department of state

Public Service Commission

FINAL

ORDER NO. 6839

IN THE MATTER OF THE SALE, RESALE, AND |

OTHER PROVISIONS OF INTRASTATE | PSC REGULATION DOCKET NO. 10

TELECOMMUNICATIONS SERVICES (OPENED |

MAY 1, 1984; REOPENED NOVEMBER 17, 1998; |

REOPENED JULY 24, 2001; REOPENED |

AUGUST 9, 2005) |

IN THE MATTER OF THE DEVELOPMENT OF |

REGULATIONS FOR THE FACILITATION OF | PSC REGULATION DOCKET NO. 45

COMPETITIVE ENTRY INTO THE |

TELECOMMUNICATIONS LOCAL EXCHANGE |

SERVICE MARKET (OPENED NOVEMBER 21, 1995; |

REOPENED NOVEMBER 17, 1998; |

REOPENED JULY 24, 2001; |

REOPENED AUGUST 9, 2005) |

AND NOW, to-wit, this 7th day of February, 2006, the Commission having received and considered the Findings and Recommendations of the Hearing Examiner previously designated in the above-captioned matters, and which Findings and Recommendations were submitted after a duly noticed public evidentiary hearing;

AND WHEREAS, the Hearing Examiner recommends approval of the proposed amendments to Rules 4 and 10 of the “Rules for the Provision of Telecommunications Services,” upon consideration of the evidence in the record;

Now, therefore, IT IS ORDERED:

1. That the Commission hereby adopts and approves in its entirety the Findings and Recommendations of the Hearing Examiner, which is attached hereto as Exhibit “A.”

2. That the Commission adopts the proposed amendments to Rules 4 and 10 of the “Rules for the Provision of Telecommunications Services,” the exact text and citation of which are attached hereto as Exhibits “B” and “C,” respectively.

3. That the Secretary shall transmit this Order, together with the exact text of the amendments to Rules 4 and 10 of the “Rules for the Provision of Telecommunications Services” to the Registrar of Regulations for publication on or before March 10, 2006.

4. That the effective date of this Order shall be the later of March 11, 2006, or ten days after the date of publication in the Register of Regulations of this Order and the final text of amendments to Rules 4 and 10 of the “Rules for the Provision of Telecommunications Services.”

5. The Commission reserves the jurisdiction and authority to enter such further Orders in this matter as may be deemed necessary or proper.

BY ORDER OF THE COMMISSION:

Arnetta McRae, Chair

Jaymes B. Lester. Commissioner

Joann T. Conaway, Commissioner

Dallas Winslow, Commissioner

Jeffrey J. Clark, Commissioner

ATTEST:

Karen J. Nickerson, Secretary

FINDINGS AND RECOMMENDATIONS OF THE HEARING EXAMINER

Ruth Ann Price, duly appointed Hearing Examiner in this Docket pursuant to 26 Del.C. §502 and 29 Del.C. ch. 101, by Commission Order No. 6690, dated August 9, 2005, reports to the Commission as follows:

I. Appearances

On behalf of the Public Service Commission Staff (“Staff”):

Constance F. Mcdowell, Chief of Technical Services

On behalf of the Division of the Public Advocate (“DPA”):

John Citrolo, Deputy Director

II. Background

1. By PSC Order No. 6690 (Aug. 9, 2005), the Public Service Commission (the “Commission”) proposed to amend Rules 4(f) and 10 of its “Rules for the Provision of Telecommunications Services” (initially adopted by PSC Findings, Opinion and Order No. 5833 (Nov. 6, 2001)).¹ The amendment to Rule 4(f), denominated as Rule 4(f)(iii), would permit telecommunications carriers to comply with their security obligations imposed by Rules 4(f)(i) and 4(f)(ii) by obtaining an irrevocable stand-by Letter of Credit. The proposed amendment to Rule 10 is designed to reduce the financial filing requirements for certain carriers who intend to issue long-term securities or debt obligations.

2. PSC Order No. 6690 further directed that the Commission Secretary forward the proposed amendments to the Delaware Registrar of Regulations for publication, which was done on September 1, 2005. Tr. 450.

3. Publication of the proposed rulemaking and evidentiary hearing was published in the form required by the Commission in The News Journal newspaper on August 29, 2005 and in the Delaware State News newspaper on August 30, 2005. Tr. 445-446, Exhs. 1 & 2.

4. Interested persons or entities had until September 30, 2005 to file comments. No comments were filed in response to this rulemaking. Tr. 448.

5. A duly noticed evidentiary hearing was conducted on October 19, 2005, in Wilmington. No members of the public attended the evidentiary hearing. Tr. 443. John Citrolo, Deputy Director, attended on behalf of the Division of the Public Advocate. The record, as developed at the hearing, consists of a 13-page verbatim transcript and four exhibits.

6. I have considered all of the record evidence and, based thereon, I submit for the Commission’s consideration these findings and recommendations.

III. Summary of Evidence

7. Constance S. McDowell, the Commission’s Chief of Technical Services, testified regarding the need for the amendments. By way of background, Ms. McDowell testified that as Chief of Technical Services she supervises the Commission’s analysts, engineers, economists, and complaint investigators. Tr. 444. She also investigates applications filed by utilities and makes recommendations to the Commissioners regarding proposed actions. Id.

