                                 CODE OF VIRGINIA

TELEPHONE REGULATORY ALTERNATIVES (§ 56-235.5)

A. As used in this section, &#8220;telephone company&#8221; means any public
service corporation or public service company which holds a certificate of
public convenience and necessity to furnish local exchange telephone service,
except that companies which are regulated pursuant to Chapter 16 (&#xA7; 56-485
et seq.) or 19 (&#xA7; 56-531 et seq.) of this title are not included within
this definition.

B. In regulating telephone services of any telephone company, and
notwithstanding any provision of law to the contrary, the Commission, after
giving notice and an opportunity for hearing, may replace the ratemaking
methodology set forth in &#xA7; 56-235.2 with any alternative form of regulation
which: (i) protects the affordability of basic local exchange telephone service,
as such service is defined by the Commission; (ii) reasonably ensures the
continuation of quality local exchange telephone service; (iii) will not
unreasonably prejudice or disadvantage any class of telephone company customers
or other providers of competitive services; and (iv) is in the public interest.
Alternatives may differ among telephone companies and may include, but are not
limited to, the use of price regulation, ranges of authorized returns,
categories of services, price indexing or other alternative forms of regulation.
A hearing under this section shall include the right to present evidence and be
heard. Prior to any hearing under this section, the Commission shall provide
parties an opportunity to conduct discovery.

C. Any telephone company or company regulated pursuant to Chapter 16 (§ 56-485
et seq.) or 19 (§ 56-531 et seq.) of this title may apply to the Commission at
any time to obtain an alternative form of regulation. The Commission shall
approve the application if it finds, after notice to all affected parties and
hearing, that the proposal meets the standards for an alternative form of
regulation set forth in subsection B.

   1. A Commission order, including appropriate findings of fact and conclusions
   of law, denying or approving, with or without modification, an application for
   an alternative form of regulation shall be entered no more than 90 days from
   the filing of the application, except that the Commission, upon notice to all
   parties in interest, may extend that period in additional 30-day increments
   not to exceed an additional 90 days in all.

   2. If the Commission approves the application with modifications, the
   telephone company, or company regulated pursuant to Chapter 16 (&#xA7; 56-485
   et seq.) or 19 (&#xA7; 56-531 et seq.) of this title, may, at its option,
   withdraw its application and continue to be regulated under the form of
   regulation that existed immediately prior to the filing of the application,
   unless it is modified for a telephone company by the Commission pursuant to
   subsection B.

D. The Commission may, after notice and opportunity for hearing, alter, amend or
revoke any alternative form of regulation previously implemented if it finds
that (i) the affordability of basic local exchange service, as such service is
defined by the Commission, is threatened by the alternative form of regulation;
(ii) the quality of local exchange telephone service has deteriorated or will
deteriorate to the point that the public interest will not be served by
continuation of the alternative form of regulation; (iii) the terms ordered by
the Commission in connection with approval of a company&#8217;s application for
alternative form of regulation have been violated; (iv) any class of telephone
company customers or other providers of competitive services are being
unreasonably prejudiced or disadvantaged by the alternative form of regulation;
or (v) the alternative form of regulation is no longer in the public interest.

E. The Commission shall have the authority, after notice to all affected parties
and an opportunity for hearing, to determine whether any telephone service of a
telephone company is subject to competition and to provide, either by rule or
case-by-case determination, for deregulation, detariffing, or modified
regulation determined by the Commission to be in the public interest for such
competitive services.

F. The Commission may determine telephone services of any telephone company to
be competitive when it finds competition or the potential for competition in the
market place is or can be an effective regulator of the price of those services.
Such determination may be made by the Commission on a statewide or a more
limited geographic basis, such as one or more political subdivisions or one or
more telephone exchange areas, or on the basis of a category of customers, such
as business or residential customers, or customers exceeding a revenue or
service quantity threshold, or some combination thereof. The Commission may also
determine bundles composed of a combination of competitive and noncompetitive
services to be competitive if the noncompetitive services are available
separately pursuant to tariff or otherwise. In determining whether competition
effectively regulates the prices of services, the Commission shall consider: (i)
the ease of market entry, (ii) the presence of other providers reasonably
meeting the needs of consumers, and (iii) other factors the Commission considers
relevant. For purposes of this section, the Commission shall consider all
wireless communications providers that offer voice communications services to be
facilities-based competitors owning wireline network facilities and reasonably
meeting the needs of consumers, regardless of whether such wireless providers
own wireline network facilities. In its determination, the Commission shall not
exclude as a competitor any affiliate of the telephone company. Notwithstanding
any other provisions of this subsection, any telephone services that are the
functional equivalent of the services offered individually or as part of a
bundle of services by a county, city or town pursuant to &#xA7; 56-265.4:4 or
Article 5.1 (&#xA7; 56-484.7:1 et seq.) of Chapter 15 of this title, either
directly or pursuant to a public-private partnership, shall be deemed
competitive services in the geographic area where the services of the county,
city or town are offered for purposes of this article and any alternate
regulatory plans approved by the Commission.

G. The Commission shall monitor the competitiveness of any telephone service
previously found by it to be competitive under any provision of subsection F
above and may change that conclusion, if, after notice and an opportunity for
hearing, it finds that competition no longer effectively regulates the price of
that service.

H. Whenever the Commission adopts an alternative form of regulation pursuant to
subsection B or C above, or determines that a service is competitive pursuant to
subsections E and F above, the Commission shall adopt safeguards to protect
consumers and competitive markets. At a minimum these safeguards must ensure
that there is no cross subsidization of competitive services by monopoly
services.

I. If the Commission determines pursuant to subsections E and F that 75 percent
or more of residential households or businesses in a telephone company&#8217;s
incumbent territory are in areas that have been determined by the Commission to
be competitive for a telephone service, the Commission shall expand, for that
telephone service throughout the company&#8217;s incumbent territory, its
competitive determination and apply the same regulatory treatment already
adopted by the Commission for that telephone service in competitive areas,
including any safeguards under subsection H.

J. If a telephone company provides 90 percent or more of its residential and
business lines access to fiber optic or copper-based broadband service, as
defined by the Federal Communications Commission, within an exchange area, the
Commission shall expand, for basic and associated telephone services in that
exchange area, its competitive determination and apply the same regulatory
treatment already adopted by the Commission for those services in competitive
areas, including any safeguards under subsection H.

HISTORY: 1993, c. 21; 1996, c. 18; 2002, cc. 479, 489; 2003, c. 711; 2009, c.
788.