2391 Investigation regarding intrastate access charges and IntraLATA toll rates of rural carriers and The Pennsylvania Universal Service Fund; doc. no. I-00040105
Investigation Regarding Intrastate Access Charges and IntraLATA Toll Rates of Rural Carriers and The Pennsylvania Universal Service Fund; Doc. No. I-00040105 [36 Pa.B. 7391]
[Saturday, December 2, 2006]Public Meeting held
November 9, 2006Commissioners Present: Wendell F. Holland, Chairperson; James H. Cawley, Vice Chairperson; Kim Pizzingrilli; Terrance J. Fitzpatrick
2006 Annual Price Stability Index/Service Price Index Filing of Denver & Ephrata Telephone and Telegraph Company; Doc. No. P-00981430F1000, R-00061377 2006 Annual Price Stability Index/Service Price Index Filing of Buffalo Valley Telephone Company;
Doc. No. P-00981428F1000, R-000613752006 Annual Price Stability Index/Service Price Index Filing of Conestoga Telephone & Telegraph Company;
Doc. No. P-00981429F1000, R-00061376Order By the Commission:
Presently before this Commission for consideration is the Joint Motion of The Rural Telephone Company Coalition1 (RTCC), Office of Consumer Advocate (OCA), Office of Trial Staff (OTS), and The United Telephone Company of Pennsylvania d/b/a Embarq Pennsylvania (''Embarq Pennsylvania'') (f/d/b/a Sprint), (collectively ''Joint Movants''). The Joint Motion concerns the RTCC/OCA/OTS/Embarq Pennsylvania's request that the Commission grant a further stay of the above-captioned investigation at I-00040105. Verizon Pennsylvania, Inc., Verizon North, Inc. and MCImetro Access Transmission Services, LLC d/b/a Verizon Access Transmission Services (collectively ''Verizon''), Qwest Communications, and Sprint Nextel Corporation filed status reports and answers to the Joint Motion requesting the Commission resume the investigation. The Joint Movants filed a status report in support of continuing the stay. T-Mobile Northeast LLC, f/k/a Omnipoint Holdings, Inc. d/b/a T-Mobile, Voicestream Pittsburgh LP d/b/a T-Mobile, and Cellco Partnership d/b/a Verizon Wireless (collectively, the ''Wireless Carriers'') submitted a joint status report stating that because the FCC's Unified Intercarrier Compensation proceeding at CC Docket No. 01-92, and pending federal legislation may substantially alter the law governing intrastate universal service programs, these continuing federal administrative and legislative activities present a ''moving target'' of uncertain result with respect to the parameters and outcomes of any further investigation undertaken in this docket at this time. Therefore, the Wireless Carriers believe there is no value in continuing an active investigation on the questions posed by the Commission in its December 16, 2004 order initiating the investigation. The Commission's and interested parties' resources would be better spent elsewhere to address intrastate intercarrier compensation issues, according to the Wireless Carriers. The Office of Small Business Advocate filed an Answer agreeing with the Joint Movants that the FCC's Unified Intercarrier Compensation proceeding and pending Congressional legislation could significantly impact the issues raised in the instant proceeding.
Procedural History
The Global Order2 of September 30, 1999 reduced access charges of all local incumbent exchange carriers operating in Pennsylvania. That order directed a Pennsylvania Universal Service Fund (PaUSF) be established to enable the rural incumbent local exchange carriers (ILECs) and Sprint/United to reduce access charges and intraLATA toll rates while at the same time ensuring that residential basic local service rates do not exceed the designated price cap of $16.00 per month. The Global Order also called for an investigation to be initiated in January 2001 to further refine a solution to the question of how the carrier charge (CC) pool can be reduced and to consider the appropriateness of a toll line charge to recover any resulting reductions.
On July 15, 2003 at Docket Nos. M-00021596, P-00991648, P-00991649, M-00031694, M-00031694C0001,and P-00930715, this Commission entered an order granting a Joint Procedural Stipulation filed on June 5, 2003, by the RTCC, Sprint/United, OTS, OCA, OSBA, AT&T Communications of Pennsylvania, Inc., Verizon and MCI WorldCom Network Services, Inc. The Order further reduced intrastate access charges for the rural telephone companies operating within the Commonwealth, and increased the cap on basic local service rates from $16.00 to $18.00 per month. The size of the Pennsylvania Universal Service Fund (''PaUSF'' or ''Fund'') was not changed. No regulations were promulgated to alter the regulations3 governing the PaUSF or to terminate the Fund. The Fund continues until a further rulemaking is completed.
On December 20, 2004, the Commission entered an order in the above-captioned case instituting an investigation into whether there should be further intrastate access charge reductions and intraLATA toll rate reductions in the service territories of rural incumbent local exchange carriers. This investigation was instituted as a result of the Commission's prior order of July 15, 2003, which discussed implementing continuing access charge reform in Pennsylvania. The July 15, 2003 order also provided that a rulemaking proceeding would be initiated no later than December 31, 2004, to address possible modifications to the PaUSF regulations and the simultaneous institution of a proceeding to address all resulting rate issues should disbursements from the PaUSF be reduced in the future.
