20241001Final_Order_No_36341.pdf

Office of the Secretary
Service Date
October 1,2024
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
2023-2024 IDAHO UNIVERSAL SERVICE ) CASE NO. GNR-T-24-05
FUND ANNUAL REPORT AND )
RECOMMENDATIONS ) ORDER NO. 36341
The Idaho Universal Service Fund ("IUSF") rules were adopted under the general legal
authority of the Telecommunications Act of 1988,Chapter 6,Title 62,Idaho Code,and the specific
authority of Idaho Code§§ 62-610 et seq. The Idaho Public Utilities Commission("Commission")
established a universal service fund to maintain the universal availability of local exchange service
at reasonable rates and to promote the availability of Message Telecommunications Service
("MTS") at reasonably comparable rates throughout the state of Idaho. Idaho Code § 62-610(1).
The IUSF is funded through a statewide end-user surcharge on local exchange services and
intrastate MTS and Wide Area Telephone Service ("WATS") type services. The IUSF
administrator ("Administrator") submits an Annual Report to the Commission detailing the
program activities of the previous year and recommending surcharge rates to meet the next year's
funding requirements.Idaho Code § 62-610 and IDAPA 31.46.01.303. The Commission issues an
Order in response to the Administrator's report establishing statewide end-user surcharges to be in
effect for the next twelve months beginning October 1. IDAPA 31.46.01.104.01.
As explained below, the Commission sets that the monthly IUSF surcharge rates shall
decrease to $0.24 per residential line, $0.41 per business line,and$0.005 per MTS/WATS minute,
effective for 12 months beginning October 1, 2024.
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 ending balance and recommends several optional
changes to the surcharge rates to maintain adequate funding levels. Commission Staff("Staff')
then analyzes the Administrator's report and submits its recommendations to the Commission.
After reviewing the report and Staff s 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 most recent order setting IUSF surcharge rates, current monthly IUSF rates
ORDER NO. 36341 1

are$0.25 per residential line, $0.44 per business line, and$0.007 per intrastate long-distance billed
minute. Order No. 33851.
POSITIONS OF THE PARTIES
On July 15, 2024, the Administrator filed their initial report raising concerns that the fund
would go insolvent before June 30, 2025, unless adjustments were made. The Administrator's
report also outlined several options to fund the IUSF going forward.'
In its September 3, 2024, Decision Memorandum, Staff reiterated the Administrator's
concern that the IUSF fund would become insolvent by June 30, 2025, if no action was taken. To
avoid insolvency, Staff recommended that the Commission adopt Option 3 as initially proposed
by the Administrator ("Original Option 3") Staff included several tables demonstrating various
historical variations in the IUSF over time. Three of these tables are described herein and included
as attachments to this Order:
1. Exhibit B: This table shows that the disbursement to the qualifying companies has
remained unchanged since 2016.
2. Exhibit C: This table shows that the total number of reported lines contributing to
the IUSF has fallen from 548,344 in 2010 to 104,914 in 2024; relatedly, notable
decreases in the MTS/WATS minutes billed also occurred during this period.
3. Exhibit D: This table showed that the charges for residential lines, business lines,
and MTS/WATS per minute have respectively gone from $0.10, $0.17, and $0.003
in 2010 to $0.25, $0.44, and $0.007 in 2024.
Original Option 3 would have lowered the disbursement while also lowering the rate per
business line and the rate charged for intrastate MTS/WTS billed minutes. This option was one of
the Administrator's two originally preferred options.2 Amended Annual Report at 6. Original
Option 3 was also the option recommended by Staff.
The Idaho Telecom Alliance ("ITA") submitted comments on August 30, 2024. Original
Option 3 was not recommended by ITA who instead suggested that the Commission increase the
rates charged to customers—which ITA noted had not been done since 2017. In justifying its
' All options discussed herein are found in Exhibit A below. In coordination with Staff, the Administrator's initial
report was amended on August 20,2024.
2 Under the Original Option 3 the rate charged per business line and rate charged per MTS/WATS would have slightly
decreased.The rate charged per residential line would have slightly increased. See Exhibit A.
ORDER NO. 36341 2

