The Committee on Government Affairs was called to order at 8:16 a.m., on Friday, April 30, 1999. Chairman Douglas Bache presided in Room 3143 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Guest List. All Exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.

COMMITTEE MEMBERS PRESENT:

Mr. Douglas Bache, Chairman

Mr. John Jay Lee, Vice Chairman

Ms. Merle Berman

Mrs. Vivian Freeman

Ms. Dawn Gibbons

Mr. Harry Mortenson

Mr. Roy Neighbors

Ms. Bonnie Parnell

Ms. Gene Segerblom

Mr. Kelly Thomas

Ms. Sandra Tiffany

Ms. Kathy Von Tobel

Mr. Wendell Williams

COMMITTEE MEMBERS EXCUSED:

Mr. David Humke

GUEST LEGISLATORS PRESENT:

Senator Randolph Townsend, Washoe County Senatorial District 4

Senator Bernice Mathews, Washoe County Senatorial District 1

Senator Valerie Wiener, Clark County Senatorial District 3

STAFF MEMBERS PRESENT:

OTHERS PRESENT:

Senator Randolph Townsend, Washoe County Senatorial District 4, testified he was appearing after the previous day’s hearing on the special committee on electric energy and the bill resulted from a joint effort between the telecommunications services providers. The industry had worked hard over the past 20 years in bringing consistency to utility regulation in the State of Nevada, and he hoped the present bill accomplished that. He pointed out Senator Mathews would also be testifying, as she had introduced a bill regarding several similar issues and those were merged into S.B. 440. One issue addressed long distant carriers’ use of facilities operated by local exchange companies, what the patterns of behavior would be, how they would be measured, and what the penalties were. In a remarkable effort by the industry an advanced and aggressive regulatory mechanism allowing the ability of long distance carriers to compete in the local market was developed. There was also a level of stringency in the behavior by the local exchange companies creating a higher standard than elsewhere in the country. He felt it encouraged competitive market behavior by placing everyone on an equal footing.

The second part of the bill specifically dealt with local exchanges and their ability to provide new products in a fast and efficient manner, in order to compete with other carriers. The ability of the local exchange company to come to the market immediately with new products and new services was now available along with opening competition at the local level, and that was crucial to the success of telecommunications in the state. He felt the growth of local companies was imperative but more importantly was the ability to solicit all size companies to the state. Large companies, with the human resource assets they had, looked at all aspects of the state in analyzing the opening of a plant, or expanding an existing office. When looking at the bill one had to take into consideration not only what it did for citizens, but also what it did for the companies that competed against each other. It also would help with a more consistent tax base if nongaming type companies could be brought into the communities. He thought the S.B. 440 was a good companion bill to the electric restructuring bill.

Senator Townsend added that representatives from the local exchange companies, as well as the long distant carriers, worked for months crafting language affecting everyone in the State of Nevada. He pointed out that chairman Bache was the prime author of the restructuring bill A.B. 366 of the 1997 session and similar language was used in S.B. 440, in terms of commission review of revenues and rate of return. The fact that basic services were going to be the focus in the future had been outlined in the bill. There would have to be an understanding of the entire plan for alternative regulation in moving into a competitive market. There would be a basic service with all the embellishments being competitive. The market pressure should drive prices down for customers with service left to the marketplace and not the legislature. In closing he stated he was in the legislature when the decision was made by congress to break up the monopoly. The concept was simple with the companies obtaining different products and services from different carriers. The outcome had little impact on the business customer, but the true result was the demand by the public on the industry for independence through better technology, lower prices and better services. Deregulation had made these benefits available to everyone not just the business customer. He thought the bill enhanced that.

Senator Bernice Mathews, Washoe Senatorial District 1 testified she had input on only a small portion of the bill. She had proposed some of the language in her own bill, which was rolled into S.B. 440. She indicated she was at the meeting to lend support to Senator Townsend.

Mrs. Freeman indicated it was the first opportunity she had to check the bill. She said four sessions ago, the issue had been brought up by Dina Titus, who had done an energy study, so it was certainly not a new issue. She thought everyone’s constituents should be assured they would be treated fairly and the transition done in such a way that they would be comfortable with their service. There should also be assurance costs would not go up without some type of hearing and input from the public. Senator Townsend replied there was a definition of basic service on page 2, section 4, of the bill. The industry realized the most important point was basic service, as it was now almost perceived as a constitutional right. He felt that as long as the basic service was paid, that service should be available to the consumer whether it was telephoning a hospital to turning on a light.

