20210928Final_Order_No_34180.pdf

ORDER NO. 35180 1
Office of the Secretary
Service Date
September 28, 2021
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF THE ANNUAL
REVISION OF THE UNIVERSAL SERVICE
FUND SURCHARGES TO BECOME
EFFECTIVE OCTOBER 1, 2021.
)
)
)
)
)
CASE NO. GNR-T-21-07

ORDER NO. 35180

The Idaho Telecommunications Act of 1988 created the Idaho Universal Service Fund
(IUSF) 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 IUSF is funded by end-user
surcharges on local exchange service, MTS, and wide area telecommunications service (WATS).
See IDAPA 31.46.01.103-104. Each year, the Commission establishes the monthly surcharges
levied upon local exchange service and intrastate MTS/WATS (long-distance) service. See Idaho
Code § 62-610(2). The surcharges are in effect for 12 months starting October 1. See IDAPA
31.46.01.104. As explained below, the Commission finds it is reasonable to maintain the local
exchange surcharge rates ($0.25 per residential line and $0.44 per business line), maintain the
intrastate MTS/WATS billed minutes to $0.007, and maintain funding levels for 12 months,
effective October 1, 2021.
BACKGROUND
The Commission annually distributes IUSF funds to qualifying high-cost local
exchange telephone companies to supplement their annual revenue requirements. The IUSF
Administrator submits an Annual Report to the Commission. See Idaho Code § 62-610 and
IDAPA 31.46.01.102. In the report, the Administrator reviews the fund balance and recommends
changes to the surcharge rates to maintain adequate funding levels. The Commission’s Staff then
analyzes the report and submits recommendations to the Commission. After reviewing the report
and recommendations, the Commission issues an order prescribing IUSF surcharge rates for the
next 12 months. See IDAPA 31.46.01.104-106. As set forth in the Commission’s 2020 order,
current monthly IUSF rates are $0.25 per residential line, $0.44 per business line, and $0.007 per
intrastate long-distance billed minute. See Order No. 34765.

ORDER NO. 35180 2
THE 2021 REPORT
A. The 2021 Data and 2021-2022 Proposed Budget
On July 13, 2021, the IUSF Administrator filed the Annual Report for the IUSF fiscal
year from July 1, 2020, through June 30, 2021, including a proposed budget for fiscal year 2021-
2022. The Administrator reported IUSF surcharge revenue for fiscal year 2020-2021 totaled about
$2,000,824. This amount consisted of: (1) total surcharge revenue from local exchange services
of about $1,249,708 or (62%) of the total, and MTS/WATS surcharges of about $751,116 or (38%)
of the total. Surcharge revenue from local exchange services increased by approximately $115,270
and MTS/WATS surcharge revenue decreased by approximately $32,183. The Administrative
expenses such as the Administrator’s salary, expenses, and bank charges for the year were $19,108.
Annual disbursements to the eight qualifying telephone companies are unchanged and
totaled approximately $1,698,610. The fund’s annual year-end cash balance, after applying bank
charges and administrative expenses, was about $1,254,623.
The Administrator proposed an annual administrative budget for fiscal year 2021-2022
of $26,750. This amount includes the Administrator’s salary and all other relevant expenses,
including a fund audit that is anticipated to cost $7,500.
According to the Administrator, as of May 1, 2021, companies had reported that about
97,154 residential lines and 101,719 business lines were in service each month, for a total of about
198,873 lines. This represents a 3% increase in residential wire lines, and a 16% increase in
business wire lines, when compared to the prior year.
Long-distance service providers reported intrastate MTS/WATS billed minutes of
90,893,786, a decrease of about 15%. The statewide average switched access rate was $0.036, a
change from last year’s rate of $0.042. Based on data from wire-line telephone companies and
long-distance companies, the Administrator calculated the 2021 statewide weighted average rates
for one-party single line residential service and business service, and the corresponding 125% of
the statewide weighted average rates, as set out below:
2020 Statewide
Weighted
Average Rate
2021 Statewide
Weighted
Average Rate
125% Statewide
Weighted Average
Rate – 2020
125% Statewide
Weighted Average
Rate - 2021
Residential Services $23.56 $24.68 $29.45

