20120911final_order_no_32637.pdf

Office of the Secretary
Service Date
September 11,20 2
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE ANUAL )
REVISION OF THE UNIVERSAL SERVICE )CASE NO.GNR-T-12-07
FUND SURCHARGES TO BECOME )
EFFECTIVE OCTOBER 1,2012.)ORDER NO.32637
_________________________________________________________________________________
)
BACKGROUND
The Idaho Universal Service Fund (USF)rules were adopted under the general legal
authority of the Telecommunications Act of 1988,Chapter 6,Title 62,Idaho Code,and the
specific authority of §62-610,Idaho Code.The Commission established a universal service
fund “for the purpose of maintaining the universal availability of local exchange service at
reasonable rates and to promote the availability of message telecommunications service (MTS)at
reasonably comparable rates throughout the State of Idaho.”Idaho Code §62-610(1).The USF
is funded through a statewide end-user surcharge on local exchange services and intrastate MTS
and Wide Area Telephone Service (WATS)services.The USF Administrator submits an Annual
Report to the Commission detailing the program activities of the previous year and
recommending surcharge rates to meet the next year’s funding requirements.The Commission
issues an Order in response to the Administrator’s report establishing statewide end-user
surcharges to be in effect for the next 12 months beginning October 1.
THE 2012 ANNUAL REPORT
On July 17,2012,the Administrator of the Idaho USF filed her Annual Report to the
Commission for the period of July 1,2011 through June 30,2012,including a proposed USF
2012-2013 Administration Budget.The current USF monthly surcharge rates are $.12 per
residential line,$.19 per business line,and $.0035 per intrastate MTS/WTS billed minute,
established in 2010 and maintained in 2011.See Order Nos.32058 and 32336.Surcharge
revenue for the year totaled $1,654,166.Local exchange services contributed $914,350 (55%),
and $739,816 (45%)was contributed by MTS/WATS services.These amounts reflect a decrease
in local exchange surcharge revenue of approximately $30,761 (from $945,111 in 2011),and a
decrease in MTS/WATS surcharge revenue of approximately $30,470 (from $770,286 in 2011).
Administrative expenses for the year totaled $21,994,including Administrator’s salary,
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expenses.bank and brokerage fees,and $6,750 for professional services associated with an audit
completed in 2011.
Currently eight qualifying incumbent local exchange carriers (ILECs)receive annual
payments from the USF,and those payments remained unchanged at $1,698,610.The ending
cash balance,after applying bank charges,administrative expenses and interest received,was
$38,329.For the next fiscal year,beginning July 1,2012,annual disbursements are expected to
remain at $1,698,610.
Because the USF surcharge attaches to the residential and business lines,and long-
distance service minutes,of wireline companies,the Administrator annually obtains reports from
those companies.As of May 1,2012,companies reported a monthly inventory of 253,461
residential lines and 219,108 business lines,for a total of 472,569 lines.This is a net decrease in
lines of approximately 41,477 (8%)with residential lines decreasing by nearly 13%and business
lines increasing by almost 1%.The newly calculated statewide weighted average rates for a one-
party,single-line residential and business service and the corresponding threshold average rates
are:
Residential Services
Business Services
2011 Statewide 2012 Statewide 125%Statewide 125%Statewide
Weighted Weighted Weighted Average Weighted Average
Average Rate Average Rate Rate -2011 Rate -2012
$21.25 $21.66 $26.57 $27.07
$32.08 $33.37 $40.10 $41.71
Long-distance service providers reported intrastate MTS/WATS billed minutes of 257,750,454
compared to the 2011 reported minutes of 253,602,445,a 2%increase,although the increase
appears to result from more accurate reporting by some companies.The statewide average
switched access rate was $0.054.
The Administrator also reviews the residential,business,and switched access rates of
the recipient ILEC companies to determine eligibility to receive USF funding.A telephone
company’s average one-party,single-line rate must equal or exceed 125%of the statewide
weighted average line rate,and the average rates per minute for MTS/WATS access rate must
exceed 100%of the statewide weighted average access rate.IDAPA 3 1.41.01.106.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
ORDER NO.32637
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 may by Order change a telephone company’s USF funding in connection
with the recalculation of the statewide average rates.