Mrs. Freeman asked if she felt the breakup of the phone system benefited the consumer. Senator Mathews replied as a small business owner, she felt it was good for all small business-owners. She did have to shop for prices for services but good prices were available, and the bill could only enhance that entire situation.

Mrs. Freeman questioned if she had been able to find a service that was less expensive but also fitted her needs better. Senator Mathews responded the she referred to those added features as designer services, and they were readily available to the consumer. She added it was the same as shopping around to find a dress she liked and could not wear as she could not wear a size 12 dress that was on the rack. Her phone system was designed to fit her needs and she then shopped the marketplace to obtain the best possible price.

Mrs. Freeman wondered about the Senator’s home service. Senator Mathews indicated that her home service was just basic service.

Senator Townsend interjected that the basic residential service would not change and they would still have the ability to pick any long distance carrier they wanted, with those changes broken out on their bill. There would not be any rate increase as in the north there was consistency, although southern Nevada was a different problem.

Mrs. Freeman asked if the commission overseeing the utility was the same one that dealt with electric utilities, to which Senator Townsend replied in the affirmative.

Senator Townsend pointed out there were at least three commissioners in the audience who had been appointed by various governors. The burden of proof in the current residential structure lay with the utility, because it was their choice to go into a competitive undertaking, so basic service did not change under the bill.

Mrs. Freeman knew from discussions on electric deregulation during the 1997 session the consumer advocate had substantial input and asked if it was the same situation under S.B. 440. Senator Townsend related there was no change in the office of the consumer advocate with the bill. If a local exchange carrier decided to step out of the plan for alternative regulation (PAR) and unregulated service, the commission had the same position as the consumer advocate and unregulated in the competitive marketplace.

Ms. Segerblom asked if the bill would prevent slamming. Senator Townsend disclosed there was another bill from the consumer advocate, S.B. 485, dealing with slamming that the industry supported. Everyone in the Senate knew it was a serious problem and an unacceptable practice in the State of Nevada.

Mr. Neighbors stated both Las Vegas and Reno had been mentioned, but wondered what the rural counties could expect, as basic services were not available in some of the more remote areas. Senator Townsend declared as technology evolved, individuals in rural markets would utilize a wireless system rather than one involving poles and wires. It would require a satellite and presently Iridian was in the process of establishing a worldwide satellite so no matter where a person was located on the plant cell service would be available. He pointed out Senator Rhodes had a rather large ranch and depended more on his cell phone than his land line, but presently there were portions of his land where he was unable to receive service. He did not feel basic service would be changed in the rural counties, just regulated as it was in urban areas.

Mrs. Freeman stated she understood there was a small private company in the Fallon area. Senator Townsend said Churchill County had the only county owned phone system. As he had previously indicated, basic service was always going to be available and regulated, no matter what happened with any additional services that were offered.

Brian Herr, representing Nevada Bell thought the industry had changed considerably in recent years. Even a few years ago there were no laptops, which are considered wireless tools. There were now wireless phones, internet access, with features and functions on the telephone such as caller I.D. and voice mail. Those innovations are relied on extensively in our daily lives. Mr. Herr felt the challenge was to evolve the public policy forum under which we operate. To that end this was one of the many times since 1985 he had appeared before the committee regarding issues resulting from the breakup of the Bell system. In 1989 he was involved with the first plan for alternative regulations and again in 1993 to address issues relating to the cable industry. In 1995 he addressed the final plan for alternative regulation or PAR and felt S.B. 440 was a continuation of the regulatory reform and modified that plan for alternative regulation.

