20240820Annual Report_Amended.pdf

RECEIVED
Tuesday, August 20, 2024
IDAHO PUBLIC UTILITIES
ADMINISTRATOR'S REPORT COMMISSION
IDAHO UNIVERSAL SERVICE FUND
YEAR ENDED -- JUNE 307 2024
SURCHARGE REVENUES
Surcharge revenues collected during the year ended June 30, 2024 totaled
$1,174,946, of which $559,847, or 48% was assessed on local exchange
services and $615,098, 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.
DISBURSEMENTS
COMPANIES RECEIVING DISBURSEMENTS
Authorized disbursements to Local Exchange Companies during the year
ended June 30, 2024 totaled $1,698,610 (page 11). The following table
shows the Local Exchange companies authorized by the Idaho Public
Utilities Commission to receive disbursements from the Idaho Universal
Service Fund.
Original IPUC Order Current
Authorizing Authorized Annual
Company Name Disbursement Disbursement
ATC Communications 22718 & 22128 $ 464,502
Cambridge Telephone 22131 $ 1387162
Fremont Telecom 28085 & 28166 $ 571258
Inland Telephone Co 23838 $ 271604
Midvale Telephone 22377 $ 3 50,78 5
Direct Communication 22132 $ 2027401
Rockland
Rural Telephone Co 22414 & 26598 $ 302,221
Silver Star Telecom 22237 & 22370 $ 155 677
Total $116981610
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ADMINISTRATIVE FEES AND EXPENSES
Administrative fees and expenses for the year ended June 30, 2024 were
$19,438. Administrative expenses include bank and broker charges of
$361. Administrative expenses payable at June 30, 2024 are $1,579.
INVESTMENTS AND FUNDS
CASH
At June 30, 2024, the Idaho Universal Service Fund had a cash balance
of $345,966. The following is a table showing the beginning, ending, and
quarterly fund cash balances for the year ended June 30, 2024.
Beginning Ending
Balance Balance Balance Balance Balance
6/30/23 9/30/23 12/31/23 3/31/24 6/30/24
$8891068 $7051248 $6031872 $4801275 $3451966
INTEREST
No interest was earned on funds held in bank accounts for the year ended
June 30, 2024.
INVESTMENTS
The Idaho Universal Service Fund had no investments during the year
ended June 30, 2024.
INVENTORIES
Total residential and business lines at May 1, 2024 were 57,436 and
47,478 respectively (pages 38 and 40). This represents a decrease of 12%
in residential lines and 30% in business lines from the prior year. Total
MTS/WATS billed minutes of use for the year ended December 31, 2023
were 87,944,136 (page 43), a 91% increase from the prior year.
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STATEWIDE WEIGHTED AVERAGE RATES
A schedule summarizing the total funding eligibility for the authorized
local exchange companies is shown on page 12.
ONE-PARTY, SINGLE LINE SERVICE
The statewide weighted average rates for one-party single-line residential
and business services are shown on pages 21 and 36. The following table
shows the statewide weighted averages for one-party, single line service.
IUSF THRESHOLD
STATEWIDE 125% STATEWIDE
WEIGHTED WEIGHTED
AVERAGE RATE AVERAGE RATE
RESIDENTIAL SERVICES $29.17 $36.46
BUSINESS SERVICES $46.90 $58.62
TOLL SWITCHED ACCESS
The statewide weighted average revenue per MTS/WATS access minute is
shown on page 14. The statewide weighted average toll switched access
revenue is $ .064 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 $689,310 (page 44). The 2023--2024 IUSF authorized
disbursements will continue at $1,698,610. MTS/WATS services would
contribute approximately 41% of the surcharge revenue and local
exchange services would contribute 59% of the surcharge revenue,
however the fund would become insolvent before June 30, 2025.
OPTION 2: ADJUST SURCHARGE RATES &MAINTAIN FUDNING
If surcharge rates are increased to $.5 7 per residential line, $.91 per
business line, and $.01 per intrastate MTS/WATS billed minute and
current funding levels are maintained, the fund will increase by
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approximately $62,853 (page 44). 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 $408,819 at June 30, 2025.
