20020815_239.pdf

DECISION MEMORANDUM
TO:CO MMISSI 0 NER KJELLAND ER
CO MMISSI 0 NER SMITH
CO MMISSI 0 NER HANSEN
JEAN JEWELL
RANDY LOBB
DON HOWELL
LYNN ANDERSON
JOE CUSICK
DOUG COOLEY
CAROLEE HALL
WAYNE HART
BEVERLY BARKER
RON LAW
GENE FADNESS
TONY A CLARK
WORKING FILE
FROM:BIRDELLE BROWN
DATE:AUGUST 13, 2002
RE:IDAHO UNIVERSAL SERVICE FUND - 2002 ANNUAL REPORT
On July 15, 2002, Alyson Anderson, the Administrator of the Idaho Universal Service
Fund, filed her Annual Report to the Commission for the period of July 1 , 2001 through
June 30, 2002. Staff has reviewed the calculations and recommendations in this report and finds
them to be accurate and comprehensive. Once again, Staff commends Ms. Anderson for her
continued outstanding performance as Administrator of this fund.
Ms. Anderson reports surcharge revenue for the year in the amount of $2,498 097 of
which $1 231 353 (49%) was contributed by local exchange services and $1 266 744 (51 %) was
contributed by MTS/W A TS services. (This is a decrease in local revenue of nearly $170 000
and an increase in toll revenue of about $90 000.) Disbursements to the eight qualifying
independent local exchange carriers (ILECs) totaled $1 898.303, which is a decrease of nearly
$300 000 resulting from the completion of a short-term payment to Fremont Telcom. The
ending fund cash balance at June 30, 2002 after applying bank charges, administrative expenses
and interest received was $646 286.
DECISION MEMORANDUM AUGUST 13 2002
Local Service
As of May 1 , 2001 companies reported 532 279 residential lines and 190,428 business
lines, for a total of 722 707 lines. This represents an approximate 2.7% decrease in total lines
from the prior year. The newly calculated statewide average rates and threshold rates are:
Business Services
2001 Current 2002 Statewide 125% Statewide 125% Statewide
Weighted Weighted Weighted Average Weighted Average
Average Rate Average Rate Rate - 2001 Rate - 2002
17.46 $17.21.83 $22.
32.$32.42 41.03 $40.
Residential
Switched Access Service
Toll access minutes reported by the local exchange companies were 609 012 001 , which
represents a small increase from 574 million minutes in 2001. The new Statewide Average rate
has decreased to $0.051828 per minute.
Toll Minutes
The number of toll minutes reported to the USF decreased by 2.34% from 304 million
minutes in the 2001 report to about 297 million minutes in the 2002 report. Toll revenue
reported showed a decline of about 60% due to report anomalies.
Disbursements
Total disbursements for the year were $1 898 303 , and are not expected to change for the
coming year unless modifications to access rates are required of some companies.
Funding
The Universal Service Fund is currently funded through assessments of $0.1 0 per
residential line per month, $0.15 per business line per month, and $0.0035 per toll minute.
DECISION MEMORANDUM AUGUST 13 , 2002
ADMINISTRATOR'S OPTIONS
The Administrator has presented three funding options for the coming year. These
options are as follows:
Option 1: Status Quo - Ms. Anderson stated that if current surcharge levels are
maintained and no additional funding is needed, the fund will increase to a balance of
220 634, a greater reserve balance than she recommends.
Option 2: Adjust Funding to meet Statewide Averages and Maintain Surcharge Rates - In
this discussion, Ms. Anderson compares the companies' current local and switched access rates
to the statewide threshold rates and applies the eligibility rule (Idaho Universal Service Fund
Rule 106.02) to determine what revisions are required by current participants to the fund to
continue to qualify. She notes that ATC', Fremont', and Inland's switched access rates are
above the threshold rate and they should reduce their rates (thus increasing their draw from the
Universal Service Fund). If these adjustments are made and the current assessment is
maintained, Ms. Anderson projects an ending balance of$I 182 174, which is still a greater
reserve balance than she recommends.
Option 3: Adjust Funding to meet Statewide Averages and Maintain Surcharge Rates - In
this option, Ms. Anderson proposes a decrease in current surcharge rates to $0.08 per residential
line, $0.13 per business line and $0.0025 per toll minute and increasing disbursements resulting
from adjusted access rates as discussed in Option 2. This plan would produce a projected
balance of$711 652.
ADMINISTRATOR'S RECOMMENDATION
Ms. Anderson recommends Option 3, which would reduce the surcharge rates to $0025
per MTS/W ATS billed minute and to $.08 per residential and $.13 per business line. She
recommends adjustments to Fremont, ATC and Inland, which will increase disbursements by
$38,460 to offset decreases in access rates and keeping surcharges at their current levels. The
fund would increase to approximately $711 652.
DECISION MEMORANDUM AUGUST 13, 2002
STAFF COMMENTS AND RECOMMENDATION
Staff finds Ms. Anderson s report to be complete and comprehensive. Staff would add
that it has requested explanations from four companies regarding reported access rates that
increase even though there was no authorized rate increase. Two companies have revised their
reports and no longer show excess rates from access. ATC and Inland have promised to send the
information as soon as they can compile it. Staff did not contact Fremont. Staff also notes that
Rural's access rate declined by an amount greater than the allowed 3% to $.048781 as a result of
lost billing and collection revenues from its recent EAS implementation. Rural received
Universal Service Funds to compensate for this lost revenue.
Staff recommends that the Commission adopt the Administrator s Option No.3 to reduce
access rates, but to defer any adjustments to access rates for any company. Over time, these rates
seem to be stabilizing and most significant variations seem to be a result of reporting anomalies.
COMMISSION DECISION
Does the Commission approve the Administrator s recommended Option No.3 to reduce
surcharge rates to $0.08 for residential lines, $0.13 for business lines and $0.0025 per toll
minute?
Does the Commission wish to defer revisions of Access Rates?
Attachment
Iusf/yearly/200 1-2002/reports/annrept dmm
DECISION MEMORANDUM AUGUST 13 2002