Proposal to Restructure Washington State USF Recommends Deep Change

Access reforms described in the paper would have “all carriers, defined broadly, who use the network pay to support the public communications network” according to a contribution mechanism that would be developed and enforced by the commission. The commission would run the USF or delegate that authority. ILECs with less than 2 percent of the access lines in the state would be eligible for funding, with support based on switched access revenue reduction, adjusted for local service, on a one-time calculation. The threshold would be a simplified earnings review using total company regulated revenues and expenses with Part 64 adjustments explained. ILECs could propose transition plans for reaching their benchmarks, and could elect to seek high-cost support.

The elements of high-cost support would be high cost measured on a wire center basis under a cost standard the commission sets. The commission would establish carrier-of-last-resort obligations. Each area would be allowed one supported carrier for high-cost purposes, with other providers there relieved of last-resort duties, except as federal ETC status demands. ILECs that drop last-resort status could opt for competitive status.

On the transition to broadband, the paper proposes that the commission define state broadband goals and identify high-cost broadband areas. The fund would offer support for high-cost areas if needed to reach or maintain state goals. There would be a 10-year transition from the old fund to the new, starting after the access reform goal meets commission-set standards differing from those for the high-cost track in a separate broadband phase.

The high-cost track would apply to areas historically served by ILECs with 2 percent or more of the state’s access lines, the paper said. Low-cost areas would be those within wire centers where the forward-looking cost per line is less than the high-cost threshold. High-cost areas would be those in which the forward-looking cost per line exceeds $45 per month or any national benchmark set in a federal USF or national broadband proceeding.

In the first phase of the new program, support of existing multi-use networks would apply to ILECs with 2 percent or more of the state’s access lines and to CLECs. In funding high-cost areas, the program would set draws from a forward-looking cost model based on sub-wire center level granularity; high-cost sub-wire center level costs only; and an offset draw using revenues from supported services within high-cost areas.

Each carrier’s support would be capped at its existing support levels regardless of actual cost to serve its existing high-cost footprint. Each carrier would have to maintain at least its existing broadband and voice deployment levels throughout its footprint, whether or not the entire high-cost area is funded. The provider receiving support would assume carrier-of-last-resort duties. The state automatically would classify as competitive low-cost areas that have alternative providers with functionally equivalent services, such as a facilities-based provider or a designated CETC.

The state broadband plan -- phase 2 of the proposal -- would be triggered when the state redefines “universal service” to include both voice and broadband or if it mandates broadband speeds. Eligibility would extend to ILECs with 2 percent or more of statewide access lines, CLECs and all other facilities-based providers operating in high-cost track areas.

The state broadband plan would have to include minimum deployment levels and targets that providers would have to meet to keep getting funding. The process would be competitively and technologically neutral, including regulation at retail, where rules would be streamlined. All applicants would use a single forward-looking cost model. A means would be developed for picking a single carrier-of-last-resort provider, whether awarded or designated, for each high-cost area. Arrangements would be reviewed at least every five years. Recipients of awards would have to accept carrier-of-last-resort obligations such as now apply to ILECs for designated areas, and all other applicants or providers would be relieved of such duties.

The paper describes an application process in which providers must submit completed forward-looking cost data consistent with the model that the commission approves and confirm their ability and willingness to assume last-resort responsibilities if awarded a high-cost area. Providers applying for broadband support would have to submit a plan consistent with the state broadband plan, including any construction plans. Non-ILEC award recipients would have to comply with commission rules for competitive companies. Providers would have to agree to implement the local service benchmark set by the commission.

Applicants would have to put certain details in service extension plans. Facilities-based providers’ submissions would have to apply distance-based allowances consistent with ILEC treatment. Wireless or satellite providers would have to submit an auditable cost-based allowance replicating the distance-sensitive allowance. Providers would have to track each customer request involving a service extension, including quote and resolution. Applicants ordered to build facilities to provide required services would have to do so within 12 months of being awarded a high-cost area. Funding would begin once services are provided.

In evaluating and designating last-resort providers, the state would have to balance the need to control fund size with applicants’ long-term sustainability as described in their business plans and their ability to provide quality service to high-cost areas -- in other words, the commission would not be bound to take the lowest bidder, the paper said. If no non-ILEC applicants materialize for a high-cost area, the commission could designate an ILEC an area’s last-resort provider, with USF support set using an updated forward-looking cost model.

In the broadband phase, low-cost areas with alternative providers of functionally equivalent services would be deemed competitive. Unsupported service providers within a wire center would be relieved of last-resort duties, except as federal ETC status requires, and would be treated as competitive if under commission jurisdiction.

Under access reform all participating providers would have to cut their intrastate switched minute of use access charge rates to at least their composite interstate switch minute of use access rate, or to a lower level set by the commission, for a maximum of four years. CLEC rates would be capped at the ILEC rate for the same serving area. The commission would set a single “benchmark” local service rate to which companies eligible to draw from the state universal service fund would have to hew, the paper said. AT&T, Kalama and Tenino Telephone, Asotin, Lewis River, McDaniel Telephone, Century Link and commission staff have made presentations at workshops, the commission said.