Alaska Commission Warned Not to Kill State USF

Revamp, don’t repeal Alaska USF, urged the telecom industry and Alaska’s attorney general in comments this week in docket R-18-001 at the Regulatory Commission of Alaska. The RCA last month proposed phasing out AUSF by July 31, 2019 (see 1801160014). The Alaska Telephone Association (ATA), Alaska Communications (AC) and the AG office rejected that and pitched alternatives. AUSF surcharges -- 19 percent this year -- “will almost certainly continue to rise,” a lawmaker said. The federal USF contribution factor for Q1 is 19.5 percent.

ATA “strongly opposes” repeal but “recognizes that the current AUSF program is unsustainable and that substantial reform is necessary,” the association commented. RCA can stabilize the fund without totally repealing it, said AC. AT&T, which pays into AUSF but doesn’t receive the state funding, supports "a broad and holistic review of the AUSF, but is concerned that a sudden elimination of the entire fund is not sound public policy and may cause a major disruption in service to consumers.” Proposed repeal is "ill-advised and incomplete and … illegal" because it would provide no way for carriers to recover lost revenue from another source,” GCI said. AUSF “should be reformed, not repealed,” AG Jahna Lindemuth (I) commented.

“Flash cuts in support could lead to service reductions or interruptions and steep local rate increases,” warned AC, saying it would reduce Alaska carrier revenue by more than $27 million. That would mean customers paying an additional 15.25 percent for intrastate services, it said. “Carriers would have little choice but to disproportionately shift the recovery of the lost support to those customers residing in areas with no competitive alternative, which also are generally those that cost the most to serve.” Maintaining AUSF remains important “to fill the gap created by the FCC’s Connect America Fund (CAF) II order for Alaska, where most of AC’s Bush communities were excluded from receiving any federal USF support,” it said.

ATA said its proposed USF overhaul would increase sustainability and transparency. Developed with the Rural Coalition, the RCA would cap the USF surcharge at 10 percent and reduce all AUSF support amounts on a pro rata basis to comply with the cap, effective Jan. 1. It's easier to cap the surcharge than cap the total fund at an arbitrary level, ATA said. “This reform significantly reduces the surcharge and avoids any unexpected future increases.” An “essential network support” (ENS) mechanism would replace carrier common line (CCL) and carrier of last resort (COLR) funds, ATA said. The new mechanism would equal 2016 CCL support and COLR support for remote areas, but not include COLR support for non-remote areas. Carriers would file an annual report explaining how they used the ENS support. Effective Jan. 1, the ATA plan would end Lifeline and public interest payphone support and phase out dial equipment minute weighting support over three years. It would require the RCA in 2029 to decide if AUSF should be retained, amended or repealed.

GCI and AC supported the ATA plan. AC also floated an alternative under which RCA would set an overall fund budget, then distribute money using a cost model -- based on a federal CostQuest model -- that forecasts “the cost a reasonably efficient provider would incur to provide service in each area.” AC proposed connections-based contributions to the fund by wireline and wireless providers, with revenue-based contributions used in cases where it’s technically impossible to measure connections. The Rural Coalition can't support using the CostQuest model “without significant review of the model details and potential impacts.”

The ATA proposal is better than total repeal, but not the best approach, said the AG. Lindemuth proposed a 15 percent surcharge cap while the RCA investigates if carriers are getting a reasonable level of support. Expand AUSF to support broadband because Section 706 of the Telecom Act lets it and other states including Nebraska and New York support deployment, she said. For long-term sustainability, Alaska must expand the contribution base to include broadband providers, she said. But it’s not allowed, so Alaska and other states should petition the FCC to reverse the prohibition, she said.

“Telecommunications is no longer a world where telephone services deliver data services, but one where data networks deliver voice services,” said state Rep. David Guttenberg (D). “It is imperative that we update state support mechanisms to reflect this.”