20100831final_order_no_32058.pdf

Office of the Secretary
Service Date
August 31 , 2010
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE ANNUAL
REVISION OF THE UNIVERSAL SERVICE
FUND SURCHARGES TO BECOME
EFFECTIVE OCTOBER 1, 2010.ORDER NO. 32058
CASE NO. GNR-10-
BACKGROUND
At the direction of Idaho Code 9 62-610, the Commission established a universal
service fund (USF) for the purpose of maintaining the universal availability of local telephone
exchange service at reasonable rates and to promote the availability of message
telecommunications service (MTS) at reasonably comparable rates throughout the state of Idaho.
The USF is funded through a statewide end-user surcharge on local exchange services and
intrastate MTS and Wide Area Telephone Service (W A TS) type services. Each year the USF
Administrator files an Annual Report with the Commission detailing the program activities for
the previous year and recommending surcharge rates to meet the next year s funding
requirements. On or before September 1 of each year the Commission issues an Order to
establish statewide end-user surcharges to be in effect for the 12 months beginning October 1
following issuance of the Order.
THE 2010 ANNUAL REPORT
On July 15 2010, the Administrator of the Idaho USF filed an Annual Report to the
Commission for the period of July 1 2009 through June 30, 2010, including a proposed budget
for 2010-2011 fiscal year. Staff reviewed the calculations, supporting documentation, and
recommendations contained in the Administrator s Annual Report.
The current USF monthly surcharge rates are $.10 per residential line
, $.
17 per
business line, and $.003 per intrastate MTS/WTS billed minute, established in Order No. 30894.
Surcharge revenue for the past year totaled $1,734 098. Fees on local exchange services
contributed $932 556 (54%), and $801 542 (46%) was contributed by MTS/WATS services.
This is a decrease in local exchange surcharge revenue of approximately $36 000 (from
ORDER NO. 32058
$968 594 in 2009), and an increase in MTS/W A TS surcharge revenue of approximately
$111 000 (from $690 061 in 2009).
As of May 1 , 2010, telephone companies reported an inventory of 328 592 residential
lines and 219 752 business lines, for a total of 548 344 lines. This is a net decrease in lines of
approximately 47 931 (8%) with residential lines decreasing by nearly II % and business lines
decreasing by almost 2%. Long-distance service providers reported intrastate MTS/W A TS total
billed minutes of 284 863 207 compared to the 2009 reported minutes of 304 154 937, a 6%
decrease.
Pursuant to Commission Order No. 30894, the annual disbursements to the eight
qualifying incumbent local exchange carriers (ILECs) decreased by approximately $122 456
from $1 943 523 in 2009 to $1 821 067 for the year ending June 30, 2010. The year-end USF
cash balance, after bank charges, administrative expenses and interest received, was $104 258.
For the next fiscal year, beginning July 1 , 2010, the annual disbursements to the qualifying
ILECs are expected to total $1 698 610, unless the Commission approves changes to the USF
funding~
The Administrator proposed an annual administrative budget of $24 100, including
the Administrator s salary and other expenses , such as office supplies and bank and brokerage
fees, as well as an audit. This year s increase in the administration budget of $6,745 includes the
cost of a triennial audit to be completed by the end of the next fiscal year.
The Administrator is required to review the residential , business, and access rates of
the recipient ILEC companies. IDAP A 31.46.01.106. To be eligible to receive USF funding
pursuant to Rule 106, a telephone company s average one-party, single-line rate must equal or
exceed the 125% statewide weighted average line rate and its average rates per minute for
MTS/W A TS access rate must exceed 100% of the statewide weighted average access rate. If the
difference in the company s current average rate and the statewide average threshold rate is
greater than three percent (3%), and the difference in the annual revenue associated with the
company s current rate and the revenue associated with the statewide average threshold rates is
over $6 000, the company may need to revise rates to meet or exceed the statewide threshold
rates. The Commission on its own motion may by Order change a telephone company s USF
I The revenue from the MTS/W A TS surcharge increased despite a reduction in total MTS/W A TS billed m mutes in
each of the last several years. The increase in revenue this year is an anomaly resulting from different schedules for
reporting MTS/W A TS data and collecting the surcharge revenues.
ORDER NO. 32058
funding in connection with the recalculation of the statewide average rates.See IDAPA
31.46.01.06.04.
In response to the Administrator s 2009 USF Annual Report, the Commission issued
Order No. 30894 on September 2, 2009. The eight ILEC companies receiving USF
disbursements were given notice that their residential rates needed to increase to meet the USF
eligibility requirements. By September 1 , 2010, all eight companies will have complied with this
Order, thus maintaining their USF funding eligibility.
In the current annual report, the Administrator recommended no adjustments to
residential or business rates of the recipient companies. The Administrator recommended an
adjustment to the switched access rate of three companies.
ADMINISTRATOR'S RECOMMENDATIONS
The Administrator reviewed four funding options for the proj ected annual
disbursements and expenses for the coming year, as follows:
Option 1: Status Quo - If current surcharge levels are maintained and no additional
USF funding is authorized, the fund will decrease by approximately $25 516 by the end of the
year. The 2010-2011 USF authorized disbursements will be $1 698 610 and the fund balance
would be approximately $78 742 on June 30, 2011. Surcharge revenue contributions would be
approximately 50% from MTS/W A TS services and 50% from local exchange services.
