20180131CenturyLink Position Paper.pdf

ldaho Pubiic Utilities Commission
Otfice ol the SecretaryRECEIVED
JAN 3 r 2018 *:K centurylink*
Boise,ldaho
James B. Farr
Regulatory Affairs Director - ldaho and Utah
Suite 1000
250 East 200 South
Salt Lake City, Utah 841 11Office: 801-238-0240Fax: [phone]il2
[e-mail]
January 31, 2018
Wa Email and
Overnight Delivery
Diane Hanian, Secretary
Idaho Public Utilities Commission
472West Washington
Boise,ID 83702-5983
RE Case No.: GNR-T-17-05
Idaho Universal Service Fund (IUSF)
CenturyLink and Level3 Position
Dear Ms. Hanian:
Attached are an original and 7 copies of Centurylink's and Level 3's position on the IUSF
Please contact me with any questions regarding this filing.
Sincerely,
g ')-^^^--
JBF/jga
Affachments
CENTURYLINK AND LEVEL 3 - POSITION
IDAHO I.INIVERSAL SERVICE FUND (ruSF)
CASE NO. GNR.T.I7.O5
January 31, 2018
Background:
In its August22,2017, Order No. 33851 in Case No. GNR-T-17-04, the Idaho Public Utilities
Commission (IPUC) ordered avery significant percentage increase in the Idaho Universal
Service Fund (IUSF) surcharges applicable to residential access lines, business access lines and
to MTS/IVATS minutes of use (MOU). The surcharge for residential access lines increase from
$.12 per month per line to $.25 per month per line. The surcharge for business access lines
increased from $.20 to $.44 per month per line. The surcharge for MTS/IVATS increased from
$.005 to $.009 per MOU. Attachment A provides more specific information regarding the IUSF
program history along with the most recent increases.
In the same order, referenced above, the IPUC stated; "The Administrator and Commission Staff
have expressed concerns about the continuing viability of this program in light of the declining
industry around it, as technology evolves and cell phones and VoIP technology have rapidly
overtaken wireline telecommunication sentices and long-distance calling. Further, revenue
impacts of increasing surcharges to fund current IUSF disbursements are rapidly eroding
Idaho's land line customer base while simultaneously increasing the financial impacts on it. We
share these important concerns with Staff and find it prudent and necessary to take a hard look
at the sustainability andviability of the IUSF. "1 The IPUC also ordered its Staff and
Administrator to initiate a generic docket2 to address the IUSF.
On December 21,2017, the IPUC in Order No. 33951 in this generic docket, sent out a notice of
public workshops and provided the opportunity for interested parties to file position papers by no
later than January 31, 2018.
State USFs and high-speed internet (HSI) deployment incentives:
CenturyLink supports the need for state USFs and/or state high speed internet (HSD programs
creating economic incentives for HSI providers to build HSI networks that are capable of
Pages 6 and 7, IPUC's August 22,2017 Order No.33851, Case No. GNR-T-17-04 PUC website link:
http://www.puc.idaho.gov/fileroom/cases/tele/GNR/GNRT 1704/ordnotc/20170822FINAL-ORDER-NO_3385
l.PDF
IN THE MATTER OF THE 2OI7 REVIEW OF IDAHO UNIVERSAL SERVICE FUND, CASE NO. GNR-T-
t7-05:
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supporting voice service, especially in high cost unserved and underserved areas.3 These
incentives include HSI investment tax credits, sales and property tax abatement for HSI
investment, along with targeted HSI funding as an aid to construction for specific projects to
build HSI networks in high cost areas.
Immediate recommendation to the IPUC:
The IPUC rightfully has recognized the significant problems that exist with the current IUSF and
that it is not sustainable to continue to increase the surcharges on access lines. It is clear that a
complete solution to the problems will require legislative action. However, the IPUC in the
interim, until the legislature has time to act, should not approve any additional increases to the
access lines surcharges. This will only make the situation worse and harm remaining customers
who subscribe to traditional phone service. As IUSF revenues decline because of access line
loss, the IPUC should reduce IUSF distributions to providers based upon demonstrated needs and
not increase the burden upon the remaining customers who pay the IUSF access line surcharge.
