20180907Second Summary and Report.pdf

SEAN COSTELLO
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOTSE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 8743
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Street Address for Express Mail
472 W. WASHINGTON
BOISE, IDAHO 83702-59I8
Attorney for the Commission Staff
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
STAFF'S SECOND SUMMARY
AND REPORT
STAFF OF the Idaho Public Utilities Commission (Commission), by and through its Attorney of
record, Sean Costello, Deputy Attorney General, submits the following Staff summary and report.
BACKGROUND
In Order No. 33951, the Commission opened a generic docket to allow interested stakeholders to
provide insight and commentary on the continued viability ofthe Idaho Universal Services Fund. See Order
Nos.3385l and 33951. The Commission ordered a schedule to be adopted, including two public
workshops, and a deadline for interested stakeholders to submit position papers. See Order No.33951 at
2. The first public workshop occurred on Wednesday, January 17, 2018, and interested stakeholders
submitted position papers by January 31,2018. See id.
In lieu of conducting the second workshop, Staff then proposed that it would compile and file a
summary and report on the stakeholders' position papers, including its own analysis, and proposed that the
Commission order a reply deadline for stakeholders' to respond to said summary and report. See Staff
Summary and Report, Case No. GNR-T-17-05. Based on the party's positions and its own analysis related
to the sustainability of the Fund, Staff, in its Summary and Report, provided three outcomes for interested
stakeholders to respond to in their Reply Comments:
STAFF'S SECOND SUMMARY AND REPORT I SEPTEMBER 7,2018
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Staff Option l: Leave the IUSF as is, cap the Fund based on the projected surcharge revenue
collected each year, and adjust the distribution to the current recipients accordingly. This
option would be hard to execute, because Fund assessment and distribution methodologies
are codified in the Telecommunications Act of 1988 and, therefore, the Commission may
be in conflict with the statute;
Staff Option 2: Seek statutory revisions. Specifically, approach the legislature about
updating and revising the statute. These changes would most likely include adding
assessments on, and expanding disbursements to include, all qualifzing providers, so long
as they are serving unserved and underserved areas according to the amended statute; and
Staff Option 3: The third option would be to leave disbursement of the Fund at its current
level and fund the IUSF out of the general fund as the State of Washington does. This
would also require involving the Idaho legislature to update and revise the statute.
Id. at ll
Four stakeholders provided reply commentary, which is summarized below
SUMMARY OF' STAKEHOLDERS' REPLY COMMENTS
AT&T
AT&T noted that some stakeholders advocated funding the expansion of broadband internet access
services with the [USF, which AT&T does not support. See AT&T Reply Comments at l. AT&T
concluded that if the Idaho legislature wants to fund internet access availability initiatives at the state level
it should establish a separate, stand-alone incentive based funding mechanism, with funding from the Idaho
general fund. AT&T maintains that any broadband funding from the IUSF would be inherently inequitable
and contrary to federal law. Id. at 1.
Instead, AT&T concludes that the legislature "should review, then reaffirm or modifr, the goals of
the IUSF; establish a firm and self-effectuating budget for the IUSF; and then determine whether a change
to the contribution base is necessary and, if so ensure that any such changes is non-discriminatory and
comports with federal law." Id. at l-2. AT&T believes that the Commission is not the proper forum for
debate related to IUSF reform and believe any further debate or workshops should only be held with
participation of the legislature.
AT&T took issue with CenturyLink's proposal that the Commission be given legislative authority
to approve "one-time IUSF distributions for carriers of last resort ('COLRs') to build high-speed internet
facilities that are capable of voice service in unserved/underserved high cost areas." Id. at5. Instead,
AT&T argued that if the legislature decides to establish a support mechanism, it should track its proposal,
and be a general framework intended to be a competitively neutral, competitive bidding process that would
complement the federal Connect America Fund (CAF) . See Id. at 3-5.
STAFF'S SECOND SUMMARY AND REPORT 2 SE,PTEMBER 7. 20I8
AT&T also took issue with the City of Ammon's suggestion that broadband be recognized as an
essential service and receive utility treatment for high-cost wireline infrastructure because, AT&T argued,
Idaho has no jurisdiction over internet access services, citing to the FCC's 201 5 Open Internet Order, fl 43.
Id. at 5-6.
Next, AT&T reiterated its Position Paper in this matter, stating that "because the IUSF imposes
burdens on contributing providers and their customers, before any reform is contemplated, the legislature
should first establish measurable objectives of the IUSF and then identity the smallest IUSF needed to
achieve these objections." Id. at 6.
AT&T also disagreed with CenturyLink that it is adequate to permit IUSF contributions to be
recoverable without a mechanism for all providers of assessable services. 1d. Because federal law requires
contributions to state USFs to be equitable and nondiscriminatory, IUSF contributions should be collected
at the point of sale by modifuing Idaho's existing 9ll contribution POS mechanism to collect IUSF
surcharges simultaneou sly. Id.
