuance of a Commission approval and the accompanying Certificate of Public Convenience as preconditions to closing a transaction. Level 3 Reply Comments, pp. 10 and 11.
Disposition. We understand the concerns and addressed them. The final rule in §§ 63.324(k) and 63.325(k) provides that the Commission will act by Secretarial Letter or Order following a review conducted under § 63.324(h)(1)—(4) or § 63.325(h)(1)—(4), respectively. However, although the Commission fully expects that these time frames for approval will be met, the Commission's time frames for review and approval are directory in nature; as such, in the absence of Commission approval within these time frames, the application is not deemed to be approved.
The rules publish an application, establish a 15 day protest period, and hold that the filing of any formal protest or complaint will subject a General Review transaction to Traditional Rule review. This final rule timelines may be longer than the one envisioned in the proposed rule. However, the same timeline is also considerably shorter than the unlimited time span for Traditional Rule review.
Section 63.324(l). Limitations on general rule transactions. This concluding provision addresses bankruptcy and the possible misuse of a Pro Forma Transaction.
Objections and Disposition. There were no objections to this provision.
Section 63.325. Requirements for a telecommunications public utility seeking Commission approval of a Pro Forma Transaction subject to 66 Pa.C.S. §§ 1102(a)(3) and 1103. This provision addresses pro forma changes when a carrier or public utility undergoes restructurings that also require a certificate of public convenience.
Section 63.325(a). Pro Forma Transactions. This provision provided that Pro Forma review and approval applied to an application that did not change conditions of service or rates or did not reduce an applicant's control by more than 10%. Since there is no change in rates or service conditions, the public interest in these applications is typically far less than an application involving rates or conditions of service.
Section 63.325(b). Reclassification of a Pro Forma transaction. This provision mirrored the Section 63.324(b) provision addressing reclassification of a General Rule Transaction. In this case, however, the reclassification would have been to either the General Rule classification or Traditional review.
Objections. IRRC recommended that the Statutory Advocates be given notice of any reclassification. IRRC Comments, p. 5.
Disposition. As discussed earlier, the final-form rulemaking will publish applications for transfers of control in the Pennsylvania Bulletin to provide notice. That notice informs the public, the Statutory Advocates, and the applicant of the transaction and any reclassification. That notice also provides any entity an opportunity to file a formal protest or complaint.
We conclude that any challenge to the reclassification should be filed during the 15 day protest period established in the notice. The Commission will address challenges to reclassification during consideration of the application based on whether or not a formal protest or complaint has been filed by any entity.
A challenge to the Commission's reclassification of an unprotested application will not automatically subject the application to Traditional Rule review. In those cases, the Commission or staff will address any reclassification challenge during review and approval of the application. But, a challenge to a protested application will be reviewed during consideration of the application under Traditional Rule review. This is consistent with our determination that a protested Pro Forma or General Rule application will subject the protested application to Traditional Rule review.
Section 63.325(c). Notification Requirements for Pro Forma Transactions. This provision mirrored the provision in § 63.324(c) for notification. The reasoning here was similar to the reasoning there. A simultaneous notice requirement to the Commission and the Statutory Advocates or others was considered to be a cost-effective way to keep interested parties informed while keeping a transaction on track. This was expected to minimize formal protests to an application just to stay informed.
Objections. OSBA recommended that the application be served on the Statutory Advocates. OSBA Comments, Annex A, p. 16. Verizon advocated deletion of most of the filing requirements. Verizon Comments, pp. 12 and 13. PTA suggested replacing the list in § 63.325(c) with a cite to § 63.624(c). PTA Comments, p 13.
Disposition. For the reason discussed above, we agree that the Statutory Advocates should be provided copies of the application and any updates. We do not agree that service is required. That unnecessarily increases costs since service is a legal requirement whereas providing a copy is a notice requirement.
