1. (a) Scope and purpose. This section applies to the certification of persons and entities to provide basic local exchange telephone service, basic local telecommunications service, and switched access service as holders of service provider certificates of operating authority, established in the Public Utility Regulatory Act, Chapter 54, Subchapter D. Through this section, the commission strives to protect the public interest against entities that are not qualified to provide basic local exchange telephone service, basic local telecommunications service, and switched access service. The commission's overall goal is to encourage the development of a competitive marketplace for local exchange telecommunications services, free of unreasonable barriers to entry, that will provide consumers with the best services at the lowest cost.

2. (b) Standards for granting certification to SPCOA applicants.

   1. (1) The commission may condition or limit the scope of a SPCOA's service in at least the following ways:

      1. (A) Facility-based;
      2. (B) Resale-only;
      3. (C) Data-only;
      4. (D) Geographic scope;
      5. (E) Some combination of the above, as appropriate.

   2. (2) The commission shall consider the following factors in deciding whether and how to condition or limit a SPCOA:

      1. (A) Whether the applicant has satisfactorily provided all of the information required in the application for a SPCOA.
      2. (B) Whether the applicant is financially qualified as a facilities-based SPCOA. To prove financial qualifications as a facilities-based SPCOA, the applicant shall meet the standards set forth in §26.109(b)(1)(B) of this title (relating to Standards for Granting Certificates of Operating Authority).

      3. (C) Whether the applicant is financially qualified as a resale-only SPCOA. To prove financial qualifications as a resale-only SPCOA, an applicant shall provide evidence sufficient to establish that:

         1. (i) Applicant possesses the greater of $25,000 cash or cash equivalent or sufficient cash or cash equivalent to meet start-up expenses, working capital requirements and capital expenditures, liquid and readily available to meet the applicant's start-up expenses, working capital requirements and capital expenditures for the first year of its Texas operations; or

         2. (ii) Applicant is an established business entity and is able to demonstrate evidence of profitability in existing operations for two years preceding the date of application by submitting a balance sheet and income statement audited or reviewed by a certified public accountant establishing all of the following:

            1. (I) A long-term debt to capitalization ratio of less than 60%;
            2. (II) A return-on-assets ratio of at least 10%; and,
            3. (III) The greater of $10,000 cash or cash equivalent or sufficient cash or cash equivalent to meet start-up expenses, working capital requirements and capital expenditures, liquid and readily available to meet the applicant's start-up expenses, working capital requirements and capital expenditures for the first year of its Texas operations.

      4. (D) Whether the applicant is technically qualified. The commission shall determine whether an applicant possesses sufficient technical qualifications to be awarded a facilities-based SPCOA certification or whether applicant should be restricted to a resale-only SPCOA certification, based upon a review of the following information.

         1. (i) Prior experience by the applicant or one or more of the applicant's principals or employees in the telecommunications industry or a related industry.
         2. (ii) Any complaint history regarding the applicant, applicant's telecommunications affiliates, predecessors in interest, shareholders, and principals on file at the Public Utility Commission of Texas, the Texas Attorney General, or with the Public Utility Commissions, Public Service Commissions, or Attorneys General in other states where the applicant is doing business. Relevant information shall include, but not be limited to, the type of complaint, status of complaint, resolution of complaint, and the number of customers in each state where complaints have occurred.
         3. (iii) The compliance record of the applicant, applicant's telecommunications affiliates, predecessors in interest, shareholders, and principals at the Texas Comptroller's Office.
         4. (iv) The compliance record of the applicant, applicant's telecommunications affiliates, predecessors in interest, shareholders, and principals at the Public Utility Commission of Texas.
      5. (E) Whether the applicant is able to meet the commission's quality of service standards. The quality of service standards shall include, but not be limited to, 911 compliance, local number portability capability and Y2K compliance of all telecommunications equipment.
      6. (F) Whether certification of the applicant is in the public interest.
      7. (G) Whether the applicant, together with affiliates, had in excess of 6.0% of the total intrastate switched access minutes of use as measured by the most recent 12-month period preceding the filing of the application for which data is available.
      8. (H) Whether the applicant has limited its operation to data-only services. If the applicant is limited to data-only services, the applicant will be eligible for a data-only SPCOA, and the applicant shall be waived from 911 and local number portability compliance as related to switched voice services. If the applicant intends to add voice services at a future date, the applicant must first file an amendment, subject to approval of the commission, which shows that the applicant is in compliance with all of the commission's quality of service standards.
   3. (3) If, after considering the factors in this subsection, the commission finds it to be in the public interest to do so, the commission may limit the geographic scope of the SPCOA.

