DEPARTMENT OF STATE

Public Service Commission

Statutory Authority: 26 Delaware Code, Section 209(a) (26 Del.C. §209(a))

PROPOSED

IN THE MATTER OF THE SALE, |

RESALE, AND OTHER PROVISIONS |

OF INTRASTATE | PSC

TELECOMMUNICATIONS | REGULATION

SERVICES (OPENED MAY 1, 1984; | DOCKET NO. 10

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

COMPETITIVE ENTRY INTO THE | REGULATION

TELECOMMUNICATIONS LOCAL | DOCKET NO. 45

EXCHANGE SERVICEMARKET |

(OPENED NOVEMBER 21, 1995; |

REOPENED NOVEMBER 17, 1998; |

REOPENED JULY 24, 2001; |

REOPENED AUGUST 9, 2005) |

PUBLIC NOTICE OF PROPOSED AMENDMENTS TO THE PUBLIC SERVICE COMMISSION’S

RULES FOR THE PROVISION OF TELECOMMUNICATIONS SERVICES

TO: ALL TELECOMMUNICATIONS CARRIERS,

ALL CONSUMERS, AND OTHER

INTERESTED PERSONS

In 2001, the Public Service Commission ("PSC ") adopted “Rules for the Provision of Telecommunications Services” (“Telecom Rules”) to govern its regulatory oversight of telecommunications carriers operating within Delaware. Those Rules apply to all current telecommunications carriers, except Verizon Delaware Inc.

By PSC Order No. 6690 (Aug. 9, 2005), the PSC now proposes to amend Rule 4(f) and Rule 10 of those Telecom Rules. The proposed change to Rule 4(f) will allow telecommunications carriers to submit irrevocable stand-by Letters of Credit as a substitute for the filing of surety bonds currently required under Rule 4(f)(i) & (ii). Such Letters of Credit, like the now required bonds, will provide financial assurances that carriers will pay financial liabilities for inadequate performance (Rule 4(f)(i)) and that sufficient funds will remain available in case refunds of customer deposits and prepaid monies might be required (Rule 4(f)(ii)). The proposed amendment to Rule 10 will allow a “qualified carrier,” one with less than $2,500,000 in annual gross intrastate revenues in the preceding year, to forego filing most of the financial, merger, and transfer of control applications now required by 26 Del.C. §215(a) & (b). The exemption will not apply to local exchange carriers, will not be available during the first year after the carrier’s certification, and will not apply to mergers or acquisitions involving another carrier with more than $2,500,000 in annual gross Delaware revenues.

The text of these proposed amendments are attached to PSC Order No. 6690. That Order and the exhibits are reproduced in the September 2005 edition of the Delaware Register of Regulations. The Order and exhibits can also be reviewed on-line at the PSC’s website at www.state.de.us/delpsc. You can also obtain a paper copy of the Order at the PSC’s Dover office. Those paper copies will cost $0.25 per page.

You can file written comments, suggestions, briefs, compilations of data, or other materials concerning these proposed amendments to the Telecom Rules. Such material (10 copies) must be submitted to the Commission on or before Friday, September 30, 2005. Send the material to the Commission’s Dover office at the following address:

Delaware Public Service Commission

861 Silver Lake Boulevard

Cannon Building

Suite 100

Dover, Delaware, 19904

Attn: PSC Reg. Dckts. Nos. 10 & 45

In addition, the PSC will conduct a public hearing on these proposed changes on Wednesday, October 19, 2005, beginning at 10:00 AM. The hearing will take place in the Third Floor Conference Room of the Carvel State Office Building, 820 North French Street, Wilmington, Delaware. You can submit additional materials then.

If you are handicapped and might need assistance or aids in participating in this matter, please contact the PSC to discuss the needed assistance or aids. You can contact the PSC with questions or requests about this matter at the Commission's toll-free telephone number (800) 282-8574 (Delaware only) or (302) 739-4333 (including text telephone). You can also send inquiries by Internet e-mail addressed to karen.knickerson@state.de.us.

ORDER NO. 6690

This 9th day of August, 2005, the Commission determines and Order the following:

A. BACKGROUND AND SUMMARY

1. More than three years ago, this Commission adopted its “Rules For The Provision of Competitive Intrastate Telecommunications Services,” a set of unified regulations applicable to most, but not all, telecommunications carriers providing telecommunications services in Delaware. Those Rules include not only criteria related to the initial certification but also explain how the Commission will supervise carriers’ offerings and prices. In some cases, the Rules require different presentations or impose differing duties, depending on the category of services to be offered by the carrier (for example, local exchange or interexchange). In other instances, the Rules apply across the board.

