20180130Idaho Telecom Alliance Position Paper.pdf

D ORIGINAI,
Cynthia A. Melillo (lSB # 5819)
Cynthia A. Melillo PLLC
8385 W. Emerald Street
Boise, lD 83704
Telephone: [phone]
Email: [e-mail]
()
Attorneys for ldaho Telecom Alliance
BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE 2017 REVIEW OF
THE IDAHO UNIVERSAL SERVICE FUND
CASE NO. GNR-T-17-05
POSITION PAPER OF THE IDAHO
TELECOM ALLIANCE
The ldaho Telecom Alliance ('lTA'), by and through its attorneys of record, Cynthia A.
Melillo PLLC and Givens Pursley LLP, hereby files this Position Paper in response to the Notice
of Public Workshops in Case No. GNR-T-17-05, Order No. 33951, issued on December 21,2017 .
ITA is a state telephone association, and its members include both commercial companies and
cooperatives. The fourteen (14) members of ITA provide advanced telecommunications and
broadband services in rural ldaho. All the members (or affiliates of the members) are designated
Eligible Telecommunications Carriers ('ETC') in ldaho. Eight of the members receive funding
from the ldaho Universal Service Fund and claim a direct and substantial interest in this
proceeding.
i'* ***ul
(_rO--O-::
S-m<F
U'?)a
FJ
=CE'(-skrnc,) C)om ?#rn
€(for
)
)
)
)
)
)
)
)
1POSITION PAPER OF IDAHO TELECOM ALLIANCE - GNR-T-17-05
Kenneth R. McClure (lSB #2616)
Givens Pursley LLP
601 W Bannock Street
Boise, lD 83702
Telephone: [phone]
Email: [e-mail]
On January 17,2018, the ldaho Public Utilities Commission (the "Commission") convened
a workshop for interested parties and stakeholders in the ldaho Universal Service Fund ("lUSF")
to discuss how the IUSF relates to the current legal and regulatory framework, the evolving
telecommunications landscape, and universal telecommunications services in ldaho generally.
Following the workshop, interested parties were invited to submit a position paper. The following
is ITA's position on the matter of the IUSF.
Brief Historical Summary
As the Commission is aware, the ITA member companies serve areas of the state that
were not served by the original Bell telephone operating companies. These areas were the non-
economic leftovers the Bell operating companies elected not to serve, and thus by definition,
these areas are high cost territories. The Bell operating system was able to subsidize those high
cost areas that were served by the Bell operating system by using the profits from its urban service
territories. The non-Bell telephone companies that served only the high cost territories had no
urban territories to subsidize their high cost areas, but they were assisted by the implicit subsidies
of the intercarrier compensation system that provided payments from the Bell operating
companies for the origination and termination of calls to and from the non-Bell company service
territories.
Following divestiture of the Bellsystem, technological advances subjected the Bell holding
companies to competition from providers using new and cheaper technologies. Naturally, this
competition occurred primarily in the low cost and higher margin urban areas. The new
competitors offered services at rates below the Bell companies' tariffed rates, thereby cutting the
profits the Bell companies used to subsidize their high cost areas. ln this new telecommunications
environment with decreasing margins and declining market share in urban areas, created by new
2POSITION PAPER OF IDAHO TELECOM ALLIANCE - GNR-T-17-05
technologies providing services, the ITA member companies serving high cost areas could not
receive enough intercarrier compensation to keep their networks economically viable. The ITA
member companies serving the highest cost areas, and similarly situated companies across the
country, would not have survived the economic free for all that followed the divestiture and de-
regulation without a system of explicit subsidies, and thus, in order to assure continued service in
their high cost rural service territories the ldaho legislature established the IUSF to enable the
goal of ubiquitous service at comparable rates. ln short, divestiture and de-regulation forced ithe
historic implicit subsidies to become explicit, lest those highest cost areas lose
telecommunications altogether.
