Ariz. Commissioners Won't Raise State USF Fees

Arizona commissioners questioned state USF accountability as they unanimously declined Tuesday to raise contribution rates. During a livestreamed meeting, commissioners voted 5-0 against staff’s proposed decision to raise state USF charges for 2024 (docket RT-00000H-97-0137). In addition, members unanimously granted a Verizon application to discontinue MCIMetro basic local exchange services to residential and small business customers throughout its service territory on Dec. 31 (docket T-03574A-23-0243).

Arizona commissioners also refused to raise USF fees last year. This year's staff proposal recommended an increase due to that 2022 decision as well as fewer reported access lines and interconnecting trunk lines and a decrease in intrastate revenue (see 2311200062). For basic local exchange and wireless service providers that interconnect with the public switched network, staff recommended increasing the monthly surcharge to 3 cents per access line, up from 2 cents and to 31 cents per interconnecting trunk line, up from 20 cents. For intrastate toll service providers, Arizona commission staff recommended increasing the monthly surcharge to 57.4% of revenue, up from 34.1%. Frontier Communications is the only company receiving Arizona USF high-cost support.

Commissioner Lea Marquez Peterson (R) voted no with concerns about “how Frontier continues to receive payouts from this fund without … accountability,” she said. “I’d like to see change in how [Arizona USF] is structured.” The lack of accountability has existed for years, the commissioner said: She could not support the proposed increase because “too many parameters are not clear and too much information is missing and I still think we lack the accountability.” Frontier didn’t comment Tuesday.

The commission has had “multiple conversations” about possibly restructuring the state USF, Marquez Peterson noted. The commission in March decided to wait to change or repeal state USF with a Frontier rate case on the horizon (see 2303160069). Under a proposed schedule for a Frontier rate case opened in August, the Arizona commission will receive testimony next summer, hold a fall hearing and propose an order by year-end 2024, said Utilities Division co-Director Ranelle Paladino in response to a question by Marquez Peterson.

Also voting against the surcharge increase, Commissioner Kevin Thompson (R) agreed “real oversight” is lacking. Also, Thompson questioned “whether a carrier of last resort is still even needed in this area.” The commissioner decided not to offer a proposed amendment that would have modified the staff proposal to say, "Contrary to Staff's recommendations, the Commission believes the current surcharges are adequate for the next year.”

Commissioner Anna Tovar (D) questioned Frontier's service quality given past “complaints, compliance and service issues.” Service has improved, said Paladino. The company installed battery backup at some locations, resulting in fewer outages, she said. Staff hasn’t seen negative impacts from the company’s bankruptcy and reorganization, she added.

All five commissioners backed Verizon’s discontinuance application. “MCIMetro states it is discontinuing these services because of a significant decrease in demand,” noted staff’s proposed decision: The company had 77 residential and 10 business customers left when it filed its application. "These customers have access to comparable, alternative services available from other affiliated companies or may obtain similar services from other Arizona local exchange carriers," the staff proposal said.