The December 20, 2004 Order directed the Office of Administrative Law Judge conduct the appropriate proceedings including, but not limited to, a fully developed analysis and recommendation on the following questions:
(a) Whether intrastate access charges and intraLATA toll rates should be further reduced or rate structures modified in the rural ILECs' territories.
(b) What rates are influenced by contributors to and/or disbursements from the PaUSF?
(c) Should disbursements from the PaUSF be reduced and/or eliminated as a matter of policy and/or law?
(d) Assuming the PaUSF expires on or about December 31, 2006, what action should the Commission take to advance the policies of this Commonwealth?
(e) If the PaUSF continues beyond December 31, 2006, should wireless carriers be included in the definition of contributors to the Fund? If included, how will the Commission know which wireless carriers to assess? Will the Commission need to require wireless carriers to register with the Commission? What would a wireless carrier's contribution be based upon? Do wireless companies split their revenue bases by intrastate, and if not, will this be a problem?
(f) What regulatory changes are necessary to 52 Pa. Code §§ 63.161--63.171 given the complex issues involved as well as recent legislative developments?
Following the institution of this investigation, the Federal Communications Commission (FCC) on March 3, 2005, entered its order instituting an intercarrier compensation proceeding at CC Docket No. 01-92 (FNPRM). The FCC is examining the intercarrier compensation system including interstate and intrastate access, reciprocal compensation and universal service. The FCC stated that one of the main reasons reform is needed is because the current intercarrier compensation system is based on jurisdictional and regulatory distinctions that are no longer linked to technological or economic differences. FNPRM at par. 15. The FCC also established goals for intercarrier compensation reform including the preservation of universal service and the promotion of economic efficiency (FNPRM at par. 33).
By order entered August 30, 2005, this Commission stayed the instant investigation for a period not to exceed twelve months unless extended by Commission order, or until the FCC issues its ruling in its Unified Intercarrier Compensation proceeding. We further ordered parties to submit status reports pertaining to related matters in the instant investigation and the FCC's Unified Intercarrier Compensation proceeding and the need for any coordination of these matters that may arise after the instant investigation is reinstated. We also stated that we shall entertain future requests for further stays of this investigation for good cause shown and for the purpose of coordinating this Commission's action with the FCC's ruling in its Unified Intercarrier Compensation proceeding.
We further ordered that upon the expiration of the twelve-month stay of the investigation or the issuance of a FCC ruling in the Unified Intercarrier Compensation proceeding, whichever occurs earlier, the parties to the proceeding shall submit status reports to the Commission pertaining to common or related matters in the instant investigation and the FCC's Unified Intercarrier Compensation proceeding and the need for any coordination of those matters or any new matters that may arise once the instant investigation is reinstituted.
Upon receipt of the status reports, Commission Staff was directed to prepare a recommendation regarding the reinstitution of this investigation and taking of any other appropriate action.
On July 18, 2006, the so-called Missoula Plan was submitted to the FCC. The Missoula Plan was the product of a NARUC task force that included numerous working groups and stakeholders. Generally, the Missoula Plan seeks to unify intercarrier charges for all traffic over a four-year time period, reduce intercarrier compensation rates, provide an ability to recover those reduced rates through explicit means, move rates for all traffic closer together, and establish uniform default interconnection rules. By notice issued July 25, 2006, the FCC requested parties submit comments on the Missoula Plan by September 25, 2006, and reply comments by November 9, 2006. Further, on August 17, 2006, this Commission adopted a motion of Vice Chairman Cawley convening a workshop and facilitated discussion of interested participants, to facilitate the development of comments to the FCC. The workshop was conducted and comments were submitted to the FCC on October 25, 2006, regarding this Commission's opinion of the Missoula Plan. This FCC proceeding continues to have significant potential to directly impact if not render moot the issues in the instant proceeding.
On or about August 30, 2006, status reports were submitted to the Commission by the RTCC, OTS, OCA, Embarq,4 Verizon, Sprint/Nextel Corp.,5 the Wireless Carriers, and Qwest Communications. Additionally, the RTCC, OTS, OCA and Embarq filed a Joint Motion for further stay of investigation to which the other parties which filed status reports in objection. This Motion is ripe for a decision.
Background of Global Order
We established the PaUSF through our Global Order wherein we stated:
The USF is a means to reduce access and toll rates for the ultimate benefit of the end-user and to encourage greater toll competition, while enabling carriers to continue to preserve the affordability of local service rates. Although it is referred to as a fund, it is actually a pass-through mechanism to facilitate the transition from a monopoly environment to a competitive environment--an exchange of revenue between telephone companies which attempts to equalize the revenue deficits occasioned by mandated decreases in their toll and access charges.