The IUSF was established to maintain "the universal availability of local exchange
service at reasonable rates and to promote the availability of message telecommunications
service (MTS) at reasonably comparable prices throughout the state of ldaho." ldaho Code
S 62-610. The IUSF is funded by a statewide per line end user surcharge on local exchange
service and a cents-per-minute surcharge on MTS and WATS type services. ldaho Code S 62-
610. ln a sense, this system maintains the concept of supporting high cost rural areas with
low cost urban revenues with a uniform charge.
Distributions from the IUSF are available to the individual eligible telecommunications
carriers in ldaho that provide basic local exchange service and meet certain other
requirements as set forth in the Telecommunications Act of 1988. There are eight members
of the ITA who meet these requirements and receive funding from the lUSF.1
' The ITA members receiving funding from the IUSF are ATC, Cambridge, Direct, Fremont, lnland,
Midvale, Rural and Silver Star.
3POSITION PAPER OF IDAHO TELECOM ALLIANCE _ GNR-T-17-05
The Commission and the stakeholders acknowledge that the IUSF funding levels have
been steadily decreasing, and the future of the IUSF is in jeopardy. Based upon information
provided by the Commission at the workshop, line counts have been decreasing by an average
of ten percent (10Yo) per year over the last five years. Likewise, MTSAruATS billed minutes have
declined by an average of twelve percent (12Yo) per year over the last five years. As the sources
of funding decrease, the revenues in the fund decline. lf the line count numbers and MTSAffATS
billed minutes continue to decline at the pace presented at the workshop2, then the current funding
levels or sources will not be adequate to sustain the fund into the future.
The ITA member companies have used the federal Universal Service Fund support and
the IUSF support to build networks for communications services throughout rural ldaho. The ITA
member companies are also the providers of broadband services and internet connectivity to their
subscribers in the rural service territories over the networks they have constructed. While in some
areas, ldaho residents may have a choice between landline, wireless or broadband service
providers, in most ITA member service territories there is only one network over which these
various services are economically provided, and that is the network built by the ITA member
companies with IUSF funding. Without continued IUSF support, these networks will fail, and that
does not simply mean that the rural citizens will not have access to wireline voice services. lt also
means that their communications needs will not be supplied by wireless or broadband providers
because these providers use the same network. Without the network that enables
communications services, rural ldaho citizens will exist on the wrong side of a digital divide unable
to keep pace with the rest of the country.
2 The ITA would like additional information regarding reported line counts. Based upon the collective
knowledge of the ITA members, the line count numbers reported by the Commission at the workshop do
not appear on their face to accurately reflect line counts. Can the Commission provide a list of line counts
by company?
4POSITION PAPER OF IDAHO TELECOM ALLIANCE - GNR-T-17-05
The Continuing Need for the IUSF
The position of the ITA is that the IUSF must be maintained, and that the Commission and
interested stakeholders work together to continue toward the goal of providing ubiquitous service
to all ldahoans at comparable prices. While the telecommunications landscape has evolved since
the Telecommunications Act of 1988 and voice services look very different today than they did in
1988, universal telecommunications services in ldaho should remain a priority to continue to
bridge the divide between the urban population and ldaho's rural population. The IUSF is needed
to sustain necessary services in high cost areas. Because of the IUSF, many areas in ldaho that
would not have communication services, now have those services. lf IUSF support were to cease,
the provision of communications services to these high cost areas in ldaho would not be
sustainable over time. lf a provider is forced to maintain the current rate structure and simply
sustain the losses, over time the provider would cease to be viable, its network would fail, and
ldaho citizens would suffer. lt might be suggested that the provider could charge the actual cost
of service to customers in the high cost areas. That not only would defeat the goal of ubiquitous
service at comparable costs throughout all regions of the state, the cost to the customer would be
prohibitive, the customer base would shrink, and the network would not be sustainable. Either
way, rural areas ultimately would lose communications capabilities. The argument that urban
ldahoans should not have to support rural ldahoans access to telecommunications because rural
ldahoans choose to live in these areas, is as simplistic as saying that rural ldahoans should not
have to pay taxes that fund infrastructure in primarily urban areas. Just like highway
infrastructure, communications infrastructure is useful both to those who live in these areas and
to those traveling through.