3. (c) Financial instruments that will meet the cash requirements established in this section.

   1. (1) Applicants for SPCOAs shall be permitted to use any of the financial instruments set out in subparagraphs (A)-(F) of this paragraph to satisfy the cash requirements established in this rule to prove financial qualification.

      1. (A) Cash or cash equivalent, including cashier's check or sight draft.
      2. (B) A certificate of deposit with a bank or other financial institution.
      3. (C) A letter of credit issued by a bank or other financial institution, irrevocable for a period of at least 12 months beyond certification of the applicant by the commission.
      4. (D) A line of credit or other loan, issued by a bank or other financial institution, irrevocable for a period of at least 12 months beyond certification of the applicant by the commission and payable on an interest-only basis for the same period.
      5. (E) A loan issued by a subsidiary or affiliate of applicant, or a corporation holding controlling interest in the applicant, irrevocable for a period of at least 12 months beyond certification of the applicant by the commission, and payable on an interest-only basis for the same period.
      6. (F) A guaranty issued by a shareholder or principal of applicant, a subsidiary or affiliate of applicant, or a corporation holding controlling interest in the applicant, irrevocable for a period of at least 12 months beyond the certification of the applicant by the commission.
   2. (2) To the extent that the applicant relies upon a loan or guaranty provided in paragraph (1)(E) or (F) of this subsection, the applicant shall provide evidence sufficient to establish that the lender or guarantor possesses sufficient cash or cash equivalent to fund the loan or guaranty.
   3. (3) All cash and instruments listed in paragraph (1)(A)-(F) of this subsection shall be unencumbered by pledges as collateral and shall be subject to verification and review by the commission prior to certification of the applicant and for a period of 12 months beyond the date of certification of the applicant by the commission. Failure to comply with this requirement may void an applicant's certification or result in such other action as the commission deems in the public interest, including, but not limited to, assessment of reasonable penalties and all other available remedies under the Public Utility Regulatory Act.

4. (d) Name on certificates.

   1. (1) All basic local exchange telephone service, basic local telecommunications service, and switched access service provided under an SPCOA shall be provided in the name under which certification was granted by the commission. The commission shall grant the certificate in only one name.

      1. (A) If the applicant is a corporation, the commission shall issue the certificate in the corporate or assumed name of the applicant.
      2. (B) If the applicant is an unincorporated business entity or an individual, the commission shall issue the certificate in the assumed name of the entity or the individual.
      3. (C) Commission staff shall review the requested name to determine if the name is deceptive, misleading, vague, inappropriate, or duplicative of an existing certificated telecommunications utility. If the staff determines that the requested name is deceptive, misleading, vague, inappropriate, or duplicative, it shall notify the applicant and the applicant shall modify the name to alleviate the staff's concerns. If the name is not adequately modified, the application may be denied.
   2. (2) The holder of an SPCOA may request commission approval to change the name on the certificate by filing an application to amend its certificate with the commission.

5. (e) Reporting requirements.

   1. (1) All SPCOA holders shall file updated information set forth in paragraph (2) of this subsection on an annual basis, by June 30 of each year.

   2. (2) Annual reportable information shall consist of, but not be limited to the following:

      1. (A) Changes in addresses, telephone numbers, authorized contacts and other information for contacting SPCOA holders in Project Number 19421, Notification of Changes in Address, Contact Representative, and/or Telephone Numbers, Pursuant to P.U.C. Substantive Rule §26.89;
      2. (B) A description of the type(s) of communications services being provided and the exchanges in which the services are being provided.

Source Note:The provisions of this §26.111 adopted to be effective September 2, 1999, 24 TexReg 6737.