20150916final_order_no_33378.pdf

Office of the Secretary
Service Date
September 16,2015
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE ANNUAL )
REVISION OF THE UNIVERSAL SERVICE )CASE NO.GNR-T-15-07
FUND SURCHARGES TO BECOME )
EFFECTIVE OCTOBER 1,2015.)ORDER NO.33378
________________________________________________________________________________________
)
The Idaho Telecommunications Act of 1988 created a Universal Service Fund (USF)
to maintain “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 by end-user
surcharges on local exchange service,message telecommunication service (MTS),and wide area
telecommunications service (WATS).IDAPA 31.46.01.103-104.Each year,the Commission
establishes the monthly surcharges levied upon local exchange service and intrastate
MTSIWATS (long-distance)service.Idaho Code §62-610(2).The surcharges are in effect for
the 12-month period starting October 1.Telecom Rule 104,IDAPA 31.46.01.104.As set out in
greater detail below,the Commission reduces the USF surcharges effective October 1,2015.
BACKGROUND
The Commission annually distributes USF funds to qualifying high-cost local
exchange telephone companies to supplement their annual revenue requirements.The Idaho
Telecommunications Act restricts USF support to those local telephone companies that have
monthly rates for single-party,residential and business services that exceed 125%of the
weighted statewide average rates for such services.Idaho Code §62-610(3);Telecom Rule 106,
IDAPA 31.46.01.106.
The USF Administrator submits an Annual Report to the Commission.In the report,
the Administrator reviews the fund balance and recommends changes,if any,to the surcharge
rates in order to maintain adequate funding levels.After reviewing the report,the Commission
issues an Order prescribing USF surcharge rates for the next 12 months beginning October 1.
IDAPA 31.46.01.104-106.As set in the Commission’s 2014 Order,current monthly USF rates
are $0.16 per residential line,$0.25 per business line,and $0.006 per intrastate long-distance
billed minute.See Order No.33120.
ORDER NO.33378 1
THE 2015 REPORT
A.The 2015 Data and 2016 Proposed Budget
On July 15,2015.the USF Administrator filed the Annual Report for the USF fiscal
year from July 1,2014 through June 30,2015.The Administrator reported that USF surcharge
revenue for the past year totaled $2,046,064 —an increase of about $100,000 from 2014.The
surcharge revenue from local exchange services during the reporting year totaled $1,081,691
(about the same as 2014),and the long-distance surcharge revenue increased to $964,373.Fifty-
three percent (5 3%)of the total USF revenue was from local exchange services surcharges,and
47%was from long-distance surcharges.
Annual disbursements to the eight qualifying telephone companies —unchanged from
2014 —totaled $1,698,610.The fund’s annual year-end cash balance after applying bank charges
and administrative expenses was $567,282.The Administrator estimated that if current
surcharge levels are maintained,the fund will increase by approximately $174,641 to about
$741,923 on June 30,2016.
The Administrator’s expenses for the 2015 year were $19,657.The Administrator
proposed an annual administrative budget for next year of $16.200.This amount includes the
Administrator’s salary and other expenses.
Based upon data submitted to the Administrator,she reported that as of May 1,2015,
ldaho’s telecommunications companies reported 181,984 residential lines in service and 225,505
business lines in service,for a total of 407,489 lines.Comparing this data to the prior year,the
Administrator calculated that the number of residential wire lines decreased by about 10%and
business wire lines decreased by about 5%.
Long-distance service providers reported intrastate MTS/WATS billed minutes of
167,029,919,a decrease of approximately 3%from the prior year.The statewide average
switched access rate was $0.036,a slight change from last year’s rate of $0.037.Based upon the
reports submitted by the wire line telephone companies and the long-distance companies,she
calculated the statewide weighted average for one-party single line residential and business
service and the corresponding 125%statewide weighted average as set out below:
2015 Statewide Weighted 125%Statewide Weighted
Type of Service Average Rate Average Rate —2015
Residential Service $21.79 $27.23
Business Service $36.93 $46.16
ORDER NO.33378
B.The Four Surcharge Options
The Administrator noted that over the last several years,both local access lines and
intrastate MTSIWATS minutes have steadily declined.This continued decline,she asserted,
makes it difficult to calculate the funding requirements necessary to maintain adequate fund
balances throughout the fiscal year.Consequently,the Administrator proposed four surcharge
options for the Commission’s review,all reflecting the decline in current line inventories and
minutes of use by the average percentage decline over the last five years.
Option 1 —Maintain Current USF Rates:If current surcharge levels are maintained
and no additional USF funding is authorized,the Administrator calculated that the USF revenues
will increase by approximately $174,641.Assuming the same disbursements as last year
($1,698,610),the year-end fund balance would grow to $741,923.Surcharge revenues would be
approximately 52%from MTS/WATS services and 48%from local exchange services.