Problems with the IUSF:
The existing IUSF has major problems that will require action by the Idaho legislature to
address, either fixing it or changing to something different to accomplish the goals of universal
service. There are two major problems along with some other changes that need to be
considered. First, the funding is broken, since the surcharge is collected on a declining base.
The decline in access lines will continue due to migration to wireless and Voice over the Internet
Protocol (VoIP) voice services. Increases in the IUSF surcharges on the existing declining base
are not sustainable going forward.
The existing IUSF is not competitively and technology neutral, since wireless and VoIP
providers are not required to pay into the IUSF. The IUSF should neither advantage or
disadvantage any provider or technology in the collection of the IUSF surcharge or payment
from the IUSF to providers. Additionally, rural telecom providers, who are rate-of-return
regulated and receive ongoing draws from the IUSF, should be required to demonstrate
continued need for the support they receive. This will most likely require allocation of more
resources by the legislature to the IPUC necessary to support frequent rate cases/audits, along
with development of a cost model or other cost methodology as an option to the rate case
approach.
The ldaho legislature will need to make very important policy decisions regarding the future of
the IUSF. There are at least two options that state policy makers should consider.
Within CenturyLink's and Frontier's service territory in Idaho, the FCC CAf' II program did not fund the
deployment of HSI to census blocks with over 12,400 high cost customer locations.
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Option I - Reform the IUSF, fixing the problems:
Parity of payment into the IUSF: Require all providers of voice lines/connectionsa to
pay into the IUSF on a non-discriminatory and competitively neutral basis. Wireless and
VoIP providers will be required to start paying into the ruSF. Providers will be allowed
to recover the IUSF surcharge from their end-user customers if they want to do so, but it
will not be mandated.s Obtaining parity will allow the IPUC to significantly reduce the
IUSF surcharge, making it the same for business and residential lines/connections, and
also eliminating the need for the MTS/WATS MOU surcharge. Attachments B shows
that if all providers of voice lines/connections in Idaho were paying into the IUSF, at the
current level of funding of $1.7 million ayear, would only require a per line/connection
surcharge of $.07 per month. This a very small cost to ensure that collection of the IUSF
is competitively and technology neutral neither advantaging or disadvantaging any voice
line service provider in Idaho.
o At the same time the legislature fixes the parity problem with payment into the
IUSF, it can ensure parity with the payment of the other fees and surcharges under
the jurisdiction of the IPUC. Wireless and VoIP voice service providers should
be required to pay the same fees and surcharges that access line voice service
providers are required to pay. In addition to the IUSF this also includes the
Telecom Relay Service (TRS),Idaho Telephone Service Assistance Program
(ITSAP) and Public Utilities Regulatory Fees (PURF). The ruSF, TRS, ITSAP
and PURF should be assessed on all voice service providers in Idaho based upon
the number of voice lines/connections they provide in Idaho. Attachment C
shows that current levels of funding will only require a per line/connection
surcharge of $.15 per month. This is also a very small cost to ensure that the
collection of the funds necessary to support the various telecommunications
programs and the regulatory resources necessary to support universal service and
telecommunications is done in a competitively and technology neutral manner.
Demonstration of continued need: The legislature needs to ensure that the IPUC has
the resources it requires to be able to have frequent rate cases/audits ofthe rate-of-return
regulated telecom providers who receive ongoing draws from the ISUF. Additionally,
the resources necessary to adopt a cost model or other cost methodology as an option to
A voice line/connection is defined as any voice service that can make calls to or receive calls from the Public
Switched Telephone Network (PSTN) consistent with the FCC requirements.
By not mandating an end-user surcharge, eliminates the need for the legislature to get involved in establishing a
point ofsale process for pre-paid wireless providers.
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rate cases/audits and to also provide the opportunity for non-rate-of-return, carriers oflast
resort6 (COLRs) to receive support for the high cost areas they serve.