Global Order, page 142.
The establishment of the PaUSF was carried out on a revenue-neutral basis and included the rebalancing of intrastate access charges, toll rates, and local rates by the rural local exchange carriers. The PaUSF was a modified version of a settlement plan submitted by the RTCC and Bell Atlantic-Pennsylvania, Inc. (Bell is now Verizon-Pa.).
The components of the PaUSF, from the standpoint of the RTCC members, are briefly summarized below:
1. All small incumbent local exchange carriers, which included all ILECs other than Bell and GTE North (GTE North is now Verizon-North), were directed to be recipients of the PaUSF. The PaUSF was established for the purpose of the rate rebalancing needs of the rural local exchange carriers including reductions in their intrastate access and toll rates. All Pennsylvania telecommunications service providers (excluding wireless carriers) were directed to contribute to the PaUSF based upon their intrastate end-user revenues.
2. The RTCC members were permitted to restructure, modify and reduce their access, toll and local rates, as follows:
a) Intrastate traffic sensitive switched access rates and structure (including local transport restructure) were converted to mirror interstate switched access rates and structure in effect on July 1, 1998.
b) The Common Carrier Line Charge (''CCLC'') was restructured as a flat-rate Carrier Charge (''CC'') and reduced to an intrastate rate not exceeding $7.00 per line and allocated to intrastate toll providers based on their relative minutes of use.
c) The RTCC members were given the opportunity to reduce their intrastate toll rates to an average rate not lower than $.09 per minute.
d) The RTCC members with low local exchange rates were permitted to increase their residential one-party basic, local rates to an average monthly charge of at least $10.83, to the extent necessary to offset the reduced toll rates.
e) Those RTCC members with an average monthly R-1 rate above $16.00 (inclusive of touch-tone) were directed to provide their customers with a Universal Service credit to effectively reduce the rate to $16.00 with the difference coming out of the PaUSF.
See Global Order at pp. 151-152. Sprint was not an original participant in the RTCC plan in the Global proceeding, but after pleading its inclusion in the USF at the Global Order hearings, the Commission ordered that it be included as a recipient carrier and in exchange for access charge reductions, it be allowed to draw $9,000,000 from the PaUSF annually.
We also stated in our Global Order:
[W]e shall initiate an investigation on or about January 2, 2001, to further refine a solution to the question of how the Carrier Charge (CC) pool can be reduced. At its conclusion, but no later than December 31, 2001, the pool will be reduced. In addition, we shall consider the appropriateness of a Toll Line Charge (TLC)[or an intrastate Subscriber Line Charge] to recover any resulting reductions.
Global Order at 60.
Further Intrastate Rate Rebalancing History
In addition to the Commission's competitive undertakings on the intrastate side, the FCC instituted numerous proceedings aimed at further addressing an orderly transition from monopoly to a more competitive environment.
Pursuant to TA-96, the FCC undertook reform of both interstate access charges and federal universal service support mechanisms. Beginning in 1997, the FCC adopted several measures to move interstate access charges for price cap carriers toward lower, cost-based levels by revising the recovery of loop and other non-traffic sensitive costs from per-minute charges to flat rate per line charges thereby aligning rates more closely with the way the costs are incurred. For example, in order to phase out Carrier Common Line (''CCL'') charges, the per-minute charges assessed on interexchange (''IXC'') carriers through which ILECs recover their residual interstate loop costs that are not recovered through their capped federal SLCs, the FCC created the presubscribed interexchange carrier charge (''PICC''), a flat, per line monthly charge imposed on IXCs. The FCC also shifted the non-traffic sensitive costs of the line ports from per-minute local switching charges to the common line category and established a mechanism to phase out the per-minute transport interconnection charge (TIC). The FCC held that more rate structure modifications would be required to create a system that accurately reflects the true cost of service in all respects. The FCC believes the market-based approach, in which competitive forces primarily drive access charges down to cost-based levels, would serve the public interest better than regulatory-prescribed rates.
In the Interstate Access Support Order6 the FCC continued the process of access charge and universal service reform for price cap carriers. This order prescribed a more straightforward, and purportedly economical rational, common line rate structure by increasing the caps on the federal SLC, a flat monthly charge assessed directly on end-users to recover interstate loop costs, and phasing out the PICC, which the FCC viewed as economically inefficient due to the indirect flow of loop costs to end-users through IXCs. The FCC also revisited the controversial ''X-factor,'' changing its function from a productivity offset to a tool for reducing per-minute access charges to target levels proposed by the CALLS members.