The Administrator recommended maintaining the USF funding levels and increasing
the surcharge rates to $.1 5 per residential line,$.23 per business line,and $.004 per intrastate
MTS/WATS billed minute.At these rates,the Administrator projects USF fund increases of
approximately $376,260,resulting in an end-of-year balance on June 30,2013 of approximately
$414,589.MTS/WATS service would contribute 49%of the surcharge revenue and local
exchange services would contribute 51%.StatT supports the Administrator’s recommendation
that the Commission maintain the company disbursements at the current level,and increase the
surcharge rates as recommended.This will approximate a 50-50 contribution of surcharge
revenues from local exchange services and MTS/WATS services.The estimated fund balance at
June 30,2013 will provide a healthy three-month reserve.
COMMISSION DECISION
The last several years have seen a steady decline in both local access lines and
intrastate MTS/WATs billed minutes.As a result,it is difficult to estimate the fund balance for
the next fiscal year with precise accuracy.The Administrator reported that.with the increased
popularity of wireless/cellular services and VoIP services,as well as the decline in the economy,
it would stand to reason that the decline in both local access lines and intrastate toll minutes will
continue.”The Administrator believes the increased popularity of wireless and VoIP services
will continue to place a downward pressure on the number of local exchange lines and long
distance minutes.
At the same time that wireline residential and business lines have declined,the
statewide average residential rates have steadily increased for more than ten years,although
determining the true statewide average rate has become more difficult.The large,deregulated
wireline companies,those with the greatest market share and therefore the greatest impact on
statewide average rates,have increased their standalone residential rates to encourage customers
to purchase bundled services that include local residential service.The USF annual report,and
the calculation of the statewide average rate,does not reflect this shift because those companies
are required to report only the standalone residential rate shown in tariffs and price lists.This
ORDER NO.32637 3
shift from standalone residential local exchange services to bundled packages affects the
statewide average rate calculations and the application of Rule 106 to the companies that receive
USF funds.
Further complicating application of Rule 106 to USF surcharges are recent FCC
Orders that directly impact switched access rates in Idaho.The Administrator noted the
USF/ICC Transformational Order,released on November 18,2011 and the Third Order on
Reconsideration,released on May 14,2012 that adopt a national bill-and-keep methodology for
inter-carrier compensation and reduce certain switched access rates.The effect of these Orders
over time will be to limit the Commission’s ability to change USF recipient company access
rates when Rule 106 would require.The Administrator stated,“[i]n light of the FCC Orders and
the changes in the industry,it is becoming more difficult to evaluate the IUSF funding as it
applies to Rule 106.”
If Rule 106 were strictly enforced now,six of the eight USF companies would be
required to increase their residential local exchange rates from $25.76 to $27.07,while their USF
funding would decline.Rather than this result,Staff recommended the Commission use 2005
rates to determine statewide average rates and USF eligibility.Idaho Code §62-605(5)(e)
provides that residence and business rates in effect on July 1,2005 may be used “[f]or the
purpose of calculating the weighted statewide average rates for residence and business basic
local exchange service rates to enable the commission to determine eligibility for distributions to
eligible telecommunications carriers.”On the record in this case,the Commission finds it
appropriate to use the 2005 rates as Section 62-605 allows.Both the Administrator and Staff
recommended the USF surcharges he increased to ensure stability in the rate for the next year,
rather than adjust recipient company rates and disbursements.The Commission approves the
Administrator’s recommendation that the USF funding levels be maintained,and that the USF
surcharge rates be increased to $.15 per residential line,$.23 per business line and $.004 per
intrastate MTS/WATS billed minute.This will result in a reserve balance of approximately
$414,589 and will provide a comfortable three-month cushion.
ORDER
IT IS HEREBY ORDERED that the monthly USF surcharge rates are increased to
$.15 per residential line,$.23 per business line,and $.004 per MTS/WATS minute,effective for
12 months beginning October 1,2012.
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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 Ibr reconsideration.See idaho Code §61-
626.
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this //
day of September 2012.
PAUL KJELLANDER,PRESIDENT
\r\N A3N
MACK A.REDFORt1O.MISSIOISER
L2 JSL
MARSHA H.SMITH,COMMISSIONER
ATTEST:
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Jean D.Jewell
Commission Secretary
O:GNR-T-I 2-O7s
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