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Home My WebLink About20230714Annual Report.pdf1 ADMINISTRATOR’S REPORT IDAHO UNIVERSAL SERVICE FUND YEAR ENDED -- JUNE 30, 2023 SURCHARGE REVENUES Surcharge revenues collected during the year ended June 30, 2023 totaled $1,420,072, of which $687,706, or 48% was assessed on local exchange services and $732,366, or 52%, was assessed on MTS/WATS services. Current monthly surcharge rates are $.25 per residential line, $.44 per business line, and $.007 per MTS/WATS billed minute. COMPANIES RECEIVING DISBURSEMENTS Authorized disbursements to Local Exchange Companies during the year ended June 30, 2023 totaled $1,698,610 (page 10). The following table shows the Local Exchange companies authorized by the Idaho Public Utilities Commission to receive disbursements from the Idaho Universal Service Fund. Authorizing Authorized Annual RECEIVED 2023 JULY 14, 2023 IDAHO PUBLIC UTILITIES COMMISSION 2 ADMINISTRATIVE FEES AND EXPENSES Administrative fees and expenses for the year ended June 30, 2023 were $19,360. Administrative expenses include bank and broker charges of $83. Administrative expenses payable at June 30, 2023 are $1,601. CASH At June 30, 2023, the Idaho Universal Service Fund had a cash balance of $889,068. The following is a table showing the beginning, ending, and quarterly fund cash balances for the year ended June 30, 2023. INTEREST No interest was earned on funds held in bank accounts for the year ended June 30, 2023. INVESTMENTS The Idaho Universal Service Fund had no investments during the year ended June 30, 2023. INVENTORIES Total residential and business lines at May 1, 2023 were 65,516 and 68,257 respectively (pages 48 and 50). This represents a decrease of 10% in residential lines and 13% in business lines from the prior year. Total MTS/WATS billed minutes of use for the year ended December 31, 2022 were 46,111,289 (page 53), a 49% decrease from the prior year. RECEIVED 2023 JULY 14, 2023 IDAHO PUBLIC UTILITIES COMMISSION 3 STATEWIDE WEIGHTED AVERAGE RATES A schedule summarizing the total funding eligibility for the authorized local exchange companies is shown on page 11. ONE-PARTY, SINGLE LINE SERVICE The statewide weighted average rates for one-party single-line residential and business services are shown on pages 22 and 46. The following table shows the statewide weighted averages for one-party, single line service. TOLL SWITCHED ACCESS The statewide weighted average revenue per MTS/WATS access minute is shown on page 13. The statewide weighted average toll switched access revenue is $ .067 per minute. FUNDING OPTIONS OPTION 1: STATUS QUO If current surcharge rates ($.25 per residential line, $.44 per business line, and $.007 per intrastate MTS/WATS billed minute) are maintained and no additional IUSF funding is authorized, the fund will decrease by approximately $848,186 (page 54). The 2023-2024 IUSF authorized disbursements will continue at $1,698,610. MTS/WATS services would contribute approximately 37% of the surcharge revenue and local exchange services would contribute 63% of the surcharge revenue. The fund would have a balance of approximately $40,882 at June 30, 2024. OPTION 2: ADJUST SURCHARGE RATES & MAINTAIN FUDNING If surcharge rates are increased to $.27 per residential line, $.52 per business line, and $.014 per intrastate MTS/WATS billed minute and current funding levels are maintained, the fund will decrease by RECEIVED 2023 JULY 14, 2023 IDAHO PUBLIC UTILITIES COMMISSION 4 approximately $444,157 (page 54). 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 $444,911 at June 30, 2024. OPTION 3: ADJUST SURCHARGE RATES & ADJUST FUNDING TO MEET STATEWIDE AVERAGES Idaho Universal Service Fund rule 106.02 indicates that to continue receiving IUSF funding after the first year of eligibility, the company may need to revise rates to meet or exceed the statewide threshold rates. If the rate is below the statewide threshold rate, and the difference between the rate is greater than 3% and $6,000, the company must revise rates equal or exceed 100% of the statewide average for MTS/WATS access service, and 125% of the statewide average for local exchange service. The following applies rule 106 to each company currently drawing from the IUSF. ♦ ATC Communications should increase local residential and business, as well as toll switched access rates. ATC Communications’ annual IUSF draw would be reduced by $279,257. ♦ Cambridge Telephone Company should increase toll switched access, local residential, and business rates. Cambridge Telephone Company annual IUSF draw would be reduced by $250,768, and thus eliminate Cambridge Telephone Company’s IUSF annual draw of $138,162. ♦ Columbine Telephone /Silver Star Telecom should decrease toll switched access, and increase local residential and local business rates. Silver Star Telecom annual IUSF draw would be reduced by $207,967, and thus eliminate the Silver Star Telecom’s annual IUSF draw of $155,677. ♦ Direct Communications Rockland should increase local residential and business rates. Direct Communications Rockland’s annual IUSF draw would be reduced by $78,728. ♦ Fremont Telecom should increase toll switched access rates, and local residential and business rates. Fremont Telecom’s annual IUSF draw would be decreased by $150,542, and thus eliminate the Fremont Telecom’s annual IUSF draw of $57,258. ♦ Inland Telephone Company should increase local residential rates. Inland Telephone Company annual IUSF draw would be reduced by $18,523. ♦ Midvale Telephone Company should increase local residential