The FCC also established a new interstate access support mechanism, capped at $650 million annually, to replace what the FCC deemed implicit support included in the interstate access charges of price cap carriers, finding $650 million to be a reasonable amount that would provide sufficient, but not excessive, support. In this regard, the FCC observed that a range of funding levels might be deemed ''sufficient'' for purposes of TA-96, and that ''identifying an amount of implicit support in our interstate access charge system to make explicit is an imprecise exercise.''7
In recognition of the need for a more comprehensive review of the issues of access charge and universal service reform for the remaining 1,300 or so rural carriers serving less than 2% of the nation's access lines, the FCC placed such reforms for the non-price cap carriers on a separate track. As documented in a series of white papers prepared by the Rural Task Force, which was constituted by the FCC to study the differences between the provision of telecommunications services in rural and non-rural areas, rural carriers generally have higher operating and facilities costs due to lower subscriber density, smaller exchanges and limited economies of scale.8 Significantly, rural carriers rely more heavily on revenues from access charges and universal service support in order to provide ubiquitous and affordable local service. On May 23, 2001, the FCC released its Fourteenth Report and Order and Twenty-Second Order on Reconsideration, and Further Notice of Proposed Rulemaking, Multi-Association Group (MAG) Plan for Regulation of Interstate Services of Non-Price Cap Incumbent Local Exchange Carriers and Interexchange Carriers, CC Docket No. 00-256, Report and Order, 16 FCC RCD 11244 (released May 23, 2001) (''Rural Task Force Order'').
The Rural Task Force Order changed the manner in which rural interstate universal service support is currently calculated and applied. Among other things, the Rural Task Force Order endorsed use of a modified embedded cost mechanism for rural carriers, as opposed to a forward-looking cost mechanism required for price cap carriers, to determine rural carrier support, and included implementation of a rural growth factor (the sum of annual line growth and a general inflation factor) and a safety net additive and safety valve to provide support for new investment and growth above stated thresholds. While created as an interim plan, the FCC also made clear its intention to develop ''a long-term plan that better targets support to carriers serving high-cost areas, while at the same time recognizing the significant differences among rural carriers, and between rural and non-rural carriers.''9
Having taken major steps in beginning to reform interstate high-cost support, interstate access charges and universal service support systems for non-rural carriers through a series of reports and orders in the matter of Federal-State Joint Board on Universal Service, CC Docket No. 96-45 and the Interstate Access Support Order, and the interstate high-cost support for rural carriers through the Rural Task Force Order, the FCC began to address the matter of interstate access charge and universal service support reforms for the rural carriers. On November 8, 2001, the FCC issued its Second Report and Order at CC Docket Nos. 01-304, 00-256 (MAG Plan), 96-45 (USF), 98-77 (Access Charge Reform) and 98-166 (Authorized ROR), in what is referred to as the MAG Order. In the MAG Order, the FCC stated its intent to align the interstate access rate structure with a lower, more cost-based level, remove what the FCC deemed to be implicit support for universal service and replaced it with explicit, portable and competitively neutral support. Specifically, the MAG Order lowered interstate access charges from approximately $0.046 per minute to possibly as low as $0.022 per minute; increased the interstate SLC over a period of time; and phased out the CCL by July 1, 2003, and replaced it with a portable Interstate Common Line Support (''ICLS'') universal service mechanism. In addition, SLC caps were increased effective January 1, 2002, raising monthly per line rates from $3.50 to $5.00 for residence and single line business, and from $6.00 and $6.50, respectively. These interstate changes have resulted in significant increases to most Pennsylvania consumers which are in addition to the intrastate increases in local service rates under Chapter 30 rate rebalancings.
Discussion
In the instant proceeding, the Joint Movants request that the Commission issue an order staying the above-captioned investigation pending the outcome of the FCC unified intercarrier compensation proceeding at CC Docket No. 01-92 for at least one year after the Commission enters an order acting on this motion, or until the FCC rules on its Unified Intercarrier Compensation proceeding, whichever is earlier. For the reasons that follow, we shall continue the stay of the investigation for another year or upon completion of the FCC's Unified Intercarrier Compensation proceeding, whichever occurs first.
Although, the Joint Proposal does not expressly state that it advocates a continuation of the current PaUSF under the existing regulations codified at 52 Pa. Code §§ 63.161--63.171, we may infer that it is the position of the Joint Movants that the status quo be maintained until there is a resolution after an investigation and until a future rulemaking determines otherwise.
We acknowledge that the Missoula Plan as well as other plan proposals before the FCC could have a significant impact on rural access reform as many of these proposals propose interstate and intrastate access charge reform as well as federal and state universal service funds. Most of the proposed plans propose that rural carriers should continue to receive funding of their networks to foster universal service and in many cases create supplemental rural universal service funding or access charge replacement funding to compensate rural carriers for additional required access reform. The Missoula Plan contains provisions that, if adopted, would affect our jurisdiction over setting intrastate access charges. The Missoula Plan eliminates differences between intrastate access, interstate access and reciprocal compensation.