We disagree that substantial revision in the information update requirements is necessary. The purpose of the update mandate is to discourage the filing of formal complaints and protests to get updates on a proceeding. This is even more important now that the filing of any formal protest or complaint will reclassify an abbreviated Pro Forma application to Traditional Rule review. This keeps the public updated while discouraging a formal protest or complaint to get information.
Section 63.325(d). Content of notification for Pro Forma Transaction. This provision mirrored § 63.324(d) on filing requirements. This provided the same list of filing information for abbreviated review, albeit as a Pro Forma Transaction. The final-form rulemaking adopts the revisions set forth in § 63.325(d) similar to § 63.324(d).
Objections and Disposition. The objections to § 63.325(d) were like those to § 63.324(d). The final-form regulation in § 63.325(d) mirror § 63.324(d).
Section 63.325(e). Continuing obligations for notification of Pro Forma Transactions. This provision mirrored the § 63.324(e) provisions for General Rule transactions. This provision essentially required an applicant to keep the Commission informed about subsequent developments in other jurisdictions pertaining to the transaction pending at the Commission.
Objections and Disposition. The final-form regulation in § 63.325(e) mirror those for § 63.324(d) for similar reasons.
Section 63.325(f). Commission publication of Pro Forma Transaction. This provision addresses Commission publication about Pro Forma Transactions. The proposed requirements were different from those for General Rule review in § 63.324(f). Pro Forma Transactions are more mundane and involve no changes in conditions of service or rates compared to General Rule transactions.
Section 63.325(f)(1)—(3) no longer required publication in the Pennsylvania Bulletin nor was there a formal protest period. The Secretary had the discretion, not the obligation, to post a transaction on the Commission's website. The Secretary also had the discretion to solicit general comments.
Objections. IRRC suggested that the word ''may'' be replaced by the word ''will'' to promote certainty. IRRC thought this would remove uncertainty on how the Commission and the regulated community would know when the thirty period expired. IRRC also thought that posting on the Commission's website would further notice. IRRC Comments, p. 7. The objections to § 63.325(f) mirror those set out and addressed in § 63.324(f).
Disposition. We agree with IRRC's concerns, particularly about posting some applications on the website while publishing others in the Pennsylvania Bulletin. The final-form rulemaking addresses that concern by publishing every application in the Pennsylvania Bulletin and establishing a uniform fifteen day protest period. The final-form regulation in § 63.325(f) are similar to those set out in § 63.324(f) for similar reasons.
Section 63.325(g). Telecommunications public utility notice to customers. This provision addressed information the applicant provided to customers. These transactions, unlike their counterpart in § 63.324(g), did not involve changes in service conditions or rates. The proposed regulation authorized the applicant to prepare and distribute a prior notice to the customers but need not do so if it were not practical. This approach ensured public notice in a way that did not undermine abbreviated review.
Objections and Disposition. IRRC was concerned about the differences in the notice requirements and the treatment of formal protests or complaint for a Pro Forma Transaction compared to General Rule transactions. IRRC suggested that the requirements for Pro Forma Transactions mirror those for General Rule transactions review the reference to § 5.14. IRRC Comments, p. 8.
Disposition. We agree with IRRC. The final-form regulation in § 63.325(g) mirror those for § 63.324(g). We also note that the reference to § 5.14 includes § 5.14(c) and (d). The rules in § 5.14(c) on protests contain a reference to § 5.53, a section that sets a 60 day default period for filing a protest unless the notice determines otherwise. Section 5.14(d) establishes a 15 day default period for filing a formal complaint. The final-form rulemaking requires a uniform 15 day period to file a formal protest or complaint. This meshes §§ 5.14(c), 5.14(d), and 5.53.
Section 63.325(h). Commission Review of Pro Forma Transactions. This provision formalized the Commission's discretionary authority under 66 Pa.C.S. §§ 1102(a)(3) and 1103, particularly regarding the imposition of conditions when they are needed to justify approving a transaction as in the public interest.
