States Seek to Update USF, COLR Rules for Internet Age

Most states have intrastate revenue-based USF contribution mechanisms but some shifted to a connections-based system in recent years. They include Maine, Nebraska, New Mexico and Utah. “Connections-based methodology has been used successfully for funding for Telephone Relay Service in nearly all the states for some time, so the change to connections is not as big a leap as it would seem,” emailed National Regulatory Research Institute Telecom Principal Sherry Lichtenberg.

A final round of comments at the Oklahoma commission is due Friday, after an administrative law judge extended the deadline from Monday. Commissioners might decide the issue as soon as next month, Crowe & Dunlevy telecom attorney Ron Comingdeer told us Tuesday. Rural LECs he represents will propose Friday that the ALJ recommend shifting to the connections method, he said. Comingdeer expects someone will object to whatever the ALJ recommends and request oral argument before the commissioners.

Citing a decline in intrastate revenue, Oklahoma USF Administrator Brandy Wreath recommended a connections-based mechanism, including a 91 cents per line surcharge. If the commission won’t change the method, the revenue-based contribution factor must increase to 10.34% from 6.28% today, he testified June 29 in docket OSF 201900316. Windstream and RLECs support that plan, but CTIA disagrees the approach will be more equitable across telecom technologies. It would mean big increases to wireless phone bills, disproportionately affecting the poorest consumers during a pandemic when many are out of work, CTIA testified June 5.

Texas might eye a connections-based contribution in 2021. Utility commissioners “believe that a proper and lasting solution requires legislative input,” a PUC spokesperson emailed. To maintain the state fund’s solvency without doubling USF fees, PUC Chairman DeAnn Walker wrote legislators July 30 about options including shifting to a connections method and requiring VoIP customers to pay in. “I believe that there are some fundamental policy issues regarding the fund and its use that should be addressed in the 2021 legislative session,” she said.

The Oregon PUC plans to weigh state USF changes this and next year, but it’s not planning to change the contribution method because existing Oregon law doesn’t allow a connection-based surcharge, said a spokesperson. The agency opened a rulemaking (AR 640) last month to implement a law requiring VoIP and wireless providers pay into the state fund (see 2007280043). “Staff is in the process of planning the steps moving forward, which will include workshops and opportunities for comment,” the spokesperson emailed. Those temporary rules must be decided by Jan. 1, with draft rules expected in the next month including what fees would be assessed, she said. The PUC plans to consider permanent rules next year in another USF docket (UM 2040), with a workshop scheduled Aug. 25.

After moving to connections in 2018 (see 1808220040), the New Mexico Public Regulation Commission is weighing changes to state USF rules for the broadband program, eligible telecommunications carrier (ETC) status qualifications, need-based support, fund usage and reporting, said a June 3 NPRM in docket 19-00286-UT. The PRC will consider recent FCC rules and other ways to modernize the state fund, it said. Reply comments are due Aug. 17, with a hearing Sept. 2 at 2 p.m. MDT.

Comments are due Aug. 31 on the next phase of the Nebraska Public Service Commission’s USF contribution overhaul -- extending its connections-based mechanism to business and government services (docket NUSF-119). The PSC has reported no problems since residential services switched to that method last year (see 2007280043).

COLR Relief

Oregon’s commission has a Thursday workshop on its investigation into the continued relevance of carrier of last resort obligations. COLR is “inextricably linked” with Oregon USF, the Oregon Cable Telecommunications Association told the PUC last week. An ETC must provide service to all requesting customers in its areas, but COLR relief would remove that commitment for ILECs, OCTA said. “In any geographic area for which an ILEC were to receive COLR relief it would necessarily be required to forego any further OUSF support."

The COLR requirement “is no longer tenable for large telecommunications providers that do not receive sufficient subsidies on a per line basis,” CenturyLink and Ziply Fiber, formerly Frontier Communication, said jointly. “It is patently unfair to force a provider that serves a shrinking minority of the market to bear the sole burden of being the COLR.” Big incumbents “used to rely on revenues generated from above cost rates in densely populated areas, like cities and suburbs, to subsidize high cost areas,” CenturyLink and Ziply said. “Those revenue sources, however, have dried up as mobile and cable service providers have cherry-picked customers in lower cost areas, reducing the large ILECs market share in those communities to the double and in some cases single digits.”

“Any relinquishment of COLR based on the presence of competitive providers would require a change to existing statutes because they require that the Commission allocate territory to a provider, thereby creating a COLR in areas where an ILEC serves,” advised CenturyLink and Ziply. Provide USF support “based on the number of high cost locations for which the company has an obligation to serve,” so an incumbent “would no longer be eligible to receive state USF for locations for which it relinquishes the COLR,” they said.

COLR obligations are dated, but don’t do away with them, said the League of Oregon Cities. It urged the PUC to update the current telephone-focused system to apply to broadband and treat the internet technology as an essential utility. Regulation and oversight is needed, “whether it is through COLR or not, to assure consumer protections are in place to promote and maintain access, competition, reliability, and quality service,” the league said.