20050831final order no 29860.pdf

Office of the Secretary
Service Date
August 31 , 2005
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MA TTER OF THE ANNUAL
REVISION OF THE UNIVERSAL SERVICE
FUND SURCHARGES TO BECOME
EFFECTIVE OCTOBER 1, 2005.ORDER NO. 29860
CASE NO. GNR- T -05-
On July 14, 2004, the Administrator of the Universal Service Fund (US F) filed the
Annual Report for the previous USF fiscal year from July 1 2004, through June 30, 2005. Based
upon the Commission s review of the Annual Report and the recommendation of 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 $.10 per residential line and
15 per business line be increased to $.12 per residential line and $.20 per business line. The
Commission also orders the present Idaho USF surcharge of $.003 per MTS/W A TS minute
should be increased to $.004 per toll minute. These surcharges will become effective October 1
2005.
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 9 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 requirements. 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 9 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. 29860
THE 2005 REPORT
The Administrator reported that surcharge revenue for the past year totaled
616 135. Fifty-one percent (51%) of that amount was derived from surcharges on local
exchange services and 49 percent (49%) was derived by surcharges on MTS/W A TS services.
Disbursements to the eight qualifying local exchange carriers increased slightly to a total of
973 671. As of June 30, 2005, the ending fund cash balance was $65 265.
The USF is currently funded through surcharges of $.1 0 per residential line per
month
, $.
15 per business line per month, and $.003 per intrastate toll minute. The
Administrator s Report indicated that the total USF surcharge revenue has increased by
approximately $130 000, as compared to 2004. The Administrator reported that if current
surcharge levels are maintained and no additional funding is needed, the fund will eventually
decrease to a negative balance of approximately $22 886 by June 30, 2006.
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 A TS 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 and Inland Telephone Company could slightly
reduce access rates pursuant to IDAP A 31.46.01.106. The Administrator recommended Option
, which would result in an estimated reserve balance of $552 958 by June 30, 2006.
DISCUSSION
The USF surcharge rates were decreased in 2002 , Order No. 29101 , and were not
changed in 2003. Order No. 29324. The surcharge rates were increased to their current levels in
2004 to avoid a negative balance in the fund. Order No. 29570. The current surcharge rates
resulted in a year-end cash balance of $65 265 in the fund, which is a historically low reserve
balance for the fund. As previously stated, maintaining these current surcharge levels will result
in a negative balance. Staff, although concerned about increasing the per-toll-minute rate
because of continued competitive pressure and unstable toll minute inventories, states that local
exchange companies also face increasing competition and shrinking line counts. Therefore, Staff
supports spreading the needed income increase among the local and toll carriers. Staff also
recommends that making slight adjustments to the access rates of Cambridge Telephone and
Inland Telephone is not necessary at this time, as it may not have any distinguishable effect
ORDER NO. 29860
gIven the components of access revenue and the reporting cycles to the fund. Staff
recommended adopting the Administrator s Option 4, that is, increasing all surcharge rates.
After reviewing the Administrator s Report and the analysis provided by Staff, the
Commission finds that the USF surcharges should be increased to avoid the USF from incurring
a negative balance 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 $.12 per residential line and $.20 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 A TS usage should be increased to
004 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 9 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 100% 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 $.12 per month for each residential line and $.20 per month for each business
line.
IT IS FURTHER ORDERED that the Universal Service Fund MTS/WATS
surcharge shall be $.004 per minute.
IT IS FURTHER ORDERED that these USF surcharges shall be effective October 1
2005.
ORDER NO. 29860
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 with regard to any
matter decided in this Order. Within seven (7) days after any person has petitioned for
reconsideration, any other person may cross-petition for reconsideration. See Idaho Code 9 61-
626.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this 3/
day of August 2005.
MARSHA H. SMITH, COMMISSIONER
Out of the Office on this Date
DENNIS S. HANSEN, COMMISSIONER
ATTEST:
~lJ ~ff
.Ie D. Jewell
mISSIon Secretary
O:GNR-05-06 dw
ORDER NO. 29860