Finally, AT&T concluded, along with CenturyLink, that: (a) no surcharge increase should occur;
(b) distributions should be appropriately decreased; and (c) IUSF participants should be required to
demonstrate continued need until a legislative solution is achieved. 1d.
CenturyLink
CenturyLink found one area of agreement among the various stakeholders to this proceeding: "the
Idaho legislature need to determine the long term/permanent solution addressing the problems with the
UUSF]." CenturyLink Reply Comments at l. CenturyLink appreciated Staff s proposed Option 1, which
would cap the IUSF upon projected surcharge revenue collected each year and adjust distribution to the
current recipients accordingly. It also shared Staff s concern with this approach because the IUSF statute
does not specifically state that the Commission may cap the surcharge amount. However, it argued, other
provisions within the IUSF statute may be considered, namely, Idaho Code $$ 62-610A,610(2), and 610(4).
At base, CenturyLink agreed with Staff s Option 2. Id. at3.
More specifically, CenturyLink concluded that the existing IUSF funding mechanism is not
competitively and technology neutral as wireless and VoIP providers are not required to pay into it. Id. at
2. Increasing the existing surcharge before this problem is fixed by the legislature will only exacerbate the
existing discriminatory surcharge assessed on residential and business local exchange voice service and not
assessed on VoIP and wireless voice services. CenturyLink maintains that an increase to the existing
surcharge would violate the mandate that the surcharge be non-discriminatory, arguing that the Commission
should not take action to make the situation worse. Instead it believes that the funding mechanism not
being competitively and technologically neutral provides greater public harm than capping the surcharge at
STAFF'S SECOND SUMMARY AND REPORT 3 SEPTEMBER 7, 20I8
current levels, and that the Commission has the authority, by necessity, to decline to take further action,
even if in contravention of the stattte. Id.
Further, CenturyLink stated that it has been many years since any analysis has been done
demonstrating that each of the eight rural telecommunications companies that currently receive IUSF
support are within the 7SYo - 100% residual revenue requirement range outlined in statute . See id. at 2; and
Idaho Code $ 62-610(4). Instead of continuing to raise the surcharge to keep the IUSF funding at current
levels, CenturyLink counseled the Commission to determine the level of funding at the current surcharge
level and adjust each of the eight rural telecommunications companies' ongoing support downward
accordingly. Id. lf any of the eight companies object, the Commission could then require them to provide
evidence demonstrating where they are in comparison to the statutorily required range. After an evidentiary
hearing the level of ongoing support would be adjusted and the surcharge would be modified to achieve the
required level of funding based upon the Commission's findings. 1d.
CenturyLink offered that another option for the Commission would be to move forward and
adopt/implement the transition described in ldaho Code $ 62-610F. CenturyLink counseled that, again, if
any of the eight companies objected to having their disbursements lowered, the Commission could move
forward with implementing the statute by requiring interested parties to propose the appropriate forward-
looking cost methodology that the Commission should utilize to determine support. Id. at 3.
Simultaneously, the Commission could expand the surcharge to all "end users of all retail
telecommunications services originating and terminating within the state of Idaho and collected by the
telecommunications carrier providing telecommunications services to end users." See id.; and ldaho Code
$ 62-610F(2). CenturyLink presumes that wireless telecommunications carriers would then be required to
start collecting and paying the IUSF surcharge which would have the effect of significantly increasing the
contribution base and would allow the Commission to significantly lower the IUSF surcharges unless there
was a significant increase in draws. 1d.
CenturyLink maintains that it is critical for the Commission to take the appropriate action in the
interim to prevent increasing the disparity and discrimination currently inherent in the IUSF surcharge
mechanism. At base CenturyLink agreed with pursuit of Staff s Option 2, as described above, but noted
the legislative reform of the IUSF will be a difficult task. Id. at3.
CTIA
Much like AT&T, CTIA first reiterated its position that the IUSF should be funded out of the state's
general tax revenue. Reply Comments of CTIA at 1. It also believes the Commission and the legislature
should determine a viable course of action for the future of the Fund. The Commission and the legislature
should seek ways to minimize the economic burden of the IUSF on consumers by ensuring that the fund is
STAFF'S SECOND SUMMARY AND REPORT 4 SEPTEMBER 7,20I8
kept to the minimum size necessary to achieve universal service goals, and periodically review the fund
size toward that end. Id. at2-3.
CTIA noted that when the Commission and legislature work toward reform of the IUSF, they
should take into account that Idaho ILECs receive tens of millions of dollars in annual universal support
through the federal USF. /d. at 3. Further, the Commission and legislature should analyze the need for any
universal state support, where, for example, Idaho and Montana have almost identical telephone penetration
rates while Montana does not have a state universal service fund.