2. By this Order, the Commission now proposes to make two amendments to those Telecom Rules. Both changes are mostly administrative. The first proposed revision will enable telecommunications carriers to utilize the banking device of a stand-by “Letter of Credit” (“the Letter”) as the security instrument to ensure both the carrier’s performance and the availability of funds to remit its customers’ prepaid deposits. Under the current Rules, the carrier must guarantee both its performance and its refunds by filing a bond executed by a Delaware surety. By the second change – more substantive in nature – the Commission proposes to forebear from enforcing the provisions of 26 Del.C. §215(a) & (b) in the case of those telecommunications carriers that have been certificated for at least a year but have little Delaware revenues. If so “qualified,” such carrier would no longer have to obtain Commission approval for its financings, mergers, or transfers of control. However, under the proposal, the exemption is not absolute. The proposed forbearance would not extend to carriers offering local exchange and exchange access voice services, and would not apply where a contemplated merger or transfer of control involves another carrier with significant Delaware earnings.

B. AUTHORITY FOR AMENDMENTS

3. The Commission is generally empowered to promulgate regulations governing the operations of public utilities. See 26 Del.C. §209(a)(1). In addition, the Commission is empowered to grant Certificates of Public Convenience and Necessity to public utilities, including telecommunications carriers. See 26 Del.C. §203(A)(a), (b) (3)-(5). Moreover, since 1992, the Commission has been authorized to adopt alternative forms of regulation for telecommunications carriers, including both de-tariffing and deregulation. See 26 Del.C. §703(3)(2004 Supp.).

C. “LETTER OF CREDIT” ALTERNATIVE

4. Under the present Telecom Rules, a telecommunications carrier must file as a condition of its certification, and must maintain during its operations, a $10,000 performance bond executed by a Delaware surety. That bond is to be renewed annually. Telecom Rule 4(f)(i). Similarly, if a carrier will require its customers to pay a deposit or make any form of advance payment, the carrier must initially file a bond, issued by a corporate surety licensed to do business in this State, guaranteeing the repayment of all such customer deposits and advances. Telecom Rule 4(f)(ii).

5. Recently, several carriers have requested waivers from the requirement to file a surety bond to guarantee their performance or their repayment of customer deposits. Those carriers report that corporate insurers often refuse to stand as sureties on such commitments or charge carriers extremely high premiums for such guarantee instruments. See e.g., PSC Order No. 6437 at 1 & 3 (June 22, 2004) (Commission waives surety bond requirement in favor of stand-by Letter to secure carrier’s performance obligations).

6. The Commission now proposes to amend Rule 4(f) to add a new subparagraph (iii). The new subparagraph would allow telecommunications carriers to fulfill security obligations imposed by Rule 4(f)(i) or Rule 4(f)(ii) (or both) by use of a banking instrument: an irrevocable stand-by Letter of Credit. The Letter would be an alternative to the carrier filing the otherwise required insurance instruments – bonds with Delaware sureties. However, the Letter alternative would track the requirements for a surety bond. The amount payable under the Letter would have to be equivalent to the level of bond guarantee required by either Rule 4(f)(i) or Rule 4(f)(ii). Also, the Letter must be consistent with the provisions of 6 Del.C. §§ 5-101 through 5-117. The Letter must name the Commission as its beneficiary and authorize draws on presentation of a Commission Order, ruling, or decision finding or reciting that the carrier is liable for a monetary amount due to its failure to comply with applicable rules or statutes or that the carrier is obligated to make refunds of deposits on advance payments to its customers. The Letter must be issued by a bank or other entity doing business in Delaware, or, if not, be subject to an agreement by a confirming bank doing business in Delaware that the confirming bank will honor the Letter issued by the other bank or entity.

7. The text of this amendment to allow such Letters is set forth in Exhibit “A” as a new Rule 4(f)(iii) subparagraph. The Commission believes that the public interest will be served by allowing such an alternative form of security. While not a true guarantee, the Letter seemingly provides similar assurances that monetary amounts will be available in case of defaults by carriers. Indeed, in contrast to bonds where the surety can avail itself of various defenses held by the carrier, the Letter creates an independent obligation for the issuing entity to pay if the called-for documents are presented. Moreover, by allowing another security device, more carriers may be able to meet, without additional delay and cost, the requirements of Rule 4(f)(i) or (ii).

D. FORBEARANCE FROM §215(a) AND (b) OBLIGATIONS FOR CERTAIN NON-LOCAL EXCHANGE TELECOMMUNICATIONS CARRIERS WITH LIMITED INTRASTATE REVENUES

8. As a second amendment, the Commission proposes to include within Rule 10 of the Telecom Rules a new subparagraph by which the Commission will lift, in the case of certain certificated telecommunications carriers, the statutory obligation to seek and obtain Commission approval for certain transactions. See 26 Del.C. §215(a) and (b). Under such forbearance exemption, “qualifying” telecommunications carriers would not need to file applications to gain approval to issue or assume long-term securities and debt obligations, to dispose of utility assets, or, in some situations, to merge. See 26 Del.C. §215(a)(1)-(3). Similarly, the qualifying carrier would not, in many situations, have to seek approval for transfers in its ownership or its acquisition of other carriers. See 26 Del.C. §215(b). Rather, the qualifying carrier would only have to report such merger or transfer of control in its year-end Annual Report filed under Rule 10(a) of the Telecom Rules.

