Telecommunications Companies: Legal Issues & Considerations

In Minnesota, a telecommunications carrier is “a person, firm, association, or corporation authorized to furnish” an interchange telephone service and/or a local telephone service (Minn. Stat. § 327.01 subd. 6). Such carrier “does not include entities that derive more than 50 percent of their revenues from operator services provided to transient locations such as hotels, motels, and hospitals” nor “entities that provide centralized equal access services.” Id.

A telephone company on the other hand is “any person, firm, association or any corporation, private or municipal, owning or operating any telephone line or telephone exchange for hire, wholly or partly within this state, or furnishing any telephone service to the public” (Minn. Stat. § 327.01. subd. 7). A telephone company has four subcategories:

  1. Cooperative telephone associations, governed by Minnesota Statutes section 237.065;
  2. Municipal telephone associations, governed by Minnesota Statutes section 237.19;
  3. Large companies; and
  4. Independent telephone companies that provide “local exchange service to fewer than 30,000 subscribers within the state” (Minn. Stat. § 237.01, subd. 3).

A telephone company or telecommunications carrier providing services in Minnesota must comply with the regulations set forth in Minnesota Statutes chapter 237. Consequently, below are a number of unique legal issues and considerations that a telecommunications company will need to prepare for.

Legal Considerations

Unless otherwise noted, the following regulations only apply to telephone companies and telecommunications carriers offering local services and are not applicable to telecommunications carriers.

Company Must Have Authority to Provide Services

Prior to providing any telephone service, a certificate of authority must be obtained from the commission (Minn. Stat. § 237.16, subd. 1). The commission will determine whether the “person possesses the technical, managerial, and financial resources to provide the proposed telephone services.”Id. In addition to requesting a certificate of authority, the company must also “file a territorial map” identifying the territory that is going to be served (Minn. Stat. § 237.16, subd. 3).

Meet Commissions Regulatory Expectations

In order to meet the commission’s regulatory expectations, a company should make sure that the state’s goals are being met; therefore, pursuant to Minnesota Statues section 237.011, a telecommunications company should provide:

Universal Service

The telephone company may not provide services “within the state upon terms or rates that are unreasonably discriminatory… [nor] unreasonably limit its service offerings to particular geographic areas unless facilities necessary for the service are not available and cannot be made available at reasonable costs” (Minn. Stat. § 237.60).

Fair and Reasonable Rates

In addition to furnishing “reasonably adequate service and facilities for the accommodation of the public,” the companies rates must be “fair and reasonable for the intrastate use” (Minn. Stat. § 237.06).

Make Sure Prices are Not Discriminatory

The company may not charge any more or less for “compensation for services for any interstate service rendered by it” than that charged to another “firm, person, or corporation” for similar services under similar circumstances (Minn. Stat. § 237.09).

Make Sure Special Pricing is Appropriate and Justified

Special pricing is permitted for “noncompetitive services and for services subject to emerging competition when differences in the cost of providing a service or a service element justifies a different price for a particular customer or group of customers” (Minn. Stat. § 237.071). Company promotions that offer waiver of charges, redemption coupon, or premium with the purchase of a service are permitted as long as there are distinctions among the customer group (Minn. Stat. § 237.626).

Make Sure All Rates and Price Lists are Filed and Public

A company must file with the department any “specific rate, toll, or charge for every kind of noncompetitive service and a price list for every kind of service subject to emerging competition, together with all rules and classifications used by it in the conduct of the telephone business, including limitations on liability” (Minn. Stat. § 237.07).

Make Sure to Obtain Approval for Any Rate Changes

Established rates for large companies may only be changed if they are shown to be “just and reasonable” and are “approved by the commission” (Minn. Stat. § 237.075). Rate considerations shall give weight to “the property [cost] when first devoted to public use, to prudent acquisition cost to the telephone company, less appropriate depreciation on each, to construction work in progress, to offsets in the nature of capital provided by sources other than the investors, and to other expenses of a capital nature.” Id.

Appropriate Infrastructure

A company shall provide infrastructure for high speed and economically efficient telecommunications services. A company many not “intentionally impair the speed, quality, or efficiency of services, products, or facilities offered to a consumer under a tariff, contract, or price list (Minn. Stat. § 237.121). This requirement also applies to telecommunications carriers.

Fair and Reasonable Competition

To increase competition for local exchange telephone services, the commission may authorize and prescribe the terms and conditions of the construction of telephone lines or exchanges; and protect against “monopolistic practices” by establishing the “terms and conditions for the entry of telephone service providers” (Minn. Stat. § 237.16, subd. 1). The commission may also require “equal access and interconnection with the company’s network and other features, functions, and services” (Minn. Stat. § 237.16, subd. 8). This provision also applies to telecommunications carriers.

