Fiscal Note & Local Impact Statement

126 th General Assembly of Ohio

Ohio Legislative Service Commission

77 South High Street, 9th Floor, Columbus, OH 43215-6136 Phone: (614) 466-3615

Internet Web Site: http://www.lsc.state.oh.us/

BILL:

Sub. H.B. 218

DATE:

May 31, 2005

STATUS:

As Reported by House Public Utilities

SPONSOR:

Rep. Daniels

LOCAL IMPACT STATEMENT REQUIRED:

No

No local cost

 


CONTENTS:

Authorizes the PUCO to allow alternative regulation of basic local exchange telephone service and specifies the scope of PUCO authority over wholesale telecommunications services, advanced services, and Internet protocol-enabled services

 

State Fiscal Highlights

 

STATE FUND

FY 2006

FY 2007

FUTURE YEARS

General Revenue Fund

Revenues

- 0 -

- 0 -

- 0 -

Expenditures

- 0 -

- 0 -

- 0 -

Public Utilities Fund (Fund 5F6)

Revenues

- 0 -

- 0 -

- 0 -

Expenditures

Potential minimal increase

Potential minimal increase

Potential minimal increase

Note: The state fiscal year is July 1 through June 30. For example, FY 2006 is July 1, 2005 June 30, 2006.

 

        The bill makes a number of statutory changes to PUCO authority, which may have some budgetary effect on the Commission. If there is any such effect, it is expected to be minimal.

Local Fiscal Highlights

 

LOCAL GOVERNMENT

FY 2005

FY 2006

FUTURE YEARS

Counties, municipalities, townships, school districts

Revenues

- 0 -

- 0 -

- 0 -

Expenditures

Potential increase

Potential increase

Potential increase

Note: For most local governments, the fiscal year is the calendar year. The school district fiscal year is July 1 through June 30.

 

        The bill raises the possibility that PUCO makes an erroneous determination that competition exists, and allows incumbent local exchange carriers more freedom to raise rates for basic local exchange service. This raises the possibility that local governments, especially smaller ones, could pay more for such services.


 


 

Detailed Fiscal Analysis

 

H.B. 218 would authorize the Public Utilities Commission of Ohio (PUCO) to exempt basic local exchange service offered by an incumbent local exchange carrier (i.e., a local telephone utility) from the provisions of Chapters 4905. and 4909., and sections 4931.01 to 4931.35 of the Revised Code (these chapters and sections establish the regulatory and rate-making powers of PUCO). The PUCO is authorized to exempt such service if (and only if) it finds that doing so is in the public interest and that the market offers competition or alternative supply of basic local exchange service. Further, the PUCO may not exempt the service unless it finds that there are no barriers to entry to the market.

 

The bill would also prohibit PUCO from adopting requirements governing unbundled network elements of telephone networks (regarding either price or access) that are inconsistent with federal law. Similarly, the bill would prohibit PUCO from exercising jurisdiction over advanced telecommunication services or Internet protocol-enabled services that is inconsistent with federal law. Also, existing law authorizes the PUCO to modify or abrogate an order that grants similar exemptions for telecommunications services other than basic local exchange service any time up to eight years after the exemption was granted if the conditions under which it was granted change. The bill shortens this period from eight years to five, and extends its applicability to exemptions granted for basic local exchange service.

 

Background

 

Am. Sub. H.B. 563 of the 117th General Assembly created an alternative framework for regulating incumbent local exchange carriers. Prior to the enactment of H.B. 563, telecommunications services offered by local exchange carriers were subject to traditional rate regulation by the PUCO. H.B. 563 allowed the PUCO to exempt telecommunications services other than "basic local exchange service" from the provisions of Chapters 4905. and 4909. of the Revised Code. The PUCO was not permitted to do so unless it found that the carrier faced competition in the local market or that the carrier's customers had available alternatives to the carrier for the supply of those other services. Furthermore, the PUCO was authorized to establish rates for all services, including basic local exchange services, under an alternative method if it found that the alternative method was in the public interest. The PUCO retains jurisdiction over carriers that operate under alternative regulation, and is authorized to abrogate or modify an agreement with such a carrier anytime up to eight years after the agreement is initiated if the Commission finds that the conditions under which alternative regulation was granted have changed. Currently all seven of Ohio's large telephone companies operate under alternative regulation.

 

In this context, "basic local exchange service" means the ability to send and receive voice communications over the telephone within a local service area. Existing law specifically lists the following services as being included in basic local exchange service: local dial tone service; touch tone dialing service; access to 9-1-1 service; access to operator services and directory assistance; provision of a telephone directory and a listing in it; caller identification blocking service; access to telecommunications relay service; and access to long-distance telephone carriers.

Fiscal effect

 

The various changes to PUCO authority raise the possibility that there might be a budgetary impact on that agency. A PUCO official reports that agency officials do not expect any such impact, and if one should be experienced it is expected to be minimal.

 

Also, the bill raises the possibility of higher rates for basic local exchange service if PUCO were to make an erroneous determination that competition is present in a market. Assuming no such error occurs, one would expect rates paid by local governments not to change, or even to be made lower by the bill as incumbent carriers are enabled to compete more freely with competitors regarding prices offered to customers. If such an error were to be made, however, and an incumbent local exchange carrier that had market power were free to raise rates, there would be the potential for telephone rates paid by local governments, especially smaller ones, to increase.

 

 

 

 

LSC fiscal staff: Ross Miller, Economist

 

HB0218HR.doc/lb