In Utah, First State Using Connections for USF Contributions, PSC Praises Early Numbers

Utah Public Service Commission staff is pleased with early results of changing state USF to a connections-based contribution from the earlier revenue-based model, said PSC Telecom Manager Bill Duncan in an interview this week. The change to 36 cents per line took effect Jan. 1; PSC telecom staff released its first status report taking connections into account on April 19. CTIA opposes the change and its lawsuit created legal uncertainty for Utah's pioneering shift away from revenue-based contribution, the method used for federal and other state USFs (see 1804120046). Separately, industry supported an Idaho Public Utilities Commission staff finding that revamping state USF requires the state legislature to act.

Utah USF showed a balance of about $6.57 million at the end of March 2018, up about $28,400 from the previous month, the PSC status report said. March contributions totaled about $1.03 million, with USF distributions about $894,000, it said. There were 2.74 million connections reported by 55 providers remitting USF based on connections, while providers claimed 1,094 connections as exempt because they said they paid to another state's USF. "The fund has ranged between $3.3 and $6.7 million for the last 12 months," staff said. Contributions lag about two months from when service was provided, so this month's report on March contribution was the first to reflect the methodology switch, Duncan said.

Reported numbers were about what the PSC expected, Duncan said. The PSC knew about how many connections there were based on the state relay service fund, which already used a connections method, he said. The USF revenue was slightly under, but that may have been because companies are allowed to contribute once every six months if they collected less than $1,000, he said.

Under the old revenue-based model, the USF balance was increasing in the months after the PSC increased its surcharge to 1.65 percent from 1 percent in in October 2016, Duncan said. It was increasing at about the same monthly rate as seen in this month's report, he said. However, connections-based contribution "will be a more stable revenue source" long-term, he said. "The revenues were just falling drastically and it would have required us to just be continually updating the surcharge rate." It's not tough to increase the rate, "but we wondered, well, where's the floor on this?" Money going out of state USF will rise if the PSC approves applications by two wireless eligible telecom carriers seeking Lifeline support, Duncan said. Hearings on those are in November and December, he said. An April 2017 report by the Utah Division of Public Utilities found the 1.65 percent rate likely would be adequate through the end of that year, but "beyond 2017, this mechanism would require constant monitoring and adjustment."

Switching methodology went more smoothly than expected, with some carriers switching "fairly early," Duncan said. Three providers didn't yet switch to the connections method, but it wasn't a significant amount of revenue, he said. The commission will be following up with the carriers to bring them into compliance, Duncan said. "We have to just continually educate some of our providers." Duncan hasn't heard any complaints from consumers about the change to the USF fee on their phone bill. The CTIA suit adds legal uncertainty, he said.

Wireless carriers see the change to contributions as a "regressive tax" in which lower-revenue users, which likely correlates with low-income households, pay more while high-revenue users, which may correlate with businesses or more affluent households, pay less, said CTIA Director-State Regulatory Benjamin Aron in an interview. Lifeline customers used to have a zero-rate plan but now will have to pay 36-cents monthly, he said. It's discriminatory against prepaid providers, which unlike postpaid providers can't pass the surcharge through to end users, he said.

The law requires state USFs to be consistent with revenue-based federal USF, Aron said. Rather than act on their own, states should "work through the process" by pushing for USF changes by the FCC Federal-State Joint Board on Universal Service, he said. CTIA supports the revenue-based surcharge model or states following Washington state's example and using general tax revenues to pay for services instead of state USF, Aron said.

Comcast is "collecting and remitting the Utah state USF fees consistent with the law and the rules," a spokeswoman said. AT&T directed us to CTIA, while the Utah Rural Telecom Association didn't comment.

Idaho

Only the state legislature may change Idaho USF, said AT&T, CTIA and Idaho cable companies in reply comments Wednesday in docket GNR-T-17-05 at the PUC. They responded to a commission staff finding that the agency lacks authority to change state USF without statutory changes (see 1804050052).

Lawmakers should review state USF, but don't fund internet access with it, replied AT&T. Instead, the legislature should establish a separate, stand-alone fund that uses "a competitive process to award support to no more than a single provider to make available internet access per unserved area," funded by the state general fund, the carrier said.

Idaho's "best option" to fund state USF is general tax revenue, "given the general benefit of such programs," CTIA replied: It's "more economically efficient because the mechanism to extend the availability of telecommunications services will not suppress demand for those same services."

Idaho USF is fine without legislative changes, though state lawmakers would be needed to change the fund, said the Idaho Cable Broadband Association. "The IUSF disburses approximately $1.7 million to eight (8) qualifying rural high-cost telephone companies," it said. "Neither Staff nor any participant in this case have presented evidence that this amount is inadequate for these carriers to maintain facilities necessary to deliver voice communications in high-cost areas." It's "premature" to plan to include broadband as a supported service, the association said.