Quality Service

Pursuant to Minnesota Statutes section 237.16, and also applicable to telecommunications carriers, the commission may “prescribe standards for quality of service.” Additionally, the commission may only grant “consent to a sale of a service territory” if it finds that the company “servicing the local exchange service territory” has complied with quality standards and the proposed buyer will have the financial means to comply as well (Minn. Stat. § 237.231, subd. 5).

Customer Choice

The commission may require services of both telephone companies and telecommunications carriers to be unbundled to “at least the level required by existing federal standards” (Minn. Stat. § 237.16). If the company offers bundles, each service must be “available to customers on a standalone basis” and the “package rate or price may not exceed the sum of the unpackaged rates or prices for the individual service elements or services” (Minn. Stat. § 237.626).

Company Must Have an Office in Minnesota

The company must have an office in Minnesota and make “reports to the department as it shall from time to time require” (Minn. Stat. § 237.11).

Company Must Annually Advice Residential Customers of Available Services and Prices

Residential customers shall be advised “of the price of all service options available to that customer” annually in the form of a bill insert (Minn. Stat. § 237.66).

Company May be Required to Physically Connect to Other Systems

For public convenience, a telephone company may be required to physically connect and offer telephone services between its own systems and another telephone company for a reasonable price “whenever such physical connection or connections are practicable and will not result in irreparable injury to the telephone system” (Minn. Stat. § 237.12). If a company is providing long-distance telephone service, that company shall pay local telephone services compensation that is a portion of the fair and reasonable (1) “costs of local exchange facilities used in connection with long-distance telephone services,” and (2) “common costs of companies providing local telephone services.” Id. When a company is required to interconnect, upon request, it must “disclose in a timely and uniform manner information necessary for the design of equipment and services that will meet the specifications for interconnection” (Minn. Stat. § 237.121). This requirement also applies to telecommunications carriers.

Company Must File Appropriate Documents When Expanding

When a company wishes to “expand the area to which it can provide calling to its customers,” all “agreements between the telephone company and other telephone companies and telecommunications carriers” must be filed with the commission (Minn. Stat. § 237.414).

Company Must Obtain Consent When Purchasing and Selling

The telephone company may not “purchase or acquire the property, capital stock, bonds, securities, or other obligations, or the franchises, rights, privileges, and immunities of any telephone company doing business within the state without first obtaining the consent of the commission” (Minn. Stat. § 237.23). Additionally, if the telephone company “has annual revenues from regulated telecommunication operations of $100,000,000 or more,” the telephone company “may not sell a local exchange service territory without receiving the prior consent of the commission” (Minn. Stat. § 237.231).

School Service and Pricing Special Regulations Must be Complied With

If there is a school in the company’s service area, additional service must be provided when it is requested to “ensure access to basic telephone service from each classroom and other areas within the school” (Minn. Stat. § 237.065). The cost of these additional services must be based on a set flat rate “that is less than the company’s flat rate for an access line for a business and the same as or greater than the company’s flat rate for an access line for a residence in the same local telephone service exchange.” Id.

State Government Pricing Plan May be Implemented

There may be a state governmental telecommunications pricing plan if such plan will “(1) provide and ensure availability of high-quality, technologically advanced telecommunications services at a reasonable cost to the state; and (2) further the state telecommunications goals” (Minn. Stat. § 237.066). Such plan may serve “state agencies; educational institutions, . . . private colleges; public corporations; and political subdivisions of the state” and may offer “basic or advanced telecommunications services at discounted or reduced rates.” Id. Such plan must be submitted to, and approved by, the commission. Id.

Company Must Contribute to Universal Service Fund

The commission will require “all providers of telephone services, including telecommunications carriers, to contribution to a universal service fund” (Minn. Stat. § 237.16, subd. 9). The fund is “designed to preserve the availability of universal service throughout the state.” Id.

Company Must Comply with Anti-Slamming Requests

If a telecommunications carrier customer requests authorization prior to service from a different intrastate telecommunications carrier, the telephone company may “not process a request to serve the customer by another telecommunications carrier without prior authorization from the customer” (Minn. Stat. § 237.661).

Company Must Pay Regulatory Assessments

Company must pay the commission quarterly assessment costs (Minn. Stat. § 237.295).

Service May be Obtained by Fraud

When a person obtains services by fraud, the telecommunications provider may “begin a civil proceedings in a district court to enjoin the violation” (Minn. Stat. § 237.73).

In addition to the provisions noted above, pursuant to Minnesota Statutes section 237.74 telecommunications carriers must also file a services price list, provide nondiscriminatory prices and services, only offer special pricing when appropriate, comply with investigations, and obtain certification prior to operation.

The above provisions provide an outline of Minnesota regulation; however, pursuant to Minnesota Statutes section 237.76, a telephone company can “petition the commission for approval of an alternative regulation plan. Such plan may be approved ” in order to provide customers quality service at affordable rates and to provide more flexibility and “facilitate the development of telecommunication alternatives for customers.” Id.


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