Speakers at NARUC panel on telecom bankruptcy warned state regula...
Speakers at NARUC panel on telecom bankruptcy warned state regulators to make sure bankruptcy judges understood state interest in any bankruptcy case involving regulated carrier and to make advance contingency plans for handling carrier bankruptcy’s possible impact on customers.…
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Ore. Asst. Attorney Gen. Dan Rosenhouse said that even when carrier entered bankruptcy, state regulators still had right and obligation to protect public interest. He said judges tended to be sympathetic to regulators and commissions should provide bankruptcy judge with brief on state laws and regulations that governed company. But Rosenhouse cautioned that if states involved themselves as party in carrier’s federal bankruptcy proceeding, they could lose their 11th Amendment sovereign immunity. He said that as long as carrier was in Chapter 11 reorganization, it would have interest in keeping business operational. But if reorganization failed and carrier’s assets were sold off in bankruptcy liquidation, he said states needed to have policies and processes in place for reassigning customers to other providers if their service was terminated. Bob Burns, NRRI senior legal research analyst, said states needed to move quickly to make their interests known, explain regulatory scheme and statutory obligations governing carrier and commission’s “comfort zone” involving increases in revenue requirements that might be needed in carrier reorganization. He said states should make clear their intent to hold carrier to its regulatory obligations. Both speakers warned that filing of bankruptcy meant any past debts, such as past-due universal service fund assessments or past-due penalties, might not be paid but bankrupt carrier was legally responsible for any future assessments or penalties. Burns suggested states characterize universal service assessments as tax in order to get higher priority on list of debt claims for payment. He said status of state enforcement proceedings in progress at time of bankruptcy filing was tricky and there was no assurance bankruptcy judge would approve payment of any penalties subsequently assessed. He advised state commissions to close any service quality or other enforcement proceedings that were open when company filed for bankruptcy and start new cases.