Mr. Herr stated there was 5 key issues in the bill. First was the cap of basic service rates for both business and residential. It moved the industry away from rate of return regulation, which was something that did not fit in with the competitive telecommunication industry. One of the most important conditions for Nevada Bell was the ability to compete fairly and the bill allowed them to bring products to market faster, some pricing flexibility, and the promotion of product and packaging capabilities. Those were important in meeting the demands of the customers. He thought the day was long gone where a telephone service could be pulled off the shelf and with the customer told it would fill their needs. Telecommunications services must be customized for residents and business customers alike in meeting their specific needs. Another portion of the bill needing comment was that part of the telecommunications act of 1996 dividing the industry into both wholesale and retail segments. When competitors came into the market, specifically in northern Nevada, some would build extensive networks, but some would buy parts of the wholesale basic services from Nevada Bell. They would then package those parts with their products and services and sell a retail package to the customer. The last section of the bill assured the wholesale customer was treated the same as the retail customer. He felt it was a balanced bill and believed it continued regulatory oversight where it was necessary and yet allowed competition in all the other segments. Telecommunications was an important part of the economy of Nevada when looking at growing and diversifying and with that a progressive and advanced telecommunications market should be in place.

Dan Reaser, attorney, with Lionel Sawyer & Collins representing Nevada Bill testified he would be addressing section 2 through 22 of the bill and some of the operative language in section 29. Sections 2 through 12 of the bill were definitions, and he would not go through those in depth. Sections 4, 5, 7, and 11 were definitions of basic, competitive, discretionary, and other essential services. He pointed out the consumer advocate would be involved in any potential proceedings and was entitled to receive certain information under the bill. Other definitions that were critical for a complete understanding were the definitions, in section 8 of an electing carrier, because the local telephone company would be an electing carrier. It was a local company such as Nevada Bell, but it was also one that was in a plan of alternative regulations under the commission’s existing regulations, and a company providing "provider of last resort" services in a major geographical area already under some form of alternative regulation. What the bill did was let them opt into an additional set of alternative regulatory procedures.

He added in section 12 he wanted to touch on "price floor." For purposes of discussion it merely meant "below cost." The concept of "price floor" was adopted to grant the commission future flexibility if it wanted to redefine what the price floor was. Section 13 was the first substantive section of the bill allowing a local telephone company already in the commission’s plan of PAR to opt into the alternative regulatory scheme provided in the bill. Section 14 stated once election was made, the local company was subject to four basic concepts. It was then free from the historical rate of return regulations or earnings review. It allowed the electing carrier veto power over decreasing rates in basic services on the date it elected into the program. As of that date there would already be rate caps because they were in a plan of alternative regulation. For instance if Nevada Bell opted to join the program there would be a freeze of residential rate at the current tariff of $10.75. Unless the utilities commission reclassified that basic service to competitive, discretionary or other essential uses it stayed as an electing carrier. The only way rates could be changed was to appear before the commission and say although the service was historically basic, because of competitive changes in the marketplace it was not basic anymore and should be moved into another market. They then could have pricing flexibility that existed under the commission’s regulations.

Section 15 provided that an electing carrier must continue providing basic residential phone services at the rates and under the terms and conditions that existed on the effective date the bill was enacted. So it provided protection for all the citizens that their basic service would not change into a competitive environment without the commission’s approval. There was a procedure for the commission in section 16 for reclassification of a basic service. That meant even though something was classified as basic service today, if the competitive environment changed, a petition could be filed with the commission changing it into one of the other markets. There was only one service that could not be eliminated from basic service and that was 911. Also in that section there was further delegation of rule making obligation to the commission in establishing criteria that governed the reclassification procedure and set forth some basic parameters for those rules.

Mr. Reaser stated section 17 created a procedure for the local telephone company to follow in setting prices for services classified as competitive and offer product packages, just as their competitors currently could. One important restriction was the price must be above the "price-floor." The price for services classified as basic, discretionary, or other essential must be geographically averaged throughout the provider’s service territory of "last resort," thereby insuring there would not be any discriminatory offerings to customers and competitors. Another standard that must be met was a 30 day notice to the commission before the utility could exercise price flexibility or offer product packages. Certain information must be included such as pricing, services, and packages and must be accompanied by a certification that there had been a cost study in establishing costs were not below the "price-floor." There were certain grounds for objection with procedures set in the bill for the commission to consider disputes and if the local company was providing a package of services each one of those services, must be provided individually. That way a consumer would have the ability to pick which features they wanted and would not be forced to buy the complete package.

