20220831Final_Order_No_35517.pdf

ORDER NO. 35517 1
Office of the Secretary
Service Date
August 31, 2022
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF THE ANNUAL
REVISION OF THE UNIVERSAL SERVICE
FUND SURCHARGES TO BECOME
EFFECTIVE OCTOBER 1, 2022
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CASE NO. GNR-T-22-04

ORDER NO. 35517

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”). 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. Idaho Code § 62-610(2). The surcharges are effective 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, 2022.
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. Idaho Code § 62-610 and IDAPA 31.46.01.303.02.
In the report, the Administrator reviews the fund balance and recommends changes to the
surcharge rates to maintain adequate funding levels. Commission Staff (“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. IDAPA 31.46.01.104-106. As set forth in the Commission’s 2021 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. Order No. 35180.

ORDER NO. 35517 2
THE 2022 REPORT
A. The 2022 Data and 2022-2023 Proposed Budget
On July 15, 2022, the IUSF Administrator submitted the Annual Report for the IUSF fiscal
year, July 1, 2021, through June 30, 2022, and a proposed budget for the 2022-2023 fiscal year.
The Administrator reported IUSF surcharge revenue for the year totaled $1,650,870. Total
surcharge revenue from local exchange services was $972,387 or (59%) of the total, and
MTS/WATS surcharge revenue was $678,483 or (41%) of the total. Revenue from local exchange
services decreased by approximately $227,321 and revenue from MTS/WATS decreased by
approximately $72,633. The administrative expenses for the year were $19,833.
Total annual disbursements to the eight qualifying telephone companies remained
unchanged at $1,698,610. The fund’s annual year-end cash balance, after applying bank charges
and administrative expenses, was $1,187,050.
The Administrator proposed an annual administrative budget for fiscal year 2022-2023 of
$27,850. This amount encompasses the Administrator’s salary and all other relevant expenses,
including postage/copies, telephone, bank/investment charges, letterhead, and anticipated costs for
an audit and legal fees.
According to the Administrator, as of May 1, 2022, companies reported that 72,811
residential lines and 78,030 business lines were in service each month, for a total of 150,841 lines.
This represents a 25% decrease in residential wire lines, and a 23% decrease in business wire lines
from last year.
Long-distance service providers reported intrastate MTS/WATS billed minutes of
89,781,375, a decrease of 1%. The statewide average switched access rate is $0.056, a change
from last year’s rate of $0.036. Based on data from wire-line telephone companies and long-
distance companies, the Administrator calculated the 2022 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 $24.68 $25.84 $30.85

$32.30

Business Services $39.22 $42.27 $49.02 $52.84
ORDER NO. 35517 3
See Idaho Code §§ 62-605, -610 and IDAPA 31.46.01.106.
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. Last year was an anomaly as
local exchange lines increased for the first time in recent history. The Administrator and 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 the following
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 2022-2023 ($1,698,610), the year-end
fund balance on June 30, 2022, is estimated to be approximately $719,490. MTS/WATS services
would contribute about 50% of the surcharge revenue and local exchange services would
contribute 50% of the surcharge revenue.
Option 2—Adjust Surcharge Rates & Maintain Funding: If IUSF surcharges were reduced
to $0.20 per residential line, $0.33 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
$793,808. MTS/WATS services would contribute about 48% of the surcharge revenue, and local
exchange services would contribute the other 52%. The Administrator projected that the year-end
fund balance on June 30, 2022, would decrease to about $393,241.
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 3% or less than the statewide threshold
rate and the annual revenue associated with the company’s current rate is $6,000 or 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. If surcharge
ORDER NO. 35517 4
rates were suspended, the fund would decrease by about $875,104 and the balance would be about
$311,946 on June 30, 2023.
Option 4—Adjust Inventories, Adjust Surcharge Rates & Maintain Funding Levels: To
calculate future fund balances more accurately, the line inventories are adjusted to reflect the most
recent five-year trend. Thus, the residential lines have been reduced 13%, the business lines
reduced 7%, and the MTS/WATS billed minutes reduced 6%. If the surcharge rates were reduced
to $0.22 per residential line, $0.37 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 $733,066. 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 $453,983 on June 30, 2022.
In the report, the Administrator recommended the Commission adopt Option 3. If the
Commission wishes to keep current funding levels, then the Administrator recommends that the
Commission adopt Option 2, which reduces the surcharge rates and would be adequate to meet the
fund obligations.
STAFF RECOMMENDATIONS
Staff analyzed the Administrator’s report and supporting documentation. 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 3. 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 receive state IUSF disbursements.
Staff stated Option 2 would lower the funding level too much over the next couple of years.
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 2022-2023 IUSF authorized disbursements will be $1,698,610.
MTS/WATS services would contribute approximately 50% of the surcharge revenue and local
exchange services would contribute 50% of the surcharge revenue. The fund would have a balance
of approximately $719,490 on June 30, 2023.
ORDER NO. 35517 5
Staff and the Administrator were mainly concerned about trying to fund the IUSF in a
declining industry where land lines are being replaced with new technologies such as VoIP and
cell phones. Staff did not want to see the fund return to the dire funding levels it was facing in
2017 and 2018.
Staff noted that even though the stakeholders agree that a legislative solution is necessary
to mitigate funding issues related to IUSF, Order No. 34524, the stakeholders have not come
together on a legislative change.
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 saw an increase last year, it appears to have
been an anomaly likely created by the pandemic as people added lines to work from home. It
remains a difficult task 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, -
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 rates’ 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
ORDER NO. 35517 6
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 2022 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 3 risks being too aggressive 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.
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, 2022. The Administrator’s proposed fiscal year 2021-2022 budget
is accepted.
IT IS FURTHER ORDERED that the Administrator shall provide Staff quarterly cash flow
reports, as outlined above and in Order No. 33851.
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 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.
ORDER NO. 35517 7
DONE by order of the Idaho Public Utilities Commission at Boise, Idaho this 31st day of
August 2022.

__________________________________________
ERIC ANDERSON, PRESIDENT

__________________________________________
JOHN CHATBURN, COMMISSIONER

__________________________________________
JOHN R. HAMMOND JR., COMMISSIONER

ATTEST:

Jan Noriyuki
Commission Secretary

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