Idaho Public Utilities Commission

Case No. TFW-T-09-01, Order No. 32550

May 25, 2012

Contact: Gene Fadness (208) 334-0339, 890-2712

Settlement between TracFone, commission approved

A company that provides wireless service through pre-paid calling cards has said it will start paying into a fund that helps low-income customers in exchange for state regulators declaring it eligible to receive funds from federal and state low-income assistance programs.

As part of the settlement, TracFone Wireless Inc. also said it will drop its current appeal before the Idaho Supreme Court and will let a district court decide if it has to pay into the state E-911 fund.

The settlement is intended to resolve a longstanding dispute between TracFone, the Idaho Public Utilities Commission and other Idaho telecommunications providers.

In March 2010, TracFone filed an application seeking commission designation as an Eligible Telecommunications Carrier in Idaho. ETC status would qualify TracFone to receive money from federal and state low-income assistance programs. The commission denied the company’s request due primarily to TracFone’s belief that its customers are not required to pay an assessment to the ldaho Telephone Service Assistance Fund (ITSAP) or its federal counterpart, Lifeline.

ITSAP and Lifeline allow telephone customers who meet state Health and Welfare Department guidelines to receive discounts that help to ensure they have access to local dial-tone service for medical and other emergencies. The program is funded by a monthly charge of 6 cents per line for each Idaho residential, business and wireless customer. The revenue from that charge and the federal Lifeline funds provide for a discount that is currently $13.50 per month for qualifying participants.

TracFone claimed it could not assess its customers the surcharge because it offers its service through pre-paid airtime cards available at third-party outlets (e.g. Wal-Mart, Target, Best Buy, etc.) rather than billing its customers, which would be the mechanism for collecting the surcharge. TracFone also said it would not contribute to Idaho’s Emergency-911 fund for primarily the same reasons. Not doing so is a violation of the Idaho Emergency Communications Act, the commission ruled.

TracFone already offers pre-paid wireless service in Idaho, but sought ETC designation so it could provide service to low-income customers under the name SafeLink Wireless. Under the program, qualifying customers would receive a free handset and up to 250 minutes of free time. For use beyond 250 minutes, customers would purchase a pre-paid card at 10 cents per minute. In other states, SafeLink offers service to low-income, low-volume users and transient users who either choose not to enter into long-term service commitments or are unable to meet the credit requirements necessary to obtain service from other carriers.

After the commission denied TracFone’s petition for reconsideration, TracFone appealed to the state Supreme Court. Since the appeal, TracFone, commission staff, The Idaho Telecom Alliance (a 14-member association of commercial telephone companies and cooperatives) and CTC Telecom (Snake River PCS) engaged in settlement discussions.

Under the settlement, TracFone agrees to contribute to the Lifeline fund retroactive to January 1, 2011. TracFone also agrees to file a Declaratory Judgment Action in state district court requesting a determination as to whether it must pay into the E-911 fund. If the court determines TracFone is subject of E-911 fees, it will reimburse the Idaho Emergency Communications Commission past due funds dating from Jan. 1, 2011. If TracFone appeals an adverse district court decision, the PUC may revoke TracFone’s ETC status.

The Idaho Telecom Alliance and CTC Telecom opposed the settlement. Granting the settlement allows TracFone a “waiver” of 11 of the 12 years TracFone has conducted in business in Idaho, shortchanging counties more than $4 million in E-911 fees and giving TracFone a competitive pricing edge, they argued.

The commission disagreed with the telephone companies’ assertion that past fees are being waived, noting that TracFone has not conceded it owes the fees. The commission “is in no way ceding its authority or waiving any past due amounts. Rather, the commission is approving a reasonable settlement of a disputed issue pending before the Idaho Supreme Court.” Further, the companies’ argument that TracFone has needlessly deprived ITSAP of needed funds ignores the fact that TracFone is not currently drawing from the ITSAP fund, the commission said.

In earlier orders, the commission said the just because TracFone does not bill its customers does not justify violating Idaho statutes requiring all telecommunications providers to contribute to E-911 and Lifeline. “TracFone has elected to pursue a business model that makes the collection of the fees more challenging than a more typical telecommunications provider .... However, TracFone’s selection of a business model does not render the relevant statutes inapplicable.” The commission said TracFone’s testimony indicated it has the ability to track the usage rate of its customers and calculate the amount that would be due in low-income and E-911 surcharges.

TracFone argued denial of its application would be a disservice to low-income households in Idaho.