Okla. to 'Try' Connections-Based USF

Oklahoma adopted a connections-based contribution method for state USF on an interim basis Thursday. The Oklahoma Corporation Commission voted 2-0, with a concerned third commissioner abstaining, for a proposed order to replace the 6.28% revenue-based monthly fee with a $1.14 per connection surcharge. In Texas, state senators are pushing Gov. Greg Abbott (R) and the Public Utility Commission to act before rates spike for rural customers. Alaska, California and Oregon are mulling changes.

Oklahoma USF will shift to the connections method in November while stakeholder talks about a legislative fix continue. The draft order would ask for proposed statutory language to be filed within 90 days, the case to be reopened within 180 days, and for commissioners to meet Jan. 11 “for further proceedings and action as the Commission deems appropriate.” The order said legislation is needed and directs the fund administrator to work with stakeholders to propose statutory language that would include a cap on the monthly connections-based factor. The revenue-based rate could have doubled without the method change (see 2106150051).

“I am willing to give a try to the connection-based methodology,” said Chairman Dana Murphy at the OCC meeting livestreamed from Oklahoma City. “I won't say I'm all in the boat ... but I'm in the boat.” Commissioner Todd Hiett “struggled to get in the boat,” but sees the connections way as sustainable, equitable and transparent. He said a legislative fix is needed long term.

“AT&T will hold its nose and work with all the parties” on the long-term resolution, said John Gray, senior legal counsel: the company is “willing to support” the interim order. Hiett asked, “AT&T is just going to swim alongside the boat and hope for the best?” Gray said yes.

Commissioner Bob Anthony refused to vote because the change means a $27 million increase to the fund size and he has transparency concerns, Anthony told us. “The federal government is on the verge of having multiple billion-dollar programs to support broadband,” said Anthony. “Why should I have a 73% increase to the people of Oklahoma when the federal government is just about to get an enormous increase in support for the programs, anyway?” Most of the OSF subsidy goes to owners of small phone companies, but detailed information about those companies and how they operate isn’t public, Anthony said. “I do not support the secrecy of elements of the OUSF participants.”

Texas

A fresh Texas bill to revamp USF could be tough to pass during a special session that got national headlines when Democrats fled the state in protest of a voting rights bill. SB-73 sponsor Sen. Charles Perry (R) and 19 other Texas state senators, including 12 Republicans and eight Democrats, urged Abbott to direct the PUC to adjust the surcharge. The governor vetoed Perry’s same USF bill in regular session (see 2106210048).

“The PUC's lack of action to date has caused an approximate $70 million shortfall to the high-cost providers, putting their continued existence in question,” said the senators’ July 28 letter to Abbott, posted Wednesday. “This shortfall will increase by an estimated $10 million each month," and rural customers' rates could be hiked by $30 to $175 per month. Abbott didn’t comment Thursday. The PUC got the letter but can’t talk about matters subject to pending litigation, a spokesperson said.

“We’re working on multiple legs,” Perry told us Thursday. Abbott would have to name SB-73 as a priority bill for it to be considered in the next special session that likely starts in days, Perry said. Abbott didn't include USF on a Thursday agenda for the special session starting Saturday. Perry, industry and affected rural groups are engaging the governor’s office about the issue, the senator said. Abbott hasn’t responded to the July 28 letter, and Perry doesn’t expect one, the senator said. He attributed the governor’s veto to “bad advice” that the USF change was a tax increase. The Republican couldn’t say if Democratic legislators would allow a quorum.

Perry got commitments from the three newest PUC commissioners to tackle USF, he said: The agency doesn’t need a new law to make USF changes. Perry threatened to hold up confirmations for three commissioner seats open next month, including for one member who needs reconfirmation and two spots added under a law expanding membership (see 2106010052). “I’m playing with all the political cards I’ve got,” the lawmaker said.

Perry supports expanding the contribution base to include VoIP providers in combination with an increase to the revenue-based surcharge. Connections-based contribution was considered, but the issue impeded finding consensus, he said. To “keep this ball moving,” Perry wants to defer that issue until there’s time to study it in other states, he said.

SB-73 “will not progress,” said Texas Telephone Association Executive Director Mark Seale, who supports the bill. “There is no quorum for the House to take up any bill.” The governor didn’t put it on call for the special session and isn’t expected to since he vetoed the last bill, said Texas Statewide Telephone Cooperative CEO Weldon Gray.

Other States

The Oregon PUC’s state USF update probably will “extend well into 2022,” said Nicola Peterson, senior telecom analyst, at a virtual workshop Wednesday. She said parties should propose a timeline for docket UM-2040 including a new date -- previously Aug. 16 -- for comments on staff’s July 27 proposal and for when groups including state telecom and cable associations can provide a status update on their own efforts to reach agreement on a proposal (see 2107130041). Groups earlier planned to talk about the possible pact at Wednesday’s workshop, but “a few weeks ago, we were informed that they hadn’t reached an agreement [and] wanted to see staff’s proposal first,” Peterson said.

Industry officials disagreed on the staff proposal at the workshop, including on a recommendation to use a single model for all companies to calculate Oregon USF distributions. Staff said treating all companies and census blocks the same would be equitable and nondiscriminatory, and suggested using the CostQuest model used by the FCC. Richard Finnigan, an attorney for rural telecom companies, objected that no model has ever accurately predicted costs for every company. CTIA Assistant Vice President-State Regulatory Affairs Benjamin Aron and Davis Wright’s Mark Trinchero, representing the Oregon Cable Telecommunications Association, countered that companies that disagree with distribution amounts could appeal under a single-model approach.

The Regulatory Commission of Alaska will weigh adding a reply round to its state USF review, said an agenda for the Aug. 11 meeting released Wednesday. Comments are due Sept. 1 on how to change the fund, which sunsets June 30, 2023. Alaska USF “continues to experience significant problems,” including declining contributions, said the RCA’s June 29 order opening docket R-21-001: The surcharge would have to be "set at nearly 30% to fully fund current outlays and retire current shortfalls.”

Some industry groups urged the California PUC to slow down on proposed changes including to adopt a connections-based mechanism, in comments last week in docket R.21-03-002. Parties “should have an opportunity to review and comment on a Staff Report detailing the methodology of the new mechanism and projecting the impact of the mechanism on consumers,” said Charter Communications. The Utility Reform Network and Center for Accessible Technology disagreed. “Despite the expected requests by the providers for more time and clarifications," the two groups said, they "urge the Commission to move forward quickly to gather data that will support its deliberations about changes to the surcharge mechanism.”