20030611Protest of ID Telephone Assoc.pdf

Conley Ward
GIVENS PURSLEY LLP
277 North 6th Street, Suite 200
O. Box 2720
Boise, ID 83701
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Attorneys for Idaho Telephone Association
S:\MACS\CEW\IT A \Clear Talk\Protest.doc
BEFORE THE IDAHO PUBLIC SERVICE COMMISSION
IN THE MATTER OF THE PETITION OF IAT
COMMUNICATIONS , INC., d.a. NTCH-
IDAHO, INC. OR CLEAR TALK FOR
DESIGNATION AS AN ELIGIBLE
TELECOMMUNICATIONS CARRIER
: CASE NO.: GNR-03-
IN THE MATTER OF THE APPLICATION OF : CASE NO.: GNR-03-
NPCR, INC. DBA NEXTEL PARTNERS
SEEKING DESIGNATION AS AN ELIGIBLE : PROTEST OF IDAHO TELEPHONE
TELECOMMUNICATIONS CARRIER : ASSOCIATION
In Order No. 29240, the Idaho Public Utilities Commission ("Commission ) combined
the Applications ofIAT Communications, Inc. ("Clear Talk") and NPCR, Inc. ("Nextel") in the
above-entitled cases and requested comments from interested parties on the Commission
tentative proposal to process both applications under Modified Procedure. On behalf of its
member companies, the Idaho Telephone Association ("IT A") strongly opposes the combined
applications and requests that the Commission schedule these applications for full evidentiary
hearings rather than the use of Modified Procedure. In support of this Protest, the IT A states as
follows:
PROTEST OF IT A-
1. On the face of the pleadings, it is obvious that neither Application meets the
requirements for an Eligible Telecommunications Carrier ("ETC") designation in
rural telephone company study areas.
Both Nextel and Clear Talk seek ETC designations in the study areas of "rural telephone
companies " as defined in 47 U.c. ~ 153(37). Nextel seeks ETC designations in the
following rural telephone company service areas: Albion Telephone Company ("Albion
Filer Mutual Telephone Company ("Filer ), Farmers Mutual Telephone Cooperative
Association, Inc. ("Farmers ), Project Mutual Telephone Cooperative Association, Inc.
(Project Mutual"), and Mud Lake Telephone Cooperative Association, Inc. ("Mud Lake
Clear Talk seeks ETC designations in the following rural telephone company service areas:
Albion, Filer, Project Mutual, and Fremont Telcom Co. ("Fremont"
Each Application states that the Applicant fully complies with the requirements for ETC
designation in each of the affected study areas. Nextel's Application states
, "
Nextel Partners
meets all of the requirements for designation as an ETC in each of these Designated Areas.
Nextel Application at 2. Clear Talk's Application claims
, "
Clear Talk meets all of the
Commission s requirements for E.T.C. designation to serve southeast Idaho customers.
Clear Talk Application at 3. Both statements are manifestly false.
The Telecommunications Act requires companies seeking an ETC designation to provide
the services supported by universal support mechanisms "throughout the service area for
which the designation is received." 47 US.c. ~ 214(e). The Act further provides
, "
In the
case of an area served by a rural telephone company, 'service area' means such company
study area.'" 47 US.C. ~ 214(e)(5).! Comparing the Applicants ' coverage area maps with
the rural telephone companies ' service area maps on file with the Commission , it is obvious
1 This provision may be altered only by exceptions established by the federal and state regulatory authorities and the
Joint Board, none of which are alleged to have occurred in this case.
PROTEST OF IT A - 2
that the Applicants cannot meet this fundamental statutory requirement for ETC designation
in most, if not all, the affected rural telephone companies ' service areas.
In the case ofNexte1, the Applicant clearly does not provide service in the entirety of
Albion , Filer , and Mud Lake s service territories. Whether it provides service throughout
the entirety of the Farmers and Project Mutual service areas cannot be determined without
further investigation.
In the case of Clear Talk, the coverage map makes it abundantly clear that Clear Talk
does not provide coverage throughout the service area of any of the affected rural telephone
companies. In fact, it is not clear that Clear Talk's coverage area includes any of the Albion
Filer, and Fremont service areas. At best, Clear Talk serves only a small fraction of these
companies' service areas.