In Pennsylvania, we have taken steps to gradually reduce intrastate access charges through revenue-neutral methods, in an effort to increase competition in rural areas, while assuring affordable and reliable residential service in those areas by establishing our own Pennsylvania Universal Service Fund. We have a closed system, whereby certificated carriers offering service in Pennsylvania help support the intrastate access charge reform by contributing to the Pennsylvania Universal Service Fund. Intrastate revenues are re-distributed within the Commonwealth. This fund supports rural ILECs that are undergoing network modernization to offer residential rates at reasonable costs while still promoting competition in the rural more high-cost areas of the state. Most states do not have a similar fund.
The Missoula Plan apparently advocates that the FCC should exercise its authority to preempt state regulation of intrastate access and local interconnection and establish alternative cost recovery mechanisms within the intrastate jurisdiction. If adopted, it is unclear what this would cost Pennsylvania carriers and their ratepayers. If a federal USF were to replace individual state USFs in access charge reform, it is possible that Pennsylvania would be a net-contributor to the federal Fund regarding access charge reform because we have already undertaken reform within our state, and our intrastate access charges are lower than many other states. Thus, other states would have a greater need to draw from a Federal USF to support a revenue-neutral intrastate access charge reduction. Probably, the states with higher revenues then would be contributing more to the Fund. This national re-distribution of wealth, from urban to rural states is a political policy, but not one which Pennsylvania advocates, because, although we have rural areas within our state, we are not a rural state when compared to Arkansas, Alaska, and Wyoming for example. Pennsylvania is generally a net-contributor to the Federal Universal Service Fund currently. Although we receive some monies for our Lifeline/Link-Up programs, Rural Health Care, Schools and Libraries, and High-Cost Support, our ratepayers pay far more into the Federal USF, than is given back by those four programs. All carriers operating in the nation would be contributing on a pro-rata share possibly based upon their revenues, and possibly, Pennsylvanians would pay a large portion of the cost.
The Missoula Plan proposes an ''Early Adoptor Fund'' of $200 million to support states that have already reduced intrastate access charges to closer mirror interstate access charges. However, since our PaUSF's inception in April, 2000, our 35 rural ILECs have received over $200 million from the PaUSF in aggregate. Therefore, Pennsylvania would possibly not be able to fully recover under the ''Early Adopter Fund'' as proposed. The Missoula Plan also brings into question whether this Commission should act quickly to order further intrastate access charge reductions which possibly then would hurt our chances in the future of receiving federal subsidy monies for these reductions. Given all of these potential changes at the federal level that can affect universal service, we agree that the Joint Motion should be granted.
Moreover, we are persuaded to stay the investigation because there is pending United States Congressional legislation designed to change existing federal USF funding and potentially related issues and Congress is now back in session. A bill called the Universal Service Reform Act of 2006 (HR 5072) was introduced by House Representatives Rick Boucher and Lee Terry this year. A comprehensive legislative telecommunications reform initiative sponsored by Senator Stevens (HR 5252) also contains stabilization provisions for federal universal service funding purposes. Further stay of the procedural schedule at Docket No. I-00040105 remains both judicious and warranted until changes arising from the federal legislative landscape have settled and are known.
Verizon opposes the Joint Motion because three of the Joint Movants (Denver & Ephrata Telephone and Telegraph Company, Buffalo Valley Telephone Company and Conestoga Telephone and Telegraph Company) have unilaterally raised their intrastate access charges, actions inconsistent with their request for a stay. This Commission's recent rulings reviewing the PSI filings of the three movants allowed the three carriers to increase access rates as part of their 2006 Annual Price Stability Index/ Service Price Index filings on the express condition that these rates would be subject to further investigation in the instant investigation.10 While we criticized the move to raise access rates noting that it appeared to contradict long-standing access service reform in Pennsylvania, we also ruled that if the companies did not bank the proposed increases or allocate them to basic local exchange services, the instant investigation would be expanded to include an examination of whether the three companies' access rate increases are consistent with the regulations and policies governing the PaUSF, the request for a stay of investigation, the previously approved Amended Chapter 30 Plans set forth in Docket No. P-0098143F1000, and the continuing statutory obligations set forth in Sections 3011(1)-(13), 3019(h) and Chapter 13 of the Public Utility Code.
As noted, Denver and Ephrata Telephone & Telegraph Company, Buffalo Valley Telephone Company and Conestoga Telephone and Telegraph Company (D&E Companies) filed a joint response to Verizon's opposition to further stay. First, the D&E companies argue Verizon failed to object to the 2006 Chapter 30 filings even though it was served with timely notice. Second, the companies argue they are faced with intermodal competition which precludes further increases in their basic exchange rates and the minor increases to their intrastate access charges were the only realistic means to achieve additional revenues to carry-out their accelerated Chapter 30 broadband deployment commitments. Finally, the companies argue Verizon is disingenuous and conflicting in its position because its own position regarding further reductions of Verizon's intrastate access charges at Docket No. C-20027195 is the same as the Joint Movants. In that proceeding, Verizon recognizes that the FCC's Unified Intercarrier Compensation proceeding will comprehensively address all types of intrastate compensation, including intrastate access rates. Verizon further stated that any rush by the Commission to get ahead of the FCC is ill-advised.