He went on to say section 19 allowed local phone companies to run promotions, just as competitors did currently and still have some areas of protection. The promotions would be limited to 90 days within any 12 month consecutive period and must be offered on a non-discriminatory basis, territory wide within that same 12 month basis. For instance, if Nevada Bell offered a promotion in Carson City, it would have to be offered in the same 12 months to entire service territory of Nevada Bell. Consistent with existing regulations, a 1-day notice must be submitted to the commission before a promotion was offered. Section 19 allowed local companies to offer consumers new products with fewer restrictions than currently existed providing a more even playing field between the local company and the competitors that came into the local market. New product offerings were limited to the same limitations that governed pricing flexibility and product packaging.

Section 21 provided intrastate access costs must be at parody, meaning it had to be at or below what was paid for interstate access. It also provided a method for the carrier to recover losses caused by that change in policy by allowing the carrier to make adjustments in prices to other essential services on a revenue neutral basis and subjected to commission regulation. It was made clear in section 22 it was not the intent of the act to have any adverse affect on the local telephone company’s obligation as a wholesale business provider, it was a retail bill only. There was a whole new area under the telecommunications act of 1996 where local companies had both wholesale and retail capabilities, and the purposes of that section was to assure the wholesale portion was not altered in any manner. He added section 29 provided that sections 2 through 22 became effective on October 1, 1999.

Ms. Gibbons asked what the 1-day notice to the commission entailed. Mr. Reaser said there was no written notice required, what section 18 did was adopt the same standard for promotional pricing that presently existed.

Ms. Gibbons questioned if there had to be approval from the commission or could they just be noticed. Mr. Reaser replied it was only a notice to the commission.

Ms. Gibbons wondered if there were certain peak periods where responses to promotions were better. Mr. Herr noted that the point of the language was to allow some regulatory flexibility putting the local company in the same position as their competitors. It was clearly a marketing decision as to which products and services would be promoted. There were certain times of the year when promotions were more attractive, but it was a marketing decision in determining when and what should be promoted.

Mr. Mortenson was concerned about the prices for basic services being capped because the cost of basic service traditionally had gone down over the years. He asked if there was an inflationary clause allowing them to increase the basic cap. Mr. Reaser replied when each of the existing companies went into PAR, presently authorized by statute, the commission conducted a full-rate review basing the decision on the company’s actual cost structure. With passage of the bill there would no longer be a rate of return review every 5 years on the PAR giving additional freedom in presenting new products to the market place and more pricing flexibility.

Mr. Mortenson asked if the company had the option of capping the rate over the years, there would no longer be an advantage for rate decreases. He questioned if other companies would be able to offer basic service could they opt out of the package. Mr. Reaser stated other companies could clearly provide basic services. AT&T for example could come in and provide local residential services while having no regulatory limitation.

Steve Tackes, attorney at law, was appearing on behalf of MCI Worldcom, Cox Communications, and Nextlink, indicated competitive local service throughout the State of Nevada could be provided by those companies. MCI Worldcom was thought of as long distance carrier, but there was a subsidiary called Brooks Fiber providing competitive local telephone service in the Reno area. Nextlink and Cox Communications were competitive providers of local service in the Las Vegas market. The remaining sections of the bill not previously discussed were originally captured in a bill authored by Senator Mathews and later rolled into S.B. 440 so all telecommunications matter could be addressed together. Sections 23 through 26 dealt with a concept called performance standards and an expedited compliant process between carriers. Performance standards were the guarantee that the service occurring when the two companies interconnected would not be such that the customer would end up with degraded service. A user would want assurance they still had the ability to call all the people they had previously, as a telephone system had no value if the user could only reach a little subgroup of those people. It was very important that the same quality was available through the interconnection as was previously in place.

A lot of time had been spent with the commission over the past 18 months in developing measurements on how quickly local companies and competitors could repair facilities with basic agreements reached among the industry in measuring those elements. Sections 23 through 26 basically gave the commission the implementation of those standards for all consumers and telephone companies in Nevada. In the adoption of penalties it allowed companies to be penalized if they failed to meet the performance standards. There was also an expedited forum for dealing with carrier complaints as it would be unacceptable if a customer wanted to make calls on an interconnection, and there was a dispute between the two carriers. That would be unfair to both the customer and the network and would certainly harm competition if carrier disputes prevented the completion of calls or the use of competitive services.