These obvious misstatements by the Applicants call into question the validity of the other
claims in their Applications, and the IT A respectfully requests the opportunity to conduct
discovery and present evidence that may expose other misstatements or errors by the
Applicants. Furthermore, if the Applicants are in fact providing service within some portion
of the rural telephone companies' service areas , the IT A has serious doubts that the
Applicants are doing so in accordance with applicable legal requirements and Commission
policies. To cite but two examples, the IT A believes it can prove in an evidentiary
proceeding that the Applicants have not entered into required interconnection agreements
with the affected companies, are not in many cases paying applicable access charges, and are
otherwise not in compliance with this Commission s policies and industry standards. Again
the IT A requests an evidentiary hearing on these and other issues that may be unearthed
during discovery.
PROTEST OF IT A - 3
2. Granting the Applicants ' request for ETC status in the rural telephone companies
service areas would be contrary to the public interest.
The Telecommunications Act does not require this Commission to designate any
additional ETCs in rural telephone company service areas. 47 US.C. ~214(e)(2). ("(TJhe
State commission may, in the case of an area served by a rural telephone company, and shall
in the case of all other areas, designate more than one common carrier as an eligible
telecommunications carrier for a service area.) (emphasis added). In fact, the Act expressly
forbids the designation of additional ETCs in rural telephone companies' service areas
unless
, "
the State commission shall find that the designation is in the public interest." Id.
(emphasis added).
Unfortunately, all too many state commissions are effectively ignoring the Act's statutory
commands and designating additional ETCs in a manner that is contrary to the public
interest. As the United States Telecom Association pointed out in a recent filing before the
Joint Board
The federal universal service fund (USF) is under strain.
One of the main reasons is that the FCC and state commissions are
granting an increasing number of companies ETC status.
Payments of high-cost USF support to competitive ETCs (CETCs)
has increased seven times in just under two years.2 Although
required by law to assess whether the public interest is served by
multiple ETCs in areas served by rural telephone companies 3 state
commission are granting CETC designations for the sake of
spurring on competition, regardless of whether these designations
serve the public interest. Competition among multiple service
providers in high-cost rural markets is not the goal of universal
service policy. Ubiquitous, affordable telecommunications service
is. USF support is a cost-recovery mechanism that is necessary to
keep telephone rates in high-cost areas comparable to rates in other
See USTA Comments at n.3 Section 2l4(e)(2) of the Communications Act of 1934, as amended (the Act), states
, "
Before designating an
additional eligible telecommunications carrier for an area served by a rural telephone company, the State
commission shall find that the designation is in the public interest."
PROTEST OF IT A - 4
parts of the country.4 To that end, all ETCs must be able to
provide critical infrastructure capable of providing qualifying
services reasonably comparable to service provided in lower cost
areas. Nonetheless, state commission are using universal service
to encourage what they perceive to be competition in the form of
complimentary wireless services rather than to ensure ubiquitous
service. Artificially induced competition allows CETCs to reap the
benefits of USF support even if not justified by their costs. While
incumbent local exchange carriers (ILECs) must demonstrate that
they use high-cost USF support to fund maintenance and
expansion of their network facilities, CETCs have been able to use
USF support simply to boost profits. Industry analysts recognize
that granting CETCs has, as one analyst puts it
, "
extraordinary
potential for abuse and disruption of the current rural markets, by
affecting the size of the (universal service J fund, creating
businesses that are founded on 'regulatory revenues' rather than on
regulatory formulas tied to investment levels (allowed rates of
return), and possibly damaging the incumbent carriers as
customers are siphoned away from already-sparse service areas.
Another industry analyst has characterized the increasing share of
USF support to CETCs as proof of "the opportunity for rural
wireless carriers to supplement organic EBITDA with high-margin
subsidies. ,,
USTA Reply Comments In the Matter of Federal-State Joint Board on Universal Service
CC Docket No. 96-45 (filed June 2, 2003) (proceeding hereafter cited as USF Joint Board).
The public interest perils cited by the USTA clearly apply to these Applications. Both
Applications point to competition with the incumbent local exchange carriers as the primary
advantages to be derived from their Applications. But there is no showing that, in the case of
rural telephone company study areas, additional competition needs to be subsidized by the
federal USF or that it is in the public interest. In fact, the available evidence is to the
contrary.
