Arizona Corporation Commission Recognizes Changing Landscape of Telecommunications

Over the past year, the Arizona Corporation Commission ("Commission") has begun to tailor certain of its regulations to more aptly fit the current landscape of the competitive telecommunications market.  Although the changes have come through ad hoc decisions, they recognize that the telecommunications market has changed since certain of the Commission's rules and requirements were enacted, and the impact of the changes is likely to expand as more providers seek waivers and exemptions.

I.                   Contract Filing Requirement 

AAC R14-2-1115.C ("Contract Filing Rule") requires competitive telecommunications providers to file with the Commission all contracts that fall within the Commission's competitive telecommunications rules "within five business days after execution."  In multiple decisions over the past year, the Commission has granted waivers of this requirement, in recognition that "the telecommunications industry has changed since the Contract Filing Rules were adopted by the Commission," and therefore, "there is no need for carriers to file contracts within five (5) business days of their execution."  See, e.g., Decision No. 73773 (Mar. 21, 2013) at 3.  In each of the decisions, the Commission did, however, make clear that the carriers were not receiving absolute waivers from the Contract Filing Rule and the Commission required each carrier to provide contracts to Commission Staff upon request.

II.                Performance Bond Requirement 

For many years, the Commission, as a condition to the granting of a Certificate of Convenience and Necessity ("CC&N"), has required competitive providers to procure a performance bond to secure advances, deposits, and prepayments.  The amount of the bond varied based on the types of services for which the new entrant sought authority.  Again recognizing the changing landscape of the telecommunications market, however, the Commission has granted CC&N's in two recent decisions without a performance bond requirement.  Based on the recommendation of its Staff, the Commission determined that a provider need not procure a performance bond so long as it demonstrated that it has the financial, managerial, and technical capability to provide its proposed services.  See Decision No. 74295 (Jan 29, 2014) at 4-5.  The Commission relied upon its Staff's recognition that "the telecommunications industry has changed significantly since Staff began recommending that applicants obtain bonds."  Id. at 5.  The Commission Staff further noted that "technology has changed such that consumers have numerous choices in determining what type of service would best meet their telecommunications requirements, as well as a variety of companies from which they can obtain these telecommunications services."  Id.

Although this change in policy has so far only impacted new entrants, numerous providers currently holding performance bonds have filed for relief from this requirement using the same rationale relied upon in the decisions noted above.

III.             Affiliated interests rules 

The Commission’s Affiliated Interests Rules (AAC R14-2-801 et seq.) ("Rules") contain certain restrictions relating to transactions between Class A Utilities (i.e., telecommunications providers with more than $1 million in annual intrastate operating revenues) and their affiliates.   AAC R 14-2-803 requires that a utility file a Notice of Intent with the Commission in order to perform a "reorganization", as such term is defined by the Rules.  AAC R14-2-804 requires Commission approval for certain transactions between Class A utilities and their affiliates.  Finally, AAC R14-2-805 requires that a Class A utility submit an annual report relating to diversification plans and transactions between the utility and its affiliates.

In two recent decisions, the Commission, once again recognizing the changes in the telecommunications industry, has provided limited waivers of the Rules to telecommunications providers.  In an application filed by Electric Lightwave, LLC and Mountain Telecommunications seeking a complete waiver of the Rules, the Commission instead granted a limited waiver.  Under this waiver, the companies must only seek approval under AAC R14-2-803 and AAC R14-2-804 if the reorganization or transaction could directly or indirectly result in a change to the maximum rates on file for the companies.  See Decision No. 73999 (Jul. 30, 2013).

In a similar filing, CenturyLink and its affiliates sought waiver of the Affiliated Interests Rules.  In that matter, CenturyLink noted recent statutory changes that exempt competitive providers from the provisions of ARS § 40-285 relating to disposition of and encumbrances of plant by utilities.  Finding similarities between the coverage of that statute and the coverage of the Rules, the Commission granted CenturyLink a waiver of the Rules but required that the companies continue to provide limited information in relation to affiliate activities.  See Decision No. 74092 (Sep. 13, 2013).

You can search for ACC Decisions using the Commission's eDocket system, available here.