Objections and Disposition. The objections to § 63.325(h) mirror those already raised and addressed in § 63.324(h). The major concerns were compliance with the City of York standard and 66 Pa.C.S. §§ 1102(a) and 1103(a), sufficient notice provided to consumers, and ensuring the Commission's authority to impose conditions when necessary. These issues arose here even though the rules address transfers when there was no change in rate or conditions of service. Other concerns focused on due process and notice. The final-form rulemaking contains changes similar to § 63.324(h).
Section 63.325(i). Protests to a Transaction Subject to the General Rule. This provision explains how to file a formal protest or complaint. There were no objections.
Section 63.325(j)(1) and (2). Removal of a transaction as a Pro Forma Transaction. This provision recognized that some transactions may be reclassified.
Objections and Disposition. The objections to § 63.325(j)(1) and (2) mirrored those in § 63.324(j)(1) and (2). Although that section addressed applications with changes in rates or service conditions and this provision did not, IRRC's concern with consistency warrants rules that are consistent even if these transactions have no changes in rates or conditions of service. The final-form regulations in § 63.324(j)(1) and (2) do that.
Section 63.325(k). Commission approval for a Pro Forma Transaction. This provision established the process for reviewing and approving pro forma transactions.
Sections 63.325(k)(1)—(3) detailed the mechanics. Section 63.325(k)(1) provided that the Commission will issue a Secretarial Letter or order approving a transaction. Section 63.325(k)(2) recognized that staff may need a longer review period, reclassify a transaction, or take other action deemed appropriate. Section 63.325(k)(3) provided that final staff action shall be taken in writing and be subject to an appeal of staff which shall be stated in the writing informing the applicant of the decision.
Objections and Disposition. The objections in this provision mirror similar objections for § 63.324(k)(1)—(3). The final-form regulation in § 63.325(k)(1)—(3) mirror disposition of the objections to § 63.324(k)(1)—(3).
Section 63.325(l). Limitations on Pro Forma transactions. This concluding provision addresses bankruptcy and the possible misuse of a Pro Forma Transaction.
Section 63.325(l)(1) excludes bankruptcy proceedings from Pro Forma treatment. Bankruptcy filing requirements are addressed in the Commission's regulations at
Sections 1.61 and 1.62. There is no compelling reason to revisit that provision.
Objections and Disposition. There were no objections to these provisions.
Section 63.325(l)(2) prohibits a carrier or public utility from using this Pro Forma provision to abandon existing conditions of service, like payment dates and penalty provisions, or embed a rate change in an otherwise seamless transaction. This is consistent with the FCC's Streamlined Regulation Order.9
Objections. IRRC noted that this provision is lacking in the accompanying provision at § 63.324(l) for General Review transactions. IRRC Comments, p. 8.
Disposition. IRRC is correct. The proposed rulemaking contained this provision to prevent misuse of a Pro Forma Transaction as compared to a General Rule transaction. Pro Forma transactions do not involve changes in rates or conditions of service. This provision ensures that an applicant with a transaction involving a change in rates or conditions of service cannot file that transaction as a Pro Forma Transaction instead of filing it as a General Rule or Traditional Rule transaction. If that were to occur and the filing were approved, this provision provides a backstop for subsequent action.
Section 63.326. Approval of contracts between a carrier or public utility and an affiliated interest under sections 2101(a) and 3019(b) and 3106(f)(1) of Chapter 30.
The proposed rulemaking was intended to codify the Commission's residual authority over affiliated interest agreements to ensure that they do not cross-subsidize competitive services in violation of 66 Pa.C.S. § 3016(f)(1), as well as the Commission residual authority over utility contracts.
Objections. There was substantial opposition to this provision as contrary to 66 Pa.C.S. § 3019(b)(1). Section 3019(b)(1) of 66 Pa.C.S. limits the Commission's review and approval authority over affiliated interest agreements to noncompetitive services. Moreover, 66 Pa.C.S. § 3019(b)(1) provides that any filing must be for notice only and that the Commission is not authorized to approve the agreement.