4 Section 254(b)(3) of the Act requires the FCC to base policies for the preservation and advancement of universal
service on the principle that consumers in all regions of the country, including high-cost areas, should have access to
telecommunications services that are "reasonably comparable to those services provided in urban areas and that are
available at rates that are reasonably comparable to rates charged for similar services in urban areas.
Less Mason Universal Service Financial Analysis (April 28, 2003) at 9.
6 Solomon Smith Barney,
Wireless EDGE Weekly (JaR 31 , 2003); See also Public Notice at n. 43 , citing Solomon
Smith Barney report finding that wireless carriers treat high-cost funding as an incremental revenue source that
represents "almost all margin.
PROTEST OF IT A - 5
In the course of preparing its own Comments for the USF Joint Board the IT A surveyed
its members on a number of issues, including the effect of wireless competition on the
member companies ' service areas. (A copy of the resulting IT A Comments is attached as
Exhibit A). The results paint a very revealing portrait of the state of rural telephone company
service areas in Idaho.
One of the most important survey findings is that Idaho rural companies have extremely
high cost service areas. Idaho rural telephone companies average only 2 access lines per
square mile of service territory, whereas the average rural telephone company nationwide has
a service density nearly 10 times the Idaho average, at 19 customers per square mile. IT
Comments at 2. Gross plant investment per access line for ITA members is roughly $5,400.
Id. at 3.Given the cost of service in these areas, it is not surprising that none of the IT A
members reported wireline competition within their service territories. Id. at 2. But there is
no shortage of wireless competition.
There are an average of 5 wireless carriers serving these study
areas. Four study areas reported between 1 to 3 wireless providers
four additional study areas stated that there were 4 to 6 providers
and the remaining four study areas identified between 7 to 10
wireless carrier alternatives. In many cases, these CMRS
providers have been offering mobile service for 5 to 10 years.
Even more significantly, these carriers have been offering their
services since inception without high-cost support.
Id. at 3.
While the wireless carriers do not currently receive USF support, they have a number of
countervailing advantages vis a vis their rural telephone company competitors. First, the
wireless carriers are completely exempt from state regulation. See Idaho Code ~ 62-603(14).
Second, they are not required to serve the entirety of the ILEC's service area and are free to
concentrate on the small pockets of relatively low cost, high margin customers. Third, they
PROTEST OF IT A - 6
are exempt from the cost of a number of pro-competitive requirements, such as equal access
that are imposed on wire line companies by federal or state regulations.
While the IT A cannot definitively prove, at this point, that wireless competition is
negatively impacting its member companies' finances , the available evidence strongly
suggests this is the case. On the whole, IT A access line counts for the last five years are at
best flat, with a steady decline in residential access lines even though at least some of the
areas have experienced significant population growth. See IT A Comments at 5. Even more
striking is the fact that the majority ofITA members experienced a 4% to 8% reduction in
interstate access minutes from 2001 to 2002, presumably because wireless customers are
using the bundled minutes in their wireless plan for toll calling. Id. at 6.
Under these circumstances, it is folly to provide ETC status and a new subsidy to wireless
carriers in Idaho rural telephone company service areas. As FCC Commissioner Martin
recently observed, the Commission should be
hesitant to subsidize multiple competitors to serve areas in which
costs are prohibitively expensive even for one carrier. This policy
may make it difficult for anyone carrier to achieve the economies
of scal necessary to serve all customers in a rural area, leading to
inefficient or stranded investment and a ballooning universal
service fund.
Separate Statement of Commissioner Kevin J. Martin In the Matter of Federal-State Joint
Board on Universal Service CC Docket No. 96-45 (November 18 , 2001). Commissioner
Martin s observations are doubly true in Idaho , where continued inroads by wireless carriers
will ultimately put further pressure on the state, as well as the federal, USF.
For these and other reasons, the IT A respectfully requests that the Commission schedule
full evidentiary proceedings in the above-entitled matter. The IT A is confident that such
proceedings will demonstrate that the Applicants are not in compliance with the requirements
PROTEST OF ITA - 7
for ETC status in the rural telephone company service areas, and that ETC designations for
the Applicants in such areas would be contrary to the public interest.