Targeted, HSI deployment funding: Provide the IPUC with the authority to approve
targeted, one-time IUSF distributions as an aid to construction, to help COLRs fund
specific projects to construct HSI facilities, capable of supporting voice service, in high
cost areas that are underserved or unserved.T
Option 2 -Change the IUSF to a IISI investment program:
A new targeted HSI funding program, replacing the existing IUSF. (To be managed
by the IPUC):
o One-time distributions as an aid to construction on specific projects to help
COLRs fund the building of HSI networks, capable of supporting voice service in
specific unserved or underserved high cost areas, that otherwise would not get
HSI without the targeted funding.8
These distributions can also be used to help fund the backbone fiber
facilities of COLRs necessary to serve wireless cell sites in high cost
areas, where there is a significant public safety/public interest need for
wireless service.
o Initially funded through grants from the Idaho general fund.e In the future,
depending upon the success of the program, the legislature may consider funding
Carrier of last resort (COLR), can be any, landline or wireless voice service provider, willing to be designated
by the IPUC as the default carrier in an area in which they receive high cost IUSF support.
The definition of underserved and unserved should be consistent with the FCC HSI goals. A COLR may
qualify for one-time ISUF funding in any high cost area that is unserved or underserved. (The area can be at the
sub census block level. Just because a portion of a census block is served by an unsubsidized competitor does
not automatically exclude the rest of the census block that is not served.)
During the January 17,2018 workshop, at least one rural ILEC expressed concerns that one-time distributions
as an aid to construction helps covers the capital costs, but not ongoing operating costs. This need not be a
roadblock to implementing targeted one-time distributions on a project by project basis. The deployment of
more fiber in the network for the most part helps reduce ongoing operating costs. However, it is also possible to
provide one-time distributions at a level that not only covers a significant portion of the capital costs, but also a
reasonable portion ofthe anticipated maintenance costs, that will not be covered by anticipated revenues in the
project area.
By initially funding it through the general fund, should reduce/eliminate opposition to getting the program
started. This will provide time for the IPUC to be able to fully evaluate the cost/benefits of the program so that
it can report to the legislature and provide recommendations concerning what changes should be made to the
program to ensure that the program is effective and efficient, accomplishing the desired goals ofincenting HSI
deployment in high cost unserved and underserved areas. The legislature then can determine the best way to
fund the program.
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it through a per voice line/connection based surcharge on providers, implemented
in a competitively and technologically neutral manner.
Economic incentives for overall HSI investment throughout Idaho:
o Enhance the existing HSI investment tax credits.
. It is currently a3o/o credit lncrease the tax credit in both urban and
suburban areas, and significantly more in rural areas.
o Implement sales and property tax abatement incentives for HSI investment.
Conclusion:
CenturyLink supports either of the two options for the legislature to take action in regards to the
ruSF. Option I to reform the existing IUSF and fix the problems, or Option 2 to change the
IUSF to a HSI investment program. Centurylink defers to the legislature, who are the policy
makers, to decide which approach will better serve the citizens in ldaho. However, Centurylink
strongly recommends that the IPUC not increase the IUSF surcharge on access lines in the
interim, until the legislature has time to act. Otherwise this will cause significant harm to the
customers that subscribe to the voice services currently subject to the access lines surcharges. If
the amount of IUSF revenue decreases in the interim, the IPUC can adjust the payments
accordingly.
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Attachment A - Centurylink Position Paper (01/31/18) Case No. GNR-T-I7-05
Idaho Universal Service Fund (IUSF)
2000' 20092 20163 20174
Access liness
Residential Lines
Business Lines
Total
Minutes-of-Use (MOU)
Toll - MTS/WATS 302,160,126 313,436,250 197,135,147 125,154,200
531,879
187.r25
719,004
418,844
232.536
651,380
169,987
193.095
363,082
$.12
$.20
$.00s
152,290
122.009
274,299
$.2s
$.44
$.009
Ordered Monthly Surcharge
Residential (per line) $.14
Business (per line) $.26
Mrs/wATS (MOU) $.004s
Annual Disbursement
8 Rural ILECs $2,212,761 $1,943,523 $1,698,610 $1,699,000
$.10
$.17
$.003
Percentage change between 2000 and 2017:
Residential access lines: 71.4% decrease6
Business access lines: 34.8% decreaseT
Total access lines: 61.9% decreases
MOU MTSiIVATS: 58.6% decreasee
Annual Disbursements: 23.2% decreaselo
Surcharge percentage change between 2016 and 2017:
Residential access lines: l08o/o increasell
Business access lines: l}}ohincreaset2
MTS/WATS (MOU) 807o increaser3
Information - IPUC Order No. 28492, Case No. GNR-T-00-29, August 29,2000.
