Alaska USF Revamp Heats Up as Revenue Melts Across States
With cracks in state USF availability widening fast, the Regulatory Commission of Alaska is bearing down on a short-term fix and long-term overhaul. Alaska commissioners discussed fixing USF at two public meetings in June. Seeking to stem the bleeding while the RCA considers broader changes, commissioners voted 4-1 at Wednesday’s meeting to seek comment on changing rules about what to do in a USF shortage. Commissioners said they will take further action in late July. State USF revenue is down in many states and Alaska is one of a few eyeing a shift to connections-based contribution as a possible long-term solution.
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Alaska is different from most states because its geography means fewer contributors and higher costs to provide telecom service, said Sherry Lichtenberg, principal for telecom research and policy at the National Regulatory Research Institute. Alaska may face a bigger threat to state USF, but collections are down in many states, Lichtenberg said. “That's why states like New Mexico and Nebraska are examining a connections-based model and why Indiana is going to study how USF funds are collected and disbursed,” she said. “In the long term, the real issue for both the FCC and the states is how to ‘fix’ contribution so that the dwindling base of wireline customers no longer has to continue to bear the burden of almost the entire program.”
Alaska’s USF surcharge spiked to 14.2 percent this year, said the Alaska Universal Service Administrative Co. The AUSF balance fell by $600,000 over one year to about $6,000 at the end of 2016, said AUSAC’s 2016 report. If downward trends continue, AUSF could go further into the hole by about $200,000 each quarter, assuming revenue holds steady and the contribution base doesn't decline further, said Common Carrier specialist Steven Kramer at the RCA meeting Wednesday. “If the deficit continues at this pace, soon the shortage will consume all of the [carrier common line (CCL)] support and then [carrier of last resort (COLR)] support and finally Lifeline support. It will eventually get to the point where there will be no support paid for the current month and the disbursements will only pay the eligible support that was carried over from prior months.”
AUSF gross revenue was about $218 million in 2016, down from $265 million in 2015 and $355 million in 2011, said AUSAC reports. Kramer said revenue in Q1 2017 was less than $50 million, and if revenue holds steady for the next three quarters, there will be less than $200 million in revenue for the full year. But staff expects revenue to drop over the next few quarters, making the full-year amount lower than that, Kramer said. “Staff believes [it’s] critical to do something in the short term to stop the bleeding until a thorough examination of the fund and its components is undertaken.”
For the short-term fix, Kramer suggested two options -- one developed by industry and a staff-revised version of it -- that would stop the USF administrator from using a current month’s funds to pay eligible USF recipients not paid in prior months. And they would stop the state USF administrator from disbursing AUSF funds greater than the amount of surcharge revenue collected for the month. The industry option scraps a priority list of who gets AUSF funding during a shortage and instead would require the administrator to distribute funds pro-rata based on recipients' aggregated claim for support. Acknowledging urgency, commissioners voted to collect more feedback on both options with intention to choose a direction at the end of July. The RCA will likely release the notice seeking comment later this week after the July 4 holiday, Kramer said Friday.
A broader AUSF overhaul “is not going to be easy,” warned outgoing RCA Chairman Robert Pickett. Alaska must decide,“Is the purpose of the AUSF fund to prop up … the existing status quo the best we can, including the entities, or is it more to focus on functions and purposes and gaps in the system?” That’s a controversial debate, he said. “Should there be an AUSF?” Pickett asked later. “Is there some other direction? Is it a hybrid of continuing some of these programs, but targeting some of it for [capital expense] cap-ex gaps in the telecommunications system on some grant award basis…? These are all live issues.”
“Over the past year it’s become evident that the Alaska Universal Service Fund is suffering from changes affecting our industry,” said Alaska Telephone Association Executive Director Christine O’Connor at the RCA’s June 14 meeting. “The contribution base is contracting due to landline abandonment, wireless rate structure changes and wireless rate contraction.” ATA members expected increases to AUSF surcharges, but the pace at which they spiked caught ATA members “flatfooted,” she said. Industry wants a 10 percent cap on the surcharge, she said.
Industry didn't suggest moving away from revenue-based contributions, but RCA staff studied connections-based contribution, Kramer said at the June 14 meeting. Utah recently made that change and Nebraska is considering it, he said.
Utah is preparing to shift to a connections-based mechanism Aug. 1, the Utah Public Service Commission said in a June 9 memo. It will charge 36 cents monthly per connection rather than 1.65 percent of intrastate revenue, and VoIP providers will be included in the contribution base, the PSC said. Comments are due July 3 in docket 17-R360-01.