DATED this 10th day of June 2003.
PROTEST OF IT A - 8
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on the 10th day of June 2003, I caused to be served a true and
correct copy of the foregoing by the method indicated below, and addressed to the following:
Jean Jewell
Idaho Public Utilities Commission
472 W. Washington Street
O. Box 83720
Boise, ID 83720-0074
- US. Mail - Fax -L By Hand
Molly O'Leary, Esq.
Richardson & O'Leary, PLLC
99 E. State Street, Suite 200
Eagle, ID 83616
-.2L US. Mail - Fax - By Hand
Sean P. Farrell, Esq.
IA T Communications, Inc.
NTCH-Idaho Inc., dba Clear Talk
703 Pier Avenue, Suite B, PMB 813
Hermosa Beach, CA 90254
-.2L US. Mail - Fax - By Hand
Dean J. Miller, Esq.
420 West Bannock
O. Box 2564-83701
Boise, ID 83702
-.2L US. Mail - Fax - By Hand
Philip R. Schenkenberg, Esq.
2200 First National Bank Building
332 Minnesota Street
Saint Paul, MN 55101
-.2L US. Mail - Fax - By Hand
Morgan W. Richards
Moffatt, Thomas, Barrett, Rock & Fields
101 S. Capitol Blvd., 10th Floor
O. Box 829
Boise, ID 83701-0829
-.2L US. Mail - Fax - By Hand
PROTEST OF ITA - 9
Lance A. Tade, Manager
State Government Affairs
Citizens Telecommunications
Company of Idaho
4 Triad Center, Suite 200
Salt Lake City, UT 84180
-.2L US. Mail - Fax - By Hand
Robert M. Nielsen
548 E Street
O. Box 706
Rupert, ID 83350
-.2L US. Mail - Fax - By Hand
Charles H. Creason, Jr.
President and General Manager
Project Mutual Telephone Cooperative Association, Inc.
507 G Street
O. Box 366
Rupert, ID 83350
-.2L US. Mail - Fax - By Hand
~~-
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PROTEST OF IT A-I 0
Before the
FEDERAL COMMUNICATIONS COMMISSION
Washington, D.c. 20554
In the Matter of
CC Docket No. 96-
FCC 03J-Federal-State Joint Board
On Universal Service
COMMENTS OF THE
IDAHO TELEPHONE ASSOCIATION
I. Introduction
The Idaho Telephone Association ("IT A") by counsel, respectfully submits its
Comments in the above captioned proceeding whereby the Federal-State Joint Board on
Universal Service seeks comment on certain of the Commission s rules relating to high-
cost universal service support and the ETC designation process.
IT A is a state telephone association and its members include both commercial
companies and cooperatives. 2 The fourteen ITA member companies provide basic and
advancing telecommunications services in rural Idaho. All ofITA's members are rural
telephone companies as defined in 47 U.c. ~ 153(37).
Through these Comments, ITA provides facts, data, and views to assist the Joint
Board in developing constructive and meaningful recommendations that will ensure the
continued stability, sufficiency and predictability of the universal service fund
mechanisms.
Public Notice CC Docket No. 96-, FCC 03J-, Released February 7, 2003 (Notice).
1TA member companies submitting these collective comments include: Albion Telephone Company,
Cambridge Telephone Company, Custer Telephone Cooperative, Inc., Farmers Mutual Telephone
Company, Filer Mutual Telephone Company, Inland Telephone Company, Midvale Telephone Company,
Mud Lake Telephone Cooperative Association, Project Mutual Telephone Cooperative Association, Direct
Communications - Rockland, Rural Telephone Company, Silver Star Telephone Company, Oregon-Idaho
Utilities, and Fremont Telecom.
47 u.S.c. 9 254(b)
EXHIBIT
II. State of the Marketplace and Universal Service Fund
The Joint Board's Public Notice requests detailed data on competition and line
growth in high cost areas and observes that the more detailed data it receives, the better
positioned the Joint Board will be to develop recommendations to perpetuate the Act's
goals of maintaining universal service and fostering competition. 4 In responding to this
request, IT A surveyed its members to compile as much meaningful and useful
information as possible within the compressed timeframe allowed for these comments.
Of the 15 study areas represented by ITA'14 member companies, ITA collected
information on 12 study areas. This response accounts for approximately 98 percent of
the ITA's membership s total access lines.s The data presented in these comments is
based on this survey.
No competitive local exchange carriers (CLECs) currently offer service in ITA
member company serving areas. This is not surprising given the relatively low density
demographics, high-cost infrastructure investment, and substantial operating expenses
associated with serving these rural areas. On average, the ITA companies have only 2
access lines per square mile of service territory. This is in contrast to the findings of the
Rural Task Force, which determined that, on average, rural carriers serve 19 lines per
square mile.6 Four of the IT A study areas have a line density per square mile ofless than
1 and three study areas have a density of between 1 and 2 lines per square mile. On the
other end of the spectrum, one member with a comparatively small service territory has
more than 100 access lines per square mile.
Notice at para. 9.5 Three member companies with combined access lines of approximately 1 000 were unable to respond to
the data request in the time allowed for the comments.6 Rural Task Force, White Paper 2 The Rural Difference January 2000, page 33.
The lack of access line density and ubiquity of coverage in these rural areas
translates into high costs. At the end of 2002, the gross investment in telephone plant in
service per access line for the ITA members was approximately $5 400. Plant Specific
Operating Expenses were $445 per line for this same period, or $37 per line per month.
Because of this cost structure, it is vital to rural customers in Idaho that specific
predictable, and sufficient federal universal service funding be maintained so that these
customers continue to enjoy the same level of service at comparable rates to those
services received by urban customers. In light of these demographics and resulting costs
to serve, it is not surprising that these rural markets have yet to attract any CLECs.
The Joint Board cites the Commission s most recent CMRS Competition report
which found that 94 percent of the total United States population lives in counties with
three or more mobile telephone service operators and asks what percentage of rural
customers have access to mobile services.7 IT A members' customers generally have a
wide choice of wireless providers. There are an average of 5 wireless carriers serving
these study areas. Four study areas reported between 1 to 3 wireless providers, four
additional study areas stated that there were 4 to 6 providers, and the remaining four
study areas identified between 7 to 10 wireless carrier alternatives. In many cases, these
CMRS providers have been offering mobile service for 5 to 10 years. Even more
significantly, these carriers have been offering their services since inception without
high-cost support.
The Joint Boards asks to what extent support for competitive ETCs will grow
over time.8 The historic growth in the universal service fund is well documented in
Notice at para. 12.
Notice at para. 11.
OP ASTCO's recently released White Paper titled Universal Service in Rural America: A
Congressional Mandate at Risk.
9 Without the Commission s adoption of appropriate
Joint Board recommendations and absent prudent state commission decisions with
respect to eligibility, IT A believes pressure on the fund will continue to grow at an
exponential rate, thereby jeopardizing the future sustainability of the fund. To the extent
funding support is curtailed, this will have a chilling effect on investment in rural
telecommunications infrastructure.
Idaho exemplifies the increasing activity of wireless providers seeking
competitive ETC status and, in turn, potentially increasing demands on the fund. On
January 28 2003 , IAT Communications d.a. Clear Talk filed for eligible CETC status
with the Idaho Public Utilities Commission in six Idaho service areas.10 This request was
followed by a Nextel Partners application for eligibility for five study areas and so called
conditional designation" in another carrier s territory upon redefinition of the service
area. 11 Three of these study areas are the same for the two applicants. Thus, the Idaho
Commission faces critical decisions concerning whether to designate three providers in
three study areas and two providers in the other study areas. And, it is probable that
additional filings by other wireless providers may be forthcoming. IT A shares the
concerns of Commissioner Martin when he stated:
I also note that I have some concerns with the Commission policy.. .
using universal support as a means of creating "competition" in high cost
areas. I am hesitant to subsidize multiple competitors to serve areas in
which costs are prohibitively expensive even for one carrier. This policy
9 See OPASTCO written
ex parte filed in CC Docket No. 96-45 on January 28 2003.
10 Before the Idaho Public Utilities Commission, In the Matter ofIA T Communications, Inc., d.a. Clear
Talk, Petition for Designation as an Eligible Telecommunications Carrier, January 28 2003.
11 Before the Idaho Public Utilities Commission, In the Matter of the Application ofNPCR, INC. d/b/a
NEXTEL PARTNERS Seeking Designation as an Eligible Telecommunications Carrier that may receive
Federal Universal Service Support, Application of Nextel Partners, April 28 , 2003.
may make it difficult for anyone carrier to achieve the economies of scale
necessary to serve all customers in a rural area, leading to inefficient or
stranded investment and a ballooning universal service fund.
The Joint Board's Notice questions ifthere is line growth in high cost areas and
how much of the growth is due to wireline, wireless, and other technology platforms. The
Idaho companies are only in a position to answer the question from the wireline
perspective and do not have access to data that addresses the question in the context of
wireless or other platforms for their specific serving areas. The table below summarizes
combined access lines for the twelve study areas for the past three years.
2000 2001 2002
Residential 582 30,472 373
Business - Single Line 715 040 537
Business - Multi-Line 745 631 991
Special Access 576 604 591
Total Access Lines 39,618 39,747 39,492
As the above data indicates, the access line growth of the IT A members has been
essentially flat. This is not surprising given the economy in this area of the country, with
continuing small business closures, and population declines. While discussions with IT A
members indicate there is anecdotal evidence that a few customers may have "cut the
cord", the companies are not experiencing major access line losses to CMRS providers.
IT A believes that a reasonable forecast for future line growth in these rural areas would
range from flat to declining by 1 to 2 percent per year.
The story is different when examining interstate access minutes of use. For the
combined study areas, interstate access minutes of use increased three percent from 2000
to 2001 , and were essentially flat from 2001 to 2002. However, when the data is
12 In the Matter of Federal-State Joint Board on Universal Service CC Docket No. 96-45, FCC 01-304, reI.
November 18, 2001 , separate statement of Commissioner Kevin 1. Martin.
disaggregated to the study area level , the majority of ITA members experienced interstate
access usage declines in the four percent to eight percent range. This loss in usage was
offset by access minute growth of the other carriers yielding overall flat growth for 2002.
There are some customers who are not designating a primary carrier for long distance
service, indicating their intention to use their wireless provider for this function.
In the Notice the Joint Board questions whether wireless service is a complement
to or substitute for wireline service.13 Based on the foregoing rural Idaho specific
information, ITA believes that wireless service is complementary to wireline service with
respect to basic local service, but that customers are substituting wireless service for their
long distance calling. This understandably reflects the regional and national "buckets of
minutes , free night and weekend calling, and other features being offered by the CMRS
providers. Dr. William R. Gillis in recent testimony before the Senate Subcommittee
supports this view:
.1 would observe mobile wireless and traditional telecommunications are
not for the most part competing services and have been inappropriately
characterized as such. With the exception of those cases where mobile
wireless has resulted in the ability of customers to eliminate their
traditional telecommunications connections, we are discussing
complementary services, both desired by consumers for different
reasons
As the data indicates, rural Idaho customers are not substituting their wireline
phones for wireless phones to any major extent. Rather, as observed by Dr. Gillis, they
value both services for different reasons. With respect to wire line service, customers
place importance on reliability, quality of service, public safety, and the ability to receive
13 Notice at para. 14
14 Testimony of Dr. William R. Gillis, Director, Center to the Bridge to the Digital Divide, Washington
State University, before the Communications Subcommittee of the Senate Committee on Commerce
Science, and Transportation, April 2, 2003.
service regardless of where they live in the ILEC's service territory, i., carrier oflast
resort obligations (COLR). Wireless service offers the customer a different value
proposition; namely mobility, nationwide calling, different ringing tones, and
differentiated phones, among other factors. IT A believes this trend raises a compelling
public interest question: In light of the equal access obligations of the incumbent ILECs
how much scarce federal universal service funds does the Commission want to devote to
providing more long distance competition in rural areas?
The Joint Board also requested comments on the methodology of calculating
support for competitive ETCs and the related reporting requirements if support were
based on their own costs, rather than those of the incumbent.1s IT A believes that funding
for all ETCs should be based on their own specific, supportable, historic costs. Wireline
and wireless carriers have fundamentally different cost structures. Wireline providers
utilize significant switching and distribution facilities to provide service, while wireless
carriers' networks consist of towers and radio equipment. The competitive ETCs costs
need to be known to make an informed decision that balances the benefits of ETC
funding with the costs of that funding. Also, without knowing these costs it is impossible
to judge the competitive impacts; competitive ETCs may be over or under recovering
their costs. This information is obtainable but not currently known.
Tens of millions of dollars of federal USF funding currently flows to competitive
ETCs.16 Furthermore, the level of funding is predicted to grow exponentially in the
future, absent changes in the rules. Because of the magnitude of these amounts and the
fact that federal USF is a scarce national resource, IT A strongly believes that there should
15 Notice at para. 18
16 Annualizing USAC data for 2Q03 , Report HCOI produces payments of$147 million to competitive
ETCs in 2003.
be accountability by competitive ETCs. This reporting should demonstrate that the
universal service funds received by the CETCs have been used for purposes consistent
with section 214( e) of the Telecommunications Act of 1996 and are not just considered
upside to the bottom line of the wireless providers.l? We believe that as a matter of law
and the public interest, the allocation of finite public resources demands this
accountability. If competitive ETCs do not want to provide and support their costs and be
held accountable for the use of publicly provided funds, they would have the option of
not seeking support.
IT A does not believe it is feasible or in the public interest to base support on the
lowest cost provider s costs as discussed in the Notice.18 Not all carriers provide the
quality and reliability of service that is vital to customers for their public health and
safety. Additionally, not all wireless carriers provide coverage throughout the wireline
carrier s service area. Finally, only one carrier, the incumbent ILEC, bears the costs and
obligations of COLR, which results in a comparatively higher cost structure. For the
foregoing reasons, we do not believe this proposal is appropriate or competitively neutral.
III. Scope of Support
The Public Notice questions whether section 254 of the Act would be better
served if support were limited to a single connection to the residential and single line
business users, whether these lines are provided by the incumbent ILEC or the
competitive ETC. IT A does not believe it is appropriate or practical to limit support
based on primary and secondary lines. Customers maintain more than one line for a
variety of reasons including telecommuting, Internet access, and fax. To these customers
17 Notice at Footnote 43 referencing the Solomon Smith Barney that indicates that universal service
funding is an additional revenue source that is "almost all margin
18 Notice at para. 19
both lines are important to their everyday lives. Furthermore, these services are readily
available in urban markets. Most importantly, capital investment decisions of the rural
ILECs are made at the network level, not the line level. And, funding is necessary to
support total network costs, not individual lines of a customer. Restricting support to a
single connection, whether by the wireline or CMRS provider, raises compelling
questions concerning the ILECs ability to continue to invest in the network, maintain
quality service at affordable rates, and fulfill their carrier of last resort obligations.
Furthermore, the loss of support for multi-line small rural businesses could place those
businesses at a competitive disadvantage vis a vis their urban counterparts. In summary
we believe restricting support would be bad public policy and inconsistent with the Act.
IV. Process for Designating ETCs
The Joint Board's Public Notice seeks comments on the system for designating
ETCs and what factors should be considered in making these public interest
determinations pursuant to sections 214 (e)(2) and 214 (e) (6) of the Act. 19 ITA believes
that a well-reasoned and diligent evaluation of the public interest standard when deciding
on a CETC application for eligibility would meaningfully examine whether additional
public funding will achieve a commensurate level of public benefits for rural customers.
In this regard, FCC Commissioner Jonathan Adelstein has recently commented:
I'm encouraging state commissions to carefully consider the public
interest when making eligibility determinations, as is required by the Act.
Specifically, states must make sure that the new market entrants receiving
universal service meet all the obligations required by the Act. These
include providing service throughout the service area and advertising its
availability. They also need to consider whether the new service proposed
is an enhancement or an upgrade to already existing or currently available
service. Another consideration is the effect it will have on the cost of
providing service. As the fund grows, so does the level of contribution.
19
Notice at para. 33.
We must ensure that the benefits that come from increasing the number of
carriers we fund outweigh the burden of increasing contributions for
consumers ( emphasis added)
When evaluating the costs of granting CETC status to an applicant, the state commission
or FCC, in those situations where the state lacks jurisdiction, should review not only the
additional costs imposed on the federal universal service fund, but also any state
universal service fund impacts as well. This multi-jurisdictional view is especially
relevant in Idaho where the state has, since 1988, administered a state universal service
fund "for the purpose of maintaining the universal availability oflocal exchange service
at reasonable rates and to promote the availability of message telecommunications
service (MTS) at reasonably comparable prices throughout the state ofldaho
In addition to the federal and state impacts on universal service funds, regulatory
authorities should consider the strong probability that additional CMRS providers will
also seek eligibility status. They will be compelled to do this to remain competitive. In
some study areas in Idaho , this could potentially result in up to 11 publicly funded
networks in a single study area if the incumbent ILEC and 10 wireless carriers were all
granted eligible status.
The evaluation of the benefits to consumers of granting eligibility to additional
ETCs should, at a minimum, consider the following factors: effect on prices, introduction
of new or improved service over and above those currently available, improvements in
service quality, specific plans to increase coverage to provide service to the entire study
area, willingness and ability to assume carrier of last resort obligations, and the overall
commitment and capability of the applicants to do what they say they are going to do and
20 Remarks of Commissioner Jonathan Adelstein before the National Telephone Cooperative Associations
February 3, 2003.
21 Idaho Code 9 62-610(1).
that they are not merely pursuing this course of action for short term financial gain. Once
a competitive ETC is designated as eligible for public funds, accountability standards and
reporting responsibilities need to be put in place. This would be over and above the
current annual certification process. This reporting would encompass monitoring service
level quality, customer complaints , pricing, and financial reporting to ensure that the
funds have been used for their intended purposes. Concurrently, ILECs should be
simultaneously allowed the same pricing flexibility as the competitive ETC including the
ability to deaverage rates in those situations where the competitive ETC does not serve
the entire study area. This flexibility is needed to promote regulatory parity and ensure
competitive neutrality.
The Joint Board asks whether it is advisable to establish permissive
federal guidelines for states to use in designating ETCs under section 214(e)(2)
and what should be included in such guidelines.22 The Joint Board also asks that
the impact of the Fifth Circuit's decision regarding the Commission s ability to
prohibit states from imposing additional eligibility criteria on ETCs be addressed.
In this case, the Court reversed the portion of the FCC's Order prohibiting states
from imposing any additional requirements when designating eligible ETCs.
Taking the Court's decision into consideration in conjunction with sections
214(e)(2) and 214(e)(6), the ITA does not believe it is appropriate to establish
federal guidelines. While consistency in eligibility decisions across multiple
jurisdictions may be a laudable goal, the ITA's opinion is that the relevant state
47u.S.c. 92l4(e).
23
Texas Office of Public Utility Counsel v. FCC 183 F.3d 393 418 (stb Cir. 1999).
jurisdiction is in the best position to make public interest determinations taking
into consideration the facts and circumstances relevant to the particular state.
V. Conclusion
ITA members' customers have enjoyed a wide choice of wireless service
offerings for many years without high cost support being provided to CMRS providers.
These wireless offerings have not significantly affected access line growth in rural Idaho
but are resulting in reductions in interstate access minutes. Since wireless service is
complementary to wire line service for basic local service and is a substitute for long
distance service, regulatory authorities face a compelling public interest determination in
deciding how much public funding is made available to support more long distance
competition in rural areas. The IT A believes that funding should be at the network level
and not at the "primary line" level. Supporting network costs is consistent with the
service obligations of the ILECs and their capital investment decisions. The state
jurisdictions are legally authorized to make public interest determinations regarding
eligibility for USF funding and federal guidelines should not be necessary. To the extent
public funding is deemed appropriate, that funding should reflect the varying levels of
service quality, coverage, and specific, supportable costs of the CETC. The public
interest and regulatory parity demands that these recipients be held to the same regulatory
standards as the incumbent ILECS and accountable for the use of any funds received to
ensure consistency with section 214(e) of the Act.
Respectfully submitted
Idaho Telephone Association
Conley Ward
Their Attorney
Givens Pursley, LLP
O. Box 2720
Boise, Idaho 83701-2730
[phone]
May 5, 2003