8. Mrs. McDowell summarized the need for the new Rules stating that the intrastate portion of the Rules have been in effect since 1984. Tr. 446. The local exchange portion of the Rules was made effective in 1995. Id. In 2001, the current version of the Rules was approved by the Commission. Id.

9. Ms. McDowell noted that given the changing regulatory climate for telecommunications companies, the Commission’s Staff found that changes were needed in the Rules allowing companies to use irrevocable Letters of Credit, rather than bonds, to guarantee customer deposits and to reduce the Staff’s workload in reviewing filings for financings and the sale and acquisition of major assets. Id.

IV. Summary of the Proposed Amendments

A Rule 4

10. Rule 4 entitled “Certification” of the Commission’s “Rules for the Provision of Telecommunications Services,” sets forth the basic requirements for a local exchange telecommunications carrier’s application for a Certificate of Public Convenience and Necessity (“CPCN”). Rule 4 provides that it is critically important for a prospective carrier to demonstrate that it has the financial viability to guarantee its service and its customer deposits and advances.

11. Staff proposes to include a new subsection under Rule 4(f), entitled “Bonds” of the Rules pertaining to certification of carriers. The new section, Rule 4(f)(iii), provides an alternate method for carriers to comply with the general $10,000 performance bond requirement of Rule 4(f)(1) or the surety bond for deposits stated in Rule 4(f)(ii). Exh 3. Instead of providing a performance bond (Rule 4(f)(i)) or a surety bond (Rule 4(f)(ii)) to the Commission, Rule 4(f)(iii) provides that carriers may file an irrevocable stand-by Letter of Credit in the amounts stated in Rules 4(f)(i) and 4(f)(ii). Exh. 3.

12. Proposed Rule 4 (f)(iii) sets forth the requirements for an acceptable letter of credit which shall include that it must be irrevocable, issued by a Delaware bank or a confirming bank doing business in Delaware and, in cases of dispute, that Delaware law will apply. The Commission must be named as the beneficiary of the Letter of Credit and the instrument must contain language that obligates the issuer to pay a Commission-mandated monetary obligation.

13. Current Rule 4(f)(i) provides that applicants for a CPCN may post a $10,000 performance bond, which must be renewed annually. The bonding requirement ensures that there are funds available to cover advance payments made by customers, as well as abandonment fees that are due when a carrier declares bankruptcy or abandons service. Exh. 3.

14. Rule 4(f)(ii) provides that in order to collect customer deposits or to demand any security for payment, a telecommunications carrier doing business in Delaware must file a bond with the Commission guaranteeing the payment of all deposits and advances. Submission of this bond is a condition precedent to the Commission’s issuance of a CPCN.

B. Rule 10

15. Staff also proposes to amend Rule 10, “Reports to the Commission,” which sets forth the obligations of intrastate carriers to file annual and periodic reports with the Commission. In general, all intrastate carriers must file an annual report with the Commission. Exh. 4, Rule 10(a). The Annual Report must include the customary financial information, such as a balance sheet, statement of operations, and supporting schedules. In addition, in order to give the Commission a complete picture of the carrier’s financial status, the Annual Report must include, among other things, such items as the information used by the utility to calculate its Delaware tax liability, the company’s intrastate revenues, and its intrastate access and billing and collection costs for each service category. Exh. 4, Rule 10(ii), (iv) & (v).

16. Staff proposes to amend the Commission’s Rule 10 by including a new section, Rule 10(e), entitled “Forbearance From Filing Applications for Approval Under 26 Del.C. §215(a) and 215(b).” Rule 10(e) waives certain filing requirements under 26 Del.C. §215(a) and §215(b). Section 215 governs a public utility’s ability to sell or transfer property that it uses in the performance of its public utility service. Section 215 provides that a public utility must first obtain Commission approval before it can either directly or indirectly dispose of or alienate its plant or equipment, or modify or dilute its corporate securities structure. Section 215(a) and (b) provides as follows:

§215. Merger, mortgage or transfer of property; issuance of securities; assumption of obligation of another; transfer of control; exceptions.

(a) No public utility, without having first obtained the approval of the Commission, shall:

(1) Directly or indirectly merge or consolidate with any other person or company, or sell, lease, assign, or mortgage except by supplemental indenture in accordance with the terms of a mortgage outstanding September 1, 1949, or otherwise dispose of or encumber any essential part of its franchises, plant, equipment or other property, necessary or useful in the performance of its duty to the public; or

(2) Issue any stocks, stock certificates, or notes, bonds or other evidences of indebtedness payable in more than 1 year from the date thereof; or

(3) Assume any obligation or liability as guarantor, endorser, surety or otherwise in respect of any security of any other person or corporation, payable or maturing more than 1 year after the date of such issue or assumption of liability.

(b) No individual, group, syndicate, general or limited partnership, association, corporation, joint stock company, trust or other entity, whether or not organized under the laws of this State, shall acquire control, either directly or indirectly, of any public utility doing business in this State, without having first obtained the approval of the Commission. Any such acquisition of control without such prior authorization shall be void and of no effect. As used herein the term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a public utility, whether through the ownership of voting securities, by effecting a change in the composition of the board of directors, by contract or otherwise. Control shall be presumed to exist if any such individual or entity, directly or indirectly, owns 10% or more of the voting securities of the public utility. This presumption may be rebutted by a showing that such ownership does not in fact confer control.