We agree with Verizon that to date, the D&E companies have neither banked their proposed increase, nor allocated it to basic local exchange services. Instead, they raised intrastate access charges. This policy seems contrary to our policy of the Global Order, wherein we emphasized a need for reducing intrastate access charges in the rural ILEC territories to gradually mirror interstate access charges in order to bring about greater competition in those areas. The Pennsylvania Universal Service Fund was established in April, 2000, in order to reimburse the rural ILECs for revenue losses attributable to reductions in intrastate access charges and intraLATA toll rates during this period of transition from a monopolistic industry to a competitive one, while at the same time ensuring basic local service rates for residential customers would stay under a reasonable cap. We are concerned as to how increases in intrastate access charges proposed by those same companies that participate in the Pennsylvania Universal Service Fund will ultimately affect the fund.
It is important to note that since the Global Order of September 30, 1999, this Commission has been lowering intrastate access charges in an effort to transition from a monopolistic to a competitive environment in rural areas within the Commonwealth. Generally, since Global, we have only discussed the reduction of access charges. The fact that we never expressly stated that increases to access charges were precluded until the next investigation was held, does not mean the Commission intended to carve out an exception to our general public policy rule of lowering intrastate access charges and allow for intermittent increases to intrastate access charges with rural ILEC PSI filings. Such a policy would cause problems in the administration of the Pennsylvania Universal Service Fund which depends upon annual recalculations regarding what is owed recipient carriers versus what contributors owe on an annual basis. To allow carriers to increase their intrastate access charges mid-year would cause problems in calculating support owed the recipient carriers, and calculating mid-year reductions in the overall size of the fund.
Therefore, pursuant to express statutory authority at 66 Pa.C.S. § 703(g), we are hereby reconsidering our orders of June 23, 2006, which allowed Denver & Ephrata Telephone & Telegraph Company, Conestoga Telephone Company and Buffalo Valley Telephone Company to raise intrastate access charges. In light of our concerns, we shall hold further hearings under Section 703(g) so as to afford the parties due process, and to enable us to reconsider our earlier order in this matter and to determine, based on the record, whether any rescission or amendment would be warranted by the evidence, consistent with our access charge reform and universal service policies, and lawful under the companies' Chapter 30 plans. Moreover, revenues from increases in access charges collected from the date of this order may be subject to refund depending upon the outcome of these further hearings. The bifurcation of these hearings from the instant matter should adequately address Verizon's concerns regarding the instant motion. Further, given our action to reconsider the access charge increases previously approved for Denver & Ephrata Telephone & Telegraph Company, Conestoga Telephone Company and Buffalo Valley Telephone Company, other rural ILECs contemplating the submission of PSI filings should be prepared to fully support the justness and reasonableness of any proposed increase to intrastate access charges during the stay of this proceeding both in regard to Chapter 30 and the policies that underlie the Pennsylvania Universal Service Fund.
Sprint Nextel urges this Commission to deny the Joint Motion on the grounds that intrastate access reform, particularly for the rural carriers, is urgently needed. Sprint Nextel claims it pays an average intrastate access rate in Pennsylvania that is much higher than the national average intrastate access rate and significantly higher than interstate access rates paid to Pennsylvania ILECs, yet it offers no specifics regarding this claim. Further delay in the reduction of implicit subsidies in intrastate access rates is not warranted according to Sprint Nextel. If the FCC acts while the investigation is ongoing, that action should be factored into the proceeding and any necessary adjustments could be addressed at that time. However, Sprint Nextel argues that it is unlikely the FCC will act before mid-2007. Further, Sprint Nextel argues that it is uncertain whether preemptive action by the FCC against the states would be upheld by the courts. Sprint Nextel admits the FCC's resolution of the proceeding will have an impact on Pennsylvania's local exchange carriers, but it denies any evidentiary record compiled by moving forward with the investigation would be moot or stale if the FCC acts. Finally, although Sprint Nextel admits there is legislative activity underway at the federal level addressing universal service, there is no time frame set for deliberations and any definitive legislation action may not take place for several congressional sessions.
We are not persuaded by Sprint Nextel's argument to resume the investigation at this time. The looming decision of the FCC regarding the Missoula Plan and of pending federal legislation warrant a further one year stay of the investigation. Sprint Nextel's assertions that it pays more in Pennsylvania for intrastate access charges are made without specifics. There is no direct comparison between rural ILECs operating in our state with similar companies in other states. Neither is there a direct comparison between a national average intrastate access charge for rural companies with our companies or a comparison between interstate access charges and the intrastate access charges for rural carriers in our state.
