20130829final_order_no_32883.pdf

Office of the Secretary
Service Date
August 29,2013
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE ANNUAL )
REVISION OF THE UNIVERSAL SERVICE )CASE NO.GNR-T-13-04
FUND SURCHARGES TO BECOME )
EFFECTIVE OCTOBER 1,2013.)ORDER NO.32883
________________________________________________________________________________________
)
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 Section 62-6 10,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 2013 ANNUAL REPORT
On July 15,2013,the Administrator of the Idaho USF filed her Annual Report to the
Commission for the period of July 1,2012 through June 30,2013,including a proposed USF
2013-2014 Administration Budget.The Commission raised the USF monthly surcharges last
year to their current rates of $.15 per residential line,$.23 per business line,and $.004 per
intrastate MTS/WTS billed minute.See Order No.32637.Surcharge revenue for the year
totaled $1,683,231.Local exchange services contributed $1,018,269 (60%),and $664,962 (40%)
was contributed by MTS/WATS services.These amounts reflect an increase in local exchange
surcharge revenue of approximately $103,919 (from $914,350 in 2012),and a decrease in
MTS/WATS surcharge revenue of approximately $74,854 (from $739,816 in 2012).
Administrative expenses for the year totaled $16,229,including Administrator’s salary,
expenses,bank and brokerage fees.
ORDER NO.32883 1
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
$6,746.For the next fiscal year,beginning July 1,2013,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 1,2013,companies reported a monthly inventory of 229,336
residential lines and 230,860 business lines,for a total of 460,196 lines.This is a net decrease in
lines of approximately 12,373 (3%)with residential lines decreasing by nearly 9.5%and
business lines increasing by almost 5%.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
2012 Statewide 2013 Statewide 125%Statewide 125%Statewide
Weighted Weighted Weighted Average Weighted Average
Average Rate Average Rate Rate -2012 Rate -2013
$21.66 $21.73 $27.97 $27.16
$33.37 $33.79 $41.71 $42.23
Long-distance service providers reported intrastate MTS/WATS billed minutes of 197,465,217
compared to the 2012 reported minutes of 257,750,454,a 23%decrease.The statewide average
switched access rate was $0.047.
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 31.41.01.106.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
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
ORDER NO.32883 2
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 $.16 per residential line,$.29 per business line,and $.006 per intrastate
MTSIWATS billed minute.At these rates,the Administrator projects USF fund increases of
approximately $435,100,resulting in an end-of-year balance on June 30,2014 of approximately
$473,400.MTS/WATS service would contribute 50%of the surcharge revenue and local
exchange services would contribute 50%.Staff 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 30,2014 would provide a healthy three-month reserve.
COMMISSION DECISION
Both local access lines and intrastate MTS/WATs billed minutes have steadily
declined during the last several years.As a result,it is difficult to accurately estimate the fund
balance for the next fiscal year.The Administrator reported that it is likely the popularity of
wireless and VoIP services will continue to reduce the number of local exchange lines and long-
distance minutes,thereby decreasing USF revenues.At the same time the number of wireline
residential and business lines have declined,the statewide average residential rates have steadily
increased for more than ten years.The Commission noted last year that determining the true
statewide average rate has become more difficult because the large,deregulated wireline
companies —those with the greatest market share and therefore the greatest impact on statewide
average rates —have increased their stand-alone residential rates to encourage customers to
purchase bundled services that include local residential service.Order No.32637,p.3.This
shift from stand-alone residential local exchange service 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,limiting the Commission’s ability to
change USF recipient company access rates when Rule 106 would require it.If Rule 106 were
strictly enforced,last year six of the eight USF companies would have had to increase their
ORDER NO.32883 3
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.”The Commission found it appropriate to use the 2005 rates as Section 62-605 allows.
Order No.32637,p.4.The Commission approved 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.With
those rates in place,the Administrator projected a reserve balance of approximately $414,589 at
June 20,2013,and instead the USF balance at year-end was $6.746.
The current Administrator’s report presents the Commission with the same situation.
Traditional landline use again declined along with MTS minutes,reducing USF revenues,while
statewide average rates for basic local service increased.The USF mechanism,if enforced each
year without the option in Section 62-605 to use 2005 local service rates to establish the
statewide averages,would result in ever increasing local rates for the USF recipient company
customers as their USF support steadily declines.Even the relief in Section 62-605 does not
alter the annual erosion in USF revenues,necessitating increases in USF surcharges to maintain
existing funding levels.As they did last year,the Administrator and Staff recommend increasing
the USF surcharges while maintaining the current USF disbursements.The Commission has few
options under the existing USF protocol,and only the Legislature can address this situation.
On the record in this case,the Commission finds it just and reasonable to approve
the Administrator’s report and recommendation to increase the USF monthly surcharge rates to
$.16 per residential line,$.25 per business line,and $.006 per MTS/WATS minute,effective for
12 months beginning October 1,2013.With these rates,the Administrator projects an adequate
reserve in the USF fund at year-end June 30,2014.
ORDER NO.32883 4
ORDER
IT IS HEREBY ORDERED that the monthly USF surcharge rates are increased to
S.16 per residential line,$.25 per business line,and $.006 per MTS/WATS minute,effective for
12 months beginning October 1,2013.
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 §61-
626.
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this 2 9 ‘
day of August 2013.-1
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-/1
\PAUL KLLADR PRESIDENT
(\
MACK A.REDFORD,COMI’ISSIONER
kL
MARSHA H.SMITH,COMMISSIONER
ATTEST:
D.JeweU
Cbmmission Secretary
O:GNR-T-13-O4ws
ORDER NO.32883 5