and business rates. Midvale Telephone Company annual IUSF draw would be reduced by $99,955. ♦ Rural Telephone Company should increase local residential and business rates, as well as toll switched access. Rural Telephone Company annual IUSF draw would be reduced by $116,783. RECEIVED 2023 JULY 14, 2023 IDAHO PUBLIC UTILITIES COMMISSION 5 The 2023-2024 IUSF authorized disbursements, including the adjustments to company funding per rule 106, will be $754,267. If surcharge rates are decreased to $.02 per residential line, $.04 per business line, and $.001 per intrastate MTS/WATS billed minute, the fund will decrease by approximately $688,969 (page 55). MTS/WATS services would contribute approximately 49% of the surcharge revenue and local exchange services would contribute 51% of the surcharge revenue. The fund would have a balance of approximately $200,099 at June 30, 2024. OPTION 4: ADJUST INVENTORIES, ADJUST SURCHARGE RATES & MAINTAIN FUNDING LEVELS In order to more accurately calculate future fund balances, the inventories have been adjusted according to the most recent five-year trend. Thus, the residential lines have been reduced 11%, the business lines reduced 9% and the MTS/WATS billed minutes have been reduced 14%. If the surcharge rates are increased to $.30 per residential line, $.57 per business line, and $.02 per intrastate MTS/WATS billed minute and IUSF disbursements are maintained at current levels, the fund will decrease by approximately $294,754 (page 55). MTS/WATS services would contribute approximately 56% of the surcharge revenue and local exchange services would contribute 44% of the surcharge revenue. The fund would have a balance of approximately $594,314 at June 30, 2024. OPTION 5: ADJUST INVENTORIES, ADJUST SURCHARGE RATES & ADJUST FUNDING TO MEET STATEWIDE AVERAGES In order to more accurately calculate future fund balances, the inventories have been adjusted according to the most recent five-year trend. If the surcharge rates are increased to $.27 per residential line, $.52 per business line, and $.02 per intrastate MTS/WATS billed minute and IUSF disbursements are adjusted to meet statewide averages per rule 106, the fund will increase by approximately $352,040 (page 56). MTS/WATS services would contribute approximately 49% of the surcharge revenue and local exchange services would contribute 51% of the surcharge revenue. The fund would have a balance of approximately $1,241,108 at June 30, 2024. OPTION 6: ADJUST INVENTORIES, ADJUST SURCHARGE RATES & ADJUST FUNDING TO MEET STATEWIDE AVERAGES In order to more accurately calculate future fund balances, the inventories have been adjusted according to the most recent five-year trend. If the surcharge rates are increased to $.27 per residential line, $.52 per business line, and $.02 per intrastate MTS/WATS billed minute and disbursements RECEIVED 2023 JULY 14, 2023 IDAHO PUBLIC UTILITIES COMMISSION 6 are maintained at current levels, the fund will decrease by approximately $592,303 (page 56). MTS/WATS services would contribute approximately 49% of the surcharge revenue and local exchange services would contribute 51% of the surcharge revenue. The fund would have a balance of approximately $296,765 at June 30, 2024. During the past year, there was a continued decrease in both local residential lines of 10% and in local business lines of 13%. MTS/WATS billed minutes decreased significantly at 49%. As in the past, I believe that the local access lines and toll minutes will continue to decline due to the continued migration toward broadband, wireless, cellular and VOIP services, as well as the shift from stand-alone residential service to bundled packages. This affects the statewide average rate calculations, as well as the application of rule 106 to the companies funded by the IUSF. In light of FCC orders and continuing industry changes, it is becoming more difficult to evaluate the IUSF funding as it applies to Rule 106. It is equally challenging to estimate future inventory levels and the fund balance. The Commission recognized this in opening Case No. GNR-T-17-05, The 2017 Review of the Idaho Universal Service Fund. Until changes to the IUSF rules are made, I am obligated to apply the current Rules for Idaho Universal Service Fund, IDAPA 31.46.01. Due to the lag in reporting and remitting any surcharge change, it is optimal that the fund maintains at least a three-month disbursement balance. That balance is $431,978 for IUSF authorized disbursements at current levels and $195,892 if IUSF authorized disbursement are adjusted per rule 106. I recommend that the Commission adopt Option 5, increasing the surcharge rates and applying rule 106.02 to adjust funding to the companies. Option 5 also adjusts the inventories for the five-year average decline. Under Option 5, the fund balance would be adequate to meet the funding obligations with a reserve balance going forward as the telecom industry continues to evolve. The fund balance at June 30, 2024 would approximate $1,241,108. If the Commission is inclined to maintain company funding levels until changes are made to the underlying rules and statutes, I recommend the adoption of Option 4. This option increases the surcharge rates to $.30 per residential line, $.57 per business line, and $.02 per intrastate MTS/WATS billed minute. Under Option 4, the fund balance would be adequate to meet the fund obligations with less of a reserve for industry changes going forward. The fund balance will approximate $594,314 at June 30, 2024. RECEIVED 2023 JULY 14, 2023 IDAHO PUBLIC UTILITIES COMMISSION