If there was something wrong, the 30-day notice allowed the process to come before the commission and expedited an agreeable outcome as spelled out in section 24. Section 25 insured any decisions made by the commission were still subject to judicial review. Section 26 was requested by the consumer advocate to insure nothing done by the bill would in any way limit the advocate’s ability to proceed with an antitrust action if some grievous or widespread problems occurred. The phone companies were hooking up new customers on a daily basis so there could also be problems on a daily basis. Most problems would be resolved between the carriers themselves; however, some still needed another body to intervene. There might be widespread abuse of some sort statewide, and it was important for the consumer advocate to have the ability to step in and assert anti-trust actions against the parties.

Ms. Von Tobel questioned if only courts had the ability to penalize the utility and wondered why authority was being given to a regulatory agency within the state, when the move was away from regulation. Mr. Tackes replied it was a fallacy that only courts could penalize utilities. In the past if a utility did something wrong the commission would penalize them in the context of a general rate case. The change allowed the commission to directly penalize actions, particularly anti-competitive actions, and that was what the bill accomplished. Just as any other commission decision, if someone did not agree with the assessed penalty, they could still take it to court.

Ms. Von Tobel asked what he envisioned for the future of the Public Utility Commission. Mr. Tackes said the commission’s role had been progressing over the past 20 years toward one of less "who set the rates" to one who "we are the ones managing the transition to competition." In 1984 AT&T was broken up into separate regional bell operating companies and a separate long distance division. That was the beginning of competition and a change in the commission’s role. The commission was no longer looking just at rate cases but also dealing with access charges issues. The question arose about how local and long distance companies compensated each other when their facilities were used to complete calls, and the telecommunication act was the start of competition between local phone companies.

Ms. Von Tobel inquired if the commission’s thrust was more of a way of resolving disputes. Mr. Tackes related they would address resolution, but they would still deal with consumer protections, because as competition evolved new consumer problems also evolved. He added slamming was an issue arising with competition. That did not mean competition was bad, only that the bad points needed to be addressed, and saw the commission as playing a major consumer role in resolving disputes.

Ms. Von Tobel noted there was already a consumer advocate. Mr. Tackes stated the consumer advocate served a critical role, but on consumer issues involving telecommunication services, most of those arose in the context of the Public Utilities Commission. The consumer advocate was the person arguing in front of the commission for consumer rights and benefits, and their role was enlarged as they now had separate antitrust powers.

Ms. Segerblom questioned how Nevada Bell’s lines could be used by other entities. Mr. Tackes declared the telecommunications act of 1996, and previous to that the Nevada commission, took some very progressive actions saying that they realized new competitors were not able to come in and duplicate the network. So they required any incumbent local phone company to lease out some of their facilities to those competitors. The commission went through a process of pricing all of those elements to make sure that when elements were purchased it was at a price fair to them. He added in the long distance market that was always the case, everyone used each other’s networks and reimbursed them for that use.

Chairman Bache interjected that as the Senate was going into floor session shortly and Senator Valerie Wiener had requested to be heard on her bill before they convened, S.B. 440 would be interrupted, allowing her to testify.

Senator Valerie Wiener, Clark County District 3, testified she was appearing to request support of S.B. 27, which dealt with telephones and telegraphs. Several months ago she had talked with Bob Erickson, Research Director with the Legislative Counsel Bureau (LCB) in an effort to find something to repeal in Nevada law. There was such a propensity to add laws so she thought it would be an innovative approach to repeal something. After a great deal of research she and Bob came upon the idea of doing something about telegraph lines and thought it would be appropriate as she had been a radio station owner in southern Nevada. The reason she picked telegraph lines was because they were no longer in existence in the state. She had asked Mr. Erickson to work with telephone service providers as well the public utilities commission and S.B. 27 was the result of that effort. The bill would repeal 21 sections of Nevada law and she had asked Scott Young from LCB to address those sections.