Option 2: Adiust Funding to Meet Statewide Averages and Maintain Surcharge Rates
- With this option, the current surcharge rates are maintained and the access rates for A
Communications, Inland Telephone Company, and Midvale Telephone Company are slightly
increased. The USF distribution to these three companies would decrease by a corresponding
amount. Under this proposal the annual USF disbursements would decrease by $31 541 from
698 610 to $1 667 069 and the fund balance on June 30, 2011 would be approximately
$110 283. With this option, MTS/W ATS services would contribute 50% of the total surcharge
revenue and local exchange services ' contribution would be 50%.
Option 3: Adiust Funding to Meet Statewide Averages and Increase Surcharge Rates
- In this scenario, the Administrator reviewed the effect of reducing the USF disbursements as
outlined in Option 2, and increasing the surcharge rates to $.12 per residential line
, $.
19 per
business line, and $.0035 per intrastate MTS/W ATS billed minute. The fund balance would be
ORDER NO. 32058
approximately $384 318 on June 30, 2011. MTS/W ATS service would contribute 49% of the
surcharge revenue and local exchange services would contribute 51
Option 4: Maintain Funding Levels and Increase Surcharge Rates - In this scenario
the surcharge rates would be increased to $.12 per residential line
, $.
20 per business line, and
004 per intrastate MTS/W ATS billed minute. MTS/W ATS service would contribute 53% and
local exchange services would contribute 47%. The fund would have a balance of approximately
$521 578 on June 30, 2011.
The Administrator assumes disbursements and the surcharge revenue sources (line
count and billed minutes) will be relatively stable during the next year. If the surcharge rates
remain unchanged, the fund balance will decrease to $78 742, a figure that is approximately one-
half the amount required for a single month disbursement to the eight USF recipients. The
Administrator believes the surcharge rates need to be increased for the USF fund to meet existing
obligations, and to create a reserve balance to cover approximately three months of
disbursements. The Administrator thus recommended that the Commission increase the monthly
USF surcharge rates to $ .12 per residential line
, $ .
19 per business line, and increase the intrastate
MTS/W ATS surcharge to $.0035 per billed minute. The Administrator also recommended that
ATC Communications, Inland Telephone Company, and Midvale Telephone Company increase
their switched access rates. With this option, the USF fund will be able to meet all obligations
and provide a reserve balance on June 30, 2011 of approximately $384 318.
Staff agreed with the Administrator s recommendation to increase surcharge rates to
maintain stability in the USF fund. Staff opposed the recommendation to increase the switched
access rates of three companies.
COMMISSION FINDINGS
After reviewing the Administrator s report and recommendations, the Commission
finds that it is necessary to increase the USF surcharges to ensure adequate resources are
available to meet current funding requirements, and to allow for a reasonable reserve in the USF
account. Without an increase in the surcharges, the fund will decrease to an unacceptable level
and could jeopardize disbursements to the eight companies that receive USF funds.
Accordingly, the Commission finds it reasonable and prudent to increase the monthly USF
surcharge rates to $ .12 per residential line
, $ .
19 per business line, and to increase the intrastate
MTS/W ATS surcharge to $.0035 per billed minute.
ORDER NO. 32058
The Commission does not believe the slight adjustment to the switched access rates
for A TC, Inland, and Midvale recommended by the Administrator is necessary. The impact of
an increase or decrease in access rates is uncertain over a 12-month period, as demonstrated by
the sharp increase in MTS/W A TS surcharge revenues during the past year. The fluctuation in
the number of lines and intrastate MTS/W A TS minutes is unpredictable, and it is not possible to
know whether wide fluctuations are caused by changes in consumer calling patterns or by
anomalies in company reporting. Likewise, it is difficult to determine the amount of adjustment
a company must make to the access rate for that company to stay at or below the threshold of
100% statewide weighted average rate.
Although the past few years have seen gradual decreases in the numbers of local
residential and business lines, the Administrator anticipated no significant changes in the coming
year that will substantially impact the USF fund. With increases to the monthly USF surcharge
rates to $.12 per residential line
, $.
19 per business line, and an increase of the intrastate
MTS/W ATS surcharge to $.0035 per billed minute, the USF should have a reasonable reserve
balance of approximately $352 777 on June 30, 2011.
ORDER
IT IS HEREBY ORDERED that the monthly USF surcharge rate for residential lines
is increased to $.12 per residential line, the monthly USF surcharge on business lines is increased
to $ .19 per business line, and the USF surcharge on MTS/W A TS is increased to $.003 5 per
minute, effective October 1 2010.
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.
ORDER NO. 32058
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this is
day of August 2010.
ATTEST:
~:tCIL flo (bu Cfu2 .s
Bar ara Barrows
Assistant Commission Secretary
O:GNR-10-04 ws
ORDER NO. 32058
-'2/1 D. KEMPTON
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iSIDENT
MARSHA H. SMITH, COMMISSIONER
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MACK A. REDFORD, C MMISSIONER