(a) Application. This section applies to incumbent
local exchange companies (ILECs), as defined in the Public Utility
Regulatory Act (PURA) §51.002(3), which have not elected to be
regulated pursuant to PURA Chapters 58 or 59.
(b) Purpose. The purpose of this section is to establish
the substantive and procedural requirements for an ILEC to introduce
new services and/or to exercise pricing and packaging flexibility,
including customer promotional offerings, and for complaints regarding
service offerings introduced by informational notice offerings.
(c) New services. The term "new services" has the meaning
assigned in §26.5 of this title (relating to Definitions) and
shall include services for which no rate was in effect on September
1, 1999. An ILEC may file an informational notice to introduce a new
service. An ILEC filing an informational notice pursuant to this subsection
shall file the appropriate information in accordance with subsection
(g)(2) of this section.
  (1) Pricing standards.
    (A) An ILEC shall price each new service at or above
the service's long run incremental cost (LRIC).
    (B) The price of a new service may not be preferential,
prejudicial, discriminatory, predatory, or anticompetitive.
    (C) A price that is set at or above the service's LRIC
is presumed not to be predatory.
  (2) LRIC studies. An ILEC may establish a service's
LRIC by submitting a LRIC study, as specified in subsection (g)(2)(D)(ix)
of this section, that conforms to the requirements of §26.214
of this title (relating to Long Run Incremental Cost (LRIC) Methodology
for Services Provided by Certain Incumbent Local Exchange Companies
(ILECs)).
  (3) LRIC adoption. An ILEC serving fewer than one million
access lines in Texas may establish a service's LRIC by adopting the
commission-approved cost studies of a larger company for the same
service.
  (4) Rate adoption. In lieu of filing a LRIC study or
adopting the LRIC studies of a larger company, an ILEC with less than
one million access lines may adopt a rate that is identical to or
higher than a larger company's tariffed rate for the same service.
  (5) Packaging of new services. If an ILEC offers a
new service as a component of a package, the ILEC shall also offer
the new service as a separately tariffed service.
(d) Pricing and packaging flexibility. An ILEC may
file an informational notice to exercise pricing and packaging flexibility
by filing the appropriate information in accordance with subsection
(g)(2) of this section.
  (1) General requirements.
    (A) Pricing flexibility includes:
      (i) customer specific contracts;
      (ii) packaging of services;
      (iii) volume, term, and discount pricing;
      (iv) zone density pricing, with a zone defined as an
exchange; and
      (v) other promotional pricing.
    (B) A discount or other form of pricing flexibility
may not be preferential, prejudicial, discriminatory, predatory, or
anticompetitive.
    (C) An ILEC may exercise pricing flexibility, including
the packaging or joint marketing of any regulated service with any
other regulated or unregulated service or any service of an affiliate.
  (2) Pricing standards.
    (A) An ILEC shall price each regulated service offered
separately or as part of a package at either the service's tariffed
rate or at a rate not lower than the service's LRIC.
    (B) An ILEC shall price each service at or above the
service's LRIC.
    (C) A price that is set at or above the service's LRIC
is presumed not to be predatory.
    (D) The price of a package that combines regulated
products or services with unregulated products or services shall recover
the cost to the ILEC of acquiring and providing the unregulated products
or services. In this section, unregulated products or services are
products or services provided by an entity that is unaffiliated with
the ILEC.
    (E) The price of a package that combines regulated
products or services with the products or services of an affiliate
shall recover the cost to the ILEC of acquiring and providing its
affiliate's products or services, which shall be greater than or equal
to the cost to the affiliate of acquiring and/or providing the products
or services. The cost to an ILEC of acquiring or providing the affiliate's
products or services shall be valued in a manner consistent with Federal
Communications Commission (FCC) requirements, to the extent such requirements
are applicable to the ILEC, and with subparagraph (F) of this paragraph.
A group of products or services that are jointly marketed by an ILEC
in conjunction with one or more of its affiliates shall be priced
in a manner consistent with FCC requirements, to the extent such requirements
are applicable to the ILEC, and with subparagraph (F) of this paragraph.

    (F) Consistent with PURA §52.051(1)(C), an ILEC
shall not use revenues from regulated monopoly services to subsidize
services subject to competition.
  (3) LRIC studies. An ILEC may establish a service's
LRIC by submitting a LRIC study, as specified in subsection (g)(2)(D)(ix)
of this section, that conforms to the requirements of §26.214
of this title.
  (4) LRIC adoption. An ILEC serving fewer than one million
access lines in Texas may establish a service's LRIC by adopting the
commission-approved cost studies of a larger company for the same
services.
  (5) Rate adoption. In lieu of filing a LRIC study or
adopting the LRIC studies of a larger company, an ILEC with less than
one million access lines may adopt a rate that is identical to or
higher than a larger company's tariffed rate for the same service.
(e) Customer promotional offerings. An ILEC may file
an informational notice to offer customer promotional offerings by
filing the appropriate information in accordance with subsection (g)(2)
of this section.
  (1) An ILEC may offer a promotion for a regulated service
for not more than 90 days in any 12-month period.
  (2) Customer promotional offerings may consist of:
    (A) a waiver of installation charges or service order
charges, or both, for not more than 90 days in a 12-month period;
or
    (B) a temporary discount of not more than 25% from
the tariffed rate for not more than 60 days in a 12-month period.