ln addition to the necessity of IUSF funding to sustain services already provided in high
cost areas, the need for IUSF funding likely will exist as long as high cost areas exist. The Federal
5POSITION PAPER OF IDAHO TELECOM ALLIANCE - GNR-T-17-05
Communications Commission ("FCC") recently announced the Connect America Fund Phase ll
Auction (Auction 903)to award nearly $2 Billion to service providers that will commit to offer voice
and broadband services to fixed locations in unserved high-cost areas. The list of unserved high
cost locations includes over 2,000 such locations for the state of ldaho. (See FCC Fact Sheet -
Connect America Fund Phase ll Auction (Auction 903) - Public Notice - AU Docket NO. 17-182,
issued January 9,2018). Many of these areas received no bids in earlier auctions because even
with federal funding, many bidders believed the areas were too expensive to serve and the
likelihood of all such areas in ldaho being awarded funding in the Auction 903 is slim.
Next Steps for the IUSF
As noted above, ITA recognizes that the current funding sources or funding levels for the
IUSF are not adequate to sustain the fund into the future. ITA acknowledges that change needs
to occur, and short of simply increasing the per line/per minute charges, any change will require
legislation and rulemaking. With the primary goalof maintaining ubiquitous and affordable'service
to the residents of ldaho, ITA is open to exploring all reasonable recommendations that will allow
the continued viability of the fund. ldaho is not the first state to examine the issue and certainly
not the only state to have a high cost universal service fund. Other states have different funding
mechanisms and may not be affected by decreasing line counts, and other states have recently
made changes to their universal service funds to address issues the IUSF is now facing. Changes
include increasing funding levels and/or sources of funding, and also address expanding the pool
of eligible recipients of funding or otherwise providing for limited distributions to currently ineligible
recipientsto ensure adequate service in eligible high cost areas.
lf the IUSF is in fact failing because of decreases in line counts and presumably a
decrease in the use of traditional landline voice services, perhaps the Commission needs to
6POSITION PAPER OF IDAHO TELECOM ALLIANCE - GNR-T-17-05
consider a broader, technologically neutral IUSF Perhaps any provider of communication
services that has ETC status and obligations should be eligible for funding the network in the
highest cost areas Perhaps also all customers who use communication services that are
delivered over the network should pay for the network.
The ITA acknowledges that not all unserved or underserved areas located within ldaho
are within the service territories of those companies currently receiving IUSF funding. ITA
believes in the overall goal of ubiquitous service at comparable costs for all ldahoans, and
perhaps expanding the pool of eligible recipients is a fair approach to accomplishing that goal.
The Commission would have to consider what the requirements might be for these companies to
receive funding that would be comparable to the requirements placed upon the current recipients.
ln summary, ITA continues to support the goal of universal service for all ldahoans at
comparable rates. That goal can only be reached if the IUSF is maintained. The IUSF can only
be maintained if the contribution base of the fund is expanded. With the growth of the contribution
base, ITA is open to expanding the potential recipients of funding. Finally, the ITA would like to
see this case expanded beyond the remaining scheduled workshop. The ITA believes it would
be beneficial for the Commission to guide discussions to enable all interested stakeholders to
seek agreement on basic terms upon which legislative action may be commenced.
7POSITION PAPER OF IDAHO TELECOM ALLIANCE - GNR-T-17-05
ITA respectfully submits this Position Paper as of this 30th day of January 2018.
By:
A.
CYNTHIA A. MELILLO PLLC
KA//Ik
Kenneth R. McClure
GIVENS PURSLEY LLP
Attorneys for ldaho Telecom Alliance
8POSITION PAPER OF IDAHO TELECOM ALLIANCE - GNR-T-17-05