Under Section 215, the Delaware legislature has delegated to the Commission global supervisory authority over the assets of the public utilities that it regulates to ensure that companies’ managers’ decisions to alienate assets or to change the capital structure are prudent and in the best interests of ratepayers.

17. Staff’s proposal to modify the financial reporting requirements imposed by 26 Del.C. §215 does not seek to abandon the filing requirements by all carriers. Pursuant to Rule 10, Staff proposes to extend forbearance from regulation under Section 215 to a discrete set of “qualifying” telecommunications carriers. See Rule 10(e). A “qualifying” carrier must hold a CPCN for at least one year, but it cannot: (1) offer or provide local exchange voice service; (2) have earned more than $2,500,000 in annual gross intrastate revenues in the preceding year; or (3) have its principal operations’ office located in Delaware.

18. Staff’s proposed relaxation of the Section 215 reporting requirements does not extend to transactions involving acquisitions, mergers, consolidations, or transfers of control with nonqualified entities. Exh. 4, Rule 10 (e)(ii). Qualifying carriers must still report to the Commission under Section 215 where:

(a) a qualified carrier and a nonqualified carrier are parties to a merger;

(b) a qualified carrier will acquire, merge with, or consolidate with a nonqualified carrier;

(c) a nonqualified carrier will acquire, merge with, or consolidate with a qualifying carrier; or

(d) after the completion of the acquisition, merger, consolidation, or transfer of control, the qualifying carrier and nonqualified carriers are owned by the same corporate entity. Exh. 4, Rule 10(e)(ii).

19. The qualifying carrier is not relieved of its requirement to notify the Commission within ten (10) days of the consummation of an acquisition, merger, consolidation, or transfer of control if it changes its corporate or trade name. Exh. 4, Rule 10(e)(v).

20. All carriers, qualifying and nonqualifying, must file with the Commission their intent to abandon service. Further, all carriers created as a result of an acquisition, merger, consolidation, or transfer of control must file for a CPCN in order to provide telecommunications service in the State. Exh. 4, Rule 10(e)(vi).

21. The forbearance from filing contemplated by Staff in its proposed amendment of Rule 10 is applicable to transactions between entities that are both qualifying carriers. By definition, these carriers provide limited services and have a small presence in Delaware.

V. Findings and Recommendations

22. The Commission has the authority and jurisdiction to promulgate and amend regulations under 26 Del.C. §209(a) and 29 Del.C. §10111 et seq. Pursuant to 26 Del.C. §209(a), the Commission may fix “just and reasonable” regulations governing any public utility.

23. Further, under the Delaware Administrative Procedures Act, 29 Del.C. §§1011 et seq., in the interests of the public welfare, administrative agencies are authorized to promulgate regulations concerning the agency.

24. The “Telecommunication Regulatory Authorization Act of 1992,” 26 Del.C. §703(3) (2004 Supp.), authorized the Commission to modify its traditional rate of return regulatory requirements where to do so would “promote efficiency in public and private resource allocation.” This legislation expresses the Delaware legislature’s desire to allow the Commission to promulgate streamlined reporting requirements so long as its regulatory supervision of utilities results in financially viable companies and in low cost and efficient service to ratepayers.

25. The amendments proposed by Staff, as outlined above, streamline certain reporting requirements and allow companies to use irrevocable Letters of Credit, rather than bonds, to guarantee customer deposits. These modifications are consistent with the changing regulatory climate for telecommunications companies and serve to reduce Staff’s workload in reviewing filings for financings and asset transfers.

26. For all of the above reasons, I recommend that the Commission adopt, as just and reasonable, Staff’s proposed amendments to the “Rules for the Provision of Telecommunications Services” as attached hereto as Attachment “A.” A proposed form of Order implementing the above recommendation is attached hereto as Attachment “B” for the Commission’s consideration.

REGULATION DOCKET NO. 10; SALE, RESALE, AND OTHER PROVISIONS OF INTRASTATE TELECOMMUNICATIONS SERVICES

E X H I B I T "A"

Docket 10: The Sale, Resale, and Other Provisions of

Intrastate Telecommunications Services

Docket 45 : Regulations for the Facilitation of

Competitive Entry into the

Telecommunications Local Exchange Service

Market

Effective: December 10, 2001

PART A

CERTIFICATION AND REGULATION OF CARRIERS

1.0 Definitions

“Rules” shall mean these Rules, including PARTS A and B, governing the provision of telecommunications services in Delaware.

“Carrier” shall mean any person or entity offering to the public Telecommunications service that originates or terminates within the State of Delaware. The term "Carrier" does not include:

“CPCN” shall mean a Certificate of Public Convenience and Necessity issued by the Commission.

“Commission” shall mean the Public Service Commission of Delaware.

“Competitive Local Exchange Carrier ("CLEC")” shall mean a Carrier, other than the Incumbent Local Exchange Carrier, offering and/or providing local telecommunications exchange services within the State of Delaware.

“Incumbent Local Exchange Carrier ("ILEC")” shall mean in Delaware Bell Atlantic-Delaware, Inc., and any successor thereto.