CTIA also believes that, contrary to CenturyLink's opinion, in terms of assessing the surcharge to
pre-paid wireless providers, "allowing some providers to pass through the surcharge while it is impossible
for others to do so is both discriminatory and not competitively neutral," as well as being in conflict with
the federal statutes. Id. at3-4. CTIA found that the proper assessment collection should occur at the point
of safe for pre-paid wireless. Id. at 4. Therefore, where the Commission should encourage the legislature
to reform from a technology and competitively neutral stance, funding the IUSF through general fund
dollars would simpliS, the process of assessing, for example, pre-paid wireless providers. /d.
CTIA believes that any IUSF 'oreforms should embrace the principle that parity in contributions
should be matched by parity in distributions." Id. at 5. If the contribution base is expanded then the
distribution recipients should expand also. Id. Distribution should not just go to legacy technology, but to
new technologies such as wireless, VoIP, or satellite. Id.
In conclusion, CTIA offered a set of policy principles, including the use of accountability measures,
non-duplicate state and federal funding, and surcharge setting at lowest level necessary to accomplish
universal service goals without subsidizing competitive losses. Id. at 6.
Idaho Cable Broadband Association (ICBA)
ICBA argued that IUSF support is limited to telecommunications services, and does not include
VoIP or broadband internet access services. Idaho Cable Broadband Association Reply to Staff Summary
and Report at 1. Because contributions are set and limited by statute, ICBA agreed with Staff that any
change to the IUSF's purpose, contribution methodology, or pool of contributors, or the inclusion of non-
telecommunications services as IUSF supported services, would require legislative action. Id. at 2.
However, ICBA disagreed that legislative action is necessary for the IUSF to continue to meet its intended,
original purpose. 1d.
Without evidence of a showing of inadequacy of support to the eight qualifying rural high-cost
telephone companies, ICBA recommended that the Commission first determine the necessary cumulative
cost of eligible high-cost support. Id. at3. Only once that amount is determined should the Commission
explore the various options Staff and commenters offer to "modernize" the [USF, including the addition of
STAFF'S SECOND SUMMARY AND REPORT 5 SEPTEMBER 7,20I8
broadband service as eligible for high-cost support. Id. ICBA argued that broadband in high-cost areas of
Idaho is already receiving considerable amounts of federal CAF Phase II (and more through the CAF Phase
II reverse auction, the Mobility /fund, and the Remote Areas Fund) model support, and state efforts would
duplicate federal efforts. Id. at3-4.
STAFF FINDINGS AND RECOMMENDATIONS
Staff has reviewed the stakeholders' reply comments and determined that the stakeholders seem
most in line with Staff s Option 2 from Staff s Summary and Report:
Option 2: Seek statutory revisions. Specifically, approach the legislature about updating and
revising the statute. These changes would most likely include adding assessments on, and
expanding disbursements to include, all qualifoing providers, so long as they are serving unserved
and underserved areas according to the amended statute.
Staff now recommends that those stakeholders desiring to do so should provide proposed legislative
changes to the various stakeholders (under Case No. GNR-T-17-05) on or before October 4,2018, for
consideration at an informal settlement meeting with stakeholders to be set for October 17,2018, at l0:00
a.m., during which stakeholders will propose and agree to additional process or, after which Staff will
compile a final summary and report to the Commission.
7'LRespectfully submitted this day of September 2018.
Sean Costello
Deputy Attorney General
Technical Staffi Carolee Hall
Daniel Klein
I:\LegaI\TELEPHONE\CNR-T- I ?-o5\GNRT I 70s_staff summary and repon 9.201 8.docx
STAFF'S SECOND SUMMARY AND REPORT 6 SEPTEMBER 7,20I8
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 7th DAY OFSEPTEMBER2O18,
SERVED THE FOREGOING STAFF'S SECOND SUMMARY AND REPORT, IN
CASE NO. GNR-T-17-05, BY E-MAILTNG A COPY THEREOF TO THE FOLLOWNG:
E-mail List:[e-mail]
[e-mail]
i ames. farr@centurylink. com
i ohn. stuart@mtecom. com
[e-mail]
krm@ givenspursley.com
[e-mail]
[e-mail]
mestess@apublicpolicy. com
[e-mail]
mamotzkus@si lverstar.net
b p atters o n @ c it)ro f'amur o n. us
[e-mail]
[e-mail]
j [e-mail]
ron@wil liamsbradbury. com;
j [e-mail]
ssri [e-mail]
j on. barrett@ irp. idaho. sov
ttaw
SECRETARY
STAFF'S SECOND SUMMARY AND REPORT 7 SEPTEMBER 7,20I8