Information - IPUC Order No. 30635, Case No. GNR-T-08-03, September 9, 2008.
Information - IPUC Order No. 33582, Case No. GNR-T-16-12, September 8,2016, and the August 19,2016,
Decision Memorandum in the same case.
Information - IPUC Order No.33851, Case No. GNR-T-17-04, August 22,2017.
Switched access lines - traditional phone lines. Wireless and VoIP currently are not required to pay.
(531,879 - 152,290: 379,589) I 531,879:71/% decrease.
(187,125 - 122,009 : 65,1 16) I 187,125 :34.8% decrease.
(719,004 - 274,299 :444,705) 1719,004--619% decrease.
(302,160,126 - 125,154,200 = l7'7,005,926) I 302,160,126 = 58.6% decrease.
(52,213,761 - $1,699,000 : $514,761) l$2,212,761 : 23.zyo decrease.
($.12 - $.25 = $.13)/$.12 = 108% increase.
($.20 - $.44 = $.24)l$.20 : 120% increase.
($.005 - $.009: $.004y$.005 : 80% increase.
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Attachment B
Centurylink Position Paper
(01/31/18)
Case No. GNR-T-17-05
CALCULATED IUSF SURCHARGE PER VOICE LINE
Voice Lines - Idahor June 2015
Wireless 1,515,000
Switched access lines 342,000
Interconnected VoIP 106,000
June 2016
1,586,000
325,000
114.000
oh Change
4.7% increase
7.9% decrease
7.5% increase
TOTAL 1,963,000 2,025,000 3.2o/o increase
Annual IUSF funding (current level) : $ 1,700,000
Total voice lines as of June 2016:2,025,000
$1,700,00012,025,000: $.84 l12months: $.07 per month per voice line2
Total Idaho voice lines as of June 2016 - calculated from the FCC's report, State Level Subscriptions:
Website link: https://www.fcc.gov/voice-telephone-services-report
This analysis assumes the IUSF charge per voice line/connection will be the same for both residential and business.
Also, the MTSNVATS MOU surcharge is eliminated.
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Attachment C
Centurylink Position Paper
(01/31/18)
Case No. GNR-T-17-05
CALCULATED PARITY SURCHARGE PER VOICE LINE
Yaice Lines: Idahol June 20L5 June 201.6 %o Chanee
Wireless
Switched access lines
Interconnected VoIP
1,5 15,000
342,000
106,000
1,586,000
325,000
114,000
4.7% increase
7.9% decrease
75% increase
TOTAL 1,963,000 210251000 3.2o/o increase
Annual Funding requirement (most recent level of funding):
Idaho Universal Service Fund (IUSF) S 1,700,000
Idaho Telephone Service Assistance Plan (ITSAP) S 123,0002
Telecom Relay Service (TRS) $ 102,0003
Public Utili
TOTAL ANNUAL FUNDING $ 3,525,000
Annual funding : $3,525,000 I 2,025,000 voice lines : $1.74 per voice line
$ 1 .74 I 12 months : $.15 per month per voice line
Total Idaho voice lines as of June 2016 - calculated from the FCC's report, State Level Subscriptions: Website link:
https ://www. fcc. gov/voice-telephone-services-report
Estimate based upon IPUC's Order No. 33732,March29,2017, Case No. GNR-T-I7-03:
http://www.puc.idaho.gov/fileroom/cases/tele/GNR/GNRTl703/ordnotc/20l70329FINAL ORDER NO_33732.PDF
Estimate based upon IPUC's OrderNo 33730,March22,2017,Case No. GNR-T-17-02:
htto://www.ouc.idaho.sov/fileroom/cases/tele/GNR/GNRTl702/ordnotcl20l70322FlNAl ORDER NO 33730.PDF
Annually, the legislature establishes the budget for the Public Utility Commission, and the PURF is collected from
regulated utilities to cover the costs of the budget. For this analysis, an assumed 25%o of the IPUC's budget is needed
to support universal service and telecommunications. All voice lines/connections in Idaho, regardless of the regulatory
status ofthe service provider, benefit equally from the regulatory resources required to support universal service and
telecommunications. Link to the 2017 budget
https://dfm.idaho.gov/publications/bb/eb/eb20l7lsectionb/economic/puc.pdf
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