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(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

Attorney General's Office (AGO)

Public Regulatory Commission (PRC)

SUMMARY

Synopsis of Bill

House Bill 912 relates to the telecommunications industry in New Mexico. It requires the Public Regulation Commission (PRC) to approve certain changes of control transactions, and enacts a new section of the Telephone and Telegraph Company Certification Act. This bill, if enacted, would require prior approval by the PRC of any "change of control transactions" involving "telecommunications entities," including a grant of authority to the PRC to impose "requirements [on the entities that] further the benefits to the ratepayers" as a condition of approval.

Significant Issues

Currently, there is no statute explicitly stating that telecommunications entities need prior approval of the PRC before entering into transactions that affect control. This bill would expressly provide the PRC with the same authority over telecommunication entities that it has over other public utilities.

The bill broadly defines the scope of "telecommunications entity" to include the transmission of signs, signals, writings, images, sounds, messages, data or other information of any nature by wire, radio, lightwaves or other electromagnetic means originating and terminating in this state regardless of actual call routing.

FISCAL IMPLICATIONS

According to the PRC, passage of this bill would increase costs to the PRC. Additional staff would be required to evaluate and analyze all mergers, consolidations or acquisitions for over 400 telecommunications carriers to determine the impact on the public. The PRC estimates that one hearing examiner, one staff attorney, one technical staff member and one administrative support person would be required at an estimated $240.0 recurring impact to the general fund. PRC rulemakings arising from passage of this bill would also impose administrative costs estimated to be $70.0.

Additionally, the Attorney General may need to intervene and participate in the approval process of any future change of control transaction involving telecommunications entities to determine if the transaction is in the public interest of residential and small business consumers. As a result, the Attorney General's Office may require appropriations to support such activities.

ADMINISTRATIVE IMPLICATIONS

According to the PRC and the AGO, passage of this bill could significantly increase the workloads of their respective offices.

Passage of HB912 would require the PRC to amend its current rules and regulations regarding change of control transactions for telecommunications providers. The PRC would also be required to add a new administrative procedure for petitions for change of control transactions, which is not provided for under the current law and regulations. This bill would require most changes in the corporate structure of any of the 400 entities to be investigated and approved or disapproved by the PRC, regardless of the fact that the majority of these change of control transactions have no adverse impact on New Mexico customers.

Passage of this bill may also require the AGO to intervene and participate in the approval process of any future change of control transaction involving telecommunications entities.

TECHNICAL ISSUES

According to AGO, there is currently litigation pending as to whether the PRC has implicit authority over change of control transactions involving telecommunication entities. The PRC recently considered the issue when US West, Inc. sought to merge with Qwest Corporation, Inc. The PRC concluded it did not have regulatory authority to approve or disapprove the proposed merger. The PRC's decision is currently before the New Mexico Supreme Court on appeal by the Attorney General. Passage of this bill will not render the appeal moot (see N.M. Const. art. IV, § 34.), but will define the scope of the PRC's regulatory authority in future merger and change of control transaction cases.

HB912 conflicts with PRC rules and regulations that became effective January 1, 2001, which were implemented pursuant to HB400 (passed last year), to permit a regulatory framework that will allow an orderly transition from a regulated telecommunications industry to a competitive market environment by imposing an additional regulatory requirement upon all telecommunication entities. NMSA 63-9A-2. These rules, 17.11.19.14 NMAC and 17.11.21.15 NMAC, require prior written notification for change of control transactions, as defined in HB 912, for intrastate long distance providers and competitive local exchange carriers. HB912 also conflicts with 17 NMAC 13.5 that requires written notification for change of control transactions for incumbent local exchange carriers.

According to he PRC, HB912 also conflicts the section 253 of the Federal Telecommunications Act of 1996, which prohibits a state from imposing a local statute or regulation that "may prohibit or have the effect of prohibiting the ability of any entity to provide any interstate or intrastate telecommunications service". 47 USC 253. The provision of HB 912, which requires the PRC to regulate change of control transactions for cellular service companies, section A (3) may also be preempted by federal law.

OTHER SUBSTANTIVE ISSUES

HB 912 states no specific criteria for approving or disapproving a change of control transaction for a telecommunications entity and may impose additional regulatory barriers on an industry where the state and federal government are moving towards deregulation and promoting competition.

The existing New Mexico Telecommunications Act does not specifically address the authority of the PRC in change of control transactions involving telecommunications entities. This failure leads to uncertainty and litigation. Though the Attorney General believes the PRC currently has plenary authority over public utilities, including telecommunications companies, to protect the public interest and review such things as mergers, enactment of this bill will clarify and eliminate the ambiguity regarding the PRC's duty and authority in future change of control transaction cases.

LG/njw:ar