$30.85

Business Services $38.21 $39.22 $47.77 $49.02

See Idaho Code §§ 62-605, -610 and IDAPA 31.46.01.106.
ORDER NO. 35180 3
B. The Five Surcharge Options
The Administrator has shown that over the last several years, both local access lines
and intrastate MTS/WATS minutes have, on average, steadily declined. This year is an anomaly
as local exchange lines increased for the first time in recent history. Therefore, the Administrator
and Commission Staff asserted that it would be difficult to accurately calculate the funding needed
to maintain adequate fund balances throughout the coming fiscal year. The Administrator thus
proposed five 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 – Status Quo: The Administrator calculated that IUSF revenues would
decrease by about $260,565 if current surcharge levels are maintained and no additional IUSF
funding is authorized. Assuming the same disbursement as fiscal year 2020-2021 ($1,698,610),
the year-end fund balance on June 30, 2022, is estimated to be about $994,058. MTS/WATS
services would contribute about 43% of the surcharge revenue and local exchange services would
contribute 57% of the surcharge revenue.
Option 2—Adjust Surcharge Rates & Maintain Funding: If IUSF surcharges were
reduced to $0.15 per residential line, $0.23 per business line, and $0.005 per intrastate MTS/WATS
billed minute, and if current funding levels were maintained, the fund balance would decrease by
about $815,270. MTS/WATS services would contribute about 50% of the surcharge revenue, and
local exchange services would contribute the other 50%. The Administrator projected that the
year-end fund balance on June 30, 2022, would decrease to about $439,354.
Option 3—Adjust Surcharge Rates & Adjust Funding to Meet Statewide Averages:
IUSF Rule 106.02, IDAPA 31.46.01.106.02, provides that a qualifying telephone company may
need to revise rates to meet or exceed the statewide threshold rates to continue receiving IUSF
funding after the first year of eligibility. If the company’s rate is more than 3% less than the
statewide threshold rate and the annual revenue associated with the company’s current rate is over
$6,000 less than the revenue associated with the statewide average threshold rate, the company
must revise its rates to equal or exceed the statewide threshold rate for MTS/WATS access service,
and 125% of the statewide average for local exchange service.
If Rule 106 were applied to each of the eight companies that are eligible to receive
IUSF disbursements, each would receive reduced disbursements during the next fiscal year. The
total disbursements would be $1,069,012. If surcharge levels were reduced to $0.02 per residential
line, $0.03 per business line, and $0.0006 per intrastate MTS/WATS billed minute, the fund would
ORDER NO. 35180 4
decrease by about $981,290. MTS/WATS services would contribute 48% of the total surcharge
revenue, and local exchange services would contribute the remaining 52%. The fund balance
would be about $273,333 on June 30, 2022.
Option 4—Adjust Inventories, Adjust Surcharge Rates & Maintain Funding Levels: To
calculate future fund balances more accurately, the line inventories would be adjusted to reflect
the most recent five-year trend. Thus, the residential lines would be reduced 10%, the business
lines reduced 10%, and the MTS/WATS billed minutes reduced 13%. If the surcharge rates were
reduced to $0.16 per residential line, $0.26 per business line, and $0.006 per intrastate MTS/WATS
billed minute—and if IUSF disbursements were maintained at current levels—the fund
disbursements would decrease by about $799,169. MTS/WATS services would contribute about
51% of the surcharge revenue, and local exchange services would contribute the other 49%. The
fund would have a balance of about $455,455 on June 30, 2022.
Option 5—Adjust Inventories, Adjust Surcharge Rates & Adjust Funding to Meet
Statewide Averages: To calculate future fund balances more accurately, the line inventories would
be adjusted to reflect the most recent five-year trend. Thus, the residential lines would be reduced
10%, the business lines reduced 10%, and the MTS/WATS billed minutes reduced 13%. If the
surcharge rates were reduced to $0.02 per residential line, $0.03 per business line, and $0.0007 per
intrastate MTS/WATS billed minute—and if the IUSF disbursements were adjusted per Rule 106,
(see Option 3 explanation)—fund disbursements would decrease by about $986,678. MTS/WATS
services would contribute about 51% of the surcharge revenue, and local exchange services would
contribute the other 49%. The fund would have a balance of about $267,946 on June 30, 2022.
In her report, the Administrator recommended the Commission adopt Option 5. If the
Commission wishes to keep current funding levels, then the Administrator recommends that the
Commission adopt Option 4, which just adjusts surcharge rates.
STAFF RECOMMENDATIONS
Staff analyzed the Administrator’s report and supporting documentation and
recommendations. Staff also analyzed Federal Communications Commission (FCC) rate freezes
and how specific FCC orders interact with IUSF Rules (IDAPA 31.46.01), particularly Rule 106.
Based on its analysis, Staff disagreed with the Administrator’s recommendation that the
Commission adopt Option 5. Staff noted that, given the FCC’s recent rate-freeze orders, the
Commission should not apply Rule 106.02 to determine eligibility for the eight companies that
ORDER NO. 35180 5
receive state IUSF disbursements. Staff stated Option 5 would lower the funding level too much
for the upcoming fiscal year.
Staff recommended adopting Option 1 to maintain the current surcharge rates of $0.25
per residential line, $0.44 per business line, $0.007 per intrastate MTS/WATS billed minute, and
