20040823Final Order No 29570.pdf

Office of the Secretary
Service Date
August 23, 2004
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE ANNUAL
REVISION OF UNIVERSAL SERVICE FUND
SURCHARGES TO BECOME EFFECTIVE
OCTOBER 1, 2004. CASE NO. GNR- T -04-
ORDER NO. 29570
On July 30, 2004, the Administrator of the Universal Service Fund (USF) filed the
Annual Report for the USF fiscal year from July 1 2003, through June 30, 2004. Based upon the
Commission s review of the Report and the recommendations of the Staff and the fund
Administrator, the Commission finds that the USF surcharges should be increased. The
Commission orders that the current Idaho USF monthly surcharge of $.08 per residential line and
13 per business line be increased to $.1 0 per residential line and $.15 per business line. The
Commission also orders the present Idaho USF surcharge of $.0025 per MTS/W A TS minute be
increased to $.003 per toll minute. These surcharges will become effective October 1 2004.
BACKGROUND
The Idaho Telecommunications Act of 1988 created a Universal Service Fund (USF)
for the purpose of maintaining the universal availability of local exchange service at reasonable
rates and to promote the availability of message telecommunication service (MTS) at reasonably
comparable prices throughout the state of Idaho.Idaho Code ~ 62-610(1). The USF is funded
from surcharges levied upon local exchange service and intrastate MTS (long-distance) and wide
area telecommunication services (W A TS). Funds are distributed to qualifying high-cost local
exchange telephone companies to supplement their annual revenue. In that way, distributions
from the USF offset a certain amount of revenues that necessarily would come from customers in
the absence of the fund. See Idaho Code ~ 62-610(2)-(4).
In July of each year the USF Administrator provides an Annual Report to the
Commission reviewing the fund balance and recommending changes, if any, in the surcharges to
maintain adequate funding levels. Following its review of the report, the Commission issues an
Order prescribing USF surcharges for the next 12 months beginning October 1. See Rules 104
through 106 of the Commission s USF Rules; IDAPA 31.46.01.104-106.
ORDER NO. 29570
THE 2004 REPORT
The Administrator reported that surcharge revenue for the past year totaled
485 790. Fifty-two percent (52%) of that amount was derived from surcharges on local
exchange services and forty-eight percent (48%) was derived by surcharges on MTS/W A TS
services. Disbursements to the eight qualifying local exchange carriers totaled $1 898 303. As
of June 30, 2004, the USF contained a balance of $136 311. Additionally, investments carry a
cash value of $300 000 with staggered maturity dates through September 30, 2004.
The USF is currently funded through surcharges of $.08 per residential line per
month
, $.
13 per business line per month, and $.0025 per intrastate toll minute. The
Administrator s Report indicated that the total USF funding has decreased by approximately
$168 000, as compared to 2003 , due largely to a decrease in inventory. The Administrator
reported that if current surcharge levels are maintained and no additional funding is needed, the
fund will decrease eventually to a negative balance of approximately $51 807 by June 30 , 2005.
The Fund Administrator presented five options to the Commission for possible
adjustments to the USF surcharges: (1) maintain the current surcharge levels; (2) increase local
surcharge rates only; (3) increase MTS/W ATS surcharge rates only; (4) increase all surcharge
rates; and (5) adjust funding to meet statewide averages and increase all surcharge rates. The
Administrator noted that Cambridge Telephone shows a need to slightly reduce its access rates
while Midvale Telephone shows a need to slightly increase its access rates pursuant to IDAP
31.46.01.106.
DISCUSSION
The current USF surcharge rates were established in 2002, when the Commission
decreased all surcharge rates to their current levels. Order No. 29101. These surcharge rates
were not changed in 2003. Order No. 29324. As previously stated, maintaining the current
surcharge levels will result in a negative fund balance. Staff, although concerned about
increasing the per-toll-minute rate because of growing competitive pressure and shrinking toll
minute reserves, stated that local exchange companies also face increasing competition and
shrinking line counts. Therefore, Staff supports spreading the needed revenue increase among
the local and toll carriers. Staff also recommended that making very slight adjustments to the
access rates of Cambridge Telephone and Midvale Telephone is not necessary at this time, as it
ORDER NO. 29570
may not have any distinguishable effect given the components of access revenue and the
reporting cycles to the fund.
After reviewing the Administrator s Report and the analysis provided by Staff, the
Commission finds that the USF surcharges should be increased to avoid a negative balance in the
USF in the upcoming year, to provide a reasonable reserve, and to ensure that the fund will
continue to operate for the benefit of universal telephone service in the State of Idaho. The
Commission finds that a monthly surcharge of $.10 per residential line and $.15 per business line
is adequate and in the public s interest to help ensure the continuing solvency of the USF. The
Commission further finds that the surcharge for MTS/W ATS usage should be increased to $.003
per minute to maintain an appropriate balance between local and toll revenues, and to maintain a
reasonable funding level for the USF. The Commission will not order that individual company
access rates be increased or reduced at this time.
Idaho Code ~ 62-610 establishes the eligibility requirements for local exchange
companies to draw funds from the USF, and requires participating companies' toll access rates to
be at least 1000/0 of the statewide average. The Commission s Rules require a participating
company to revise its rates if: (1) the difference between the Company s rates and a statewide
threshold rate is more than 3%; and (2) the difference in the amount of revenue collected under
the company s rates and the threshold rate is greater than $6 000. See IDAPA 31.46.01.106.02.
The Commission Staff may investigate individual company access rates and report to the
Commission whether adjustments are necessary in order for the companies to remain eligible for
USF support.
ORDER
IT IS HEREBY ORDERED that the Universal Service Fund local exchange service
surcharge shall be $.10 per month for each residential line and $.15 per month for each business
line.
IT IS FURTHER ORDERED that the Universal Service Fund MTS/W A TS
surcharge shall be $.003 per minute.
IT IS FURTHER ORDERED that these USF surcharges shall be effective October 1
2004.
ORDER NO. 29570
THIS IS A FINAL ORDER. Any person interested in this Order may petition for
reconsideration within twenty-one (21) days of the service date of this Order. Within seven (7)
days after any person has petitioned for reconsideration, any other person may cross-petition for
reconsideration. See Idaho Code ~ 61-626.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this cJ...O-t1'
day of August 2004.
MARSHA H. SMITH, COMMISSIONER
Out of the Office on this Dat
DENNIS S. HANSEN, COMMISSIONER
ATTEST:
Je~ D. Jewell
Co mission Secretary
O:GNRTO412 dw
ORDER NO. 29570