“Facilities-based Carrier” shall mean a Local Exchange Carrier that directly owns, controls, operates, or manages plant and equipment through which it provides local exchange services to consumers within the local exchange portion of the public switched network.

“Local Exchange Carrier ("LEC")” shall mean a Carrier offering and/or providing local telecommunications exchange services (i.e., CLECs and ILECs); including both facilities-based and non-facilities-based Carriers.

“Local Telecommunications Exchange Service” shall mean non-toll, intrastate Telecommunications Services provided over a Local Exchange Carrier’s network, including, but not limited to, exchange access services and basic local services.

“Resale” shall mean the sale to an end user of any telecommunications service purchased from another Carrier.

“Telecommunications” shall mean the transmission, between or among points specified by the user, of information of the user’s choosing, without change in the form and content of the information as sent and received.

“Telecommunications Service” shall mean the offering of telecommunications for a fee directly to the public within the State of Delaware (originating or terminating within the State, without regard to how the Carrier decides to route the traffic), or to such classes of users as to be effectively available to the public, regardless of the facilities used. "Telecommunications Service" does not include:

2.0 Applicability

These Rules shall apply to all Carriers, as defined by these Rules, and shall be construed consistently with Rule 3 of these Rules.

3.0 Application of and Conflict With Other Rules, Regulations, Tariffs and/or Price Lists

3.1 The ILEC.

3.1.1 The ILEC will remain subject to the Telecommunications Technology [Investment] Act (TTIA), 26 Del.C. sub. Ch. VII-A, and any implementing regulations promulgated by the Commission during the term of its election thereunder. During such term, the ILEC shall not be subject to the requirements of these Part A. Rules; and

3.1.2 The ILEC has Carrier of last resort obligations in its service territory.

3.2 Telephone Service Quality Regulations (Docket No. 20).

3.2.1 All Carriers shall provide telephone service in accordance with the Telephone Service Quality Regulations the Commission adopted in PSC Regulation Docket No. 20, by Order No. 3232 (January 15, 1991) as such may from time to time be amended, except to the extent these Rules impose obligations or grant privileges inconsistent therewith.

3.3 Negotiation and Mediation Guidelines.

3.3.1 All Carriers must abide by the Commission’s Guidelines for Negotiations, Mediation, Arbitration and Approval of Agreements between Local Exchange Telecommunications Carriers (Order No. 4245).

3.4 Rules of Practice and Procedure

3.4.1 The practice and procedure governing any proceedings required or authorized by these Rules shall be as set forth by the Commission’s Rules of Practice and Procedure adopted in PSC Docket No. 99-9, by Order No. 5057 (April 6, 1999) as the same may be hereafter from time to time amended.

3.5 Other Rules and Statutes.

3.5.1 These Rules shall prevail over any inconsistent requirements imposed by prior Order or regulation of the Commission, except for Rule 3.1 preceding and where expressly authorized by a Commission Order granting a waiver. All Carriers remain subject to any and all applicable provisions of state and federal law.

3.6 Tariffs or Price Lists.

3.6.1 To the extent that a tariff or price list of any Carrier is inconsistent with these Rules, then, and in that event, these Rules shall control, subject to Rule 3.1 preceding, unless where expressly authorized by a Commission Order granting a waiver.

4.0 Certification

4.1 Certification Requirement.

4.1.1 No person or entity shall offer public intrastate or local exchange telecommunications service within the State of Delaware without first obtaining from the Commission a Certificate of Public Convenience and Necessity authorizing such service. A Carrier offering telecommunications service within the State of Delaware without a CPCN duly issued by this Commission is acting unlawfully and shall immediately cease offering such service until a CPCN is granted.

4.2 Application.

4.2.1 An applicant for a CPCN shall file with the Commission an original and ten (10) copies of an Application for Certificate of Public Convenience and Necessity, together with the statutory filing fee set forth in 26 Del.C. §114, as the same may from time to time be amended. Such application shall contain all the information and exhibits hereinafter required and may contain such additional information as the applicant deems appropriate to demonstrate to the Commission that it possesses the technical, financial and operational ability to adequately serve the public and that the public convenience and necessity requires or will require the operation of such business. If the applicant fails to provide the required information and exhibits within six months of the application, the Commission may take action to close this docket and the applicant will forfeit its application fee.

4.3 Notice.

4.3.1 The applicant shall serve a notice of the filing of such an application upon the Public Advocate, and to such other entities as may be required by the Commission. The applicant shall provide public notice of the filing of the application in two (2) newspapers having general circulation throughout the county or counties where service is to be offered in a form to be prescribed by the Commission.

4.4 Business License and Registered Agent.

4.4.1 An applicant shall demonstrate that it is legally authorized and qualified to do business in the State of Delaware, including that it has received authorization to do business issued by the Secretary of State. An applicant shall provide the name, address, and telephone number of its Delaware Resident Agent. Following certification, all Carriers shall promptly notify the Commission in writing of changes of Resident Agent or the name, address, or telephone number thereof.