recommendation, ITA noted that other states have changed the funding mechanism for their
analogous programs which has led to more stable funding. ITA stated that it supported legislative
changes in this regard but had not been able to independently motivate legislative action. ITA also
noted that the companies that receive the IUSF disbursement also provide broadband and wireless
services—not simply traditional landlines—and serve some of the most rural regions of the State.
ITA initially recommended"that the Commission adopt rate increases to the statewide average of
$29.17 per residential line and $46.90 per business line." ITA Comments at 5. ITA also
recommended that the Commission raise the surcharge rate in coordination with the Administrator
and requested the Commission's assistance in promoting changes to the IUSF's underlying statutes
to ensure that the fund remains viable.
SEPTEMBER 3, 2024,DECISION MEETING
At the Commission's September 3, 2024, Decision Meeting, Staff presented a Decision
Memorandum recommending that the Commission adopt the Administrator's Option 3.
At the same meeting the ITA, represented by Kenneth McClure and Cynthia Mellillo,
presented the ITA's position on the IUSF funding. The ITA countered Staff s recommendation
and requested "that the Commission adopt rate increases to the statewide weighted average of
$29.17 per residential line and $46.90 per business line" and increase the surcharge rates in an
amount that would be acceptable to both the Commission and the Administrator. ITA's August
30,2024,Comments at 5. The ITA also requested that the Commission bring stakeholders together
to promote a change to the IUSF's funding mechanism.
A motion was made for Staff and the ITA to supplement the record and bring the matter
before the Commission again before the October 1, 2024, effective date. The motion was passed
unanimously.
SEPTEMBER 17, 2024,DECISION MEETING
Prior to the September 17, 2024, Decision Meeting, Staff, the ITA, and Administrator
discussed alternative options. As a result of these discussions, the Administrator amended certain
aspects of her report and submitted an Addendum on September 4,2024. The Addendum adjusted,
Option 3 ("Adjusted Option 3") and Option 5 ("Adjusted Option 5") of the options originally
proposed by the Administrator. ITA submitted additional comments on September 9,2024,noting
that it had discussed the matter with Staff and recommended that the Commission adopt the
Adjusted Option 5. ITA also reiterated its request for Commission assistance in promoting changes
ORDER NO. 36341 3

to the IUSF statutes to ensure the fund's viability. After reviewing the additional comments from
ITA, Staff also recommended the Adjusted Option 5 in its September 17, 2024, Decision
Memorandum.
FINDINGS AND DISCUSSION
As we have noted before, local access lines and intrastate long-distance billed minutes
continue to decline. This complicates the task of predicting the necessary IUSF fund balance for
the next fiscal year and determining 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 to receive a distribution. See
Idaho Code §§ 62-605, -610, and IDAPA 31.46.01.106. To qualify for IUSF 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.
The actual statewide average rate is obscured by large,deregulated telephone companies—
those with the greatest market share and therefore the greatest impact on the threshold rate—that
have increased their stand-alone residential rates to encourage purchases 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 because
companies are only required to report stand-alone residential rates. Also, in 2011 and 2014, the
Federal Communications Commission 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.
The reality is that the total number of lines funding the NSF has drastically decreased in
recent years—as illustrated in Exhibit C. The Commission cannot continue to maintain the same
disbursement provided in 2016 with less than a third of the total number of customer lines
contributing to the fund. After carefully considering the Administrator's 2024 Annual Report and
subsequent filings, Staff s recommendations, and ITA's filings, we find the IUSF rates per line
ORDER NO. 36341 4