Accordingly, for these above-stated reasons, the Joint Movants' request that the Commission stay this matter pending the outcome of the FCC Unified Intercarrier Compensation proceeding at Docket No. 01-92, for at least a period of twelve months or until the FCC acts on its Unified Intercarrier Compensation proceeding, whichever is earlier, will be granted.
Finally, we note that our contract with the third-party administrator of the Pennsylvania Universal Service Fund, Solix, Inc., is due to expire on December 31, 2006. Since, there has been no resolution to access charge reform, the status quo stays in place, and the Pennsylvania Universal Service Fund shall continue under the existing regulations codified at 52 Pa. Code §§ 63.161-- 63.171 until such time as regulations are promulgated eliminating or modifying the Fund. Law Bureau as Issuing Office is coordinating the selection of an Administrator of the Pennsylvania Universal Service Fund through a competitive bidding process for a contractual period of January 1, 2007 through December 31, 2010 with a possible one-year extension through December 31, 2011. The request for proposals has been posted on our website, www.puc.state.pa.us since October 25, 2006, and questions and answers pertaining to same are being placed upon the Commission's website as they are received and answered. Proposals are due by 1:30 p.m. on November 27, 2006. Ultimately, a provision shall be made in the final contract that the contract may need to be amended later if the Pennsylvania legislature authorizes or mandates changes or if the Commission orders the termination or the modification of the fund. Thus, if the fund is eliminated through the regulatory process prior to the expiration of the contract, the contract will terminate earlier than 2010; Therefore,
It Is Ordered That:
1. The Joint Motion of the Rural Telephone Company Coalition, Office of Consumer Advocate, Office of Trial Staff, and the United Telephone Company of Pennsylvania d/b/a Embarq Pennsylvania is granted in its entirety and this Investigation shall be further stayed pending the outcome of the FCC's Unified Intercarrier Compensation proceeding at CC Docket No. 01-92 or for one year from the date of entry of this Order, whichever is earlier.
2. The Commission Staff from the Office of Special Assistants and the Law Bureau is hereby directed to monitor the Federal Communications Commission's Unified Intercarrier Compensation proceeding.
3. The Commission shall entertain future requests for further stays of this investigation for good cause shown and for the purpose of coordinating this Commission's actions with the Federal Communications Commission's ruling in its Unified Intercarrier Compensation proceeding.
4. Upon the expiration of the twelve-month stay of the instant investigation or the issuance of a Federal Communications Commission ruling in the Unified Intercarrier Compensation proceeding, whichever occurs earlier, the parties to this proceeding shall submit status reports to the Commission pertaining to common or related matters in the instant investigation and the Federal Communications Commission's Unified Intercarrier Compensation proceeding and the need for any coordination of those matters or any new matters that may arise once the instant investigation is reinstituted. Status reports are due thirty days prior to the expiration of the on-year stay or thirty days after the FCC decision is made regarding the Unified Intercarrier Compensation proceeding, whichever occurs earlier.
5. Upon receipt of the status reports directed in Ordering paragraph 4, above, the Office of Special Assistants and Law Bureau shall prepare a Staff recommendation for the Commission's timely consideration at a Public Meeting on reinstituting this investigation and taking any other appropriate action.
6. The Office of Administrative Law Judge will conduct expedited hearings pursuant to 66 Pa.C.S. § 703(g) reconsidering our orders of June 23, 2006, which had allowed Denver & Ephrata Telephone & Telegraph Company, Conestoga Telephone Company and Buffalo Valley Telephone Company to raise intrastate access charges. A recommended decision shall be made on or before February 28, 2007.
7. Upon the resumption of this investigation, the participating parties shall be afforded due process opportunities to supplement the evidentiary record.
8. Upon resumption of this investigation, the participating parties shall address and provide record evidence on the legal, ratemaking and regulatory accounting linkages between: (a) the Federal Communications Commission's ruling in its Unified Intercarrier Compensation proceeding; (b) the intrastate access charge reform for rural ILECs in view of the new Chapter 30 law and its relevant provisions at 66 Pa.C.S. §§ 3015 and 3017; (c) the Pennsylvania Universal Service Fund; and (d) the potential effects on rates for the basic local exchange services of the rural ILECs.
9. The Pennsylvania Universal Service Fund shall continue under the existing regulations codified at 52 Pa. Code §§ 63.161--63.171 until such time as regulations are promulgated eliminating or modifying the Fund.
10. Revenues from increased intrastate access charges collected by Denver & Ephrata Telephone & Telegraph Company, Conestoga Telephone Company and Buffalo Valley Telephone Company may be subject to refund.