4.5 Identification and Billing of Intrastate and Interstate Traffic.

4.5.1 An applicant shall be required to set forth an effective plan for identifying and billing intrastate versus interstate traffic, and shall pay the appropriate LEC for access at the LEC’s prevailing access charge rates. If adequate means of categorizing traffic as interstate versus intrastate are not or cannot be developed, then, for purposes of determining the access charge to be paid to the LEC for such undetermined traffic, the traffic shall be deemed to be of the jurisdiction having the higher access charges and billed at the higher access charges.

4.6 Bonds.

4.6.1 Performance Bonds.

4.6.1.1 All applicants must post a $10,000 performance bond with Delaware surety and renew such bond annually.

4.6.2 Carriers requiring deposits, or any form of payment in advance for service.

4.6.2.1 No Carrier shall require its customers in Delaware to pay a deposit or pay or otherwise provide any security or advance as a condition of service unless that Carrier first has filed with the Commission a bond, issued by a corporate surety licensed to do business in Delaware, guaranteeing the repayment of all customer deposits and advances upon the termination of service. The bond need not be filed with the application, but no CPCN will be issued until such bond is filed with the Commission. The amount of the bond shall be the greater of: (A) 150% of the projected balance of deposits and advances at the end of three years of operation; or (B) $50,000. If at any time the actual amount of deposits and advances held by a Carrier exceeds the bond, then the Carrier promptly shall file with the Commission a bond with surety to comply with the requirement of the preceding sentence. A Carrier may petition for waiver of the bond requirement three years from the date the certificate was issued and such waiver will be granted upon a demonstration of an adequate operating history and financial resources to insure the repayment to customers of any advance payments or deposits held.

4.6.3 In order to comply with Rule 4.6.1 or 4.6.2, an applicant or carrier may file an irrevocable stand-by Letter of Credit in lieu of a bond executed by a Delaware corporate surety. Such Letter of Credit shall:

4.6.3.1 allow a draw or demand against such Letter in the amount prescribed by Rule 4.6.1 or 4.6.2;

4.6.3.2 be irrevocable, and not subject to modification, except upon the consent of the Commission;

4.6.3.3 be issued by a federal or state chartered financial institution which does business in Delaware or be subject to an agreement with a confirming bank doing business in Delaware that such confirming bank will honor drafts or demands under such Letter;

4.6.3.4 be consistent with provisions of 6 Del.C. §§5-101 through 5-117 and include terms that make Delaware law govern the relationship between the issuer and the Commission as beneficiary;

4.6.3.5 name the Commission as the beneficiary under such Letter; and

4.6.3.6 contain terms obligating the issuer to honor demands upon presentation of an Order, ruling, or decision from the Commission which finds, determines, or reports that the carrier is: (1) liable for a specified monetary sanction for its failure to perform an obligation imposed by the Public Utility Act, a Commission rule or regulation, or an Order of the Commission (Rule 4.6.1)); or (2) is liable to refund an amount representing prepaid deposits or advances paid by customers of the carrier (Rule 4.6.2)).

4.6.3.7 The form and terms of the Letter of Credit shall be subject to approval by the Commission staff.

4.7 Minimum Financial Requirements for LECs.

4.7.1 Any applicant for certification as a facilities-based CLEC shall demonstrate in its application that it possesses a minimum of $100,000 of cash or cash equivalent, reasonably liquid and readily available;

4.7.2 Any applicant for certification to do business as a non-facilities-based CLEC shall demonstrate in its application that it possesses a minimum of $25,000 of cash or cash equivalent, reasonably liquid and readily available;

4.7.3 Any applicant that has profitable interstate operations or operations in other states may meet the minimum financial requirements of subparagraphs 4.7.1 and 4.7.2 above by submitting an audited balance sheet and income statement demonstrating sufficient cash flow to meet the above requirements; and

4.7.4 An applicant may demonstrate cash or cash equivalent by the following:

4.7.4.1 Cash or cash equivalent, including cashier’s check, sight draft, performance bond proceeds, or traveler’s checks;

4.7.4.2 Certificate of deposit or other liquid deposit, with a reputable bank or other financial institution;

4.7.4.3 Preferred stock proceeds or other corporate shareholder equity, provided that use is restricted to maintenance of working capital for a period of at least twelve (12) months beyond certification of the applicant by the Commission;

4.7.4.4 Letter of credit, issued by a reputable bank or other financial institution, irrevocable for a period of at least (12) months beyond certification of the applicant by the Commission;

4.7.4.5 Line of credit, issued by a reputable bank or other financial institution, irrevocable for a period of at least twelve (12) months beyond certification of the applicant by the Commission;

4.7.4.6 Loan, issued by a qualified subsidiary, affiliate of applicant, or a qualified corporation holding a controlling interest in the applicant, irrevocable for a period of at least twelve (12) months beyond certification of the applicant by the Commission, and payable on an interest-only basis for the same period;

4.7.4.7 Guarantee, issued by a corporation, copartnership, or other person or association, irrevocable for a period of at least twelve (12) months beyond certification of the applicant by the Commission;

4.7.4.8 Guarantee, issued by a qualified subsidiary, affiliate of the applicant, or a qualified corporation holding controlling interests in the applicant irrevocable for a period of at least twelve (12) months beyond the certification of the applicant by the Commission.