should be decreased to $0.24 per residential line and $0.41 per business line. The charge for
intrastate MTS/WTS billed minutes should also be reduced to $0.005. Available IUSF
disbursements should be decreased from $1,698,610 to $904,977 based on the underlying metrics
of the Original Option 3. The option ordered by the Commission is similar to the Original Option
3 recommended by Staff and initially preferred by the Administrator. Staff s September 3, 2024,
Decision Memoranudm at 16; Administrator's Amended Annual Report at 6. However, after
carefully reviewing the rates charged to Idaho customers over time as found in Exhibit D, the
Commission finds that the Residential Rate Per Line should also be decreased (from the $0.26 as
proposed in the Original Option 3) to $0.24. Exhibit C shows that the $0.24 per residential line
charge is still double what residential customers were paying as recently as 2017.
Based on the year after year decrease in number of lines contributing to IUSF and the
increasing rates over the recent past the Commission cannot ignore its statutory responsibility to
ensure rates(including charges that fund the NSF) are fair,just, and reasonable. The Commission
has carefully considered ITA's and Staffs recent recommendation to accept Adjusted Option 5.
We appreciate the parties' willingness to work together to find solutions,but this recommendation
does not address the root cause of the issue—fewer lines contributing and ever-increasing customer
rates. This is not sustainable. The Commission does not believe the best path forward includes
forcing a smaller customer population to shoulder an even larger financial burden, something the
parties also recognize; taking residential and business rates per line (that were $0.12 and $0.20
respectively in 2017) to $0.51 and $0.82 is not fair,just and reasonable. When compared to the
IUSF's rates and disbursement in 2017, Adjusted Option 5's less than 20% decrease to the
disbursement does not justify more than quadrupling the rates per line charged to fewer Idaho
customers over the same period (the substantial increases to the MTS/WATS billed minute
contribution should also be noted). See Exhibits B and D. Considering the record in this case the
Commission finds that the funding option discussed above represents a reasonable and necessary
change that will fulfill the purposes of Idaho's Telecommunications Act of 1988 and Idaho Code
§ 62-610 while also encouraging the parties to seek changes in how IUSF is funded to make it
more sustainable.The Commission encourages ITA to continue to work with Staff to find solutions
in this regard.
Finally,the Commission accepts the Administrator's proposed budget for fiscal year 2024-
2025. We further note it is important for the Commission to strictly monitor the IUSF balance to
ORDER NO. 36341 5

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.
ORDER
IT IS HEREBY ORDERED that the monthly IUSF surcharge rates shall be $0.24 per
residential line, $0.41 per business line, and $0.005 per MTS/WATS minute, effective for 12
months beginning October 1,2024.The IUSF disbursement shall also be reduced to approximately
$904,977.
IT IS FURTHER ORDERED that the Administrator's proposed fiscal year 2023-2024
budget is accepted.
IT IS FURTHER ORDERED that the Administrator shall continue to 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.
DONE by order of the Idaho Public Utilities Commission at Boise, Idaho this I st day of
October 2024.
ERIC ANDERSON, PRESIDENT
JO R. HHAAMMOND JR., COMMISSIONER
G
EDWARD LODGE, COMAISSIONER
ATTEST:
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ORDER NO. 36341 6

EXHIBIT A: Options Discussed Above
*All Option 1: Option 2: Original Administrator Modified Option 4: Orin Administrator Option 6:
Estimates Status Quo Adjust Option 3: Adiusted Orikinal Adjust Option S: Adiusted Adjust
Found in this Surcharge Adjust Option 3: Option 3: Inventories Adjust Option S: Inventories
Table are Rates and Surcharge Adjust Original and Inventories, Adjust and
Approximate Maintain Rates and Surcharge Option 3 Surcharge Surcharge Inventories, Surcharge
Funding Adjust Rates and with Modest Rates, Rates,and Surcharge Rates and
Funding to Funding to Reduction in Maintain Funding to Rates,and Maintain
Meet Meet 100% Residential Funding Meet Funding to Funding
Statewide of Statewide Rate Levels Statewide Meet 100% Levels
Averages Averages (Commission Averages of Statewide
Decision) Averages
Rate Per Line Residential Residential Residential Residential Residential Residential Residential Residential Residential
Line: $0.25 Line: $0.57 Line: $0.26 Line: $0.44 Line: $0.24 Line: $0.65 Line: $0.30 Line: $0.51 Line: $0.57
Business Business Business Business Business Business Business Business Business
Line: $0.44 Line: $0.91 Line: $0.41 Line: $0.71 Line: $0.41 Line: $1.05 Line: $0.47 Line: $0.82 Line: $0.91
MTS/WATS $0.007 $0.01 $0.005 $0.008 $0.005 $0.01 $0.005 $0.008 $0.01
billed minute
Contribution
Total $1,698,610 $1,698,610 $904,977 $1,384,680 $904,977 $1,698,610 904,977 $1,384,680 $1,698,610
Company
Disbursement
Fund as of Insolvent $408,819 $264,201 $343,313 $250,417 $435,305 $278,277 $369,943 $318,291
June 30,2025
Case No. GNR-T-24-05
Order No. 36341
Page 1 of 4