9. The above forbearance would apply only to telecommunications carriers fulfilling all the following criteria:

(a) the carrier is currently certificated to provide intrastate telecommunications services and has held such certification for at least one year;

(b) the carrier does not provide or offer local exchange or exchange access voice services (see Telecom Rule 8) in Delaware;

(c) the carrier earned less than two and one-half million dollars ($2,500,000) in annual gross intrastate revenues as reported in the carrier’s last timely filed annual gross revenue return (26 Del.C. §115(e)); and

(d) the carrier’s principal operations’ office is not located in Delaware.

Thus, the forbearance exemption will not apply to any carrier offering local exchange voice services, regardless of its annual intrastate operating revenues. A carrier offering such voice services will have to continue to comply with the §215 filing and approval regime. The Commission desires to track ownership of such carriers in light of the network access services being provided. For the same reason, the exemption will not apply to a carrier who operates its network from a principal place of business in Delaware. If the carrier has its operations headquartered in Delaware, the Commission believes it appropriate to track its financial dealings and its owners. The revenue qualifier is triggered by looking to the “annual gross intrastate revenues” reported in the carrier’s relevant annual gross return filed by the carrier. If a carrier has not timely submitted such a return reporting its revenues for the prior year, the exemption is not available.

10. At the same time, the forbearance proposed to be granted to qualifying carriers does not extend to all transactions covered by §215(a) and (b). If a transfer of control (§215(b)) or a merger (§215(a)(1)) involves another certificated carrier – as either the acquired or acquiring entity – and such other entity is not a “qualifying” one, then the statutory provisions must be followed. Similarly, if the transfer of control or merger transaction (regardless of the other carrier) will result in the dissolution of the qualifying carrier or the creation of a new carrier, then the qualifying carrier must still file a petition for abandonment and the new resulting entity must still seek certification as a carrier.

11. The Commission recognizes that the §215(a) and (b) filing and approval obligations are ones imposed by statute; they are part of the Public Utilities Act of 1974. However, in 1992, the General Assembly and Governor, in the “Telecommunications Regulatory Authorization Act of 1992,” granted this Commission the ability to respond to the changing structure of the telecommunications industry by modifying the regulation of telecommunications services in cases where such modification might “promote efficiency in public and private resource allocation.” The Commission believes that the elimination of most of the §215(a) and (b) obligations for non-local exchange carriers with less than $2,500,000 in annual intrastate gross revenues will serve such goal of the efficient use of resources. The proposed change lifts not only from qualified carriers, but this Commission, the burdensome - and really no longer useful - reporting and approval requirements. Moreover, a large part of the §215(a) duty to obtain Commission approval for certain transactions can be traced to a component of the Commission’s exercise of rate regulation under a cost-of-service, rate of return regime. However, by the Telecom Rules, this Commission lifted the latter type of rate regulation regime from most of the carriers covered by those Rules. In fact, the Commission has already granted to carriers governed by those Rules relief from other statutory filing obligations that historically accompanied such cost-of-service supervision.

12. The text of the proposed amendment granting such forbearance to qualified carriers is set forth in Exhibit “B” as new subsection (e) to Rule 10 of the Telecom Rules.

Now, therefore, IT IS ORDERED:

1. That, pursuant to 26 Del.C. §§209 and 703(3), the Commission proposes to amend Rule 4(f) and Rule 10 of its “Rules for the Provision of Telecommunications Services” (initially adopted by PSC Findings, Opinion, and Order No. 5833 (Nov. 6, 2001)). The proposed amendment to Rule 4(f) is set forth in Exhibit “A” to this Order; the proposed amendment to Rule 10 is set forth in Exhibit “B”.

2. That, pursuant to 29 Del.C. §§1133 & 10115, the Secretary shall transmit a copy of this Order, with the attached exhibits, to the Registrar of Regulations for publication in the Delaware Register of Regulations.

3. That, pursuant to 26 Del.C. §209 and 29 Del.C. §10115(a)(2) & (b), the Secretary shall cause the form of public notice attached as Exhibit “C” to be published in two-column format, outlined in black, in the following two newspapers on the following dates:

The News Journal (August 29, 2005)

Delaware State News (August 30, 2005)

The Secretary shall also ensure, pursuant to 29 Del.C. §10115, that a copy of such notice is sent to the Registrar of Regulations for its publication in the Register of Regulations. In addition, the Secretary shall mail a copy of this Order, with its exhibits, to the Division of the Public Advocate and to all persons or entities who have made written requests for advanced notice of this Commission’s rule-making proceedings. The Secretary shall file a certification of the completion of these tasks by September 16, 2005.