  (3) Although ILECs are not required to file LRIC studies
with informational notices regarding these customer promotional offerings,
the offerings are subject to the standards for pricing flexibility
in subsection (d) of this section, in the event of a complaint.
(f) Requirements for customer specific contracts. An
ILEC may enter into customer-specific contracts for certain services
as provided in §26.211 of this title (relating to Rate-Setting
Flexibility for Services Subject to Significant Competitive Challenges).
For all services not addressed in §26.211 of this title, an ILEC
must offer customer-specific contracts pursuant to this section.
(g) Procedures related to the filing of informational
notices and associated tariffs. The provisions of this subsection
apply to ILECs choosing to introduce new services and exercise pricing
and packaging flexibility including customer promotional offerings
through informational notice filings.
  (1) Notice requirements.
    (A) An ILEC shall provide the informational notice
in compliance with this section to the commission, to the Office of
Public Utility Counsel (OPC), and to any person who holds a certificate
of operating authority in the ILEC's certificated area or areas, or
who has an effective interconnection agreement with the ILEC.
    (B) Unless an interconnection agreement contract specifies
otherwise, an incumbent local exchange carrier shall continue to provide
to affected resellers of retail services the same notice of rate changes
or withdrawal of detariffed services that it was required to provide
prior to detariffing.
  (2) Filing requirements.
    (A) Filing of informational notice and confidential
information. At the time the informational notice is filed in Central
Records, a copy of the informational notice, including confidential
information, shall be delivered to OPC. In addition to the record
copy, an additional copy of any confidential information shall be
filed in Central Records for use by the commission staff.
      (i) The commission shall assign each informational
notice a unique control number and shall stamp the tariff sheets "received."

      (ii) The commission staff shall file any notice of
deficiencies (including deficiencies in LRIC studies submitted) for
incomplete filings not in compliance with this section or pleading
alleging that the service offering is inappropriately filed as an
informational notice filing within three working days after the date
of the filing of the informational notice.
      (iii) Within two working days after the date of the
commission staff's filing, the applicant shall file an explanation
of the actions it has taken or intends to take in response to a notice
or pleading filed under clause (ii) of this subparagraph.
    (B) Effective date. A service offering shall be effective
no earlier than ten days after the ILEC files a complete informational
notice with the commission.
    (C) Access to confidential information. Access to confidential
information filed with the commission as part of an informational
notice filing shall be available to commission staff and OPC, upon
execution of a commission approved protective agreement, at the time
the informational notice is filed.
    (D) Format of filing. An informational notice under
this section must include the following elements:
      (i) name of company;
      (ii) PURA chapter under which company operates;
      (iii) date of submission;
      (iv) effective date;
      (v) new and/or revised tariff pages, written in plain
language and conforming to the requirements of §26.207 of this
title (relating to Form and Filing of Tariffs);
      (vi) proposed implementation date (if different from
effective date);
      (vii) affidavit of notice to the Office of Public Utility
Counsel, certificate of operating authority holders, and parties to
interconnection agreements;
      (viii) type of filing (new service; pricing flexibility;
packaging, or promotional offering; customer specific contract);
      (ix) except for customer promotional offerings, relevant
LRIC study or LRIC study reference, and relevant support materials
(confidential/proprietary/protected materials provided to commission
only). When LRIC studies for which commission approval has not been
obtained are provided with an informational notice filing, an application
for approval of that LRIC study must be filed pursuant to the standards
in §26.214 of this title to establish a LRIC floor and shall
be filed before or simultaneously with the informational notice filing.
The ILEC shall file a notice of intent to file LRIC studies pursuant
to §26.214 of this title no later than ten days before the filing
of the LRIC study;
      (x) except for customer promotional offerings, relevant
LRIC study or LRIC study reference, and relevant supporting materials
(confidential/proprietary/protected materials provided to commission
only), if an ILEC chooses to adopt LRIC studies of a larger company
pursuant to the requirements of subsection (c)(3) or (d)(4) of this
section, as applicable;
      (xi) except for customer promotional offerings, relevant
tariff rates or specific tariff references, if the ILEC chooses to
adopt rates of a larger company pursuant to requirements of subsection
(c)(4) or (d)(5) of this section, as applicable;
      (xii) a response of "yes", "no", or "not applicable",
with explanatory language, to the following question: "Is the sum
of the TELRIC-based wholesale prices of components needed for provision
of the retail service at or below the retail price set forth in this
filing?" Except for customer promotional offerings, if the response
is "yes" or "no", the filing must identify the components needed for
the provision of the retail service, along with a list of relevant
wholesale and retail prices;
      (xiii) a response of "yes" or "no" to the following
question: "Is the service available for resale by a competitor?" If
the answer is "no", does the proposed price meet the standards set
forth in §26.274(f) - (h) of this title (relating to Imputation)?
For purposes of this question, "available for resale" means:
        (I) the service is not subject to tariffed resale restrictions;
and
        (II) the ILEC is not aware of any constraints that
would prevent a competitor from functionally provisioning the service
to the competitor's customers in parity with the ILEC's provisioning
of the service to the ILEC's customers;
      (xiv) for package offerings that combine regulated
products or services with unregulated products or services and/or
with the products or services of an ILEC's affiliate, an affidavit
indicating that the price of the package recovers the cost to the
ILEC of acquiring and providing the unregulated products or services
or the affiliate's products or services. The affidavit shall also
indicate that the cost to the ILEC of acquiring and providing an affiliate's
products or services is greater than or equal to the cost to the affiliate
of acquiring Cont'd...