4.8 Initial Tariffs or Price Lists.

4.8.1 An applicant shall file proposed initial rates, prices, rules, regulations, terms and conditions of service specifically adopted for the State of Delaware. Upon an investigation into unjust and unreasonable pricing practices, the Commission Staff may require the applicant to provide cost data demonstrating that rates are reasonably expected to cover the incremental cost of offering the service. Copies of the applicant’s rates and terms and condition of service in other jurisdictions must be provided to the Commission upon request. Any applicant’s tariff or price lists must include at a minimum specific policies regarding:

4.8.1.1 customer deposits and advances;

4.8.1.2 prompt reconciliation of customer billing problems and complaints; and

4.8.1.3 timely correction of service problems.

4.9 Demonstration of Fitness.

4.9.1 An applicant shall be required to demonstrate to the Commission its financial, operational, and technical ability to render service within the State of Delaware. Such demonstration shall include, but is not limited to, the following:

4.9.1.1 The applicant’s certified financial statements current within twelve (12) months of the filing, and, where applicable, the most recent annual report to shareholders and SEC Form 10-K;

4.9.1.2 A brief narrative description of the applicant’s proposed operations in Delaware, any present operations in all other states, and states for which service applications are pending;

4.9.1.3 A description of the relevant operations experience of applicant’s personnel principally responsible for the proposed Delaware operations;

4.9.1.4 A specific description of the applicant’s engineering and technical expertise showing its qualifications to provide the intended service, including the names, addresses, and qualifications of the officers, directors, and technical or engineering personnel or contractors who will be operating and/or maintaining the equipment to be used to provide such service; and

4.9.1.5 A description, including location, of the applicant’s facilities that the applicant will use to provide the proposed service in the next three years. Upon written request of the Commission Staff, the applicant shall provide a one year construction, maintenance, engineering, and financial plan for all services intended to be provided within the State of Delaware with a technical description of the equipment which will be used to provide such service.

5.0 New Options or Offerings; Changes to Existing Rates, Prices or Terms and Conditions

5.1 Notice Required for New Service Options and Offerings.

5.1.1 No Carrier shall offer new telecommunication service options or offerings except ten (10) days after filing with the Commission the proposed tariff or price list.

5.2 Notice Required to Revise Existing Tariff or Price List.

5.2.1 No Carrier shall revise an existing tariff or price list except three (3) days after filing with the Commission the proposed tariff or price list.

5.3 Service of Notice.

5.3.1 A Carrier filing a new service or changes to an existing service pursuant to this Rule shall serve the filing on:

5.3.1.1 the Public Advocate; and

5.3.1.2 all interested persons that submit a written request to the Commission to receive such notice.

5.3.1.2.1 A Carrier shall file with the Commission a certificate of service as part of its notice requirement. To the extent that any such documents contain information claimed to be proprietary and interested persons have submitted a written request for notice, but have not executed an appropriate proprietary agreement, the Carrier shall provide an expurgated version of the notice to such parties.

5.4 Investigation of Filings.

5.4.1 A filing made pursuant to this rule shall not preclude the Commission or its Staff from an informal or formal investigation into the filing in order to protect fair competition, including requiring the Carrier to provide cost data demonstrating that rates are reasonably expected to cover the incremental cost of offering the service.

5.5 Special Contracts

5.5.1 A Carrier shall file under this rule all contracts with a customer to the extent the contract changes the terms or conditions generally offered to the public in the carrier’s tariff or price list on file with the Commission.

6.0 Discrimination Prohibited

No Carrier shall unreasonably discriminate among persons requesting a service within the State of Delaware. Any finding of unreasonable discrimination shall be grounds for suspension or revocation of the Certificate of Public Convenience and Necessity granted by the Commission, as well as the imposition of monetary and other penalties pursuant to 26 Del.C. §§217 and 218.

7.0 Abandonment or Discontinuation of Service

A Carrier may abandon or discontinue service, in whole or in part, in accordance with the terms of 26 Del.C. §203A(c). The Carrier shall provide notice of its application to discontinue or abandon service to its customers subscribing to such service and to the Division of Public Advocate. Such notice shall describe the options available to the customers. The Carrier’s application to abandon or discontinue a service shall contain proposed provision for payment of all relevant outstanding liabilities (deposits and advance payments), if any, to customers within the State of Delaware.

8.0 Services to be Provided By CLECs Providing Voice Telephone Service

8.1 Any CLEC providing voice telephone service shall offer, at a minimum, the following telecommunication services to its customers:

8.1.1 access to the public switched network;

8.1.2 dial tone line services;

8.1.3 local usage services;

8.1.4 access to all available long distance Carriers;

8.1.5 TouchTone services;

8.1.6 White page listing;

8.1.7 Access to 911 enhanced emergency system;

8.1.8 Local directory assistance service;

8.1.9 Access to telecommunications relay service.

9.0 Resale Prohibitions

9.1 Cross-Class Selling.

9.1.1 A Carrier that by tariff or price list makes a service available only to residential customers or a limited class of residential customers may prohibit the purchaser from offering such services to classes of customers that are not eligible for such services from the providing Carrier.

9.2 Other.

9.2.1 With respect to any restrictions on resale other than cross-class selling as described in paragraph 9.1 above, a Carrier may impose a restriction only if the Commission determines that the restriction is reasonable and nondiscriminatory.