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 $205,200.
♦ Cambridge Telephone Company should increase local residential and
business rates. Cambridge Telephone Company annual IUSF draw
would be reduced by $196,494, 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 $138,002.
♦ Direct Communications Rockland should increase local residential and
business rates. Direct Communications Rockland's annual IUSF draw
would be reduced by $4 7,164.
♦ Fremont Telecom should increase toll switched access rates, and local
residential and business rates. Fremont Telecom's annual IUSF draw
would be decreased by $13 5,404, and thus eliminate the Fremont
Telecom's annual IUSF draw of $5 7,2 58.
♦ Inland Telephone Company should increase local residential and
business rates. Inland Telephone Company annual IUSF draw would be
reduced by $21,475.
♦ Midvale Telephone Company should increase local residential and
business rates. Midvale Telephone Company annual IUSF draw would
be reduced by $75,997.
♦ 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 $110,375.
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The 2024--2025 IUSF authorized disbursements, including the adjustments
to company funding per rule 106, will be $904,977. If surcharge rates are
decreased to $.41 per business line and $.005 per intrastate MTS/WATS
billed minute, and increased to $.26 per residential line the fund will
decrease by approximately $81,764 (page 45). MTS/WATS services would
contribute approximately 52% of the surcharge revenue and local
exchange services would contribute 48% of the surcharge revenue. The
fund would have a balance of approximately $264,201 at June 30, 2025.
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 30%
and the MTS/WATS billed minutes have been increased 3%. If the
surcharge rates are increased to $.6 5 per residential line, $1.0 5 per
business line, and $.01 per intrastate MTS/WATS billed minute and IUSF
disbursements are maintained at current levels, the fund will increase by
approximately $89,340 (page 45). 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 $435,305 at June 30, 2025.
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 $.30 per residential line, $.47 per business
line, and decreased to $.005 per intrastate MTS/WATS billed minute, and
IUSF disbursements are adjusted to meet statewide averages per rule 106,
the fund will decrease by approximately $67,688 (page 46). MTS/WATS
services would contribute approximately 52% of the surcharge revenue
and local exchange services would contribute 48% of the surcharge
revenue. The fund would have a balance of approximately $278,277 at
June 30, 2025.
OPTION 6: 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 30%
and the MTS/WATS billed minutes have been increased 3%. If the
surcharge rates are increased to $.5 7 per residential line, $.91 per business
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line, and $.01 per intrastate MTS/WATS billed minute and IUSF
disbursements are maintained at current levels, the fund will decrease by
approximately $27,674 (page 46). MTS/WATS services would contribute
approximately 53% of the surcharge revenue and local exchange services
would contribute 47% of the surcharge revenue. The fund would have a
balance of approximately $318,291 at June 30, 2025.
ADMINISTRATOR'S RECOMMENDATION
During the past year, there was a continued decrease in both local
residential lines of 12% and in local business lines of 30%. MTS/WATS
billed minutes increased significantly at 91%. This drastic increase
emphasizes the difficulty estimating future inventory levels. 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 $4317978 for IUSF authorized disbursements at
current levels and $233,569 if IUSF authorized disbursements are adjusted
per rule 106.
I recommend that the Commission adopt Option 3 or Option 5 adjusting
the surcharge rates and, also, applying rule 106.02 to adjust funding to the
companies. Both options also adjust the inventories for the five-year
average and will provide an approximate three-month reserve balance
going forward as the telecom industry continues to evolve. The fund
balance at June 30, 2025 under Option 5 would approximate $278,277.
The fund balance at June 30, 2025 under Option 3 would approximate
$2641201.
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 6. This option increases the surcharge rates to $.5 7 per
residential line, $.91 per business line, and $.01 per intrastate MTS/WATS
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billed minute. Under Option 6, the fund balance would be adequate to
meet the fund obligations, though with less of a reserve for industry
changes going forward. The fund balance will approximate $318,291 at
June 30, 2025.