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(a) An incumbent local exchange company may elect to be subject to incentive regulation and to make the corresponding infrastructure commitment under this chapter by notifying the commission in writing of its election.(b) The notice must include a statement that the company agrees to:(1) limit until September 1, 2005, any increase in a rate the company charges for basic network services as prescribed by Subchapter C; and(2) fulfill the infrastructure commitment prescribed by Subchapters F and G.(c) Except as provided in Subsection (d), an election under this chapter remains in effect until the legislature eliminates the incentive regulation authorized by this chapter and Chapter 59.(d) The commission may allow an electing company serving fewer than five million access lines to withdraw the company's election under this chapter:(1) on application by the company; and(2) only for good cause.(e) In this section, "good cause" includes only matters beyond the control of the company.

This chapter governs the regulation of an electing company's telecommunications services regardless of whether the company is a dominant carrier.


(a) As a condition of election under this chapter, an electing company shall commit to not increasing a rate for a basic network service on or before the fourth anniversary of its election date.(b) The rates an electing company may charge on or before that fourth anniversary are the rates charged by the company on June 1, 1995, or, for a company that elects under this chapter after September 1, 1999, the rates charged on the date of its election, without regard to a proceeding pending under:(1) Section 15.001;(2) Subchapter D, Chapter 53; or(3) Subchapter G, Chapter 2001, Government Code.(c) Notwithstanding Subsections (a) and (b), the cap on the rates for basic network services for a company electing under this chapter may not expire before September 1, 2005.

If the company has been required to perform or has elected to perform a long run incremental cost study, the appropriate cost for the service is the service's long run incremental cost.

(a) An electing company, after the 42nd month after the date the company elects incentive regulation under this chapter, may file an application for a commission review of the company's need for changes in the rates of its services if the company:(1) has fewer than five million access lines in this state; and(2) is complying with:(A) the company's infrastructure commitment;(B) each requirement relating to quality of service; and(C) each commission rule adopted under Chapter 60.(b) The company's application may request that the commission adjust rates, implement new pricing plans, restructure rates, or rebalance revenues between services to recognize changed market conditions and the effects of competitive entry.(c) The commission may use an index and a productivity offset in determining the requested changes.(d) The commission may not:(1) order an increase in the rate for residential local exchange telephone service that would cause the rate to increase by more than the United States Consumer Price Index in any 12-month period; or(2) set the monthly rate for residential local exchange telephone service in an amount that exceeds the nationwide average rates for similar local exchange telephone services.

Notwithstanding Subchapter B, the commission, on request of the electing company, shall allow a rate group reclassification that results from access line growth. An electing company that adopts a cost under this subsection is not required to present its own long run incremental cost study to support the adopted cost.

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