4. That interested persons or entities may submit written suggestions, compilations of data, briefs, or other written materials concerning these proposed amendments on or before Friday, September 30, 2005. Pursuant to 26 Del.C. §209(a), the Commission, through its designated Hearing Examiner, will hold a public hearing on the proposed amendments on Wednesday, October 19, 2005, beginning at 10:00 AM in the Third Floor Conference Room of the Carvel State Office Building, 820 North French Street, Wilmington, Delaware.

5. That, pursuant to 26 Del.C. §502 and 29 Del.C. §10117, the Commission designates Hearing Examiner Ruth Ann Price to organize, classify, summarize, and make recommendations concerning the rule changes proposed by this Order in light of the submitted materials and public hearings. Hearing Examiner Price is specifically authorized to conduct further hearings or direct submission of additional documents if deemed necessary or appropriate.

6. 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.

BY ORDER OF THE COMMISSION:

Arnetta McRae, Chair

Joann T. Conaway, Commissioner

Jaymes B. Lester, Commissioner

Dallas Winslow, Commissioner

ATTEST:

Karen J. Nickerson, Secretary

E X H I B I T "A"

RULES FOR THE PROVISION OF TELECOMMUNICATIONS SERVICES

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:

• Any political subdivision, public or private institution of higher education or municipal corporation of this State or operated by their lessees or operating agents that provides telephone service for the sole use of such political subdivision, public or private institution of higher learning or municipal corporation;

• A company that provides telecommunications services solely to itself and its affiliates or members or between points in the same building, or between closely located buildings which are affiliated through substantial common ownership and does not offer such services to the available general public;

• Providers of domestic public land mobile radio service provided by cellular technology excluded from the Commission’s jurisdiction under 26 Del.C. §202(c); and

• Payphone service providers regulated by this Commission under Rules promulgated in Regulation Docket No. 12.

“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:

• The rent, sale, lease, or exchange for other value received, of customer premises equipment, except for specialized terminal equipment as defined in 48 U.S.C. § 610(g);

• Telephone or telecommunications answering services, paging services, and physical pickup and delivery incidental to the provision of information transmitted through electronic or electromagnetic media, including light transmission;

• The one-way distribution of entertainment services or informational services with no more than incidental customer interaction required for selection of such entertainment or information services; and

• Telecommunications service provided by either primary cellular technology or by domestic public land mobile radio service, even in the event that such transmission originates or terminates in a wireline telephone.

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;

10.1.1.16 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 certifiecated 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 qualifed 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 carrrier’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.

9 DE Reg. 374 (9/1/05)

See PSC Findings, Opinion, and Order No. 5833 (Nov. 6, 2001) (adopting such “Telecom Rules”). The Telecom Rules do not apply to carriers electing regulation under the Telecommunications Technology Investment Act, 26 Del.C. §§704-11 (2004 Supp.). Thus, Verizon Delaware Inc. is not currently governed by the Telecom Rules.

This advance deposit bond must secure repayment in the amount of the greater of either 150% of the projected balance of such deposits at the end of three years or $50,000. If at any time during the carrier's operations its deposits exceed the bond amount, the carrier must submit a new bond in an amount to cover the higher pre-paid deposit balance. After three years, a carrier may obtain a waiver of the advance payment bond obligation by establishing sufficient financial resources to insure repayment of the deposits or advance payments held by the carrier.

The Letter would have to include a "choice of law" provision agreeing that Delaware law would govern the relationship between the issuer and the Commission as the Letter's beneficiary.

This requirement parallels the present requirement that the surety on a bond must be one licensed to do business in this State.

For a similar reason, the exemption is not available until a carrier has been certificated for one year. The Commission desires to have the opportunity to know both who controls a newly certificated carrier and what financial obligations such a new carrier is assuming during its first year of certification within this State.

See 26 Del.C. §203A(a) (certification), (c) (abandonment).

26 Del.C. §703(3) (2004 Supp.)

In current practice, the Commission allows many §215 applications filed by certificated carriers with no or only minimal business in Delaware to be "deemed approved" without any affirmative action by the Commission. See 26 Del.C. § 215(d).

See Rule 5(a)-(c) (allowing use of price lists in lieu of tariffs; allowing services to be introduced on 10 days notice and price changes to be made on 3 days notice); 5(d) (upon Commission investigation, a carrier must establish that price or rate is expected to cover the incremental cost of providing the service).