Verizon Slams Oklahoma Proposal for Toll-Free Statewide Fund, Commission Member Calls for Circumspection

An Oklahoma proposal for a statewide toll-free calling plan is “fundamentally flawed” and should be set aside in favor of a “more targeted solution,” Verizon said in preliminary comments to the Corporation Commission. The plan proposes to ban “an entire class of competitors -- interexchange carriers -- from serving an admittedly competitive market,” the company said.

The plan, submitted by the commission staff, would make all instate calls toll-free, with a surcharge on customers’ monthly bills covering the resulting loss to competitive carriers, estimated at $118 million annually. The surcharge would underwrite a new fund replacing the Oklahoma High Cost Fund. The commission has set a March 29 vote on whether to advance the plan to the Legislature.

Implementing the plan as constituted would “replace a $37 million fund with a $271 million-plus fund in order to subsidize the lost toll revenues and networks costs necessary to augment the network and build new facilities,” Verizon said. Local exchange carriers would be compelled to provide long-distance service in-state over the new network for “free,” the telco said. Already commission staff members have raised their estimate of the monthly consumer surcharge to cover the program from $2 to $3.19, it said.

The commission and its staff should slow down and rethink the toll-free proposal, Commissioner Dana Murphy urged Wednesday. “In the past few months, the Commission has attempted to completely rework funding mechanisms involving payments among telecommunications carriers for the use of landline facilities for intrastate long distance calls. The Commission has embarked on rulemaking to make statewide long-distance telephone service toll-free,” Murphy said in a statement. “In neither instance has the Commission been provided with the type of well-researched, legally sufficient, economically viable options that should be considered before embarking on such radical changes to our telecommunications environment."

The latest staff filing on the toll-free proposal seems “to seek even more change in the regulatory landscape before the weed-pulling is finished on the ground we already are trying to tend,” the commissioner said. “While the industry and public are reeling from all that has been proposed, staff wants to move up by more than one year the date for industry reports on telephone competition. The timing is not right to demand early reports from the state’s phone companies on so-called competitive technologies and the whole panoply of new proposals in Staff’s application. It’s time to put a stop to this willy-nilly approach that has caused so much confusion,” Murphy said, calling for the staff “to reconsider how they are proceeding and for the Commission to take a more thorough, well-reasoned approach."

The commission has set an April 1 date for reporting on the proposal to the Legislature -- a deadline with which the telco found enormous fault. In the same filing, the company hailed the commission for voting Thursday to open a new inquiry on availability of universal service in high-cost areas around the state. If not rushed, the new inquiry “is a more appropriate procedural vehicle to determine the nature and scope of any problems with the existing high cost fund and to adopt targeted solutions as necessary,” wrote attorney Jack Clark of Clark Stakem, which represents Verizon. The telco plans to submit additional comments that “more fully address the serious, unanswered legal and policy issues” it has with the proposal, he said.

The speedy turnaround rejects advice from Attorney General Drew Edmondson, Verizon said. Edmondson’s office “has urged the Commission to slow down, evaluate the legal and jurisdictional considerations first, and build a real record before adopting this sweeping new plan,” the filing said.

Edmondson raised concerns about the validity of a Feb. 22 supplemental economic analysis by the commission staff, Verizon said, quoting earlier remarks by the attorney general: “[F]urther economic analysis is needed and more specificity required regarding the ultimate cost to the consumer should this plan be adopted.” The staff analysis is plagued by “material deficiencies,” said Clark. “As the Attorney General has said, getting the economic analysis right is critically important not just for carriers but for consumers, who bear the ultimate responsibility to pay for the plan in a monthly surcharge on each of their wireline, wireless and VoIP numbers,” he added.

Verizon believes the staff analysis underestimates the costs to consumers "because it fails to include all of the costs of implementing the plan, particularly the substantial sums that will be incurred to augment the network and build new facilities where needed to enable local exchange carriers to transport interexchange calls statewide for `free,'” its filing said. The staff’s analysis “also fails to include, among other things, the large up-front administrative costs necessary to update legacy billing and provisioning systems to enable a numbers-based methodology of contributing to a new fund to pay for the plan."

Verizon said the staff analysis may overestimate by as many as 623,000 the quantity of “assessable numbers,” meaning those on which surcharge revenue is estimated. That miscount may have occurred, the company said, because the staff included in its calculations “intermediate numbers” as defined under FCC numbering rules. “If these numbers are excluded, the estimated surcharge would rise from $3.19 to $3.49 per number -- and would rise further still when all the costs of the plan are included,” the filing said.

The commission’s “unnecessarily expedited” schedule doesn’t allow enough time to correct such “material deficiencies,” the filing said. So the commission should suspend its self-imposed April 1 deadline and allow the legal, public policy, jurisdictional and data issues still outstanding to mature fully and be dealt with, the company said.

The state’s proposal would “ban interexchange carriers from competing in the Oklahoma market and establish a new fund that is more than seven times the size of the current Oklahoma High Cost Fund,” Verizon said. Wireless and VoIP connectivity costs are supposed to be recoverable under the plan, but those costs are left out of the staff analysis as well, the filing said.