Disposition. Although the provision was intended to implement other provisions of residual Commission authority to prevent cross-subsidization, we delete the provision in its entirety.
Regulatory Review
Under section 5(a) of the Regulatory Review Act (71 P. S. § 745.5(a)), on January 30, 2008, the Commission submitted a copy of the notice of proposed rulemaking, published at 38 Pa.B. 758 (February 9, 2008), to IRRC and to the House Committee on Consumer Affairs, the Senate Committee on Consumer Protection and Professional Licensure (Committees) for review and comment.
Under section 5(b.1) of the Regulatory Review Act, IRRC and the Committees were provided with copies of the comments received during the public comment period, as well as other documents when requested.
The final-form rulemaking was deemed approved by the Committees on June 16, 2010. Under section 5(c) of the Regulatory Review Act, IRRC met on June 17, 2010, and approved the final-form rulemaking.
Accordingly, under 66 Pa.C.S. §§ 502, 1102, 1103, 2101—2107 and 3019, sections 201 and 202 of the act of July 31, 1968 (P. L. 769, No. 240) (45 P. S. §§ 1201 and 1202), known as the Commonwealth Documents Law, and the regulations promulgated thereunder, section 204(b) of the Commonwealth Attorneys Act (71 P. S. § 732.204(b)) and section 745.5 of the Regulatory Review Act, the Commission adopts as final the regulations set forth in Annex A; Therefore,
It Is Ordered That:
1. The Secretary shall submit this order and Annex A to the Office of the Attorney General for review as to form and legality and to the Governor's Budget Office for review of fiscal impact.
2. The Secretary shall certify this order and Annex A for review by IRRC and the Committees.
3. The Secretary shall certify this order and Annex A with the Legislative Reference Bureau to be published in the Pennsylvania Bulletin as final following review and approval by IRRC and the Committees.
4. Upon final approval by IRRC, the Bureau of Fixed Utility Services shall have delegated authority to: (a) reclassify transactions when publishing notice of a submitted application and review; and (b) review and act on an uncontested Pro Forma transaction subject to § 5.44 of the Commission's rules of administrative practice and procedure.
5. The regulations of the Commission, 52 Pa. Code Chapter 63, are amended by adding §§ 63.321—63.325 to read as set forth in Annex A.
ROSEMARY CHIAVETTA,
Secretary(Editor's Note: The proposal to add § 63.326, included in the proposed rulemaking published at 38 Pa.B. 758, has been withdrawn by the Commission.)
(Editor's Note: For the text of the order of the Independent Regulatory Review Commission relating to this document, see 40 Pa.B. 3753 (July 3, 2010).)
Fiscal Note: Fiscal Note 57-260 remains valid for the final adoption of the subject regulations.
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4 See generally Palmerton Telephone Company v. Global NAPS South, Inc., et al., Docket No. C-2009-2093336, Order entered March 16, 2010.
5 Streamlined Regulation Order, paragraph 28. The FCC carefully distinguishes between applicants that are not dominant with regard to ''any service'' compared to those that are dominant in one service and not another. This approach apparently reflects Federal definitions of service set out in 47 U.S.C.A. § 153.
6 Streamlined Regulation Order, paragraph 30 and n. 65.
7 In the Matter of the Review of Chapter 4901:1-6, Ohio Administrative Code, Case No. 06-1345-TP-ORD (June 6, 2007), Proposed Rule 4901:1-6-09(D) Affiliate Transactions, p. 48.
8 Telephone Company in Pennsylvania Eliminates Provisions Restricting Competition to Address Justice Department Concerns, Procompetitive Changes to Rural Incumbent Telephone Company's Settlements with New Entrants Will Deter Misuse of Regulatory Challenges and Benefit Rural Pennsylvania Telephone Customers, United States Department of Justice, Antitrust Division, Press Release 07-448, June 25, 2007 (Pennsylvania Telco Release).
9 Streamlined Regulation Order, paragraph 52.
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