10.0 Reports to the Commission.

10.1 Annual and Periodic Reports.

10.1.1 All Carriers shall file with the Commission an Annual Report as described below and such other reports or information as the Commission may from time to time require to fulfill its statutory obligations. The Annual Report shall include standard financial reports (balance sheet, statement of operations, supporting schedules, etc.). This report shall also include:

10.1.1.1 the same after-the-fact information that management is provided concerning the measurement of performance provided in Delaware;

10.1.1.2 the information used to determine Delaware income tax liability;

10.1.1.3 financial and operating information for the smallest management unit that includes Delaware;

10.1.1.4 intrastate revenues (net of uncollectible) by service category;

10.1.1.5 intrastate access and billing and collection cost by service category;

10.1.1.6 total number of customers by service category;

10.1.1.7 total intrastate minutes of use by service category;

10.1.1.8 total intrastate number of calls by service category;

10.1.1.9 a description of service offered;

10.1.1.10 a description of each complaint received by service category (in the form of a single Complaints Log); and

10.1.1.11 verification of deposits, customer advances, the bond requirement and the bond with surety, where applicable.

10.2 Accounting System.

10.2.1 All Carriers shall use an accounting system in accordance with Generally Accepted Accounting Principles or such other uniform system of accounts previously approved in writing by the Chief of Technical Services of the Commission.

10.3 Attestation.

10.3.1 All Carriers shall file all reports required by these Rules with a sworn statement by the person under whose direction the report was prepared, that the information provided in the report is true and correct to the best of the person’s knowledge and belief.

10.4 Time for Filing.

10.4.1 All periodic reports to be filed with this Commission must be received on or before the following due dates, unless otherwise specified herein, or unless good cause is demonstrated by the Carrier:

10.4.1.1 Annual Report: one hundred twenty (120) days after the end of the reported period; and

10.4.1.2 Special and additional reports: as may be prescribed by the Commission unless good cause to the contrary is demonstrated.

10.5 Forbearance from Filing Application for Approval Under 26 Del.C. §215 (a) and 215 (b)

10.5.1 A qualified carrier (as defined below) need not file an application for approval of the financial and asset transactions set forth in 26 Del.C. §215 (a)(1), (a)(2), or (a)(3);

10.5.2 Except in the case of transactions described below, a qualified carrier (as defined below) need not file for approval of mergers or consolidations under 26 Del.C. §215 (a)(1) or for transfer of control under 26 Del.C. §§215 (b). However, if the other entity involved in such proposed transaction is a carrier certified in this State that, in the preceding year, reported annual gross intrastate revenues of $2,500,000 dollars, a qualifying carrier must continue to file an appropriate application for merger or transfer of control under 26 Del.C. §215 (a)(1) and 215 (b). An entity is involved in the transaction if:

10.5.2.1 it is a party to the merger agreement;

10.5.2.2 it is the entity to be acquired in the merger or transfer of control by the qualified carrier or its corporate parent;

10.5.2.3 it is the entity acquiring the qualified carrier; or

10.5.2.4 it will, as a result of the transaction, be owned by the same corporate owner as the qualified carrier.

10.5.3 A qualified carrier is a carrier:

10.5.3.1 that does not provide or offer local exchange and intrastate exchange access voice services;

10.5.3.2 that is currently certificated and that has held such certification for at least one year;

10.5.3.3 that had less than $2,500,000 in annual gross intrastate revenues, as reported in the carrier’s timely filed Annual Gross Revenue return submitted under 26 Del.C. §215 (e); and

10.5.3.4 that does not operate its network from a principal place of business in Delaware.

10.5.4 A qualified carrier shall include in its Annual Report under Rule 10.1, the date and nature of any mergers or transfers of control occurring during the preceding calendar year.

10.5.5 If any transfer of control, merger, or other similar transaction shall result in the change of the corporate, or trade, name of the certificated qualified carrier, the qualified carrier must file, within 10 days after such transaction, a statement identifying the new name of the certificated carrier.

10.5.6 The forbearance from filing granted by Rule 10.5.1 and 10.5.2 do not relieve any carrier of the obligation to file for abandonment of service under 26 Del.C. §203A, nor does such forbearance remove the obligation that any new entity created by a merger, transfer of control, or other transaction obtain a Certificate of Public Convenience and Necessity from the Commission.

11.0 Enforcement

11.1 Commission Oversight.

11.1.1 The Commission shall have the authority and the discretion to take such action, upon complaint, motion, or formal or informal investigation, to remedy any alleged violations of these Rules. The Commission shall have available to it all remedies and enforcement powers bestowed by statute and consistent with due process.

11.2 Violation and Penalties.

11.2.1 Failure of a Carrier to comply with any provision of these Rules may result in the suspension or revocation of its CPCN, and/or of the imposition of monetary or other penalties as authorized by 26 Del.C. §§217 and 218.

11.3 Proceedings.

11.3.1 Upon application by any person affected, including the Division of the Public Advocate or another Carrier, or upon its own motion, the Commission may conduct a proceeding to determine whether a Carrier has violated any provision of these Rules. Such proceedings shall be conducted according to the Commission’s Rules of Practice and Procedure.