EXHIBIT B: Table 3 in Staffs September 3, 2024,Decision Memorandum
Fiscal Year-End Projected Year-
Year Surcharge Revenue Disbursement Cash Balance End Cash Balance
a b c d e
2016 $ 1,644,938 $ 1,698,610 $ 500,768 $ 479,993
2017 $ 1,291,532 $ 1,698,610 $ 80,784 $ 504,036
2018 $ 1,889,493 $ 1,698,610 $ 249,758 $ 502,320
2019 $ 2,227,054 $ 1,698,610 $ 767,449 $ 1,038,211
2020 $ 1,917,737 $ 1,698,610 $ 972,125 $ 744,509
2021 $ 2,000,824 $ 1,698,610 $ 1,254,623 $ 994,058
2022 $ 1,650,870 $ 1,698,610 $ 1,187,050 $ 719,490
2023 $ 1,420,072 $ 1,698,610 $ 889,068 $ 40,000
2024 $ 1,174,946 $ 1,698,610 $ 345,966 $ 343,344
Case No. GNR-T-24-05
Order No. 36341
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EXHIBIT C: Table 4 in Staff's September 3, 2024, Decision Memorandum
Reported average Reported average MTS/WATS
monthly inventory: monthly inventory: Reported Total Billed
Years Residential Lines Business Lines Total Lines minutes
a b c d e
2010 328,592 219,752 548,344 284,863,207
2011 292,282 221,764 514,046 253,602,445
2012 253,461 219,108 472,569 257,750,454
2013 229,336 230,860 460,196 197,465,217
2014 202,341 236,547 438,888 172,567,590
2015 182,038 225,512 407,550 167,029,919
2016 169,987 193,095 363,082 197,135,147
2017 152,290 122,009 274,299 125,154,200
2018 122,347 114,359 236,706 110,719,570
2019 106.787 114,073 220,860 117,572,337
2020 94,556 87,586 182,142 107,374,568
2021 97,154 101,719 198,873 90,893,786
2022 72,811 78,030 150,841 89,781,375
2023 65,516 68,257 133,773 46,111,289
2024 57,436 47,478 104,914 87,944,136
Case No. GNR-T-24-05
Order No. 36341
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EXHIBIT D: Table 5 in Staffs September 3, 2024, Decision Memorandum
Rates: Total
MTS/WATS per Rates per residential Rates per business Surcharge
Years minute lines lines Revenue
2010 $ 0.003 $0.10 $0.17 $1,734 098
2011 $ 0.003 $0.12 $0.19 $1,715,397
2012 $ 0.003 $0.12 $0.19 $1,654,166
2013 $ 0.004 $0.15 $0.23 $1,683,231
2014 $ 0.006 $0.16 $0.25 $1,946,672
2015 $ 0.006 $0.16 $0.25 $2,046,064
2016 $ 0.005 $0.12 $0.20 $1,644,938
2017 $ 0.005 $0.12 $0.20 $ I,291,532
2018 $ 0.009 $0.25 $0.44 $1,889,493
2019 $ 0.009 $0.25 $0.44 $2,227,054
2020 $ 0.007 $0.25 $0.44 $1,917,737
2021 $ 0.007 $0.25 $0.44 $2,000,824
2022 $ 0.007 $0.25 $0.44 $1,650,870
2023 $ 0.007 $0.25 $0.44 $1,420,072
2024 $ 0.007 $0.25 $0.44 $1,174,946
Case No. GNR-T-24-05
Order No. 36341
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