She added the first telegraph line in the country was commissioned in 1843 between Washington D.C., and Baltimore, Maryland and in the early days the lines in Nevada went over the Sierra Mountains using trees instead of poles. At that same time as teamsters crossed the mountains and had trouble with their rigs they would cut sections of those trees to repair the wheels on their wagons. It disrupted service and often delayed important communications including the news of President Lincoln’s election to office. Nevada’s first regulation of the lines dated back to 1864 and during the civil war Governor Nye sent telegrams to Washington, D.C., to request federal troops to keep Nevada true to the union. In 1907 Governor Sparks telegraphed President Teddy Roosevelt requesting federal troops to settle a labor dispute in the town of Goldfield because Governor Sparks had disbanded the National Guard in the state. The president recalled the troop upon learning it was actually a labor dispute and chastised the Governor. The governor then established the state police by calling a special session of the legislature. After the Second World War use of the telegraph dropped significantly and other forms of communication took its place. Those included telephones, televisions, satellites, computers, and other evolving technologies making the telegraph obsolete.

In 1960’s, Western Union moved from telegraph lines to transcontinental microwave, which was replaced in the 1970’s with satellites, and in the 1980’s with computers. In terms of the history of telegraphs in Nevada even the repeal of those 21 sections of law would not totally delete the presence of the telegraph. It would continue to remain a link to the state’s heritage as it was contained in the state seal artwork.

Senator Wiener said an amendment had been offered on the Senate side after working closely with different service providers in the industry, primarily with the telephone companies. The amendment was offered to protect the cable television industry and that was on page 2, section 4 of the bill.

Scott Young from LCB stated the cable industry requested section 4, insuring that they had the same protection previously extended to telegraphs. Those issues were still relevant to the cable industry.

Chairman Bache indicated they would recess the hearing on S.B. 27 and Mr. Young could continue after finishing testimony on S.B. 440.

Julian Chang, Legislative Counsel for AT&T in the pacific region, said without repeating the statements of Mr. Reaser and Mr. Tackes, she indicated AT&T was in support of S.B. 440. The bill was the result of long negotiations between all parties in the industry. He felt it was a progressive move for the State of Nevada, and the performance measurements portion of the bill were necessary to insure the work over the past 18 months came to fruition.

Danny Thompson, representing the Nevada State AFL/CIO, indicated he had with him John Durran who represented the communication workers of America. The bill represented many hours of negotiation and the final product was S.B. 440. They were in support of the bill and felt it meant more jobs for Nevada citizens. Technology had replaced many workers in the area, as telephone operators were almost nonexistent, and the bill would once again add jobs to the industry

John Durran, president, Communication Workers of America, Local 9413, stated he believed it was about jobs in Nevada. Technology was changing and when the job market was opened to competition the members of the union would benefit.

Bob Ostrovsky, representing Cox Communications and Nextlink, pointed out both were competitive local exchange carriers in the Las Vegas Market. Cox was a cable company but was also licensed to provide telephone services. Nextlink was a competitive local exchange company providing mostly business service. He added he did not want to repeat what had previously been explained but stressed negotiations had actually started during the 1997 session, but the parties were unable to reach agreement at that time. The competitive local companies then agreed to meet monthly for the last 18 months and those meetings brought about the language in the bill. He felt it was good legislation and everyone in the industry would be happy to provide answers to any concerns there might be. He also felt the bill would encourage new competitors into the market place because they would have the benefit of the process the commission went through while developing performance standards. In addressing problems of local exchange carriers who could not meet the standards, penalties had been established, and it would eliminate all but the best competitive companies. They felt it was fair to both existing local companies, and the competitive local exchange companies as well.

Commissioner Michael Pitlock, member of Nevada Public Utilities Commission (NPUC), testified the bill was a logical next step in moving from a monopoly based telecommunications industry to a competitively based system. Traditionally evolution began with a series of steps, and holding back the former monopolies provided a way for the new start competitors to enter the market. Now they were to a point of setting regulations that freed up the incumbent utilities because the industry was becoming more competitive. The bill set forth the framework for NPUC to become the monitor of competitive behavior as well as insure competitors did not employ anti-competitive tactics. The goal was to see the market evolve and become more competitive. There was also language enabling them to penalize competitors that did not meet the standards and was probably one of the most important new tools that could be given to the commission so they could adequately deal with their new role of monitoring the competitive market.

In a competitive world, things moved very quickly, in the old regulated world it did not matter how fast they acted. That was why it was important to have expedited procedures to deal with company complaints but also provisions within the bill allowed a single commissioner to take certain actions. Even though they were dealing with complaints that were between carriers what usually hung in the balance was service to the customer. It was important that the commission could enter the dispute and have it resolved as quickly as possible so the customer continued to receive service. He felt the bill struck a good balance for both the incumbent and the competitive market, so he requested favorable treatment of the S.B. 440.

