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:


Am. Sub. H.B. 218


June 21, 2005


As Passed by the Senate


Rep. Daniels



No local cost



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



FY 2006

FY 2007


Public Utilities Fund (Fund 5F6)


- 0 -

- 0 -

- 0 -


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


        No direct fiscal effect on political subdivisions.



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.




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.


The bill also raises the possibility of indirect fiscal effects. If the PUCO were to determine that competition is present in a local service territory and exempt the incumbent local exchange carrier from Chapters 4905. and 4909. of the Revised Code, then the rates for basic local exchange service in that territory would no longer be fixed by PUCO under the current rate-setting process. In consequence, rates for such service might either rise or fall. If sufficient competition is present in that market, rates would be expected to fall. There is a possibility that they would rise, however. If that were to occur, then a small local government that used only basic local exchange service, if there are any that do so, would experience an increase in telephone rates.



LSC fiscal staff: Ross Miller, Economist