11. Law Bureau is directed as Issuing Office to coordinate the selection of an Administrator of the Pennsylvania Universal Service Fund through a competitive bidding process for a contractual period from January 1, 2007 through December 31, 2010 with a possible one-year extension through December 31, 2011. A provision should be made in the contract that the contract may need to be amended later if the Pennsylvania legislature authorizes or mandates changes or if the Commission orders the termination or the modification of the fund. Thus, if the fund is eliminated through the regulatory process prior to the expiration of the contract, the contract will terminate earlier than 2010.
12. A copy of this order be delivered to all telecommunications carriers operating in Pennsylvania and Solix, Inc. f/k/a NECA Services, Inc., the current Administrator of the Pennsylvania Universal Service Fund.
13. A copy of this order be delivered for publication to the Pennsylvania Bulletin.
JAMES J. MCNULTY,
Secretary[Pa.B. Doc. No. 06-2391. Filed for public inspection December 1, 2006, 9:00 a.m.] _______
1 The RTCC consists of the following rural incumbent local exchange carriers: Windstream Pennsylvania, Inc. f/k/a ALLTEL Pennsylvania, Inc., Armstrong Telephone Company--PA, Armstrong Telephone Company-North, Bentleyville Communications Corporation, d/b/a The Bentleyville Telephone Company, Buffalo Valley Telephone Company, Citizens Telephone Company of Kecksburg, Commonwealth Telephone Company, Conestoga Telephone and Telegraph Company, Denver and Ephrata Telephone and Telegraph Company d/b/a D & E Telephone Company, Deposit Telephone Company, Frontier Communications of Breezewood, Inc., Frontier Communications of Canton, Inc., Frontier Communications of Lakewood, In., Frontier Communications of Oswayo River, Inc., Frontier Communications of Pennsylvania, Inc., The Hancock Telephone Company, Hickory Telephone Company, Ironton Telephone Company, Mahanoy & Mahantango Telephone Company, Marianna & Scenery Hill Telephone Company, The North-Eastern Pennsylvania Telephone Company, North Penn Telephone Company, North Pittsburgh Telephone Company, Palmerton Telephone Company, Pennsylvania Telephone Company, Pymatuning Independent Telephone Company, South Canaan Telephone Company, Sugar Valley Telephone Company, Venus Telephone Corporation, West Side Telephone Company and Yukon-Waltz Telephone Company.
2 Re Nextlink Pennsylvania, Inc., Docket No. P-00991648; P-00991649, 93 PaPUC 172 (September 30, 1999)(Global Order); 196 P.U.R. 4th 172, aff'd sub nom. Bell Atlantic-Pennsylvania, Inc. v. Pennsylvania Public Utility Commission, 763 A.2d 440 (Pa.Cmwlth. 2000), alloc. granted.
3 The regulations governing the PaUSF are found at 52 Pa. Code §§ 63.161--63.171. There is no sunset provision.
4 The RTCC, OTS, OCA and Embarq filed a joint status report.
5 Sprint Nextel Corp. filed on behalf of Sprint Communications Company L.P., its interexchange and competitive local exchange carrier entity and its wireless entities operating in the state, Sprint Spectrum, L.P. d/b/a Sprint PCS and Nextel Communications, Inc., and NPCR, Inc. d/b/a Nextel Partners.
6 Access Charge Reform, Price Cap Performance Review for Local Exchange Carriers, Transport Rate Structure and Pricing, End User Common Line Charges, CC Docket Nos. 96-262, 94-1, 91-213, 95-72, First Report and Order, 12 FCC Rcd 15982, May 31, 2000, (Access Charge Reform Order) at 15998 Par. 35.
7 Interstate Access Support Order at 13046 par. 201.
8 See Federal-State Joint Board on Universal Service, CC Docket No. 96-45, Report and Order, 12 FCC Rcd 8776, 9164-65 (1977) (Universal Service First Report and Order) at 8917 par. 253 (subsequent history omitted); Rural Task Force Order.
9 Id. at 11249 par. 8.
10 Denver & Ephrata Telephone & Telegraph Company Supplement No. 251 to Tariff PaPUC No. 15 and Supplement No. 10 to Tariff PaPUC No. 16, Order, R-00061377, June 23, 2006. 2006 Annual Price Stability Index/Service Price Index Filing of D & E Telephone and Telegraph Company, Order, P-00981430F1000, June 23, 2006, Buffalo Valley Telephone Company Supplement No. 54 to Tariff Pa.PUC No. 7 and Supplement No. 8 to Tariff Pa.PUC No. 8, Order, R-00061375, 2006 Annual Price Stability Index/Service Price Index Filing of Buffalo Valley Telephone Company, Order, P-00981428F1000, Conestoga Telephone & Telegraph Company Supplement No. 206 to Tariff Pa.PUC No. 10, Supplement No. 7 to Tariff Pa.PUC No. 11, Order, R-00061376, June 23, 2006. 2006 Annual Price Stability Index/Service Price Index Filing of Conestoga Telephone & Telegraph Company, P-00981429F1000, Order, June 23, 2006.