Option 2 —Adjust Funding Disbursement to the USF Recipients and Maintain the
Current Surcharges:If current USF charges were maintained and disbursements to the eight
USF recipients were adjusted to meet the 125%statewide averages,six of the recipients would
receive reduced disbursements while the remaining two would receive an increase in
disbursements.Under Option 2,the Administrator projected that annual USF disbursements
would be approximately $1,562,958,while the year-end fund would increase to approximately
$877,575.Under this option,MTSIWATS services would contribute 48%of the total surcharge
revenue and the local exchange services would contribute approximately 52%.
Option 3 —Maintain Funding Levels and Decrease Surcharge Rates:Under this
option,USF disbursement amounts would remain the same,but the USF surcharge rates would
be decreased to $0.12 per residential line,$0.20 per business line,and $0.005 per intrastate
MTS/WATS billed minute.Overall USF funding would decrease by approximately $188,700
and the year-end balance would be approximately $378,549.Revenues raised from MTSIWATS
services and local exchange services would be roughly equal.
Option 4 —Adjust Funding to Meet Statewide Averages and Decrease Surcharge
Rates:Under this option,the Administrator decreased the amount of USF disbursements and also
proposed to decrease the surcharge rates to $0.08 per residential line,$0.14 per business line,and
maintain the rate of $0.004 per intrastate MTSIWATS billed minutes.Under this option,funding
would decrease by approximately $443,515 and the year-end balance would be approximately
ORDER NO.33378 3
$123.767.MTS/WATS services would contribute 49%and local exchange services would
contribute 5 1%.
Given the anticipated decline in the number of local access lines and long-distance
minutes,the Administrator and Commission Staff recommended that the Commission adopt
Option 3 —maintain USF disbursements at the current level and decrease the surcharge rates.
Again,the Administrator calculated that the year-end balance on June 30,2016 under Option 3
would be approximately $378,549.The Administrator opined that Option 3 would allow the
USF fund to meet all of its obligations as well as provide an appropriate reserve balance.
DISCUSSION
Over the last several years,local access lines and intrastate long-distance billed
minutes have generally declined.The Administrator again reported that the number of
residential lines is projected to decrease by about 11%,the number of billed long-distance
minutes decrease by about 10%,while the number of business lines remain unchanged.At the
same time,the statewide average residential and business rates have steadily increased.This
makes it difficult to predict the necessary USF fund balance for the next fiscal year,and also
difficult to determine appropriate rates in order for qualifying telephone companies to maintain
USF eligibility per Telecom Rule 1 06.
To receive USF funding.a telephone company providing local exchange services and
access services to long-distance providers must qualify under Telecom Rule 106.IDAPA
31.46.01.106.To qualif’under Rule 106,a telephone company’s average rates for one-party,
residential and business services,and per minute for long-distance access services must meet or
exceed the weighted statewide averages —or threshold rate —as calculated by the USF
Administrator.See IDAPA 31.46.01.106.01,31.46.01.302.The Commission may revise a
qualifying telephone company’s rates in order for the company to maintain USF eligibility,based
on the company’s average rate or annual revenue as compared to the threshold rate or threshold
rate’s associated annual revenue.See IDAPA 3 1.46.01.106.02.
As we have noted in prior years,the true statewide average rate is difficult to
determine because the large deregulated companies —with the greatest market share and greatest
impact on the threshold rate —have increased their stand-alone residential rates to encourage
purchase of bundled services that include local residential service.See Order Nos.32883 at 3;
32637 at 3.This shift to bundled services is not reflected in the USF Annual Report or the
ORDER NO.33378 4
threshold rate calculations because companies are only required to report stand-alone residential
rates.Also,in 2011,the Federal Communications Commission (FCC)issued an order capping
inter-carrier compensation rates,causing a decline in statewide average switched access rates,
further impacting USF eligibility.In the Matter of Connect America Fund,26 F.C.C.R.17663
(2011);see Order Nos.32637at 4;32883 at 3-4.
Based upon our review of the 2015 Annual Report and the recommendations of Staff
and the fund Administrator,the Commission finds that the USF surcharges should be reduced.
Given the various complicating factors discussed above,the Commission agrees with Staff and
the Administrator that Option 3 represents a reasonable alternative.Consequently,the
Commission approves the Administrator’s recommendation that the USF disbursement levels be
maintained and the surcharge rates be reduced,as proposed in Option 3.The Commission finds
that this option,which is estimated to yield a reserve balance of about $378,549,is the most
prudent for maintaining an adequate USF funding level.
The Commission also accepts the Administrator’s proposed 2016 administrative
budget.We commend her work as Administrator.
ORDER
IT IS HEREBY ORDERED that the monthly USF surcharge rates shall be reduced to
$0.12 per residential line,$0.20 per business line,and $0.005 per MTS/WATS minute,effective
for 12 months beginning October 1,2015.The Commission also accepts the Administrator’s
proposed 2016 budget.
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 and 62-619.
ORDER NO.33378
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this
day of September 2015.
ATTEST:
La4Z
MARSHA H.SMITH.COMMISSIONER
KRISTINE RAPER,COMMISSIONER
Jel
mmission Secretary
O:GNR-T I 5-07 don
ORDER NO.33378 6