Ms. Von Tobel asked if the bill was reflected in their budget. Mr. Pitlock replied they did not see it as having any fiscal impact on the agency.

Ms. Segerblom asked if the bill benefited the utility stockholders. Mr. Pitlock said if she was referring to the incumbent companies, he felt it would be beneficial.

Chairman Bache said he thought the fact Nevada Bell fulfilled both roles was a good indication that agreements had been reached between competitors and incumbents, as they were the incumbent in northern Nevada and the competitor in the south.

Clay Johnson, representing GTE of Nevada, introduced Pat Fagan, legal counsel for Allison, McKenzie, Hartman, Soumbeniotis & Russell, he was appearing to testify against section 23 through 26 of the bill; however, GTE supported the other sections of the bill. Those sections required the Public Utility Commission to establish business and reporting standards for telecommunications services. It also required the commission to establish civil penalties for noncompliance as well as expedited procedures to resolve complaints associated with alleged violations of the standards. He had provided a copy of GTE’s concerns to the committee (Exhibit C).

The first two sections dealt with proposed amendments. The remaining segments were self-explanatory. He had been directed to monitor the bill on the Senate side, and early in the hearings GTE became concerned about liquidated damages and the separation of power issues. He only attended one meeting between Nevada Bell, Sprint, and competitive carriers when it became apparent that GTE was only a small player. GTE served 36,000 access lines mostly in Douglas and Lyon counties, while Nevada Bell served 340,000 access lines in the north and Sprint 824,000 lines in the south. Some of those concerns were addressed and eliminated such as the liquidated damages. The parties negotiated up until the last Senate committee was held, with changes and/or proposed amendments presented. GTE did not see the final version of the bill until it was presented on the Senate floor on April 19. They had only had the final bill for 9 days and GTE felt the amendments they were proposing were minor and would avoid any legal challenge to S.B. 440 in the future.

Mr. Johnson stressed that GTE fully supported local competition and the majority of the bill. GTE opposed arbitrary, prejudicial decisions by rulemaking or statute that discriminated against the legal rights of local phone companies. They believed without the proposed amendments, it was a bad policy to be pursued by the State of Nevada.

Ms. Berman stated she had read his handout but also heard him say he had not attended all the meetings and asked why she should give credence to his concerns if he had not participated in those meetings. Mr. Johnson replied as had been discussed there were only 2 companies that were in the PAR, those being Nevada Bell and Sprint. GTE was traditionally regulated, and it was a business decision on whether to take it forward. At the first meeting they were discussing PAR companies, but the traditional companies were not addressed.

Ms. Berman mused she just found it interesting that a full page of amendments was submitted by someone that had not been a part of the original hearings.

Ms. Von Tobel observed that although GTE was a small player in Nevada they were affiliated with GTE Communications Corp and that was a nationwide company. She understood they had just acquired a $265 million contract, which indicated it was a large nationwide company. She just wanted to make that point so people were clear that they were not a very small company. Mr. Johnson reiterated they were a small company as far as Nevada was concerned.

Chairman Bache commented he had stumbled into various meetings on S.B. 440 when it was still in the Senate hearings, and found 20 to 25 people representing various telephone companies throughout the state and thought due to the importance the company would want to be involved. He felt it was not a minor issue that only affected the two major incumbent companies.

Mr. Tackes indicated the issues brought up by GTE were fully discussed at the meetings and believed they had been adequately addressed in the resulting legislation. He was surprised at the first bullet point in the handout as that was not what the bill stated. There were specific language changes in the bill to insure that the commission’s decisions could be fully reviewed by the courts.

Mr. Chang added that S.B. 440 and S.B. 207 were not rolled together until the Senate hearing on April 15 and it appeared amendments targeted S.B. 207, which had been introduced on February 15. Between those two dates there were ample independent discussions on both bills and GTE chose not to participate. The concerns had already been substantively addressed and he urged a "yes" vote on S.B. 440 as it had been presented, without any amendments.