keeping the companies draws the same. This will result in a fund decrease of approximately
$260,565. Staff calculated that the 2021-2022 Idaho USF authorized disbursements will be
$1,698,610. MTS/WATS services would contribute approximately 43% of the surcharge revenue
and local exchange services would contribute 57% of the surcharge revenue. The fund would have
a balance of approximately $994,058 on June 30, 2022.
Staff and the Administrator were very concerned about trying to fund the Idaho USF
in a declining industry where land lines are being replaced with new technologies such as VoIP
and cell phones. Staff does not want to see the fund return to the dire funding levels it was facing
in 2017 and 2018. Staff believes the increase in local exchange lines was an anomaly, possibly
driven by people working from home due to Covid and needing to add lines that normally would
not have been added. Statewide inventories could reverse themselves quickly as workers move
back to office locations.
Staff noted that even though the stakeholders agree that a legislative solution is
necessary, the stakeholders have not come together on a legislative change. See Case No. GNR-
T-17-05, Order No. 34524.
Finally, Staff recommended that the Administrator continue to provide quarterly cash
flow analysis of the IUSF to Staff, as detailed in Order No. 33851. The quarterly cash flow review
will allow Staff to monitor any anomalies that may arise and to proactively respond to any
unforeseen cash flow impacts due to further declines in line counts or minutes.
FINDINGS AND DISCUSSION
We again acknowledge that local access lines and intrastate long-distance billed
minutes have declined over the last several years. Although we have seen an increase this year, it
appears to be an anomaly likely created by the pandemic as people added lines to work from home.
These conditions could likely reverse depending on the pandemic. These factors continue to make
it difficult to predict the necessary IUSF fund balance for the next fiscal year, and to determine
appropriate rates so qualifying telephone companies can maintain IUSF eligibility.
To receive IUSF funding, a telephone company providing local exchange and access
services to long-distance providers must qualify for a distribution. See Idaho Code §§ 62-605, -
ORDER NO. 35180 6
610 and IDAPA 31.46.01.106. To qualify for a distribution, 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
IUSF Administrator. See IDAPA 31.46.01.106.01 and 31.46.01.302. The Commission may revise
a qualifying telephone company’s rates so the company can maintain IUSF 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 31.46.01.106.02.
As we have noted before, the true statewide average rate is difficult to determine
because the large, deregulated companies – those 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, and
32637 at 3. The IUSF Annual Report and the threshold rate calculations do not reflect this shift to
bundled services because companies are only required to report stand-alone residential rates. Also,
in 2011 and 2014, the FCC capped inter-carrier compensation rates and caused statewide average
switched access rates to decrease, further affecting IUSF eligibility. See In the Matter of Connect
America Fund, 26 F.C.C.R. 17663 (2011); In the Matter of Connect America Fund, etc., 29
F.C.C.R. 8769 (2014), and see Order Nos. 32637 at 4; and 32883 at 3-4.
Based upon our review of the Administrator’s 2021 Annual Report and Staff’s
recommendations, we find the IUSF local exchange surcharges should be maintained at $0.25 per
residential line and $0.44 per business line. The surcharge for intrastate MTS/WTS billed minutes
should be maintained at $0.007, and IUSF disbursements should be maintained at current levels.
While the Commission appreciates the Administrator’s recommendation and arguments for it,
Option 5 risks being too aggressive of a solution by reducing both the funding to eligible
telecommunications carriers and the IUSF fund balance. Given the complicating factors discussed
above, the Commission finds that Staff’s recommended funding option represents a reasonable
surcharge that will fulfill the purposes of Idaho’s Telecommunications Act of 1988 and maintain
a prudent IUSF fund balance.
Finally, the Commission accepts the Administrator’s proposed budget for fiscal year
2021-2022. We commend her work. We further note it is important for the Commission to strictly
monitor the IUSF balance to avoid unforeseen cash flow impacts due to diminishing line counts
and minutes. The Administrator should continue to provide Staff with quarterly cash flow analysis
to assist us in monitoring IUSF balances. See Order No. 33851 at 7.
ORDER NO. 35180 7
O R D E R
IT IS HEREBY ORDERED that the monthly IUSF surcharge rates shall be $0.25 per
residential line, $0.44 per business line, and $0.007 per MTS/WATS minute, effective for 12
months beginning October 1, 2021. The Administrator’s proposed fiscal year 2021-2022 budget
is accepted.
IT IS FURTHER ORDERED that the Administrator provide to Commission Staff
quarterly cash flow reports, as outlined above and in Order No. 33851.
THIS IS A FINAL ORDER. Any person interested in this order (or in issues finally
decided by this order) may petition for reconsideration within twenty-one (21) days of the service
date of this order regarding 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.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this 28th day
of September 2021.

PAUL KJELLANDER, PRESIDENT

KRISTINE RAPER, COMMISSIONER

ERIC ANDERSON, COMMISSIONER

ATTEST:

Jan Noriyuki
Commission Secretary

I:\Legal\TELECOM\GNR-T-21-07\GNRT2107_final_es.docx