11.4 Investigations.

11.4.1 For the purpose of determining whether it is necessary or advisable to commence a proceeding, the Commission or its Staff may, at any time, investigate whether a Carrier is in compliance with these Rules. Upon request, the Carrier shall provide to the Commission or its Staff sufficient information to demonstrate its compliance or noncompliance with the Rules, including such data as shall demonstrate that the Carriers’ services are provided at rates that generate sufficient revenue to cover the incremental cost of offering that service.

11.5 Customer Complaints as Ground for Proceeding or Investigation.

11.5.1 The Commission may hold a proceeding to determine whether to suspend or revoke the certificate of, or otherwise penalize any Carrier for reason of customer complaints. The Commission may investigate any customer complaints received.

12.0 Waiver of Rules Upon Petition

12.1 A Carrier may petition the Commission for waiver of a Rule or Rules on a temporary or permanent basis by demonstrating to the satisfaction of the Commission that a waiver is in the public interest or for other good cause, including unreasonable hardship or burden. The Carrier shall comply with all Rules until the petition for waiver has been granted.

PART B

CUSTOMER ELECTION OF PREFERRED CARRIER

13.0 Additional Definitions

For purposes of this PART B, in addition to the Definitions set forth by PART A, the following definitions shall apply:

13.1 Preferred Carrier shall mean the Carrier providing service to the customer at the time of the adoption of these Rules, or such Carrier as the customer thereafter designates as the customer’s Preferred Carrier.

13.2 Preferred Carrier Change Order shall mean generally any order changing a customer’s designated Carrier for local exchange service, intraLATA intrastate toll service or both.

14.0 Applicability

Any Carrier offering intrastate and/or local exchange service for public use within the State of Delaware, including the ILEC, Bell Atlantic-Delaware, Inc., shall be subject to the provisions of these Part B Rules.

15.0 Verification of Orders for Telecommunications Service

No Carrier shall submit a Preferred Carrier Change Order unless and until the Order has been first confirmed in accordance with one of the procedures set forth in 47 C.F.R. § 64-1120.

16.0 Letter of Agency Form and Content

A Carrier may use a letter of agency to obtain written authorization and/or verification of a customer’s request to change his or her Preferred Carrier selection. A letter of agency that does not conform with the requirements set forth in 47 C.F.R. § 64.1130 is invalid.

17.0 Submission and Execution of Changes in Customer Carrier Selections

Submission and execution of changes in customer carrier selection shall comply with 47 C.F.R. § 64.1120.

18.0 Preferred Carrier Freezes

A Preferred Carrier freeze prevents a change in a customer’s Preferred Carrier selection unless the customer has given the Carrier from which the freeze was requested his or her express consent. All Carriers who offer Preferred Carrier freezes must comply with the provisions of 47 C.F.R. § 64.1190.

19.0 Customer Protection

19.1 Procedures To Be Followed By The Customer.

19.1.1 A customer who believes his or her Carrier or Carriers have been changed, without the customer’s authorization, and/or that the customer has been billed for charges not authorized by the customer, should first attempt to resolve the matter with the Carrier or Carriers responsible for the unauthorized changes and/or charges. If the customer is not satisfied with the resolution offered by the Carrier, the customer may file a complaint with the Commission.

19.2 Procedures To Be Followed By Carriers.

19.2.1 A Carrier who is informed by a customer that the customer believes the Carrier has caused or allowed a change in the customer’s Carrier without the customer’s authorization, or that the Carrier has caused or allowed the customer to be billed for charges not authorized by the customer shall attempt to resolve the complaint promptly and in good faith. If the customer and Carrier are not able to resolve the complaint, then the Carrier shall inform the customer orally or in writing of the right to file a complaint with the Commission and shall provide the customer with the Commission’s address and telephone number.

19.3 Carriers to Maintain Record of Complaints.

19.3.1 Each Carrier shall maintain a record of the complaints received by it alleging that the Carrier has caused or allowed a customer’s Carrier to be changed without the customer’s authorization or has caused or allowed the customer to be billed for charges not authorized by the customer. The Carrier shall maintain the record of each complaint for a period of two years following initial notification of the complaint. Upon request by the Commission or its staff, a Carrier shall furnish a copy of its complaint records and such other information as the Commission Staff may require. A Carrier’s complaint records shall include at least the following information:

19.3.1.1 name, address, and telephone number of complainant and the date and manner received by the Carrier; and

19.3.1.2 a chronological summary of the dispute and its current status, including any resolution and date of resolution.

19.4 Refund and Penalties.

19.4.1 In the event the Commission determines that a Carrier has caused a customer’s Carrier for a service to be changed without the customer’s authorization obtained in exact compliance with these Rules, or has caused the customer to be billed for charges imposed without exact compliance with these Rules, then the Commission shall require the Carrier to promptly refund or void to the customer any charges the Carrier has caused to be billed as a result of the unauthorized change or charge, and/or any other remedies available for violation of these Rules as allowed by law. 26 Del.C. §924(c). The Commission’s remedies are in addition to those required under 47 C.F.R. § 64.1170 to the extent the FCC’s remedies have not provided a refund or credit to the subscriber in the amount of 100% of all charges the Carrier caused to be billed as a result of the unauthorized change or charge.

Rules for the Provision of Telecommunication Services

9 DE Reg. 1390 (03/01/06) (Final)