Idaho Public Utilities Commission
Case No. GNR-T-09-05, Order No. 30951
December 11, 2009
Contact: Gene Fadness (208) 334-0339, 890-2712
Telephone companies could lose funding if rates not updated
Rural telephone companies need to adjust their rates closer to the statewide average if they are to continue to receive funding designed to equalize rates between customers in urban areas and those in rural areas.
Eight rural telephone companies serving customers in Idaho have been eligible to receive money from the state Universal Service Fund (USF). The fund, established by the federal Telecommunications Act of 1988, recognizes the higher costs to serve in rural areas where communications equipment must stretch over longer areas to serve fewer customers. The USF was designed to make phone service affordable and available to all at comparable rates by disbursing monies to rural telephone companies from the fund. In Idaho, the state USF is funded by a customer charge of 10 cents per month on each residential line and 17 cents per month on each business line as well as a third of a cent per long-distance minute.
For rural companies to qualify for USF, the company’s average residential and business local exchange rates must be in excess of 125 percent of the weighted statewide average rates for the same services. Since Idaho gave telephone companies the option to remove themselves from price regulation by the PUC in 2005, the weighted average rates for customers of the two largest telephone service providers – Qwest and Verizon – have increased, bringing the 2009 statewide weighted average up to $20.61 per month for residential customers and $32.43 for business service.
But rates for rural companies have not increased comparably, according to a report filed by the administrator of the state USF fund. The residential rate for the eight companies that receive USF is $24.10 and should be raised to at least $25.76. “The lower rate has been in place for 10 years or more for most of these companies and they now are required to increase the rate only by $1.67 per month to continue receiving USF funds,” the commission said.
“The USF was not intended to support rural company rates at historic levels in perpetuity while all other telephone customer rates increase over time,” the commission said. The Idaho Legislature determined that rates for telephone companies using USF be at least 125 percent of the statewide average, the commission said. “Absent a rapid, dramatic increase in the statewide average rates, we believe the Legislature intended that rate relationship be maintained.”
The Idaho Telecom Alliance, representing rural telephone companies, filed comments disputing the formula for determining the statewide weighted average. The ITA said that the statewide average does take into account the promotional discounts, credits or bundled service discounts offered by Qwest and Verizon, the two companies whose customers comprise 84 percent of the total residential lines in Idaho.
ITA also said the commission has the ability to use an historic statewide average established in 2005, the year the state offered companies the option to be price deregulated. But the commission said the option to use 2005 numbers was established due to a concern that deregulation of the major carriers’ rates could result in dramatic increases, and thus higher statewide average rates. The commission noted that the USF administrator had reported on the current statewide average rates each year since and the commission has always used those annual updates rather than the 2005 average.
The eight companies impacted and their annual USF disbursements include: ATC Communications ($63,850), Cambridge Telephone ($29,218), Direct Communications Rockland ($19,446), Fremont Telecom ($66,636), Inland Telephone ($15,557), Midvale Telephone ($28,875), Rural Telephone ($13,907) and Silver Star Telecom ($7,424).
A full text of the commission’s order, along with other documents related to this case, is available on the commission’s Web site at www.puc.idaho.gov. Click on “File Room” and then on “Telecommunications Cases” and scroll down to Case No. GNR-T-09-05.
Interested parties may petition the commission for reconsideration by no later than Dec. 28. Petitions for reconsideration must set forth specifically why the petitioner contends that the order is unreasonable, unlawful or erroneous. Petitions should include a statement of the nature and quantity of evidence the petitioner will offer if reconsideration is granted.
Petitions can be delivered to the commission at 472 W. Washington St. in Boise, mailed to P.O. Box 83720, Boise, ID, 83720-0074, or faxed to 208-334-3762.
The premise for Universal Service Fund is (IC 62-610A) is that "all consumers in this state, without regard to their location, should have comparable accessibility to basic telecommunications services at just and reasonable rates." Since the 1930s, Congress has mandated that all telephone companies providing interstate service must contribute to the USF. The USF helps to make phone service affordable and available to all Americans, including those living in areas where the cost of providing telephone service is high, schools, libraries and rural health care providers.