Ms. Parnell questioned if all the parties were comfortable with the single commissioner decision. Mr. Tackes replied there were many discussions regarding the single commissioner, and they had effectively limited the authority of that commissioner just to take interim relief, absent any award of penalties. That was where the compromise played a part, as it was important to have an individual commissioner step in and at least postpone an inappropriate action.

Chairman Bache closed the hearing on S.B. 440 and stated they would continue hearing testimony on S.B. 27.

Bob Gastonguay, executive director of the Nevada State Cable Telecommunications Association, testified they were the group that originally amended S.B. 27 due to the fact that in the near future they would be an important part of providing telephones on a hot wire. They felt the protection provided by the bill would benefit cable television also.

Stephanie Tyler, representing Nevada Bell, said they had worked with Senator Wiener since conception of the bill, and she had gone through the statutes and looked at modernizing them. She added Nevada Bell was in full support of the legislation.

Margaret McMillan, representing Sprint, stated they were also lending their support to the bill.

Chairman Bache stated, as there was no further testimony they would close the hearing on S.B. 27. There was one other matter that had previously been discussed, and there were people in attendance wishing to testify on S.B. 341. It was the bill that dealt with the subcontracting of franchises.

Danny Thompson, representing the Nevada AFL/CIO stated he had previously passed out an amendment to the bill and a subsequent amendment, both were in error. In Clark County, Silver State Disposal decided to contract out all the hauling of garbage and in fact lay off those employees of the company that were currently performing the work. He said they were concerned with that type of action without any oversight of that company. The company was a monopolistic franchise and their rates were tied to the Consumer Price Index, becoming the middleman with the public’s money. Those 80 drivers that hauled the garbage to the dump would lose their jobs and the work contracted out. In speaking to representatives of Silver State he had been told they did not have the expertise to haul the garbage to the dump and he did not understand what a contractor could do differently as the garbage was picked up, taken to the dump, and dumped. He added he would get the current language amending NRS 244.187 addressing the county law and NRS 268.081 that was the city law to the committee during the day. In effect it would say, "No franchisee in a county over 400,000 who operated in the collection and disposal of garbage or other waste, or the operation of landfill may assign, sell, lease, or subcontract any rights, duties, or work contained in or covered by the agreement." That could only be done with approval by the county commissioners with a 30-day written notice of the franchisee’s or public utility’s intent to assign, sell, assign, lease, or subcontract rights, duties, or work contained in or covered by the agreement with the county. There was a similar proposal addressing city responsibility. While the teamster’s contract allowed subcontracting of work, they did not believe that for future issues it was proper such a radical decision was made before obtaining permission of the governing body.

Dennis Kist, representing AFL/CIO, Local 631, had no additional comments except to state that the specifics of what Silver State intended was to let their drivers go and let the subcontractor do it with fewer drivers on a per load basis. He felt the governing agency should be concerned with safety issues, as those semi-trucks would be driving on the roadways of southern Nevada. Those governing bodies should have knowledge of who was doing the work and if they subcontracted out to cut their costs, how were those rates adjusted in comparison to what everyone was paying for their garbage service. If a rate was already agreed to by the users and the work costs were cut in half, then the rate savings should be passed on to the consumer.

Robert Grossbeck, general counsel, Republic Silver State Disposal, pointed out the subcontractor dispute over the transfer department had been resolved subject to ratification by the membership of Local 631. The process in place worked, and there was a collective bargaining agreement that was designed to deal with disputes. The collective bargaining agreement was supposed to do that and there had been testimony about public hearings to pass on rate savings. Under the process they appeared before each separate franchise area and municipalities they served, to justify rate increases when they presented them. He pointed out compensation was a large issue, but the Consumer Price Index limited the company’s rates. They were proud of the services they provided and their rates were among the lowest in the country. He added their relationship with Local 631 was good, and there was a mechanism in place that addressed labor disputes so he was confident the process would continue to work.

Chairman Bache questioned if the amendments had helped facilitate discussions in trying to resolve the situation. Mr. Grossbeck related he gave the union a lot of credit and thought it would have been worked out regardless of the amendment.

Chairman Bache commented no action would be taken on any of the bills, as the committee had lost all but 6 members. As there were no further business the meeting was adjourned at 10:22 a.m.

RESPECTFULLY SUBMITTED:

Virginia Letts,

Committee Secretary

APPROVED BY:

Assemblyman Douglas Bache, Chairman

DATE: