20240430Decision Memo.pdf

DECISION MEMORANDUM
TO: COMMISSIONER ANDERSON
COMMISSION HAMMOND
COMMISSIONER LODGE
COMMISSION SECRETARY
LEGAL
FROM: JOHAN E. KALALA-KASANDA
MICHAEL DUVAL
DATE: APRIL 30,2024
RE: 2023 IDAHO TELEPHONE SERVICE ASSISTANCE PROGRAM ("ITSAP")
ANNUAL REPORT; CASE NO. GNR-T-24-03.
BACKGROUND
Each year the Administrator of the Idaho Telecommunications Service Assistance Program
("ITSAP") files a report detailing the activities and status of the program during the previous year
and submits a recommended budget for the next year. ITSAP provides eligible recipients with a
reduction in the cost of residential basic local exchange telephone service. Funds for the program
are raised through a surcharge on all end-user business,residential, and wireless access service
lines not receiving the ITSAP credit. The Commission determines the uniform statewide monthly
surcharge, and the Idaho Department of Health and Welfare ("IDHW") administers the program
and grants limited federal "lifeline" contributions to Idaho's low-income customers. Idaho Code §
56-901(1). Idaho telephone companies assist in the form of a monthly discount of$2.50 to eligible
subscribers. Idaho Code § 56-902(1). To be eligible for ITSAP assistance, the applicant must be
the head of a household and meet narrowly targeted eligibility criteria based solely on income or
factors established by IDHW. Idaho Code § 56-903(l). To be eligible to receive reimbursement
for providing low-income benefits (ITSAP and federal lifeline assistance), a company must be
designated as an Eligible Telecommunications Carrier("ETC")by a state commission. 47 C.F.R. §
54.201(a)(1).
In 2012, IDHW introduced legislation amending Idaho Code § 56-902. The legislation
reduced the amount of the monthly ITSAP assistance credit from $3.50 to $2.50. The ITSAP
surcharge rate of$0.01 per access line remained suspended during 2023, and no gross or net
surcharge revenue was collected or deposited during the year ending December 31, 2023.
DECISION MEMORANDUM - I - APRIL 30, 2024

The ITSAP surcharge rate suspension was initially made by Commission Order No. 33732
in Case No. GNR-T-17-03, on March 29, 2017, with an effective date of May 1, 2017. This
suspension was made subject to further annual budget review by the Commission.
THE 2023 ANNUAL REPORT
On February 15, 2024, the Commission received the annual ITSAP report from the Program
Administrator, Ms. Kathleen Toohill. On April 10, 2024, Ms. Toohill submitted an amended report
to the Commission following several discussions with Commission Staff.
In the amended report, as illustrated in Table No. 1 below, Ms. Toohill reported total local
access lines in the amount of 1,574,726 compared to 1,745,735 reported in the prior year 2022, a
decrease of 171,009 lines or approximately 10%. The reported wireless access lines amounted to
1,769,513 compared to 2,797,830 reported in the year 2022, a decrease of 1,028,317 lines or
approximately 37%. The number of ITSAP credit recipients in 2023 was 93,325 compared to
80,604 reported in 2022, an increase of 12,721 or 16%. Ms. Toohill, also, reported unspecified
access lines of 10,899. The gross surcharge revenue for the year was reported at $0 since the
surcharge rate is still suspended.
The quarterly average number of wireline access lines reported to the Administrator for
residential lines was 225,638 compared to 244,079 in 2022; 168,043 compared to 192,355 for
business lines; and the quarterly average number of wireless access lines reported was 442,378
compared to 699,458 in 2022. The Administrator explained that there is a lag in receiving reports
for quarter 4 lines due to some companies reporting quarterly and monthly up to 2-3 months
behind, leading to a rise in lines for Q1 of the subsequent year. Companies report monthly,
quarterly, and even annually, hence the provision of quarterly averages. Additionally, these
numbers are underreported due to a lack of wireless providers reporting line counts due to the
surcharge suspension.
The average number of reported ITSAP recipients per month in 2023 was approximately
7,777 credit recipients per month or 93,325 per year. This is an increase from the 6,725 per month,
or approximately 80,604 per year, reported in 2022. Telecommunications companies received
$233,312.50 in disbursements for ITSAP credits paid to eligible recipients compared to the
$201,731 that was reported in 2022. Disbursements for company administrative costs of the
program were $26,240.65, an increase from the $24,975 reported in 2022.
DECISION MEMORANDUM - 2 - APRIL 30, 2024

Table No. 1: ITSAP Trend of Reported Annual Data
Years Year 1: Year 2: Year Year 4: Year 5: Year 6:
2018 2019 3: 2020 2021 2022 2023
Local
Access Amount Amount Amount Amount Amount Amount
Lines
Residential 1,525,716 1,302,666 1,198,146 1,003,491 976,314 902,553
Business 1,414,148 1,288,214 888,994 964,291 769,421 672,173
Total 2,939,864 2,590,880 2,087,140 1,967,782 1,745,735 1,574,726
Wireless 3,722,983 3,651,576 2,543,252 2,523,243 2,797,830 1,769,513
Access
Unspecified
Access 10,899
Lines
Total Lines 6,662,847 6,242,456 4,630,392 4,491,025 4,543,565 3,355,138
Credit 21,455 17,657 14,157 113,880 80,604 93,325
Recipients
During 2023, ITSAP reimbursed companies for net monthly discounts provided to eligible
subscribers and costs of administering the program, so checks were written in the total amount of
$259,053.45 compared to the $226,318.89 reported for 2022. The Administrator's fees and
expenses were $9,152.40 for the year. The fund's cash balance at the end of the year was reported
at $334,811.90.
2024 BUDGET AND TRENDS
The ITSAP Administrator projects that the funding requirements for 2024 will increase.
There have been several new telecommunication companies that have been granted access to
participate in the ITSAP program. The Administrator estimates the ITSAP disbursements at
approximately$233,310 and the projected expenses of$45,441,1 which is composed of$9,200 of
Administrator salary and estimated bank charges; $10,000 of 4 years of auditor's fees; and $26,241
of program administration costs.
I This amount and its breakdowns are shown in the ITSAP Worksheet and Historical Data—Amended,attached to the
2023 Amended ITSAP Annual Report.
DECISION MEMORANDUM - 3 - APRIL 30, 2024

To establish the 2024 budget, the Administrator estimates that the number of access lines
subject to the surcharge will be approximately 278,686 per month and the average number of
ITSAP recipients will amount to approximately 7,777 per month or 93,325 per year. Based on this
data, the ITSAP Administrator(Ms. Toohill) projects the funding requirement for 2024 will be
approximately $233,310 and the end-of-year 2024 balance is expected to be $56,061. This is
illustrated in Table 2 below.
Table No. 2: ITSAP FUND - 2024 BUDGET
CASH BALANCE 1/l/2024 $334,812
2024 INTEREST 0
2024 ASSISTANCE CREDITS $233,310
2024 ADMIN EXPENSES $45,441
CASH BALANCE 12/31/2024 if no surcharge $56,061
2024 RESERVE BALANCE 200,000
2024 SURCHARGE REQUIREMENT $143,939
ADMINISTRATOR'S 2023 FUNDING RECOMMENDATIONS
The surcharge rate has been suspended for several years; however, the Administrator, Ms.
Toohill, recommends that the surcharge rate be reinstated, at this time, at the rate of$0.07 per
access line. Currently, there is $0.00 per access line and the assistance credit amount of$2.50 per
customer per month, which was introduced by the Idaho Department of Health and Welfare in a
2012 legislation amending Idaho Code §56-902.
Ms. Toohill stated that during 2023, there were significant numbers of credit recipients,
from 80,692 in 2022 to 93,325, an increase of 12,633 or approximately 16%. The fund balance
decreased by$268,838.88, or approximately 45%. It started the year on January 1, 2023, with a
cash balance of$603,650.78 and(after checks clearing throughout the year) closed the year on
December 31, 2023, with a cash balance of$334,811.90. Thus, if the numbers of customers, credit
recipients, and fund administration costs for 2024 were to mirror 2023—with no surcharge—then
the fund balance would be depleted to $56,061, a balance that will fund about one additional
quarter of funding into 2025. This is shown in Table 2 above.
DECISION MEMORANDUM -4- APRIL 30, 2024

Ms. Toohill represented that, throughout 2023, 278,686 monthly average lines for local and
wireless access lines were reported. This means that, "[i]n order to maintain around a$200,000
fund balance, then a line surcharge would need to be reinstated at a minimum of$.043 . [sic] This
rate would maintain a surcharge closer to about $200,000, but that is not enough for one year of
expenses." See Amended ITSAP Administrator Report 2023 at 3. Ms. Toohill stated, further, that
when evaluating the annual income versus the outgoing expenses, the fund balance would reach
about $290,157, with a$0.07 surcharge rate per line, and will maintain around a$200,000 fund
balance, at the end of the fiscal year, which is December 31, 2024. Therefore, a line charge of
$0.07 per line would be a recommended and a more stabilizing rate to bring in annual income
closer to expected annual expenses, as average annual expenses over the last three years have been
about$255,000.
Ms. Toohill confirmed that the fund balance would prove dangerously low at the end of the
year 2024. The estimated balance for the end-of-year 2024 is projected to be $56,061. This
includes 7,777 monthly credit recipients (or 93,324 for the whole year). It also includes the fund's
related administration costs.
STAFF ANALYSIS AND FUNDING RECOMMENDATION
Staff reviewed the 2023 amended annual report of the ITSAP program, the proposed 2024
budget, and the funding recommendation. Staff agrees with the Administrator's assessment and the
proposed 2024 budget. Additionally, Staff supports the Administrator's recommendation for the
reinstatement of the surcharge rates for all wireline and wireless access lines.
However, Staff recommends that the surcharge rate should be reinstated at$0.05 per access
lines rather than the $0.07 proposed by Ms. Toohill. This is because Staff considers that a yearly
gradual change to the surcharge rate after a surcharge suspension would be more appropriate, and
the $0.05 reinstatement rate is a good starting point. The surcharge rate of$0.05 is projected to
generate a fund balance of$223,237, as of December 31, 2024. This is projected to generate the
$200,000 minimum 2024 year-end balance referred to by Ms. Toohill, as shown in Table 2 above.
Staff will be working with Ms. Toohill throughout the year 2024 to monitor the ITSAP fund level
closely.
On March 29, 2017, the Commission issued Commission Order 33732 in Case No. GNR-T-
17-03 suspending the surcharge rate of$0.01 per access line. At the time of this suspension, the
Administrator's fees and expenses were $8,827 for 2016. The Administrator reported a fund cash
DECISION MEMORANDUM - 5 - APRIL 30, 2024

balance at the end of 2016 of$1,354,852—which was the beginning balance on January 1, 2017.
The estimated balance for end-of-year 2017 was projected at about $1,232,771. There was a
significant decline in credit recipients which caused the fund to continue growing each year. This
is different from this year 2024.
As Table No. 1 above illustrates, there has been a steady and significant increase in credit
recipients since 2018. For example, in 2018 the number of credit recipients was 21,455. In 2023
that number had risen to 93,325. This amounts to an increase of 71,870 (or 335%) in credit
recipients. This trend is continuing as demonstrated by the current increasing number of
telecommunication companies acquiring ETC status in Idaho. This trend is also compounded by
the need for Staff to conduct a closer examination of the credit recipients; Staff noted that there is a
recipient mentioned in the 2023 Annual Report who receives 70% of the entire ITSAP fund's total
disbursement. Staff intends to work with Ms. Toohill to determine the appropriate course of action.
Staff agrees with Ms. Toohill's assessment that, with no surcharge rate, the fund balance
will be depleted and will be insufficient to meet the 2024 expenses as well as provide for any
unforeseen changes to the number of ITSAP recipients. Thus, Staff recommends that the
Commission approve the Administrator's 2024 budget and approve the Administrator's
recommendation to reinstate the surcharge rate. Staff considers the appropriate reinstatement
surcharge rate to be $0.05 per access line, effective May 1, 2024, until the next annual budget
review.
Additionally, Staff recommends the Commission direct all companies to report access line
counts to the Administrator. Staff and the Administrator will continue to monitor the number of
recipients and make changes if needed if participation continues to increase.
COMMISSION DECISION
1. Does the Commission wish to accept the 2023 ITSAP annual report and adopt the
Administrator's 2024 budget?
2. Does the Commission wish to accept the Administrator's recommendation to reinstate
the ITSAP program surcharge rate?
3. Does the Commission wish to adopt the Administrator's recommendation to reinstate
the ITSAP program surcharge rate at$0.07 per access line, effective May 1, 2024, until the next
annual budget review?
DECISION MEMORANDUM - 6 - APRIL 30, 2024

4. Does the Commission wish to adopt the Staff s recommendation to reinstate the ITSAP
program surcharge rate at $0.05 per access line, effective May 1, 2024, until the next annual budget
review?
5. Does the Commission wish to direct all companies to report access line counts to the
Administrator? N"
Johan E. Kalala-Kasanda
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DECISION MEMORANDUM - 7 - APRIL 30, 2024